advisedif the Company thatPlan was in existence then. No awards will be made under the Plan until it intends to submit the following proposal at the Company’s 2006 Annual Meeting of Shareholders.is approved by our shareholders.
The words “we” and “our” in the Supporting Statement mean the Sheet Metal Workers, not the Company:Approval
“Resolved: That the shareholders of Peabody Energy Corporation (“Company”) hereby request that the Board of Directors initiate the appropriate process to amend the Company’s governance documents (certificate of incorporation or bylaws) to provide that director nominees shall be elected
Under Delaware law, approved by the affirmative voteholders of thea majority of votes cast at an annual meeting of shareholders.
Supporting Statement: Our Company is incorporated in Delaware. Delaware law provides that a company’s certificate of incorporation or bylaws may specify the number of votes that shall be necessary for the transaction of any business, including the election of directors. (DGCL, Title 8, Chapter 1, Subchapter VII, Section 216). The law provides that if the level of voting support necessary for a specific action is not specified in a corporation’s certificate or bylaws, directors “shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.”
Our Company presently uses the plurality vote standard to elect directors. This proposal requests that the Board initiate a change in the Company’s director election vote standard to provide that nomineesis required for the board of directors must receive a majorityapproval of the vote cast in order to be elected or re-elected toPlan. Under Section 162(m) of the Board.
We believe thatInternal Revenue Code, the material terms of a majority vote standard in director elections would giveperformance goal are approved by shareholders a meaningful role in the director election process. Under the Company’s current standard, a nomineeif, in a director election can be elected with as little asseparate vote, a single affirmative vote, even if a substantial majority of the votes cast on the issue are “withheld” from that nominee. The majority vote standard would require that a director receive a majority of the vote cast in order to be elected to the Board.
The majority vote proposal received high levels of support last year, winning majority support at Advanced Micro Devices, Freeport McMoRan, Marathon Oil, Marsh & McLennan, Office Depot, Raytheon, and others. Leading proxy advisory firms recommended voting in favor of approval. If the proposal.
Some companies have adopted board governance policies requiring director nominees that fail to receive majority support from shareholders to tender their resignations toPlan receives initial shareholder approval, we will redisclose the board. We believe that these policies are inadequate for they are based on continued usematerial terms of the plurality standardPlan and would allow director nominees to be elected despite only minimalseek shareholder support. We contend that changingreapproval every five years after the legal standard to a majority vote is a superior solution that merits shareholder support.Plan’s effective date, unless required sooner by law or the Plan.
Our proposal is not intended to limit the judgment of the Board in crafting the requested governance change. For instance, the Board should address the status of incumbent director nominees who fail to receive a majority vote under a majority vote standard and whether a plurality vote standard may be appropriate in director elections when the number of director nominees exceeds the available board seats.
We urge your support for this important director election reform.”
The Board of Directors recommends that you vote AGAINST the proposal submitted by the Sheet Metal Workers for the following reasons:“For” Item 4, to approve our 2008 Management Annual Incentive Compensation Plan.
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| • | A similar majority-vote proposal was presented, but did not pass, at last year’s Annual Meeting. The Board, however, heard the concerns of shareholders voting in favor of the |
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| | proposal and established a new director election process which it believes is a better alternative to a majority-voting standard. |
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| • | The Board believes this proposal was submitted as part of a “corporate campaign” aimed at pressuring the Company into adopting policies being promoted by union officials that would be detrimental to the Company and its shareholders and employees.SeeShareholder Proposals and Company’s Statements in Opposition — Introduction. |
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| • | The Board believes that adopting the proposal would make it easier for special interest groups to pressure the Board, to cause disruption and to push their own agendas to the detriment of the Company and its shareholders as a whole. |
In 2005, the Board of Directors specifically reviewed and addressed the issue of whether the Company should retain its plurality voting standard in director elections as provided under Delaware law or adopt a majority-voting standard. As part of its review, the Board considered recent governance trends and input from independent governance experts. After carefully considering these and other factors, the Board determined that retaining the plurality standard in director elections remains in the best interests of the Company and its shareholders. At the same time, the Board recognized that in situations where a director nominee receives more “withheld” votes than “for” votes, it warrants the Board’s careful attention. To address this situation, the Board established a new director election process, which was implemented through the Board’s adoption of the Corporate Governance Principle on Majority Voting appearing asAnnex A to this Proxy Statement.
In adopting the new director election process, the Board recognized that a number of special interest groups are promoting the majority-voting standard as a means to wage corporate campaigns or other detrimental activities that are not in the best interest of all shareholders. The Board believes that if it were to adopt majority voting for directors, it would likely increase the ability of shareholder activists to disrupt elections, destabilize the board and push their special interest agendas. The Board also believes that a majority-voting standard could have the effect of deterring competent people from accepting nomination to the Board.
