8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 16, 2007

Peabody Energy Corporation

(Exact name of registrant as specified in its charter)

Delaware	1-16463	13-4004153
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
701 Market Street St. Louis, Missouri		63101-1826
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code:		(314) 342-3400

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.05. Costs Associated with Exit or Disposal Activities.
	Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers
	Item 9.01. Financial Statements and Exhibits
SIGNATURES
Exhibit Index
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 99.1
Exhibit 99.2

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Item 2.05. Costs Associated with Exit or Disposal Activities.

Peabody Energy Corporation (“Peabody”) announced on October 10, 2007, that its board of directors approved a spin-off of its wholly-owned subsidiary Patriot Coal Corporation (“Patriot”). The spin-off will be accomplished through a special dividend of all outstanding shares of Patriot to be issued to Peabody shareholders.

Peabody estimates that it will incur transaction costs in connection with the spin-off. Peabody has determined that at the time of this filing, it is unable in good faith to make a determination of the estimates required by paragraphs (b), (c), and (d) of Item 2.05 of the Form 8-K General Instructions. Peabody will file an amended report on Form 8-K within four business days of making a determination of the required estimates.

A copy of the press release relating to our announcement of the record date and expected distribution date for the spin-off is attached to this Current Report on Form 8-K as Exhibit 99.1.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

Departures of directors

On October 10, 2007, Irl F. Engelhardt voluntarily resigned from his position as Chairman of the board of directors of Peabody. In addition, Mr. Engelhardt submitted his resignation from Peabody’s board of directors, effective only in the event the proposed spin-off by Peabody of Patriot occurs and Mr. Engelhardt joins the Patriot board of directors. He will continue to be employed by Peabody until the spin-off occurs. The Patriot spin-off is expected to occur on October 31, 2007.

On October 10, 2007, B. R. Brown stepped down from Peabody’s board of directors, effective immediately. Mr. Brown joined the board of directors of Patriot effective as of October 12, 2007.

Appointment of Gregory H. Boyce as Chairman

On October 10, 2007, the board of directors of Peabody named President and Chief Executive Officer Gregory H. Boyce to succeed Mr. Engelhardt in the role of Chairman. A copy of the press release relating to our announcement of Mr. Boyce’s appointment as Chairman is attached to this Current Report on Form 8-K as Exhibit 99.2.

Amendments to Peabody benefit plans

The Board of Directors of Peabody approved amendments on October 10, 2007 (the “Amendments”) to the following three Peabody plans: (1) the Peabody 2004 Long-Term Equity Incentive Plan (the “2004 Plan”); (2) the Peabody 2001 Long-Term Equity Incentive Plan (the “2001 Plan”); and (3) the 1998 Stock Purchase and Option Plan for Key Employees of P&L Coal Holdings Corporation (the “1998 Plan” and, collectively with the 2001 Plan and the 2004 Plan, the “Plans”).

The Plans, each of which authorizes the award of shares of Peabody common stock to Peabody employees, were amended to define the “fair market value” of Peabody’s common stock and prohibit granting any stock options or stock appreciation rights under the Plans that have an exercise price that is below the fair market value of the underlying Peabody stock on the date of grant, as required to comply with final regulations promulgated under Section 409A of the Internal Revenue Code of 1986, as amended.

In addition, each of the Plans was amended with respect to certain awards held by Peabody employees who transfer directly to employment with Patriot following the spin-off of Patriot from Peabody (the “Patriot Employees”). The Plans were each amended to provide that the Patriot Employees’ employment with Patriot following the spin-off will be treated as employment with Peabody for purposes of vesting and retirement eligibility with respect to awards under the Plans. For Patriot Employees who become Patriot senior management employees following the spin-off (excluding the Executive Advisor of Patriot), the Amendments provide that, (i) with respect to awards granted to such employees prior to 2006 under a Plan that are scheduled to vest on or before January 3, 2008, such employees’ employment periods with Patriot will be treated as employment with Peabody for purposes of vesting and retirement eligibility under such awards, and (ii) with respect to awards granted to such employees prior to 2006 under a Plan that are scheduled to vest after January 3, 2008, such awards shall vest as of the effective date of the spin-off (and awards that are stock options shall cease to be exercisable and shall expire on July 3, 2008). All awards granted under the Plans held by Patriot Employees shall be immediately vested upon a Change in Control of Patriot, as defined in the Amendments.

