10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2009

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                  to                 

Commission File Number 001-32331

Foundation Coal Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	42-1638663
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

999 Corporate Boulevard, Suite 300 Linthicum Heights, Maryland	21090
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (410) 689-7500

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨ Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

There were 44,688,759 shares of common stock outstanding on April 30, 2009.

TABLE OF CONTENTS

		Page
	PART I—FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
	Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	3
	Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three Months Ended March 31, 2009 and 2008	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008	5
	Notes to Consolidated Financial Statements	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4.	CONTROLS AND PROCEDURES	35
	PART II—OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	35
ITEM 1A.	RISK FACTORS	35
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	36
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	36
ITEM 5.	OTHER INFORMATION	36
ITEM 6.	EXHIBITS	36

2

PART I – FINANCIAL INFORMATION

Unless the context otherwise indicates, as used in this Form 10-Q the terms “we,” “our,” “us” and similar terms refer to Foundation Coal Holdings, Inc. and its consolidated subsidiaries.

ITEM 1. FINANCIAL STATEMENTS.

Foundation Coal Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

	March 31,         2009		December 31,     2008
	(Unaudited)
ASSETS
Current assets:
Cash	$	69,553	$	42,326
Trade accounts receivable, net		94,000		135,354
Inventories, net		67,502		56,508
Deferred income taxes		29,255		29,302
Prepaid expenses		26,595		28,517
Other current assets		5,233		5,676
Total current assets		292,138		297,683
Owned surface lands		53,464		51,802
Plant, equipment and mine development costs, net		696,061		685,609
Owned and leased mineral rights, net		873,135		888,514
Coal supply agreements, net		6,009		6,910
Other noncurrent assets		36,757		37,590
Total assets	$	1,957,564	$	1,968,108
LIABILITIES
Current liabilities:
Current portion of long-term debt	$	25,125	$	16,750
Trade accounts payable		50,864		52,595
Accrued expenses and other current liabilities		177,506		202,752
Total current liabilities		253,495		272,097
Long-term debt		574,660		583,035
Deferred income taxes		648		-
Coal supply agreements, net		3,343		4,268
Postretirement benefits		539,771		533,166
Other noncurrent liabilities		366,488		351,181
Total liabilities		1,738,405		1,743,747
Commitments and contingencies (Note 16)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 100.0 million shares authorized, 47.2 million shares issued and 44.7 million shares outstanding at March 31, 2009; 47.0 million shares issued and 44.5 million shares outstanding at December 31, 2008		472		470
Additional paid-in capital		317,933		316,567
Retained earnings		82,644		89,329
Accumulated other comprehensive loss		(92,014)		(93,378)
Treasury stock, at cost: 2.5 million shares at March 31, 2009; 2.5 million shares at December 31, 2008		(89,876)		(88,627)
Total stockholders’ equity		219,159		224,361
Total liabilities and stockholders’ equity	$	1,957,564	$	1,968,108

The accompanying notes are an integral part of these consolidated financial statements.

3

Foundation Coal Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited, dollars in thousands, except per share data)

	Three Months Ended March 31,
	2009		2008
Revenues:
Coal sales	$	395,324	$	406,946
Other revenue		10,336		5,358
Total revenues		405,660		412,304
Costs and expenses:
Cost of coal sales (excludes depreciation, depletion and amortization)		331,672		315,473
Selling, general and administrative expenses (excludes depreciation, depletion and amortization)		17,456		19,791
Accretion on asset retirement obligations		2,957		2,557
Depreciation, depletion and amortization		49,517		53,265
Amortization of coal supply agreements		(25)		125
Employee termination costs		1,387		-
Income from operations		2,696		21,093
Other income (expense):
Interest expense		(9,150)		(12,914)
Interest income		147		443
(Loss) income before income tax benefit (expense) and equity in losses of affiliates		(6,307)		8,622
Income tax benefit (expense)		2,103		(2,267)
Equity in losses of affiliates		(249)		(185)
Net (loss) income		(4,453)		6,170
Other comprehensive (loss) income:
Adjustments to unrecognized gains and losses and amortization of employee benefit plan costs, net of tax benefit of $759 in 2009 and tax expense of $20 in 2008		(1,256)		613
Unrealized (loss) gain on financial swaps, net of tax benefit of $573 in 2009 and tax expense of $365 in 2008		(2,293)		577
Reclassification of unrealized loss on financial swaps, net of tax expense of $1,228 into cost of coal sales		4,913		-
Comprehensive (loss) income	$	(3,089)	$	7,360
Basic (loss) earnings per common share	$	(0.10)	$	0.14
Diluted (loss) earnings per common share	$	(0.10)	$	0.13
Weighted-average shares-basic		44,582,077		45,009,728
Weighted-average shares-diluted		44,582,077		46,259,336
Dividends declared per share	$	0.05	$	0.05

The accompanying notes are an integral part of these consolidated financial statements.

4

Foundation Coal Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)

	Three Months Ended             March 31,
	2009		2008
Operating activities:
Net (loss) income	$	(4,453)	$	6,170
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Accretion on asset retirement obligations		2,957		2,557
Depreciation, depletion and amortization		49,492		53,390
Amortization of deferred financing costs		467		454
Gain on sale of assets		(120)		(84)
Non-cash stock compensation		2,749		6,134
Excess tax benefit from stock-based awards		-		(1,664)
Deferred income taxes		(665)		(2,398)
Asset retirement obligation payments		(753)		(322)
Equity in losses of affiliates		249		185
Other		202		643
Changes in operating assets and liabilities:
Trade accounts receivable, net		41,354		(24,747)
Inventories, net		(10,994)		(145)
Prepaid expenses and other current assets		2,184		8,815
Other noncurrent assets		91		(43)
Trade accounts payable		(1,732)		4,632
Accrued expenses and other current liabilities		(12,679)		(8,067)
Noncurrent liabilities		17,195		10,018
Net cash provided by operating activities		85,544		55,528
Investing activities:
Purchases of property, plant, equipment and mine development costs		(54,858)		(35,252)
Acquisition of mineral rights under federal lease		-		(36,108)
Purchases of equity-method investments		-		(9,799)
Proceeds from disposition of property, plant and equipment		22		254
Net cash used in investing activities		(54,836)		(80,905)
Financing activities:
Payment of cash dividends		(2,232)		(2,253)
Proceeds from issuance of common stock		-		950
Excess tax benefit from stock-based awards		-		1,664
Other		(1,249)		(1,924)
Net cash used in financing activities		(3,481)		(1,563)
Net increase (decrease) in cash and cash equivalents		27,227		(26,940)
Cash and cash equivalents at beginning of period		42,326		50,071
Cash and cash equivalents at end of period	$	69,553	$	23,131
Supplemental cash flow information:
Cash paid for interest	$	12,955	$	16,422
Cash paid for income taxes, net of refunds	$	214	$	(282)

The accompanying notes are an integral part of these consolidated financial statements.

5

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

(1) Basis of Presentation of Consolidated Financial Statements

The accompanying interim consolidated financial statements of Foundation Coal Holdings, Inc. and Subsidiaries (the “Company”) are unaudited and prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America as long as the statements are not misleading. In the opinion of management, these interim consolidated financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in its Annual Report on Form 10-K for the twelve months ended December 31, 2008, filed March 2, 2009.

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to coal reserves that are the basis for future cash flow estimates and units-of-production depreciation, depletion and amortization calculations; environmental and reclamation obligations; asset impairments; postemployment, postretirement and other employee benefit liabilities; valuation allowances for deferred income taxes; income tax provision calculations; reserves for contingencies and litigation; and the fair value and accounting treatment of certain financial instruments. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates. In addition, different assumptions or conditions could reasonably be expected to yield different results.

The operating results for the three months ended March 31, 2009 may not necessarily be indicative of the results to be expected in any other quarter or for the twelve months ended December 31, 2009.

(2) Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS No. 107-1 and APB 28-1 Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS No. 107-1 and APB No. 28-1”). FSP FAS No. 107-1 and APB No. 28-1 require fair value disclosures in both interim and annual financial statements in order to provide more timely information about the effects of current market conditions on financial instruments. FSP FAS No. 107-1 and APB No. 28-1 are effective for interim and annual periods ending after June 15, 2009. The implementation of these standards will have no impact on the amounts recorded in the Company’s consolidated financial statements; the standards will require additional disclosure in the Company’s notes to the consolidated financial statements.

In December 2008, the FASB issued FSP No. 132(R)-1 Employers’ Disclosures about Postretirement Benefit Plan Assets (“FSP FAS No. 132(R)-1”). This FSP amends Statement of Financial Accounting Standards (“SFAS”) No. 132 (revised 2003), Employers’ Disclosures about Pension and Other Postretirement Benefits, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The additional disclosure requirements under this FSP include expanded disclosures about an entity’s investment policies and strategies, the categories of plan assets, and concentrations of credit risk and fair value measurements of plan assets. FSP FAS No. 132(R)-1 will be effective for fiscal years ending after December 15, 2009. The implementation of this standard will have no impact on the amounts recorded in the Company’s consolidated financial statements; the Company will include the additional disclosures in the notes to the Company’s consolidated financial statements for the year ending December 31, 2009.

In June 2008, the FASB issued FSP Emerging Issues Task Force 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP No. 03-6-1”). This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of both basic and diluted earnings per share. FSP No. 03-6-1 is effective for fiscal years beginning after December 15, 2008 and interim periods within those years. All prior year EPS data presented is required to be adjusted retrospectively. The Company adopted FSP No. 03-6-1 on January 1, 2009 and the implementation of this standard did not have a material impact on the Company’s consolidated financial statements.

6

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). This standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company expects to adopt SFAS No. 162 when it becomes effective and does not believe it will have a material impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS No. 161”). This standard amends and expands the disclosure requirements of SFAS No. 133 and establishes, among other things, the disclosure requirements for derivative instruments and for hedging activities. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. The Company adopted the provisions of SFAS No. 161 on January 1, 2009. The implementation did not have an impact on the amounts recorded in the Company’s consolidated financial statements; the standard required additional disclosures in the notes to the Company’s consolidated financial statements. See Note 19 for SFAS No. 161 information and disclosures.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS No. 160”). This standard outlines the accounting and reporting for ownership interest in a subsidiary held by parties other than the parent. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company adopted the provisions of SFAS No. 160 on January 1, 2009 and the implementation did not have an impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS No. 141(R)”). This standard establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. This statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS No.141(R) is effective for acquisitions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS No. 141(R) changes the accounting after the acquisition date for reductions in valuation allowances established in purchase price allocation related to an acquired entity’s deferred assets; including those relating to acquisitions prior to the adoption of SFAS No. 141(R). Effective from the date of adoption of SFAS No. 141(R), the effects of reductions in valuation allowances established in purchase accounting that are outside of the measurement period are reported as adjustments to income tax expense. The Company adopted the provisions of SFAS No. 141(R) on January 1, 2009. The implementation did not have an impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 clarifies how to measure fair value as required or permitted under other accounting pronouncements but does not require any new fair value measurements. SFAS No. 157 was originally effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. On February 12, 2008, the FASB issued FSP No.157-2, Effective Date of FASB Statement No. 157 (“FSP No. 157-2”). FSP No. 157-2 was effective upon issuance and delayed the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis or at least once a year, to fiscal years beginning after November 15, 2008. The Company adopted the provisions of SFAS No. 157 on January 1, 2008 and the Company had no required fair value measurements for non-financial assets and liabilities in the first quarter of 2009 and no required additional disclosures upon adoption.