Under the new election process, the Company’s directors will continue to be elected by a plurality vote — the same voting standard used in director elections at most public companies in the United States. However, in uncontested elections, if a director nominee receives more “withheld” than “for” votes, the director nominee will be required to promptly tender his or her resignation. The Board will then determine whether to accept or reject the resignation based on all factors affecting the nominee’s qualifications and contributions to the Company.
In most cases, the outcomes under the new election process and the proposal would be the same. For example, under a majority-voting standard, if a non-incumbent director nominee receives a majority of “withheld” votes, the nominee would not be elected to the board and there would likely be a board vacancy. As provided in the Company’s organizational documents, the Board would then have discretion to fill the vacancy, either with the nominee or someone else. Ultimately, under both the new election process and a majority-voting standard, the Board would determine whether the nominee would serve on the board.
In other situations, the Board believes the plurality standard, as supplemented by the corporate governance principle, yields a superior outcome and avoids certain legal flaws inherent in applying a majority-voting standard. For example, where an incumbent director nominee receives a majority of “withheld” votes, the new election process is more effective than the proposal at removing a director opposed by shareholders because it requires the nominee to tender his or her resignation. Under the proposal, the nominee would continue to serve on the board even though he or she did not receive a
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majority of votes. This is because Delaware’s so-called “hold-over” rule allows an incumbent director to hold office until his or her successor has been elected and qualified, unless he or she voluntarily retires or resigns.
In summary, the Board heard concerns at last year’s Annual Meeting, and responded by establishing a new director election process. The Board believes this new process strengthens the Company’s governance and will allow the Board to be more responsive to shareholders, while at the same time not allowing special interest groups to influence Board decisions to the detriment of shareholders as a whole.
The Board recommends that you vote “AGAINST” the proposal submitted by the Sheet Metal Workers.
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ITEM 6 — | BOARD DECLASSIFICATION |
This proposal was submitted by the AFL-CIO Reserve Fund (the “AFL-CIO”), 815 Sixteenth Street, N.W., Washington, D.C. 20006. The AFL-CIO has represented that it is the beneficial owner of 400 shares of Common Stock and has advised the Company that it intends to submit the following proposal at the Company’s 2006 Annual Meeting of Shareholders.All references to “we” and “our” in the Supporting Statement mean the AFL-CIO, not the Company:ADDITIONAL INFORMATION
“RESOLVED: The shareholders of Peabody Energy Corporation (the “Company”) urge the Board of Directors to take the necessary steps, in compliance with state law, to declassify the Board for the purpose of director elections. The Board’s declassification shall be completed in a manner that does not affect the unexpired terms of directors previously elected.
SUPPORTING STATEMENT
Our Company’s Board of Directors is divided into three classes, with approximately one-third of all directors elected annually to three-year terms. In our opinion, this director classification system, which results in only a portion of the Board being elected annually, is not in the best interests of our Company and its shareholders. We believe shareholders should have the opportunity to vote on the performance of the entire Board each year.
Shareholders overwhelmingly supported this proposal last year, with more than 70% voting in favor of declassifying our Company’s board.
In our view, the election of directors is the primary avenue for shareholders to influence corporate governance policies and to hold management accountable for implementing those policies. Eliminating this classification system would require each director to stand for election annually and would give shareholders an opportunity to register their views on the performance of the board collectively and each director individually.
We believe that electing directors annually is one of the best methods available to shareholders to ensure that our Company is managed in the appropriate interests of its investors. Several in-depth studies of the past five years have found significant positive links between governance practices favoring shareholders (like declassifying the board) and firm value. One of the most recent studies, “The Costs of Entrenched Boards,” by Harvard Law School’s Lucian Bebchuk and Alma Cohen, found that staggered boards were associated with an economically meaningful reduction in firm value (as measured by Tobin’s Q). The authors also found “evidence that staggered boards bring about, and not merely reflect, an economically significant reduction in firm value” (Journal of Financial Economics, 2005).
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We believe investors increasingly favor requiring annual elections for all directors. The Council of Institutional Investors, the California Public Employees’ Retirement System, and Institutional Shareholder Services have supported this reform. According to the Investor Responsibility Research Center, a majority of shareholders at 74 companies voted in favor of annual director elections in 2005, and a record 44 companies proposed to repeal their classified board structure last year.
In our opinion, electing all directors annually is one of the best methods available to shareholders to ensure that the Company will be managed in a manner that is in the best interest of shareholders. We therefore urge our fellow shareholders to support this reform.”