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Peabody also entered into an amendment to the 2004 Plan which provides that the spin-off of Patriot from Peabody shall not be considered or treated as a “Recapitalization Event” for purposes of the 2004 Plan.

Finally, the Board approved an amendment on October 10, 2007 to the Peabody Energy Corporation Employee Stock Purchase Plan (the “ESPP”) that permits any Patriot Employee who is currently enrolled in the ESPP for the offering period ending December 31, 2007 to remain in the ESPP until the earliest to occur of (i) the end of the current offering period; (ii) such Patriot Employee’s termination of employment with Patriot or (iii) three months from the date of the Patriot Employee’s termination of employment with Peabody.

The above descriptions of the Amendments to the Plans and the ESPP are qualified in their entirety by reference to the texts of the Amendments, which are attached as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 hereto and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

(d)     Exhibits

Exhibit No.	Description of Exhibit
10.1	Amendment No. 2 to Peabody 2004 Long-Term Equity Incentive Plan
10.2	Amendment No. 3 to Peabody 2004 Long-Term Equity Incentive Plan
10.3	Amendment to the Peabody 2001 Long-Term Equity Incentive Plan
10.4	Amendment to the 1998 Stock Purchase and Option Plan for Key Employees of P&L Coal Holdings Corporation
10.5	Amendment No. 2 to Peabody Employee Stock Purchase Plan
99.1	Press release issued by Peabody Energy Corporation, dated October 10, 2007, regarding approval of the spin-off
99.2	Press release issued by Peabody Energy Corporation, dated October 10, 2007, regarding election of Gregory H. Boyce as Chairman

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PEABODY ENERGY CORPORATION
By:	/s/ Alexander C. Schoch
	Name:	Alexander C. Schoch
	Title:	Executive Vice President — Law and Chief Legal Officer

Dated: October 16, 2007

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Exhibit Index

Exhibit No.	Description of Exhibit
10.1	Amendment No. 2 to Peabody 2004 Long-Term Equity Incentive Plan
10.2	Amendment No. 3 to Peabody 2004 Long-Term Equity Incentive Plan
10.3	Amendment to the Peabody 2001 Long-Term Equity Incentive Plan
10.4	Amendment to the 1998 Stock Purchase and Option Plan for Key Employees of P&L Coal Holdings Corporation
10.5	Amendment No. 2 to Peabody Employee Stock Purchase Plan
99.1	Press release issued by Peabody Energy Corporation, dated October 10, 2007, regarding approval of the spin-off
99.2	Press release issued by Peabody Energy Corporation, dated October 10, 2007, regarding election of Gregory H. Boyce as Chairman.

EX-10.1

Exhibit 10.1

AMENDMENT NO. 2 TO THE
PEABODY ENERGY CORPORATION
2004 LONG-TERM EQUITY INCENTIVE PLAN

     WHEREAS, Peabody Energy Corporation (the “Corporation”) adopted and maintains the Peabody Energy Corporation 2004 Long-Term Equity Incentive Plan (the “Plan”);

     WHEREAS, pursuant to Section 16 of the Plan, the Board of Directors of the Corporation (the “Board”) may amend the Plan for various purposes, including but not limited to preventing an expense charge to the Corporation, subject to the limitations set forth therein;

     WHEREAS, the Corporation contemplates spinning off a portion of its business into another entity and distributing a dividend in the form of stock of that other entity (such transaction referred to herein as “Project Gemini”), which, if such actions were to constitute a “Recapitalization Event” under the Plan, would cause the Corporation to incur a substantial expense under the Plan;

     WHEREAS, the “Recapitalization Event” definition was not intended by the Corporation to apply in a transaction such as Project Gemini, which does not include a cash dividend or the distribution of additional cash value to the shareholders of the Corporation; and

     WHEREAS, the Corporation deems it appropriate to amend the “Recapitalization Event” definition used in the Plan;

     NOW, THEREFORE, the Plan is hereby amended, effective as of January 1, 2007, as follows:

I.