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Inputs are either observable or unobservable and refer broadly to the assumptions that are used in pricing assets or liabilities. Observable inputs are reflective of market data and unobservable inputs reflect the entity’s own assumptions about pricing assets or liabilities. As defined below, the fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS No. 157 are further described as follows:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

7

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

Level 2	Quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability, or by market-corroborated inputs;
Level 3	Unobservable inputs for the assets or liabilities in which the fair value measurement is supported by little or no market activity but reflects the best information available to the reporting entity and may include the entity’s own data.

These levels are not necessarily an indication of the risk or liquidity associated with the financial assets or liabilities disclosed.

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy at March 31, 2009. As required by SFAS No. 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Level 1	Level 2		Level 3
Derivative instruments	—	$	26,680	—

The Company’s derivative instruments are reported at fair value, which are derived using valuation models commonly used for derivatives. Where possible, the Company verifies the values produced by such models to market prices. Valuation models require a variety of inputs, including contractual terms, market fixed prices, inputs from forward price yield curves, notional quantities, measures of volatility and correlations of such inputs. The inputs in such valuation models do not involve significant management judgment. Fair value measurement of such instruments is typically classified within Level 2 of the fair value hierarchy.

In October 2008, the FASB issued FSP FAS No.157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP No. 157-3”). FSP No. 157-3 clarifies the application of SFAS No. 157 in determining the fair value of a financial asset when the market for that financial asset is not active. FSP No. 157-3 became effective upon issuance, including interim periods for which financial statements have not been issued. The Company adopted FSP No.157-3 upon issuance.

In April 2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP No. 157-4”). FSP No. 157-4 provides additional guidance on factors to consider in estimating fair value when there has been a significant decrease in market activity for a financial asset. FSP No. 157-4 is effective for interim and annual periods ending after June 15, 2009. The Company does not expect the implementation of this standard to have a material impact on its consolidated financial statements.

(3) Inventories

Inventories consisted of the following:

	March 31,         2009		December 31,         2008
Saleable coal	$	35,063	$	21,013
Raw coal		2,588		4,839
Materials and supplies		38,103		38,764
		75,754		64,616
Less materials and supplies reserve for obsolescence		(8,252)		(8,108)
	$	67,502	$	56,508

Saleable coal represents coal stockpiles ready for shipment to a customer. Raw coal represents coal that requires further processing prior to shipment.

8

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

(4) Prepaid Expenses

Prepaid expenses consisted of the following:

	March 31,         2009		December 31,     2008
Prepaid royalties	$	261	$	1,551
Prepaid longwall move expenses		10,069		6,487
Prepaid SO2 emission allowances		-		544
Prepaid taxes		7,933		9,071
Prepaid insurance		6,075		9,291
Other		2,257		1,573
	$	26,595	$	28,517

(5) Plant, Equipment, Mine Development Costs and Owned and Leased Mineral Rights

Plant, equipment, mine development costs and owned and leased mineral rights consisted of the following:

	March 31,         2009		December 31,     2008
Owned and leased mineral rights
Owned and leased mineral rights	$	1,291,326	$	1,291,326
Less accumulated depletion		(418,191)		(402,812)
	$	873,135	$	888,514
Plant, equipment and mine development costs
Plant, equipment and asset retirement costs	$	1,063,192	$	1,030,016
Mine development costs		76,870		70,922
Internal use software		38,358		38,082
Coalbed methane equipment and development costs		28,595		23,520
		1,207,015		1,162,540
Less accumulated depreciation and amortization:
Plant, equipment and asset retirement costs		(478,884)		(448,819)
Mine development costs		(9,498)		(8,179)
Internal use software		(15,469)		(14,164)
Coalbed methane equipment and development costs		(7,103)		(5,769)
		(510,954)		(476,931)
	$	696,061	$	685,609

In the first quarter of 2008, Foundation Wyoming Land Company, an indirect wholly owned subsidiary of the Company, was the successful bidder on a new federal coal lease adjacent to the western boundary of the Eagle Butte mine located north of Gillette, Wyoming. The Company’s lease bonus bid was $180,540, payable in five equal annual installments of $36,108. The Company made the first payment of $36,108 during the first quarter of 2008. The initial payment was capitalized as a component of Owned and leased mineral rights, net in the Consolidated Balance Sheets. Subsequent payments will be capitalized when paid. The lease became effective on May 1, 2008, and the four remaining annual installments will be paid on the annual anniversary dates of the lease. This federal coal lease contains an estimated 224.0 million tons of proven and probable coal reserves.

9

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

(6) Other Noncurrent Assets

Other noncurrent assets consisted of the following:

	March 31,         2009		December 31,     2008
Unamortized deferred financing costs	$	7,721	$	8,188
Advance mining royalties		1,876		1,848
Equity-method investments		8,993		9,232
Deferred income taxes, net		16,325		16,307
Other		1,842		2,015
	$	36,757	$	37,590

During the three months ended March 31, 2008, the Company acquired a 49% interest in the common stock of Target Drilling Inc. (“Target”), a privately-held contract drilling company, for $9,246. The Company has the ability to exercise significant influence over, but not control the operating activities of Target, and accordingly uses the equity method of accounting in accordance with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. The Company records its proportionate share of earnings or losses of Target in its Consolidated Statements of Operations and Comprehensive (Loss) Income under the caption Equity in losses of affiliates. The Company adjusts the carrying amount of its investment in Target for its share of earnings or losses of Target accordingly.

The Company performed a fair value analysis of the net tangible and intangible assets of Target in order to account for the difference in the cost of its investment and its underlying equity in the net assets that were reflected on the books of Target on the date of acquisition. The Company assigned its proportionate share of the difference between the historical cost of the identifiable tangible and intangible assets recorded on the books of Target and their respective fair values based on the fair value analysis. The differences assigned to the identifiable tangible and intangible assets, other than equity-method goodwill, are being amortized over their respective useful lives as a component of Equity in losses of affiliates. The differences assigned consisted of tangible assets of $2,315, intangible assets of $1,955 (excluding equity-method goodwill), equity-method goodwill of $3,826 and a deferred tax liability of $1,779.

(7) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	March 31,         2009		December 31,     2008
Wages and employee benefits	$	33,708	$	40,850
Postretirement benefits other than pension		24,429		24,429
Interest		3,604		9,011
Royalties		6,634		7,635
Taxes, other than income taxes		39,394		39,256
Asset retirement obligations(1)		5,052		5,595
Workers’ compensation		8,930		8,930
Accrued capital expenditures		10,137		18,893
Accrued derivatives(2)		26,680		28,877
Other		18,938		19,276
	$	177,506	$	202,752
(1)       See Note 12. (2)       See Note 19.

10

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

(8) Other Noncurrent Liabilities

Other noncurrent liabilities consisted of the following:

	March 31,         2009		December 31,     2008
Post employment benefits	$	4,801	$	4,931
Pension benefits		122,585		115,990
Workers’ compensation		22,973		23,396
Black lung reserves		21,768		20,806
Contract settlement accrual		3,759		4,555
Asset retirement obligations(1)		168,560		165,779
Deferred production tax		17,741		11,393
Deferred credits and other		4,301		4,331
	$	366,488	$	351,181
(1)       See Note 12.

(9) Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss, net of tax, consisted of the following at:

	March 31,         2009		December 31,     2008
Defined benefit pension, postretirement and other Company sponsored plans	$	(79,353)	$	(78,097)
Unrealized losses on cash flow hedges		(12,661)		(15,281)
Total	$	(92,014)	$	(93,378)

(10) Pension, Other Postretirement Benefit Plans and Pneumoconiosis

Components of Net Periodic Pension Costs

The components of net periodic benefit costs are as follows:

	Three Months Ended March 31,
	2009		2008
Service cost	$	1,950	$	1,575
Interest cost		3,605		3,118
Expected return on plan assets		(2,450)		(3,333)
Amortization of:
Prior service cost		43		(3)
Actuarial losses		1,702		38
Net expense	$	4,850	$	1,395

Components of Net Periodic Other Postretirement Benefit Plans Costs

The components of net periodic benefit costs are as follows:

	Three Months Ended March 31,
	2009		2008
Service cost	$	2,255	$	1,925
Interest cost		8,458		8,525
Net expense	$	10,713	$	10,450

The Company’s postretirement medical and life insurance plans are unfunded.

11

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

Components of Pneumoconiosis Costs

The components of net periodic benefit costs are as follows:

	Three Months Ended March 31,
	2009		2008
Service cost	$	280	$	293
Interest cost		422		353
Expected return on plan assets		(54)		(107)
Amortization of actuarial losses		157		14
Net expense	$	805	$	553

(11) Stock-Based Compensation

On July 30, 2004, the Company’s Board of Directors adopted the Foundation Coal Holdings, Inc. 2004 Stock Incentive Plan (the “Plan”), which is designed to assist the Company in recruiting and retaining key employees, directors and consultants. The Plan, which was amended and restated effective on May 22, 2008 upon shareholder approval, permits the Company to grant its key employees, directors and consultants nonqualified stock options (“options”), stock appreciation rights, restricted stock or other stock-based awards. The awards under the Plan may be granted at a fair value or exercise price of no less than 100% of the fair market value of the Company’s common stock on the date of grant. The Plan is currently authorized for the issuance of awards for up to 5,978,483 shares of common stock. At March 31, 2009, 1,420,855 shares of common stock were available for grant under the Plan.

The Company has three types of stock-based awards outstanding: restricted stock units, restricted stock and options. Total compensation expense related to stock-based awards recognized in Selling, general and administrative expenses for the three months ended March 31, 2009 was $2,195, consisting of $1,657, $529 and $9 for restricted stock units, restricted stock and options, respectively. Total compensation expense related to stock-based awards recognized in Cost of coal sales for the three months ended March 31, 2009 was $554 for restricted stock units. Compensation expense related to stock-based awards recognized in Selling, general and administrative expenses for the three months ended March 31, 2008 was $4,891, consisting of $2,132, $144 and $2,615 for restricted stock units, restricted stock and options, respectively. Compensation expense related to stock-based awards recognized in Cost of coal sales for the three months ended March 31, 2008 was $1,243 for restricted stock units. During the first quarter of 2008, the Company modified the vesting conditions for certain of its outstanding stock-based awards. As a result, the Company remeasured the affected stock-based awards in accordance with SFAS No. 123 (revised 2004), Share-Based Payment, and recognized additional compensation expense of approximately $89 and $82 in Selling, general and administrative expenses and Cost of coal sales, respectively, during the three months ended March 31, 2009 and approximately $2,372 and $172 in Selling, general and administrative expenses and Cost of coal sales, respectively, during the three months ended March 31, 2008.

(12) Asset Retirement Obligations

The Company’s mining activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect the public health and environment and believes its operations are in material compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the exact amount of such future expenditures. Estimated future reclamation costs are based principally on estimated costs to achieve compliance with legal and regulatory requirements.

The following table describes all changes to the Company’s asset retirement obligation liability from December 31, 2008 through March 31, 2009:

Asset retirement obligations, December 31, 2008	$	171,374
Accretion expense		2,957
Revisions in estimated cash flows and liabilities incurred		34
Liabilities settled		(753)
Asset retirement obligations, March 31, 2009	$	173,612

12

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

The current portions of the asset retirement obligation liabilities of $5,052 and $5,595 at March 31, 2009 and December 31, 2008, respectively, are included in Accrued expenses and other current liabilities. See Note 7. The noncurrent portions of the Company’s asset retirement obligation liabilities of $168,560 and $165,779 at March 31, 2009 and December 31, 2008, respectively, are included in Other noncurrent liabilities. See Note 8. There were no assets that were legally restricted for purposes of settling asset retirement obligations at March 31, 2009 or December 31, 2008. At March 31, 2009, regulatory obligations, such as reclamation obligations, for asset retirements are secured by surety bonds in the amount of $271,189. These surety bonds are partially collateralized by letters of credit issued by the Company.