The Board recommends that you vote AGAINST the proposal submitted by the AFL-CIO for the following reasons:
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| • | A majority of shareholders voted in favor of a similar proposal submitted by the AFL-CIO at last year’s Annual Meeting. The Board, however, believes shareholders voting in favor of the proposal may not have realized the proposal was intended to pressure the Company into adopting policies being promoted by union officials that would be detrimental to the Company and its shareholders and employees.See Shareholder Proposals and Company’s Statements in Opposition — Introduction. |
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| • | A classified board structure is an important protection for shareholders in a hostile takeover situation because it allows the Company time to negotiate with a potential acquirer, to consider alternative proposals and to maximize shareholder value. |
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| • | The Board continues to believe the classified structure improves its ability to protect shareholder interests and the Company’s long-term value. |
Our current system of electing directors by classes has been in effect since we became a public company in 2001. Under this system, the shareholders elect approximately one-third of our directors each year. Electing directors for staggered three-year terms ensures that a majority of directors will always be familiar with the Company’s complex, global operations. Staggered elections also enable new directors to gain access over time to the knowledge and experience of continuing directors, thereby enhancing their familiarity with the Company’s businesses and strategies. This, in turn, promotes the continuity and stability of Board-formulated policies and the Company’s ability to execute its long-term strategies. In view of these and other important shareholder benefits, nearly 60% of all public companies in the United States, including 53% of S&P 500 companies and 65% of S&P MidCap 400 companies, continue to have classified board structures.
The AFL-CIO’s supporting statement implies that the Company’s performance is adversely impacted by its classified board structure. This, however, does not accord with the facts. Since the Company’s initial public offering in 2001, our shareholder value has increased by more than 500%, and our market capitalization has increased by more than $10 billion. In 2005 alone, our shareholders received a 105% total return and Peabody Energy was ranked among the 10 best performing “large-cap” stocks in the world. The Company has created superior value for its shareholders since its initial public offering, significantly outperforming both its peer group and the broader market indices.SeeStock Performance Graph on page 42 of this Proxy Statement. Furthermore, as a testament to our shareholder focus and strong governance practices, the Company was recently recognized byInstitutional Investormagazine as a finalist among “America’s Most Shareholder-Friendly Companies.”
The Board of Directors continues to believe that the classified structure improves its ability to protect the interests of the shareholders and the long-term value of the Company. Importantly, the classified structure allows directors to make sound long-term strategic decisions, rather than
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focusing on the short-term. Staggered terms also encourage those who might seek to take control of the Company to negotiate with the Board, which enables the Board to better protect shareholder interests. Because a takeover attempt involving the replacement of directors requires the span of at least two annual meetings, the Board would have more time and leverage to review a takeover proposal, consider alternative proposals and make recommendations to the shareholders. Although the classified structure enhances a board’s ability to negotiate favorable terms in connection with unfriendly or unsolicited proposals, it does not preclude takeover offers.
The Board also believes that directors elected to classified three-year terms are no less accountable to shareholders than they would be if elected annually. The same standards of performance and responsibility apply regardless of length of term of service. Shareholders also have the opportunity to express their views regarding board performance and composition by replacing directors and electing alternate nominees for the class of directors to be elected each year. For the foregoing reasons, the Board of Directors believes that the benefits of the classified board do not come at the cost of director accountability.
The existence of a classified board also enhances the independence of non-executive directors. By providing directors with longer assured terms, directors have the latitude to make decisions which may initially be unpopular but which are, in fact, in the best interests of the Company and the shareholders.
The Board of Directors takes the views of its shareholders seriously and recognizes that a significant number of shares that were voted supported a similar proposal presented at the annual meeting in 2005. As a result, in connection with the Board’s consideration of this year’s proposal, the Board consulted with outside corporate governance experts, reviewed trends in shareholder voting, considered institutional investor concerns and factored in other shareholder considerations. After a thorough review, the Board concluded that the classified board continues to be in the best interests of the Company and our shareholders.
The Board recommends that you vote “AGAINST” the proposal submitted by the AFL-CIO.
