(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

March ~~27, 2008~~26, 2009

Dear Shareholder:

You are cordially invited to attend the ~~2008~~2009 Annual Meeting of Shareholders of Peabody Energy Corporation, ~~(the “Company”),~~ which will be held on Thursday, May ~~8, 2008,~~7, 2009, at 10:00 A.M., Central Time, at the Ritz-Carlton Hotel, 100 Carondelet Plaza, Clayton, Missouri 63105.

During this meeting, shareholders will vote on the following items:


	1.	Election of ~~one Class I Director~~five Directors for a ~~three-year~~one-year term;

	2.	Ratification of the appointment of Ernst & Young LLP as ~~the Company’s~~our independent registered public accounting firm for the fiscal year ending December 31, ~~2008;~~2009;

	3.	~~A proposal to declassify~~Reapproval of the ~~Company’s Board~~material terms of ~~Directors;~~the performance measures under our 2004 Long-Term Equity Incentive Plan; and

	4.	~~The Company’s 2008 Management Annual Incentive Compensation Plan.~~

	5.	Consideration of such other matters as may properly come before the meeting.

The accompanying Notice of Annual Meeting of Shareholders and Proxy Statement contain complete details on these items and other matters. We also will be reporting on ~~the Company’s~~our operations and responding to shareholder questions. If you have questions that you would like to raise at the meeting, we encourage you to submit written questions in advance (by mail ore-mail) to the Corporate Secretary. This will help us respond to your questions during the meeting. If you would like toe-mail your questions, please send them tostockholder.questions@peabodyenergy.com.

Your understanding of and participation in the Annual Meeting is important, regardless of the number of shares you hold. To ensure your representation, we encourage you to vote over the telephone or Internet or to complete and return a proxy card as soon as possible. If you attend the Annual Meeting, you may then revoke your proxy and vote in person if you so desire.

Thank you for your continued support of Peabody Energy. We look forward to seeing you on May 8.7.

Very truly yours,

Gregory H. Boyce

Chairman and Chief Executive Officer

PEABODY ENERGY CORPORATION
701 Market Street
St. Louis, Missouri63101-1826

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Peabody Energy Corporation (the “Company”) will hold its Annual Meeting of Shareholders at the Ritz-Carlton Hotel, 100 Carondelet Plaza, Clayton, Missouri, 63105 on Thursday, May ~~8, 2008,~~7, 2009, at 10:00 A.M., Central Time, to:


	•	Elect ~~one Class I Director~~five Directors for a ~~three-year~~one-year term;

	•	Ratify the appointment of Ernst & Young LLP as ~~the Company’s~~our independent registered public accounting firm for the fiscal year ending December 31, ~~2008;~~2009;

	•	~~Approve a proposal to declassify~~Reapprove the ~~Company’s Board~~material terms of ~~Directors;~~

	•	~~Approve~~ the ~~Company’s 2008 Management Annual~~performance measures under our 2004 Long-Term Equity Incentive ~~Compensation~~ Plan; and

	•	Consider any other business that may properly come before the Annual Meeting.

The Board of Directors has fixed March ~~14, 2008~~13, 2009 as the record date for determining shareholders who will be entitled to receive notice of and vote at the Annual Meeting or any adjournment. Each share of Common Stock is entitled to one vote. As of the record date, there were ~~271,167,596~~267,360,541 shares of Common Stock outstanding.

If you own shares of ~~the Company’s~~ Common Stock as of March ~~14, 2008,~~13, 2009, you ~~can~~may vote those shares via the Internet, by telephone or by attending the Annual Meeting and voting in person. If you received your proxy materials by mail, you may also vote your shares by completing and mailing your proxy/voting instruction card.

An admittance card or other proof of ownership is required to attend the Annual Meeting. If you are a shareholder of record, please retain the admission card printed on your ~~notice~~Notice of ~~internet availability~~Internet Availability of ~~proxy materials~~Proxy Materials or your proxy card for this purpose. Also, please indicate your intention to attend the Annual Meeting by checking the appropriate box on the proxy card, or, if voting by the Internet or by telephone, when prompted. If your shares are held by a bank or broker, you will need to ask ~~them~~that record holder for an admission card in the form of a confirmation of beneficial ownership. If you do not receive a confirmation of beneficial ownership or other admittance card from your bank or broker, you must bring proof of share ownership (such as a copy of your brokerage statement) to the Annual Meeting.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please cast your vote by telephone or the Internet, or complete, date and sign a proxy card and return it in the envelope provided. If you attend the ~~meeting,~~Annual Meeting, you may withdraw your proxy and vote in person, if you so choose.

~~Jeffery L. Klinger~~Alexander C. Schoch

Executive Vice President ~~General Counsel~~Law, Chief Legal

Officer and ~~Corporate~~ Secretary

March ~~27, 2008~~26, 2009

PEABODY ENERGY CORPORATION
PROXY STATEMENT
FOR THE
~~2008~~2009 ANNUAL MEETING OF SHAREHOLDERS

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING


Q:		Why did I receive a notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?

A:		In accordance with rules and regulations ~~recently~~ adopted by the Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of our proxy materials to each shareholder of record, we may ~~now~~ furnish proxy materials, including this Proxy Statement and the Peabody Energy Corporation (“Peabody” or the “Company”) ~~2007~~2008 Annual Report to Shareholders, by providing access to such documents onvia the Internet. We believe this ~~will allow~~allows us to provide our shareholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting.

Most shareholders will not receive printed copies of the proxy materials unless they request them. Instead, a notice (the “Notice”) was mailed that will tell you how to access and review all of the proxy materials on the Internet. The Notice also tells you how to submit your proxy on the Internet or by telephone. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.


		Most shareholders will not receive printed copies of the proxy materials unless they request them. Instead, a Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed that will tell you how to access and review all of the proxy materials on the Internet. The Notice also tells you how to submit your proxy on the Internet or by telephone. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.

Q:		Why am I receiving these materials?

A:		We are providing these proxy materials to you on the Internet or delivering printed versions of these materials to you by mail in connection with our Annual Meeting of Shareholders, which will take place on May ~~8, 2008.~~7, 2009. These materials were first made available on the Internet or mailed to shareholders on or about March ~~27, 2008.~~26, 2009. You are invited to attend the Annual Meeting and requested to vote on the proposals described in this Proxy Statement.

Q:		What is included in these materials?

A:		These materials include:


		• Our Proxy Statement for the Annual Meeting; and

		• Our ~~2007~~2008 Annual Report to Shareholders, which includes our audited consolidated financial statements.


		If you requested printed versions of these materials by mail, these materials also include the proxy/voting instruction card for the Annual Meeting.


Q:		What am I being asked to vote on?

A:		You are being asked to vote on the following items:


		• Election of ~~Sandra Van Trease~~Gregory H. Boyce, William E. James, Robert B. Karn III, M. Frances Keeth and Henry E. Lentz as ~~a Class I Director of the Company~~directors for a ~~term of three years;~~one-year term;

		• Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, ~~2008;~~2009;

		• ~~Approval~~Reapproval of ~~a proposal to declassify~~the material terms of the performance measures under our ~~Board of Directors;~~2004 Long-Term Equity Incentive Plan; and

		~~• Approval of our 2008 Management Annual Incentive Compensation Plan; and~~

		• Any other matter properly introduced at the meeting.


Q:		What are the voting recommendations of the Board of Directors?

A:		The Board recommends the following votes:


		• FOR the election of ~~Sandra Van Trease~~Gregory H. Boyce, William E. James, Robert B. Karn III, M. Frances Keeth and Henry E. Lentz as ~~a Class I Director~~directors (Item 1);

		• FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, ~~2008~~2009 (Item 2);

		~~• FOR approval of the proposal to declassify our Board of Directors (Item 3)~~; and

		• FOR ~~approval~~reapproval of the material terms of the performance measures under our ~~2008 Management Annual~~2004 Long-Term Equity Incentive ~~Compensation~~ Plan (Item 4)3).


Q:		Will any other matters be voted on?

A:		We are not aware of any other matters that will be brought before the shareholders for a vote at the Annual Meeting. If any other matter is properly brought before the meeting, your proxy will authorize each of Blanche M. Touhill, Alexander C. Schoch and ~~Jeffery~~Kenneth L. ~~Klinger~~Wagner to vote on such matters in their discretion.

Q:		How do I vote?

A:		If you are a shareholder of record or hold ~~stock~~Common Stock through the Peabody Investments Corp. Employee Retirement Account (or any of the other 401(k) plans sponsored by our subsidiaries), you may vote using any of the following methods:


		• Via the Internet, by visiting the website~~www.proxyvote.com~~ ~~and~~ “www.voteproxy.com” following the instructions for Internet voting on your Notice or proxy/voting instruction card;


		• ~~From~~By dialing 1-800-PROXIES(1-800-776-9437) in the United States ~~Canada~~ or ~~Puerto Rico, by dialing 1-800-690-6903~~1-718-921-8500 from foreign countries and following the instructions for telephone voting on your Notice or proxy/voting instruction card;


		• If you received your proxy materials by mail, by completing and mailing your proxy/voting instruction card; or

		• By casting your vote in person at the Annual Meeting.


		If you vote over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible. The telephone and Internet voting facilities for the shareholders of record of all shares, other than those held in the Peabody Investments Corp. Employee Retirement Account (or other 401(k) plans sponsored by our subsidiaries), will close at 10:59 P.M. Central Time on May ~~7, 2008.~~6, 2009. The Internet and telephone voting procedures are designed to authenticate shareholders by use of a control number and to allow you to confirm that your instructions have been properly recorded.


		If you participate in the Company Stock Fund under the Peabody Investments Corp. Employee Retirement Account (or other 401(k) plans sponsored by our subsidiaries), and had shares of ~~the Company’s common stock~~Common Stock credited in your account on the record date of March ~~14, 2008,~~13, 2009, you will receive a single Notice or proxy/voting instruction card with respect to all shares registered in your name, whether inside or outside of the plan. If your accounts inside and outside of the plan are not registered in the same name, you will receive a separate Notice or proxy/voting instruction card with respect to the shares credited in your plan account. Voting instructions regarding plan shares must be received by 3:00 P.M. Central Time on May ~~5, 2008,~~4, 2009, and all telephone and Internet voting facilities with respect to plan shares will close at that time.


		Shares of ~~common stock~~Common Stock in the Peabody Investments Corp. Employee Retirement Account (or other 401(k) plans sponsored by our subsidiaries) will be voted by Vanguard Fiduciary Trust Company (“Vanguard”), as trustee of the plan. Plan participants should indicate their voting instructions to


		to Vanguard for each action to be taken under proxy by Internet or telephone or by completing and returning a proxy/voting instruction card. All voting instructions from plan participants will be kept confidential. If a plan participant fails to sign or to timely return the proxy/voting instruction card or otherwise timely indicate his or her instructions by telephone or over the Internet, the shares allocated to such participant, together with unallocated shares, will be voted in the same proportion as plan shares for which ~~the trustee~~Vanguard receives voting instructions.


		If you vote by Internet or telephone or return your signed proxy/voting instruction card, your shares will be voted as you indicate. If you do not indicate how your shares are to be voted on a matter, your shares will be voted “For” the election of ~~Sandra Van Trease~~Gregory H. Boyce, William E. James, Robert B. Karn III, M. Frances Keeth and Henry E. Lentz as ~~a Class I Director,~~directors, “For” ratification of the appointment of Ernst & Young LLP, and “For” ~~approval~~reapproval of the ~~proposal to declassify~~material terms of the performance measures under our ~~Board of Directors and “For” approval of our 2008 Management Annual~~2004 Long-Term Equity Incentive ~~Compensation~~ Plan.


		If your shares are held in a brokerage account in your broker’s name (also known as “street name”), you should follow the instructions for voting provided by your broker or nominee. You may submit voting instructions by Internet or telephone or, if you received your proxy materials by mail, you may complete and mail a voting instruction card to your broker or nominee. If you provide specific voting instructions by telephone, Internet or mail, your broker or nominee will vote your shares as you have directed. Please note that shares in ~~the Peabody Energy Corporation~~our U.S. Employee Stock Purchase Plan are held in street name by ~~A. G. Edwards & Sons, Inc.,~~Wachovia Securities, the plan administrator.


		Ballots will be provided during the Annual Meeting to anyone who wants to vote in person at the meeting. If you hold shares in street name, you must request a confirmation of beneficial ownership from your broker to vote in person at the meeting.

Q:		Can I change my vote?

A:		Yes. If you are a shareholder of record, you can change your vote or revoke your proxy before the Annual Meeting by:


		• Submitting a valid, later-dated proxy/voting instruction card;


		• Submitting a valid, subsequent vote by telephone or the Internet at any time prior to 10:59 P.M. Central Time on May ~~7, 2008;~~6, 2009;


		• Notifying ~~the Company’s~~our Corporate Secretary in writing that you have revoked your proxy; or

		• Completing a written ballot at the Annual Meeting.


		You can revoke your voting instructions with respect to shares held in the Peabody Investments Corp. Employee Retirement Account (or other 401(k) plans sponsored by our subsidiaries) at any time prior to 3:00 P.M. Central Time on May ~~5, 2008~~4, 2009 by timely delivery of an Internet or telephone vote, or a properly executed, later-dated voting instruction card, or by delivering a written revocation of your voting instructions to Vanguard.


Q:		Is my vote confidential?

A:		Yes. All proxies, ballots and vote tabulations that identify how individual shareholders voted will be kept confidential and not be disclosed to our directors, officers or employees, except in limited circumstances, including:


		• When disclosure is required by law;

		• During any contested solicitation of proxies; or

		• When written comments by a shareholder appear on a proxy card or other voting material.


Q:		What will happen if I do not instruct my broker how to vote?

A:		If your shares are held in street name and you do not instruct your broker how to vote, your broker may vote your shares at its discretion on routine matters such as the election of directors (Item 1), ratification of the independent registered public accounting firm (Item 2)~~, approval~~ and the reapproval of the ~~proposal to declassify~~material terms of the performance measures under our ~~Board of Directors (Item 3) or approval of our 2008 Management Annual~~2004 Long-Term Equity Incentive ~~Compensation~~ Plan (Item 4)3). On non-routine matters, brokers and other nominees cannot vote without instructions from the beneficial owner, resulting in so-called “broker non-votes.”

Q:		How will my Company stock in the Peabody Investments Corp. Employee Retirement Account or other 401(k) plans sponsored by the Company’s subsidiaries be voted?


A:		Vanguard, as the plan trustee, will vote your shares in accordance with your instructions if you vote by Internet or the telephone or send in a completed proxy/voting instruction card before 3:00 P.M. Central Time on May ~~5, 2008.~~4, 2009. All telephone and Internet voting facilities with respect to plan shares will close at that time. Vanguard will vote allocated shares of ~~Company~~ Common Stock for which it has not received direction, as well as shares not allocated to individual participant accounts, in the same proportion as plan shares for which ~~the trustee~~Vanguard receives voting instructions.


Q:		How many shares must be present to hold the Annual Meeting?

A:		Holders of a majority of the shares of outstanding Common Stock as of the record date must be represented in person or by proxy at the Annual Meeting in order to conduct business. This is called a quorum. If you vote, your shares will be part of the quorum. Abstentions, “Withheld” votes and broker non-votes also will be counted in determining whether a quorum exists.

Q:		What vote is required to approve the proposals?

A:		In the election of directors, the number of shares voted “For” ~~the~~a nominee must exceed 50% of the number of votes cast with respect to ~~her~~such nominee’s election in order for ~~her~~such nominee to be elected. Votes cast ~~includes~~include votes to withhold authority ~~or votes against in each case as applicable~~ and ~~excludes~~exclude abstentions with respect to ~~the~~a nominee’s election. If the number of shares voted “For” ~~the~~a nominee dodoes not exceed 50% of the number of votes cast with respect to ~~her~~such nominee’s election, our Corporate Governance Guidelines require that ~~she~~such nominee promptly tender his or her resignation to the Chairman of the Board following certification of the shareholder vote. The procedures to be followed by the Board with respect to such resignation are described on page 15.

		The proposal to ratify the appointment of Ernst & Young LLP (Item 2) will require approval by the holders of a majority of the shares present in person or by proxy at the meeting and entitled to vote. Abstentions and broker non-votes will have no effect on this proposal.

		The proposal to ~~declassify~~reapprove the material terms of the performance measures under our Board of Directors (Item 3) will require approval by the holders of seventy-five percent (75%) of our outstanding shares entitled to vote. Abstentions and broker non-votes will have the effect of an “Against” vote on this proposal.

		~~The proposal to approve our 2008 Management Annual~~2004 Long-Term Equity Incentive ~~Compensation~~ Plan (Item 4)3) will require approval by the holders of a majority of the shares present in person or by proxy at the meeting and entitled to ~~vote.~~vote on this matter. Abstentions and broker non-votes will have no effect on this proposal.

Q:		What does it mean if I receive more than one notice or proxy card or voting instruction form?

A:		It means your shares are registered differently or are held in more than one account at the transfer agentand/or with banks or brokers. Please vote all of your shares.


Q:		What do I need to do to attend the Annual Meeting?

A:		If you are a shareholder of record or a participant in the Peabody Investments Corp. Employee Retirement Account (or other 401(k) plans sponsored by our subsidiaries), your admission card is printed on the Notice or attached to your proxy card or voting instruction form. You will need to bring this admission card with you to the Annual Meeting.


		If you own shares in street name, you will need to ask your bank or broker for an admission card in the form of a confirmation of beneficial ownership. You will need to bring a confirmation of beneficial ownership with you to vote at the Annual Meeting. If you do not receive your confirmation of beneficial ownership in time, bring your most recent brokerage statement with you to the Annual Meeting. We can use that to verify your ownership of Common Stock and admit you to the meeting; however, you will not be able to vote your shares at the meeting without a confirmation of beneficial ownership.


Q:		Where can I find the voting results of the Annual Meeting?

A:		We plan to announce preliminary voting results at the Annual Meeting and to publish final results in our Quarterly Report on ~~SEC~~Form 10-Q for the Quarterly Period ~~Ended~~Ending June 30, ~~2008.~~2009.

ELECTION OF DIRECTORS (ITEM 1)

~~In accordance with the terms of our certificate of incorporation, the~~Our Board of Directors iscurrently consists of eleven members, who were previously divided into three ~~classes, with each class serving a staggered three-year term.~~classes. At ~~this year’s~~the 2008 Annual Meeting of Shareholders, the ~~terms~~shareholders voted to amend our Third Amended and Restated Certificate of ~~current Class I Directors will expire.~~Incorporation to eliminate the classification of the Board, beginning with the election of directors to occur at this Annual Meeting. The ~~terms of Class II Directors and Class III Directors will expire~~directors elected at the 2007 and 2008 Annual Meetings will serve out the remainder of their three-year terms before standing for re-election. Directors nominated for election at this Annual Meeting and at subsequent meetings will be elected for a one-year term. In addition, a director elected by the Board to befill a vacancy caused by the resignation, retirement or death of a director will serve until the expiration of the term of office of the director whom he or she replaced and a director elected to fill a vacancy caused by the creation of a new directorship will serve until the Annual Meeting held in ~~2009 and 2010, respectively.~~the year of expiration of his or her term of office.

The Board of Directors has nominated ~~Sandra Van Trease~~Gregory H. Boyce, William E. James, Robert B. Karn III, M. Frances Keeth and Henry E. Lentz for election as ~~a Class I Director with~~directors, each to serve for a term ~~expiring in 2011. Ms. Van Trease~~of one year and until his or her successor is duly elected and qualified. Each nominee is currently is serving as a ~~Class I Director~~director and has consented to serve for the new term. Should ~~Ms. Van Trease~~any of them become unavailable for election, your proxy authorizes us to vote for such other person, if any, as the Board ~~of Directors~~ may recommend.

The other current ~~Class I Directors,~~director whose term expires at the Annual Meeting, Dr. ~~Henry Givens, Jr. and Dr. James R. Schlesinger,~~Blanche M. Touhill, will retire at the Annual Meeting pursuant to our mandatory retirement policy for directors. No person is being nominated at the Annual Meeting to fill the vacancy on the Board created by her departure.

The Board of Directors recommends that you vote “For” the ~~Class I~~ Director ~~nominee~~nominees named below.

~~Class I Director Nominee — Term Expiring in 2011~~

SANDRA VAN TREASE, age 47, has been a director of the Company since January 2003. Ms. Van Trease is Group President, BJC HealthCare, a position she has held since September 2004. BJC HealthCare is one of the nation’s largest nonprofit healthcare organizations, delivering services to residents in the greater St. Louis, southern Illinois and mid-Missouri regions. Prior to joining BJC HealthCare, Ms. Van Trease servedNominees for Election as President and Chief Executive Officer of UNICARE, an operating affiliate of WellPoint Health Networks Inc., from 2002 to September 2004. Ms. Van Trease also served as President, Chief Financial Officer and Chief Operating Officer of RightCHOICE Managed Care, Inc. from 2000 to 2002, and as Executive Vice President, Chief Financial Officer and Chief Operating Officer from 1997 to 2000. Prior to joining RightCHOICE in 1994, she was a Senior Audit ManagerDirectors with ~~Price Waterhouse LLP. She is a Certified Public Accountant and Certified Management Accountant. Ms. Van Trease is also a director of Enterprise Financial Services Corporation.~~

~~Class II Directors —~~ Terms Expiring in 2009

GREGORY H. BOYCE, age ~~53,~~54, has been a director ~~of the Company~~ since March 2005. Mr. Boyce was named Chief Executive Officer Elect of the Company in March 2005, assumed the position of Chief Executive Officer in January 2006 and was elected Chairman by the Board of Directors in October 2007. He was President of the Company from October 2003 to December 2007 and was Chief Operating Officer of the Company from October 2003 to December 2005. He previously served as Chief Executive — Energy of Rio Tinto plc (an international natural resource company) from 2000 to 2003. Other prior positions include President and Chief Executive Officer of Kennecott Energy Company from 1994 to 1999 and President of Kennecott Minerals Company from 1993 to 1994. He has extensive engineering and operating experience with Kennecott and also served as Executive Assistant to the Vice Chairman of Standard Oil of Ohio from 1983 to 1984. Mr. Boyce serves on the board of directors of Marathon Oil Corporation. He is ~~Co-Chairman~~Vice Chairman of the World Coal ~~Based Generation Stakeholders Group,~~Institute and the National Mining Association. He is a member of the National Coal Council (NCC) and the Coal Industry Advisory Board of the International Energy ~~Agency,~~Agency. He is a Board member of the Business Roundtable and the American Coalition for Clean Coal Electricity (ACCCE). Mr. Boyce is a member of Civic Progress in St. Louis; the Board of Trustees of St. Louis Children’s Hospital; the School of Engineering and Applied Science National Council at Washington University in St. Louis; and the Advisory Council of the University of Arizona’s Department of Mining and Geological Engineering and the National Council of the School of Engineering and Applied Science at Washington University in St. Louis. He is a board member of the Center for Energy and Economic Development, the National Mining Association, the National Coal Council, Civic Progress and St. Louis Children’s Hospital Mr. Boyce has been elected to the Board of Directors of Marathon Oil Corporation effective April 1, 2008.

April 2008, Mr. James periodically ~~provides~~provided consulting services to Lehman Brothers Inc., an investment banking firm (“Lehman Brothers”), on matters unrelated to the Company.

ROBERT B. KARN III, age ~~66,~~67, has been a director ~~of the Company~~ since January 2003. Mr. Karn is a financial consultant and former managing partner in financial and economic consulting with Arthur Andersen LLP in St. Louis. Before retiring from Arthur Andersen in 1998, Mr. Karn served in a variety of accounting, audit and financial roles over a33-year career, including Managing Partner in charge of the global coal mining practice from 1981 through 1998. He is a Certified Public Accountant and has served as a Panel Arbitrator with the American Arbitration Association. Mr. Karn is also a director of Natural Resource Partners L.P., a coal-oriented master limited partnership that is listed on the New York Stock Exchange, the Fiduciary/Claymore MLP Opportunity Fund, the Fiduciary/Claymore Dynamic Equity Fund and Kennedy Capital Management, Inc.

M. FRANCES KEETH, age 62, has been a director since March 2009. She was Executive Vice President of Royal Dutch Shell, plc, and Chief Executive Officer and President of Shell Chemicals Limited, a services company responsible for Royal Dutch Shell’s global petrochemical businesses, from January 2005 to December 2006. She served as Executive Vice President of Customer Fulfillment and Product Business Units for Shell Chemicals Limited from July 2001 to January 2005 and was President and Chief Executive Officer of Shell Chemical LP, a U.S. petrochemical member of the Royal Dutch/Shell Group, from July 2001 to July 2006. Mrs. Keeth also serves as a director of Verizon Communications Inc. and Arrow Electronics Inc.

HENRY E. LENTZ, age ~~63,~~64, has been a director ~~of the Company~~ since February 1998. Mr. Lentz ~~is currently~~was a Managing Director of Barclays Capital, an investment banking firm and successor to Lehman Brothers, from September 2008 to March 2009. In March 2009, he accepted a position as Managing Director of Lazard Frères & Co, an investment banking firm, commencing in June 2009. From January 2004 to September 2008 he was employed as an Advisory Director by Lehman Brothers. He joined Lehman Brothers in 1971 and became a Managing Director in 1976. He left the firm in 1988 to become Vice Chairman of Wasserstein Perella Group, Inc., an investment banking firm. In 1993, he returned to Lehman Brothers as a Managing Director and served as head of the firm’s worldwide energy practice. In 1996, he joined Lehman Brothers’ Merchant Banking Group as a Principal and in January 2003 became a consultant to the Merchant Banking Group. ~~He assumed his current role with Lehman Brothers effective January 2004.~~ Mr. Lentz is also ~~a director~~the non-executive Chairman of Rowan Companies, Inc. and ~~CARBO Ceramics, Inc.~~

~~BLANCHE M. TOUHILL, PhD, age 76, has been~~ a director of the Company since 2001. Dr. Touhill is Chancellor Emeritus and Professor Emeritus at the University of Missouri — St. Louis. She previously served as Chancellor and Professor of History and Education at the University of Missouri — St. Louis from 1991 through 2002. Prior to her appointment as Chancellor, Dr. Touhill held the positions of Vice Chancellor for Academic Affairs and Interim Chancellor at the University of Missouri — St. Louis. Dr. Touhill also has served on the Boards of Directors of Trans World Airlines and Delta Dental. She holds bachelor’s and doctoral degrees in history and a master’s degree in geography from St. Louis University.CARBO Ceramics, Inc.

~~Class III~~Incumbent Directors —with Terms Expiring in 2010

WILLIAM A. COLEY, age ~~64,~~65, has been a director ~~of the Company~~ since March 2004. Since March 2005, Mr. Coley has served as Chief Executive Officer and Director of British Energy Group plc, the U.K.’s largest electricity producer. He was previously a non-executive director of British Energy. Mr. Coley served as President of Duke Power, theU.S.-based global energy company, from 1997 until his retirement in February 2003. During his37-year career at Duke Power, Mr. Coley held various officer level positions in the engineering, operations and senior management areas, including Vice President, Operations(1984-1986), Vice President, Central Division(1986-1988), Senior Vice President, Power Delivery(1988-1990), Senior Vice President, Customer Operations(1990-1991), Executive Vice President, Customer Group(1991-1994) and President, Associated Enterprises Group(1994-1997). Mr. Coley was elected to the board of Duke Power in 1990 and was named President following Duke Power’s acquisition of PanEnergy in 1997. Mr. Coley earned his B.S. in electrical engineering from Georgia Institute of Technology and is a registered professional engineer. He is also a director of E. R. Jahna Enterprises.

WILLIAM C. RUSNACK, age ~~63,~~64, has been a director ~~of the Company~~ since January 2002. Mr. Rusnack is the former President and Chief Executive Officer of Premcor Inc., one of the largest independent oil refiners in the United States prior to its acquisition by Valero Energy Corporation in 2005. He served as President, Chief Executive Officer and Director of Premcor from 1998 to February 2002. Prior to joining Premcor, Mr. Rusnack was President of ARCO Products Company, the refining and marketing division of Atlantic Richfield Company. During a31-year career at ARCO, he was also President of ARCO Transportation Company and Vice President of Corporate Planning. He is also a director of Sempra Energy and Flowserve Corporation.

JOHN F. TURNER, age ~~66,~~67, has been a director ~~of the Company~~ since July 2005. Mr. Turner served as Assistant Secretary of State for the Bureau of Oceans and International Environmental and Scientific Affairs from November 2001 to July 2005. Mr. Turner was previously President and Chief Executive Officer of The Conservation Fund, a national nonprofit organization dedicated to public-private partnerships to protect land and water resources. He was director of the U.S. Fish and Wildlife Service from 1989 to 1993. Mr. Turner also served in the Wyoming state legislature for 19 years and is a past president of the Wyoming State Senate. He serves as a consultant to The Conservation Fund. Mr. Turner also serves as Chairman of the University of Wyoming, Ruckelshaus Institute of Environment and Natural Resources and as a Visiting Professor of Environment and Natural Resources at the University. He is also a director of International Paper Company, American Electric Power Company, Inc. and Ashland, Inc.

ALAN H. WASHKOWITZ, age ~~67,~~68, has been a director ~~of the Company~~ since May 1998. Until July 2005, Mr. Washkowitz was a Managing Director of Lehman Brothers and part of the firm’s Merchant Banking Group, responsible for oversight of Lehman Brothers Merchant Banking Partners. He joined Kuhn Loeb & Co. in 1968 and became a general partner of Lehman Brothers in 1978 when it acquired Kuhn Loeb & Co. Prior to joining the Merchant Banking Group, he headed Lehman Brothers’ Financial Restructuring Group. Mr. Washkowitz is also a director of L-3 Communications Corporation.

Incumbent Director with Term Expiring in 2011

SANDRA VAN TREASE, age 48, has been a director since January 2003. Ms. Van Trease is Group President, BJC HealthCare, a position she has held since September 2004. BJC HealthCare is one of the nation’s largest nonprofit healthcare organizations, delivering services to residents in the greater St. Louis, southern Illinois and mid-Missouri regions. Prior to joining BJC HealthCare, Ms. Van Trease served as President and Chief Executive Officer of UNICARE, an operating affiliate of WellPoint Health Networks Inc., from 2002 to September 2004. Ms. Van Trease also served as President, Chief Financial Officer and Chief Operating Officer of RightCHOICE Managed Care, Inc. from 2000 to 2002, and as Executive Vice President, Chief Financial Officer and Chief Operating Officer from 1997 to 2000. Prior to joining RightCHOICE in 1994, she was a Senior Audit Manager with Price Waterhouse LLP. She is a Certified Public Accountant and Certified Management Accountant. Ms. Van Trease is also a director of Enterprise Financial Services Corporation.

INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES

Director Independence

As required by the rules of the New York Stock Exchange (“NYSE”), the Board of Directors evaluates the independence of its members at least annually, and at other appropriate times when a change in circumstances could potentially impact the independence or effectiveness of one or more directors (e.g., in connection with a change in employment status or other significant status changes). This process is administered by the Nominating & Corporate Governance Committee of the Board of Directors, which consists entirely of directors who are independent under applicable NYSE rules. After carefully

considering all relevant relationships with ~~the Company,~~us, the Nominating & Corporate Governance Committee submits its recommendations regarding independence to the full Board, which then makes an affirmative determination with respect to each director.

In making independence determinations, the Nominating & Corporate Governance Committee and the Board consider all relevant facts and circumstances, including (1) the nature of any relationships with ~~the Company,~~us, (2) the significance of the relationship to ~~the Company,~~us, the other organization and the individual director, (3) whether or not the relationship is solely a business relationship in the ordinary course of ~~the Company’s~~our and the other organization’s businesses and does not afford the director any special benefits, and (4) any commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. For purposes of this determination, the Board deems any relationships that have expired for more than three years to be immaterial.

After considering the standards for independence adopted by the NYSE and various other factors as described herein, the Board has determined that all directors other than Mr. Boyce are independent. None

¹ ~~Prior to May 2001, the Merchant Banking Fund owned in excess~~judgment of 90% of the Company’s outstanding Common Stock. Over the ensuing three-year period, the Merchant Banking Fund sold all of its Company holdings through a series of registered public offerings, falling below a 50% controlling interest level in April 2002 and completing its exit in March 2004.Mr. Lentz or Mr. James.

Board Attendance and Executive Sessions

The Board of Directors met 11eight times in ~~2007.~~2008. During that period, each incumbent director attended 75% or more of the aggregate number of meetings of the Board and the committees on which he or she served, and average attendance was ~~94%~~98%. Pursuant to our Corporate Governance Guidelines, the non-management directors meet in executive session at least quarterly. The chair of each executive session rotates among the chairs of the Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee. During ~~2007,~~2008, our non-management directors met in executive session ~~eight~~seven times.

Committees of the Board of Directors

The Board of Directors has appointed four standing committees from among its members to assist it in carrying out its obligations. These committees are the Audit Committee, Compensation Committee, Executive Committee and Nominating & Corporate Governance Committee. Each standing committee has adopted a formal charter that describes in more detail its purpose, organizational structure and responsibilities. A copy of each committee charter can be found on our website (www.peabodyenergy.com) by clicking on “Investors,” and then “Corporate Governance” and is available in print to any shareholder who requests it. Information on our website is not considered part of this Proxy Statement. A description of each committee and its current membership follows:

Compensation Committee

The members of the Compensation Committee are Robert B. Karn III (Chair), William A. Coley, Henry E. Lentz and John F. Turner. The Board of Directors has affirmatively determined that, in its judgment, all members of the Compensation Committee are independent under rules established by the ~~New York Stock Exchange.~~NYSE.

The Compensation Committee met 10eight times during ~~2007.~~2008. Some of the primary responsibilities of the Compensation Committee include the following:


	•	To annually review and approve corporate goals and objectives relevant to our ~~CEO~~Chief Executive Officer (“CEO”) compensation, ~~evaluate~~initiate the evaluation by the Board of the CEO’s performance in light of those goals and objectives, and together with the other independent members of the Board, determine and approve the CEO’s compensation levels based on this evaluation;

	•	To annually review with the CEO, the performance of our executive officers and make recommendations to the Board with respect to the compensation plans for such officers;

	•	To annually review and approve the CEO’s and the executive officers’ base salary, annual incentive opportunity and long-term incentive opportunity and as appropriate, employment agreements, severance agreements, retirement and other post-employment benefits, change in control provisions and any special supplemental benefits;

	•	To approve annual bonus awards for executive officers other than the CEO;

	•	To oversee our annual and long-term incentive programs;

	•	To periodically assess our director compensation program and, when appropriate, recommend modifications for Board consideration;

	•	~~To review and make recommendations to the Board in conjunction with the CEO, as appropriate, with respect to succession planning and management development;~~ and

	•	To make regular reports on its activities to the Board.

Executive Committee

The members of the Executive Committee are Gregory H. Boyce (Chair), William A. Coley, Henry E. Lentz and William C. Rusnack. The Executive Committee met ~~once~~three times during ~~2007.~~2008.