(13) Stockholders’ Equity, Earnings (Loss) Per Common Share and Common Share Repurchases

Stockholders’ Equity

During the three months ended March 31, 2009, the Company declared and paid cash dividends of $2,232.

Earnings (Loss) Per Common Share

The following table provides a reconciliation of weighted-average shares outstanding used in the basic and diluted earnings (loss) per common share computations for the periods presented:

	Three Months Ended March 31,
	2009	2008
Weighted average common shares outstanding-basic	44,582,077	45,009,728
Dilutive impact of stock options	-	1,010,061
Dilutive impact of restricted stock plans	-	239,547
Weighted average common shares outstanding-diluted	44,582,077	46,259,336

For financial reporting purposes, in periods of losses from continuing operations, basic loss per common share and dilutive loss per common share are the same. The Company reported a net loss for the three months ended March 31, 2009 and excluded 452,648 and 263,781 common shares from the computation of diluted loss per common share related to outstanding stock options and restricted stock plans, respectively.

In the three months ended March 31, 2008, 11,650 restricted stock units that could have potentially diluted basic earnings per common share were not included in the computation of diluted earnings per common share because to do so would have been anti-dilutive.

Common Share Repurchases

In July 2006, the Board of Directors authorized a stock repurchase program (the “Repurchase Program”), authorizing the Company to repurchase shares of its common stock. The Company may repurchase its common stock from time to time, as determined by authorized officers of the Company. In September 2008, the Board of Directors authorized a $100,000 increase to the Repurchase Program, up to an aggregate amount of $200,000. Repurchases of common shares in a cumulative amount over $100,000 are subject to a maximum leverage ratio test of pro-forma net debt to adjusted EBITDA of less than 2.25 to 1.00 under the Senior Secured Credit Facility. During the three months ended March 31, 2009, the Company did not purchase any shares under the Repurchase Program. At March 31, 2009, $113,587 of funds remained under the Repurchase Program. During the three months ended March 31, 2009, the Company issued 212,450 shares of common stock to employees upon vesting of restricted stock units. The Company repurchased 80,498 common shares withheld from employees to satisfy the employees’ minimum statutory tax withholdings upon vesting.

13

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

(14) Segment Information

The Company produces primarily steam coal from surface and deep mines for sale to utility and industrial customers, which is distributed by rail, barge and/or truck. The Company operates only in the United States with mines in three of the major coal basins. The Company has four reportable business segments: Northern Appalachia, consisting of two underground mines in southwestern Pennsylvania; Central Appalachia, consisting of six underground mines and two surface mines in southern West Virginia; the Powder River Basin, consisting of two surface mines in Wyoming and the Company’s Other segment. Other includes an idled underground mine in Illinois; expenses associated with closed mines; Dry Systems Technologies; revenues from royalties and sales of coalbed methane; coal trade activities; selling, general and administrative expenses not charged out to the Powder River Basin, Northern Appalachia or Central Appalachia mines and the elimination of intercompany transactions. The Company evaluates the performance of its segments based on income (loss) from operations.

Segment results for the three months ended March 31, 2009 are as follows:

	Powder River Basin		Northern   Appalachia			Central   Appalachia			Other			Consolidated
Total revenues(1)	$	141,296	$	142,623		$	110,237		$	11,504		$	405,660
Income (loss) from operations	$	11,745	$	6,181		$	4,057		$	(19,287	)	$	2,696
Equity in earnings (losses) of affiliates	$	4	$	(253	)	$	-		$	-		$	(249	)
Depreciation, depletion and amortization	$	11,859	$	22,621		$	13,509		$	1,528		$	49,517
Amortization of coal supply agreements	$	391	$	-		$	(487	)	$	71		$	(25	)
Capital expenditures	$	11,526	$	35,779		$	7,269		$	284		$	54,858
Equity-method investments at March 31, 2009	$	1,034	$	7,959		$	-		$	-		$	8,993
Total assets at March 31, 2009	$	492,182	$	905,033		$	390,113		$	170,236		$	1,957,564

⁽¹⁾     For the three months ended March 31, 2009, total revenues included revenues related to coal shipped to customers outside of the U.S. of $4,323 and $5,660 for the Northern Appalachia and Central Appalachia segments, respectively. All contracts are denominated in U.S. dollars.

Segment results for the three months ended March 31, 2008 are as follows:

	Powder River Basin		Northern   Appalachia			Central   Appalachia			Other			Consolidated
Total revenues(1)	$	128,137	$	176,155		$	102,690		$	5,322		$	412,304
Income (loss) from operations	$	12,755	$	34,140		$	(2,701	)	$	(23,101	)	$	21,093
Equity in losses of affiliate	$	-	$	(185	)	$	-		$	-		$	(185	)
Depreciation, depletion and amortization	$	11,756	$	22,132		$	17,131		$	2,246		$	53,265
Amortization of coal supply agreements	$	1,139	$	(76	)	$	(1,067	)	$	129		$	125
Capital expenditures	$	2,844	$	28,616		$	3,414		$	378		$	35,252
Acquisition of mineral rights under federal lease	$	36,108	$	-		$	-		$	-		$	36,108
Equity-method investments at December 31, 2008	$	1,021	$	8,211		$	-		$	-		$	9,232
Total assets at December 31, 2008	$	495,332	$	919,360		$	394,823		$	158,593		$	1,968,108

⁽¹⁾     For the three months ended March 31, 2008, total revenues included revenues related to coal shipped to customers outside of the U.S. of $15,735 and $10,185 for the Northern Appalachia and Central Appalachia segments, respectively. All contracts are denominated in U.S. dollars.

14

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

(15) Other Revenue

Other revenue consisted of the following:

	Three Months Ended March 31,
	2009		2008
Royalty income	$	2,865	$	1,325
Coalbed methane		1,548		1,748
Dry Systems Technologies equipment and filter sales		2,140		1,648
Other		3,783		637
Total other revenue	$	10,336	$	5,358

(16) Commitments and Contingencies

General

The Company follows SFAS No. 5, Accounting for Contingencies, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies and legal expenses associated with the contingency are accrued by a charge to income when information available indicates that it is probable that an asset had been impaired or a liability had been incurred and the amount of the loss can be reasonably estimated. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the consolidated financial statements when it is at least reasonably possible that a loss will be incurred and the loss is material.

Commitments

On February 20, 2008, the Company was determined to be the successful bidder on a federal coal lease by the Bureau of Land Management, a unit of the United States Department of the Interior. The bid was accepted as submitted in the amount of $180,540 for an approximate 1,428 acre tract of federal land. The lease became effective on May 1, 2008. This lease is subject to the deferred bonus payment provisions of the Code of Federal Regulations and, as such, the Company remits the bonus payment in five equal installments, the first of which was submitted with the bid as a deposit on the lease in February 2008. The remaining four annual installments of $36,108 each are due on the annual anniversary dates of the lease.

See Note 12 regarding our Asset Retirement Obligations.

Guarantees

Neweagle Industries, Inc., Neweagle Coal Sales Corp., Laurel Creek Co., Inc. and Rockspring Development, Inc. (collectively, “Sellers”) are indirect wholly owned subsidiaries of the Company. The Sellers sell coal to Birchwood Power Partners, L.P. (“Birchwood”) under a Coal Supply Agreement dated July 22, 1993 (“Birchwood Contract”). Laurel Creek Co., Inc. and Rockspring Development, Inc. were parties to the Birchwood Contract since its inception, at which time those entities were not affiliated with Neweagle Industries, Inc., Neweagle Coal Sales Corp. or the Company. Effective January 31, 1994, the Birchwood Contract was assigned to Neweagle Industries, Inc. and Neweagle Coal Sales Corp. by AgipCoal Holding USA, Inc. and AgipCoal Sales USA, Inc., which at the time were affiliates of Arch Coal, Inc. Despite this assignment, Arch Coal, Inc. (“Arch”) and its affiliates have separate contractual obligations to provide coal to Birchwood if Sellers fail to perform. Pursuant to an Agreement & Release dated September 30, 1997, the Company agreed to defend, indemnify and hold harmless Arch and its subsidiaries from and against any claims arising out of any failure of Sellers to perform under the Birchwood Contract. By acknowledgement dated February 16, 2005, the Company and Arch acknowledged the continuing validity and effect of said Agreement & Release.

In the normal course of business, the Company is a party to guarantees and financial instruments with off-balance sheet risk, such as bank letters of credit, performance or surety bonds and other guarantees and indemnities related to the obligations of affiliated entities, which are not reflected in the accompanying Consolidated Balance Sheets. Management does not expect any material losses to result from these guarantees and other off-balance sheet instruments.

15

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

Contingencies

Extensive regulation of the impacts of mining on the environment and of maintaining workplace safety, and related litigation, has had or may have a significant effect on the Company’s costs of production and results of operations. Further regulations, legislation or litigation in these areas may also cause the Company’s sales or profitability to decline by increasing costs or by hindering the Company’s ability to continue mining at existing operations or to permit new operations.

Legal Proceedings

The Company is involved in various claims and other legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, consolidated results of operations or consolidated cash flows.

Letters of Credit

At March 31, 2009, the Company had $171,170 of letters of credit outstanding under its revolving credit facility. Of this amount, $117,063 is being used to partially collateralize the surety bonds securing the Company’s regulatory obligations for asset retirements. See Note 12.

(17) Employee Termination Costs

On January 30, 2009, affiliates of the Company idled the Laurel Creek mining complex, which produced approximately 1.0 million clean tons of coal in 2008, and consists of three underground mines and an associated preparation plant, as well as an offsite railcar loading facility. As of December 31, 2008, the Laurel Creek mining complex had approximately 33.3 million tons of proven and probable coal reserves, consisting of approximately 18.0 million tons of surface-minable reserves and approximately 15.3 million tons of underground-minable reserves. The decision to idle the Laurel Creek mining complex was due to certain business conditions. During the first quarter of 2009, the Company recorded $1,387 in employee severance and medical continuance costs in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The Company does not anticipate recording any additional material employee termination costs related to idling the Laurel Creek mining complex. The Laurel Creek mining complex is included in the Company’s Central Appalachia segment. See Note 14.

(18) Income Taxes

For the three months ended March 31, 2009, the income tax benefit of $2,103 represents an effective benefit of 33% on a pre-tax loss of $6,307 compared to an income tax expense of $2,267, representing an effective rate of 26% on pre-tax income of $8,622 for the three months ended March 31, 2008. The income tax benefit for the three months ended March 31, 2009 is comprised of two elements: (1) a $1,407 or 22% benefit based on forecasted annual results for 2009; and (2) an 11% discrete benefit of $696 recorded in the first quarter of 2009. Absent the discrete items, the forecasted annual effective rate of 22% for 2009 increased from the 2008 effective rate of 14% due primarily to an increase in projected 2009 pre-tax income compared to 2008, which has the effect of reducing the percentage of tax benefit related to the expected excess depletion deduction for 2009. The impact of this permanent difference on the excess depletion deduction changes during interim periods as the Company reconsiders its forecast of full-year pre-tax income based on its most recent experience. These changes in estimates are reflected in the effective tax rate in the period in which the information becomes available to the Company.

(19) Derivatives

Derivative instruments and hedging activities are accounted for in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activity (“SFAS No. 133”) (as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities and SFAS No. 161). SFAS No. 133 and SFAS No. 161 establish accounting and disclosure standards for derivative instruments and hedging activities and require that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value.