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ITEM 7 — | “WATER USAGE” REPORT |
This proposal was submitted by the Sierra Club, 85 Second Street, Second Floor, San Francisco, California 94105. The Sierra Club has represented that it is the beneficial owner of 76 shares of Common Stock and has advised the Company that it intends to submit the following proposal at the Company’s 2006 Annual Meeting of Shareholders:
“Whereas, when the United States Congress passed the Clean Water Act in 1972 it did so with the expectation that toxic releases to waters would be eliminated. The law also created a system to move towards achieving health and water quality-based standards that would create waters that would be safe enough for activities such as fishing and swimming. The Act also prohibits potentially harmful spills of oil and certain hazardous substances; and
Whereas the United Nations General Assembly has proclaimed 2005 to 2015 as the International “Water for Life’ Decade and has declared that water is essential to life and crucial for sustainable development and the preservation of our natural environment; and
Whereas people and wildlife have the right to ample supplies of clean water for drinking, livelihood, recreation and habitat; and
Whereas Peabody is under investigation by the Illinois Attorney General over alleged water pollution on the Coal Eagle no 2 mine site in Gallatin County, Illinois where coal mine refuse, and
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other related wastes at Eagle No. 2 contain such inorganic chemicals, including, but not limited to: chlorides, manganese, total dissolved solids, sulfates, and iron, which are believed to have leached into the groundwater and off-site; and
Whereas Peabody proposes drawing up to 30 million gallons of water from Illinois’ Kaskaskia River for cooling purposes at its proposed Prairie State Generating Station in Washington County, an amount which could adversely impact water quality and river flow; and
Whereas downstream Illinois communities rely on the Kaskaskia River for drinking water, transportation and recreation; and
Whereas there are cost-effective and commercially available alternate cooling technologies for coal-fired power plants already in use in other states and other countries, such as dry cooling systems, that would eliminate the need to remove millions of gallons of Kaskaskia River water every day; and
Whereas, Peabody Western Coal Company (PWCC) has been pumping an average of 1.3 billion gallons of precious groundwater per year from the Black Mesa’s Navajo Aquifer for coal mining and pipe line operations in Arizona; and
Whereas according Natural Resources Defense Council, water levels have decreased in some wells by more than 100 feet and discharge has dropped by more than 50% in the majority of monitored Navajo Aquifer springs; and
Whereas PWCC should consider alternative methods to transport coal rather than relying upon ground water;
Therefore the shareholders resolve that Peabody prepare a report detailing how the company is responding to rising regulatory, competitive, public pressure to significantly reduce surface and groundwater withdrawals and water pollution from the company’s current and proposed power plant operations, coal mining sources, and coal combustion waste facilities.
The report should be provided by September 1, 2006, at a reasonable cost and omit proprietary information.”
The Board recommends that you vote AGAINST the Sierra Club’s proposal for the following reasons:
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| • | The Company is committed to the principles of environmental stewardship and complies with all laws and regulations governing its water use. |
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| • | The requested report is unnecessary as reports are already prepared annually for water use at Black Mesa, and will be required to be prepared annually for water use at Prairie State after operations begin. The Company also plans to publish a corporate and social responsibility report later this year outlining the Company’s views on a variety of social and environmental issues, including water use. |
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| • | The Board believes the proposal contains erroneous and incomplete information about the Company’s operations, and that preparing a report in response to such a proposal would not be in the best interests of the Company or its shareholders. |
Being a good steward of the environment is a central tenet of the Company’s mission statement. The Company applies the principles of sustainable development to its operations, integrating community and environmental stewardship in all aspects of planning, mining and reclamation. The Company’s approach to stewardship and conservation is recognized throughout the industry with
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more than 20 major awards in the past two years. In 2005, the U.S. Department of the Interior honored the Company’s operations with five of 12 major awards for stewardship including three prestigious Good Neighbor Awards in three of our four U.S. operating regions.
In support of its proposal, the Sierra Club provides erroneous and incomplete information about the Company’s operations. To set the record straight, the Company offers the following:
The Company operated the former Eagle 2 Mine near Shawneetown, Illinois from 1969 to 1993. Years ago, a difference of opinion arose with the local water conservancy district over the amount of sulfate present in the water. Although the measured levels for sulfate were consistent with those found in public water sources elsewhere across the state, the Company agreed to fund relocation of a well and implement a groundwater monitoring system. This resolved the matter to the satisfaction of the water district. The Company continues to monitor water quality in the area, and water quality remains good.
The Company’s Prairie State Energy Campus near Lively Grove, Illinois, is a planned 1,500 megawatt coal-fueled electricity generating station that will provide low-cost energy for more than 1.5 million families. Prairie State will use 21st Century technologies to protect the environment and be among the cleanest coal-fueled plants in America. Despite these benefits, the Sierra Club has actively opposed the project for years, relying on questionable studies and distorted facts.
In reality:
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| • | The Company met all regulatory requirements in obtaining a permit to use water from the Kaskaskia River; |
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| • | The Sierra Club expressed its views to the Illinois EPA about Prairie State’s proposed water use during the permitting process; and |
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| • | By issuing the permit, the Illinois EPA rejected the Sierra Club’s concerns and agreed that Prairie State’s water use will not significantly impact other water users. |
The Board believes this Proxy Statement is an inappropriate forum for the Sierra Club to reiterate its views about proposed water use at Prairie State, as the Sierra Club fully aired those views to the Illinois EPA during the permitting process and it has chosen to appeal the granting of the permit.
It should be noted that Prairie State would use less than one percent of the Kaskaskia River’s average daily flow primarily for the plant’s cooling process, using technology that will minimize water use and recycle water multiple times. While a dry cooling system was evaluated during the permitting process, the Illinois EPA determined that the technology was not suitable for use at Prairie State.