When the Board of Directors is not in session, the Executive Committee has all of the power and authority as delegated by the Board, except with respect to:


	•	Amending our certificate of incorporation and bylaws;

	•	Adopting an agreement of merger or consolidation;

	•	Recommending to shareholders the sale, lease or exchange of all or substantially all of our property and assets;

	•	Recommending to shareholders dissolution of the Company or revocation of any dissolution;

	•	Declaring a dividend;

	•	Issuing stock;

	•	Appointing members of Board committees; and

	•	Changing major lines of business.

Nominating & Corporate Governance Committee

The members of the Nominating & Corporate Governance Committee are Blanche M. Touhill (Chair), ~~Henry Givens, Jr.,~~ William E. James, ~~James R. Schlesinger,~~ John F. Turner and Alan H. Washkowitz. The Board of Directors has affirmatively determined that, in its judgment, all members of the Nominating & Corporate Governance Committee are independent under ~~New York Stock Exchange~~NYSE rules.

The Nominating & Corporate Governance Committee met six times during ~~2007.~~2008. Some of the primary responsibilities of the Nominating & Corporate Governance Committee include the following:


	•	To identify, evaluate and recommend qualified candidates for election to the Board;

	•	To advise the Board on matters related to corporate governance;

	•	To assist the Board in conducting its annual assessment of Board performance;

	•	To recommend the structure, composition and responsibilities of other Board committees;

	•	To advise the Board on matters related to corporate social responsibility;

	•	To ensure we maintain an effective orientation program for new directors and a continuing education and development program to supplement the skills and needs of the Board;

	•	To provide review and oversight of potential conflicts of interest situations, including transactions in which any related person had or will have a direct or indirect material interest;

	•	To review our policies and procedures with respect to related person transactions at least annually and recommend any changes for Board approval;

	•	To monitor compliance with, and advise the Board regarding any significant issues arising under, our corporate compliance program and Code of Business Conduct and Ethics;

	•	To review and make recommendations to the Board in conjunction with the CEO, as appropriate, with respect to executive officer succession planning and management development; and

	•	To make regular reports on its activities to the Board.

Audit Committee

The members of the Audit Committee are William C. Rusnack (Chair), Robert B. Karn III, Sandra Van Trease and Alan H. Washkowitz. The Board of Directors has affirmatively determined that, in its judgment, all members of the Audit Committee are independent under ~~New York Stock Exchange~~NYSE and SEC rules. The Board also has determined that each of Messrs. Rusnack, Karn and Washkowitz and Ms. Van Trease is an “audit committee financial expert” under SEC rules.

The Audit Committee met ~~eight~~nine times during ~~2007.~~2008. The Audit Committee’s primary purpose is to provide assistance to the Board in fulfilling its oversight responsibility with respect to:


	•	The quality and integrity of our financial statements and financial reporting processes;

	•	Our systems of internal accounting and financial controls and disclosure controls;

	•	The independent registered public accounting firm’s qualifications and independence;

	•	The performance of our internal audit function and independent registered public accounting firm; and

	•	Compliance with legal and regulatory requirements, and codes of conduct and ethics programs established by management and the Board.

Some of the primary responsibilities of the Audit Committee include the following:


	•	To appoint our independent registered public accounting firm, which reports directly to the Audit Committee;

	•	To approve all audit engagement fees and terms and all permissible non-audit engagements with our independent registered public accounting firm;

	•	To ensure that we maintain an internal audit function and to review the appointment of the senior internal audit teamand/or provider;

	•	To approve the terms of engagement for the internal audit provider;

	•	To meet on a regular basis with our financial management, internal audit management and independent registered public accounting firm to review matters relating to our internal accounting controls, internal audit program, accounting practices and procedures, the scope and procedures of the outside audit, the independence of the independent registered public accounting firm and other matters relating to our financial condition;

	•	To oversee our financial reporting process and to review in advance of filing or issuance our quarterly reports onForm10-Q, annual reports onForm 10-K, annual reports to shareholders, proxy materials and earnings press releases;

	•	To review our guidelines and policies with respect to risk assessment and risk management, and to monitor our major financial risk exposures and steps management has taken to control such exposures; and

	•	To make regular reports to the Board regarding the activities and recommendations of the Audit Committee.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee has reviewed and discussed the Company’s audited financial statements and management’s report on internal control over financial reporting as of and for the fiscal year ended December 31, ~~2007~~2008 with management and Ernst & Young LLP, the Company’s independent registered public accounting firm. Management is responsible for the Company’s financial statements and internal control over financial reporting, while Ernst & Young is responsible for conducting its audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and expressing opinions on the Company’s financial statements in accordance with U.S. generally accepted accounting principles and the Company’s internal control over financial reporting.

The Audit Committee reviewed with Ernst & Young the overall scope and plans for their audit of the Company’s financial statements and internal control over financial reporting. The Audit Committee also discussed with Ernst & Young matters relating to the quality and acceptability of the Company’s accounting principles, as applied in its financial reporting processes, as required by Statement of Auditing Standards No. 61 as amended ~~and~~(AICPA,Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee ~~reviewed and discussed with Ernst & Young~~has received the ~~auditor’s independence from management and the Company, as well as the matters included in~~ written disclosures ~~received~~and letter from Ernst & Young as required by ~~Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as adopted by~~applicable requirements of the Public Company Accounting Oversight Board ~~in Rule 3600T.~~regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young its independence from management and the Company. As part of its review, the Audit Committee reviewed fees paid to Ernst & Young and considered whether Ernst & Young’s performance of non-audit services for the Company was compatible with the auditor’s independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, ~~2007~~2008 for filing with the Securities and Exchange Commission.

MEMBERS OF THE AUDIT COMMITTEE:

WILLIAM C. RUSNACK, CHAIR
ROBERT B. KARN III
SANDRA VAN TREASE
ALAN H. WASHKOWITZ

FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP served as our independent registered public accounting firm for the fiscal years ended December 31, ~~2007~~2008 and ~~2006.~~2007.

The following fees were paid to Ernst & Young for services rendered during our last two fiscal years:


	•	Audit Fees: $3,456,000 (for the fiscal year ended December 31, 2008) and $3,705,000 (for the fiscal year ended December 31, 2007) ~~and $3,317,000 (for the fiscal year ended December 31, 2006)~~ for fees associated with the annual audit of our consolidated financial statements, including the audit of internal control over financial reporting, the reviews of our quarterly reports onForm 10-Q, services provided in connection with statutory and regulatory filings, assistance with and review of documents filed with the SEC, and accounting and financial reporting consultations.

	•	Audit-Related Fees: $532,000 (for the fiscal year ended December 31, 2008) and $669,000 (for the fiscal year ended December 31, 2007) ~~and $405,000 (for the fiscal year ended December 31, 2006)~~ for assurance-related services for audits of employee benefit plans, internal control reviews, due diligence services associated with acquisitions or divestitures, and other attest services not required by statute.

	•	Tax Fees: $166,000 (for the fiscal year ended December 31, 2008) and $1,150,000 (for the fiscal year ended December 31, 2007) ~~and $958,000 (for the fiscal year ended December 31, 2006)~~ for tax compliance, tax advice and tax planning services.

	•	All Other Fees: ~~$6,000~~$5,000 (for the fiscal year ended December 31, ~~2007)~~2008) and $6,000 (for the fiscal year ended December 31, ~~2006)~~2007) for fees related to an on-line research tool.

Under procedures established by the Board of Directors, the Audit Committee is required to pre-approve all audit and non-audit services performed by our independent registered public accounting firm to ensure that the provisions of such services do not impair such firm’s independence. The Audit Committee may delegate its pre-approval authority to one or more of its members, but not to management. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Each fiscal year, the Audit Committee reviews with management and the independent registered public accounting firm the types of services that are likely to be required throughout the year. Those services are comprised of four categories, including audit services, audit-related services, tax services and all other permissible services. At that time, the Audit Committee pre-approves a list of specific services that may be provided within each of these categories, and sets fee limits for each specific service or project. Management is then authorized to engage the independent registered public accounting firm to perform the pre-approved services as needed throughout the year, subject to providing the Audit Committee with regular updates. The Audit Committee reviews the amount of all billings submitted by the independent registered public accounting firm on a regular basis to ensure that their services do not exceed pre-defined limits. The Audit Committee must review and approve in advance, on acase-by-case basis, all other projects, services and fees to be performed by or paid to the independent registered public accounting firm. The Audit Committee also must approve in advance any fees for pre-approved services that exceed the pre-established limits, as described above.

Under Company policyand/or applicable rules and regulations, our independent registered public accounting firm is prohibited from providing the following types of services to us: (1) bookkeeping or other services related to our accounting records or financial statements, (2) financial information systems design and implementation, (3) appraisal or valuation services, fairness opinions orcontribution-in-kind reports, (4) actuarial services, (5) internal audit outsourcing services, (6) management functions, (7) human resources, (8) broker-dealer, investment advisor or investment banking services, (9) legal services, (10) expert services unrelated to audit, (11) any services entailing a contingent fee or commission, and (12) tax services to an officer of the Company whose role is in a financial oversight capacity.

During the fiscal year ended December 31, ~~2007,~~2008, all of the services described under the headings “Audit-Related Fees,” “Tax Fees” and “All Other Fees” were approved by the Audit Committee pursuant to the procedures described above.

CORPORATE GOVERNANCE MATTERS

Good corporate governance has been a priority at Peabody Energy for many years. Our key governance practices are outlined in our Corporate Governance Guidelines, committee charters, and Code of Business Conduct and Ethics. These documents can be found on our Corporate Governance webpage (www.peabodyenergy.com) by clicking on “Investors” and then “Corporate Governance,” and are available in print to any shareholder upon request. Information on our website is not considered part of this Proxy Statement. The Code of Business Conduct and Ethics applies to our directors, Chief Executive Officer, Chief Financial Officer, Controller and other Company personnel.

The Nominating & Corporate Governance Committee of the Board of Directors is responsible for reviewing the Corporate Governance Guidelines from time to time and reporting and making recommendations to the Board concerning corporate governance matters. Each year, the Nominating & Corporate Governance Committee, with the assistance of outside experts, reviews ~~the Company’s~~our corporate governance practices, not only to ensure that they comply with applicable laws and NYSE listing requirements, but also to ensure that they continue to reflect what the Committee believes are best practices and promote our best interests and the best interests of ~~the Company and its~~our shareholders.

Majority Voting Bylaw

In July 2007, our Board of Directors amended our Bylaws to provide for majority voting in the election of directors. In the case of uncontested elections, in order to be elected the number of shares voted in favor of a nominee must exceed 50% of the number of votes cast with respect to that nominee’s election at any meeting of shareholders for the election of directors at which a quorum is present. Votes cast ~~includes~~include votes to withhold authority ~~or votes cast against in each case as applicable~~ and ~~excludes~~exclude abstentions with respect to that nominee’s election.

If a nominee is an incumbent director and receives a greater number of votes withheld from his or her election than votes in favor of his or her election, our Corporate Governance Guidelines require that such director promptly tender his or her resignation to the Chairman of the Board following certification of the shareholder vote. The Nominating ~~and~~& Corporate Governance Committee will promptly consider the resignation submitted by such director and will recommend to the Board whether to accept or reject the tendered resignation. In considering whether to accept or reject the tendered resignation, the Committee will consider all factors deemed relevant by its members. The Board will act on the Committee’s recommendation no later than 90 days following the date of the shareholders’ meeting where the election occurred. In considering the Committee’s recommendation, the Board will consider the factors considered by the Committee and such additional information and factors the Board deems to be relevant. Any director who tenders his or her resignation pursuant to our Corporate Governance Guidelines will not participate in the Committee recommendation or Board consideration regarding whether or not to accept the tendered resignation.

In the case of contested elections, directors will be elected by a plurality of the votes of the shares present in person or by proxy and voting for nominees in the election of directors at any meeting of shareholders for the election of directors at which a quorum is present. For these purposes, a contested election is any election of directors in which the number of candidates for election as directors exceeds the number of directors to be elected.

Shareholder Communications with the Board of Directors

The Board of Directors has adopted the following procedures for shareholders and other interested persons to send communications to the Board, individual directorsand/or Committee Chairs (collectively, “Shareholder Communications”):

Shareholders and other interested persons seeking to communicate with the Board should submit their written comments to the Chairman, Peabody Energy Corporation, 701 Market Street, St. Louis, Missouri 63101. The Chairman will forward such Shareholder Communications to each Board member (excluding routine advertisements and business solicitations, as instructed by the Board), and provide a report on the disposition of matters stated in such communications at the next regular meeting of the Board. If a Shareholder Communication (excluding routine advertisements and business solicitations) is addressed to a specific individual director or Committee Chair, the Chairman will forward that communication to the named director, and will discuss with that director whether the full Boardand/or one of its committees should address the subject matter.

If a Shareholder Communication raises concerns about the ethical conduct of management or the Company, it should be sent directly to our Chief Legal Officer at 701 Market Street, St. Louis, Missouri 63101. The Chief Legal Officer will promptly forward a copy of such Shareholder Communication to the Chairman of the Audit Committee and, if appropriate, the Chairman of the Board, and take such actions as they authorize to ensure that the subject matter is addressed by the appropriate Board committee, managementand/or the full Board.

If a shareholder or other interested person seeks to communicate exclusively with ~~the Company’s~~our non-management directors, such Shareholder Communication should be sent directly to the Corporate Secretary who will forward any such communication directly to the Chair of the Nominating & Corporate Governance Committee. The Corporate Secretary will first consult with and receive the approval of the Chair of the Nominating & Corporate Governance Committee before disclosing or otherwise discussing the communication with members of management or directors who are members of management.

At the direction of the Board, we reserve the right to screen all materials sent to our directors for potential security risksand/or harassment purposes.

Shareholders also have an opportunity to communicate with the Board at our Annual Meeting of Shareholders. Pursuant to Board policy, each director is expected to attend the Annual Meeting in person, subject to occasional excused absences due to illness or unavoidable conflicts. Each of our directors with the exception of Mr. Rusnack attended the last Annual Meeting of Shareholders in May ~~2007.~~2008.

Overview of Director Nominating Process

The Board of Directors believes that one of its primary goals is to advise management on strategy and to monitor ~~the Company’s~~our performance. The Board also believes that the best way to accomplish this goal is by choosing directors who possess a diversity of experience, knowledge and skills that are particularly relevant and helpful to ~~the Company.~~us. As such, current Board members possess a wide array of skills and experience in the coal industry, related energy industries and other important areas, including finance and accounting, operations, environmental management, education, governmental affairs and administration, and healthcare. When evaluating potential members, the Board seeks to enlist the services of candidates who possess high ethical standards and a combination of skills and experience which the Board determines are the most appropriate to meet its objectives. The Board believes all candidates should be committed to creating value over the long term and to serving our best interests and the best interests of ~~the Company and all of its~~our shareholders.

The Nominating & Corporate Governance Committee (“Committee”) is responsible for identifying, evaluating and recommending qualified candidates for election to the Board. The Committee will consider director candidates submitted by shareholders. Any shareholder wishing to submit a candidate for consideration should send the following information to the Corporate Secretary, Peabody Energy Corporation, 701 Market Street, St. Louis, Missouri 63101:


	•	Shareholder’s name, number of shares owned, length of period held, and proof of ownership;

	•	Name, age and address of candidate;

	•	A detailed resume describing among other things the candidate’s educational background, occupation, employment history, and material outside commitments (e.g., memberships on other boards and committees, charitable foundations, etc.);

	•	A supporting statement which describes the candidate’s reasons for seeking election to the Board, and documentshis/her ability to satisfy the director qualifications described below;

	•	A description of any arrangements or understandings between the shareholder and the candidate; and

	•	A signed statement from the candidate, confirminghis/her willingness to serve on the Board.

The Corporate Secretary will promptly forward such materials to the Committee Chair and the Chairman of the Board. The Corporate Secretary also will maintain copies of such materials for future reference by the Committee when filling Board positions.

Shareholders may submit potential director candidates at any time pursuant to these procedures. The Committee will consider such candidates if a vacancy arises or if the Board decides to expand its membership, and at such other times as the Committee deems necessary or appropriate. Separate procedures apply if a shareholder wishes to nominate a director candidate at the ~~2009~~2010 Annual Meeting. Those procedures are described on page ~~67 of this Proxy Statement~~60 under the heading “Information About Shareholder Proposals.”

Pursuant to its charter, the Committee must review with the Board, at least annually, the requisite qualifications, independence, skills and characteristics of Board candidates, members and the Board as a whole. When assessing potential new directors, the Committee considers individuals from various and diverse backgrounds. While the selection of qualified directors is a complex and subjective process that requires consideration of many intangible factors, the Committee believes that candidates should generally meet the following criteria:


	•	Candidates should possess broad training, experience and a successful track record at senior policy-making levels in business, government, education, technology, accounting, law, consultingand/or administration;

	•	Candidates should possess the highest personal and professional ethics, integrity and values. Candidates also should be committed to representing the long-term interests of the Company and all of its shareholders;

	•	Candidates should have an inquisitive and objective perspective, strength of character and the mature judgment essential to effective decision-making;

	•	Candidates need to possess expertise that is useful to ~~the Company~~us and complementary to the background and experience of other Board members; and

	•	Candidates need to be willing to devote sufficient time to Board and ~~Committee~~committee activities and to enhance their knowledge of ~~the Company’s~~our business, operations and industry.

The Committee will consider candidates submitted by a variety of sources (including, without limit, incumbent directors, shareholders, ~~Company~~ management and third-party search firms) when filling vacanciesand/or expanding the Board. If a vacancy arises or the Board decides to expand its membership, the Committee generally asks each director to submit a list of potential candidates for consideration. The Committee then evaluates each potential candidate’s educational background, employment history, outside commitments and other relevant factors to determine whetherhe/she is potentially qualified to serve on the Board. At that time, the Committee also will consider potential nominees submitted by shareholders in accordance with the procedures described above. The Committee seeks to identify and recruit the best available candidates, and it intends to evaluate qualified shareholder nominees on the same basis as those submitted by Board members or other sources.

After completing this process, the Committee will determine whether one or more candidates are sufficiently qualified to warrant further investigation. If the process yields one or more desirable candidates, the Committee will rank them by order of preference, depending on their respective qualifications and ~~the Company’s~~our needs. The Committee Chair, or another director designated by the Committee Chair, will then contact the preferred candidate(s) to evaluate their potential interest and to set up interviews with members of the Committee. All such interviews are held in person, and include only the candidate and the independent Committee members. Based upon interview results and appropriate background checks, the Committee then decides whether it will recommend the candidate’s nomination to the full Board.

The Committee believes this process has consistently produced highly qualified, independent Board members to date. However, the Committee may choose, from time to time, to use additional resources (including independent third-party search firms) after determining that such resources could enhance a particular director search. ~~The Committee has not used~~Mrs. Keeth, who was appointed to the Board in March 2009, was brought to the Committee’s attention by an independent third-party ~~firms for prior searches.~~search firm.

OWNERSHIP OF COMPANY SECURITIES

The following table sets forth information as of March 1, ~~2008~~2009 with respect to persons or entities who are known to beneficially own more than 5% of our outstanding Common Stock, each director, each

Name and Address of Beneficial Owner

BlackRock, Inc.⁽⁵⁾

40 East 52^nd Street
New York, NY 10022

Alexander C. Schoch⁽⁷⁾


⁽⁶⁾		This information is based on a Schedule 13G/A filed with the SEC on February 9, 2009 by UBS AG, in which it reported sole voting power as to 10,895,228 shares and shared dispositive power as to 13,335,699 shares as of December 31, 2008.

⁽⁷⁾		Includes 4,145 shares that have been pledged by Mr. Schoch as security for a margin loan.

Section 16(a) Beneficial Ownership Reporting Compliance

Our executive officers and directors and persons beneficially holding more than ten percent of our Common Stock are required under the Securities Exchange Act of 1934 to file reports of ownership and changes in ownership of our Common Stock with the ~~Securities and Exchange Commission~~SEC and the ~~New York Stock Exchange.~~NYSE. We file these reports of ownership and changes in ownership on behalf of our executive officers and directors.

To the best of our knowledge, based solely on our review of the copies of such reports furnished to us during the fiscal year ended December 31, ~~2007,~~2008, filings with the ~~Commission~~SEC and written representations from certain reporting persons that no additional reports were required, all required reports were timely ~~filed.~~

filed except that, due to internal administrative errors, Ian Craig was late in filing a Form 4 to report the forfeiture of shares of performance-based restricted stock, Mr. Ford was late in filing a Form 4 to report the withholding of shares to pay withholding taxes upon vesting of a restricted stock award, and Roger Walcott, Kemal Williamson and Messrs. Boyce, Craig and Navarre and Ms. Fiehler were each one day late in filing a Form 4 to report the vesting of a performance unit award and the withholding of shares to pay withholding taxes on that award. In addition, due to an administrative error by his investment advisor, Mr. Ford was one day late in filing a Form 4 to report an open market purchase of common stock. The required reports were promptly filed when the errors were discovered.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

~~Overview~~Executive Summary

On the following pages, we discuss how our Chairman and Chief Executive Officer, Gregory H. Boyce, and our other executive officers listed on page 21 (“Named Executive Officers” or “NEOs”) were compensated for 2008 and how this compensation fits within our pay-for-performance philosophy. We also describe certain changes to our executive compensation program for 2009.

Focus of Our Executive Compensation Program

We design our compensation program with a focus on financial, operational and safety performance, while also recognizing the individual and team performance of each NEO in achieving our business objectives. A substantial majority of each NEO’s annual compensation is performance-based, tied to metrics which align with shareholder value. For 2008, the performance-based portion of NEO compensation consisted of performance units, stock options and annual cash incentive opportunity and was contingent on meeting certain goals for total shareholder return (relative to industry peers and to the Standard & Poor’s 500 Index), return on invested capital, EBITDA (as defined on page 26), operating profit, earnings per share (“EPS”), and safety. For 2008, our NEOs received payouts for performance units slightly below target, consistent with our three-year performance results, and received payouts for annual cash incentives above target, driven by record 2008 performance achievements.

The compensation reported in this Proxy Statement primarily reflects performance during two periods — calendar year 2008 and the three-year period ended December 31, 2008. Under our leadership team, we had an outstanding performance year in 2008, achieving record sales, EBITDA and safety performance. We focused on operational performance and undertook targeted production and safety initiatives as we advanced our sustainability efforts. In 2008, we returned nearly $265 million to

shareholders in the form of share repurchases and dividends. Over the three-year period ended in 2008, we performed well on cumulative measures of Return on Invested Capital and total shareholder return, achieving a goal slightly below target level. These accomplishments and other criteria were considered by the Compensation Committee when determining the compensation of our NEOs for 2008.

Changes for 2009

During 2008, the Compensation Committee, in consultation with its independent compensation consultant, undertook a full review of our compensation program for NEOs and other company officers and concluded that the current compensation opportunities are competitive with the peer groups and the performance-based program is effective in driving results and delivering returns to shareholders. The Committee also reviewed the performance metrics used in our executive compensation program to ensure that they increase shareholder value and decided to measure performance for purposes of our 2009 performance unit awards entirely on relative total shareholder return for the2009-2011 performance period, thereby eliminating the Return on Capital metric. The Committee concluded, based on the uncertain economic environment and in consultation with its independent compensation consultant, that this is the most appropriate way to align long-term equity award payouts with increases in shareholder value.

As discussed on page 24, the named executive officers have volunteered, with the agreement of the Compensation Committee, to forgo 2009 annual base salary merit increases.

Executive Compensation Overview

Our Named Executive Officers


Named Executive		Service with Our
Officer	Title	Company

Gregory H. Boyce	Chairman and Chief Executive Officer	Since 2003
Richard A. Navarre	President and Chief Commercial Officer	Since 1993
Eric Ford	Executive Vice President and Chief Operating Officer	Since 2007
Sharon D. Fiehler	Executive Vice President and Chief Administrative Officer	Since 1981
Alexander C. Schoch	Executive Vice President Law, Chief Legal Officer and Secretary	Since 2006
Michael C. Crews	Executive Vice President and Chief Financial Officer	Since 1998

Our Compensation Philosophy ~~and Program~~

The objective of our executive compensation program is to attract, retain and motivate key executives to enhance long-term profitability and create shareholder value. Our compensation program is designed to align incentives for executives with achievement of our business ~~strategies:~~strategies, which include:


	•	Executing the basics: best in class safety, operations and marketing;

	•	Capitalizing on organic growth opportunities;

	•	Expanding in high-growth global markets; and

	•	Participating in new generation and Btu Conversion projects.

Our compensation program is based on the following policies and objectives:


	•	~~Program~~Compensation has a clear link to shareholder value;


	•	~~Program~~The compensation program is designed to support achievement of our business objectives;

	•	Total compensation opportunities are established at levels which are competitive with companies of similar size and complexity and other pertinent criteria, taking into account such factors as executive performance, level of experience and retention value;

	•	~~Performance-based pay constitutes the majority of each executive’s compensation;~~

	•	Incentive pay is designed to:


	–	Reflect company-wide, business unit and individual performance, based on each individual’s position and level;

	–	Balance rewards for short-term performance with long-term ~~performance based~~performance-based incentives;

	–	Balance rewards for financial and operating performance with compensation for shareholder value creation; and

	–	Incorporate internal and external performance measures.


	•	Program is communicated so that participants understand how their decisions and actions affect business results and their compensation.

With these policies and objectives in mind, the Compensation Committee has approved a compensation program for the named executive officers that incorporates four key components: base salary, annual incentive payments, long-term incentive compensation consisting of stock options and performance units, and retirement and other benefits.

Role of the Compensation Committee

~~Deductibility of Compensation Expenses~~

Role of the Compensation Consultant

~~well as annual and long-term incentives.~~ In addition, ~~Mercer~~F.W. Cook advised the Committee on plan design for each element of executive compensation, including helping to identify:


	•	the appropriate mix of base salary and annual and long-term incentive compensation;

	•	the appropriate financial measures and weightings for annual incentive and performance unit awards ~~(e.g.~~(including EBITDA, ~~Earnings per Share~~EPS, total shareholder return and ~~Leverage Ratio)~~Return on Capital);

	•	the appropriate mix of long-term equity compensation to be paid as stock options versus performance units; and

	•	the relevant industry comparator groups and the relative weightings of total shareholder return for measuring the value of performance units.

The ~~Compensation Committee did not engage F.W. Cook until after executive compensation opportunities for 2007 had been approved. The Compensation~~ Committee and the Special Committee sought and used F.W. Cook’s advice in determining annual incentive compensation with respect to performance in ~~2007.~~2008. In addition, the Committee considered F.W. Cook’s advice in establishing the types and levels of compensation to be paid to the executives for ~~2008 and the Committee~~2009, and the Special Committee considered F.W. Cook’s advice in establishing the types and levels of compensation to be paid to Mr. Boyce for 2009. The Committee and the ~~Chairman and Chief Executive Officer~~Special Committee retain authority for ~~2008. F.W. Cook’s role and duties in determining~~ compensation ~~opportunities for 2008 were similar to Mercer’s role and duties in determining compensation opportunities for 2007.~~decisions, which may deviate from the consultant’s recommendation.

Review of External Data

Each year, the Compensation Committee commissions a compensation analysis conducted by its independent compensation consultant to determine whether our executive compensation program is consistent with those of other publicly-held companies of similar size and industry.

For mid-level management positions that require technical coal industry knowledge and experience, we use a mining comparator group for benchmarking purposes. These positions are generally operational in nature. None of the named executive officers held these positions during 2007. The mining comparator group comprises publicly-held coal companies from which we believe we are likely to recruit for these types of positions and is composed of Alpha Natural Resources, Inc., Arch Coal, Inc., CONSOL Energy, Inc., Foundation Coal Holdings, Inc., International Coal Group, Inc., James River Coal Company, Massey Energy Company, and Westmoreland Coal Company. This is the same comparator group as the Industry Peer Group used in connection with our performance unit program.

Talent for ~~other~~ senior-level management positions and key roles in the organization can be acquired across a ~~broader~~broad spectrum of companies. As such, we ~~use both the above-mentioned mining comparator group and~~rely on a group of publicly-held companies of similar size ~~and~~and/or complexity to assess competitiveness. ~~This~~The Industrial comparator group is comprised of the following companies:


Air Products & Chemicals, Inc.		Monsanto Company
Barrick Gold Corporation		National Oilwell Varco, Inc.
Cliffs Natural Resources Inc.*		Newmont Mining Corporation
Consol Energy Inc.*		Praxair, Inc.
Eastman Chemical Company		Rockwell Automation, Inc.
Ecolab, Inc.		Rohm and Haas Company
El Paso Corporation*		Smith International, Inc.
EOG Resources*		Southern Copper Corporation
Freeport-McMoRan Copper & Gold, Inc.		SPX Corporation
Goodrich Corporation		Teck Cominco Ltd.
ITT Corporation		Timken Company
Lubrizol Corporation


*		Added to peer group during 2008.

We also review the compensation practices and performance of eight publicly-held coal mining companies as a secondary comparison. Because these companies are much smaller than us, we rely more on the Industrial comparator group for individual executive compensation benchmarking. The

composition of this group of companies did not change from 2007 to 2008. The Coal comparator group is ~~composed~~comprised of Air Products & Chemicals, Inc., Barrick Gold Corporation, Eastman Chemical Company, Ecolab, Inc., Freeport-McMoRan Copper & Gold, Goodrich Corporation, ITT Corporation, Lubrizol Corporation, Monsanto Company, National Oilwell Varco, Inc., Newmont Mining Corporation, Praxair, Inc., Rockwell Automation, Rohm and Haas Company, Smith International, Inc., Southern Copper Corporation, SPX Corporation, Inc., Teck Cominco Ltd., and Timken Company. the following companies:


Alpha Natural Resources, Inc.		International Coal Group, Inc.
Arch Coal, Inc.		James River Coal Company
Consol Energy Inc.		Massey Energy Company
Foundation Coal Holdings, Inc.		Westmoreland Coal Company

In addition, ~~for international positions,~~ we review international companies such as Anglo American, plc, Rio Tinto, plc, and BHP Billiton Limited when relevant compensation data isare available.

Overall, ~~the independent compensation consultants~~F.W. Cook confirmed that our executive compensation program, as structured, is ~~competitive.~~competitive with our peers. Based upon the review of the compensation plans discussed below, peer group compensation levels and assessments of individual and corporate performance, the ~~Compensation~~ Committee, ~~assisted by its independent compensation consultants~~with the assistance of F.W. Cook, determined that the value and design of our executive compensation program is appropriate.

~~2007~~2008 Executive Compensation Components

For the year ended December 31, ~~2007,~~2008, the principal components of compensation for the named executive officers were:


	•	Annual Base Salary;

	•	Annual Cash Incentive Compensation;

	•	Long-term Equity Incentives; and

	•	Retirement and Other Benefits.

Annual Base Salary

In general, base salary for each employee, including the named executive officers, is established based on the individual’s job responsibilities, performance and experience, our overall budget for merit increases and the competitive environment. In ~~2007,~~2008, we provided a base pay increase to our ~~employees~~executives but, in accordance with our philosophy of providing a strong link between pay and performance, the exact amount of the increase (if any) varied among ~~employees~~executives based on their performance levels. For 2009, the named executive officers have volunteered, with the agreement of the Compensation Committee, to forgo 2009 annual base salary merit increases. Any market-based compensation adjustments will be made if warranted.

The ~~Compensation~~ Committee reviewed the ~~2007~~2008 base salaries of Mr. Boyce and the ~~Chairman and Chief Executive Officer and his direct reports~~executives who report directly to Mr. Boyce to ensure competitiveness in the marketplace. Consistent with our philosophy, the Committee (and, in the case of ~~the Chairman and Chief Executive Officer,~~Mr. Boyce, the Special Committee), approved base salary adjustments based on market information, individual performance and ~~individual performance. The~~any change in role or promotion. On an ongoing basis, the Committee will ~~continue to~~ review the base salaries of our executive officers to ensure they take into account performance, experience and retention value and that salary levels ~~continue to be~~are competitive with companies of similar size and complexity.

Annual Cash Incentive Compensation

Our annual incentive compensation plan provides opportunities for key executives, including the named executive officers, to earn annual cash incentive payments tied to the successful achievement of pre-established objectives that support our business strategy.

Under the plan, participants are assigned threshold, target and maximum performance goal levels. If actual performance does not meet the threshold level, no incentive is earned under the plan. At threshold performance levels, the incentive that can be earned generally equals 50% of the target incentive.earnings opportunities. The target incentive opportunity is established through an analysis of compensation for comparable positions in industries of similar size and complexity and is intended to provide a competitive level of compensation when participants achieve their performance objectives. If actual performance does not meet the threshold level, no incentive is earned under the plan for that particular performance goal. At threshold performance levels, the incentive that can be earned generally equals 50% of the target incentive, and at maximum, the incentive that can be earned generally equals 200% of the target incentive.

~~Target~~Participants generally earn target incentive payouts ~~generally are received~~ for achieving budgeted financial and safety goals and meeting individual performance goals. Our philosophy is to set these budgeted goals at ~~levels that represent~~ high levels of performance. Maximum incentive payments generally are awarded when budgeted financial goals and individual performance goals are significantly exceeded. ~~A participant’s annual incentive opportunity is based upon his or her level of participation in~~Goals for the ~~plan~~named executive officers, excluding Mr. Boyce, are reviewed and ~~competitive market practices.~~approved by the Compensation Committee for each calendar year. The Special Committee reviews and approves the goals and payouts for Mr. Boyce for each calendar year.

Awards for the named executive officers are based on achievement of corporate and individual goals. Achievement of corporate goals is determined by comparing our actual performance against objective goals, and achievement of individual goals is determined by evaluating a combination of achievement of both objective and ~~subjective~~discretionary performance measures. ~~All goals are established by us, and goals~~Goals for the named executive officers, excluding ~~the Chairman and Chief Executive Officer,~~Mr. Boyce, are reviewed and approved by the ~~Compensation~~ Committee for each calendar year. The Special Committee ~~of the Board of Directors~~ reviews and approves the goals and payouts for ~~each calendar year for the Chairman and Chief Executive Officer~~Mr. Boyce for each calendar year.

~~In determining final annual incentive awards, the Chairman and Chief Executive Officer has discretion~~The Committee recommends, for ~~each of his direct reports up to the maximum allowable award, provided that such award is approved~~approval by ~~the Compensation Committee; and~~ the Special Committee of the Board, ~~has discretion~~Mr. Boyce’s annual incentive award. Mr. Boyce recommends, for approval by the Committee, annual incentive awards for the ~~Chairman and Chief Executive Officer up to the maximum allowable award.~~

~~The Compensation Committee reviews and approves annual incentive payouts to the~~other named executive ~~officers, excluding the Chairman and Chief Executive Officer. The Special Committee of the Board of Directors reviews and approves annual incentive payouts to the Chairman and Chief Executive Officer.~~officers.