On the date a derivative instrument is entered into, the Company generally designates a qualifying derivative instrument as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability or forecasted transaction (cash flow hedge).

16

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

For derivative instruments that do not meet the qualifications to be designated as cash flow hedges, changes in fair value are recorded in current period earnings or losses. For derivative instruments that meet the qualifications and have been designated as cash flow hedges, the effective portion of the changes in fair value are recorded in Accumulated other comprehensive loss and any portion that is ineffective is recorded in current period earnings or losses. Amounts recorded in Accumulated other comprehensive loss are reclassified to earnings or losses in the period the underlying hedged transaction affects earnings or when the underlying hedged transaction is no longer probable of occurring. For derivative instruments that have been designated as fair value hedges, changes in the fair value of the derivative instrument and changes in the fair value of the related hedged asset or liability or unrecognized firm commitment are recorded in current period earnings or losses.

Forward Contracts

The Company manages price risk for coal sales through the use of long-term coal supply agreements. The Company evaluates each of its coal sales and coal purchase forward contracts under SFAS No. 133 to determine whether they meet the definition of a derivative and if so, whether they qualify for the normal purchase normal sale (“NPNS”) exception prescribed by SFAS No. 133. The majority of the Company’s forward contracts do qualify for the NPNS exception based on management’s intent and ability to physically deliver or take physical delivery of the coal. Contracts that do not qualify for the NPNS exception are treated as derivatives under SFAS No. 133 and are accounted for at fair value. Those contracts that qualify as derivatives have not been designated as cash flow hedges and accordingly, the Company includes the unrealized gains and losses in current period earnings or losses.

Swap Agreements

The Company uses diesel fuel and explosives in its production process and incurs significant expenses for the purchase of these commodities. Diesel fuel and explosive expenses represented 8% of total cash costs for the three months ended March 31, 2009 and 2008. The Company is subject to the risk of price volatility for these commodities and as a part of its risk management strategy, the Company enters into swap agreements with financial institutions to mitigate the risk of price volatility for both diesel fuel and explosives. The terms of our swap agreements allows the Company to pay a fixed price and receive a floating price, which provides a fixed price per unit for the volume of purchases being hedged. As of March 31, 2009, the Company had swap agreements outstanding to hedge the variable cash flows related to 61%, 56% and 6% of anticipated diesel fuel usage for the remainder of 2009 and for calendar years 2010 and 2011, respectively. The average fixed price per swap for diesel fuel hedges is $3.08 per gallon, $1.88 per gallon and $1.97 per gallon for calendar years 2009, 2010 and 2011, respectively. As of March 31, 2009, the Company had swap agreements outstanding to hedge the variable cash flows related to approximately 72% and 34% of anticipated explosive usage for the remainder of 2009 and for calendar year 2010, respectively. All cash flows associated with derivative instruments are classified as operating cash flows in the Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2008. The following table presents the fair values and location within the Consolidated Balance Sheets of the Company’s derivative instruments:

	Liability Derivatives (1)
	March 31, 2009		December 31, 2008
Derivatives designated as cash flow hedging instruments:
Commodity swaps	$	(21,550)	$	(23,828)
Derivatives not designated as cash flow hedging instruments:
Commodity swaps	$	(1,775)	$	(1,150)
Forward contracts		(3,342)		(3,899)
Other		(13)		-
Total	$	(5,130)	$	(5,049)
Total derivatives	$	(26,680)	$	(28,877)

(1)    Amounts included in Accrued expenses and other current liabilities. See Note 7.

17

Foundation Coal Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited, dollars in thousands)

The following table presents the gains and losses from derivative instruments for the three months ended March 31, 2009 and 2008 and their location within the Consolidated Financial Statements:

Derivatives designated as cash flow hedging instruments:	Gain (loss) reclassified from Accumulated other comprehensive loss into Net loss (1)				Loss recorded in Net loss related to derivative ineffectiveness (2)				Gain (loss) recorded in Accumulated other other comprehensive loss
	2009		2008		2009		2008		2009		2008
Commodity swaps	$	(4,913)	$	11	$	(1)	$	-	$	(2,293)	$	577
Total	$	(4,913)	$	11	$	(1)	$	-	$	(2,293)	$	577
Derivatives not designated as cash flow hedging instruments:	Gain (loss) recorded in Net loss for derivatives not designated as cash flow hedging instruments (2)
	2009		2008
Commodity swaps	$	(624)	$	-
Forward contracts		557		-
Other		56		-
	$	(11)	$	-

⁽¹⁾     Amounts included in Cost of coal sales.

⁽²⁾     Amounts included in Other revenue.

Unrealized losses recorded in Accumulated other comprehensive loss are reclassified to income or loss as the financial swaps settle and the Company purchases the underlying diesel fuel and explosives that are being hedged. During the next twelve months, the Company expects to reclassify approximately $10,831, net of tax, for diesel fuel hedges and approximately $1,910, net of tax, for explosive hedges. The following table summarizes the changes to Accumulated other comprehensive loss related to hedging activities during the three months ended March 31, 2009:

Balance December 31, 2008			Net amounts reclassified to earnings		Net change associated with current period hedging transactions			Balance March 31, 2009
$	(15,281	)	$	4,913	$	(2,293	)	$	(12,661	)

18

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains forward-looking statements that are not statements of historical fact and may involve a number of risks and uncertainties. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, developments and business strategies.

We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project” and similar terms and phrases, including references to assumptions, in this Form 10-Q to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

• market demand for coal, electricity and steel;

• future economic or capital market conditions;

• weather conditions or catastrophic weather-related damage;

• our ability to produce coal at existing and planned future operations;

• the consummation of financing, acquisition or disposition transactions and the effect thereof on our business;

• our plans and objectives for future operations and expansion or consolidation;

• our relationships with, and other conditions affecting, our customers;

• timing of reductions or increases in customer coal inventories;

• long-term coal supply arrangements;

• risks in coal mining;

• environmental laws, including those directly affecting our coal mining and production, and those affecting our customers’ coal usage;

• competition;

• railroad, barge, trucking and other transportation performance and costs;

• our assumptions concerning economically recoverable coal reserve estimates;

• employee workforce;

• regulatory and court decisions;

• future legislation and changes in regulations or governmental policies or changes in interpretations thereof;

• changes in postretirement benefit and pension obligations;

• our liquidity, results of operations and financial condition;

• disruptions in delivery or changes in pricing from third party vendors of goods and services which are necessary for our operations, such as fuel, steel products, explosives and tires;

• the global financial crisis and tightening in the credit markets could adversely affect our business and financial results as global demand for coal in the short-term is uncertain and may lead to reduced coal prices, creating challenges to producers in the industry.

You should keep in mind that any forward-looking statement made by us in this Form 10-Q or elsewhere speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Form 10-Q after the date of this Form 10-Q, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that circumstances described in any forward-looking statement made in this Form 10-Q or elsewhere might not occur.

19

Overview

Based on annual production volumes, we are the fourth largest coal producer in the United States, currently operating nine individual coal mines. Our mining operations are located in southwest Pennsylvania, southern West Virginia and the southern Powder River Basin region of Wyoming. Four of our operations are surface mines, two of our operations are underground mines using highly efficient longwall mining technology and the remaining three operations are “room-and-pillar” underground mines that utilize continuous miners. In addition to mining coal, we also purchase coal from other producers for resale or for the purpose of blending it with our own production.

For the three months ended March 31, 2009, we sold 17.2 million tons of coal, including 16.8 million tons that were produced and processed at our operations. For the comparable period in 2008, we sold 18.5 million tons of coal, including 17.9 million tons that were produced and processed at our operations. As of December 31, 2008, we had approximately 1.7 billion tons of proven and probable coal reserves.

We are primarily a supplier of steam coal to U.S. utilities for use in generating electricity. We also sell steam coal to industrial plants. Steam coal sales accounted for approximately 99% and 98% of our coal sales volume for the three month periods ended March 31, 2009 and 2008, respectively, representing approximately 95% and 92% of our coal sales revenue for the three months ended March 31, 2009 and 2008, respectively. We sell metallurgical coal to steel producers where it is used to make coke for steel production. Metallurgical coal accounted for approximately 1% and 2% of our coal sales volume for the three month periods ended March 31, 2009 and 2008, respectively, representing approximately 5% and 8% of our coal sales revenue for the three month periods ended March 31, 2009 and 2008, respectively.

While the majority of our revenues are derived from the sale of coal, we also realize revenues from coal production royalties, override royalty payments from a coal supply agreement now fulfilled by another producer, fees to transload coal through our Rivereagle facility on the Big Sandy river and revenues from the sale of coalbed methane, natural gas and Dry Systems Technologies equipment and filters.

Results of Operations

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Coal sales realization per ton sold represents revenue realized on each ton of coal sold. It is calculated by dividing coal sales revenues by tons sold.

Revenues

	Three Months Ended March 31,				Increase (Decrease)
	2009		2008		Amount		Percent
	(Unaudited, in thousands, except per ton data)
Coal sales	$	395,324	$	406,946	$	(11,622)	(3)%
Other revenue		10,336		5,358		4,978	93%
Total revenues	$	405,660	$	412,304	$	(6,644)	(2)%
Tons sold		17,169		18,451		(1,282)	(7)%
Coal sales realization per ton sold	$	23.03	$	22.06	$	0.97	4%

Coal sales revenues for the three months ended March 31, 2009 decreased by $11.6 million, or 3% compared to coal sales revenues for the three months ended March 31, 2008. Coal sales realization per ton increased 4% period-over-period, while tons sold decreased by 7% period-over-period. Consolidated coal sales realization per ton for the three months ended March 31, 2009 reflected increased prices per ton sold in three of our operating segments, consisting of a 43% increase in Central Appalachia, a 21% increase in Northern Appalachia and a 6% increase in the Powder River Basin.

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Coal sales revenues in Northern Appalachia for the three months ended March 31, 2009 decreased by $36.4 million, or 21% compared to coal sales revenues for the three months ended March 31, 2008, primarily due to lower production and shipments. Coal sales volumes in Northern Appalachia decreased by 1.4 million tons, or 35% period-over-period, while coal sales realization per ton increased 21% period-over-period due to increased pricing per ton sold. Coal sales volumes at the Cumberland mine decreased 0.5 million tons, or 24% compared to the prior year period, and production decreased 0.4 million tons, or 21% compared to the prior year. Coal sales volumes at the Emerald mine decreased 0.9 million tons, or 44% compared to the prior year period, and production decreased 0.7 million tons, or 41% compared to the prior year period.

Coal sales revenues in Central Appalachia for the three months ended March 31, 2009 increased $7.6 million, or 7% compared to coal sales revenues for the three months ended March 31, 2008, primarily as a result of higher coal sales realization per ton, partially offset by lower coal sales volumes. Coal sales realization per ton increased 43% period-over-period as a result of increased pricing per ton sold. Coal sales volumes decreased 0.4 million tons, or 25%, and production decreased 0.3 million tons, or 18%, in the three months ended March 31, 2009 compared to the prior year period.

Coal sales revenues in the Powder River Basin for the three months ended March 31, 2009 increased $12.2 million, or 10%, compared to coal sales revenues for the three months ended March 31, 2008 as a result of higher coal sales volumes and higher coal sales realization per ton. Coal sales realization per ton increased 6% period-over-period as a result of increased pricing per ton sold. Coal sales volumes increased 0.5 million tons, or 4%, in the three months ended March 31, 2009 compared to the prior year period. Production and shipments increased 10% period-over-period at Eagle Butte while production and shipments at Belle Ayr decreased 1% period-over-period.

Coal sales revenues from our coal trading group increased $5.0 million in the three months ended March 31, 2009 compared to the three months ended March 31, 2008 as a result of increased coal sales volumes that resulted in physical delivery.