The Company has operated for decades in a responsible manner at Black Mesa. Indeed, in 2005 the U.S. Department of the Interior recognized the environmental and community practices at the Company’s Arizona mines, including Black Mesa, as among the most progressive in the nation, garnering awards for good neighbor initiatives that preserve cultural ways in addition to excellence in
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reclamation. Contrary to the Sierra Club’s contentions, the Company’s water use has not harmed the Navajo Aquifer.
Since operations first began at Black Mesa, eleven major independent studies have been performed to analyze the health of the Navajo Aquifer, a huge water resource spanning an area the size of Delaware. Time and again these studies find the aquifer is healthy and robust and that the Company’s water use over the life of operations will be less than one-tenth of one percent of the water stored. In addition, each year the U.S. Department of the Interior issues a report on the aquifer’s health based on data gathered by the U.S. Geological Survey. These reports consistently show the aquifer is healthy, that water quality is excellent and that the Company’s water usage has had minimal impact on springs and streams.
In support of its proposal, the Sierra Club relies on allegations about the aquifer made by the Natural Resources Defense Council (NRDC). These allegations, however, have been summarily rejected by the U.S. Department of the Interior in consecutive annual reports on the health of the Navajo Aquifer.
It should be noted that the Black Mesa mine temporarily suspended operations on December 31, 2005, and, consequently, the Company’s water use is currently significantly less than indicated by the Sierra Club.
The Board recommends that you vote “AGAINST” the Sierra Club’s proposal.
ADDITIONAL INFORMATION
Information About Shareholder Proposals
If you wish to submit a proposal for inclusion in next year’s Proxy Statementproxy statement and proxy, we must receive the proposal on or before December 2, 2006,November 26, 2008, which is 120 calendar days prior to the anniversary of this year’s mailing date. Upon timely receipt of any such proposal, the Companywe 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 the Company’sour by-laws, if you wish to nominate a director or bring other business before the shareholders at the 20072008 Annual Meeting without having your proposal included in next year’s proxy statement:
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| | • | You must notify the Corporate Secretary in writing at the Company’sour principal executive offices between January 5, 20077, 2009 and February 4, 2007;6, 2009; however, if the Company advanceswe advance the date of the meeting by more than 20 days or delays the date by more than 70 days, from May 5, 2007,8, 2009, 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 |
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| | • | Your notice must contain the specific information required by the Company’sour 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 the Company’sour by-laws without charge by writing to the Corporate Secretary at the address shown above or by accessing the Company’sour website
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(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 the Company’sour 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. The CompanyWe and some brokers household annual reports and proxy
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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 the Companyus that your broker or the Companywe 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 the Companynotify 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 the Company’sour annual reportand/or proxy statement, please notify your broker if your shares are held in a brokerage account or the Companynotify 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 the Companyus 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) 342-3100.342-3400.
Additional Filings
The Company’s
OurForms 10-K, 10-Q, 8-K10-K,10-Q,8-K and all amendments to those reports are available without charge through the Company’sour website on the Internet as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. They may be accessed at the Company’sour 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 35 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
The Company is
We are paying the cost of preparing, printing and mailing these proxy materials. The Company hasWe have engaged Georgeson Shareholder Communications Inc. to assist in distributing proxy materials, soliciting proxies and in performing other proxy solicitation services for a fee of $9,500$10,500 plus theirout-ofout-of-pocket-pocket expenses. Proxies may be solicited personally or by telephone by our regular employees of the Company without additional compensation as well as by employees of Georgeson. The CompanyGeorgeson Inc. 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.
The CompanyWe will provide to any shareholder, without charge and upon written request, a copy (without exhibits unless otherwise requested) of the Company’sour Annual Report onForm 10-K for the Fiscal Year Ended December 31, 20052007 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) 342-3100.342-3400.
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| By Order of the Board of Directors, Jeffery L. Klinger Vice President, General Counsel 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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PEABODY ENERGY CORPORATION 2008 Management Annual Incentive Compensation Plan 1. Purpose. The purpose of the Peabody Energy Corporation 2008 Management Annual Incentive Compensation Plan (the “Plan”) is to provide key employees of Peabody Energy Corporation (the “Company”) and its affiliates with annual performance-based incentive compensation. The Plan is intended to focus the interests of eligible executive officers on, and reward for the achievement of, the key measures of the Company’s success and increasing shareholder value. 2. Compliance with Section 162(m). 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 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”shall have the meaning ascribed to such term in Section 8. “Participant” shall mean 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 Section 162(m) of the Internal Revenue Code of 1986, as amended, or any successor provision thereto, and any regulations, revenue ruling or other guidance promulgated and in effect thereunder. 4. Eligibility. The Participants in the Plan for any Performance Period shall be limited to officers of the Company or of an affiliate who are (a) subject to Section 16 of the Securities Exchange Act of 1934, as amended, and (b) designated by the Committee, individually or by class, to be Participants for such Performance Period.