~~2007~~2008 Annual Incentive Performance Measures

Based on input from management and information and advice from ~~its independent compensation consultant,~~F.W. Cook, the Special Committee and the Compensation Committee established certain performance measures and weightings for determining the ~~Chairman and Chief Executive Officer’s~~2008 annual incentive opportunity for Mr. Boyce and each of the other named executive ~~officer’s 2007 annual incentive opportunity, respectively.~~officers.


2008 Performance Measure	Method of Determination	Alignment with Performance Focus

EBITDA	Income from continuing operations before deducting net interest expense, income taxes, minority interests, asset retirement obligation expense and depreciation, depletion and amortization.	EBITDA is a key metric we use to measure our operating performance, as well as an indicator of our ability to meet debt service and capital expenditure requirements.
Earnings per Share (EPS)	EPS is calculated by dividing income from continuing operations by the number of total shares outstanding on a fully diluted basis.	EPS is a key metric used by outside investors to assess our profitability.
Safety	Safety performance is determined not only by the NEO’s contribution to promoting a culture of continuous improvement in safety, but also by our achievement of quantitative safety goals.	Safety is a core value that is integrated into all areas of our business. For 2008, our quantitative safety goal was set at a 13% improvement over 2007’s actual results.

~~For 2007, the performance measures for the named executive officers included goals for EBITDA, Earnings per Share, Leverage Ratio, Safety and Individual Goals.~~

~~EBITDA~~

The EBITDA performance measure used to determine the annual incentive is also one of the key metrics we use to measure our operating performance, as well as an indicator of our ability to meet debt service and capital expenditure requirements. EBITDA is defined as income from continuing operations before deducting early debt extinguishment costs, net interest expense, income taxes, minority interests, asset retirement obligation expense and depreciation, depletion and amortization.

~~Earnings per Share (EPS)~~

We use EPS in our annual incentive plan because it is a key metric used by outside investors to assess our profitability. EPS is calculated by dividing income from continuing operations by the number of total shares outstanding on a fully diluted basis.

~~Leverage Ratio~~

We use Leverage Ratio in our annual incentive plan to ensure our capital structure is not too heavily weighted toward debt. Leverage ratio is calculated by dividing total debt by the sum of total debt, total equity and minority interest.

~~Safety~~

Safety is a core value that is integrated into all areas of our business. In line with that philosophy, the named executive officers’ annual incentive opportunity depends not only on their contribution to promoting a culture of continuous improvement in safety (as referenced by the Safety Discretionary goal in the table below), but also our achievement of quantitative safety goals. For 2007, our quantitative safety goal was set at a 15% improvement over 2005’s actual record results.

Individual Goals

The Individual Goals established for the named executive officers were designed to further our business strategies and increase shareholder value. The individual goals for each of the named executive officers were reviewed and approved in advance by the ~~Compensation~~ Committee, and the individual goals for ~~the Chairman and Chief Executive Officer~~Mr. Boyce were then reviewed and approved in advance by the Special Committee. These goals and objectives centered on:


	•	Continuous improvement in safety


	•	Growth in revenue and earnings

	•	Succession planning and building of a deep talent pool

	•	Mergers &and acquisitions

	•	Operational improvement

	•	Industry and government relations

	•	Long-term strategic direction

The Special Committee and the Committee periodically review market conditions to ensure the appropriateness of established financial performance measures and individual goals for the annual incentive plan for Mr. Boyce and the other named executive officers, respectively.

~~2007~~ Annual Cash Incentive Payouts for 2008 Performance

The table below summarizes the actual results for these performance goals for 2007. Actual results for EBITDA and EPS for 2007 include the ten months of Patriot prior to the spin-off and therefore are not comparable to similarly named measures included in our consolidated financial statements. In 2007, we had EBITDA of $1,026.1 million and a Leverage Ratio of 56.53%, both of which were in excess of the threshold performance level but below the target for those goals. In 2007, we had EPS of $1.52, which was at the threshold performance level for this goal. However, the safety incidence rate of 3.04 was below the threshold performance level for this goal.2008.

Percentage of Total

Measure
Award Actual Results Achievement

EBITDA 40.0 % $1,026.1 million Above Threshold
EPS 10.0 % $1.52 At Threshold
Leverage Ratio 10.0 % 56.5 % Above Threshold
Safety Incidence Rate 5.0 % 3.04 Below Threshold
Safety Discretionary 5.0 % By Individual
Individual Goals 30.0 % By Individual


	Percentage
	of Total
Measure	Award			Target		Actual Results		Achievement

EBITDA ($ millions)		35.0	%		$1,000.0 million		$1,847.3 million		Above Maximum
Earnings per Share (EPS) ($/sh)		10.0	%		$0.94		$3.63		Above Maximum
US Safety Incidence Rate		5.0	%		2.00		1.65		Above Maximum
Individual Goals		50.0	%				By Individual

For their ~~2007~~2008 performance, the ~~Chairman and Chief Executive Officer, the Chief Financial Officer and the other~~ named executive officers earned payouts under our annual incentive plan, as reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation ~~Tables~~Table on ~~pages 36 and 38 of this Proxy Statement.~~page 35. Other eligible executives received payouts under the same annual incentive plan. Annual incentive payouts for ~~2007~~2008 were based on our achievement of quantitative goals and individual goals shown in the table above.

The Special Committee evaluated ~~the Chairman and Chief Executive Officer’s~~Mr. Boyce’s performance in relation to these goals, and approved the level of his ~~2007~~2008 payout under our annual incentive plan accordingly. The Compensation Committee, with ~~the Chairman and Chief Executive Officer,~~Mr. Boyce, evaluated the performance of each of the other named executive officers in relation to these goals, and approved the level of their ~~2007~~2008 payouts under our annual incentive plan accordingly.

In 2007, additional special annual incentive awards were earned by the Chairman and Chief Executive Officer, the Chief Financial Officer, two of the three named executive officers who continue to serve as executive officers, and several other non-executive employees for significant accomplishments during 2007 that were not factored into the performance measures at the beginning of the year, but which will help us execute our strategic plan. These accomplishments included, but were not limited to, the successful spin-off of Patriot Coal Corporation, the implementation in the U.S. of a new integrated information technology system provided by SAP AG, and completion of the financial closing with our equity partners for the Prairie State Energy Campus. These special award amounts are reflected in the “Bonus” column of the Summary Compensation Table on page 36 of this Proxy Statement.

The following table shows the target annual incentive payout and the applicable payout range (each shown as a percentage of base salary) for each of the named executive officers, ~~who continues to serve as an executive officer,~~ his or her actual award under our annual incentive plan ~~any special annual incentive~~

Current Officers

Richard A. Navarre⁽¹⁾

Michael C. Crews⁽²⁾

The following table shows the target annual incentive payout and the applicable payout range (each shown as a percentage of base salary) for each of the named executive officers who no longer serves as an executive officer, his actual award under our annual incentive plan, and the actual award as a percentage of salary earned in 2007. The actual awards earned for these former executives were prorated for the portion of 2007 during which they were employed by us. The target payout and payout range for each executive is based upon his level of participation in the plan and competitive market practices.

~~2007 Annual Incentives — Former Executive Officers~~

Long-Term Equity Incentive Compensation

The targeted value of these awards, shown in the table below as a percentage of each executive’s base salary, is split evenly between stock options and performance units.

~~For 2007, the Special~~The Committee awarded stock options and performance units to the Chairman and Chief Executive Officer with a total grant date fair value of 350% of his base salary. In approving this award, the Special Committee considered the advice of its independent compensation consultant, as well as available benchmarking data and the perceived retention value of the award.

~~The Compensation Committee approved a~~approves long-term equity incentive ~~opportunity~~opportunities for each of the other named executive officers through ~~annual~~ awards of stock options and performance units. The targeted value of these awards, shown in the ~~tables~~table below, is split evenly between stock options and performance units. The ~~Committee intends that these long-term incentive opportunities be competitive~~actual number of stock options and ~~based on our actual performance.~~performance units awarded is determined as discussed below. When evaluating awards to be granted, the ~~Compensation~~ Committee and the Special Committee considered competitive market data and the perceived retention value of the ~~award.~~awards.

~~2007~~2008 Long-Term Incentive Awards — ~~Current~~Named Executive Officers


	Target Award as ~~a %~~
Name	a % of Salary

~~Current Officers~~
Gregory H. Boyce		~~350~~375	%
Richard A. Navarre		~~250~~275	%
Eric Ford		250	%
Sharon D. Fiehler		200	%
~~Roger B. Walcott, Jr.~~ Alexander C. Schoch		~~200~~150	%

~~2007 Long-Term Incentive Awards — Former Executive Officers~~

Michael C. Crews
	~~Target Award as a %~~
~~Name~~	~~of Salary~~

~~Former Officers~~
~~Richard M. Whiting~~		~~245~~	%
~~Jiri Nemec~~		~~200~~150	%

Stock Options

Our stock option program is a long-term plan designed to create a direct link between executive compensation and increased shareholder value, provide an opportunity for increased equity ownership by executives, and maintain competitive levels of total compensation opportunity.

The Compensation Committee and Special Committee meet in December of each year to evaluate, review and approve the annual stock option award design and level of award for each named executive officer and ~~the Chairman and Chief Executive Officer. The~~for Mr. Boyce. These Committees approve stock option awards prospectively. ~~For example, the annual~~Annual stock option awards are generally approved in early December for granting on ~~the~~our first business day in January at our closing market price per share on the grant date. The ~~Compensation~~ Committeeand/or the Special Committee may occasionally approve stock option awards that are granted other than on ~~the~~our first business day of the year, due to promotions or new hires. In these cases the ~~Compensation~~ Committee or the Special Committee approves the award in advance of the grant date, and the stock option grant is awarded on the determined date with an exercise price equal to our closing market price per share on such date. We use aBlack-Scholesvaluation model to establish the grant-date fair value of all stock option grants.

All stock options are granted at an exercise price equal to the closing market price of our Common Stock on the date of grant. Accordingly, those stock options will have intrinsic value to employees only if the market price of our Common Stock increases after that date. Stock options generally vest in one-third increments over a period of three years or cliff vest after three years; however, options will immediately vest upon a change of control or a recapitalization event or upon the holder’s death or disability. If the holder terminates employment without good reason (as defined in his or her employment agreement), all unvested stock options are forfeited. Stock options expire ten years from the date of grant.

Performance Units

Similar to the stock option program, our performance unit program is a long-term plan designed to create a direct link between executive compensation and increased shareholder value, and maintain competitive levels of total compensation. In addition, our 2008 performance unit program is designed in part to reward executives for the achievement of strong financial returns on ~~investment.~~investment and total shareholder return. Certain key executives are eligible to receive long-term incentive awards in the form of performance units.

Performance units granted in ~~2007~~2008 will be payable, if earned, in shares of our Common Stock. The percentage of the performance units earned is based on our total shareholder return (“TSR”) over a period

~~Retirement Benefits~~

~~Defined Contribution Plan~~

~~Excess Defined Benefit and Excess Defined Contribution Retirement Plan~~

~~Other Benefits Provided by the Company~~

~~Perquisites~~

Share Ownership Guidelines

Gregory H. Boyce⁽³⁾

Gregory H. Boyce⁽¹⁾

Alexander C. Schoch⁽²⁾

Michael C. Crews⁽²⁾

Broad-based Benefits


	•	Vision Benefits

	•	Defined Benefit Plan (Pension) — plan was phased out on January 1, 2001 and is discussed in the “Pension Benefits” section on page 44.

	•	Defined Contribution Plan (401(k))

	•	Excess Defined Benefit and Excess Defined Contribution Plans

	•	Employee Stock Purchase Plan

	•	Life Insurance

	•	Business Travel Accident Insurance

	•	Accidental Death and Dismemberment

	•	Short-Term and Long-Term Disability

	•	Health Care Flexible Spending Account

	•	Dependent Care Flexible Spending Account

	•	Vacation and Holidays

Perquisites

We provide a limited number of ~~December 31, 2007~~perquisites to senior management that are related to business purposes. We provided the following perquisites to senior management in 2008.

Company Aircraft. Our aircraft may be used in the following situations:


	•	Senior management may use the aircraft for business purposes; and

	•	Spouses/partners may accompany senior management members on company aircraft for company business purposes.

Relocation. We generally provide relocation benefits to newly-hired executives or ~~three years after joining~~executives that have been asked by us to relocate. These benefits typically include payment for the ~~Board.~~costs of relocation, temporary housing, additional personal leave and associated taxgross-ups.

Other Perquisites. We do not provide or reimburse the cost of country club memberships or the purchase or lease of a vehicle for any executive.

Deductibility of Compensation Expenses

Pursuant to Section 162(m) of the Internal Revenue Code, some compensation paid to executive officers in excess of $1 million is not tax deductible, except to the extent it constitutes performance-based compensation. The Compensation Committee has and will continue to consider the impact of Section 162(m) when establishing incentive compensation plans. As a result, a significant portion of our executive compensation satisfies the requirements for deductibility under Section 162(m). At the same time, the Committee considers its primary goal to design compensation strategies that further the best interests of our shareholders. In certain cases, it may determine that the amount of tax deductions lost is not significant when compared to the potential opportunity a compensation program provides for creating shareholder value. The Committee therefore retains the ability to evaluate the performance of our executive officers and to pay appropriate compensation, even if some of it may be non-deductible.

~~The following table summarizes the ownership of our Common Stock as of December 31, 2007 by each of our current non-employee directors.~~

Ownership
Ownership

Guidelines, Relative
Relative to

Share Ownership
Share Ownership
to Annual
Annual

Name⁽¹⁾
(#) ($)⁽²⁾ Retainer⁽³⁾ Retainer⁽³⁾

Non-Employee Directors

William A. Coley 6,385 393,571 3 x 5.3 x
Henry Givens, Jr. 6,385 393,571 3 x 5.3 x
William E. James 9,381 578,245 3 x 7.7 x
Robert B. Karn III 17,603 1,085,049 3 x 14.5 x
Henry E. Lentz 6,093 375,573 3 x 5.0 x
William C. Rusnack 9,493 585,149 3 x 7.8 x
James R. Schlesinger 9,509 586,135 3 x 7.8 x
Blanche M. Touhill 9,509 586,135 3 x 7.8 x
John F. Turner⁽⁴⁾
3,455 212,966 3 x 2.8 x
Sandra Van Trease 17,173 1,058,544 3 x 14.1 x
Alan H. Washkowitz 6,093 375,573 3 x 5.0 x


⁽¹⁾		~~Mr. Boyce’s stock ownership is shown in the table for named executive officers who currently serve as executive officers.~~

⁽²⁾		~~Value is calculated based on the closing market price per share of our Common Stock on the last trading day of 2007, $61.64.~~

⁽³⁾		~~The base annual retainer for the non-employee directors in 2007 was $75,000.~~

⁽⁴⁾		~~Mr. Turner joined the Board of Directors in July 2005.~~

Employment Agreements

The Compensation Committee ~~in consultation with a prior independent compensation consultant,~~ approved the terms of all senior executive employment ~~agreements, including~~agreements. The Special Committee approved the employment agreement for ~~the Chairman and Chief Executive Officer.~~Mr. Boyce. The terms of those agreements, including the provision of post-termination benefits, were structured to attract and retain persons believed to be key to our success, as well as to be competitive with compensation practices for executives in similar positions at companies of similar size and complexity. In assessing whether the terms of the employment agreements were competitive, the Committee received advice from ~~its independent compensation consultant(s)~~F.W. Cook and reviewed appropriate ~~salary~~ surveys and industry benchmarking data. During 2008, all senior executive employment agreements ~~will be reviewed~~were amended and ~~amended~~restated as necessary to comply with Internal Revenue Code Section 409A.

~~The Chairman and Chief Executive Officer’s~~Mr. Boyce’s employment agreement ~~has a structure~~is similar to the employment agreements of the other named executive officers. However, some amounts payable to him under his agreement ~~were~~are intended to compensate him for amounts he forfeited in leaving his former employer. ~~Our Executive Vice President and Chief Operating Officer’s~~Mr. Ford’s employment agreement also includes amounts payable that ~~were~~are intended to compensate him for amounts he forfeited in leaving his former employer. These additional amounts payable to these two executives are not applicable to the other named executive officers.

~~The Chairman and Chief Executive Officer’s~~Mr. Boyce’s employment agreement provides for a three-year term that extends day-to-day so that there is at all times a remaining a term of three years. Following a termination other than for cause or resignation for good reason, ~~the Chairman and Chief Executive Officer~~Mr. Boyce would be entitled to the following cash severance benefits ~~payable in either (a)~~ equal ~~installments over three years or (b) a lump~~to the sum ~~as determined by the Board of Directors:~~of: (1) three times base salary ~~and~~ (2) three

written notice is given by either party at least 90 days before the end of the applicable period. All other named executive officers’ employment agreements have two-year terms which extend day-to-day so that there is at all times a remaining term of two ~~years.~~ years, except Mr. Schoch, whose agreement has a one-year term which extends day-to-day so that there is at all times a remaining term of one year.

Following termination other than for cause or resignation for good reason (as defined in the employment ~~agreements)~~agreement), ~~the~~ other ~~current~~ named executive officers, ~~would be~~except for Mr. Schoch, are entitled to the following cash severance benefits ~~payable in either (a)~~ equal ~~installments over two years or (b) a lump~~to the sum ~~as determined by the Chairman and Chief Executive Officer and the Board of Directors:~~of: (1) two times base salary, ~~and~~ (2) two times ~~the higher of (A) the target annual incentive or (B)~~ the average of the actual annual incentive awards paid into the executive for the three prior ~~years.~~years, and (3) two times six percent of base salary (to compensate for Company contributions the executive otherwise might have received under the Company’s retirement plan). Mr. Schoch is entitled to the following cash severance benefits: (1) one times base salary, (2) one times the annual average of the actual incentive paid to him for the three prior years, and (3) one times six percent of base salary (to compensate for Company contributions he otherwise might have received under the Company’s retirement plan). One-half of these benefits would be paid in a lump sum payment on the earlier to occur of the executive’s death or the first business day immediately following the six-month anniversary of his termination, and the remaining one-half of these benefits would be paid in six substantially equal monthly payments beginning on the first day of the month next following the initial lump sum payment. In addition, ~~the other current named executive officers~~they would be entitled to (1) a one-time prorated annual incentive for the year of termination (based on our actual performance multiplied by a fraction, the numerator of which is the number of business days the executive ~~officer~~ was employed during the year of termination, and the denominator of which is the total number of business days during that year), payable when annual incentives, if any, are paid to our other executives, and (2) qualified and nonqualified retirement, pension (if applicable), life insurance, medical and other benefits for the two-year period following ~~termination.~~termination (a one-year period following termination in the case of Mr. Schoch).

In addition, if ~~our Executive Vice President and Chief Operating Officer’s~~Mr. Ford’s employment with us were to terminate for any reason on or after age 55 or if he should die or became disabled, a lump sum of $800,000 would be paid to him. If his employment were to terminate for any reason other than death or disability prior to reaching age 55, the lump sum payment of $800,000 would be forfeited.

Under all executives’ employment agreements, we are not obligated to provide any benefits under tax qualified plans that are not permitted by the terms of each plan or by applicable law or that could jeopardize the plan’s tax status. Continuing benefit coverage will terminate to the extent an executive is offered or obtains comparable coverage from any other employer. The employment agreements provide for confidentiality during and following employment, and include a noncompetition and nonsolicitation agreement that is effective during and for one year following employment. However, in the case of Mr. Crews, the noncompetition agreement does not apply if we do not renew his employment agreement and terminate his employment and Mr. Crews does not receive severance benefits from us. The employment agreements also include a nonsolicitation agreement that is effective during and for the two years following employment. If an executive breaches any of his or her confidentiality, noncompetition or nonsolicitation agreements, the executive will forfeit any unpaid amounts or benefits. To the extent that excise taxes are incurred by an executive as a result of “excess parachute payments,” as defined by IRS regulations, we will pay additional amounts so that the executives would be in the same financial position as if the excise taxes were not incurred.

~~Named Former Executive Officers~~

On October 31, 2007, we completed the spin-off of our wholly owned subsidiary, Patriot Coal Corporation (“Patriot”), which was accomplished through a special dividend of all outstanding shares of Patriot to our shareholders. On that same date, Richard M. Whiting elected to resign from his position as our Executive Vice President and Chief Marketing Officer so that he could become Patriot’s President and Chief Executive Officer, and Jiri Nemec elected to resign from his position as our Group Vice President Eastern Operations so that he could become Patriot’s Senior Vice President and Chief Operating Officer.

Even though Messrs. Whiting and Nemec terminated their employment with us in October 2007, their compensation information is included in this Proxy Statement as required by SEC rules. To avoid confusion on the part of investors, we have included separate executive compensation tables for these former executive officers, which in each case immediately follow the executive compensation tables for the named executive officers who currently serve as executive officers. This is consistent with our treatment of the Patriot business as a discontinued operation for financial reporting purposes wherein Patriot’s operating results and financial condition are clearly segmented in our financial statements.

Pursuant to their termination arrangements with us, Messrs. Whiting and Nemec received special grants of restricted stock and Common Stock to compensate them for unvested stock options that were forfeited upon leaving us to join Patriot. Our 2007 compensation expense related to these awards is included in the “Stock Awards” column of the Summary Compensation Table on page 38. Messrs. Whiting and Nemec also received pro-rata annual incentive plan awards for 2007, which are included in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table on page 38. Additional information regarding these termination agreements can be found under the caption “Termination Arrangements with Former Executive Officers” beginning on page 57 of this Proxy Statement.

REPORT OF THE COMPENSATION COMMITTEE

SUMMARY COMPENSATION ~~TABLES~~TABLE

The following table summarizes the total compensation paid to ~~the~~or accrued by our Chairman and Chief Executive Officer, the two executives who served as our Chief Financial Officer during 2008 and ~~the~~our three other most highly compensated executive officers ~~currently employed by us~~ for their service to us during the fiscal years ended December 31, 2008, 2007 and 2006. Long-term equity incentive awards to these ~~officers~~executives include both performance units (reflected in the “Stock Award” column below) and stock options (reflected in the “Option Awards” column below). The value reflected in each of these columns is the annual compensation expense associated with equity awards for each executive, recognized for financial statement reporting purposes in accordance with ~~FAS 123R.~~Statement of Financial Accounting Standard No. 123 (Revised) (FAS 123R).

Change in

Pension Value

and Non-

qualified

Non-Equity
Deferred

Stock
Option
Incentive Plan
Compensation
All Other

Salary
Bonus
Awards
Awards
Compensation
Earnings
Compensation
Total
Name and Principal Position
�� Year ($) ($)⁽¹⁾ ($)⁽²⁾ ($)⁽²⁾⁽³⁾ ($)⁽⁴⁾ ($)⁽⁵⁾ ($)⁽⁶⁾ ($)

Current Officers

Gregory H. Boyce 2007 980,000 500,000 4,721,158 ⁽⁷⁾ 1,271,485 1,000,671 — 119,572 8,592,886
Chairman and Chief Executive Officer 2006 887,500 — 3,301,325 ⁽⁸⁾ 914,761 1,329,620 — 118,977 6,552,183
Richard A. Navarre⁽⁹⁾
2007 655,000 331,000 947,303 970,685 517,784 — 76,069 3,497,841
President and Chief Commercial Officer 2006 612,500 — 1,782,473 775,273 850,000 12,326 85,782 4,118,354
Eric Ford 2007 541,667 52,000 1,744,886 ⁽¹⁰⁾ 234,752 532,105 — 981,693 4,087,103
Executive Vice President and Chief Operating Officer
Sharon D. Fiehler⁽¹¹⁾
2007 430,250 117,000 410,506 559,794 338,701 — 53,228 1,909,479
Executive Vice President and Chief Administrative Officer 2006 408,000 — 877,306 453,722 500,000 27,160 59,171 2,325,359
Roger B. Walcott, Jr. 2007 475,000 — 439,642 389,732 360,000 — 55,138 1,719,512
Executive Vice President 2006 452,500 — 844,467 291,382 500,000 10,830 58,046 2,157,225


															Change in
															Pension Value
															and Non-
															qualified
													Non-Equity		Deferred
								Stock			Option		Incentive Plan		Compensation		All Other
			Salary			Bonus		Awards			Awards		Compensation		Earnings		Compensation		Total
Name and Principal Position	Year		($)			($)		($)⁽¹⁾			($)⁽¹⁾		($)⁽²⁾		($)⁽³⁾		($)⁽⁴⁾		($)

Gregory H. Boyce		2008		1,053,750			—		6,990,991	⁽⁵⁾		1,692,230		2,069,375		—		144,512		11,950,858
Chairman and		2007		980,000			500,000		4,721,158			1,271,485		1,000,671		—		101,772		8,575,086
Chief Executive Officer		2006		887,500			—		3,301,325			914,761		1,329,620		—		118,977		6,552,183

Richard A. Navarre		2008		730,000			—		1,952,719			1,128,169		1,116,900		5,730		103,577		5,037,095
President and Chief		2007		655,000			331,000		947,303			970,685		517,784		—		64,769		3,486,541
Commercial Officer		2006		612,500			—		1,782,473			775,273		850,000		12,326		85,782		4,118,354

Eric Ford		2008		668,750			—		1,558,493	⁽⁷⁾		554,314		918,000		—		380,859		4,080,416
Executive Vice President		2007		541,667	⁽⁶⁾		52,000		1,744,886			234,752		532,105		—		1,001,193		4,106,603
and Chief Operating Officer

Sharon D. Fiehler		2008		446,250			—		1,106,505			634,851		594,001		16,081		63,269		2,860,957
Executive Vice President		2007		430,250			117,000		410,506			559,794		338,701		—		45,478		1,901,729
and Chief Administrative Officer		2006		408,000			—		877,306			453,722		500,000		27,160		59,171		2,325,359

Alexander C. Schoch		2008		373,500			—		465,051			249,747		456,000		—		46,103		1,590,401
Executive Vice President Law, Chief Legal Officer and Secretary

Michael C. Crews⁽⁸⁾		2008		317,726			—		506,941			47,714		368,922		202		40,112		1,281,617
Executive Vice President and Chief Financial Officer


⁽¹⁾		Amounts included in this column for 2007 represent additional special annual incentive awards earned for significant accomplishments completed by us in 2007 that were not factored into the performance measures at the beginning of the year, but which will help us execute our strategic plan. These accomplishments included but were not limited to the successful spin-off of Patriot Coal Corporation, the implementation in the U.S. of a new integrated information technology system provided by SAP AG, and completion of the financial closing with the equity partners for the Prairie State Energy Campus. The material terms of these awards are described under the caption “Annual Incentive Compensation” in the Compensation Discussion and Analysis beginning on page 23 of this Proxy Statement.

⁽²⁾		Amounts in the Stock Awards and Option Awards columns represent the respective amounts of expense recognized for financial statement reporting purposes in ~~2006~~2008, 2007 and ~~2007~~2006 in accordance with FAS 123R. A discussion of the relevant fair value assumptions is set forth in note 1817 to our consolidated financial statements included in our ~~2007~~2008 Annual Report. We caution that the amount ultimately realized from the stock and option awards will likely vary based on a number of factors, including our actual operating performance, stock price fluctuations and the timing of exercises (in the case of options only) and stock sales.

⁽³⁾⁽²⁾		~~The Option Awards values reported for 2006 have been restated to reflect the 2006 compensation expense recognized for financial statement reporting purposes in accordance with FAS 123R.~~

Name and Principal Position

All Other Compensation

Current Officers

GRANTS OF PLAN-BASED AWARDS IN ~~2007~~2008

The following table sets forth information concerning grants of plan-based awards during the year ended December 31, ~~2007~~2008 to the named ~~executive officers who currently serve as~~ executive officers.


																	All Other			All Other																				All Other		All Other
																	Stock			Option																				Stock		Option
																	Awards:			Awards:																				Awards:		Awards:				Grant Date
					Estimated Possible Payouts						Estimated Future Payouts						Number of			Number of		Exercise of		Total Grant				Estimated Future Payouts												Number of		Number of		Exercise or		Fair Value of
					Under Non-Equity Incentive						Under Equity Incentive Plan						Shares of			Securities		Base Price		Date Fair				Under Non-Equity Incentive						Estimated Future Payouts Under Equity Incentive						Shares of		Securities		Base Price		Stock and
					Plan Awards						Awards⁽¹⁾⁽²⁾						Stock or			Underlying		or Option		Value: All				Plan Awards						Plan Awards⁽¹⁾						Stock or		Underlying		of Option		Option
			Approval		Threshold		Target		Maximum		Threshold		Target		Maximum		Units			Options		Awards		Awards				Threshold		Target		Maximum		Threshold		Target		Maximum		Units		Options		Awards		Awards
Name	Grant Date		Date		($)		($)		($)		(#)		(#)		(#)		(#)			(#)⁽²⁾⁽³⁾		($/Sh)⁽²⁾		($)⁽⁴⁾		Grant Date		($)		($)		($)		(#)		(#)		(#)		(#)		(#)⁽²⁾		($/Sh)⁽²⁾		($)⁽³⁾

Current Officers
Gregory H. Boyce						495,000		990,000		1,980,000																			591,250		1,182,500		2,365,000
		1/3/2007		12/5/2006								25,087		50,174		100,348									2,123,865		1/2/2008								16,826		33,652		67,304								2,368,091
		1/3/2007		12/5/2006																	120,314		34.96		1,768,836		1/2/2008																77,761		62.72		1,843,993

Richard A. Navarre						266,000		532,000		997,500																			328,500		657,000		1,314,000
																											1/2/2008								9,099		18,197		36,394								1,280,523
		1/3/2007		12/4/2006								11,790		23,579		47,158									998,099		1/2/2008																42,049		62.72		997,133
		1/3/2007		12/4/2006																	56,540		34.96		831,230
Eric Ford						260,000		520,000		975,000																			270,000		540,000		1,080,000
		1/3/2007		12/4/2006								12,261		24,522		49,044									1,038,016		1/2/2008								7,365		14,730		29,460								1,036,550
		03/06/07		12/19/2006														54,198⁽⁵	⁾						2,091,501		1/2/2008																34,037		62.72		807,140
		03/06/07		12/19/2006																	57,658		35.65		858,690
Sharon D. Fiehler						174,000		348,000		652,500																			180,000		360,000		720,000
		1/3/2007		12/4/2006								6,278		12,556		25,112								��	531,495		1/2/2008								3,943		7,886		15,772								554,938
		1/3/2007		12/4/2006																	30,107		34.96		442,615		1/2/2008																18,223		62.72		432,133
Roger B. Walcott, Jr.						192,000		384,000		720,000

Alexander C. Schoch																													152,000		304,000		608,000
		1/3/2007		12/4/2006								6,942		13,883		27,766									587,667		1/2/2008								2,495		4,990		9,980								351,146
		1/3/2007		12/4/2006																	33,290		34.96		489,421		1/2/2008																11,531		62.72		273,442

Michael C. Crews																													160,000		320,000		640,000
																											1/2/2008														1,406						88,184
																											7/14/2008								3,626		7,252		14,504								621,678
																											7/14/2008																12,579		79.28		400,780

Coal comparator group, the S&P MidCap 400 Index ~~and~~or the S&P 500 Index, and ~~the Company’s EBITDA~~our Return on Invested ~~Capital.~~Capital or Return on Capital, based on the year of grant.

A portion of the outstanding equity awards for Messrs. Navarre and ~~Walcott~~Crews and Ms. Fiehler is attributable to stock options granted to them prior to our May 2001 initial public offering (“IPO”). These options were granted in connection with a leveraged buyout transaction or “LBO” involving Peabody Energy’s acquisition of Peabody Holding Company. The size and terms of the pre-IPO stock options or “LBO grants” were determined according to standard practices at that time for private companies. The LBO grants, a portion of which remain unexercised, were designed to be competitive in the industry marketplace for top executives, to compensate the management group on a basis commensurate with the risks associated with a highly leveraged transaction, to reward performance and to align their interests with our owners. A portion of the LBO grants vested in November 2007 and ~~will expire~~expired in May 2008. The remaining outstanding LBO grants vest in either July 2009 or July 2010 and expire in January 2010 or January 2011.

All unexercisable options and unvested shares or units of stock reflected in the table below are subject to forfeiture if the holder terminates employment without good reason (as defined in the holder’s employment agreement).