Other revenues for the three months ended March 31, 2009 increased by $5.0 million (93%) compared to the three months ended March 31, 2008. The increase was due to: (a) higher other miscellaneous revenues ($3.2 million); (b) increased royalty revenue ($1.5 million); and (c) increased revenues from the sale of equipment and filters by Dry Systems Technologies ($0.5 million); partially offset by (d) decreased coalbed methane revenues ($0.2 million).

Costs and Expenses

	Three Months Ended March 31,				Increase (Decrease)
	2009		2008		Amount		Percent
	(Unaudited, in thousands)
Cost of coal sales (excludes depreciation, depletion and amortization)	$	331,672	$	315,473	$	16,199	5 %
Selling, general and administrative expenses (excludes depreciation, depletion and amortization)		17,456		19,791		(2,335)	(12)%
Accretion on asset retirement obligations		2,957		2,557		400	16 %
Depreciation, depletion and amortization		49,517		53,265		(3,748)	(7)%
Amortization of coal supply agreements		(25)		125		(150)	(120)%
Employee termination costs		1,387		-		1,387	-
Total costs and expenses	$	402,964	$	391,211	$	11,753	3 %

Cost of coal sales. Cost of coal sales increased $16.2 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, primarily due to: (a) increases in labor and benefit costs as a result of both compensation increases and hiring of additional personnel and increased expenses associated with our pension plan ($12.7 million); (b) higher repair, maintenance and operating supply costs, including diesel fuel ($11.1 million); (c) increased outside services as a result of additional contract services ($4.1 million); (d) increases in royalties mainly due to mining a higher proportion of coal subject to federal royalty ($4.0 million); (e) increased purchased coal costs as a result of increased pricing on coal purchased for physical delivery ($4.0 million); (f) increased miscellaneous other expenses ($2.7 million); partially offset by (g) decreased inventory charges to expense related to an overall lower ratio of tons sold vs. tons produced in the three months ended March 31, 2009 compared to the prior year period ($10.8 million); (h) decreased transportation and loading expenses ($6.4 million); and (i) decreased longwall move expenses ($5.2 million). Cost of coal sales per ton was $19.32 for the three months ended March 31, 2009 compared to $17.10 per ton for the three months ended March 31, 2008.

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Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended March 31, 2009 decreased $2.3 million compared to the three months ended March 31, 2008. Period-over-period decreases were due to: (a) lower expenses incurred for employee compensation and benefit related expenses due primarily to lower stock-based compensation ($2.5 million); (b) lower consulting and insurance fees ($0.6 million); partially offset by (c) higher overhead expenses attributed mainly to an increase in industry association membership fees and legal expenses ($0.8 million).

Accretion on asset retirement obligations. Accretion on asset retirement obligations is a result of accounting for asset retirement obligations under Statement of Financial Accounting Standards (“SFAS”) No. 143, Accounting for Asset Retirement Obligations (“SFAS No. 143”). Accretion represents the increase in the asset retirement liability to reflect the change in the liability for the passage of time because the initial liability is recorded at present value. Higher accretion expense in 2009 was due to increased asset retirement obligation estimates for the comparable periods.

Depreciation, depletion and amortization. Depreciation, depletion and amortization includes depreciation of plant and equipment, cost depletion of amounts assigned to owned and leased mineral rights and amortization of mine development costs, internal use software and leasehold improvements. Depreciation, depletion and amortization expense decreased $3.7 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, primarily due to lower cost depletion partially offset by higher depreciation and amortization. Cost depletion decreased by $4.7 million due to decreased production in Northern and Central Appalachia period-over-period. Depreciation and amortization increased by $1.0 million in the three months ended March 31, 2009 compared to the prior year period mainly due to depreciation and amortization associated with capital additions to plant, equipment and mine development costs during the twelve months ended March 31, 2009.

Coal supply agreement amortization. Application of purchase accounting in 2004 resulted in the recognition of a significant liability for below market priced coal supply agreements as well as a significant asset for above market priced coal supply agreements, both in relation to market prices at the date of acquisition of mining assets by the Company in 2004. Coal supply agreement amortization expense decreased $0.2 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, primarily due to a decrease in amortization of the asset for above market coal supply agreements of $1.0 million that was partially offset by a decrease in the credit to amortization expense from below market liability contracts of $0.8 million. As shipments on coal supply agreements valued in purchase accounting are completed, the period-over-period impact of the amortization on both the asset and liability balances will continue to diminish until approximately 2010 when shipments associated with these coal supply agreements are estimated to be complete.

Employee termination costs. On January 30, 2009, affiliates of the Company idled the Laurel Creek mining complex, which produced approximately 1.0 million clean tons of coal in 2008, and consists of three underground mines and an associated preparation plant. As of December 31, 2008, the Laurel Creek mining complex had approximately 33.3 million tons of proven and probable reserves, consisting of approximately 18.0 million tons of surface reserves and approximately 15.3 million tons of underground reserves. The decision to idle the Laurel Creek mining complex was due to certain business conditions. During the three months ended March 31, 2009, the Company recorded $1.4 million in employee severance and medical continuance costs in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The Company does not anticipate recording any additional material employee termination costs related to idling the Laurel Creek mining complex. The Laurel Creek mining complex is included in the Company’s Central Appalachia segment.

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Segment Analysis

Utilizing data published by Argus Media, the following graph sets forth representative steam coal prices in various U.S. markets. The prices are not necessarily representative of the coal prices actually obtained by the Company. Changes in coal prices have an impact over time on the Company’s average sales realization per ton and, ultimately, its consolidated financial results.

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The market price of coal is influenced by many factors that vary by region. Such factors include, but are not limited to: (1) coal quality, which includes energy (heat content), sulfur, ash, volatile matter and moisture content; (2) transportation costs; (3) regional supply and demand; (4) available competitive fuel sources such as natural gas, nuclear or hydro; and (5) production costs, which vary by mine type, available technology and equipment utilization, productivity, geological conditions, and mine operating expenses.

The energy content or heat value of coal is a significant factor influencing coal prices as higher energy coal is more desirable to consumers and typically commands a higher price in the market. The heat value of coal is commonly measured in British thermal units or the amount of heat needed to raise the temperature of one pound of water by one degree Fahrenheit. Coal from the Eastern and Midwest regions of the United States tends to have a higher heat value than coal found in the Western United States.

Prices for our Powder River Basin coal, with its lower energy content, lower production cost and often greater distance to travel to the consumer, typically sells at a lower price than Northern and Central Appalachian coal that has a higher energy content and is often located closer to the end user. Illinois Basin coal generally has lower energy content and higher sulfur than Northern and Central Appalachian coal, but it has higher energy content than Powder River Basin coal.

	Three Months Ended March 31,				Increase (Decrease)
	2009		2008		Tons/$		Percent
	(Unaudited, in thousands, except coal sales realization per ton and cost of coal sales per ton)
Powder River Basin
Tons sold		13,074		12,603		471	4 %
Coal sales realization per ton	$	10.66	$	10.10	$	0.56	6%
Total revenues	$	141,296	$	128,137	$	13,159	10 %
Cost of coal sales per ton(1)	$	8.70	$	7.86	$	0.84	11 %
Income from operations	$	11,745	$	12,755	$	(1,010)	(8)%
Northern Appalachia
Tons sold		2,666		4,072		(1,406)	(35)%
Coal sales realization per ton	$	51.97	$	42.97	$	9.00	21 %
Total revenues	$	142,623	$	176,155	$	(33,532)	(19)%
Cost of coal sales per ton(1)	$	41.88	$	29.04	$	12.84	44 %
Income from operations	$	6,181	$	34,140	$	(27,959)	(82)%
Central Appalachia
Tons sold		1,315		1,750		(435)	(25)%
Coal sales realization per ton	$	83.05	$	58.04	$	25.01	43 %
Total revenues	$	110,237	$	102,690	$	7,547	7 %
Cost of coal sales per ton(1)	$	68.58	$	50.22	$	18.36	37 %
Income (loss) from operations	$	4,057	$	(2,701)	$	6,758	250 %

⁽¹⁾ Excludes selling, general and administrative expense; depreciation, depletion and amortization; accretion expense; and changes in fair value of derivative instruments.

Powder River Basin—Income from operations decreased $1.0 million period-over-period due to increased operating costs of $14.2 million, partially offset by increased revenues of $13.2 million. As explained in the revenue section above, the increased revenues resulted from a 6% increase in coal sales realization per ton and a 4% increase in coal sales volumes. Coal sales volumes in the Powder River Basin increased 0.5 million tons period-over-period despite the impact of blizzard conditions in March, 2009. A 10% period-over-period increase in production and shipments at Eagle Butte was partially offset by a 1% decrease in production and shipments at Belle Ayr. Operating costs increased $14.2 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, reflecting higher period-over-period cost of sales of $14.6 million and an increase in other miscellaneous expenses of $0.2 million, partially offset by a decrease in depreciation, depletion and amortization costs of $0.6 million.

The $14.6 million increase in cost of sales referred to above resulted from an increase in cash production costs ($15.3 million) partially offset by decreased other expenses ($0.7 million). The $15.3 million period-over-period increase in cash production costs were primarily in the following areas: (a) higher supply and service costs primarily consisting of operating supply costs, repair and maintenance expenses, rent, explosives, diesel fuel and outside services ($6.3 million); (b) increased royalty costs due to mining a higher amount of coal that is subject to federal royalties and higher coal sales revenues ($3.1 million); (c) higher labor and employee benefits ($2.8 million); and (d) increased tax-related expenses ($3.1 million). Cost of coal sales per ton increased 11% period-over-period.

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Lower total depreciation, depletion and amortization costs of $0.6 million related primarily to a period-over-period $0.7 million decrease in expense associated with the amortization of coal supply agreements as shipments on a number of coal supply agreements valued in purchase accounting were completed, partially offset by increased depletion expense related to higher production period-over-period at the Eagle Butte mine, $0.1 million.

Northern Appalachia—Income from operations decreased by $28.0 million period-over-period due to decreased revenues of $33.5 million, partially offset by decreased operating costs of $5.5 million. As explained in the revenue section above, the decrease in revenues resulted from a 35% period-over-period decrease in tons sold. Coal sales volumes at the Cumberland mine decreased 0.5 million tons, or 24% compared to the prior year period and production decreased 0.4 million tons, or 21% compared to the prior year period. Coal sales volumes at the Emerald mine decreased 0.9 million tons, or 44% compared to the prior year period and production decreased 0.7 million tons, or 41% compared to the prior year period. The decrease in production and shipments at both mines were due primarily to scheduled longwall moves that occurred during the quarter.

Operating costs decreased $5.5 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, reflecting lower period-over-period cost of sales of $6.6 million, partially offset by increases in depreciation, depletion and amortization costs of $0.6 million and increased other expenses of $0.5 million.

The $6.6 million period-over-period decrease in cost of sales referred to above was the result of decreased purchased coal expense ($12.9 million) and decreased miscellaneous other costs ($0.2 million); partially offset by increased cash production costs ($6.5 million). The $6.5 million increase in cash production costs were primarily incurred in the following areas: (a) higher supply and service costs primarily consisting of operating supply costs from increased prices for and usage of roof bolts and miner bits, increased water handling requirements, repairs and maintenance costs due to the timing of rebuilding longwall and other mining equipment, outside services, rent, utilities and other miscellaneous operating costs ($11.4 million); (b) higher labor and employee benefit costs ($4.4 million); partially offset by (c) decreased longwall move expenses ($5.2 million); (d) decreased tax-related expenses ($1.0 million); (e) decreased transportation and loading expenses ($2.7 million); and (f) decreased miscellaneous expenses ($0.4 million). Cost of coal sales per ton increased by 44% period-over-period due to production costs that were spread over lower tons sold.