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5. Awards. (a) Setting the Performance Goal. The Committee shall establish the Performance Goal for each Performance Period which, if achieved, shall determine the maximum amount, 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 by the Committee no later than 90 days after the beginning of the Performance Period to which the Performance Goal pertains (and in the case of a Performance Period of less than one year, no later than the date 25% of the Performance Period has elapsed) and while the attainment of the Performance Goal is substantially uncertain. (iii) The 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 any such Award. | | | | (b) | Performance Measures. |
(i) The Performance Goal shall be based upon one or more of the following (each a“Performance Measure”), which may be applied on a pre-tax or post-tax basis: • 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); | | | | | Jeffery L. Klinger• | Operating profit; | | | | Vice President, General Counsel• | 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 Corporate Secretarytotal 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; |
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| | | | • | 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 |
Annex A(ii) Any one or more 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 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 in the form of cash, in a single lump sum payment;Corporate Governance Principleprovided,however, that the Committee may determine in its discretion that all or a portion 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”), but no later than March 15 of the calendar year immediately following the calendar year in which the Performance Period ends;provided, that except to the extent expressly otherwise required by a written agreement by and between the Participant and the Company, that the Participant is employed by the Company on Majority Votingthe Payment Date. Except to the extent expressly otherwise required by a
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written agreement by and between the Participant and the Company, if a Participant is not employed with the Company on the Payment Date, such Award shall be forfeited. 8. Plan Administration. (a) The BoardPlan shall be administered by the Compensation Committee of Directors desires to clarify its position regarding the actions to be taken when a director receives more “withheld” than “for” votes in an election. Such a vote sends a message that clearly warrants the Board’s careful attention. At the same time, the Board or such other committee, determined by the Board, which shall consist of Directors recognizes that a numbertwo or more directors of special interest groups are promoting the majority-voting standardCompany, all of whom qualify as a means“outside directors” within the meaning of Section 162(m) (the“Committee”). (b) Subject to wage corporate campaignsand consistent with the provisions of 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 detrimental activities that are not ininstrument entered into or relating to an Award under the best interestPlan; 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 the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan. Any action of the Committee with respect to the Plan shall be final, conclusive and binding on all shareholders. Certain corporations in heavy industry,persons, including the Company, receive heightened attentionits affiliates, any Participant, any person claiming any rights under the Plan from these special interest groups,or through any Participant, and shareholders 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 Boardtaking of Directors believes that special measures are warranted to protect against their coercive activities.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. In (c) The Committee may delegate its authority under the Plan to an uncontested electionofficer of Directors (i.e.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 effectiveunless (i) such amendment is approved by
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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 election whereAward under the Plan, and there is no obligation of uniformity of treatment of Participants under the Plan. (b) Non-transferability. Awards under the Plan may not be assigned, alienated, pledged, hypothecated or otherwise disposed of, including assignment pursuant to a domestic relations order, during the time in which the requirement of continued employment or attainment of performance objectives has not been achieved. (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. (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 businessand/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. Nothing contained in the Plan shall prevent the Company or any affiliate from adopting other or additional compensation arrangements for its employees. (h) Severability. If any provision of the 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 Plan shall be construed as if such invalid or unenforceable provision were omitted. (i) Headings. The headings contained in the Plan are for reference purposes only nominees are those recommendedand shall not affect the meaning or interpretation of the Plan.
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The undersigned hereby certifies that the Plan was duly adopted by the Board by unanimous written consent in lieu of Directors)a meeting on , any nominee for Director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election (a “Withhold Vote”) will promptly tender his or her resignation to the Chairman of the Board following certification of the shareholder vote.2008. 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 Nominating and Corporate Governance Committee will consider all factors deemed relevant by its members including, without limitation, the stated reasons why shareholders “withheld” votes for election from such Director, the length of service and qualifications of the Director whose resignation has been tendered, the Director’s contributions to the Company, the Company’s Corporate Governance Guidelines, and whether any special interest groups conducted a campaign involving the election of directors to further the interests of such group, as opposed to the best interests of all shareholders. The Board will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the shareholders’ meeting where the election occurred. In considering the Nominating and Corporate Governance Committee’s recommendation, the Board will consider the factors considered by the Nominating and Corporate Governance Committee and such additional information and factors the Board believes to be relevant.
To the extent that one or more Directors’ resignations are accepted by the Board, the Nominating and Corporate Governance Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.
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Any Director who tenders his or her resignation pursuant to this provision will not participate in the Nominating and Corporate Governance Committee recommendation or Board consideration regarding whether or not to accept the tendered resignation. If a majority of the members of the Nominating and Corporate Governance Committee receive Withhold Votes at the same election, then the independent Directors who are on the Board who did not receive Withhold Votes in such election (or who were not standing for election) will appoint a Board committee amongst themselves solely for the purpose of considering the tendered resignations and will recommend to the Board whether to accept them or reject them. This Board committee may, but need not, consist of all of the independent Directors who did not receive Withhold Votes in that election.