4338

Outstanding Equity Awards ~~of Named Current Executive Officers~~ at ~~2007~~2008 Fiscal Year End


	Option Awards										Stock Awards									Option Awards										Stock Awards
																		Equity																			Equity
																		Incentive																			Incentive
																Equity		Plan																	Equity		Plan
																Incentive		Awards:																	Incentive		Awards:
																Plan		Market or																	Plan		Market or
																Awards:		Payout																	Awards:		Payout
																Number of		Value of																	Number of		Value of
																Unearned		Unearned																	Unearned		Unearned
																Shares,		Shares,																	Shares,		Shares,
	Number of			Number of												Units or		Units or		Number of			Number of												Units or		Units or
	Securities			Securities										Market Value		Other		Other		Securities			Securities										Market Value		Other		Other
	Underlying			Underlying							Number of			of Shares or		Rights		Rights		Underlying			Underlying							Number of			of Shares or		Rights		Rights
	Unexercised			Unexercised			Option				Shares or Units			Units of Stock		That		That		Unexercised			Unexercised			Option				Shares or Units			Units of Stock		That		That
	Options			Options			Exercise		Option		of Stock That			That Have Not		Have Not		Have Not		Options			Options			Exercise		Option		of Stock That			That Have Not		Have Not		Have Not
	(#)⁽¹⁾			(#)⁽¹⁾			Price		Expiration		Have Not Vested			Vested		Vested		Vested		(#)⁽¹⁾			(#)⁽¹⁾			Price		Expiration		Have Not Vested			Vested		Vested		Vested
Name	Exercisable			Unexercisable			($)⁽¹⁾		Date		(#)⁽¹⁾			($)⁽²⁾		(#)⁽¹⁾⁽³⁾		($)⁽⁴⁾		Exercisable			Unexercisable			($)⁽¹⁾		Date		(#)⁽¹⁾			($)⁽²⁾		(#)⁽¹⁾⁽³⁾		($)⁽⁴⁾

Current Officers
Gregory H. Boyce																	38,426		2,368,579																	50,174		1,141,459
																	50,174		3,092,725																	33,652		765,583
												86,602	⁽⁵⁾		5,338,147																86,602	⁽⁵⁾		1,970,196
												40,000	⁽⁶⁾		2,465,600																40,000	⁽⁶⁾		910,000
												60,000	⁽⁶⁾		3,698,400																60,000	⁽⁶⁾		1,365,000
	Post-IPO Grants																			Post-IPO Grants
		433,010	⁽⁷⁾					9.0067		10/1/2013											433,010	⁽⁷⁾					9.0067		10/1/2013
		100,641	⁽⁸⁾					9.6880		1/2/2014											56,248	⁽⁸⁾					17.8541		1/3/2015
		37,499	⁽⁹⁾		18,749	⁽⁹⁾		17.8541		1/3/2015											27,501	⁽⁹⁾					21.6646		3/1/2015
		18,334	⁽¹⁰⁾		9,167	⁽¹⁰⁾		21.6646		3/1/2015											61,156	⁽¹⁰⁾		30,578	⁽¹⁰⁾		39.8143		1/3/2016
		30,578	⁽¹¹⁾		61,156	⁽¹¹⁾		39.8143		1/3/2016											40,105			80,209	⁽¹¹⁾		34.9553		1/3/2017
					120,314	⁽¹²⁾		34.9553		1/3/2017														77,761	⁽¹²⁾		62.7200		1/2/2018

Total		620,062			209,386							186,602			11,502,147		88,600		5,461,304		618,020			188,548							186,602			4,245,196		83,826		1,907,042

Richard A. Navarre																	39,924		2,460,915																	23,579		536,422
																	23,579		1,453,410																	18,197		413,982
	LBO Grants																			LBO Grants
					102,394	⁽¹³⁾		3.3001		1/1/2011														102,394	⁽¹³⁾		3.3001		1/1/2011
	Post-IPO Grants																			Post-IPO Grants
		7,382	⁽¹⁴⁾					11.2907		6/15/2014														15,884	⁽¹⁰⁾		39.8143		1/3/2016
					14,003	⁽⁹⁾		17.8541		1/3/2015														49,141	⁽¹⁴⁾		39.8143		1/3/2016
		3,898	⁽¹⁵⁾		3,898	⁽¹⁵⁾		21.9163		4/1/2015														37,693	⁽¹¹⁾		34.9553		1/3/2017
					49,141	⁽¹⁶⁾		39.8143		1/3/2016														42,049	⁽¹²⁾		62.7200		1/2/2018
		15,885	⁽¹¹⁾		31,768	⁽¹¹⁾		39.8143		1/3/2016
Total																					0			247,161												41,776		950,404
					56,540	⁽¹²⁾		34.9553		1/3/2017
Total		27,165			257,744												63,503		3,914,325
Eric Ford																	24,522		1,511,536																	24,522		557,876
												30,132	⁽¹⁷⁾		1,857,336																					14,730		335,108
												6,000	⁽¹⁸⁾		369,840																15,066	⁽¹⁵⁾		342,752
	Post-IPO Grants																														6,000	⁽¹⁶⁾		136,500
					57,658	⁽¹⁹⁾		35.6481		3/6/2017										Post-IPO Grants
																					19,220			38,438	⁽¹⁷⁾		35.6481		3/6/2017
																								34,037	⁽¹²⁾		62.7200		1/2/2018

Total					57,658							36,132			2,227,176		24,522		1,511,536		19,220			72,475							21,066			479,252		39,252		892,984

Sharon D. Fiehler																	26,615		1,640,549																	12,556		285,649
																	12,556		773,952																	7,886		179,407
	LBO Grants																			LBO Grants
					90,595	⁽¹³⁾		3.3001		1/1/2011														90,595	⁽¹³⁾		3.3001		1/1/2011
	Post-IPO Grants																			Post-IPO Grants
					6,348	⁽⁹⁾		17.8541		1/3/2015														8,472	⁽¹⁰⁾		39.8143		1/3/2016
					39,313	⁽¹⁶⁾		39.8143		1/3/2016														39,313	⁽¹⁴⁾		39.8143		1/3/2016
		8,472	⁽¹¹⁾		16,944	⁽¹¹⁾		39.8143		1/3/2016														20,071	⁽¹¹⁾		34.9553		1/3/2017
					30,107	⁽¹²⁾		34.9553		1/3/2017														18,223	⁽¹²⁾		62.7200		1/2/2018

Total		8,472			183,307												39,171		2,414,501					176,674												20,442		465,056

4439


^(12)(11)		The options were granted on January 3, 2007 and vest in three equal annual installments beginning January 3, 2008.

⁽¹²⁾		The options were granted on January 2, 2008 and vest in three equal annual installments beginning January 2, 2009.

⁽¹³⁾		The options were granted on January 1, 2001 and vest on July 1, 2010.

⁽¹⁴⁾		The options were granted on ~~June 15, 2004 and vested in three equal annual installments beginning June 15, 2005.~~

~~Outstanding Equity Awards of Named Former Executive Officers at 2007 Fiscal Year End~~

~~OPTIONS EXERCISED~~OPTION EXERCISES AND STOCK VESTED IN ~~2007~~2008

The following table sets forth detail about stock option exercises during ~~2007~~2008 and stock awards that vested during ~~2007~~2008 for each of the named ~~executive officers who currently serve as~~ executive officers. The options in this table were granted ~~in 1998~~between January 2004 and ~~between October 2003 and July 2005.~~January 2007. The stock awards are comprised of performance unit awards granted in ~~2005~~2006 and restricted stock awards granted in 2006 and 2007.

Option Awards Stock Awards
Number of
Number of

Number of
Shares Acquired
Shares Acquired

Shares
on Vesting of
on Vesting of

Acquired on
Value Realized
Performance
Restricted
Value Realized

Exercise
on Exercise
Units
Shares
on Vesting

Name
(#)⁽¹⁾ ($)⁽²⁾ (#)⁽¹⁾⁽³⁾ (#)⁽⁴⁾ ($)⁽³⁾⁽⁵⁾

Current Officers

Gregory H. Boyce 343,456 15,649,174 78,593 — 4,339,932
Richard A. Navarre 351,762 17,091,128 43,938 — 2,426,264
Eric Ford — — — 18,066 846,170
Sharon D. Fiehler 227,027 11,569,183 14,849 — 819,943
Roger B. Walcott, Jr. 264,675 12,441,014 19,038 — 1,051,287


	Option Awards				Stock Awards
					Number of		Number of
	Number of				Shares Acquired		Shares Acquired
	Shares				on Vesting of		on Vesting of
	Acquired on		Value Realized		Performance		Restricted		Value Realized
	Exercise		on Exercise		Units		Shares		on Vesting
Name	(#)⁽¹⁾		($)⁽²⁾		(#)⁽¹⁾⁽³⁾		(#)⁽⁴⁾		($)⁽³⁾⁽⁵⁾

Gregory H. Boyce		100,641		7,494,398		29,921		—		783,031
Richard A. Navarre		79,797		2,775,600		31,087		—		813,557
Eric Ford		—		—		—		15,066		788,705
Sharon D. Fiehler		33,328		1,097,273		20,724		—		542,351
Alexander C. Schoch		10,641		258,655		4,145		—		108,470
Michael C. Crews		—		—		—		1,743		104,563


⁽¹⁾		Numbers have been adjusted to reflect our2-for-1 stock splits in March 2005 and February 2006. Any options exercised after the spin-off of Patriot on October 31, 2007 have also been adjusted for the spin-off.

⁽²⁾		The value realized was calculated based on the difference between the closing market price per share of our Common Stock on the date of exercise and the applicable exercise price.

⁽³⁾		Represents the number of shares of Common Stock delivered in ~~February 2008~~January 2009 in connection with the payout of the performance unit awards granted in ~~2005.~~2006 and vested on December 31, 2008.

⁽⁴⁾		Represents the number of shares of Common Stock delivered in connection with restrictions lifting from restricted stock grants that vested during ~~2007.~~

		2008.

⁽⁵⁾		A detailed explanation of the value realized due to the payout of performance unit awards granted in ~~2005~~2006 is included in the Peabody Relative Performance for Performance Period ~~Ending~~Ended December 31, ~~2007~~2008 and Resulting Performance Unit Awards to Named ~~Current~~ Executive Officers table beginning on page ~~49 of this Proxy Statement.~~43.

Performance Unit Program

performance units granted in ~~2005~~2006 and reflect our performance and stock price appreciation during the ensuing three-year performance period. The payouts to Messrs. Whiting and Nemec relate to performance units granted in 2005, 2006, and 2007 and reflect our performance and stock price appreciation during the ensuing three-year, two-year and one-year performance periods, respectively.

Peabody Relative Performance for Performance Period ~~Ending~~Ended December 31, ~~2007~~2008 and
Resulting Performance Unit Award Payouts to Named ~~Current~~ Executive Officers

The following table compares our TSR for the three-year period ended December 31, ~~2007~~2008 to the performance of ~~a peer~~the Coal comparator group ~~of four publicly-traded mining companies~~ and to the performance of the S&P MidCap 400 ~~Index~~Index. Based on our relative performance, the named ~~executive officers who currently serve as~~ executive officers earned the following awards under the program:


								Peabody																								Peabody
			Peabody					Percentile																			Peabody					Percentile
			Percentile					Ranking																			Percentile					Ranking
			Ranking					Among					Percent of														Ranking					Among					Percent of			Percent of
			Among Peer			Peabody		Index			Peabody		Award														Among Coal			Peabody		Index			Peabody		Award			Award
			Companies -			Ranking		Companies -			Ranking		Earned for			Total			Target		Actual		Actual				Comparator			Ranking		Companies -			Ranking		Earned for			Earned for			Total			Target		Actual		Actual
			Total			Among		Total			Among		EBITDA			Payout			Award		Award		Award				Group - Total			Among Coal		Total			Among		EBITDA			Total			Payout			Award		Award		Award
	Performance		Shareholder			Peer		Shareholder			Index		ROIC			as a % of			Units		Value		Shares		Performance		Shareholder			Comparator		Shareholder			Index		ROIC			Shareholder			as a % of			Units		Value		Shares
Name	Period		Return			Companies		Return⁽¹⁾			Companies⁽¹⁾		Targets			Target			(#)⁽²⁾		($)⁽³⁾		(#)⁽⁴⁾		Period		Return			Group		Return⁽¹⁾			Companies⁽¹⁾		Targets			Return			Target			(#)⁽²⁾		($)⁽³⁾		(#)⁽⁴⁾

Current Officers
Gregory H. Boyce		2005 - 2007		93.5	%		2		96.2	%		16 of 392		96.3	%		148	%		49,394		4,339,932		78,593																							38,426		783,031		29,921
																										2006 - 2008		76.1	%		3 of 9		28.5	%		278 of 388		59.1	%		122.0	%		90.5	%
Richard A. Navarre		2005 - 2007		93.5	%		2		96.2	%		16 of 392		96.3	%		148	%		27,614		2,426,264		43,938																							39,924		813,557		31,087
Eric Ford		2005 - 2007		93.5	%		2		96.2	%		16 of 392		96.3	%		148	%		—		—		—		—		—			—		—			—		—			—			—			—		—		—
Sharon D. Fiehler		2005 - 2007		93.5	%		2		96.2	%		16 of 392		96.3	%		148	%		9,332		819,943		14,849																							26,615		542,351		20,724
Roger B. Walcott, Jr.		2005 - 2007		93.5	%		2		96.2	%		16 of 392		96.3	%		148	%		11,965		1,051,287		19,038
																										2006 - 2008		76.1	%		3 of 9		28.5	%		278 of 388		59.1	%		122.0	%		90.5	%
Alexander C. Schoch																																															5,323		108,470		4,145
Michael C. Crews																										—		—			—		—			—		—			—			—			—		—		—


⁽¹⁾		The index is designed to track the performance of companies included in the S&P MidCap 400.

⁽²⁾		Number of shares has been adjusted to reflect our2-for-1 stock splits in March 2005 and February 2006, and to reflect the spin-off of Patriot on October 31, 2007.

⁽³⁾		The value of the awards was calculated based on the average closing price per share of our Common Stock for the four-week period ended December 31, ~~2007~~2008 ($~~59.31)~~22.51).

⁽⁴⁾		The actual shares awarded were calculated based on the closing price per share of our Common Stock on the settlement date, ~~February 4, 2008~~January 29, 2009 ($~~55.22)~~26.17).

~~Peabody Relative Performance for Performance Period Ending December 31, 2007 and~~
~~Resulting Performance Unit Award Payouts to Named Former Executive Officers~~

The following table compares our TSR for the three-year period ended December 31, 2007 to the performance of a peer group of four publicly-traded mining companies and to the performance of the S&P MidCap 400 Index; for the two-year period ended December 31, 2007 to the performance of a peer group of eight publicly-traded mining companies and to the performance of the S&P MidCap 400 Index; and for the one-year period ended December 31, 2007 to the performance of a peer group of eight publicly-traded mining companies and to the performance of the S&P 500 Index. Based on our relative performance, the named executive officers who no longer serve as executive officers earned the following awards under the program:

Peabody
Peabody

Percentile
Percentile

Ranking
Ranking
Percent of

Among Peer
Among Index
Peabody
Award

Companies -
Peabody
Companies -
Ranking
Earned for
Total
Target
Actual
Actual

Total
Ranking
Total
Among
EBITDA
Payout
Award
Award
Award

Performance
Shareholder
Among Peer
Shareholder
Index
ROIC
as a % of
Units
Value
Shares

Name
Period Return Companies Return Companies Targets Target (#)⁽¹⁾ ($)⁽²⁾ (#)⁽¹⁾⁽³⁾

Former Officers

Richard M. Whiting 2005-2007 93.5 % 2 96.2 %⁽⁴⁾ 16 of 392⁽⁴ ⁾ 96.3 % 148 % 14,065 1,235,801 22,380
2006-2008 83.9 % 3 77.8 %⁽⁴⁾ 86 of 383⁽⁴ ⁾ 0.0 % 100 % 34,598 2,051,935 37,159
2007-2009 71.9 % 3 93.6 %⁽⁵⁾ 33 of 496⁽⁵ ⁾ 159.1 % 170 % 20,408 2,055,492 37,224
Jiri Nemec 2005-2007 93.5 % 2 96.2 %⁽⁴⁾ 16 of 392⁽⁴ ⁾ 96.3 % 148 % 8,234 723,468 13,102
2006-2008 83.9 % 3 77.8 %⁽⁴⁾ 86 of 383⁽⁴ ⁾ 0.0 % 100 % 15,303 907,589 16,436
2007-2009 71.9 % 3 93.6 %⁽⁵⁾ 33 of 496⁽⁵ ⁾ 159.1 % 170 % 10,262 1,033,588 18,718


⁽¹⁾		~~Number of shares has been adjusted to reflect our2-for-1~~ ~~stock splits in March 2005 and February 2006, and to reflect the spin-off of Patriot on October 31, 2007.~~

⁽²⁾		~~The value of the awards was calculated based on the average closing price per share of our Common Stock for the four-week period ended December 31, 2007 ($59.31).~~

⁽³⁾		~~The actual shares awarded were calculated based on the closing price per share of our Common Stock on the settlement date, February 4, 2008 ($55.22).~~

⁽⁴⁾		~~The index is designed to track the performance of companies included in the S&P MidCap 400.~~

⁽⁵⁾		~~The index is designed to track the performance of companies included in the S&P 500.~~

5043

PENSION BENEFITS IN ~~2007~~2008

Our frozen Salaried Employees Retirement Plan, or pension plan, is a “defined benefit” plan. The pension plan provides a monthly annuity to eligible salaried employees when they retire. An employee must have at least five years of service to be vested in the pension plan. A full benefit is available to a retiree at age 62. A retiree can begin receiving a benefit as early as age 55; however, a 4% reduction factor applies for each year a retiree receives a benefit prior to age 62.

We announced in February 1999 that the pension plan would be phased out beginning January 1, 2001. Certain transition benefits were introduced based on the age and service of the employee at December 31, 2000. Each of the applicable named executive officers has had the level of his or her pension benefits frozen. In all cases, final average earnings for retirement purposes are capped at December 31, 2000 levels.

An individual’s retirement benefit under the pension plan is equal to the sum of (1) 1.112% of the highest average monthly earnings over 60 consecutive months up to the “covered compensation limit” multiplied by the employee’s years of service, not to exceed 35 years, and (2) 1.5% of the average monthly earnings over 60 consecutive months over the “covered compensation limit” multiplied by the employee’s years of service, not to exceed 35 years. Under the plan, “earnings” include compensation earned as base salary and up to five annual incentive awards.

We announced in February 1999 that the pension plan would be phased out beginning January 1, 2001. Certain transition benefits were introduced based on the age and service of the employee at December 31, 2000: (1) employees age 50 or older continue to accrue service at 100%; (2) employees between the ages of 45 and 49 or under age 45 with 20 years or more of service continue to accrue service at the rate of 50% for each year of service worked after December 31, 2000; and (3) employees under age 45 with less than 20 years of service have had their pension benefits frozen. In all cases, final average earnings for retirement purposes are capped at December 31, 2000 levels.

Listed below is the estimated present value of the current accumulated pension benefit under qualified and non-qualified plans as of December 31, ~~2007~~2008 for the named ~~executive officers who currently serve as~~ executive officers. The estimated present value was determined assuming the officer retires at age 62, the normal retirement age under the plan, using a discount rate of ~~6.75%~~6.90% and the RP 2000 White Collar Mortality with Mortality Improvements Projected to 2007 with Scale AA Table. Other material assumptions used in making the calculations are discussed in note 1514 to our consolidated financial statements included in our ~~2007~~2008 Annual Report. The disclosed amounts are estimates only and do not necessarily reflect the actual amounts that will be paid to the ~~officers,~~executives, which will be known only at the time they become eligible for payment.


											Present
				Present Value of							Value of
		Number of Years		Accumulated		Payments in			Number of Years		Accumulated		Payments in
		Credited Service		Benefit		2007			Credited Service		Benefit		2008
Name	Plan Name	(#)⁽¹⁾		($)		($)		Plan Name	(#)⁽¹⁾		($)		($)

Current Officers
Gregory H. Boyce⁽²⁾	Salaried Employees		—		—		—	Salaried Employees Retirement Plan		—		—		—
	Retirement Plan
Richard A. Navarre⁽³⁾	Salaried Employees		8.8		167,247		—	Salaried Employees Retirement Plan		7.8		172,977		—
	Retirement Plan
Eric Ford⁽²⁾	Salaried Employees		—		—		—	Salaried Employees Retirement Plan		—		—		—
	Retirement Plan
Sharon D. Fiehler⁽³⁾	Salaried Employees		20.8		394,284		—	Salaried Employees Retirement Plan		19.8		410,365		—
	Retirement Plan
Roger B. Walcott, Jr.⁽³⁾	Salaried Employees		3.6		143,306		—
	Retirement Plan
Alexander C. Schoch⁽²⁾								Salaried Employees Retirement Plan		—		—		—
Michael C. Crews⁽³⁾								Salaried Employees Retirement Plan		2.3		8,411		—


⁽¹⁾		Due to the phase-out of our pension plan as described above, years of credited service may be less than years of actual service. Actual years of service for the officers eligible to participate in the pension plan are as follows: Mr. ~~Navarre: 14.76;~~Navarre, 15.8; Ms. ~~Fiehler: 26.79;~~Fiehler, 27.8 and Mr. ~~Walcott: 9.59.~~Crews, 10.3.


⁽²⁾
⁽²⁾		~~Mr.~~Messrs. Boyce, Ford and ~~Mr. Ford~~Schoch are not eligible to receive benefits under our pension plan because their employment with us began after the phase-out of the plan.

⁽³⁾		Under the terms of the phase-out, Mr. Navarre’s, Ms. Fiehler’s and Mr. ~~Walcott’s pension benefits were frozen as of December 31, 2000, and years of credited service, for the purpose of the pension plan, ceased to accrue.~~

Listed below is the estimated present value of the current accumulated pension benefit as of December 31, 2007 for the named executive officers who no longer serve as executive officers. The estimated present value was determined assuming the officer retires at age 62, the normal retirement age under the plan, using a discount rate of 6.75% and the RP 2000 White Collar Mortality with Mortality Improvements Projected to 2007 with Scale AA Table. Other material assumptions used in making the calculations are discussed in note 15 to our consolidated financial statements included in our 2007 Annual Report. The disclosed amounts are estimates only and do not necessarily reflect the actual amounts that will be paid to the officers, which will be known only at the time they become eligible for payment.

Present Value of

Number of Years
Accumulated
Payments in
Credited Service
Benefit
2007
Name

Plan Name
(#)⁽¹⁾ ($) ($)

Former Officers

Richard M. Whiting⁽²⁾
Salaried Employees 27.4 1,475,893 —
Retirement Plan
Jiri Nemec⁽³⁾
Salaried Employees 14.7 204,260 —
Retirement Plan


⁽¹⁾		Due to the phase-out of our pension plan as described above, years of credited service may be less than years of actual service. Actual years of service are as follows: Mr. Whiting: 31.4; and Mr. Nemec 21.5.

⁽²⁾		~~Under the terms of the phase-out, Mr. Whiting accrues credited service at the rate of 50% for each year of actual service after December 31, 2000.~~

⁽³⁾		~~Under the terms of the phase-out Mr. Nemec’s~~Crews’ pension benefits were frozen as of December 31, 2000, and years of credited service, for the purpose of the pension plan, ceased to accrue.

5244

NONQUALIFIED DEFERRED COMPENSATION IN ~~2007~~2008

The following table sets forth detail about the nonqualified deferred compensation ~~accounts~~in 2008 for ~~2007 of~~ the named executive ~~officers who currently serve as executive~~ officers.


										Aggregate														Aggregate
		Executive		Company		Aggregate		Aggregate		Balance as of			Executive		Company				Aggregate			Aggregate		Balance as of
		Contributions in		Contributions in		Earnings in		Withdrawals/		December 31,			Contributions in		Contributions in				Earnings in			Withdrawals /		December 31,
		2007		2007		2007		Distributions		2007			2008		2008				2008			Distributions		2008
Name	Plan Name	($)		($)⁽¹⁾		($)		($)		($)		Plan Name	($)		($)				($)			($)		($)

	Excess Defined Contribution
Gregory H. Boyce	Retirement Plan		53,101		45,301		17,557		—		478,740	Excess Defined Contribution Retirement Plan		54,877		49,425	(1	)		(203,332	)		—		400,273

	Excess Defined Contribution
	Retirement Plan — Performance		—		36,500		—		—
	Contribution
												Excess Defined Contribution Retirement Plan — Performance Contribution		—		22,950	(2	)		—			—
	Employment
	Agreement⁽²⁾		—		—		—		—		800,000	Employment Agreement(3)		—		—							—		800,000

Richard A. Navarre	Excess Defined Contribution Retirement Plan		30,100		25,800		24,272		—		404,958	Excess Defined Contribution Retirement Plan		35,000		30,000	(1	)		23,394			—		506,552
												Excess Defined Contribution Retirement Plan — Performance Contribution		—		13,200	(2	)		—			—
	Excess Defined Contribution
	Retirement Plan — Performance		—		20,250		—		—
	Contribution

	Excess Defined Contribution
Eric Ford	Retirement Plan		19,562		19,000		144		—		38,705	Excess Defined Contribution Retirement Plan		26,325		26,325	(1	)		(19,301	)		—		84,804

	Excess Defined Contribution
	Retirement Plan — Performance		—		—		—		—
	Contribution
												Excess Defined Contribution Retirement Plan — Performance Contribution		—		12,750	(2	)		—			—
	Employment
	Agreement⁽²⁾		—		800,000		—		—		800,000	Employment Agreement(3)		—		—							—		800,000

Sharon D. Fiehler	Excess Defined Contribution Retirement Plan		20,466		12,315		8,873		—		213,312	Excess Defined Contribution Retirement Plan		21,625		12,975	(1	)		(80,340	)		—		173,872

	Excess Defined Contribution											Excess Defined Contribution Retirement Plan — Performance Contribution		—		6,300	(2	)		—			—
	Retirement Plan — Performance		—		9,800		—		—
	Contribution

Roger B. Walcott, Jr.	Excess Defined Contribution Retirement Plan		15,100		15,000		35,842		—		446,811
Alexander C. Schoch												Excess Defined Contribution Retirement Plan		21,525		8,610	(1	)		(9,875	)		—		49,054

	Excess Defined Contribution											Excess Defined Contribution Retirement Plan — Performance Contribution		—		4,260				—			—
	Retirement Plan — Performance		—		12,000		—		—
Michael C. Crews												Excess Defined Contribution Retirement Plan		—		—	—			—			—		—
	Contribution
												Excess Defined Contribution Retirement Plan — Performance Contribution		—		—	—			—			—


⁽¹⁾		The ~~amount~~amounts reported for ~~the Performance Contribution to~~ the Excess Defined Contribution Retirement Plan isare also included in the “All Other Compensation” column for 2008 in the Summary Compensation Table on page 35 and in the “Annual 401(k) Matching and Performance Contributions” column of the All Other Compensation table on page ~~39 of this Proxy Statement.~~36.


⁽²⁾		The aggregate balances as of December 31, 2008 reported for the Excess Defined Contribution Retirement Plan for the named executive officers includes these amounts that were previously reported in the 2008 Summary Compensation Table as compensation for 2007.

⁽²⁾⁽³⁾		The amounts reported for Messrs. Boyce and Ford are discussed under the caption “Employment Agreements” in the Compensation Discussion and Analysis ~~on pages 32 and 33 of this Proxy Statement. The amount reported for Mr. Ford is also included in the All Other Compensation table~~section beginning on page ~~39 of this Proxy Statement.~~

~~The following table sets forth detail about the nonqualified deferred compensation accounts for 2007 of the named executive officers who no longer serve as executive officers.~~

Aggregate
Executive
Company
Aggregate
Aggregate
Balance as of
Contributions in
Contributions in
Earnings in
Withdrawals /
December 31,
2007
2007
2007
Distributions
2007
Name

Plan Name
($) ($)⁽¹⁾ ($) ($) ($)

Excess Defined Contribution
Richard M. Whiting Retirement Plan 17,510 14,933 44,314 — 602,542
Excess Defined Contribution
Retirement Plan — Performance — 16,575 — —
Contribution
Excess Defined Contribution
Jiri Nemec Retirement Plan 13,353 5,007 20,719 — 253,349
Excess Defined Contribution
Retirement Plan — Performance — 6,000 — —
Contribution
Deferred Compensation Plan⁽²⁾ — — (9,144 ) 820,971 —


⁽¹⁾		The amount reported for the Performance Contribution to the Excess Defined Contribution Retirement Plan is also included in the “Annual 401(k) Matching and Performance Contributions” column of the All Other Compensation table on page 40 of this Proxy Statement.

⁽²⁾		Our Deferred Compensation Plan was amended effective January 1, 2005 such that no new participants and no additional deferrals were permitted following that date. Mr. Nemec received payout for his Deferred Compensation Plan balance in March of 2007 pursuant to the terms of his previous deferral elections.32.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The table below reflects the amount of compensation that would have been payable to the named executive officers ~~who currently serve as executive officers~~ in the event of termination of such ~~executives’~~executive’s employment, including certain benefits upon a change in control of ~~the Company,~~us, pursuant to the terms of their employment agreements and long-term incentive agreements. The amounts shown assume a termination effective as of December 31, ~~2007,~~2008, including agross-up for certain taxes in the event that any payment made in connection with the change in control was subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. The actual amounts that would be payable can be determined only at the time of the ~~executives’~~executive’s termination. The amount of compensation payable to each executive upon retirement is not included in the table, as none of the executives ~~were~~was eligible for retirement (age 55, with 10 years of service) as of December 31, ~~2007. Mr. Whiting and Mr. Nemec were no longer employed by us as of December 31, 2007 and are therefore excluded from this table.~~

2008.

5445

Potential Payments Upon Termination ~~and~~or Change in Control


																			Accelerated
							Accelerated										Other		Vesting/Earnout
					Other		Vesting/Earnout						Cash		Benefits		Cash		of Unvested Equity		Excise Tax
	Cash		Cont’d Benefits		Cash		of Unvested Equity		Excise Tax				Severance		Continuation		Payment		Compensation⁽¹⁾		Gross-Up⁽²⁾		TOTAL
	Severance		& Perquisites		Payment		Compensation⁽¹⁾		Gross-Up⁽²⁾		Total

Gregory H. Boyce

“For Cause” Termination	$	0	$	0	$	0	$	0		n/a	$	0	$	0	$	0	$	0	$	0		n/a	$	0

Voluntary Termination⁽³⁾		0		0		0		1,356,080		n/a		1,356,080		0		0		0		728,000		n/a		728,000

Death or Disability⁽⁴⁾		0		0		2,300,671		24,854,885		n/a		27,155,556		0		0		2,869,375		6,129,089		n/a		8,998,464

Involuntary Termination “Without Cause” or “For Good Reason”⁽⁵⁾		6,410,393		363,538		2,300,671		18,530,082		n/a		27,604,684		8,318,166		56,815		2,869,375		6,723,566		n/a		17,967,922
Involuntary Termination Related to a Change in Control⁽⁶⁾		6,410,393		363,538		2,300,671		24,262,794		6,111,816		39,449,212

Involuntary Termination Related to a Change in Control^(5,6)														8,318,166		56,815		2,869,375		6,723,566		0		17,967,922

Richard A. Navarre

“For Cause” Termination or Voluntary Termination⁽³⁾	$	0	$	0	$	76,923	$	0		n/a	$	76,923	$	0	$	0	$	76,923	$	0		n/a	$	76,923

Death or Disability⁽⁴⁾		0		0		925,707		8,971,430		n/a		9,897,137		0		0		1,193,823		939,526		n/a		2,133,349

Involuntary Termination “Without Cause” or “For Good Reason”⁽⁵⁾		2,883,353		174,232		925,707		2,463,240		n/a		6,446,532		3,424,723		37,391		1,193,823		488,357		n/a		5,144,294
Involuntary Termination Related to a Change in Control⁽⁶⁾		2,883,353		174,232		925,707		12,479,521		0		16,462,813

Involuntary Termination Related to a Change in Control^(5,6)														3,424,723		37,391		1,193,823		2,479,910		0		7,135,847

Eric Ford

“For Cause” Termination or Voluntary Termination⁽³⁾	$	0	$	0	$	0	$	0		n/a	$	0	$	0	$	0	$	0	$	0		n/a	$	0

Death or Disability⁽⁴⁾		0		0		1,384,105		6,292,406		n/a		7,676,510		0		0		1,718,000		1,360,921		n/a		3,078,921

Involuntary Termination “Without Cause” or “For Good Reason”⁽⁵⁾		2,340,000		171,186		1,384,105		3,082,706		n/a		6,977,996		2,933,105		37,292		1,718,000		955,329		n/a		5,643,726
Involuntary Termination Related to a Change in Control⁽⁶⁾		2,340,000		171,186		1,384,105		4,581,347		0		8,476,637

Involuntary Termination Related to a Change in Control^(5,6)														2,933,105		37,292		1,718,000		955,329		0		5,643,726

Sharon D. Fiehler

“For Cause” Termination or Voluntary Termination⁽³⁾	$	0	$	0	$	62,769	$	0		n/a	$	62,769	$	0	$	0	$	62,769	$	0		n/a	$	62,769

Death or Disability⁽⁴⁾		0		0		518,470		5,263,916		n/a		5,782,386		0		0		656,770		459,263		n/a		1,116,033

Involuntary Termination “Without Cause” or “For Good Reason”⁽⁵⁾		1,825,560		115,887		518,470		1,531,756		n/a		3,991,673		1,987,134		24,879		656,770		246,373		n/a		2,915,156
Involuntary Termination Related to a Change in Control⁽⁶⁾		1,825,560		115,887		518,470		9,126,257		0		11,586,174
Roger B. Walcott, Jr.

Involuntary Termination Related to a Change in Control^(5,6)														1,987,134		24,879		656,770		2,008,437		0		4,677,220

Alexander C. Schoch

“For Cause” Termination or Voluntary Termination⁽³⁾	$	0	$	0	$	33,538	$	0		n/a	$	33,538	$	0	$	0	$	0	$	0		n/a	$	0

Death or Disability⁽⁴⁾		0		0		393,538		3,595,598		n/a		3,989,136		0		0		0		290,093		n/a		290,093

Involuntary Termination “Without Cause” or “For Good Reason”⁽⁵⁾		1,896,107		136,377		393,538		867,138		n/a		3,293,159		769,633		6,784		0		155,555		n/a		931,972
Involuntary Termination Related to a Change in Control⁽⁶⁾		1,896,107		136,377		393,538		5,187,858		n/a		7,613,880

Involuntary Termination Related to a Change in Control^(5,6)														769,633		6,784		0		155,555		0		931,972

Michael C. Crews

“For Cause” Termination or Voluntary Termination⁽³⁾													$	0	$	0	$	0	$	0		n/a	$	0

Death or Disability⁽⁴⁾														0		0	$	368,922		164,983		n/a		533,905

Involuntary Termination “Without Cause” or “For Good Reason”⁽⁵⁾														1,221,270		32,050	$	368,922		54,994		n/a		1,677,236

Involuntary Termination Related to a Change in Control^(5,6)														1,221,270		32,050	$	368,922		180,602		511,020		2,313,864


⁽¹⁾		Reflects the value the named executive officer could realize as a result of the accelerated vesting of any unvested stock option awards, based on the spread between the applicable option exercise price and stock price on the last business day of ~~2007, $61.64.~~2008, $22.75. The value realized is not and would not be our liability.


⁽²⁾		Includes excise tax, plus the effect of 35% federal income taxes, 6% state income taxes, and 1.45% FICA-HI taxes on the excise tax.

⁽³⁾		For all named executive officers except Mr. Boyce, the compensation payable would include accrued but unused vacation. Mr. Boyce’s compensation payable in the event of voluntary termination would include a) accrued but unused vacation ($0 as of December 31, ~~2007)~~2008), and b) the prorated value of outstanding restricted shares as determined by his October 1, 2003 restricted stock grant agreement. “For Cause” means (1) any material and uncorrected breach by the executive of the terms of his or her employment agreement, including but not limited to engaging in disclosure of secret or confidential information, (2) any willful fraud or dishonesty of the executive involving our ~~the~~ property or business, (3) a deliberate or willful refusal or failure to comply with any major corporate policies which are communicated in writing or (4) the executive’s conviction of, or plea of no contest to any felony if such conviction shall result in ~~imprisonment.~~

		imprisonment or, in the case of Mr. Crews, has a material detrimental effect on our reputation or business.

⁽⁴⁾		For all named executive officers except Mr. Boyce, compensation payable upon Death or Disability would include a)(a) accrued but unused vacation, ~~b) prorated~~(b) earned but unpaid annual incentive for year of termination, c)(c) 100% payout of outstanding performance units based on actual performance to the date of termination, and d)(d) the value an executive could realize as a result of the accelerated vesting of any unvested stock option awards, per the terms of the executive’s stock option grant agreement. Mr. Boyce’s compensation payable upon Death or Disability would include a)(a) accrued but unused vacation, ~~b) prorated~~(b) earned but unpaid annual incentive for year of termination, c)(c) 100% payout of


		outstanding performance units based on actual performance to the date of termination, d)(d) the value Mr. Boyce would realize as a result of the accelerated vesting of any unvested stock option awards, per the terms of his stock option grant agreement, e)(e) a lump sum of $800,000, f)(f) deferred compensation equal to the fair market value of 86,602 shares of Common Stock on the date of termination, and g)(g) the fair market value on the date of termination of 100,000 restricted shares of Common Stock for which vesting would accelerate. For ~~2007,~~2008, the ~~prorated~~earned but unpaid annual incentive was equal to 100% of the sum of the non-equity incentive plan and bonus compensation, as shown in the Summary Compensation Table on page ~~36 of this Proxy Statement,~~35, and payout of performance units reflects the values for the ~~2006~~2007 and ~~2007~~2008 performance units based on actual performance as ~~shown in the Outstanding Equity Awards at 2007 Fiscal Year End table beginning on page 43~~ of ~~this Proxy Statement.~~December 31, 2008. Amounts do not include life insurance payments in the case of death.