Higher total depreciation, depletion and amortization costs of $0.6 million related primarily to: (a) higher plant and equipment depreciation ($3.0 million); (b) a period-over-period decrease in the credit to expense associated with the amortization of below market liability coal supply agreements valued in purchase accounting ($0.1 million); partially offset by (c) lower depletion expense ($2.5 million) as a result of decreased production at both mines due to scheduled longwall moves that occurred during the quarter.

Central Appalachia—Income (loss) from operations increased by $6.8 million period-over-period due to increased revenues of $7.5 million and decreased miscellaneous other expenses of $0.1 million that were partially offset by increased operating costs of $0.8 million. As explained in the revenue section above, the increase in revenues resulted from a 43% increase in coal sales realization per ton, partially offset by a decrease in tons sold. Coal sales volumes decreased 0.4 million tons, or 25% and production decreased 0.3 million tons, or 18% in the three months ended March 31, 2009 compared to the prior year period. The decrease in coal sales volumes and production in Central Appalachia was due primarily to the idling of the Laurel Creek mining complex due to certain business conditions in late January 2009 and a contract dispute with a certain customer relating to their refusal to take delivery of contracted metallurgical coal shipments.

Operating costs increased $0.8 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, reflecting higher period-over-period cost of sales of $2.3 million, $1.4 million of employee termination costs related to the idling of the Laurel Creek mining complex in late January, 2009 and increased other expenses of $0.1 million, partially offset by decreases in depreciation, depletion and amortization costs of $3.0 million.

The $2.3 million period-over-period increase in cost of sales referred to above was the result of: (a) increased purchased coal expense ($11.1 million); (b) expenses associated with a contract accrual ($1.4 million); (c) increased other expenses ($0.4 million); partially offset by (d) decreased inventory charges to expense related to a lower ratio of tons sold vs. tons produced in the three months ended March 31, 2009 compared to the prior year period ($10.5 million); and (e) decreased cash production costs ($0.1 million). The decrease in cash production costs primarily related to: (a) decreased operating, supply, outside services, and transportation and loading costs ($5.2 million); partially offset by (b) increased labor and employee benefits ($4.1 million); (c) increased royalty expenses ($0.7 million); and (d) increased tax-related expenses ($0.3 million). Cost of coal sales per ton increased by 37% period-over-period due to purchased coal costs and production costs that were spread over lower tons sold.

The $3.0 million decrease in total depreciation, depletion and amortization consisted of: (a) lower depletion expense of $2.3 million related to decreased production period-over-period and (b) lower plant and equipment depreciation of $1.3 million; partially offset by (c) a lower credit to expense for amortization of coal supply agreements of $0.6 million primarily due to lower shipments on a number of below market coal supply agreements valued as liabilities in purchase accounting.

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Other—Includes the Company’s Illinois Basin operation, including the idled Wabash mine, which ceased operations in the second quarter of 2007; expenses associated with closed mines; Dry Systems Technologies; coal trading operations; selling, general and administrative expenses not charged out to the Powder River Basin, Northern Appalachia or Central Appalachia mines and intercompany eliminations. During the three months ended March 31, 2009, the Other segment reported a loss from operations of $19.3 million compared to a loss from operations of $23.1 million in the three months ended March 31, 2008. The decreased period-over-period loss from operations of $3.8 million in 2009 was primarily due to lower selling, general and administrative expenses and increased revenues from our coal trading operations and Dry Systems Technologies.

Interest Expense, Net

	Three Months Ended March 31,				Increase (Decrease)
	2009		2008		Amount		Percent
	(Unaudited, in thousands)
Interest expense-debt related	$	(6,959)	$	(10,620)	$	(3,661)	(34)%
Interest expense-amortization of deferred financing costs		(467)		(454)		13	3 %
Interest expense-surety bond and letter of credit fees		(1,648)		(1,637)		11	1 %
Interest expense-other		(76)		(203)		(127)	(63)%
Total interest expense		(9,150)		(12,914)		(3,764)	(29)%
Interest income		147		443		(296)	(67)%
Interest expense, net	$	(9,003)	$	(12,471)	$	(3,468)	(28)%
Interest expense, net for the three months ended March 31, 2009 decreased compared to the three months ended March 31, 2008 primarily due to decreased interest expense related to the Senior Secured Credit Facility as a result of lower variable interest rates.
Income Tax Benefit (Expense)
	Three Months Ended March 31,				Change
	2009		2008		Amount		Percent
	(Unaudited, in thousands)
Income tax benefit (expense)	$	2,103	$	(2,267)	$	4,370	193 %

For the three months ended March 31, 2009, the income tax benefit of $2.1 million represents an effective benefit of 33% on a pre-tax loss of $6.3 million compared to an income tax expense of $2.3 million, representing an effective rate of 26% on pre-tax income of $8.6 million for the three months ended March 31, 2008. The income tax benefit for the three months ended March 31, 2009 is comprised of two elements: (1) a $1.4 million or 22% benefit based on forecasted annual results for 2009; and (2) an 11% discrete benefit of $0.7 million recorded in the first quarter of 2009. Absent the discrete items, the forecasted annual effective rate of 22% for 2009 increased from the 2008 effective rate of 14% due primarily to an increase in projected 2009 pre-tax income compared to 2008, which has the effect of reducing the percentage of tax benefit related to the expected excess depletion deduction for 2009. The impact of this permanent difference on the excess depletion deduction changes during interim periods as the Company reconsiders its forecast of full-year pre-tax income based on its most recent experience. These changes in estimates are reflected in the effective tax rate in the period in which the information becomes available to the Company.

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Expected Coal Shipments

For 2009 through 2011, the Company expects average per ton sales realization, coal shipments and the percent of committed and priced tons to be as follows:

	2009	2010	2011
Average per Ton Sales Realization on Committed and Priced
Coal Shipments1
West	$10.46	$11.13	$12.06
East2,3	$65.10	$68.11	$78.82
Coal Shipments (MM Tons)2,4	70.0 - 73.0	70.0 - 74.0	70.0 - 74.0
West	53.0 - 55.0	52.0 - 55.0	52.0 - 55.0
East	17.0 - 18.0	18.0 - 19.0	18.0 - 19.0
Committed and Priced (%)2,3,5	100%	72%	44%
West	100%	83%	53%
East	98%	40%	18%

(1) Based on committed and priced coal shipments as of April 22, 2009.

(2) Includes Eastern tons scheduled for delivery to ArcelorMittal in 2009 which are the subject of litigation.

(3) In 2009, committed and priced Eastern tons exclude legacy contracts covering approximately 0.4 million tons of steam coal subject to indexed pricing anticipated to range from $60 to $90 per ton. In 2010, committed and priced Eastern tons exclude approximately 1 million tons of steam coal subject to collared pricing with an average pricing range of $75 to $84 per ton, and 0.8 million tons of metallurgical coal subject to collared pricing with an average pricing range of $153 to $195, as well as legacy contracts covering approximately 0.9 million tons of steam coal subject to indexed pricing anticipated to range from $60 to $90 per ton.

(4) Coal shipments for the East and consolidated coal shipments exclude traded coal, and include approximately 0.5 million tons of purchased coal in each of 2009, 2010 and 2011.

(5) As of April 22, 2009, compared to the midpoint of shipment guidance range.

As of April 22, 2009, we had commitments for approximately 100% of our planned 2009 production. As of April 22, 2009, uncommitted and unpriced tonnage was 28%, and 56% of planned shipments in 2010, and 2011, respectively.

Based on its committed and priced planned shipments as of April 22, 2009, the Company expects its committed and priced tonnage from its Eastern mines, encompassing Northern Appalachia and Central Appalachia, to realize $65.10, $68.11 and $78.82 per ton in 2009, 2010 and 2011, respectively. The Company also expects its committed and priced tonnage from the Powder River Basin to realize $10.46, $11.13 and $12.06 per ton in 2009, 2010 and 2011, respectively. These expected per ton average realizations include forecasted sulfur dioxide and btu premiums based on contract terms, projected coal qualities and historical realized premiums.

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of cash have been from sales of our coal production and, to a much lesser extent, sales of purchased coal to customers, and miscellaneous revenues.

Our primary uses of cash have been our cash production costs, capital expenditures, interest costs, income tax payments, cash payments for employee benefit obligations such as defined benefit pensions and retiree health care benefits, cash outlays related to post mining asset retirement obligations and support of working capital requirements. Our ability to service debt and acquire new productive assets for use in our operations has been and will be dependent upon our ability to generate cash from our operations. We generally fund all of our capital expenditure requirements with cash generated from operations. Historically, we have not engaged in financing assets such as through operating leases.

The following is a summary of cash provided by or used in each of the indicated categories of activities during the three months ended March 31, 2009 and 2008, respectively.

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	Three Months Ended             March 31,
	2009		2008
	(Unaudited, in thousands)
Cash provided by (used in):
Operating activities	$	85,544	$	55,528
Investing activities		(54,836)		(80,905)
Financing activities- proceeds from stock option exercises and excess tax benefit from stock-based awards		-		2,614
Financing activities-dividends on common stock		(2,232)		(2,253)
Financing activities-other		(1,249)		(1,924)
Net increase (decrease) in cash and cash equivalents	$	27,227	$	(26,940)

Cash provided by operating activities increased $30.0 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, primarily due to a $44.9 million increase in cash flows from working capital changes, partially offset by a $10.6 million decrease in net income and a $4.3 million decrease in non-cash add-backs to net (loss) income period-over-period. Working capital changes consist primarily of trade accounts receivable, inventory, prepaid expenses and other current and non-current assets, trade accounts payable, accrued expenses and other current and non-current liabilities.

Cash used in investing activities decreased $26.1 million in the three months ended March 31, 2009 compared to the three months ended March 31, 2008, due primarily to: (a) a $36.1 million lease bonus-bid payment in 2008 related to the successful bid on a federal coal lease located in the Powder River Basin; and (b) $9.8 million in purchases of equity-method investments during 2008; partially offset by (c) a $19.8 million year-over-year increase in capital expenditures, net of proceeds from disposals. Capital expenditures in the three months ended March 31, 2009 totaled $54.9 million which included $19.0 million for the following projects: (a) the replacement of a longwall face conveyor system at the Emerald mine; (b) expenditures for air shafts at the Cumberland mine; (c) capital expenditures related to our coal gas recovery activities; and (d) land acquisitions. Capital expenditures in the three months ended March 31, 2008 totaled $35.3 million, including a total of $15.7 million of expenditures related to the following projects: (a) the acquisition of longwall components and expenditures for a face conveyor system at the Emerald mine; (b) capital expenditures related to our coal gas recovery activities; and (c) airshaft and elevator expenditures for installation and components at the Cumberland mine.

Cash used in financing activities of $3.5 million during the three months ended March 31, 2009 consisted of (a) $1.3 million for the repurchase of common shares withheld from employees to satisfy employees’ minimum statutory tax withholding upon vesting of restricted stock units and (b) payment of cash dividends of $2.2 million ($0.05 per share paid in March 2009). Cash used in financing activities of $1.6 million during the three months ended March 31, 2008 consisted of (a) $1.9 million for the repurchase of common shares withheld from employees to satisfy employees’ minimum statutory tax withholding upon vesting of restricted stock units; (b) payment of cash dividends of $2.3 million ($0.05 per share paid in March 2008); and (c) cash proceeds related to the issuance of common stock for stock option exercises and excess tax benefits from stock-based awards ($2.6 million).