     Section 17(o) of the Plan is hereby amended to read in its entirety as follows:

     “(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 cash and/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.’”

II.

     In all other respects, the Plan shall remain unchanged and in full force and effect.

[SIGNATURE PAGE FOLLOWS]

     IN WITNESS WHEREOF, this amendment is executed this 10th day of October, 2007.

PEABODY ENERGY CORPORATION
 

By:  

Title:

2

EX-10.2

Exhibit 10.2

AMENDMENT NO. 3 TO THE
PEABODY ENERGY CORPORATION
2004 LONG-TERM EQUITY INCENTIVE PLAN

     WHEREAS, Peabody Energy Corporation (the “Company”) adopted and maintains the Peabody Energy Corporation 2004 Long-Term Equity Incentive Plan (the “Plan”);

     WHEREAS, pursuant to Section 16 of the Plan, (i) the Board of Directors of the Company (the “Board”) has the right to amend the Plan and (ii) the Plan administrator may amend the terms and conditions of outstanding grants under the Plan if such amendment does not adversely affect the participant’s rights without his or her consent; and

     WHEREAS, the Company contemplates spinning off a portion of its business during 2007 to Patriot Coal Corporation (“Patriot”), resulting in the transfer of several Company employees to employment with Patriot and constituting a Termination of Employment for such employees within the meaning of outstanding grants;

     WHEREAS, many of the Company employees who are expected to transfer to Patriot hold unvested awards under the Plan and the Company would like to permit continued vesting of some of those awards after such spin-off;

     WHEREAS, the Company deems it appropriate to amend the Plan to permit such continued vesting; and

     WHEREAS, the Company desires to amend the Plan to comply with Section 409A.

     NOW, THEREFORE, the Plan is hereby amended effective on October 31, 2007, the effective date of such spin-off (the “Effective Date”), as follows:

     1. Section 6 of the Plan is hereby amended by adding the following to the end thereof:

     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 Treasury Regulation 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.

     2. Section 7 of the Plan is hereby amended to add the following to the end thereof:

     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).

     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.

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     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 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 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 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 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 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (or any successor section thereto).

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     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 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 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 a Patriot Senior Management Employee.

     3. Section 9 of the Plan is hereby amended to add the following to the end thereof:

     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 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.

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     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 and be deemed to be exercised on 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 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 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.

     4. Section 11 of the Plan is hereby amended to add a new paragraph (e) to the end thereof that reads as follows:

     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 actual performance results as of December 31, 2007. Such payment shall be made in the form of shares of Common Stock as soon as practicable after December 31, 2007, but no later than March 15, 2008.

     5. Section 17 of the Plan is hereby amended to add a new paragraph (p) to the end thereof that reads as follows:

(p) To the extent applicable and notwithstanding any other provision of this Plan, 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 payment and/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 hereunder and/or (ii) take such other actions as the Administrator determines necessary or

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appropriate to comply with or exempt the Plan and/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.

     6. In all other respects, the Plan shall remain unchanged and in full force and effect.

PEABODY ENERGY CORPORATION

By:

Title:

Date:

6

EX-10.3

Exhibit 10.3

AMENDMENT TO THE
PEABODY ENERGY CORPORATION
2001 LONG-TERM EQUITY INCENTIVE PLAN

     WHEREAS, Peabody Energy Corporation (the “Company”) adopted and maintains the Peabody Energy Corporation 2001 Long-Term Equity Incentive Plan (the “Plan”);

     WHEREAS, pursuant to Section 16 of the Plan, (i) the Board of Directors of the Company (the “Board”) has the right to amend the Plan and (ii) the Plan administrator may amend the terms and conditions of outstanding grants under the Plan if such amendment does not adversely affect the participant’s rights without his or her consent; and