⁽⁵⁾		For all named executive officers except ~~Mr.~~Messrs. Boyce and Schoch, the compensation payable would include a)(a) severance payments of two times base salary, b)(b) a payment equal to two times ~~the higher of (1) the target annual incentive or (2)~~ the average of the actual annual incentives paid in the three prior years, ~~c) prorated~~(c) a payment equal to two times 6% of base salary to compensate for Company contributions the executive otherwise might have received under our retirement plan, (d) earned but unpaid annual incentive for year of termination, d)(e) continuation of benefits for two years, and e)(f) prorated payout of outstanding performance units based on performance to the date of termination. Mr. Boyce’s compensation payable would include a)(a) severance payments of three times base salary, b)(b) a payment equal to three times ~~the higher of (1) the target annual incentive or (2)~~ the average of the actual annual incentives paid in the three prior years, ~~c) prorated~~(c) a payment equal to three times 6% of base salary to compensate for Company contributions he otherwise might have received under our retirement plan, (d) earned but unpaid annual incentive for year of termination, d)(e) continuation of benefits for three years, e)(f) prorated payout of outstanding performance units based on performance to the date of termination, f)(g) a lump sum of $800,000, g)(h) deferred compensation equal to the fair market value of 86,602 shares of Common Stock on the date of termination, and h)(i) the fair market value on the date of termination of ~~160,000~~164,951 restricted shares of Common Stock, which would accelerate vest. Mr. Schoch’s compensation payable would include (a) severance payments of one times base salary, (b) a payment equal to one times the average of the actual annual incentives paid in the three prior years, (c) a payment equal to one times 6% of base salary to compensate for Company contributions he otherwise might have received under our retirement plan, (d) earned but unpaid annual incentive for year of termination, (e) continuation of benefits for one year, and (f) prorated payout of outstanding performance units based on performance to the date of termination.

⁽⁶⁾		A portion of the value payable upon a change in control to ~~the named executive officers, other than~~ Messrs. ~~Boyce~~Navarre and ~~Ford,~~Crews and Ms. Fiehler is attributable to stock options granted to them prior to our May 2001 initial public offering (“IPO”). These options were granted in connection with a leveraged buyout transaction or “LBO” involving Peabody Energy’s acquisition of Peabody Holding Company. The size and terms of the pre-IPO stock options or “LBO grants” were determined according to standard practices


		at that time for private companies. The LBO grants, many of which remain unexercised, were designed to be competitive in the industry marketplace for top executives, to compensate the management group on a basis commensurate with the risks associated with a highly leveraged transaction, to reward performance and to align their interests with the Company’s owners. A portion of the LBO grants vested in November 2007 and will expire in May 2008, and a portion vest in July 2010, and expire January 2011.offering. Additional detail about the LBO grants is set forth in the Outstanding Equity Awards at ~~2007~~2008 Fiscal Year End table beginning on page ~~43 of this Proxy Statement.~~

~~Termination Arrangements with Former Executive Officers~~

On October 31, 2007, we completed the spin-off of Patriot, which was accomplished through a special dividend of all outstanding shares of Patriot to our shareholders. On that same date, Richard M. Whiting elected to resign from his position as our Executive Vice President and Chief Marketing Officer so that he could become Patriot’s President and Chief Executive Officer, and Jiri Nemec elected to resign from his position as our Group Vice President — Eastern Operations so that he could become Patriot’s Senior Vice President and Chief Operating Officer.

On May 4, 2007, we entered into a Letter Agreement with each of Messrs. Whiting and Nemec regarding the transition of their employment with us to their employment with Patriot. The Letter Agreements provided for, among other things:


	•	~~Mr. Whiting and Mr. Nemec’s employment with us would continue until the date of the spin-off (October 31, 2007), which is referred to as the effective date;~~


	•	~~Mr. Whiting and Mr. Nemec’s employment with Patriot would commence on the effective date pursuant to new employment agreements with Patriot; and~~


	•	~~The handling of Mr. Whiting and Mr. Nemec’s current equity awards and benefit plans in connection with the spin-off, as described below.~~

Under their respective Letter Agreements, each of Messrs. Whiting and Nemec agreed that the transfer of employment from us to Patriot in connection with the spin-off would not constitute a termination of his employment with us, give rise to a good reason for termination or a constructive discharge or other circumstance that would entitle either executive to any severance or other payments described in Section 6 of their respective employment agreements with us. Under the Letter Agreements, each of Messrs. Whiting and Nemec is entitled to a credit for prior service with us and our affiliates for purposes of vesting, eligibility for benefits and certain other purposes under Patriot’s benefit plans and arrangements, provided that the comparable Company plan recognizes such service and such crediting does not result in duplicate benefits.

~~In addition, any equity awards issued by us that were held by Messrs. Whiting and Nemec at the time of spin-off were handled as follows:~~


	•	stock options that were granted before 2006 and were scheduled to vest by January 3, 2008 were adjusted as of the effective date to take the spin-off into account; continue to vest as long as each remains employed with Patriot; to the extent they are vested, will expire and no longer be exercisable on July 3, 2008 and otherwise will remain subject to the terms and conditions of the applicable award agreement as in effect immediately prior to the effective date;

	•	stock options that were granted before 2006 and were scheduled to vest after January 3, 2008 were adjusted as of the effective date to take the spin-off into account and were converted to a dollar value, based on the intrinsic value of the option at the opening price of our Common Stock on November 1, 2007, and were distributed to him in the form of registered shares of our Common Stock;37.

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	•	stock options that were granted in 2006 and 2007, whether vested or unvested, that were unexercised on the effective date were converted into a number of equivalent restricted shares based on the targeted compensation value used at the time of grant, and were distributed to each of Messrs. Whiting and Nemec as restricted registered shares of our Common Stock on October 12, 2007 and October 30, 2007. The restrictions on these shares lapsed upon the effective date, and the original stock options granted in 2006 and 2007 were canceled;

	•	performance units that were scheduled to vest by January 3, 2008 and that remained outstanding immediately prior to the effective date were adjusted to take the spin-off into account, continue to vest as long as each remains employed with Patriot and otherwise will remain subject to the terms and conditions of the applicable award agreement as in effect immediately prior to the effective date; and

	•	performance units that were scheduled to vest after January 3, 2008 and that remained outstanding immediately prior to the effective date were adjusted to take the spin-off into account, and became payable in the form of registered shares of our Common Stock as soon as practicable on or after December 31, 2007, but no later than March 15, 2008, at their full value, without proration, based on our actual performance results as of December 31, 2007.

For 2007, each of Messrs. Whiting and Nemec was entitled to receive his annual bonus for the full year, the portion of which paid by us was based on the period of 2007 that each of Messrs. Whiting and Nemec were employed by us, with 60% of such annual bonus being nondiscretionary based on our performance in accordance with the terms of our annual incentive plan and the remaining 40% of such annual bonus being discretionary based on Patriot’s performance in accordance with standards established by Patriot.

Each of Messrs. Whiting and Nemec is entitled to his benefits under our qualified and non-qualified defined benefit plans, to be paid in accordance with the terms of such plans, treating the spin-off as a termination of his employment. Each of their account balances under our qualified defined contribution plan was transferred into a mirror plan of Patriot. In addition, each of their benefits under our non-qualified defined contribution plan remains our obligation and will be paid in accordance with the terms and conditions of such plan following termination of employment with Patriot.

Each of Messrs. Whiting and Nemec was entitled to a continuity of medical benefits, with us being responsible for covered medical costs incurred up to October 31, 2007, to the extent that each participated in our plans, and Patriot being responsible for covered medical costs incurred thereafter, to the extent that he participates in Patriot’s plans.

~~Each of the Letter Agreements also included nonsolicitation and no-shop provisions which terminated on October 31, 2007.~~

~~2007 ANNUAL~~DIRECTOR COMPENSATION ~~OF DIRECTORS~~

~~Annual compensation~~Compensation of non-employee directors for ~~2007~~2008 was comprised of cash compensation, consisting of annual ~~retainer~~board and committee ~~fees,~~retainers and equity compensation. In 2008, the company began granting equity compensation ~~consisting~~in the form of deferred stock ~~option awards~~units, rather than in stock options and restricted stock ~~awards.~~as in prior years. Each of these components is described below in more ~~detail below.~~detail.

~~Directors~~Any director who ~~are~~is also our ~~employees receive~~employee receives no additional compensation for serving as a director.

Annual ~~Board/~~Board and Committee ~~Fees~~Retainers

In ~~2007,~~2008, non-employee directors received an annual cash retainer of ~~$75,000.~~$85,000. Non-employee directors who served on more than one committee received an additional annual $10,000 cash retainer.

The Audit Committee Chairperson received an additional annual $15,000 cash retainer, and the other Audit Committee members received additional annual $5,000 cash retainers. The Chairpersons of the Compensation and Nominating &and Corporate Governance Committees each received an additional annual $10,000 cash retainer.

We pay travel and accommodation expenses of our non-employee directors to attend meetings and other corporate functions. ~~Directors~~Non-employee directors do not receive meeting attendance fees. Non-employee directors may be accompanied by a spouse/partner when traveling on company business on the corporate aircraft.

Annual Equity Compensation

Non-employee directors received annual equity compensation valued at ~~$75,000~~$90,000 in ~~2007,~~2008, awarded ~~one-half~~ in ~~restricted shares~~deferred stock units (based on the fair market value of our Common Stock on the date of grant) ~~and one-half in stock options (based on the~~~~Black-Scholes~~~~methodology)~~. The ~~restricted~~deferred stock unit awards ~~will~~ vest on the ~~third~~first anniversary of the date of grant ~~or such other period designated by the Board of Directors pursuant to our Long-Term Equity Incentive Plan. The stock option awards were granted at an exercise price equal to the fair market value~~and are converted into shares of our Common Stock on the specified distribution date ~~of grant, will vest in equal annual installments over three years, and will expire ten years after grant.~~elected by each non-employee director. In the event of a change in control of the Company (as defined in our Long-Term Equity Incentive Plan), ~~all restrictions related to the restricted~~any unvested deferred stock ~~awards will lapse and any previously unvested options~~units will vest. The ~~restricted~~deferred stock unit awards ~~and options~~ also provide for vesting in the event of death or disability or ~~termination~~separation from service due to the non-employee director reaching the end of his or her elected term and either (a) being ineligible to run for an additional term on the Board as a result of reaching age seventy-five (75) or (b) having completed three years of service ~~without cause with~~as a non-employee director and the current Board ~~consent.~~term for which he or she was elected.

The total ~~2007~~2008 compensation of our non-employee directors is shown in the following ~~tables.~~table. Mrs. Keeth is not included in this table as she was not appointed to the Board until March 2009.

~~Current~~ Non-Employee Director Compensation for 2008


			Fees Earned		Stock		Option		All Other				Fees Earned		Stock		Option		All Other
			or Paid in		Awards		Awards		Compensation				or Paid in		Awards		Awards		Compensation
Name	Year		Cash ($)		($)⁽¹⁾⁽²⁾		($)⁽¹⁾⁽³⁾		($)⁽⁴⁾		Total ($)		Cash ($)		($)^(1)(2)(3)		($)⁽¹⁾⁽⁴⁾		($)⁽⁵⁾		��	Total ($)

Current Non-Employee Directors
William A. Coley		2007		77,500		29,169		36,437		—		143,106		95,000		114,999		28,681		—			238,680
Henry Givens, Jr.		2007		75,000		29,169		36,437		1,887		142,493
Henry Givens, Jr.⁽⁶⁾														42,500		127,499		49,001		—			219,000
William E. James		2007		75,000		25,003		59,547		—		159,550		85,000		114,999		28,681		—			228,680
Robert B. Karn III*		2007		100,000		25,003		35,113		216		160,332		110,000		114,999		28,681		—			253,680
Henry E. Lentz		2007		77,500		30,558		37,049		180		145,287		95,000		114,999		28,681		—			238,680
William C. Rusnack*		2007		100,000		25,003		35,113		—		160,116		110,000		114,999		28,681		225			253,905
James R. Schlesinger		2007		75,000		25,003		35,113		1,303		136,419
James R. Schlesinger⁽⁶⁾														42,500		127,499		49,001		—			219,000
Blanche M. Touhill*		2007		85,000		25,003		35,113		1,051		146,167		95,000		114,999		28,681		—			238,680
John F. Turner		2007		77,500		41,669		34,410		3,398		156,977		95,000		123,332		30,922		—			249,254
Sandra Van Trease		2007		80,000		25,003		35,113		1,851		141,967		90,000		114,999		28,681		—			233,680
Alan H. Washkowitz		2007		78,750		30,558		37,049		—		146,357		100,000		114,999		28,681		—			243,680


*		Committee Chair


⁽¹⁾		Amounts in the Stock Awards and Option Awards columns represent the respective amounts of expense recognized for financial statement reporting purposes in ~~2007~~2008 in accordance with FAS 123R. For all ~~current~~ non-employee directors the grant date fair value for deferred stock unit awards determined under FAS 123R for financial reporting purposes was ~~$37,500, and the grant date fair value for option awards determined under FAS 123R for financial reporting purposes was also $37,500.~~$90,000. A discussion of the relevant fair value assumptions is set forth in note 1817 to our consolidated financial statements included in our ~~2007~~2008 Annual Report. We caution that the amount ultimately realized from the stock and option awards will likely vary based on a number of factors, including our actual operating


		performance, stock price fluctuations and the timing of exercises (in the case of options only) and sales.


⁽²⁾		As of December 31, ~~2007,~~2008, the aggregate number of unvested restricted stock awards outstanding for each ~~current~~ non-employee director, ~~was as follows: Mr. Coley, 1,861;~~except Dr. Givens ~~1,861; Mr. James, 1,861; Mr. Karn, 1,861; Mr. Lentz, 1,861; Mr. Rusnack, 1,861;~~and Dr. Schlesinger, ~~1,861; Dr. Touhill, 1,861; Mr. Turner, 3,455; Ms. Van Trease, 1,861; and Mr. Washkowitz,~~was 1,861.

⁽³⁾		As of December 31, ~~2007,~~2008, the aggregate number of unvested deferred stock unit awards for each non-employee director, except Dr. Givens and Dr. Schlesinger, was 1,435.

⁽⁴⁾		As of December 31, 2008, the aggregate number of option awards outstanding for each ~~current~~ non-employee director was as follows: Mr. Coley, 16,377; Dr. Givens, ~~16,377;~~7,521; Mr. James, ~~66,745;~~12,046; Mr. Karn, 23,972; Mr. Lentz, 16,377; Mr. Rusnack, 31,745; Dr. Schlesinger, 31,745; Dr. Touhill, ~~31,745;~~4,315; Mr. Turner, 7,413; Ms. Van Trease, ~~23,972;~~12,046; and Mr. Washkowitz, 16,377. ~~The numbers have been adjusted to reflect the spin-off of Patriot on October 31, 2007.~~

⁽⁴⁾⁽⁵⁾		Includes the aggregate incremental cost of use of corporate aircraft as determined on a per flight basis, including the cost of fuel, landing fees, the cost of in-flight meals, sales tax, crew expenses, the hourly cost of aircraft maintenance for the applicable number of flight hours, and other variable costs specifically incurred. Amounts represent trips where a spouse/guest accompanied a non-employee director on corporate aircraft for ~~Company~~company business purposes.

⁽⁶⁾		On May 8, 2008, Dr. Givens and Dr. Schlesinger both retired pursuant to our mandatory retirement policy for non-employee directors.

~~Former Non-Employee Director Compensation~~Under our share ownership guidelines for directors, each non-employee director is encouraged to acquire and retain Common Stock having a value equal to at least three times his or her base annual retainer. Non-employee Directors are encouraged to meet these ownership levels within three years after joining the Board.

The following table summarizes the ownership of our Common Stock as of June 30, 2008, December 31, 2008 and January 30, 2009 by each of our non-employee directors. Mrs. Keeth is not included in this table as she was not appointed to the Board until March 2009.

Fees Earned
Stock
Option
All Other

or Paid in
Awards
Awards
Compensation

Name
Year Cash ($) ($)⁽¹⁾⁽²⁾ ($)⁽¹⁾⁽³⁾ ($)⁽⁴⁾ Total ($)

Former Non-Employee Director

B. R. Brown⁽⁵⁾
2007 75,000 62,497 29,615 934 168,046


						Ownership Relative to
						Annual Retainer⁽²⁾

			Ownership
	Year First		Guidelines,
	Elected to		Relative to Annual			June 30,			December 31,			January 30,
Name(1)	the Board		Retainer⁽²⁾			2008			2008			2009

William A. Coley		2004		3.0	x		8.1	x		2.1	x		3.3	x
William E. James		2001		3.0	x		11.2	x		8.2	x		10.0	x
Robert B. Karn III		2003		3.0	x		19.7	x		5.1	x		6.7	x
Henry E. Lentz		1998		3.0	x		7.8	x		2.0	x		3.2	x
William C. Rusnack		2002		3.0	x		11.3	x		2.9	x		4.2	x
Blanche M. Touhill		2001		3.0	x		11.3	x		10.3	x		12.3	x
John F. Turner		2005		3.0	x		5.1	x		1.3	x		2.4	x
Sandra Van. Trease		2003		3.0	x		19.3	x		5.0	x		6.5	x
Alan H. Washkowitz		1998		3.0	x		7.8	x		2.0	x		3.2	x


⁽¹⁾		~~Amounts~~Mr. Boyce’s stock ownership is shown in the ~~Stock Awards and Option Awards columns represent~~table for the respective amounts of expense recognized for financial statement reporting purposes in 2007 in accordance with FAS 123R. For Mr. Brown the grant date fair value for stock awards determined under FAS 123R for financial reporting purposes was $37,500, and the grant date fair value for option awards determined under FAS 123R for financial reporting purposes was also $37,500. A discussion of the relevant fair value assumptions is set forth in note 18 to our consolidated financial statements included in our 2007 Annual Report. We caution that the amount ultimately realized from the stock and option awards will likely vary based on a number of factors, including our actual operating performance, stock price fluctuations and the timing of exercises (in the case of options only) and sales.named executive officers.

⁽²⁾		~~As of December 31, 2007, Mr. Brown has no outstanding unvested restricted stock awards.~~

⁽³⁾		~~As of December 31, 2007, the aggregate number of option awards outstanding held by Mr. Brown was 16,377. The numbers have been adjusted to reflect the spin-off of Patriot on October 31, 2007.~~

⁽⁴⁾		Includes deferred stock units. Value is calculated based on the ~~aggregate incremental cost~~closing market price per share of ~~use~~our Common Stock on the last trading day of ~~corporate aircraft as determined on a per flight basis, including the cost of fuel, landing fees, the cost of in-flight meals, sales tax, crew expenses, the hourly cost of aircraft maintenance~~2008, $22.75. The base annual retainer for the applicable number of flight hours, and other variable costs specifically incurred. Amounts represent trips where a spouse accompanied a non-employee director on corporate aircraft for Company business purposes.

⁽⁵⁾		~~On October 10, 2007, Mr. Brown elected to retire from his position as one of our~~ non-employee directors ~~to assume a non-employee director position with Patriot.~~in 2008 was $85,000.

Stock ownership relative to guidelines varies from time to time due to changes in our stock price. Our stock price (and therefore our stock ownership relative to guidelines) has been significantly affected by the current global economic downturn and disruptions in the financial markets.

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~~2007 ANNUAL~~EQUITY COMPENSATION ~~OF THE FORMER CHAIRMAN~~PLAN INFORMATION

~~Mr. Engelhardt,~~The following table provides information regarding the securities authorized for issuance under our ~~former Chairman of the Board and former Chief Executive Officer, served~~equity compensation plans as one of our senior officers until the spin off of Patriot on October 31, 2007, at which time he elected to resign from his position in order to assume the position of Chairman of the Board of Patriot. Prior to his resignation Mr. Engelhardt served as a senior officer of the Company and received a salary and other compensation pursuant to the terms of an employment agreement with the Company. Mr. Engelhardt resigned from his position as one of our directors effective October 31, 2007. He received no additional compensation for serving as a director.

The Company entered into an amended employment agreement with Mr. Engelhardt effective January 1, 2006 at a salary and bonus level as described below. Mr. Engelhardt’s amended agreement was for a term of two years, which could have been extended by mutual agreement. In structuring the terms of Mr. Engelhardt’s employment agreement, the Compensation Committee considered his extensive experience and relationships in the coal industry, and designed a compensation package it believed necessary to retain his services for our benefit and that of our shareholders. In consultation with its independent compensation consultant and based on its assessment of Mr. Engelhardt’s anticipated future contributions to us, the Committee deemed the magnitude and structure of his employment agreement to be appropriate and recommended it to the Board of Directors for approval. The Board, excluding Mr. Engelhardt and Mr. Boyce, approved the employment agreement based on the Committee’s recommendation.

In 2007 Mr. Engelhardt received an annual salary of $350,000 for his service as one of our senior officers, and earned non-equity incentive compensation in the amount of $125,028, equal to 43% of his salary. Mr. Engelhardt received no option award, performance unit award, or restricted stock award grants in 2007. Other compensation we paid to Mr. Engelhardt during 2007 included group term life insurance, $594; and 401(k) company match and performance contribution, $20,417.

As of December 31, ~~2007 Mr. Engelhardt’s aggregate number of outstanding awards were as follows:~~2008.

Option Awards
Equity Incentive

Plan Awards:

Number of
Number of
Number of

Securities
Securities
Securities

Underlying
Underlying
Underlying

Unexercised
Unexercised
Unexercised
Option

Options
Options
Unearned
Exercise

(#)⁽¹⁾ (#)⁽¹⁾ Options
Price
Option

Name
Exercisable Unexercisable (#) ($)⁽¹⁾ Expiration Date

Irl F. Engelhardt
LBO Grants
137,572 ⁽²⁾ 3.3001 1/1/2011
Post-IPO Grants
40,070 ⁽³⁾ 18.7178 1/25/2015
Total 177,642

Number of Securities

Remaining Available for

to be Issued

Weighted-Average

Future Issuance Under

Upon Exercise of

Exercise Price of

Equity Compensation Plans

Outstanding Options,

(Excluding Securities

Warrants and Rights

Reflected in Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders

3,743,551

⁽¹⁾

17.8427

⁽²⁾

16,350,286

⁽³⁾

Equity compensation plans not approved by security holders

—

Total

3,743,551

17.8427

16,350,286


⁽¹⁾		~~The number~~Includes 86,602 shares issuable pursuant to outstanding phantom shares and ~~exercise price of all options have been adjusted~~406,092 shares issuable pursuant to ~~reflect our2-for-1~~ ~~stock splits in March 2005 and February 2006, and the spin-off of Patriot on October 31, 2007.~~outstanding performance units.

⁽²⁾		The ~~options were granted on January 1, 2001 and vest on July 1, 2010.~~weighted average exercise price shown in the table does not take into account outstanding phantom shares or performance units.

⁽³⁾		~~The options were granted on January 25, 2005~~Includes 2,841,707 shares available for issuance under our US Employee Stock Purchase Plan and ~~vest in three equal annual installments beginning January 25, 2006.~~1,000,000 shares available for issuance under our Australia Employee Stock Purchase Plan.

A substantial portion of Mr. Engelhardt’s outstanding awards is attributable to stock options granted to him prior to our May 2001 initial public offering (“IPO”) when he served as Chief Executive Officer and Chairman. These options were granted in connection with a leveraged buyout transaction or “LBO” involving Peabody Energy’s acquisition of Peabody Holding Company. The size and terms of the pre-IPO stock options or “LBO grants” were determined according to standard practices at that time for private companies. The LBO grants, many of which remain unexercised, were designed to be competitive in the industry marketplace for top executives, to compensate the management group on a basis commensurate with the risks associated with a highly leveraged transaction, to reward performance and to align their interests with our owners. A portion of the LBO grants vested in November 2007 and the remaining portion vest in July 2010, and expire in May 2008 and January 2011, respectively. Mr. Engelhardt would be entitled to accelerated vesting of his outstanding stock option awards upon a change in control of the Company under the terms of his long-term incentive agreements.

The 2007 compensation expense recognized for financial statement reporting purposes in accordance with FAS 123R for Mr. Engelhardt’s awards are as follows: option awards, $451,122; and performance unit awards, $1,222,997.

As of December 31, 2007 Mr. Engelhardt had 28 years of credited service under the Salaried Employees Retirement Plan, and the estimated present value of his current accumulated pension benefit was $5,384,079. The change in pension value for Mr. Engelhardt for 2007 was $445,336, and resulted from an increase in the discount rate from 6.0% to 6.75%. Mr. Engelhardt no longer accrues service under the plan.

In 2007 Mr. Engelhardt exercised 1,316,552 stock options and realized a total value of $61,243,095 from the exercise of these options. He earned 98,243 shares of Common Stock in connection with the payout of the performance unit awards granted on January 3, 2005, which were delivered in February 2008.

~~Compensation Committee Interlocks and Insider Participation~~COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Coley, Karn, Lentz and Turner currently serve on the Compensation Committee. None of these committee members is employed by the Company.

~~Policy for Approval of Related Person Transactions~~POLICY FOR APPROVAL OF RELATED PERSON TRANSACTIONS

Pursuant to a written policy adopted by our Board of Directors, ~~on January 23, 2007,~~ the Nominating & Corporate Governance Committee is responsible for reviewing and approving all transactions between ~~the Company~~us and certain “related persons,” such as ~~its~~our executive officers, directors and owners of more than 5% of our voting securities. In reviewing a transaction, the Committee considers the relevant facts and circumstances, including the benefits to us, any impact on director independence and whether the terms are consistent with a transaction available on an arms-length basis. Only those related person transactions that are determined to be in (or not inconsistent with) our best interests and the best interests of our shareholders are permitted to be approved. No member of the Committee may participate in any review of a transaction in which the member or any of his or her family members is the related person. A copy of the policy can be found on our website (www.peabodyenergy.com) by clicking on “Investors,” then “Corporate Governance,” and then “Nominating and Corporate Governance Committee Charter” and is available in print to any shareholder who requests it. Information on our website is not considered part of this Proxy Statement.

~~Certain Transactions and Relationships~~

A sibling of Mr. Engelhardt, our former Chairman who resigned in October 2007, is employed as Director of Real Estate Sales for one of our subsidiaries. His compensation (less than $200,000 in 2007) is

~~in accordance with our employment and compensation practices applicable to employees with similar qualifications, responsibilities and positions.~~

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(ITEM 2)

The Board of Directors has, upon the recommendation of the Audit Committee, appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, ~~2008,~~2009, subject to ratification by our shareholders. While the Audit Committee is responsible for the appointment, compensation, retention, termination and oversight of the independent registered public

accounting firm, the Audit Committee and the Board are requesting, as a matter of policy, that the shareholders ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm. The Audit Committee is not required to take any action as a result of the outcome of the vote on this proposal. However, if our shareholders do not ratify the appointment, the Audit Committee may investigate the reasons for shareholder rejection and may consider whether to retain Ernst & Young LLP or to appoint another independent registered public accounting firm. Furthermore, even if the appointment is ratified, the Audit Committee in its discretion may appoint a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and the best interests of our shareholders.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. Such representatives will have an opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions by shareholders. For additional information regarding our relationship with Ernst & Young LLP, please refer to “Report of the Audit Committee” and “Fees Paid to Independent Registered Public Accounting Firm” on pages 13 and ~~14 of this Proxy Statement.~~14.

The Board of Directors recommends that you vote “For” Item 2, which ratifies the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, ~~2008.~~2009.

~~PROPOSAL TO DECLASSIFY~~REAPPROVAL OF THE ~~BOARD~~MATERIAL TERMS OF ~~DIRECTORS (ITEM~~THE PERFORMANCE MEASURES
UNDER OUR 2004 LONG-TERM EQUITY INCENTIVE PLAN
(ITEM 3)

~~The Board~~We are asking shareholders to reapprove the material terms of ~~Directors proposes to amend Article Seventh of~~the performance measures used for performance-based awards granted under our ~~Third Amended and Restated Certificate of Incorporation~~2004 Long-Term Equity Incentive Plan (the ~~“Certificate of Incorporation”~~“Plan”) to ~~provide~~preserve our ability to take a U.S. federal tax deduction for the annual election of directors. Currently, the Board is divided into three classes, with directors elected to staggered three-year terms. Approximately one-third of our directors stand for election each year. If the proposed amendment to the Certificate of Incorporation is approved, directors will be elected to one-year terms of office starting at the 2009 Annual Meeting of Shareholders. To ensure a smooth transition to the new board structure, directors currently serving terms that expire at the 2010 and 2011 Annual Meetings of Shareholders will (subject to their earlier resignation or removal) serve the remainder of their respective terms, and thereafter their successors will be elected to one-year terms. From and after the 2011 Annual Meeting of Shareholders, all directors will stand for election annually.certain compensation awards.

~~This proposal results from~~Section 162(m) of the Internal Revenue Code the (“Code”) generally imposes an ~~ongoing review~~annual limit of ~~corporate governance matters~~$1.0 million on the tax deduction that is available to public companies for compensation paid to each of the chief executive officer and the other three most highly compensated executive officers, other than the chief financial officer, unless the compensation is performance-based. In order to qualify for this exception, however, the performance-based compensation must be paid based on the achievement of one or more performance measures that have been disclosed to and approved by the ~~Nominating~~company’s shareholders within the past five years. The performance measures used for performance-based awards under the Plan were last approved by our shareholders in May 2004. Therefore these measures, which have not changed since they were previously approved by shareholders, must be reapproved this year in order to maintain our ability to grant awards under the Plan that are eligible for deduction as compensation expense in our U.S. Federal tax returns.

For purposes of Section 162(m), the material terms of the performance measures include (i) the employees eligible to receive compensation under the Plan, (ii) a description of the business criteria on which the performance measures are based, and ~~Corporate Governance Committee and~~(iii) the ~~Board. In its review,~~maximum amount of compensation that can be paid to a participant under the ~~Committee and~~Plan. These aspects of the ~~Board considered~~Plan are discussed below.

Our shareholders are being asked only to reapprove the ~~advantages~~material terms of ~~maintaining~~ the ~~classified Board structure~~performance measures included in ~~light of our current circumstances, including~~the Plan. Note that a classified Board structure promotes Board continuity and stability, encourages a long-term perspective by company management, and reduces vulnerability to coercive takeover tactics. While the Committee and the Board continue to believe that thesewe are ~~important considerations, the Committee and the Board also considered potential advantages of declassification in light of our current~~

~~circumstances, including the ability of~~not asking shareholders to ~~evaluate directors annually, as well as~~reapprove the ~~maintenance~~Plan itself or to authorize additional shares of best practices in corporate governance by the Company. The Committee and the Board also considered the views of our shareholders regarding the classified Board structure, including the support of the holders of a majority of our outstanding Common Stock for issuance under the shareholder proposals to declassify the Board presented at the 2005, 2006 and 2007 Annual Meetings of Shareholders. The Committee and the Board also considered that many U.S. public companies have eliminated their classified Board structures in recent years in favor of annual director elections.

After carefully weighing all of these considerations, including consideration of advice from outside experts, the Committee recommended to the Board the elimination of our classified Board structure. The Board has approved the proposed amendment to our Certificate of Incorporation, a copy of which is attached to this Proxy Statement as~~Appendix A, and recommends that the shareholders adopt the amendment by voting in favor of this proposal.~~

Under the Certificate of Incorporation, this proposal must be approved by the affirmative vote of the holders of at least 75 percent in voting power of all the shares of the Company entitled to vote generally in the election of directors, voting as a single class. Accordingly, this proposal will be approved, and the proposed amendment to the Certificate of Incorporation adopted, upon the affirmative vote of the holders of 75 percent of our outstanding Common Stock. Abstentions and broker non-votes will have the effect of an “Against” vote on this proposal.Plan.

~~The Board of Directors recommends that you vote “For” Item 3, to approve an amendment to our Certificate of Incorporation to declassify the Board of Directors.~~

~~APPROVAL OF OUR 2008 MANAGEMENT ANNUAL INCENTIVE COMPENSATION PLAN (ITEM 4)~~

The Board of Directors adopted the Peabody Energy Corporation 2008 Management Annual Incentive Compensation Plan (the “Plan”) effective as of March 12, 2008, subject to approval by our shareholders at the Annual Meeting. The Plan will be effective upon its approval by our shareholders. The purpose of the Plan is to provide our eligible officers with annual performance-based incentive compensation. Additionally, the Plan is intended to focus their interests on, and reward them for the achievement of, the key measures of our success and for increasing shareholder value.

Summary of the Plan

The main features of the Plan are described below. The following summary is qualified by reference to the full text of the Plan, which is attached asAppendix BAto this Proxy Statement.

~~Administration.~~ The Plan will be administered by the Compensation Committee, or another committee determined by the Board of Directors (the “Committee”). Each member of the Committee will be an “outside director” (as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”)) of the Company. The Committee will have broad authority to administer and interpret the Plan.

~~Eligibility.~~ Our officers who are subject to Section 16 of the Securities Exchange Act of 1934 and selected by the Committee to be participants will be eligible to receive awards under the Plan. In general, such officers include our president, principal financial officer, principal accounting officer, any vice-president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for us. Currently, we have eight such officers. Officers who are selected to be participants in the Plan may be considered to have an interest in the Plan.

6452

~~Awards.~~Administration ~~For each award~~

The Plan is administered by the Board or the Compensation Committee of the Board, as the Board determines (the “Administrator”). The Administrator has sole discretion over determining persons eligible to ~~a participant~~participate in the Plan and the terms of awards issued under the Plan. Subject to the provisions of the Plan, the Administrator has the exclusive authority to interpret and administer the Plan, to establish rules relating to the Plan, to delegate some or all of its authority under the Plan and to take all other actions in connection with the ~~Committee will (1) establish~~Plan and benefits granted under the Plan as the Administrator may deem necessary or advisable.

Shares Reserved Under the Plan

An aggregate number of 14,000,000 shares (split-adjusted) of Common Stock were initially reserved for issuance under the Plan, although only a ~~performance period~~maximum of up to one year, (2) set forth one or more performance goals for that period and (3) state the maximum amount to be awarded to the participant if the performance goals for the performance period are met. However, the actual amount1,600,000 shares (split-adjusted) of ~~the award that will~~Common Stock (or units) underlying awards may be granted to ~~a participant will~~any individual in any one calendar year. Shares of Common Stock underlying expired, canceled or forfeited awards shall be ~~determined by~~added back into the ~~Committee. The Committee also has discretion~~number of shares available for issuance under the Plan (“Plan Maximum”). When the delivery of shares of Common Stock to ~~reduce (but not increase)~~us is used by a participant to pay for the ~~amount~~exercise price of stock options, the Plan Maximum will be reduced by the net (rather than the gross) number of shares of Common Stock issued pursuant to such exercise. In the event of a stock dividend, stock split, recapitalization, combination or exchange of shares, sale of all or substantially all of our assets, reorganization, rights offering, partial or complete liquidation or other event having an ~~award. Such reduction~~effect similar to any of the foregoing, the Administrator may make appropriate substitutions or adjustments to the (1) number and kind of shares that may be ~~based on~~delivered under the ~~criteria~~Plan; (2) additional maximums imposed in the Plan; (3) number and kind of shares subject to outstanding awards; (4) exercise price of outstanding stock options and SARs; or ~~factors the Committee establishes. For example, these factors might include our operating income, our revenue, our achievement~~(5) other terms of ~~non-financial goals or a participant’s individual performance. However, no participant may receive payment of an award for which the maximum payout would exceed $5,000,000 during any calendar year.~~awards as it deems appropriate to equitably reflect such event.