This corporate governance guideline will be summarized or included in each proxy statement relating to an election of directors of the Company.
A-1
ANNUAL MEETING OF SHAREHOLDERS OF PEABODY ENERGY CORPORATION Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible. ê Please detach along perforated line and mail in the envelope provided. ê | | | | | | | | PROXYTHE BOARD OF DIRECTORS RECOMMENDS VOTING INSTRUCTIONS“FOR” ITEMS 1, 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
| x | |
MAIL — Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- OR -
TELEPHONE — Call toll-free1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone
and follow the instructions. Have your proxy card
available when you call.
- OR -
INTERNET — Access “www.voteproxy.com” and
follow the on-screen instructions. Have your proxy
card available when you access the web page.
| | | | | | | | COMPANY NUMBER
| | | | | | ACCOUNT NUMBER
| | | | | | | | | | | | | | | | | | |
You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM
Eastern Time the day before the cut-off or meeting date.
â Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet.â
n
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEMS 1 THROUGH 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” ITEMS 4 THROUGH 7.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
| 1. | | Election of Directors:Director: The undersigned hereby GRANTS authority to | | | | | | elect the following nominees:nominee: (see Board recommendation below): | | | |
| | NOMINEE: | | FOR | | WITHHOLD | | | | | | | Sandra Van Trease | | o | | o | | | | | | | | | | | | | | | | | | | | | NOMINEES: | o | | FOR ALL NOMINEES | | m Gregory H. Boyce
m William E. James | o | | WITHHOLD AUTHORITY
FOR ALL NOMINEES | | m Robert B. Karn III
m Henry E. Lentz
m Blanche M. Touhill | | | | | | | o | | FOR ALL EXCEPT
(See instructions below) | | |
| | | | | | RECOMMENDATION: | | The Board recommends a votevoting“For”all Nominees. |
| | | INSTRUCTION:the Nominee. | | 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:˜ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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
Recommends “For"
| | | | | | | | | | | | | | The Board | | | | | | Recommends “For” | | | | | | | ê | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | 2. | | Ratification of Appointment of Independent Registered Public Accounting Firm. | | o | | o | | o | | | | | | | | | The Board | | 3. | | Approval of Increase in Authorized Shares of Common Stock. | | o | | o | | o |
The Board
Recommends “Against”
| | | | | Recommends “For” | | | | | | ê | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | 3. | | Approval of a proposal to Declassify the Board of Directors. | | o | | o | | o | | | | | The Board | | | | | | Recommends “For” | | | | | | ê | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | 4. | | Shareholder Proposal regarding FormationApproval of Special Committee. | | o | | o | | o | 5. | | Shareholder Proposal regarding Majority Voting. | | o | | o | | o | 6. | | Shareholder Proposal regarding Board Declassification. | | o | | o | | o | 7. | | Shareholder Proposal regarding Water Use.the 2008 Management Annual Incentive Compensation Plan. | | o | | o | | o | | | | | | | | | | | If you vote over the Internet or by telephone, please do not mail your cardcard. | | | | | | | | | | | | MARK HERE IF YOU PLAN TO ATTEND THE MEETING.o
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MARK HERE IF YOU PLAN TO ATTEND THE MEETING.o | | | | | | | | | | | | | | | | Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | | -->
| | | | | | | | | | | | | | | | | Signature of Shareholder | | | | Date: | | | | Signature of Shareholder | | | | Date: | | |
| | | | | | | |
| | Note: | | Please sign exactly as your name or names 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. | n | | n |
PEABODY ENERGY CORPORATION n
Annual Meeting of Shareholders
Friday, May 5, 2006, 10:00 A.M.
Ritz-Carlton Hotel
100 Carondelet Plaza
Clayton, Missouri 63105
If you plan to attend the 2006 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 15, 2006, 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 your shares are registered in your own name, you will need to present a 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 May 5, 20068, 2008 This proxy is solicited on behalf of the Board of Directors The undersigned hereby constitutes and appoints Gregory H. Boyce,Blanche M. Touhill, Alexander C. Schoch and Jeffery L. Klinger, and Richard A. Navarre, 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 5, 20068, 2008 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 nomineesnominee listed in Item 1, or any other person selected by the Board if anysuch nominee is unable to serve, FOR ratification of Ernst & Young LLP as Peabody’s independent registered public accounting firm for 20062008 (Item 2), FOR approvalthe proposal to declassify the Company’s Board of an increase inDirectors (Item 3) and FOR the number of shares of Common Stock authorized for issuance byproposal to approve the Company from 400,000,000 to 800,000,000 sharesCompany’s 2008 Management Annual Incentive Compensation Plan (Item 3), and AGAINST the shareholder proposals included as Items 4 through 7.4). 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 or postponements thereof. IMPORTANT —– This proxy/voting instruction card must be signed and dated on the reverse side.