Liquidity and Long-Term Debt

Our primary source of liquidity will continue to be cash from sales of our coal production and to a much lesser extent, sales of purchased coal to customers. We have borrowing availability under our revolving credit facility, subject to certain conditions.

Based on our current levels of operations, we believe that remaining cash on hand, cash flow from operations and available borrowings under the revolving credit portion of our Senior Secured Credit Facility will enable us to meet our working capital, capital expenditure, debt service and other funding requirements for at least the next twelve months.

As of March 31, 2009, we have outstanding $599.8 million in aggregate indebtedness, with an additional $328.8 million of available borrowings under our revolving credit facility after giving effect to $171.2 million of letters of credit outstanding as of March 31, 2009. Our future liquidity requirements will be significant due to debt service requirements and projected capital expenditures. Our ability to service our debt (interest and principal), acquire new productive assets or businesses, develop new mines and expand or enhance existing operations is dependent upon our ability to continue to generate cash in excess of our anticipated uses of cash. We expect to service our debt, pay dividends and fund most of our capital expenditure requirements with cash generated from operations.

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Our liquidity has historically been impacted by events initiated by the Company and will be impacted by future planned and possible unplanned events. Examples of known trends, planned and completed events which required liquidity include, but are not limited to: (1) the voluntarily prepayment during 2006 and 2007 of $33.5 million of the Company’s outstanding principal balance on the term loan facility for which scheduled payments were due in periods from 2007 to 2009; the Company is required to resume quarterly principal payments of $8.4 million beginning September 2009; (2) paying quarterly dividends to stockholders and the expectation that our Board may continue to declare quarterly dividends in future periods; (3) we have recently increased our reserve position by obtaining mining rights to federal coal reserves adjoining our current operations in Wyoming through the Lease By Application (“LBA”) process and plan to attempt to do so in the future; (4) the repurchase of common shares in accordance with our established program; and (5) capital expenditures made for the purpose of both sustaining and expanding operations.

Near-term, 2009 liquidity requirements will be impacted by planned capital expenditures which include: (1) the 2009 LBA installment payment of $36.1 million; (2) capital expenditures during calendar year 2009 of which $150.0 million to $165.0 million is to maintain production and replace mining equipment; (3) $40.0 million to $45.0 million is expected to be directed toward improvements in productivity and selective expansions of production; and (4) we expect to contribute approximately $30.0 million to our defined benefit retirement plans and to pay approximately $26.0 million of retiree health care benefits, gross of Medicare Part D subsidies, in calendar year 2009. In the foreseeable future, we expect to require similar levels of liquidity to fund LBA installment payments, capital expenditures, defined benefit plan obligations, other contractual commitments, and operational and general working capital requirements.

The recent credit crisis has resulted in unprecedented redemption pressure on money market funds in general. With respect to our short-term investments classified on our Consolidated Balance Sheets in Cash, the Company has not been affected, and our investments continue to meet the qualification of cash equivalents.

With respect to recent global economic events, there is an unprecedented uncertainty in the financial markets and this uncertainty brings potential liquidity risks to the Company. Such risks include additional declines in our stock value, less availability and higher costs of additional credit, potential counterparty defaults and further commercial bank failures. Although the majority of the financial institutions in our bank credit facility appear to be strong, there are no assurances of their continued existence as the banking industry continues to consolidate. However, we have no current indication that any such transactions or uncertainties would impact our current credit facility. The credit worthiness of our customers is constantly monitored by the Company. We believe that our current group of customers are sound and represent no abnormal business risk.

We sponsor pension plans in the United States for salaried and non-union hourly employees. For these plans, the Pension Protection Act of 2006 (“Pension Act”) requires a funding target of 100% of the present value of accrued benefits. The Pension Act includes a funding target phase-in provision that establishes a funding target of 92% in 2008, 94% in 2009, 96% in 2010 and 100% thereafter for defined benefit pension plans. Generally, any such plan with a funding ratio of less than 80% will be deemed at risk and will be subject to additional funding requirements under the Pension Act. Annual funding contributions to the plans are made as recommended by consulting actuaries based upon the ERISA funding standards. Plan assets consist of equity and fixed income funds, real estate funds, private equity funds and alternative investment funds. The Company is required to measure plan assets and benefit obligations as of the date of the Company’s fiscal year-end statement of financial position and recognize the overfunded or underfunded status of a defined benefit pension and other postretirement plans (other than a multi-employer plan) as an asset or liability in its statement of financial position and recognize changes in that funded status in the year in which the changes occur through other comprehensive (loss) income. The current volatile economic environment and the deterioration in the equity markets have caused investment income and the value of investment assets held in our pension trust to decline and lose value. As a result, we may be required to increase the amount of cash contributions into the pension trust in order to comply with the funding requirements of the Pension Act. We currently expect to make contributions in 2009 of approximately $30.0 million to maintain at least an 80% funding ratio.

Financial Swaps

The Company is subject to the risk of price volatility for certain of the materials and supplies used in production, such as diesel fuel and explosives. As a part of its risk management strategy, the Company enters into swap agreements with financial institutions to mitigate the risk of price volatility for both diesel fuel and explosives. At March 31, 2009, liabilities related to the fair value of swaps that are expected to settle in the next twelve months were $22.0 million.

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Other

As a regular part of our business, we review opportunities for, and engage in discussions and negotiations concerning, the acquisition of coal mining assets, including LBA bids to procure federal coal, and acquisitions of, or combinations with, coal mining companies. When we believe that these opportunities are consistent with our growth plans and our acquisition criteria, we will make bids or proposals and/or enter into letters of intent and other similar agreements, which may be binding or nonbinding, that are customarily subject to a variety of conditions and usually permit us to terminate the discussions and any related agreements if, among other things, we are not satisfied with the results of our due diligence investigation. Any acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. There can be no assurance that such additional indebtedness and/or equity capital will be available on terms acceptable to us, if at all.

On February 20, 2008, an affiliate of the Company successfully bid on a new federal coal lease which contains an estimated 224.0 million tons of proven and probable coal reserves. The lease bonus bid was $180.5 million to be paid in five equal annual installments of $36.1 million. The first installment was paid during the three months ended March 31, 2008. The lease became effective on May 1, 2008. The four remaining annual installments of $36.1 million each are due on the anniversary dates of the lease.

On July 18, 2006, the Board of Directors authorized a stock repurchase program (the “Repurchase Program”), authorizing the Company to repurchase shares of its common stock. The Company may repurchase its common stock from time to time as determined by authorized officers of the Company. In September 2008 the Board of Directors authorized a $100.0 million increase to the Repurchase Program, up to an aggregate amount of $200.0 million. During the three months ended March 31, 2009 and 2008, the Company did not repurchase any shares pursuant to the Repurchase Program. At March 31, 2009, there was $113.6 million available for future repurchases under the Repurchase Program. Of the amount available for future repurchases, $100.0 million is subject to our meeting a maximum leverage ratio test of pro-forma net debt to adjusted EBITDA of less than 2.25 to 1.00 under our Senior Secured Credit Facility. The ratio test must be met at the time of each applicable share repurchase.

Covenant Compliance

Our indirect wholly-owned subsidiary, Foundation Coal Corporation (“FCC”), is required to comply with certain financial covenants which are considered material terms of the Senior Secured Credit Facility and the indenture governing FCC’s outstanding 7.25% Senior Notes. Information about the financial covenants is material to an investor’s understanding of FCC’s financial condition and liquidity. The breach of covenants in the Senior Secured Credit Facility that are tied to ratios based on Adjusted EBITDA, as defined below, could result in a default under the Senior Secured Credit Facility and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result in a default under our indenture. Additionally, under the Senior Secured Credit Facility and indenture, FCC’s ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on Adjusted EBITDA.

Covenants and required levels as defined by the July 7, 2006 Senior Secured Credit Facility and the indenture governing the outstanding 7.25% Senior Notes are:

	January 1, 2009     and Thereafter Covenant Levels
Senior Secured Credit Facility(1)
Minimum Adjusted EBITDA to cash interest ratio	2.5x
Maximum total debt less unrestricted cash to Adjusted EBITDA ratio	3.5x
Indenture(2)
Minimum Adjusted EBITDA to fixed charge ratio required to incur additional debt pursuant to ratio provisions	2.0x

⁽¹⁾ The Senior Secured Credit Facility requires FCC to maintain an Adjusted EBITDA to cash interest ratio at a minimum of 2.5x and a total debt less unrestricted cash to Adjusted EBITDA ratio starting at a maximum of 3.5x in each case for the most recent twelve-month period. Failure to satisfy these ratio requirements would constitute a default by FCC under the Senior Secured Credit Facility. If lenders under the Senior Secured Credit Facility fail to waive any such default, repayment obligations under the Senior Secured Credit Facility could be accelerated, which would also constitute a default under the indenture. Covenants reflect the definition and levels required by the Senior Secured Credit Facility.

⁽²⁾ The ability for FCC to incur additional debt and make certain restricted payments under our indenture, subject to specified exceptions, is tied to an Adjusted EBITDA to fixed charge ratio of at least 2.0 to 1.

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Adjusted EBITDA is defined as EBITDA further adjusted to exclude non-recurring items, non-cash items and other adjustments permitted in calculating covenant compliance under the indenture and the Senior Secured Credit Facility. EBITDA, a measure used by management to evaluate its ongoing operations for internal planning and forecasting purposes, is defined as net income (loss) from operations plus interest expense, net of interest income, income tax expense (benefit), depreciation and amortization and charges for early extinguishment of debt. EBITDA is not a financial measure recognized under United States generally accepted accounting principles and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. The amounts shown for EBITDA as presented may differ from amounts calculated and may not be comparable to other similarly titled measures used by other companies.

As of March 31, 2009, FCC was in compliance with all required financial covenants of the Senior Secured Credit Facility.

Contractual Obligations

The following is a summary of our significant future contractual obligations by year as of March 31, 2009:

	2009		2010-2011		2012-2013		After 2013		Total
	(Unaudited, in thousands)
Long-term debt	$	16,750	$	284,750	$	-	$	298,285	$	599,785
Estimated cash interest on long-term debt		16,241		52,952		43,251		21,626		134,070
Estimated cash payments for asset retirement obligations		5,595		12,389		2,628		235,181		255,793
Purchase commitments		159,737		52,847		3,183		-		215,767
Federal coal lease		36,108		72,216		36,108		-		144,432
Operating leases		2,805		2,988		1,477		2,115		9,385
Total	$	237,236	$	478,142	$	86,647	$	557,207	$	1,359,232

We expect to use cash flows provided by operating activities to invest in the range of $190.0 million to $210.0 million in capital expenditures during calendar year 2009 of which $150.0 million to $165.0 million is to maintain production and replace mining equipment. The additional $40.0 million to $45.0 million is expected to be directed toward improvements in productivity and selective expansions of production. Approximately $67.3 million of the 2009 capital expenditures are included in purchase commitments shown above. The remaining 2009 purchase commitments consist of $32.6 million for purchased coal in normal quantities for delivery to customers and $59.8 million pertaining to forward contracts to purchase explosives and diesel fuel in normal quantities for use at our surface mines. We expect to contribute approximately $30.0 million to our defined benefit retirement plans and to pay approximately $26.0 million of retiree health care benefits, gross of Medicare Part D subsidies, in calendar year 2009. We also expect to incur approximately $6.8 million per year for surety bond premiums and letters of credit fees. We believe that cash balances plus cash generated by operations will be sufficient to meet these obligations plus fund requirements for working capital and capital expenditures without incurring additional borrowings. However, if additional borrowings are needed, the Company would plan to utilize amounts available under its revolving credit facility.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include guarantees, indemnifications and financial instruments with off-balance sheet risk, such as bank letters of credit and performance or surety bonds. Liabilities related to these arrangements are not reflected in our Consolidated Balance Sheets. However, the underlying obligations that they secure, such as asset retirement obligations, self-insured workers’ compensation liabilities, royalty obligations and certain retiree medical obligations, are reflected in our Consolidated Balance Sheets.