     WHEREAS, the Company contemplates spinning off a portion of its business during 2007 to Patriot Coal Corporation (“Patriot”), resulting in the transfer of several Company employees to employment with Patriot and constituting a Termination of Employment for such employees within the meaning of outstanding grants;

     WHEREAS, many of the Company employees who are expected to transfer to Patriot hold unvested stock options under the Plan and the Company would like to permit continued vesting of some of those stock options after such spin-off;

     WHEREAS, the Company deems it appropriate to amend the Plan to permit such continued vesting; and

     WHEREAS, the Company desires to amend the Plan to comply with Section 409A.

     NOW, THEREFORE, the Plan is hereby amended effective on October 31, 2007, the effective date of such spin-off (the “Effective Date”), as follows:

     1.     Section 6 of the Plan is hereby amended by adding the following to the end thereof:

     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 Treasury Regulation 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.

     2.     Section 7 of the Plan is hereby amended to add the following to the end thereof:

     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).

     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 or applicable Restricted Stock agreement and shall apply only to the Corporation.

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     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 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 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 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 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 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (or any successor section thereto).

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     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 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 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 a Patriot Senior Management Employee.

     3.     Section 10 of the Plan is hereby amended to add the following to the end thereof:

     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 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 or applicable NQSO agreement and shall apply only to the Corporation.

4

     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 and be deemed to be exercised on 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 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 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.

     4.     Section 11 of the Plan is amended in its entirety to read as follows:

     11. Deferred Stock Units. A Deferred Stock Unit is a hypothetical share of Common Stock of the Company with a value equal to the Fair Market Value of a share of Common Stock. A Participant who receives a Deferred Stock Unit Award has the right to receive the value of the Deferred Stock Units, subject to the terms and conditions set forth in a Deferred Stock Unit agreement as established by the Administrator in its sole discretion. At the discretion of the Administrator, payment for Deferred Stock Units may be made in cash or shares of Common Stock of the Company, or in a combination thereof, and such payment shall be made at the time or times specified in the Deferred Stock Unit agreement. In the case of any Deferred Stock Unit Award:

     (a) Deferred Stock Units may be subject to (i) forfeiture provisions or vesting requirements based on the Participant’s continued service or the attainment of specified performance objectives and (ii) such other restrictions, conditions and terms as the Administrator deems appropriate.

     (b) The Administrator may, in its discretion, provide for payments in cash or adjustment in the number of Deferred Stock Units equivalent to the dividends the Participant would have received if he or she held shares of Common Stock instead of Deferred Stock Units. Any such dividend equivalents paid in cash shall be credited to a bookkeeping account in the Participant’s name and shall be subject to all of the forfeiture provisions, vesting requirements and other restrictions, conditions and terms that apply to the Deferred Stock Units.

     (c) The Deferred Stock Unit agreement shall specify the time and form of payment of the Deferred Stock Units, including the six-month payment delay for specified employees, if applicable, in accordance with Code Section 409A and the regulations and other guidance in effect thereunder.

5

     (d) At the discretion of the Administrator, a Participant may elect to defer payment of a Deferred Stock Unit granted to such Participant until the earlier of a Specified Distribution Date (as defined below), or, subject to the six-month delay for specified employees, thirty days after the date the Participant incurs a Termination of Employment. All deferral elections under this Section 5.7(d) shall be submitted to the Administrator by the Participant in writing on a Deferral Election Form (as defined below) to be supplied and approved by the Administrator (the provisions of which Deferral Election Form are hereby incorporated herein by reference and made a part hereof) and shall be effective upon receipt and acceptance by the Administrator. A deferral election with respect to a Deferred Stock Unit shall be made not later than December 31 of the calendar year preceding the calendar year in which such Deferred Stock Unit is granted. All Deferral Election Forms filed under this Section 11(d) shall be irrevocable.