ANNUAL MEETING OF SHAREHOLDERS OF PEABODY ENERGY CORPORATION May 5, 20068, 2008 | | | | | | | PROXY VOTING INSTRUCTIONS | | |
Please date,MAIL- Date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
- or - TELEPHONE- Call toll-free1-800-PROXIES
(1-800-776-9437) from anytouch-tonetelephone and follow the instructions. Have your proxy card available when you call. - or - INTERNET- Access “www.voteproxy.com” and follow theon-screeninstructions. Have your proxy card available when you access the web page. | | | | | | |
COMPANY NUMBER
| | | | | |
ACCOUNT NUMBER
| | | | | |
| | | | | |
You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM Eastern Time the day before the cut-off or meeting date. âê Please detach along perforated line and mail in the envelope provided.providedIF you are not voting via telephone or the Internet. âê
n | | | | | | | THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” ITEMS 1, 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE | x | |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEMS 1 THROUGH 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” ITEMS 4 THROUGH 7.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
| | | | | | | | | | | | | | | | | | | | | 1. | | Election of Directors:Director: The undersigned hereby GRANTS authority to elect the following nominees:nominee: (see Board recommendation below): | | | |
| | NOMINEE: | | | | | | | | | | | | | | | | | | Sandra Van Trease | | FOR | | WITHHOLD | | | | | | | | o | | o | | | | | | | | | | | | | | | | | | | | NOMINEES: | o | | FOR ALL NOMINEES | | ¡ Gregory H. Boyce
¡ William E. James | o | | WITHHOLD AUTHORITY
FOR ALL NOMINEES | | ¡ Robert B. Karn III
¡ Henry E. Lentz
¡ Blanche M. Touhill | | | | | | | o | | FOR ALL EXCEPT
(See instructions below) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RECOMMENDATION: | | The Board recommends a votevoting“For”all Nominees. |
| the Nominee. | | | INSTRUCTION: | | 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 |
| | | | | | | | 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
Recommends “For"
| | | | | | | | | | | | | | The Board | | | | | | Recommends “For” | | | | | | | ê | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | 2. | | Ratification of Appointment of Independent Registered Public Accounting Firm. | | o | | o | | o | | | | | | | | | The Board | | 3. | | Approval of Increase in Authorized Shares of Common Stock. | | o | | o | | o |
The Board
Recommends “Against”
| | | | | Recommends “For” | | | | | | ê | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | 3. | | Approval of a proposal to Declassify the Board of Directors. | | o | | o | | o | | | | | The Board | | | | | | Recommends “For” | | | | | | ê | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | 4. | | Shareholder Proposal regarding FormationApproval of Special Committee.the 2008 Management Annual Incentive Compensation Plan | | o | | o | | o | 5. | | If you vote over the Internet or by telephone, please do not mail your card. | | Shareholder Proposal regarding Majority Voting. | | | o | | o | | o | 6. | | Shareholder Proposal regarding Board Declassification. | | MARK HERE IF YOU PLAN TO ATTEND THE MEETING.o
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| | o | | o | | o | 7. | | Shareholder Proposal regarding Water Use. | | o | | o | | o | | Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | | -->
MARK HERE IF YOU PLAN TO ATTEND THE MEETING.o
| | | | | | | | | | | | | | | | | Signature of Shareholder | | | | Date: | | | | Signature of Shareholder | | | | Date: | | |
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| | Note: | | Please sign exactly as your name or names 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. | | n | | n |
PEABODY ENERGY CORPORATION Annual Meeting of Shareholders
Tuesday, 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 24, 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 your shares are registered in your own name, you will need to present a 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. n PROXY
PEABODY ENERGY CORPORATION Proxy/Voting Instruction Card for Annual Meeting of Shareholders to be held on May 5, 2006
8, 2008 This proxy is solicited on behalf of the Board of Directors The undersigned hereby constitutes and appoints Gregory H. Boyce,Blanche M. Touhill, Alexander C. Schoch and Jeffery L. Klinger, and Richard A. Navarre, 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 5, 20068, 2008 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 nomineesnominee listed in Item 1, or any other person selected by the Board if anysuch nominee is unable to serve, FOR ratification of Ernst & Young LLP as Peabody’s independent registered public accounting firm for 20062008 (Item 2), FOR approvalthe proposal to declassify the Company’s Board of an increase inDirectors (Item 3) and FOR the number of shares of Common Stock authorized for issuance byproposal to approve the Company from 400,000,000 to 800,000,000 sharesCompany’s 2008 Management Annual Incentive Compensation Plan (Item 3), and AGAINST the shareholder proposals included as Items 4 through 7.4). 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 or postponements thereof. IMPORTANT —– This proxy/voting instruction card must be signed and dated on the reverse side. | |