Participants

The ~~performance goals will be established by~~persons eligible to participate in the ~~Committee before a performance period begins, or during~~Plan are our officers and key employees and the ~~performance period~~officers and key employees of any of our subsidiaries. The approximate number of eligible participants was 270 as ~~long as no more than 25%~~ of March 1, 2009. As of that date, 9,425,953 shares of Common Stock remained available for grants of future awards under the ~~period has elapsed. In addition, attainment~~Plan. The Administrator shall consider the factors it deems pertinent in selecting participants and in determining the type and amount of ~~the performance goal must be substantially uncertain at the time the goal is established. Each performance goal will be based on certain performance measures, which include the following:~~their respective awards.


	•	~~Earnings before any or all of interest, taxes, depreciation, depletionand/or~~ ~~amortization (actual and adjusted and either in the aggregate or on a per-share basis);~~

	•	~~Earnings (either in the aggregate or on a per-share basis);~~

	•	~~Net income or loss (either in the aggregate or on a per-share basis);~~

	•	~~Operating profit;~~

	•	~~Growth or rate of growth in cash flow;~~

	•	~~Cash flow provided by operations (either in the aggregate or on a per-share basis);~~

	•	~~Free cash flow (cash flow provided by operations less capital expenditures)(either in the aggregate on a per-share basis);~~

	•	~~Costs;~~

	•	~~Gross revenues;~~

	•	~~Reductions in expense levels;~~

	•	~~Operating and maintenance cost management and employee productivity;~~

	•	~~Shareholder returns (including, but not limited to, return on assets, investments, equity, or gross sales);~~

	•	~~Return measures (including, but not limited to, return on assets, equity, invested capital or sales);~~

	•	~~Growth or rate of growth in return measures;~~

	•	~~Share price (including, but not limited to, growth measures and total shareholder return or attainment by the shares of a specified value for a specified period of time);~~

	•	~~Net economic value;~~

	•	~~Economic value added;~~

	•	~~Aggregate product unit and pricing targets;~~

	•	Strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market share, market penetration, geographic business expansion goals, objectively identified project milestones, production volume levels, cost targets, and goals relating to acquisitions, divestitures, joint ventures or other corporate transactions;

	•	~~Achievement of business or operational goals such as market shareand/or~~ ~~business development;~~

	•	~~Achievement of diversity objectives;~~

	•	~~Customer satisfaction indicators;~~

	•	~~Debt ratings, debt leverage and debt service;~~

	•	~~Safety performance;~~

	•	~~Business unit and site accomplishments; and/or~~

	•	~~Dividend payments.~~

Types of Awards

~~Awards will only be paid after~~The Plan is a flexible plan that provides the ~~Committee certifies in writing that~~Administrator broad discretion to fashion the ~~applicable performance goals were met~~terms of awards to provide eligible recipients with such stock-based and ~~determines~~performance-related incentives as the ~~amount to be awarded to~~Administrator deems appropriate. The Plan permits the ~~participant. Each award under the Plan shall be paid~~issuance of awards in a ~~lump sum cash payment, unless the Committee exercises its discretion~~variety of forms, including (1) stock appreciation rights (“SARs”); (2) restricted stock; (3) incentive stock options; (4) nonqualified stock options; (5) stock units; and (6) performance awards.

Stock Appreciation Rights

A SAR is a right to ~~pay~~receive all or a portion of the ~~award in stock, restricted stock, stock options, or other stock-based or stock-denominated compensation, which will be made in accordance with an equity compensation plan~~difference between the fair market value of ~~ours that is in existence~~a share of Common Stock at the time of exercise of the ~~award payment. Any award~~SAR and the exercise price of the SAR established by the Administrator, subject to the terms and conditions set forth in a SAR agreement. With respect to any SAR grant, the Administrator may not establish a period of restriction or vesting period of less than two years following the date such SAR is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event (each as defined in the Plan). A SAR may be exercised (i) in lieu of the exercise of an option, (ii) in conjunction with the exercise of an

option, (iii) upon lapse of an option, (iv) independently of an option, or (v) in connection with a previously awarded option under the Plan. The Administrator shall establish, at the time of grant, a maximum amount payable upon exercise of a SAR along with other conditions on the exercise of a SAR. A SAR will be exercisable not later than 10 years after the date it is granted and will expire in accordance with the terms established by the Administrator. In addition, no SAR may be granted under the Plan that ~~becomes payable~~has an exercise price that is less than the Fair Market Value of a share of Common Stock on the date of grant.

Restricted Stock

Shares of Common Stock may be issued or transferred under the Plan at a purchase price less than fair market value on the date of issuance or transfer, or as a bonus subject to the terms of a restricted stock agreement (“Restricted Stock”). For Restricted Stock issued or transferred under the Plan, the Administrator will determine the purchase price, if any, the restricted period, the restrictions themselves (including, without limitation, restrictions on sale or disposition, reacquisition rights of the Company, forfeiture or vesting requirements) and how the Restricted Stock is to be delivered. With respect to any Restricted Stock grant, the Administrator may not establish a period of restriction or vesting period of less than two years following the date such Restricted Stock is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event. Unless otherwise provided by the Administrator, the participant shall be entitled to the dividends paid with respect to the Restricted Stock during the restricted period. The participant shall also be entitled to vote the Restricted Stock during the restricted period.

Incentive Stock Options

Incentive stock options (“ISOs”) meet the requirements of Section 422 of the Code. The exercise period for any ISO granted under the Plan will be determined by the Administrator, provided that no ISO may be exercisable more than 10 years after the date such ISO is granted or 5 years from the date of grant in the case of an ISO granted to a 10% or more stockholder of the Company. The exercise price for ISOs granted under the Plan will be determined by the Administrator, provided that the option price per share may not be less than the fair market value per share on the date the ISO is granted. For an option intended to qualify as an ISO that is to be granted to a party that is a 10% or more stockholder of the Company, the exercise price per share may not be less than 110% of the fair market value per share of the Common Stock on the grant date. The exercise price of an ISO may be paid in cash or, in the ~~calendar year immediately~~Administrator’s discretion, (i) by delivering Common Stock already owned by the participant for a period of 6 months prior to such payment, (ii) unless prohibited by law, by using shares of Common Stock that would otherwise have been received by the participant upon exercise of the option or (iii) by a combination of any of the foregoing (subject to restrictions provided in the option agreement).

Non-qualified Stock Options

Non-qualified stock options (“NQSOs”) are stock options to purchase Common Stock that do not qualify as ISOs. NQSOs are issued at exercise prices determined by the Administrator and are subject to the terms of an option agreement, provided that the exercise price of a NQSO must not be less than 100% of the fair market value of the underlying shares of Common Stock on the date the NQSO is granted. Like ISOs, the exercise price for NQSOs may be paid in cash or, in the Administrator’s discretion, (i) by delivering Common Stock already owned by the participant for a period of 6 months prior to such payment, (ii) unless prohibited by law, by using shares of Common Stock that would otherwise have been received by the participant upon exercise of the option or (iii) by a combination of any of the foregoing (subject to restrictions provided in the option agreement).

Stock Units

Stock Units represent the right to receive shares of Common Stock from us at a designated time in the future, subject to terms and conditions as may be set forth in a stock unit agreement. With respect to any Stock Unit grant, the Administrator may not establish a period of restriction or vesting period of less than two years following the ~~calendar year~~date such Stock Unit is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event. The recipient generally does not attain the rights of a stockholder until receipt of the shares. The Administrator may provide for payments in ~~which~~cash, or adjustment in the number of stock units, equivalent to the dividends the recipient would have received if the recipient had been the owner of shares of Common Stock instead of the stock units.

Performance Awards

The Administrator is authorized to condition any type of award or cash payment on our performance utilizing business criteria or other measures of our performance it deems appropriate. With respect to any Performance Award grant, the Administrator may not establish a period of restriction or vesting period of less than two years following the date such Performance Award is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event.

With respect to Performance Awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the Administrator may utilize one or more of the following business criteria for us in establishing the performance ~~period ends~~goals for such Performance Award: (1) total stockholder return; (2) total stockholder return as compared to total return (on a comparable basis) of a publicly-available index or peer group; (3) net income; (4) pre-tax earnings; (5) earnings before interest expense, taxes, depreciation and ~~no later than March 15 of such immediately following calendar year. Generally, a participant must be employed by us~~amortization (EBITDA); (6) pre-tax operating earnings after interest expense and before bonuses, service fees and extraordinary or special items; (7) operating margin; (8) earnings per share; (9) return on ~~the award payment date in order to receive an award. If the participant is not employed by us~~equity; (10) return on ~~the award payment date,~~capital; (11) return on investment; (12) operating income; (13) earnings per share; (14) working capital; (15) total revenues; and ~~if the participant does not have a written agreement with us stating otherwise, the participant shall forfeit his or her award.~~(16) value creation measures.

~~Plan Modification and Termination~~Merger, Consolidation, Acquisition or Reorganization

The Board, on the terms and conditions as it may deem appropriate, may authorize the issuance of Directors may modify or terminate the Plan at any time. However, any modification of the Plan that changes the class of employees eligible to participate in the Plan, the performance measures on which performance goals may be basedawards or the ~~maximum amount that may be paid to a participant~~assumption of benefits in ~~a calendar year will not be effective unless approved by our shareholders, unless such approval would not be required to continue to treat awards as “performance-based” under Section 162(m)~~connection with any merger, consolidation, acquisition of ~~the Internal Revenue Code.~~property or stock, or reorganization.

Nontransferability

Awards granted under the Plan may not be transferred other than by will or the laws of descent and distribution, except that NQSOs may be transferred, without consideration, to a Permitted Transferee (as defined in the Plan).

Duration

Unless the Plan is discontinued earlier by the Board, no award shall be granted on or after January 26, 2014.

Amendments; Prohibitions

Unless stockholder approval is required by law, agreement, or any applicable listing standards, the Board may amend, alter or discontinue the Plan, other than any amendment, alteration or discontinuation

that would impair the rights of a recipient of an award under the Plan, without the recipient’s consent (except an amendment made to avoid an expense charge to us or to permit us to take a deduction in compliance with the Code). In addition, neither the Board nor the Administrator will be permitted to (i) amend an option to reduce its exercise price, (ii) cancel an option and regrant an option with a lower exercise price than the original exercise price of the cancelled option, or (iii) take any other action (whether in the form of an amendment, cancellation or replacement grant) that has the effect of repricing an option.

U.S. Federal Income Tax Consequences

The following summary of some of the ~~federal~~U.S. Federal income tax consequences of awards made under the Plan is based on the laws in effect as of the date of this Proxy Statement. It is general in nature and does not account for numerous circumstances that that may apply to a particular participant in the Plan. In addition, the state or local income tax consequences of a Plan award might be different than the ~~federal~~Federal income tax consequences described below.

~~If an award under the Plan is paid in cash or its equivalent,~~Stock Appreciation Rights

Participant

Generally, a participant ~~will recognize compensation~~receiving a stock appreciation right does not realize any taxable ~~as ordinary~~ income ~~(and subject to~~for Federal income tax ~~withholding since~~purposes at the time of grant. Upon the exercise of a stock appreciation right, the participant will ~~be our employee) at the time the award is paid~~generally recognize ordinary income in an amount equal to the amount of cash or the fair market value of ~~its equivalent. For~~ the ~~same award, we~~Common Stock distributed to the participant. The participant will have a capital gain (or loss) upon a subsequent sale of shares of common stock received in an amount equal to the sale price reduced by the fair market value of the shares of common stock on the date the stock appreciation right was exercised. The holding period for purposes of determining whether the capital gain (or loss) is a long-term or short-term capital gain (or loss) will generally commence on the date the stock appreciation right is exercised.

The Company

We generally will be entitled to a ~~corresponding~~ tax deduction ~~except for any amounts that are not deductible because~~in the same amount and in the same year in which the participant recognizes ordinary income resulting from the exercise of ~~Section 162(m)~~stock appreciation rights.

Stock Awards

Participant

Generally, a participant receiving a stock award will recognize taxable income at the time of grant of a stock award of unrestricted shares. The taxable income will be equal to the excess of the ~~Internal Revenue Code. If~~fair market value of the unrestricted shares on the grant date over any amount the participant pays for the unrestricted shares. Generally, a participant will not recognize taxable income at the time of grant of a stock award ~~is paid in~~of restricted shares. However, a ~~form~~participant may make an election under section 83(b) of ~~stock-based compensation under an equity compensation plan of ours that is in existence~~the Code (“Section 83(b)”) to be taxed at the time of the stock award. If a participant does not elect under Section 83(b) to recognize income at the time of the stock award, ~~payment,~~ the ~~tax consequences~~participant will recognize taxable income at the time of vesting. The taxable income will be equal to the excess of the fair market value of the restricted shares at the time the shares vest over any amount the participant paid for the restricted shares. A participant may elect under Section 83(b) to include as ordinary income in the year of the stock award an amount equal to the excess of the fair market value of the shares on the transfer date over any purchase price paid for the shares. The fair market value of the shares will be determined as if the shares were not subject to forfeiture. If a participant makes the Section 83(b) election, the participant will not

recognize any additional income when the shares vest. Any appreciation in the value of the restricted shares after the award is not taxed as compensation, but instead as a capital gain when the restricted shares are sold or transferred. If the participant makes a Section 83(b) election and the restricted shares are later forfeited, the participant is not entitled to a tax deduction or a refund of the tax already paid. The Section 83(b) election must be filed with the IRS within 30 days following the date the shares are awarded to a participant. The 83(b) election generally is not revocable and cannot be made after the30-day period has expired. Dividends received on restricted shares subject to a Section 83(b) election are taxed as dividends instead of compensation.

The Company

We generally will be entitled to an income tax deduction equal to the amount of ordinary income a participant recognizes in connection with a stock award. The deduction will generally be allowed for the taxable year in which the participant recognizes such ordinary income.

Incentive Stock Options

Participant

Generally, a participant will not realize any taxable income for Federal income tax purposes at the time an ISO is granted. Upon exercise of the ISO, the participant will generally incur no income tax liability (other than pursuant to the alternative minimum tax, if applicable), unless the participant has left our employ more than three months before exercising the option. If the participant transfers shares of Common Stock received upon the exercise of an incentive stock option within a period of two years from the date of grant of such incentive stock option or one year from the date of receipt of the shares of common stock (the “Holding Period”), then, in general, the participant will have taxable ordinary income in the year in which the transfer occurs in an amount equal to the excess of the fair market value on the date of exercise over the exercise price. However, if the sale price is less than the fair market value of such shares on the date of exercise, the ordinary income will not be more than the difference between the sale price and the exercise price. The participant will have long-term or short-term capital gain (or loss) in an amount equal to the amount by which the amount received for such common stock exceeds (or is less than) the participant’s tax basis in the common stock as increased by the ~~particular type~~amount of ~~stock-based compensation awarded~~any ordinary income recognized as a result of the disqualifying disposition, if any. If the participant transfers the shares of common stock after the expiration of the Holding Period, he or she will recognize capital gain (or loss) equal to the difference between the sale price and the ~~equity plan under~~exercise price.

If a participant who exercises an incentive stock option pays the option exercise price by tendering shares of Common Stock, such participant will generally incur no income tax liability (other than pursuant to the alternative minimum tax, if applicable), provided any Holding Period requirement for the tendered shares is met. If the tendered stock was subject to the Holding Period requirement when tendered (i.e., had not been held for the entire Holding Period), payment of the exercise price with such stock constitutes a disqualifying disposition. If the participant pays the exercise price by tendering Common Stock and the participant receives back a larger number of shares, the participant’s basis in the number of shares of newly acquired stock equal to the number of shares delivered as payment of the exercise price will have a tax basis equal to that of the shares originally tendered, increased, if applicable, by an amount included in the participant’s gross income as compensation. The additional newly acquired shares upon exercise of the option will have a tax basis of zero. All stock acquired upon exercise will be subject to the Holding Period requirement, including the number of shares equal to the number tendered to pay the exercise price. Any disqualifying disposition will be deemed to be a disposition of stock with the lowest basis.

The Company

We will not be entitled to a tax deduction upon grant, exercise or subsequent transfer of shares of common stock acquired upon exercise of an incentive stock option, provided that the participant holds the shares received upon the exercise of such option for the Holding Period. If the participant transfers the common stock acquired upon the exercise of an incentive stock option prior to the end of the Holding Period, we will generally be entitled to a deduction at the time the participant recognizes ordinary income in an amount equal to the amount of ordinary income recognized by such participant as a result of such transfer.

Nonqualified Stock Options

Participant

Generally, a participant receiving a nonqualified stock option does not realize any taxable income for federal income tax purposes at the time of grant. Upon exercise of such option, the excess of the fair market value of the shares of common stock subject to the nonqualified stock option on the date of exercise over the exercise price will generally be taxable to the participant as ordinary income. The participant will have a capital gain (or loss) upon the subsequent sale of the shares of common stock received upon exercise of the option in an amount equal to the sale price reduced by the fair market value of the shares of common stock on the date the option was exercised. The holding period for purposes of determining whether the capital gain (or loss) is a long-term or short-term capital gain (or loss) will generally commence on the date the nonqualified stock option is exercised.

If the participant who exercises a nonqualified stock option pays the exercise price by tendering shares of Common Stock and receives back a larger number of shares, the participant will realize taxable income in an amount equal to the fair market value of the additional shares received on the date of exercise, less any cash paid in addition to the shares tendered. Upon a subsequent sale of the Common Stock, the number of shares equal to the number delivered as payment of the exercise price will have a tax-basis equal to that of the shares originally tendered. The additional newly-acquired shares obtained upon exercise of the nonqualified stock option will have a tax basis equal to the fair market value of such shares on the date of exercise.

The Company

We generally will be entitled to a tax deduction in the same amount and in the same year in which the ~~stock-based award~~participant recognizes ordinary income resulting from the exercise of a nonqualified stock option.

Other Awards

Participant

With respect to awards granted under the Plan that result in the payment or issuance of cash or shares of Common Stock or other property that is ~~granted.~~either not restricted as to transferability or not subject to a substantial risk of forfeiture, the participant must generally recognize ordinary income equal to the cash or the fair market value of shares or other property received. Thus, deferral of the time of payment or issuance will generally result in the deferral of the time the participant will be liable for income taxes with respect to such payment or issuance. With respect to awards involving the issuance of shares of Common Stock or other property that is restricted as to transferability and subject to a substantial risk of forfeiture, the participant must generally recognize ordinary income equal to the fair market value of the shares or other property received at the first time the shares or other property becomes transferable or not subject to a substantial risk of forfeiture, whichever occurs earlier. A participant may make a Section 83(b) election and be taxed at the time of receipt of shares or other property rather than upon the lapse of restrictions on

transferability or the substantial risk of forfeiture, but if the participant subsequently forfeits such shares or property the participant would not be entitled to any tax deduction, including a capital loss, for the value of the shares or property on which he previously paid tax. The participant must file such election with the Internal Revenue Service within 30 days after the receipt of the shares or other property.

The Company

We generally will be entitled to a deduction in an amount equal to the ordinary income received by the participant. The deduction will generally be allowed for the taxable year in which the participant recognizes such ordinary income.

Section 162(m)

Section 162(m) of the ~~Internal Revenue~~ Code ~~limits the deductibility of certain forms of~~provides that any compensation paid to ~~our Chief Executive Officer~~a “covered employee” within the meaning of Section 162(m) which is in excess of $1,000,000 cannot be deducted by us for Federal income tax purposes unless, in general, (1) such compensation constitutes “qualified performance-based compensation” satisfying the requirements of Section 162(m) and ~~our next three most highly paid officers~~(2) the plan or agreement providing for such performance-based compensation has been approved by shareholders.

Parachute Payments

If any payments or rights accruing to a participant upon a change in control of the Company, or any payments awarded under the Plan, constitute “parachute payments” under Section 280G of the Code, depending upon the amount of such payments accruing and the other income of the participant of the Company, the participant may be subject to a 20% excise tax (in addition to ordinary income tax) and we may be disallowed a deduction for the amount of the actual payment.

Section 409A

Section 409A of the Code generally establishes rules that must be followed with respect to certain deferred compensation arrangements in order to avoid the imposition of an additional 20% tax (plus interest) on the service provider who ~~are~~is entitled to receive the deferred compensation. Certain awards that may be granted under the Plan may constitute “deferred compensation” within the meaning of and subject to Section 16409A of the ~~Securities Exchange Act~~Code. The Plan is intended to be interpreted and operated in accordance with Section 409A of ~~1934. Any compensation~~the Code, including any regulations or guidance issued by the Treasury Department, and contains a number of provisions intended to avoid the imposition of additional tax on the Plan participants under Section 409A of the Code. Under the terms of the Plan, the Administrator may amend the Plan and outstanding awards to preserve the intended benefits of awards granted under the Plan and to avoid the imposition of an additional tax under Section 409A of the Code. However, we ~~pay~~make no guarantees to ~~one~~any participant with respect to the tax treatment of ~~these officers that is over $1 million~~awards granted under the Plan, including, without limitation, with respect to potential taxation under Section 409A of the Code.

Tax Treatment of Awards to Participants Outside the United States

The grant and ~~not performance-based will not be deductible by us on our federal income tax return. We intend for compensation paid~~exercise of options and awards under the Plan to ~~qualify as performance-based.~~participants outside the United States may be taxed on a different basis.

~~New~~ Plan Benefits

~~The award amounts~~It is not presently possible to determine the dollar value of awards that may be made, or the individuals that may be selected for ~~performance periods beginning after~~such awards, in the ~~effective date of~~future under the Plan will be determined based upon the performance goals and measures selected by the Committee, and will also be subject to the Committee’s right to reduce any participant’s award by any amount. Because the Committee can reduce each participant’s award and because no performance goals have yet been established, we cannot provide an estimate of the amounts that would have been paid for fiscal year 2007Plan.

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~~if the Plan was in existence then. No awards will be made~~Awards under the Plan ~~until it is approved by our shareholders.~~in 2008 to the Chairman and Chief Executive Officer and each of the other named executive officers are shown in the “Grants of Plan-Based Awards in 2008” table in this Proxy Statement. Awards under the Plan in 2008 for all current executive officers as a group were as follows: 196,180 stock options, 1,406 shares of restricted stock and 86,707 performance units (at target). Awards under the Plan in 2008 for all non-executive officer employees as a group totaled 93,120 stock options, 896,801 shares of restricted stock and 42,484 performance units (at target).

~~Approval~~Vote Required

~~Under Delaware law, approval~~Approval by the holders of a majority of the shares present in person or by proxy at the meeting and entitled to vote is required for ~~approval~~reapproval of the Plan. Under Section 162(m) of the Internal Revenue Code, the material terms of a performance goal are approved by shareholders if, in a separate vote, a majority of the votes cast on the issue are cast in favor of approval. If the Plan receives initial shareholder approval, we will redisclose the material terms of the ~~Plan and seek shareholder reapproval every five years after~~performance measures under the ~~Plan’s effective date, unless required sooner by law or the~~ Plan.

The Board of Directors recommends that you vote “For” Item 4,3, to ~~approve~~reapprove the material terms of the performance measures under our ~~2008 Management Annual~~2004 Long-Term Equity Incentive ~~Compensation~~ Plan.

ADDITIONAL INFORMATION

Information About Shareholder Proposals

If you wish to submit a proposal for inclusion in next year’s proxy statement and proxy, we must receive the proposal on or before November ~~26, 2008,~~25, 2009, which is 120 calendar days prior to the anniversary of this year’s mailing date. Upon timely receipt of any such proposal, we will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations governing the solicitation of proxies. Any proposals should be submitted in writing to: Corporate Secretary, Peabody Energy Corporation, 701 Market Street, St. Louis, Missouri 63101.

Under our by-laws, if you wish to nominate a director or bring other business before the shareholders at the ~~2009~~2010 Annual Meeting without having your proposal included in next year’s proxy statement:


	•	You must notify the Corporate Secretary in writing at our principal executive offices between January ~~7, 2009~~6, 2010 and February ~~6, 2009;~~5, 2010; however, if we advance the date of the meeting by more than 20 days or ~~delays~~delay the date by more than 70 days, from May ~~8, 2009,~~7, 2010, then such notice must be received not earlier than 120 days before the date of the annual meeting and not later than the close of business on the 90th day before such date or the 10th day after public disclosure of the meeting is made; and

	•	Your notice must contain the specific information required by our by-laws regarding the proposal or nominee, including, but not limited to, name, address, shares held, a description of the proposal or information regarding the nominee and other specified matters.

You can obtain a copy of our by-laws without charge by writing to the Corporate Secretary at the address shown above or by accessing our website (www.peabodyenergy.com) and clicking on “Investors,” and then “Corporate Governance”. Information on our website is not considered part of this Proxy Statement. These requirements are separate from and in addition to the requirements a shareholder must meet to have a proposal included in our proxy statement. The foregoing time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority.

Householding of Proxies

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for annual reports and proxy statements with respect to two or more shareholders sharing the same address by delivering a single annual reportand/or proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies. We and some brokers household annual reports and proxy

materials, delivering a single annual reportand/or proxy statement to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders.

Once you have received notice from your broker or us that your broker or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual reportand/or proxy statement in the future, please notify your broker if your shares are held in a brokerage account or notify us if you hold registered shares. If, at any time, you and another shareholder sharing the same address wish to participate in householding and prefer to receive a single copy of our annual reportand/or proxy statement, please notify your broker if your shares are held in a brokerage account or notify us if you hold registered shares.

You may request to receive at any time a separate copy of our annual report or proxy statement, or notify us that you do or do not wish to participate in householding by sending a written request to the Corporate Secretary at 701 Market Street, St. Louis, Missouri 63101 or by telephoning(314) 342-3400.

Additional Filings

OurForms 10-K,10-Q,8-K and all amendments to those reports are available without charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. They may be accessed at our website (www.peabodyenergy.com) by clicking on “Investors,” and then “SEC Filings.” Information on our website is not considered part of this Proxy Statement.

In accordance with SEC rules, the information contained in the Report of the Audit Committee on page 13 and ~~(ii)~~ the Report of the Compensation Committee on page 3534 shall not be deemed to be “soliciting material,” or to be “filed” with the SEC or subject to the SEC’s Regulation 14A, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that we specifically request that the information be treated as soliciting material or specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Costs of Solicitation

We are paying the cost of preparing, printing and mailing these proxy materials. We have engaged ~~Georgeson Inc.~~Laurel Hill Advisory Group to assist in distributing proxy materials, soliciting proxies and in performing other proxy solicitation services for a fee of $10,500 plus theirout-of-pocket expenses. Proxies may be solicited personally or by telephone by our regular employees without additional compensation as well as by employees of ~~Georgeson Inc.~~Laurel Hill Advisory Group. We will reimburse banks, brokerage firms and others for their reasonable expenses in forwarding proxy materials to beneficial owners and obtaining their voting instructions.

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OTHER BUSINESS

The Board of Directors is not aware of any matters requiring shareholder action to be presented at the Annual Meeting other than those stated in the Notice of Annual Meeting. Should other matters be properly introduced at the Annual Meeting, those persons named in the enclosed proxy will have discretionary authority to act on such matters and will vote the proxy in accordance with their best judgment.

We will provide to any shareholder, without charge and upon written request, a copy (without exhibits unless otherwise requested) of our Annual Report onForm 10-K for the Fiscal Year Ended December 31, ~~2007~~2008 as filed with the Securities and Exchange Commission. Any such request should be directed to Peabody Energy Corporation, Investor Relations, 701 Market Street, St. Louis, Missouri63101-1826; telephone(314) 342-3400.

By Order of the Board of Directors,

~~Jeffery L. Klinger~~Alexander C. Schoch

Executive Vice President ~~General Counsel~~Law, Chief Legal

Officer and ~~Corporate~~ Secretary

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Appendix A

~~Proposed Amendment to Article Seventh of the Company’s~~
~~Third Amended and Restated Certificate of Incorporation~~

Subject to approval by the requisite vote of stockholders, Article Seventh of the Company’s Third Amended and Restated Certificate of Incorporation shall be amended to read in its entirety as follows:

~~SEVENTH:~~ (1) The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than three directors, the exact number of directors to be determined from time to time by resolution adopted by a majority of the Board of Directors.

At the 2009 annual meeting of stockholders, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the 2010 annual meeting of stockholders and shall hold office until the next succeeding annual meeting and until his or her successor shall be elected and shall qualify, but subject to prior death, resignation, retirement, disqualification or removal from office; at the 2010 annual meeting of stockholders, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the 2011 annual meeting of stockholders and shall hold office until the next succeeding annual meeting and until his or her successor shall be elected and shall qualify, but subject to prior death, resignation, retirement, disqualification or removal from office; and at each annual meeting of stockholders thereafter, the directors shall be elected for terms expiring at the next annual meeting of stockholders and shall hold office until the next succeeding annual meeting and until his or her successor shall be elected and shall qualify, but subject to prior death, resignation, retirement, disqualification or removal from office.

Any newly created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If any applicable provision of the General Corporation Law of the State of Delaware expressly confers power on stockholders to fill such a directorship at a special meeting of stockholders, such a directorship may be filled at such meeting only by the affirmative vote of at least 75 percent of the voting power of all shares of the Corporation entitled to vote generally in the election of directors voting as a single class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the remaining term as that of his or her predecessor. Directors may be removed only for cause, and only by the affirmative vote of at least 75 percent in voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting as a single class.

(2) Notwithstanding the foregoing, whenever the holders of any one or more series of Preferred Stock or Series Common Stock issued by the Corporation shall have the right, voting separately as a series or separately as a class with one or more such other series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock or Series Common Stock) applicable thereto.

~~(3) Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of the directors of the Corporation need not be by written ballot.~~

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~~Appendix B~~

PEABODY ENERGY CORPORATION
2004 LONG-TERM EQUITY INCENTIVE PLAN

~~2008 Management Annual Incentive Compensation Plan~~(as amended by Amendment No. 1 effective as of July 20, 2004,
Amendment No. 2 effective as of January 1, 2007,
Amendment No. 3 effective as of October 31, 2007 and
Amendment No. 4 effective as of October 31, 2007)

1. Establishment and Purpose. The purpose of the Peabody Energy Corporation ~~2008 Management Annual~~2004 Long-Term Equity Incentive ~~Compensation~~ Plan (the “~~Plan~~”“Plan”) is to ~~provide~~encourage officers and key employees of Peabody Energy Corporation (the “~~Company~~”“Corporation”) and ~~its affiliates~~such subsidiaries of the Corporation as the Administrator designates, to acquire shares of common stock, $0.01 par value, of the Corporation (“Common Stock”) or to receive monetary payments based on the value of such Common Stock or based upon achieving certain goals on a basis mutually advantageous to such individuals and the Corporation and thus provide an incentive for such individuals to contribute to the success of the Corporation and align their interests with ~~annual performance-based incentive compensation. The Plan is intended to focus~~ the interests of ~~eligible executive officers on, and reward for~~ the ~~achievement~~shareholders of the ~~key measures of the Company’s success and increasing shareholder value.~~Corporation.

2. ~~Compliance with Section 162(m).~~Administration. The benefits payable under the Plan are intended to be deductible to the maximum extent possible as “performance-based compensation” within the meaning of Section 162(m) (as defined below). Unless sooner required by Section 9, the material terms of the Plan shall be ~~redisclosed and reapproved every five years~~administered by the Company’s shareholders in a separate vote. If applicable laws change to permit Committee (as defined below) discretion to alter the governing performance measures without conditioning deductibility on obtaining shareholder approval (or reapproval) of any changes, the Committee shall have sole discretion to make changes without obtaining shareholder approval or reapproval.

3. ~~Definitions.~~ ~~As used in the Plan, the following terms shall have the meanings set forth below:~~

“~~Award~~” shall mean an annual incentive compensation award under the Plan as determined by the Committee, payment of which (a) is contingent and based upon the attainment of the applicable Performance Goal for a Performance Period, and (b) may be reduced in accordance with Section 5(c).

“~~Board~~~~” shall mean~~ the Board of Directors of the ~~Company.~~

~~“Committee”~~Corporation (“Board”) or the Compensation Committee of the Board as determined by the Board (the “Administrator”). To the extent required by law, insofar as the Administrator is responsible for granting Awards (as defined in Section 5 hereof) to Participants (as defined in Section 4 hereof) hereunder, it shall ~~have~~consist solely of two or more directors, each of whom is a “non-employee director” within the meaning ~~ascribed to such term in Section 8.~~

“~~Participant~~~~” shall mean~~ofRule 16b-3 and an ~~officer of the Company or of an affiliate of the Company who satisfies the requirements, and is selected to participate in, the Plan in accordance with Section 4.~~

~~“Performance Measure”~~~~has the meaning ascribed to such term in Section 5(a).~~

~~“Performance Goal”~~means the pre-established performance goal or goals established by the Committee for each Performance Period in accordance with Section 5(a), which shall be based upon one or more of the Performance Measures selected by the Committee.

“~~Performance Period~~~~” shall mean any period of up to one year designated as a performance period by the Committee.~~

~~“Section 162(m)”~~~~shall mean~~“outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

The authority to select persons eligible to participate in the Plan, to grant Awards in accordance with Section 5 of the Plan, and to establish the timing, pricing, amount and other terms and conditions of such Awards (which need not be uniform with respect to the various Participants or with respect to different Awards to the same Participant), shall be exercised by the Administrator in its sole discretion. An Award under this Plan shall be evidenced by an Award agreement that shall set forth the terms and conditions applicable to that Award. In the event of any inconsistency between the terms of such an Award agreement and terms of this Plan, the terms of the Plan shall prevail.

Subject to the provisions of the Plan, the Administrator shall have exclusive authority to interpret and administer the Plan, to establish appropriate rules relating to the Plan, to delegate some or all of its authority under the Plan to the extent permitted by law, and to take all such steps and make all such determinations in connection with the Plan and the benefits granted pursuant to the Plan as it may deem necessary or advisable. The validity, construction, and effect of the Plan shall be determined in accordance with the laws of the State of Delaware (other than its law respecting choice of law). Any decision of the Administrator in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not limited to, Participants and their beneficiaries or successors). The Administrator shall have the full power and authority to establish the terms and conditions of any Award consistent with the provisions of the Plan and to waive any such terms and conditions at any time (including, without limitation, accelerating or waiving any vesting conditions). The Administrator shall require payment from the Participant of any amount it may determine to be necessary to withhold for federal, state, local or other taxes as a result of the exercise, grant or vesting of an Award. The obligations of the Corporation under the Plan shall be conditional on such payment, and the Corporation or any ~~successor provision thereto,~~of its subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any

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payment otherwise due to the Participant. Unless the Administrator specifies otherwise, the Participant may elect to pay a portion or all of such withholding taxes by (a) delivery in shares of Common Stock or (b) having shares of Common Stock withheld by the Corporation from any shares of Common Stock that would have otherwise been received by the Participant, on the basis of the Fair Market Value of such shares of Common Stock at the time income withholding is required in connection with the relevant Award.