     For purposes of the Plan, the term “Deferral Election Form” means the form supplied and approved by the Administrator that the Participant submits to the Administrator to make a deferral election under paragraph (d) above.

     For purposes of the Plan, the term “Specified Distribution Date”, as used with respect to a Deferred Stock Unit deferred by a Participant in accordance with paragraph (d) above, means the date specified by the Participant on the applicable Deferral Election Form as the date such Deferred Stock Unit shall be paid to the Participant. The Specified Distribution Date with respect to a Deferred Stock Unit must be the last business day of a calendar year following the calendar year in which such Deferred Stock Unit is granted . Notwithstanding the foregoing, (i) in the case of a Participant who is a non-employee director of the Company or any designated subsidiary, the Specified Distribution Date with respect to a Deferred Stock Unit shall not be earlier than the last business day of the second calendar year and no later than the last business day of the seventh calendar year following the calendar year in which such Deferred Stock Unit is granted and (ii) in the case of each other Participant not described in clause (i) above, such Specified Distribution Date shall be no later than the last business day of the fifth calendar year following the calendar year in which such Deferred Stock Unit is granted.

     5.     A new Section 18 is added to the Plan to read as follows:

     18. Section 409A.

     To the extent applicable and notwithstanding any other provision of this Plan, 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 payment and/or delivery to such Participant of such amount, the Corporation may (i) adopt such amendments to the Plan and related

6

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 hereunder and/or (ii) take such other actions as the Administrator determines necessary or appropriate to comply with or exempt the Plan and/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.

     6.     In all other respects, the Plan shall remain unchanged and in full force and effect.

PEABODY ENERGY CORPORATION

By:

Title:

Date:

7

EX-10.4

Exhibit 10.4

AMENDMENT TO THE
1998 STOCK PURCHASE AND OPTION PLAN FOR KEY EMPLOYEES OF
P&L COAL HOLDINGS CORPORATION

     WHEREAS, Peabody Energy Corporation (the “Company”) maintains the 1998 Stock Purchase and Option Plan for Key Employees of P&L Coal Holdings Corporation (the “Plan”);

     WHEREAS, pursuant to Section 10 of the Plan, (i) the Board of Directors of the Company (the “Board”) has the right to amend the Plan and (ii) the Compensation Committee of the Company may amend the terms and conditions of outstanding grants under the Plan if such amendment does not adversely affect the participant’s rights without his or her consent; and

     WHEREAS, the Company contemplates spinning off a portion of its business during 2007 to Patriot Coal Corporation (“Patriot”), resulting in the transfer of several Company employees to employment with Patriot and constituting a Termination of Employment for such employees within the meaning of outstanding grants;

     WHEREAS, many of the Company employees who are expected to transfer to Patriot hold unvested stock options under the Plan and the Company would like to permit continued vesting of some of those stock options after such spin-off;

     WHEREAS, the Company deems it appropriate to amend the Plan to permit such continued vesting; and

     WHEREAS, the Company desires to amend the Plan to comply with Section 409A.

     NOW, THEREFORE, the Plan is hereby amended effective on October 31, 2007, the effective date of such spin-off (the “Effective Date”), as follows:

     1. Section 2(k) of the Plan is amended in its entirety to read as follows:

     “Fair Market Value” means, as of any applicable date, (a) the closing sales price for one Share 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 Company’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 was reported on such date, or (b) if the foregoing subsection (a) does not apply, the fair market value of a Share 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 Treasury Regulation Section 1.409-1(b)(iv)(B)(2) or (y) include, as applicable, the value of tangible and intangible assets of the Company, the present value of future cash flows of the Company, 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 Company, 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 Company, its stockholders or its creditors.

     2. Section 5(a)(ii) of the Plan is hereby amended by adding the following at the end thereof:

     Notwithstanding the foregoing, no Option may be granted under this Plan with 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 Grant 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 Company for the following purposes under the Plan:

     (a) Continued vesting and exercisability of any Non-Qualified Stock Option 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 and exercisability of any Non-Qualified Stock Option held by a Patriot Senior Management Employee (as defined below) 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 determining the exercise period of Non-Qualified Stock Options held by any Patriot Employee and any Patriot Senior Management Employee under the provisions of any Grant Agreement between such Employee and the Company.