For purposes of this Plan, “Fair Market Value” shall mean, as of any given date, the fair market value of the Common Stock as determined by the Administrator or under procedures established by the Administrator. Unless otherwise determined by the Administrator, the Fair Market Value per share of Common Stock shall be the closing sales price per share of Common Stock on the New York Stock Exchange (or the principal stock exchange or market on which the Common Stock is then traded) on the date as of which such value is being determined or the last previous day on which a sale was reported.

3. Shares Reserved Under the Plan. Subject to the provisions of Section 12 (relating to adjustment for changes in capital stock) an aggregate number of three million five hundred thousand shares (3,500,000) of Common Stock of the Corporation shall be available for issuance under the Plan. The shares of Common Stock issued under the Plan may be authorized but unissued shares or shares re-acquired by the Corporation, including shares purchased in the open market or in private transactions. Notwithstanding anything herein to the contrary, the aggregate number of shares of Common Stock available for issuance under the Plan may only be increased by the Board, subject to the approval of the Corporation’s shareholders, in accordance with Section 16 hereof.

As used in this Section, the term “Plan Maximum” shall refer to the number of shares of Common Stock of the Corporation that are available for issuance pursuant to the Plan. Stock underlying outstanding Awards will reduce the Plan Maximum. Shares of Common Stock underlying expired, canceled or forfeited Awards shall be added back to the Plan Maximum. When the exercise price of stock options is paid by delivery of shares of Common Stock of the Corporation, or if the Administrator approves the withholding of shares from a distribution in payment of the exercise price, the Plan Maximum shall be reduced by the net (rather than the gross) number of shares of Common Stock issued pursuant to such exercise. If the Administrator approves the payment of cash to an optionee equal to the difference between the fair market value and the exercise price of stock subject to an option, or if a stock appreciation right is exercised for cash or a performance award or stock unit is paid in cash in lieu of shares of Common Stock, the Plan Maximum shall be increased by the number of shares with respect to which such payment is applicable. When a stock appreciation right is exercised and paid in shares of Common Stock, the Plan Maximum shall be reduced by the net number of shares of Common Stock issued pursuant to such exercise (rather than the gross number of shares of Common Stock underlying such Award). Restricted stock issued pursuant to the Plan will reduce the Plan Maximum while outstanding even while subject to restrictions. Shares of restricted stock shall be added back to the Plan Maximum if such restricted stock is forfeited or is returned to the Corporation as part of an exchange or a restructuring of Awards granted pursuant to this Plan or to the extent the Administrator approves of the withholding of a portion of such shares to satisfy tax withholding requirements.

Notwithstanding the above, the maximum number of shares of Common Stock or stock-based units subject to any ~~regulations, revenue ruling~~Awards that may be granted under this Plan in any calendar year to any individual shall not exceed 400,000 shares or ~~other guidance promulgated and~~units (as adjusted in ~~effect thereunder.~~accordance with Section 12).

4. ~~Eligibility.~~Participants. Participants will consist of such officers and key employees of the Corporation or any designated subsidiary as the Administrator in its sole discretion shall determine. Designation of a Participant in any year shall not require the Administrator to designate such person to receive an Award in any other year or to receive the same type or amount of Awards as granted to the Participant in any other

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year or as granted to any other Participant in any year. The Administrator shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards.

5. Types of Benefits. The ~~Participants~~following benefits (“Awards”) may be granted under the Plan: (a) stock appreciation rights (“SARs”); (b) restricted stock (“Restricted Stock”); (c) performance awards (“Performance Awards”); (d) incentive stock options (“ISOs”); (e) nonqualified stock options (“NQSOs”); and (f) Stock Units, all as described below. No more than fifty percent of the total number of shares reserved for issuance under the Plan may be granted in the form of awards other than ISO’s or NQSO’s.

6. Stock Appreciation Rights. A SAR is the right to receive all or a portion of the difference between the fair market value of a share of Common Stock at the time of exercise of the SAR and the exercise price of the SAR established by the Administrator, subject to such terms and conditions set forth in a SAR agreement as may be established by the Administrator in its sole discretion. Notwithstanding the foregoing, with respect to any SAR grant, the Administrator shall not establish a period of restriction or vesting period of less than two years following the date such SAR is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event. At the discretion of the Administrator, SARs may be exercised (a) in lieu of exercise of an option, (b) in conjunction with the exercise of an option, (c) upon lapse of an option, (d) independently of an option or (e) each of the above in connection with a previously awarded option under the Plan. If the option referred to in (a), (b) or (c) above qualified as an ISO pursuant to Section 422 of the Internal Revenue Code of 1986 (“Code”), the related SAR shall comply with the applicable provisions of the Code and the regulations issued thereunder. At the time of grant, the Administrator may establish, in its sole discretion, a maximum amount per share which will be payable upon exercise of a SAR, and may impose conditions on exercise of a SAR. At the discretion of the Administrator, payment for SARs may be made in cash or shares of Common Stock of the Corporation, or in a combination thereof. SARs will be exercisable not later than ten years after the date they are granted and will expire in accordance with the terms established by the Administrator.

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

For purposes of this Plan, “Fair Market Value” means, as of any applicable date, (a) the closing sales price for one share of Common Stock on such date as reported on the New York Stock Exchange or, if the foregoing does not apply, on such other stock exchange on which the Corporation’s Common Stock is then listed or admitted to trading, or on the last previous day on which a sale was reported if no sale of a share of Common Stock was reported on such date, or (b) if the foregoing subsection (a) does not apply, the fair market value of a share of Common Stock as reasonably determined in good faith by the Board in accordance with Code Section 409A. For purposes of subsection (b), the determination of such Fair Market Value by the Board will be made no less frequently than every twelve (12) months and will either (x) use one of the safe harbor methodologies permitted under TreasuryRegulation Section 1.409-1(b)(iv)(B)(2) or (y) include, as applicable, the value of tangible and intangible assets of the Corporation, the present value of future cash flows of the Corporation, the market value of stock or other equity interests in similar corporations and other entities engaged in trades or businesses substantially similar to those engaged in by the Corporation, the value of which can be readily determined through objective means (such as through trading prices or an established securities market or an amount paid in an arms’ length private transaction), and other relevant factors such as control premiums or discounts for lack of marketability and whether the valuation method is used for other purposes that have a material economic effect on the Corporation, its stockholders or its creditors.

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7. Restricted Stock. Restricted Stock is Common Stock of the Corporation issued or transferred under the Plan (other than upon exercise of stock options or as Performance Awards) at any purchase price less than the fair market value thereof on the date of issuance or transfer, or as a bonus, subject to such terms and conditions set forth in a Restricted Stock agreement as may be established by the Administrator in its sole discretion. In the case of any Restricted Stock:

(a) The purchase price, if any, will be determined by the Administrator.

(b) The period of restriction shall be established by the Administrator for any grants of Restricted Stock;

(c) Restricted Stock may be subject to (i) restrictions on the sale or other disposition thereof; (ii) rights of the Corporation to reacquire such Restricted Stock at the purchase price, if any, originally paid therefor upon termination of the Participant’s service within specified periods; (iii) representation by the Participant that he or she intends to acquire Restricted Stock for investment and not for resale; (iv) forfeiture provisions or vesting requirements based on the Participant’s continued service or the attainment of specified performance objectives; and (v) such other restrictions, conditions and terms as the Administrator deems appropriate. Notwithstanding the foregoing, with respect to any Restricted Stock grant, the Administrator shall not establish a period of restriction or vesting period of less than two years following the date such Restricted Stock is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event.

(d) Unless otherwise provided by the Administrator, the Participant shall be entitled to all dividends paid with respect to Restricted Stock during the period of restriction and shall not be required to return any such dividends to the Corporation in the event of the forfeiture of the Restricted Stock.

(e) The Participant shall be entitled to vote the Restricted Stock during the period of restriction.

(f) The Administrator shall determine whether Restricted Stock is to be delivered to the Participant with an appropriate legend imprinted on the certificate or if the shares are to be issued in the name of a nominee or deposited in escrow pending removal of the restrictions.

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

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

(b) Continued vesting of any Restricted Stock award held by a Patriot Senior Management Employee (as defined below) that is scheduled to vest by January 3, 2008.

Notwithstanding anything in the Plan or Restricted Stock agreement to the contrary, a Restricted Stock award held by a Patriot Senior Management Employee that is scheduled to vest later than January 3, 2008 shall be fully vested upon the effective date of the spin-off of Patriot (“Spin-Off Date”).

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

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For purposes of the accelerated vesting provisions in the Restricted Stock agreement, the terms “Change of Control” and “Recapitalization Event” (if applicable) shall continue to have the meanings set forth in the Plan and shall apply only to the Corporation.

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

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

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

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

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

As used in this definition of Patriot Change in Control, “Person” (including a “group”), has the meaning as such term is used for purposes of Section 1613(d) or 14(d) of the Securities Exchange Act of 1934, as amended (or any successor section thereto).

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

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

8. Incentive Stock Options. ISOs are options to purchase shares of Common Stock which meet the requirements of Section 422 of the Code. ISOs are awarded to employees of the Corporation or any of its subsidiaries (as defined in Section 424(f) of the Code) to purchase shares of Common Stock at not less

~~B-1~~A-5

5.than 100% of the Fair Market Value of the shares on the date the option is granted (110% if the optionee owns stock possessing more than 10% of the combined voting power of all owners of stock of the Corporation or a subsidiary), subject to such terms and conditions set forth in an option agreement as may be established by the Administrator in its sole discretion or that are required to conform to the requirements of Section 422 of the Code (including the requirement that no ISO be exercisable more than ten years (five years if the Participant owns stock possessing more than 10% of the combined voting power of all owners of stock of the Corporation or a subsidiary) after the date the ISO is granted. Such purchase price may be paid (a) by payment in cash or cash equivalent, (b) in the discretion of the Administrator, by the delivery of shares of Common Stock already owned by the participant for at least six months, (c), in the discretion of the Administrator, unless otherwise prohibited by law, by using shares of Common Stock that would otherwise have been received by the participant upon exercise of the option (which method may be restricted to a cashless exercise procedure involving a broker or dealer approved by the Administrator) or (d) in the discretion of the Administrator, by a combination of any of the foregoing, in the manner and subject to the restrictions provided in the option agreement. The aggregate fair market value (determined as of the time an option is granted) of the stock with respect to which ISOs are exercisable for the first time by an optionee during any calendar year (under all option plans of the Corporation and its subsidiary corporations) shall not exceed $100,000.

An option agreement shall indicate on its face whether it is intended to be an agreement for an ISO or an NQSO (as described below). The grant of a stock option shall occur as of the date the Administrator determines.

9. Nonqualified Stock Options. NQSOs are stock options to purchase shares of Common Stock which do not constitute ISOs and are awarded at purchase prices established by the Administrator on the date the options are granted, subject to such terms and conditions set forth in an option agreement as may be established by the Administrator in its sole discretion; provided, however, that the purchase price with respect to any option granted under this Section 9 shall not be less than 100% of the fair market value of the underlying shares of Common Stock on the date the option is granted. The purchase price may be paid (a) by payment in cash or cash equivalent, (b), in the discretion of the Administrator, by the delivery of shares of Common Stock already owned by the participant for at least six months, (c), in the discretion of the Administrator, unless otherwise prohibited by law for the Corporation or the Participant, by using shares of Common Stock that would otherwise have been received by the participant upon exercise of the option (which method may be restricted to a cashless exercise procedure involving a broker or dealer approved by the Administrator) or (d) in the discretion of the Administrator, by a combination of any of the foregoing, in the manner and subject to the restrictions provided in the option agreement.

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

Notwithstanding anything in the Plan or the applicable NQSO agreement to the contrary, employment with Patriot or with any Successor shall be treated as employment with the Corporation for the following purposes under the Plan:

(a) Continued vesting and exercisability of any NQSO held by a Patriot Employee that, immediately prior to such Patriot Employee’s transfer to Patriot, is outstanding and unvested;

(b) Continued vesting and exercisability of any NQSO held by a Patriot Senior Management Employee that was granted before 2006 and is scheduled to vest by January 3, 2008; and

(c) Determining the number of years of service required for a “Retirement” for purposes of the vesting and exercise period of NQSOs held by any Patriot Employee and any Patriot Senior

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Management Employee under the provisions of any NQSO agreement between such Employee and the Corporation.

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

Notwithstanding anything in the Plan or NQSO agreement to the contrary, an NQSO award held by a Patriot Employee shall become fully vested upon a Patriot Change in Control.

Notwithstanding anything in the Plan or any NQSO agreement to the contrary, each Accelerated Option (as defined below) shall vest on the Spin-Off Date and be deemed to be exercised on the day immediately following the Spin-Off Date. The exercise price and tax withholding with respect to such exercise shall be paid by the withholding by the Corporation of such number of shares of Common Stock acquired by the Participant upon such exercise of an aggregate fair market value equal to the exercise price plus the amount of any such tax withholding. For purposes of this paragraph and notwithstanding Section 6 of the Plan, the fair market value of a share of Common Stock shall equal the opening sales price of one share of Common Stock as reported on the New York Stock Exchange on the day immediately following the Spin-Off Date.

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

10. Stock Units. A Stock Unit represents the right to receive a share of Common Stock from the Corporation at a designated time in the future, subject to such terms and conditions set forth in a Stock Unit agreement as may be established by the Administrator in its sole discretion. Notwithstanding the foregoing, with respect to any Stock Unit grant, the Administrator shall not establish a period of restriction or vesting period of less than two years following the date such Stock Unit is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event. The Participant generally does not have the rights of a shareholder until receipt of the shares of Common Stock. The Administrator may, in its discretion, provide for payments in cash, or adjustment in the number of Stock Units, equivalent to the dividends the participant would have received if the participant had been the owner of shares of Common Stock instead of the Stock Units.

11. Performance Awards.

(a) ~~Setting the~~ Performance ~~Goal.~~Conditions. The ~~Committee shall establish the Performance Goal for each Performance Period which, if achieved, shall determine the maximum amount,~~right of a Participant to exercise or receive a grant or settlement of any Award, and its timing, may be subject to ~~Section 5(f), payable pursuant to an Award.~~

~~(i) The Performance Goal may be based upon the~~ performance ~~of the Company or any related affiliate, of a division thereof, or of an individual Participant.~~

~~(ii) The Performance Goal shall be established~~conditions specified by the ~~Committee no later than 90 days after the beginning~~Administrator. The Administrator may use business criteria and other measures of ~~the Performance Period~~performance it deems appropriate in establishing any performance conditions, and may exercise its discretion to ~~which the Performance Goal pertains (and~~reduce or increase amounts payable under any Award subject to performance conditions, except as limited under Sections 11(b) and 11(c) hereof in the case of a Performance ~~Period of less than one year, no later than the date 25%~~Award intended to qualify under Section 162(m) of the Code.

(b) Performance ~~Period has elapsed) and while~~Awards Granted to Designated Covered Employees. If the ~~attainment~~Administrator determines that a Performance Award to be granted to a person the Administrator regards as likely to be a “covered employee” within the meaning of Section 162(m) of the Code (“Covered Employee”) should qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the grantand/or settlement of such Performance ~~Goal is substantially uncertain.~~Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 11(b).

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~~(iii)~~(i) Performance Goals Generally. The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance required to achieve such Performance Goal may be expressed in absolute or relative levels and may be based upon a set increase, set positive result, maintenance of the status quo, set decrease or set negative result. The Performance Goal may be set as a specific level, or may be expressed as a relative percentage to the comparable measure at comparison companies or a defined index.

~~(iv) The Committee shall specify the weighting (which may be the same or different for multiple objectives) to be given to each Performance Goal for purposes of determining the maximum amount payable~~ with respect to such criteria, as specified by the Administrator consistent with this Section 11(b). Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the level or levels of performance targeted by the Administrator result in the performance goals being “substantially uncertain.” The Administrator may determine that more than one performance goal must be achieved as a condition to settlement of such Performance Awards. Performance goals may differ for Performance Awards granted to any ~~such Award.~~one Participant or to different Participants.


	~~(b)~~	~~Performance Measures.~~

~~(i) The Performance Goal shall be based upon one~~(ii) Business Criteria. One or more of the following ~~(each~~business criteria for the Corporation, on a“ consolidated basis,and/or for specified subsidiaries or business units of the Corporation (except with respect to the total stockholder return and earnings per share criteria), shall be used exclusively by the Administrator in establishing performance goals for such Performance ~~Measure”), which~~Awards: (1) total stockholder return; (2) such total stockholder return as compared to total return (on a comparable basis) of a publicly available index or peer group; (3) net income; (4) pre-tax earnings; (5) EBITDA; (6) pre-tax operating earnings after interest expense and before bonuses, service fees, and extraordinary or special items; (7) operating margin; (8) earnings per share; (9) return on equity; (10) return on capital; (11) return on investment; (12) operating income; (13) earnings per share; (14) working capital; (15) total revenues; and (16) value creation measures.

(iii) Performance Period: Timing For Establishing Performance Goals. Achievement of performance goals in respect of such Performance Awards shall be measured over such periods as may be ~~applied~~specified by the Administrator. Performance goals shall be established on or before the dates that are required or permitted for “performance-based compensation” under Section 162(m) of the Code. Notwithstanding the foregoing, with respect to any Performance Award grant, the Administrator shall not establish a ~~pre-tax~~period of restriction or ~~post-tax basis:~~vesting period of less than two years following the date such Performance Award is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event.

~~• Earnings before any~~(iv) Settlement of Performance Awards; Other Terms. Settlement of Performance Awards may be in cash or ~~all of interest, taxes, depreciation, depletionand/~~Common Stock, or ~~amortization (actual and adjusted and either~~ other Awards, or other property, in the ~~aggregate~~discretion of the Administrator. The Administrator may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards, but may not exercise discretion to increase any such amount payable in respect of a Performance Award subject to this Section 11(b). The Administrator shall specify the circumstances in which such Performance Awards shall be forfeited or onpaid in the event of a ~~per-share basis);~~termination of employment prior to the end of a performance period or settlement of Performance Awards, and other terms relating to such Performance Awards.


	•	~~Earnings (either in the aggregate or on a per-share basis);~~

	•	~~Net income or loss (either in the aggregate or on a per-share basis);~~

	•	~~Operating profit;~~

	•	~~Growth or rate of growth in cash flow;~~

	•	~~Cash flow provided by operations (either in the aggregate or on a per-share basis);~~

	•	~~Free cash flow (cash flow provided by operations less capital expenditures) (either in the aggregate on a per-share basis);~~

	•	~~Costs;~~

	•	~~Gross revenues;~~

	•	~~Reductions in expense levels;~~

	•	~~Growth or rate of growth in return measures;~~

	•	~~Share price (including but not limited to growth measures and total shareholder return or attainment by the shares of a specified value for a specified period of time);~~

	•	~~Net economic value;~~

	•	~~Economic value added;~~

	•	~~Aggregate product unit and pricing targets;~~

	•	Strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market share, market penetration, geographic business expansion goals, objectively identified project milestones, production volume levels, cost targets, and goals relating to acquisitions, divestitures, joint ventures or other corporate transactions;

	•	~~Achievement of business or operational goals such as market shareand/or~~ ~~business development;~~

(d) Written Determinations. All determinations by the Administrator as to the establishment of performance goals and the potential Performance Awards related to such performance goals and as to the achievement of performance goals relating to such Awards shall be made in writing in the case of any Award intended to qualify under Section 162(m) of the Code. The Administrator may not delegate any responsibility relating to such Performance Awards.

(e) Notwithstanding anything in the Plan or the applicable Performance Unit agreement to the contrary, employment with Patriot or with any Successor shall be treated as employment with the Corporation for the continued vesting of any Performance Unit held by a Patriot Senior Management Employee that is scheduled to vest by January 3, 2008.

A Performance Unit held by a Patriot Senior Management Employee that is scheduled to vest after January 3, 2008 shall become payable at its full value (without proration) based on the Corporation’s

~~B-2~~A-8


	•	~~Operating and maintenance cost management and employee productivity;~~

	•	~~Shareholder returns (including but not limited to return on assets, investments, equity, or gross sales);~~

	•	~~Return measures (including but not limited to return on assets, equity, invested capital or sales);~~

	•	~~Achievement of diversity objectives;~~

	•	~~Customer satisfaction indicators;~~

	•	~~Debt ratings, debt leverage and debt service;~~

	•	~~Safety performance;~~

	•	~~Business unit and site accomplishments;~~

	•	~~Dividend payments; and/or~~

~~(ii) Any one or more~~actual performance results as of the Performance Measures may apply to the Participant, a department, unit, division or function within the Company or any one or more affiliates; and may apply either alone or relative to the performance of other departments, units, divisions, functions, businesses or individuals (including industry or general market indices). Performance Measures and Performance Goals may differ for Awards to different Participants.

~~(c)~~ ~~Discretionary Adjustment.~~ The Committee may not increase the amount payable under an Award for a Performance Period pursuant to Section 5(a), but retains the discretionary authority to reduce the amount payable under an Award. In making its determination whether to exercise such discretionary authority to reduce the amount of an Award, the Committee may establish other criteria and consider other factors, including, but not limited to, Company, affiliate or business unit performance against budgeted financial goals (~~e.g.~~, operating income or revenue), achievement of non-financial goals, economic and relative performance considerations, assessments of individual performance, and any other subjective or objective goals which the Committee deems appropriate.

~~(d)~~ ~~Adjustments.~~ With respect to any Performance Goal, the Committee may at the time it establishes such Performance Goal, include or exclude items to measure specific objectives, such as losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts and any unusual, nonrecurring gain or loss.

~~(e)~~ ~~Certification of Performance Goal.~~ ~~The~~December 31, 2007. Such payment ~~of an Award~~ shall be ~~subject to the achievement of the Performance Goal for the applicable Performance Period, as certified by the Committee in writing following the completion of the Performance Period.~~

~~(f)~~ ~~Maximum Award.~~ ~~No Participant may receive payment of an Award for which the maximum payout would exceed $5,000,000 during any calendar year.~~

6. ~~Form of Payment.~~ ~~An Award shall be paid~~made in the form of ~~cash, in a single lump sum payment;~~~~provided~~,~~however~~~~, that the Committee may determine in its discretion that all or a portion~~shares of an Award shall be paid in stock, restricted stock, stock options, or other stock-based or stock-denominated compensation, which shall be issued pursuant to an equity compensation plan of the Company in existence at the time of such payment.

7. ~~Time of Payment.~~ ~~An Award payable to a Participant for a Performance Period shall be paid in the calendar year immediately following the calendar year in which the Performance Period ends~~~~(“Payment Date”)~~,Common Stock as soon as practicable after December 31, 2007, but no later than March 15, 2008.

12. Adjustment Provisions.

(a) In the event of any Corporation stock dividend, stock split, combination or exchange of shares, recapitalization or other change in the capital structure of the ~~calendar year immediately following~~Corporation, corporate separation or division of the ~~calendar year~~Corporation (including, but not limited to, asplit-up, spin-off, split-off or distribution to Corporation stockholders other than a normal cash dividend), sale by the Corporation of all or a substantial portion of its assets (measured on either a stand-alone or consolidated basis), reorganization, rights offering, partial or complete liquidation, or any other corporate transaction, Corporation share offering or other event involving the Corporation and having an effect similar to any of the foregoing, the Administrator may make such substitution or adjustments in the (A) number and kind of shares that may be delivered under the Plan, (B) additional maximums imposed in the Plan, (C) number and kind of shares subject to outstanding Awards, (D) exercise price of outstanding stock options and Stock Appreciation Rights and (E) other characteristics or terms of the Awards as it may determine appropriate in its sole discretion to equitably reflect such corporate transaction, share offering or other event; provided, however, that the number of shares subject to any Award shall always be a whole number.

(b) Notwithstanding any other provision of this Plan, and without affecting the number of shares reserved or available hereunder, the Board may authorize the issuance of Awards or assumption of benefits in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate.

13. Nontransferability. Each Award granted under the Plan to an employee shall not be transferable otherwise than by will or the laws of descent and distribution; provided, however, NQSOs granted under the Plan may be transferred, without consideration, to a Permitted Transferee (as defined below). Awards granted under the Plan shall be exercisable, during the Participant’s lifetime, only by the Participant or a Permitted Transferee. In the event of the death of a Participant, exercise or payment shall be made only:

(a) By or to the Permitted Transferee, executor or administrator of the estate of the deceased Participant or the person or persons to whom the deceased Participant’s rights under the Award shall pass by will or the laws of descent and distribution; and

(b) To the extent that the deceased Participant or the Permitted Transferee, as the case may be, was entitled thereto at the date of his death.

For purposes of this Section, “Permitted Transferee” shall include any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law orsister-in-law of a Participant (including adoptive relationships); any person sharing the Participant’s household (other than a tenant or employee); any trust in which the ~~Performance Period ends;~~~~provided~~~~, that except to~~Participant and any of these persons have all of the ~~extent expressly otherwise required by a written agreement by and between~~beneficial interest; any foundation in which the Participant and any of these persons control the ~~Company, that~~management of the assets; any corporation, partnership, limited liability Corporation or other entity in which the Participant ~~is employed by~~and any of these other persons are the ~~Company on~~direct and beneficial owners of all of the ~~Payment Date. Except~~equity interests (provided the Participant and these other persons agree in writing to remain the direct and beneficial owners of all such equity interests); and any personal representative of the Participant upon the Participant’s death for purposes of administration of the Participant’s estate or upon the Participant’s incompetency for purposes of the protection and management of the assets of the Participant.

14. Taxes. The Corporation shall be entitled to withhold the amount necessary to enable the Corporation to remit to the ~~extent expressly otherwise~~appropriate government entity or entities the amount of any tax required ~~by a~~to be

~~B-3~~A-9

~~written agreement~~withheld from wages attributable to any amounts payable or shares deliverable under the Plan, after giving the person entitled to receive such payment or delivery notice. The Corporation may defer making payment or delivery as to any benefit if any such tax is payable until indemnified to its satisfaction. The person entitled to any such delivery may, by notice to the Corporation at the time the requirement for such delivery is first established, elect to have such withholding satisfied by a reduction of the number of shares otherwise so deliverable, such reduction to be calculated based on the Fair Market Value on the date of such notice.

15. Tenure. A Participant’s right, if any, to continue to serve the Corporation and ~~between the Participant and the Company, if~~its subsidiaries as an officer, employee, or otherwise, shall not be enlarged or otherwise affected by his or her designation as a Participant under the Plan.

16. Duration, Interpretation, Amendment and Termination. Unless the Plan is ~~not employed with~~discontinued earlier by the ~~Company on the Payment Date, such~~Board as provided herein, no Award shall be ~~forfeited.~~granted hereunder on or after the date ten years after the date of adoption of this Plan by the Board.

8. The Board may amend, alter, or discontinue the Plan, ~~Administration.~~but no amendment, alteration or discontinuation shall be made which would adversely affect the rights of a Participant under an Award theretofore granted without the Participant’s consent, except such an amendment (i) made to avoid an expense charge to the Corporation or any of its subsidiaries, or (ii) made to permit the Corporation or any of its subsidiaries a deduction under the Code. No such amendment shall be made without the approval of the Corporation’s shareholders to the extent such approval is required by law, agreement or the rules of any stock exchange or market on which the Common Stock is listed.

~~(a)~~ The ~~Plan~~Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall ~~be administered by~~adversely affect the ~~Compensation Committee~~rights of the ~~Board~~holder thereof without the holder’s consent. Also, by mutual agreement between the Corporation and a participant hereunder, stock options or other benefits may be granted to such ~~other committee, determined by~~participant in substitution and exchange for, and in cancellation of, any benefits previously granted such participant under this Plan. To the ~~Board, which shall consist of two or more directors of the Company, all of whom qualify as “outside directors” within the meaning of Section 162(m) (the~~~~“Committee”~~).

~~(b) Subject to and consistent with the provisions of~~extent that any Award granted under the Plan ~~the Committee shall have full power and authority and sole discretion as follows:~~

~~(i) to determine when, to whom and in what amounts Awards should be granted;~~

~~(ii) to determine the terms and conditions applicable to each Award;~~

~~(iii) to determine the benefit payable under any Award and to determine whether any Performance Goals or Performance Measures have been satisfied;~~

~~(iv) to determine the Performance Period, as applicable;~~

~~(v) to appoint such agents as the Committee may deem necessary or advisable to administer the Plan;~~

(vi) to correct any defect or supply any omission or reconcile any inconsistency, and to construe and interpret the Plan, the rules and regulations, and award agreement or any other instrument entered into or relating to an Award under the Plan; and

~~(vii) to take any other action with respect to any matters relating to the Plan and to make all other decisions and determinations, including factual determinations, as may be required under~~within the terms of the Plan would qualify under present or asfuture laws for tax treatment that is beneficial to a recipient, then any such beneficial treatment shall be considered within the ~~Committee may deem necessary or advisable for the administration~~intent, purpose and operational purview of the ~~Plan.~~

~~Any action~~Plan and the discretion of the ~~Committee with~~Administrator, and to the extent that any such Award would so qualify within the terms of the Plan, the Administrator shall have full and complete authority to grant Awards that so qualify (including the authority to grant, simultaneously or otherwise, Awards which do not so qualify) and to prescribe the terms and conditions (which need not be identical as among recipients) in respect to the ~~Plan shall be final, conclusive and binding on all persons, including the Company, its affiliates, any Participant, any person claiming any rights under the Plan from~~grant or ~~through any Participant, and shareholders~~exercise of the Company, except to the extent the Committee may subsequently modify, or take further action not consistent with, its prior action. If not specified in the Plan, the time at which the Committee must or may make any determination shall be determined by the Committee, and any such determination may thereafter be modified by the Committee. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. All determinations of the Committee shall be made by a majority of its members.

(c) The Committee may delegate its authority under the Plan to an officer of the Company as it deems appropriate, except to the extent prohibited by applicable law or that it would cause an Award under the Plan to fail to be treated as “performance-based compensation” within the meaning of Section 162(m).

~~(d) The Plan shall be governed by the laws of the State of Delaware (without regard to its conflict of laws principles) and applicable federal law.~~

9. ~~Modification or Termination of Plan.~~ The Board may modify or terminate the Plan at any time, effective at such date as the Board may determine, without the approval of the shareholders of the Company. Notwithstanding the foregoing, any amendment to the Plan that changes the eligible employees specified in Section 4, the Performance Measures specified in Section 5(b), or the maximum award limitations in Section 5(f), shall not be effective~~unless~~ ~~(i) such amendment is approved by~~

~~B-4~~

~~shareholders (as provided in Section 2 or as otherwise required pursuant to Section 162(m)), or (ii) such approval would not be required to continue to treat~~ Awards ~~as “performance-based compensation” pursuant to Section 162(m).~~

~~10.~~ ~~Effective Date.~~ ~~The Plan shall be effective as of the date the Board approves the Plan, subject to shareholder approval of the Plan at the Company’s annual shareholder meeting in May 2008.~~

~~11.~~ ~~Withholding Taxes.~~ ~~The Company shall have the right to deduct from any payment made under the Plan any federal, state or local income or other taxes required by law to be withheld with respect to such payment.~~

~~12.~~ ~~Miscellaneous.~~

~~(a)~~ ~~No Uniformity.~~ ~~No person shall have any claim to an Award under the Plan, and there is no obligation of uniformity of treatment of Participants~~ under the Plan.

~~(b)~~ ~~Non-transferability.~~ ~~Awards under~~Notwithstanding anything to the ~~Plan may not~~contrary, but subject to the provisions of Section 12, neither the Board nor the Administrator shall be ~~assigned, alienated, pledged, hypothecated~~permitted to (i) amend an option to reduce its exercise price, (ii) cancel an option and regrant an option with a lower exercise price than the original exercise price of the cancelled option, or ~~otherwise disposed~~(iii) take any other action (whether in the form of ~~including assignment pursuant to a domestic relations order, during~~an amendment, cancellation or replacement grant) that has the ~~time in which the requirement~~effect of ~~continued employment or attainment of performance objectives has not been achieved.~~repricing an option.

~~(c)~~ ~~No Guarantee of Employment.~~ The establishment of a Performance Goal or the granting of an Award under the Plan shall impose no obligation on the Company or any affiliate to continue the employment of a Participant and shall not lessen or affect the Company’s or an Affiliate’s right to terminate the employment of such Participant.17. Miscellaneous.

~~(d)~~ ~~Successors and Assigns.~~ The Plan and all obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor or assign of the Company, including, without limitation, a successor or assign resulting from a direct or indirect purchase, merger, consolidation, or otherwise of all or substantially all of the business~~and/or~~ assets of the Company. All obligations imposed upon a Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors,

~~(e)~~ ~~Entire Agreement.~~ The Plan and each document evidencing an Award constitute the entire agreement with respect to the subject matter hereof and thereof; provided that in the event of any inconsistency between the Plan and such Award document, the terms and conditions of the Plan shall control.

~~(f)~~ ~~Unfunded Plan.~~ It is intended that the Plan be an “unfunded” plan for incentive and deferred compensation. The Committee may, in its discretion, authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to make payments, provided that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan and the rights of any Participant or other person hereunder shall be no greater than the rights of any unsecured general creditor of the Company.

~~(g)~~ ~~Non-Exclusivity of Plan.~~(a) Nothing contained in the Plan shall prevent the ~~Company~~Corporation or any ~~affiliate~~of its subsidiaries from adopting other or additional compensation arrangements for its employees.

(b) The Administrator may require each person purchasing or receiving shares pursuant to an Award to represent to and agree with the Corporation in writing that such person is acquiring the shares without a view to the distribution thereof. The certificates for such shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer.

A-10

All certificates for shares of Common Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations and other requirements of the Securities Exchange Commission, any stock exchange or market on which the Common Stock is then listed and any applicable Federal or state securities law, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(c) The Administrator shall establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable in the event of the Participant’s death are to be paid. (d) Any amounts owed to the Corporation or any of its subsidiaries by the Participant of whatever nature may be offset by the Corporation from the value of any shares of Common Stock, cash or other thing of value under this Plan or an agreement to be transferred to the Participant.

(e) The grant of an Award shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets, or to effectuate other similar corporate transactions.

(f) To the extent that the Administrator determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Administrator in its discretion may modify those restrictions as it determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.

(g) The headings contained in this Plan are for reference purposes only and shall not affect the meaning or interpretation of this Plan.

(h)~~Severability.~~ If any provision of ~~the~~this Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not effect any other provision hereby, and ~~the~~this Plan shall be construed as if such invalid or unenforceable provision were omitted.

(i) ~~Headings.~~ ~~The headings contained~~This Plan shall inure to the benefit of and be binding upon each successor and assign of the Corporation. All obligations imposed upon a Participant, and all rights granted to the Corporation hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors.

(j) This Plan and each agreement granting an Award constitute the entire agreement with respect to the subject matter hereof and thereof, provided that in the event of any inconsistency between this Plan ~~are for reference purposes only~~ and ~~shall not affect~~such agreement, the ~~meaning or interpretation~~terms and conditions of the Plan shall control.

(k) None of the Corporation, its subsidiaries or the Administrator shall have any duty or obligation to disclose affirmatively to a record or beneficial holder of Common Stock or an Award, and such holder shall have no right to be advised of, any material non-public information regarding the Corporation or any of its subsidiaries at any time prior to, upon or in connection with receipt or the exercise of an Award or the Corporation’s purchase of Common Stock or an Award from such holder in accordance with the terms hereof.

(l) It is intended that this Plan be an “unfunded” plan for incentive and deferred compensation. The Administrator may authorize the creation of trusts or other arrangements to meet the obligations created under this Plan to deliver Common Stock or make payments, provided that, unless the Administrator otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of this Plan.

~~B-5~~A-11

~~The undersigned hereby certifies~~(m) For purposes hereof, “Change of Control” shall mean:

(i) any Person (other than a Person holding securities representing 10% or more of the combined voting power of the Corporation’s outstanding securities as of May 22, 2001, the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any Corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), becomes the beneficial owner, directly or indirectly, of securities of the Corporation, representing 50% or more of the combined voting power of the Corporation’s then-outstanding securities;

(ii) during any period of twenty-four consecutive months (not including any period prior to May 22, 2001), 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 Corporation to effect a transaction described in clause (i), (iii) or (iv) or (B) a director nominated by any Person (including the Corporation) 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 Corporation’s shareholders was approved by a vote of at least three-fourths (3/4) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(iii) the consummation of any merger, consolidation, plan of arrangement, reorganization or similar transaction or series of transactions in which the Corporation is involved, other than such a transaction or series of transactions which would result in the shareholders of the Corporation 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 Corporation 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

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

As used in this Section 17(m), “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).

(n) For purposes hereof, “Disability” shall mean the Participant’s absence from the full-time performance of the Participant’s duties pursuant to a reasonable determination made in accordance with the Corporation’s disability plan that the Participant is disabled as a result of incapacity due to physical or mental illness that lasts, or is reasonably expected to last, for at least six months.

(o) For purposes hereof, ‘Recapitalization Event’ shall mean a recapitalization, reorganization, stock dividend or other special corporate restructuring which results in an extraordinary distribution to the stockholders of cashand/or securities through the use of leveraging or otherwise but which does not result in a Change in Control; provided, however, that neither the distribution by the Corporation to its shareholders of the common stock of Patriot Coal Corporation (the “Distribution”) nor any of the transactions undertaken in connection with the Distribution shall be considered or treated as a Recapitalization Event.

A-12

(p) To the extent applicable and notwithstanding any other provision of this Plan, ~~was duly~~this Plan and Awards hereunder shall be administered, operated and interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date on which the Board approves the Plan;provided, however,in the event that the Administrator determines that any amounts payable hereunder may be taxable to a Participant under Code Section 409A and related Department of Treasury guidance prior to the paymentand/or delivery to such Participant of such amount, the Corporation may (i) adopt such amendments to the Plan and related Award, and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Administrator determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Awards hereunderand/or (ii) take such other actions as the Administrator determines necessary or appropriate to comply with or exempt the Planand/or Awards from the requirements of Code Section 409A and related Department of Treasury guidance, including such Department of Treasury guidance and other interpretive materials as may be issued after the date on which the Board approves the Plan. The Corporation makes no guarantees to any Participant regarding the tax treatment of Awards or payments made under the Plan, and, notwithstanding the above provisions and any agreement or understanding to the contrary, if any Award, payments or other amounts due to a Participant (or his or her beneficiaries, as applicable) results in, or causes in any manner, the application of an accelerated or additional tax, fine or penalty under Code Section 409A or otherwise to be imposed, then the Participant (or his or her beneficiaries, as applicable) shall be solely liable for the payment of, and the Corporation and its subsidiaries shall have no obligation or liability to pay or reimburse (either directly or otherwise) the Participant (or his or her beneficiaries, as applicable) for, any such additional taxes, fines or penalties.

18. Effective Date. This Peabody Energy Corporation Long-Term Equity Incentive Plan shall become effective as of the date it is adopted by the Board of the Corporation subject only to approval by ~~unanimous written consent~~the stockholders of the Corporation within twelve months before or after the adoption of the Plan by the Board.

A-13

PEABODY ENERGY CORPORATION

Annual Meeting of Shareholders
Thursday, May 7, 2009, 10:00 A.M.
Ritz-Carlton Hotel
100 Carondelet Plaza
Clayton, Missouri 63105

If you plan to attend the 2009 Annual Meeting of Shareholders of Peabody Energy Corporation, please detach this Admission Card and bring it with you to the meeting.This card will provide evidence of your ownership and enable you to attend the meeting. Attendance will be limited to those persons who owned Peabody Energy Corporation Common Stock as of March 13, 2009, the record date for the Annual Meeting.

When you arrive at the Annual Meeting site, please fill in ~~lieu~~your complete name in the space provided below and submit this card to one of the attendants at the registration desk.

If you do not bring this Admission Card and your shares are registered in your own name, you will need to present a ~~meeting~~photo I.D. at the registration desk. If your shares are registered in the name of your bank or broker, you will be required to submit other satisfactory evidence of ownership (such as a recent account statement or a confirmation of beneficial ownership from your broker) and a photo I.D. before being admitted to the meeting.

Shareholder Name:

PROXY

PEABODY ENERGY CORPORATION

Proxy/Voting Instruction Card for Annual Meeting of Shareholders to be held on ~~, 2008.~~May 7, 2009
This proxy is solicited on behalf of the Board of Directors

As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-PROXIES, or via the Internet at WWW.VOTEPROXY.COM and follow the simple instructions. Use the Company Number and Account Number shown on your proxy card.

The undersigned hereby constitutes and appoints Blanche M. Touhill, Alexander C. Schoch and Kenneth L. Wagner, or any of them, with power of substitution to each, proxies to represent the undersigned and to vote, as designated on the reverse side of this form, all shares of Common Stock which the undersigned would be entitled to vote at the Annual Meeting of Shareholders of Peabody Energy Corporation (Peabody) to be held on May 7, 2009 at the Ritz-Carlton Hotel, 100 Carondelet Plaza, Clayton, Missouri 63105 at 10:00 A.M., and at any adjournments or postponements thereof.

If the undersigned is a participant in the Peabody Investments Corp. Employee Retirement Account or other 401(k) plans sponsored by Peabody or its subsidiaries, this proxy/voting instruction card also provides voting instructions to the trustee of such plans to vote at the Annual Meeting, and any adjournments thereof, as specified on the reverse side hereof. If the undersigned is a participant in one of these plans and fails to provide voting instructions, the trustee will vote the undersigned’s plan account shares (and any shares not allocated to individual participant accounts) in proportion to the votes cast by other participants in that plan.

The shares represented by this proxy/voting instruction card will be voted in the manner indicated by the shareholder. In the absence of such indication, such shares will be voted FOR the election of all the director nominees listed in Item 1, or any other person selected by the Board if any nominee is unable to serve, FOR ratification of the appointment of Ernst & Young LLP as Peabody’s independent registered public accounting firm for 2009 (Item 2), and FOR the proposal to reapprove the material terms of the performance measures under Peabody’s 2004 Long-Term Equity Incentive Plan included as Item 3. The shares represented by this proxy will be voted in the discretion of said proxies with respect to such other business as may properly come before the meeting and any adjournments or postponements thereof.

IMPORTANT – This proxy/voting instruction card must be signed and dated on the reverse side.


~~By:~~n		14475 n

ANNUAL MEETING OF SHAREHOLDERS OF

PEABODY ENERGY CORPORATION

May 7, 2009

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and proxy card
are available at http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=25749

Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.

â Please detach along perforated line and mail in the envelope provided.â


~~Name:~~ n 20500330000000001000 3		050709

THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” ITEMS 1, 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx

Election of Directors: The undersigned hereby GRANTS authority to elect the following nominees:


		NOMINEES:
o	FOR ALL NOMINEES	¡ Gregory H. Boyce ¡ William E. James
o	WITHHOLD AUTHORITY FOR ALL NOMINEES	¡ Robert B. Karn III ¡ M. Frances Keeth
o	FOR ALL EXCEPT (See instructions below)	¡ Henry E. Lentz

RECOMMENDATION:The Board recommends voting“For”all Nominees.


INSTRUCTIONS:		To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT”and fill in the circle next to each nominee you wish to withhold, as shown here:l


~~Title:~~ To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.		o


				The Board
~~Date:~~				Recommends “For”
				â

~~B-6~~

VOTE BY INTERNET — www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web PEABODY ENERGY CORPORATION site and follow the instructions to obtain your records and to create an 701 MARKET STREET electronic voting instruction form. ST. LOUIS, MO 63101-1826 ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Peabody Energy Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years. VOTE BY PHONE — 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Peabody Energy Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: PEBDY1 KEEP THIS PORTION
		FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY/VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED. PEABODY ENERGY CORPORATION THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” ITEMS 1, 2, 3 AND 4. Vote On Directors For Withhold 1. Election of Director: The undersigned hereby GRANTS 0 0 authority to elect the following nominee: (see Board recommendation below): NOMINEE: 01) Sandra Van Trease The Board The Board RECOMMENDATION: The Board recommends voting “For” Recommends “For” Recommends “For” the Nominee.DD~~Vote On Proposals For Against Abstain For Against Abstain~~	AGAINST	ABSTAIN
2.	Ratification of Appointment of Independent Registered ~~0 0 0 4. Approval~~Public Accounting Firm.	o	o	o

3.	Reapproval of the ~~2008 Management Annual~~material terms of the performance measures under Peabody’s 2004 Long-Term Equity Incentive ~~0 0 0 Public Accounting Firm. Compensation~~ Plan. ~~The Board Recommends “For”~~D~~For Against Abstain 3. Approval~~	o	o	o

If you vote over the Internet or by telephone, please do not mail your card.

MARK HERE IF YOU PLAN TO ATTEND THE MEETINGo


Signature of ~~a proposal to Declassify the Board~~Shareholder		Date:		Signature of 0 0 0 If you vote over the Internet or by telephone, please do Directors. not mail your card. For address changes and/or comments, please check this box and write them on 0 the back where indicated. Please indicate if you plan to attend this meeting. 0 0 Yes No Shareholder		Date:


n		Note:		Please sign exactly as your name or names ~~appear(s)~~appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. ~~Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date~~		n

ANNUAL MEETING OF SHAREHOLDERS OF

PEABODY ENERGY CORPORATION

May 7, 2009

~~PEABODY ENERGY CORPORATION Annual Meeting~~
		PROXY VOTING INSTRUCTIONS

INTERNET -Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page, and use the Company Number and Account Number shown on your proxy card.

TELEPHONE -Call toll-free1-800-PROXIES(1-800-776-9437) in the United States or1-718-921-8500from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call and use the Company Number and Account Number shown on your proxy card.

Vote online/phone until 11:59 PM EST the day before the meeting.

MAIL -Sign, date and mail your proxy card in the envelope provided as soon as possible.

IN PERSON -You may vote your shares in person by attending the Annual Meeting.


	COMPANY NUMBER
	ACCOUNT NUMBER

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of meeting, proxy statement and proxy
card are available at -http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=25749

â Please detach along perforated line and mail in the envelope providedIF you are not voting via telephone or the Internet.â


n 20500330000000001000 3		050709

THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” ITEMS 1, 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx

Election of Shareholders Thursday, May 8, 2008, 10:00 A.M. Ritz-Carlton Hotel 100 Carondelet Plaza Clayton, Missouri 63105 If you plan to attend the 2008 Annual Meeting of Shareholders of Peabody Energy Corporation, please detach this Admission Card and bring it with you to the meeting. This card will provide evidence of your ownership and enable you to attend the meeting. Attendance will be limited to those persons who owned Peabody Energy Corporation Common Stock as of March 14, 2008, the record date for the Annual Meeting. When you arrive at the Annual Meeting site, please fill in your complete name in the space provided below and submit this card to one of the attendants at the registration desk. If you do not bring this Admission Card and these shares are registered in your own name, you will need to present a photo I.D. at the registration desk. If these shares are registered in the name of your bank or broker, you will be required to submit other satisfactory evidence of ownership (such as a recent account statement or a confirmation of beneficial ownership from your broker) and a photo I.D. before being admitted to the meeting. Shareholder Name: ___Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. PROXY PEABODY ENERGY CORPORATION Proxy/Voting Instruction Card for Annual Meeting of Shareholders to be held on May 8, 2008 This proxy is solicited on behalf of the Board of DirectorsDirectors: The undersigned hereby ~~constitutes~~ GRANTS authority to elect the following nominees:


		NOMINEES:
o	FOR ALL NOMINEES	¡ Gregory H. Boyce ¡ William E. James
o	WITHHOLD AUTHORITY FOR ALL NOMINEES	¡ Robert B. Karn III ¡ M. Frances Keeth
o	FOR ALL EXCEPT (See instructions below)	¡ Henry E. Lentz

RECOMMENDATION:The Board recommends voting“For”all Nominees.


INSTRUCTIONS:		To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT”and ~~appoints Blanche M. Touhill, Alexander C. Schoch and Jeffery L. Klinger, or any of them, with power of substitution~~fill in the circle next to each ~~proxies~~nominee you wish to ~~represent~~withhold, as shown here:l


To change the ~~undersigned~~address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to ~~vote, as designated~~the registered name(s) on the ~~reverse side~~account may not be submitted via this method.		o


				The Board
				Recommends “For”
				â


		FOR	AGAINST	ABSTAIN
2.	Ratification of Appointment of Independent Registered Public Accounting Firm.	o	o	o

3.	Reapproval of the material terms of the performance measures under Peabody’s 2004 Long-Term Equity Incentive Plan.	o	o	o

If you vote over the Internet or by telephone, please do not mail your card.

MARK HERE IF YOU PLAN TO ATTEND THE MEETINGo


Signature of Shareholder		Date:		Signature of Shareholder		Date:


n		Note:		Please sign exactly as your name or names appear on this ~~form, all~~Proxy. When shares ~~of Common Stock which the undersigned would be entitled to vote at the Annual Meeting of Shareholders of Peabody Energy Corporation (Peabody) to be~~are held ~~on May 8, 2008 at the Ritz-Carlton Hotel, 100 Carondelet Plaza, Clayton, Missouri 63105 at 10:00 A.M., and at any adjournments~~jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or ~~postponements thereof.~~guardian, please give full title as such. If the ~~undersigned~~signer is a ~~participant in the Peabody Investments Corp. Employee Retirement Account or other 401(k) plans sponsored~~corporation, please sign full corporate name by ~~Peabody or its subsidiaries, this proxy/voting instruction card also provides voting instructions to the trustee of such plans to vote at the Annual Meeting, and any adjournments thereof,~~duly authorized officer, giving full title as ~~specified on the reverse side hereof.~~such. If ~~the undersigned~~signer is a ~~participant~~partnership, please sign in one of these plans and fails to provide voting instructions, the trustee will vote the undersigned’s plan account shares (and any shares not allocated to individual participant accounts) in proportion to the votes castpartnership name by other participants in that plan. The shares represented by this proxy/voting instruction card will be voted in the manner indicated by the shareholder. In the absence of such indication, such shares will be voted FOR the election of the director nominee listed in Item 1, or any other person selected by the Board if such nominee is unable to serve, FOR ratification of Ernst & Young LLP as Peabody’s independent registered public accounting firm for 2008 (Item 2), FOR the proposal to declassify Peabody’s Board of Directors (Item 3) and FOR the proposal to approve Peabody’s 2008 Management Annual Incentive Compensation Plan (Item 4). The shares represented by this proxy will be voted in the discretion of said proxies with respect to such other business as may properly come before the meeting and any adjournments. Address Changes/Comments: ___ ___(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)authorized person.		n


		~~OMB APPROVAL~~

		~~OMB Number:~~		~~3235-0059~~
		~~Expires:~~		~~February 28, 2006~~
		~~Estimated average burden~~ ~~hours per response~~		~~12.75~~


	o Preliminary Proxy Statement
	o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
	x Definitive Proxy Statement
	o Definitive Additional Materials
	o Soliciting Material Pursuant to §240.14a-12


	•	~~Threshold payouts (equal to 50% of the number of target performance units granted) begin for~~Required TSR ~~performance at the 40th percentile of the~~ Performance Ranking
Payout Level		Industry Peer Group ~~the 35th percentile of the~~	S&P 500 Index ~~and a threshold goal for three-year EBITDA Return~~	Limitations on ~~Invested Capital.~~Payout Levels

	•	~~Target payouts (equal to 100% of the number~~Threshold (50% of target performance ~~units granted) are earned for performance at the 55th percentile of the Industry Peer Group, 50th percentile of the S&P 500 Index and a target goal for three-year EBITDA Return on Invested Capital.~~units)

	• 40th percentile	Maximum payouts (equal to 200% of the number of target performance units granted) are earned for performance at the 80th percentile of the Industry Peer Group, the 75th percentile of the S&P 500 Index and a maximum goal for three-year EBITDA Return on Invested Capital.

	• 35th percentile	~~Payouts are ratably adjusted for performance between threshold and target, and between target and maximum levels.~~

	•	No ~~payouts~~payout will be made if TSR over the performance period is negative and performance is below the 50th percentile of the Industry Peer ~~Group. Also, the maximum~~Group


Target (100% of target performance units)		55th percentile	50th percentile


Maximum (200% of target performance units)		80th percentile	75th percentile	Maximum payout cannot exceed 150% of the number of ~~target~~ performance units granted if TSR over the performance period is negative and performance is at or above the 50th percentile of the Industry Peer ~~Group.~~Group


⁽¹⁾		~~Includes shares acquired through the 401(k) plan and the Employee Stock Purchase Plan, but excludes shares issuable upon the exercise of stock options.~~

⁽²⁾		~~Calculated based on our closing market price per share on the last trading day of 2007, $61.64.~~

⁽³⁾		Share ownership includes 86,602 phantom shares granted to Mr. Boyce on October 1, 2003 under the terms of his employment ~~agreement, which have been adjusted to reflect the spin-off of Patriot Coal Corporation on October 31, 2007.~~agreement.

⁽⁴⁾⁽²⁾		Mr. Ford joined us on March 6, ~~2007.~~2007; Mr. Schoch joined us on October 16, 2006; and Mr. Crews was promoted effective June 20, 2008.


	Filed by the Registrant x
	Filed by a Party other than the Registrant o

	Check the appropriate box:


	x No fee required.
	o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.


	1) Title of each class of securities to which transaction applies:


	2) Aggregate number of securities to which transaction applies:


	3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


	o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.


SEC 1913 (02-02)	~~Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.~~


	Page No.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS		1
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING		1
ELECTION OF DIRECTORS (ITEM 1)		6
~~Class I Director Nominee — Term Expiring in 2011~~		6
~~Class II~~Nominees for Election as Directors —with Terms Expiring in 2009		6
~~Class III~~Incumbent Directors —with Terms Expiring in 2010		7
Incumbent Director with Term Expiring in 2011		8
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES		8
Director Independence		8
Board Attendance and Executive Sessions		10
Committees of the Board of Directors		10
REPORT OF THE AUDIT COMMITTEE		13
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		14
CORPORATE GOVERNANCE MATTERS		15
Majority Voting Bylaw		15
Shareholder Communications with the Board of Directors		16
Overview of Director Nominating Process		16
OWNERSHIP OF COMPANY SECURITIES		1819
Beneficial Owners of More Than Five Percent, Directors and Management		19
Section 16(a) Beneficial Ownership Reporting Compliance		20
EXECUTIVE COMPENSATION		20
COMPENSATION DISCUSSION AND ANALYSIS		20
REPORT OF THE COMPENSATION COMMITTEE		3534
SUMMARY COMPENSATION TABLE		3635
GRANTS OF PLAN-BASED AWARDS IN ~~2007~~2008		4137
OUTSTANDING EQUITY AWARDS AT ~~2007~~2008 FISCAL YEAR END		4337
OPTION EXERCISES AND STOCK VESTED IN ~~2007~~2008		4742
PENSION BENEFITS IN ~~2007~~2008		5144
NONQUALIFIED DEFERRED COMPENSATION IN 2008		45
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL		5445
DIRECTOR COMPENSATION ~~IN 2007~~		5848
EQUITY COMPENSATION PLAN INFORMATION		51
COMPENSATION ~~OF THE CHAIRMAN IN 2007~~COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION		6151
~~Compensation Committee Interlocks and Insider Participation~~POLICY FOR APPROVAL OF RELATED PERSON TRANSACTIONS		62
~~Policy for Approval of Related Person Transactions~~		62
~~Certain Transactions and Relationships~~		6251
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 2)		6351
~~PROPOSAL TO DECLASSIFY~~REAPPROVAL OF THE ~~BOARD~~MATERIAL TERMS OF ~~DIRECTORS~~THE PERFORMANCE MEASURES UNDER OUR 2004 LONG-TERM EQUITY INCENTIVE PLAN (ITEM 3)		63
~~PROPOSAL TO APPROVE THE 2008 MANAGEMENT ANNUAL INCENTIVE COMPENSATION PLAN~~		6452
ADDITIONAL INFORMATION		6760
Information About Shareholder Proposals		6760
Householding of Proxies		6761
Additional Filings		6861	��
Costs of Solicitation		6861
OTHER BUSINESS		6962


Q:		Who ~~can~~may attend the Annual Meeting?

A:		All Peabody Energy Corporation shareholders as of March ~~14, 2008~~13, 2009 may attend the Annual Meeting.


⁽¹⁾		~~Amounts shown are based on the latest available filings on Schedule 13G or other relevant filings made with the Securities and Exchange Commission (“SEC”).~~ Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to shares. Unless otherwise indicated, the persons named in the table have sole voting and ~~sole investment control~~dispositive power with respect to all shares beneficially owned.


	1) Amount Previously Paid:


	2) Form, Schedule or Registration Statement No.:


	3) Filing Party:


	4) Date Filed:


⁽²⁾		Includes shares issuable pursuant to stock options exercisable within 60 days after March 1, ~~2008,~~2009, as follows: Mr. Boyce, ~~718,661;~~714,623; Mr. Coley, ~~12,939;~~15,446; Ms. Fiehler, ~~33,328;~~63,895; Mr. Ford, ~~19,220; Dr. Givens, 12,939;~~49,785; Mr. James, ~~63,307;~~11,115; Mr. Karn, ~~20,534;~~23,041; Mr. Lentz, ~~12,939;~~15,446; Mr. Navarre, ~~79,797;~~97,888; Mr. Rusnack, ~~28,307;~~30,814; Mr. Schoch, 14,483; Dr. ~~Schlesinger, 28,307; Mr.~~ Touhill, ~~28,307;~~3,384; Mr. Turner, ~~4,011;~~6,482; Ms. Van Trease, ~~20,534; Mr. Walcott, 117,015;~~11,115; Mr. Washkowitz, ~~12,939;~~15,446; and all directors and executive officers as a group, ~~1,245,594.~~1,072,963. Also includes shares of restricted stock that remain unvested as of March 1, ~~2008~~2009 as follows: Mr. Boyce, 100,000; Mr. Coley, ~~1,861;~~991; Mr. Crews, 21,318; Mr. Ford, ~~36,132; Dr. Givens, 1,861;~~21,066; Mr. James, ~~1,861;~~991; Mr. Karn, ~~1,861;~~991; Mr. Lentz, ~~1,861;~~991; Mr. Rusnack, ~~1,861; Dr. Schlesinger, 1,861;~~991; Dr. Touhill, ~~1,861;~~991; Mr. Turner, ~~3,455;~~991; Ms. Van Trease, ~~1,861;~~991; Mr. Washkowitz, ~~1,861;~~991; and all directors and executive officers as a group, ~~168,597.~~151,303.


⁽³⁾
⁽³⁾		Applicable percentage ownership is based on 267,360,741 shares of Common Stock outstanding at March 1, 2009. An asterisk (*) indicates that the applicable person beneficially owns less than one percent of the outstanding shares.

⁽⁴⁾		This information is based on a Schedule 13G/A filed with the SEC on February 17, 2009 by FMR LLC in which it reported sole voting power as to 713,347 shares and sole dispositive power as to 16,045,819 shares.

⁽⁵⁾		This information is based on a Schedule 13G filed with the SEC on February 10, 2009 by BlackRock, Inc., in which it reported shared voting and dispositive power as to 13,990,888 shares as of December 31, 2008.


	Percentage of Total
Measure	Award			Actual Results			Achievement

EBITDA		40.0	%		$1,026.1 million			Above Threshold
EPS		10.0	%		$1.52			At Threshold
Leverage Ratio		10.0	%		56.5	%		Above Threshold
Safety Incidence Rate		5.0	%		3.04			Below Threshold
Safety Discretionary		5.0	%		By Individual
Individual Goals		30.0	%		By Individual


	Target Payout			Payout Range							Actual + Special			Target Payout			Payout Range					Actual Award
	as a % of			as a % of			Actual Award		Special Award		Award as a % of			as a % of			as a % of			Actual Award		as a % of Salary
Name	Salary			Salary			($)		($)		Salary Earned			Salary			Salary			($)		Earned

Current Officers
Gregory H. Boyce		100	%		0-200	%		1,000,671		500,000		153	%		110	%		0-220	%		2,069,375		196	%
Richard A. Navarre		80	%		0-150	%		517,784		331,000		130	%
Richard A. Navarre⁽¹⁾															90	%		0-180	%		1,116,900		153	%
Eric Ford		80	%		0-150	%		532,105		52,000		108	%		80	%		0-160	%		918,000		137	%
Sharon D. Fiehler		80	%		0-150	%		338,701		117,000		106	%		80	%		0-160	%		594,001		133	%
Roger B. Walcott, Jr.		80	%		0-150	%		360,000		—		76	%
Alexander C. Schoch															80	%		0-160	%		456,000		122	%
Michael C. Crews⁽²⁾															80	%		0-160	%		368,922		116	%


⁽¹⁾		Mr. Navarre was promoted to President and Chief Commercial Officer effective January 1, 2008.

⁽²⁾		Mr. Crews was promoted to Executive Vice President and Chief Financial Officer effective June 20, 2008.


	•	~~EBITDA, where EBITDA is based on income~~Average annual operating profit from continuing operations before ~~deducting early debt extinguishment costs, net interest expense, income~~ taxes, ~~minority interests, asset retirement obligation expense and depreciation, depletion and amortization,~~ divided by

	•	Average ~~Total Capital,~~total capital, where ~~Average Total Capital~~average total capital is determined ~~based on average annual~~using total debt plus ~~average annual~~total equity ~~plus average annual accounts receivable securitization less average annual cash.~~for the thirty-seven (37) month-end periods from December 2007 through December 2010.


	•	Payouts are ratably adjusted for performance between threshold and target, and between target and maximum levels.


	•	~~Senior management may use the aircraft for company business purposes;~~

	•	~~Spouses/partners may accompany senior management members on the corporate aircraft for company business purposes;~~

	•	~~On rare occasions, non-employee directors, when traveling on company business, may be accompanied by a spouse/partner.~~


					Ownership			Ownership
					Guidelines, Relative			Relative to
	Share Ownership		Share Ownership		to Annual			Annual
Name⁽¹⁾	(#)		($)⁽²⁾		Retainer⁽³⁾			Retainer⁽³⁾

Non-Employee Directors
William A. Coley		6,385		393,571		3	x		5.3	x
Henry Givens, Jr.		6,385		393,571		3	x		5.3	x
William E. James		9,381		578,245		3	x		7.7	x
Robert B. Karn III		17,603		1,085,049		3	x		14.5	x
Henry E. Lentz		6,093		375,573		3	x		5.0	x
William C. Rusnack		9,493		585,149		3	x		7.8	x
James R. Schlesinger		9,509		586,135		3	x		7.8	x
Blanche M. Touhill		9,509		586,135		3	x		7.8	x
John F. Turner⁽⁴⁾		3,455		212,966		3	x		2.8	x
Sandra Van Trease		17,173		1,058,544		3	x		14.1	x
Alan H. Washkowitz		6,093		375,573		3	x		5.0	x


⁽⁴⁾		Amounts in this column represent awards under our annual incentive plan. The material terms of the ~~2007~~2008 awards are described under the caption “Annual Cash Incentive Compensation” in the Compensation Discussion and Analysis section beginning on page ~~23 of this Proxy Statement.~~

		24.

⁽⁵⁾⁽³⁾		The actual change in pension values for ~~2007, which~~2008 resulted from an increase in the discount rate from ~~6.0%~~6.75% to ~~6.75%, is as follows: Mr. Navarre, ($19,313); Ms. Fiehler, ($31,790); and Mr. Walcott, ($11,830)~~6.90%. See page ~~51 of this Proxy Statement~~44 for further discussion about the Pension Plan.


⁽⁶⁾⁽⁴⁾		Amounts included in this column for ~~2007~~2008 are described in the All Other Compensation table on page 3936. Amounts included in this column for 2007 have been revised to correct over- and understatements of ~~this Proxy Statement.~~performance contribution values as described in footnote four of the All Other Compensation table on page 36.

⁽⁷⁾⁽⁵⁾		The ~~2007~~2008 compensation expense recognized for financial statement reporting purposes in accordance with FAS 123R for outstanding phantom stock and restricted stock awards to Mr. Boyce was ~~$2,999,242,~~$3,901,641, and is included in the amount reported.

⁽⁶⁾		Mr. Ford’s 2007 salary represents a partial year, from March 6, 2007 to December 31, 2007.


⁽⁸⁾⁽⁷⁾		The Stock Awards value reported for 2006 for Mr. Boyce inadvertently excluded the portion of compensation expense related to phantom stock and restricted stock awarded to him in 2003. The 2006 compensation expense recognized for financial statement reporting purposes in accordance with FAS 123R for all outstanding phantom stock and restricted stock awarded to Mr. Boyce was $975,503, and is included in the amount reported for 2006.


⁽⁹⁾		During 2007, Mr. Navarre served as our Chief Financial Officer and Executive Vice President Corporate Development. Effective January 1, 2008, Mr. Navarre’s principal position became President and Chief Commercial Officer. He will continue to serve as Chief Financial Officer until his successor is elected.


⁽¹⁰⁾		Mr. Ford received a restricted stock award of 54,198 shares on March 6, 2007 pursuant to the terms of his employment agreement ~~dated December 23, 2006.~~with us. The ~~2007~~2008 compensation expense recognized for financial statement reporting purposes in accordance with FAS 123R was ~~$1,425,191,~~$471,124 for expense on unvested restricted shares, and is included in the amount reported for 2007. The grant date fair value of this award determined under FAS 123R for financial reporting purposes is included in the Grants of Plan-Based Awards in 2007 table on page 41 of this Proxy Statement.2008.


⁽⁸⁾
⁽¹¹⁾		~~During 2007, Ms. Fiehler~~Mr. Navarre served as our ~~Executive Vice President Human Resources and Administration. Effective January 1,~~Chief Financial Officer until June 19, 2008, ~~Ms. Fiehler’s principal position became~~when Mr. Crews was promoted to Executive Vice President and Chief ~~Administrative~~Financial Officer.


⁽⁵⁾		~~Amounts included in this column for 2007 are described in the All Other Compensation table on page 40 of this Proxy Statement.~~

⁽⁶⁾		Mr. Whiting received restricted stock awards of 38,583 shares on October 12, 2007 and 9,449 shares on October 30, 2007 pursuant to the terms of his transition letter agreement dated May 4, 2007, in recognition of the conversion of stock option awards granted to him in 2006 and 2007 to equivalent restricted shares, that vested upon the completion of the spin-off of Patriot on October 31, 2007. Mr. Whiting also received an unrestricted stock award of 44,155 shares on November 1, 2007 pursuant to the terms of his transition letter agreement dated May 4, 2007, in recognition of stock option awards granted prior to 2006 and scheduled to vest after January 3, 2008, that were accelerated upon the completion of the spin-off of Patriot on October 31, 2007. These awards were made in order to compensate Mr. Whiting for the value of unvested stock options that were forfeited upon termination of his employment with us. Our 2007 compensation expense recognized for financial statement reporting purposes for these awards in accordance with FAS 123R was $2,524,092, and is included in the amount reported. The stock award value also includes an additional compensation


		expense recognized for financial statement reporting purposes for 2007 in accordance with FAS 123R, due to the accelerated vesting of performance unit awards granted to Mr. Whiting in 2006 and 2007, pursuant to the terms of his transition letter agreement dated May 4, 2007.


⁽⁷⁾		Mr. Nemec received restricted stock awards of 17,864 shares on October 12, 2007 and 4,462 shares on October 30, 2007 pursuant to the terms of his transition letter agreement dated May 4, 2007, in recognition of the conversion of stock option awards granted to him in 2006 and 2007 to equivalent restricted shares, that vested upon the completion of the spin-off of Patriot on October 31, 2007. Mr. Nemec also received an unrestricted stock award of 69,042 shares on November 1, 2007 pursuant to the terms of his transition letter agreement dated May 4, 2007, in recognition of stock option awards granted prior to 2006 and scheduled to vest after January 3, 2008, that were accelerated upon the completion of the spin-off of Patriot on October 31, 2007. These awards were made in order to compensate Mr. Nemec for the value of unvested stock options that were forfeited upon termination of his employment with us. Our 2007 compensation expense recognized for financial statement reporting purposes for these awards in accordance with FAS 123R was $1,228,185, and is included in the amount reported. The stock award value also includes an additional compensation expense recognized for financial statement reporting purposes for 2007 in accordance with FAS 123R, due to the accelerated vesting of performance unit awards granted to Mr. Nemec in 2006 and 2007, pursuant to the terms of his transition letter agreement dated May 4, 2007.


					Annual 401(k)		Employment
					Matching and		Agreement
			Group Term		Performance		Lump Sum
			Life Insurance		Contributions		Opportunity				Perquisites		Total
Name	Year		($)		($)		($)⁽¹⁾		Tax Gross-Ups⁽²⁾		($)⁽³⁾		($)

Current Officers
Gregory H. Boyce		2007		1,656		106,300				5,047		6,569		119,572
		2006		1,656		100,750				2,019		14,552		118,977	⁽⁴⁾
Richard A. Navarre		2007		810		70,550				2,046		2,663		76,069
		2006		810		68,000				3,435		13,537		85,782
Eric Ford⁽⁵⁾		2007		1,035		30,875		800,000		40,182		109,601		981,693
Sharon D. Fiehler		2007		1,050		46,967				2,264		2,947		53,228
		2006		988		45,280				1,967		10,936		59,171
Roger B. Walcott, Jr.		2007		1,173		51,500				1,071		1,394		55,138
		2006		1,111		50,150				3,181		3,604		58,046