     Notwithstanding the foregoing, any Non-Qualified Stock Option 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 Non-Qualified Stock Option 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 Company.

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

2

     Notwithstanding anything in the Plan or any Grant Agreement to the contrary, each Accelerated Option (as defined below) shall vest and be deemed to be exercised on the effective date of the spin-off of Patriot (“Spin-Off Date”). The exercise price and tax withholding with respect to such exercise shall be paid by the withholding by the Company of such number of Shares 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 Plan, the term “Accelerated Option” means a Non-Qualified Stock Option held by a Patriot Senior Management Employee that was granted prior to 2006 and is scheduled to vest after January 3, 2008.

     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 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 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 surviving entity) more than 50% of the combined voting power of the securities of Patriot or such

3

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 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 13(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 Company directly to employment with Patriot and 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 Company, who transfers, within one (1) year of the Spin-Off Date, from employment with the Company directly to employment with Patriot and who is party to a transition letter agreement with the Company in connection with such transfer; provided, however that the Chairman of the Board and Executive Advisor of Patriot shall not be considered to be Patriot Senior Management Employee.

3. A new Section 14 is added to the Plan to read as follows:

     14. Section 409A.

     To the extent applicable and notwithstanding any other provision of this Plan, this Plan and Grants 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 Committee 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 payment and/or delivery to such Participant of such amount, the Company may (i) adopt such amendments to the Plan and related Grant, and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Committee determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Grants hereunder and/or (ii) take such other actions as the Committee determines necessary or appropriate to comply with or exempt the Plan and/or Grants 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

4

which the Board approves the Plan. The Company makes no guarantees to any Participant regarding the tax treatment of Grants or payments made under the Plan, and, notwithstanding the above provisions and any agreement or understanding to the contrary, if any Grant, 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 Company 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.

     4. In all other respects, the Plan shall remain unchanged and in full force and effect.

PEABODY ENERGY CORPORATION

By:

Title:

Date:

5

EX-10.5

Exhibit 10.5

SECOND AMENDMENT TO THE
PEABODY ENERGY CORPORATION
EMPLOYEE STOCK PURCHASE PLAN

     WHEREAS, Peabody Energy Corporation (the “Company”) previously adopted the Peabody Energy Corporation Employee Stock Purchase Plan (the “Plan”);

     WHEREAS, pursuant to Section 7.1 of the Plan, the Company has the power to amend the Plan, subject to certain limitations set forth therein;

     WHEREAS, the Company contemplates spinning off a portion of its business into another entity (referred to herein as “Patriot Coal Corporation”), which is expected to result in the transfer of some of the Company’s employees to employment with Patriot Coal Corporation; and

     WHEREAS, the Company desires to amend the Plan to allow employees who are currently contributing to the Plan and whose employment will be transferred to Patriot Coal Corporation as part of the spin-off to continue to participate in the Plan through the end of the Offering Period (as such term is defined in the Plan) in which such transfer occurs if certain conditions are satisfied;

     NOW, THEREFORE, the Plan is amended, effective October 10, 2007, as follows:

I.

     Section 2.7 of the Plan is hereby amended by the addition of a sentence at the end thereof that reads as follows:

     “Notwithstanding the foregoing, Compensation shall not include any amount paid to an Employee after he or she incurs a termination of employment with the Company and all Participating Subsidiaries.”

II.

     Section 5.1(a)(iii) of the Plan is hereby amended to read as follows:

     “(iii) unless otherwise provided in Section 5.1(c), following the termination of employment with the Company and all Participating Subsidiaries;”

III.

     Section 5.1 of the Plan is hereby amended by the addition of a new subsection (c) at the end thereof that reads as follows:

     “(c) Notwithstanding Section 5.1(a)(iii), any Employee who is enrolled in the Plan during an Offering Period in which the Employee incurs a termination of employment with the Company and transfers directly to employment with Patriot Coal Corporation shall be permitted to remain enrolled in the Plan through the earliest of (x) the Termination Date of such Offering Period, (y) the termination of such Employee’s employment with Patriot Coal Corporation, or (z) three months after the date such Employee incurs a termination of employment with the Company.”

IV.

     The Plan shall otherwise remain unchanged and in full force and effect.

PEABODY ENERGY CORPORATION


Sharon D. Fiehler
EVP Human Resources and Administration
 

2

EX-99.1

Exhibit 99.1

	PEABODY ENERGY
	News Release
	CONTACT: Vic Svec (314) 342-7768

FOR IMMEDIATE RELEASE
October 10, 2007

PEABODY ENERGY’S BOARD OF DIRECTORS
APPROVES SPIN-OFF OF PATRIOT COAL CORPORATION

ST. LOUIS, Oct. 10 — Peabody Energy (NYSE: BTU) today announced that its board of directors has approved a spin-off of coal assets and operations in West Virginia and Kentucky to BTU shareholders. The spin-off will be accomplished through a special dividend of all outstanding shares of Patriot Coal Corporation, which would then be an independent public company traded on the New York Stock Exchange under the ticker symbol PCX.

     Distribution of Patriot stock to Peabody Energy shareholders is expected to occur on October 31, at a ratio of one share of Patriot Coal stock for every 10 shares of Peabody held. Those holding Peabody shares up to the market close on the distribution date will be entitled to receive the Patriot distribution.* The record date is October 22, and “when issued” trading is expected to begin several days prior to the record date. Refer to PeabodyEnergy.com for more details regarding the distribution.

     The planned distribution has received a favorable tax-free ruling from the Internal Revenue Service. The distribution is conditioned upon Patriot’s registration statement on Form 10 being declared effective by the Securities and Exchange Commission along with other conditions outlined in the information statement filed with the SEC.

     “We believe this spin-off unlocks long-term value for shareholders, who will retain ownership in the world’s largest coal company and obtain ownership in a leading Eastern U.S. producer with a major metallurgical and steam coal position,” said Peabody Chairman and Chief Executive Officer Gregory H. Boyce. “With this spin-off, both companies are able to pursue their distinct growth plans and business focus. Peabody continues the planned transformation of our earnings base as we expand our global operating platform, increase our presence in the Western United States and Illinois Basin, accelerate our worldwide trading activities and participate in Btu Conversion.”

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PEABODY BOARD APPROVES PATRIOT SPIN-OFF — PAGE 2

     Two existing Peabody board members — Irl F. Engelhardt and Bobby R. Brown — will move to Patriot, joining five others that Patriot has named.

     Peabody also announced today that it intends to issue its earnings release for the quarter ended September 30, 2007 on November 6, 2007, following the completion of the spin-off.

     Peabody Energy (NYSE: BTU) is the world’s largest private-sector coal company, with 2006 sales of 248 million tons of coal and $5.3 billion in revenues. Its coal products fuel approximately 10 percent of all U.S. electricity generation and more than 2 percent of worldwide electricity.

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* Any holder of Peabody Energy common stock who sells shares of Peabody (NYSE: BTU) in the “regular way” market on or before the distribution date may be selling the entitlement to receive shares of Patriot Coal common stock in the spin-off. Holders of Peabody common stock are encouraged to consult with their financial advisors regarding the specific implications of selling Peabody common stock on or before the distribution date.

Use of the words “Peabody,” “the company” and “our” relate to Peabody, our subsidiaries and our majority-owned affiliates.

Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that may be beyond our control and may cause our actual future results to differ materially from expectations. We do not undertake to update our forward-looking statements. Factors that could affect our results include, but are not limited to: the outcome of our evaluation of strategic alternatives for our West Virginia and Kentucky subsidiaries; the outcome of commercial negotiations involving sales contracts or other transactions; customer performance and credit risk; supplier performance, and the availability and cost of key equipment and commodities; availability and costs of transportation; geologic, equipment and operational risks associated with mining; our ability to replace coal reserves; labor availability and relations; the effects of mergers, acquisitions and divestitures; legislative and regulatory developments; the outcome of pending or future litigation; coal and power market conditions; weather patterns affecting energy demand; availability and costs of competing energy resources; worldwide economic and political conditions; global currency exchange and interest rate fluctuation; wars and acts of terrorism or sabotage; political risks, including expropriation; and other risks detailed in the company’s reports filed with the Securities and Exchange Commission.

EX-99.2

Exhibit 99.2

	PEABODY ENERGY
	News Release
	CONTACT:
	Vic Svec
	(314) 342-7768

FOR IMMEDIATE RELEASE
October 10, 2007

PEABODY ENERGY BOARD ELECTS GREGORY H. BOYCE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER EFFECTIVE IMMEDIATELY

ST. LOUIS, Oct. 10 - The Board of Directors of Peabody Energy (NYSE: BTU) today elected President and Chief Executive Officer Gregory H. Boyce to the additional role of Chairman, effective immediately.

     Boyce succeeds Irl F. Engelhardt, who has resigned as Chairman following a successful 28-year career with the company to become Chairman of the Board of Patriot Coal Corporation, Peabody’s subsidiary that is expected to be spun off at the end of October.

     “Since Greg joined the company in late 2003 as Chief Operating Officer and later was named Chief Executive Officer in early 2005, Peabody has set new financial records, more than doubled its market value, expanded globally and been widely recognized for safety, environmental and social responsibility accomplishments,” said Dr. Blanche M. Touhill, Chairman of Peabody’s Nominating and Corporate Governance Committee. “Peabody is a leading world-class energy company that has an extremely bright future with Greg at the helm. We thank Irl for his years of outstanding service and wish him the very best in years to come.”

     “We are completing a dramatic transformation of the company with major new projects at our flagship Powder River Basin operations, new mines in Australia, expanded coal trading around the world, and the planned spin-off of Patriot Coal,” said Boyce. “I see significant opportunities to create shareholder value as we leverage the industry’s best people, assets and strategies to capitalize on global energy demand, coal-fueled generation, emerging markets for coal-to-gas and coal-to-liquids and clean coal solutions.”

     Boyce has been a member of the Board of Directors and Chairman of the Executive Committee of the Board since March 2005. He joined Peabody in October 2003 as President and Chief Operating Officer. He has extensive U.S. and international management, operating and engineering experience. Prior to joining Peabody, Boyce served as Chief Executive Officer — Energy for international mining company Rio Tinto in London, with responsibility for a

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PEABODY BOARD ELECTS BOYCE CHAIRMAN AND CEO — PAGE 2

worldwide coal and uranium portfolio. Prior to that, he was President and Chief Executive Officer of Kennecott Energy Company and President of Kennecott Minerals Company. Boyce holds a Bachelor of Science Degree in Mining Engineering from the University of Arizona, and completed the Advanced Management Program from the Graduate School of Business at Harvard University.

     Boyce’s leadership positions include Vice Chairman of the World Coal Institute. He is a member of the National Coal Council and was the Study Chair of NCC’s 2006 report, “Coal: America’s Energy Future.” He is also Co-Chairman of the Coal-Based Generation Stakeholders Group and a member of the Coal Industry Advisory Board of the International Energy Agency. He is a Board member of the Business Roundtable, the Center for Energy and Economic Development (CEED) and the National Mining Association. Boyce is a member of the Board of Directors of the St. Louis Regional Chamber and Growth Association and a member of Civic Progress in St. Louis. He is a member of 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.

     Peabody Energy (NYSE: BTU) is the world’s largest private-sector coal company, with 2006 sales of 248 million tons of coal and $5.3 billion in revenues. Its coal products fuel approximately 10 percent of all U.S. electricity generation and more than 2 percent of worldwide electricity.

-End-