We are required to provide financial assurance in order to perform the post-mining reclamation required by our mining permits, pay our federal production royalties, pay workers’ compensation claims under self-insured workers’ compensation laws in various states, pay federal black lung benefits, pay retiree health care benefits to certain retired UMWA employees and perform certain other obligations.

In order to provide the required financial assurance, we generally use surety bonds for post-mining reclamation and royalty payment obligations and bank letters of credit for self-insured workers’ compensation obligations and UMWA retiree health care obligations. Federal black lung benefits are paid from a dedicated trust fund to which future contributions will be required. Bank letters of credit are also used to collateralize a portion of the surety bonds.

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We had outstanding surety bonds with a total face amount of $296.5 million as of March 31, 2009, of which $271.2 million secured reclamation obligations; $15.7 million secured coal lease obligations; $7.1 million secured self-insured workers’ compensation obligations; and $2.5 million for other miscellaneous obligations. In addition, we had $171.2 million of letters of credit in place for the following purposes: $39.1 million for workers’ compensation, including collateral for workers’ compensation bonds; $8.1 million for UMWA retiree health care obligations; $117.1 million for collateral for reclamation surety bonds; and $6.9 million for other miscellaneous obligations. In the last few years, the market terms under which surety bonds can be obtained have generally become less favorable to all mining companies. In the event that additional surety bonds become unavailable, we would seek to secure our obligations with letters of credit, cash deposits or other suitable forms of collateral.

Certain Trends and Uncertainties

Our long-term outlook for the coal markets in the U.S. remains positive. The Energy Information Administration (“EIA”) in its Annual Energy Outlook—2009 forecasts that coal-fired electrical generation will increase by an average annual growth rate of 1.5% through 2015. For 2008, electric power generation from coal decreased 1.1% compared to 2007 as overall U.S. demand for electricity declined during that period. Long-term demand for coal and coal-based electricity generation in the U.S. will likely be driven by various factors such as the declining and rebounding economy, increasing population, increasing demand to power residential electronics and plug-in hybrid vehicles, public demands for affordable electricity, relatively high prices for the alternative fossil fuels of gas and oil for electricity generation, the inability for renewable energy sources such as wind and solar to become the base load source of electric power, geopolitical risks for continuing to import large quantities of global oil and natural gas resources, increasing demand for coal outside the U.S. resulting in increased exports and the relatively abundant steam coal reserves located within the United States. Despite the recent downturn to the U.S. and global economies, the International Monetary Fund’s April 2009 World Economic Outlook (“WEO”) forecasts U.S. average annual GDP to grow between 1.7% and 3.2% from 2010 through 2014.

According to the Ventyx Velocity Suite, a database used by the U.S. Department of Energy to track new coal-fired power plants, there are approximately 16,314 megawatts of new coal-fired electrical generation under construction in the United States. There are an additional 2,562 megawatts near construction and 5,120 megawatts of new coal-fired electrical generating capacity permitted and expected to be constructed. This new capacity will increase the annual coal consumption for electrical generation by an estimated eighty-one million tons, much of which is expected to be supplied from the Powder River Basin in Wyoming. Approximately 28,335 megawatts of additional coal-fired electrical generation has been announced and is in the early stages of permitting and development.

During 2008 coal exports from the U.S. increased significantly in response to strong worldwide demand for coal. The largest increases in international coal demand are from the rapidly growing and industrializing economies of China and India. Due partly to weather-related and infrastructure constraints in Australia and reduced exports from South Africa and other coal exporting countries, the seaborne coal trade struggled to keep up with these increases in demand. Seaborne coal shipments traditionally destined for Europe had been diverted to Asia creating opportunities to increase exports from the United States. Coal export volumes increased nearly 20% in 2007 compared to 2006. Export volumes for 2008 increased by approximately 40% to roughly 84 million tons, levels last seen over a decade ago. Although demand for US export coal will decline in 2009, the EIA expects volumes to remain higher than 2007 levels due to the number of committed tons under contract. According to the WEO, global primary energy demand will grow by more than 41% by 2030, with coal demand rising most in absolute terms and fossil fuels accounting for most of the increase in demand between now and 2030. China and India have contributed more than half the increase in global demand for energy, and over 80% for coal, since 2000. The WEO estimates these two growing economies will contribute more than 50% of the increase in global energy demand and over 85% of the increase in global coal demand through 2030. The WEO has reached a general conclusion that dependence on coal for power rises strongly in countries with emerging economies and relatively large coal reserves, while it stagnates in the more developed nations and nations with smaller coal reserves.

Ultimately, the global demand for and use of coal may be limited by any global treaties which place restrictions on carbon dioxide emissions. As part of the United Nations Framework Convention on Climate Change, representatives from 187 nations met in Bali, Indonesia in December 2007 to discuss a program to limit greenhouse gas emissions after 2012. The United States participated in the conference. The convention adopted what is called the “Bali Action Plan.” The Bali Action Plan contains non-binding commitments, but concludes that “deep cuts in global emissions will be required” and provides a timetable for two years of talks to shape the first formal addendum to the 1992 United Nations Framework Convention on Climate Change treaty since the Kyoto Protocol. The ultimate outcome of the Bali Action Plan, and any treaty or other arrangement ultimately adopted by the United States or other countries, may have a material adverse impact on the global demand for and supply of coal. This is particularly true if cost effective technology for the capture and storage of carbon dioxide is not sufficiently developed.

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Proposed coal-fired electric generating facilities that do not include technologies to capture and store carbon dioxide are facing increasing opposition from environmental groups as well as state and local governments who are concerned with global climate change and uncertain financial impacts of potential greenhouse gas regulations. Coal-fired generating plants incorporating carbon dioxide capture and storage technologies will be more expensive to build than conventional pulverized coal generating plants and the technologies are still in the developmental stages. This dynamic, coupled with the weakened short-term economic outlook, may cause power generating companies to cut back on plans to build coal-fired plants in the near term. Nevertheless, the desire to attain US energy independence suggests the construction of new coal-fired generating facilities is likely to remain a viable option. This desire, coupled with heightened interest in coal gasification and coal liquefaction, is a potential indicator of increasing demand for coal in the United States.

Based on weekly production reporting through March 31, 2009 from the EIA, first quarter year-over-year Appalachian production has declined by approximately 4.5% due to higher costs and decreasing coal demand. Compared to the first quarter of 2008, Western coal production had decreased by approximately 1.5% in the first quarter of 2009. In Central Appalachia, delays with respect to permits to construct valley fills at surface mines are likely to slow the permitting process for surface mining in that region with resultant uncertainties for producers. Average spot market prices for March 2009 for Central Appalachian and Northern Appalachian coals decreased by roughly 40% and 35%, respectively, compared to the same month one year earlier. Average spot market prices for the month of March for Powder River Basin coal are down approximately 30% from the previous year, with the basin offering the least expensive fossil fuel on a dollar per Btu basis. Long-term, the delicate balance of coal supply and increasing coal demand is expected to result in strong, but volatile fundamentals for the U.S. coal industry.

Our revenues depend on the price at which we are able to sell our coal. The current pricing environment for U.S. steam coal production has fallen significantly below the high levels seen during the spring and summer of 2008. Prices for high quality metallurgical coal, used to manufacture coke for steelmaking, have deteriorated in response to decreased worldwide demand for steel.

The worldwide economic slowdown and the current volatility and uncertainty in the credit markets have had an impact on the demand for and price of coal. Weakening global energy fundamentals, including the decline in demand and prices for both natural gas and crude oil have driven spot prices of coal lower in the marketplace. Steel manufacturers are shutting-in capacity due to the lack of near-term visibility around demand for steel for construction, automobile manufacturing and other down-stream products. Steel manufacturers are destocking their current inventories in a move which is further weakening short-term demand for coal. The low price of natural gas is creating further competitive pressure on the demand for steam coal. A protracted economic slowdown could slacken demand for metallurgical and steam coals and could negatively influence pricing in the near-term. Longer-term, coal industry fundamentals remain intact. Coal has been the fastest growing fossil fuel for five consecutive years, and significant additional growth is expected worldwide. The seaborne coal market has grown to nearly 1 billion tons annually, and U.S. exports will be needed to meet worldwide demand. In addition, the idling of coal mines due to weakened market conditions and high costs, and the resulting decrease in production, particularly in Central Appalachia, should help to reduce excessive supply levels. These factors should lead to a tighter market for coal, both globally and in the United States, in the coming years.

Our results of operations are dependent upon the prices we obtain for our coal as well as our ability to improve productivity and control costs. We spend more than $600 million per year to procure goods and services in support of our business activities, excluding capital expenditures. Principal goods and services include maintenance and repair parts and services, electricity, fuel, roof control and support items, explosives, tires, conveyance structure, ventilation supplies and lubricants. We use suppliers and service contractors for a significant portion of our equipment rebuilds and repairs both on- and off-site, as well as for construction and reclamation activities and to support internal computer systems.

The Company’s management continues to aggressively control costs and strives to improve operating performance to mitigate external cost pressures. As with most of our competitors, we are experiencing volatility in operating costs related to fuel, explosives, steel, tires, contract services and healthcare and have taken measures to mitigate the increases in these costs at all operations. Each of our regional mining operations has developed their own supplier bases consistent with local needs. We have a centralized sourcing group for major supplier contract negotiation and administration, for the negotiation and purchase of major capital goods, and to support the business units. The supplier base has been relatively stable for many years, but there has been some consolidation. We are not dependent on any one supplier in any region. We promote competition between suppliers and seek to develop relationships with those suppliers whose focus is on lowering our costs. We seek suppliers who identify and concentrate on implementing continuous improvement opportunities within their area of expertise. To the extent upward pressure on costs exceeds our ability to realize sales increases, or if we experience unanticipated operating or transportation difficulties, our operating margins would be negatively impacted. Employee labor costs have historically increased primarily due to the demands associated with attracting and retaining a workforce, however recent stability in the marketplace has helped ease this situation. We may also continue to experience difficult geologic conditions, delays in obtaining permits, labor shortages, unforeseen equipment problems and shortages of critical materials such as tires and explosives that may result in adverse cost increases and limit our ability to produce at forecasted levels.

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Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements in ITEM I.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Price Risk

We manage our price risk for coal sales through the use of long-term coal supply agreements. As of April 22, 2009, we had sales commitments for approximately 100% of planned shipments for 2009. Uncommitted and unpriced tonnage was 28% and 56% for 2010 and 2011, respectively.

We have exposure to price risk for supplies that are used directly or indirectly in the normal course of production such as diesel fuel, steel and other items such as explosives. We manage our risk for these items through strategic sourcing contracts in normal quantities with our suppliers and may use derivative instruments from time to time, primarily swap contracts with financial institutions, for a certain percentage of our monthly requirements. Swap agreements essentially fix the price paid for our diesel fuel and explosives by requiring us to pay a fixed price and receive a floating price. The discussion below presents the sensitivity of the market value of our financial instruments to selected changes in market rates and commodity prices. The range of changes reflects our view of changes that are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates and prices chosen.

We expect to use approximately 39,000 tons and 51,000 tons of explosives for the remainder of 2009 and in 2010, respectively. As of March 31, 2009, through our derivative swap contracts, we have fixed prices for approximately 72% and 34% of our expected explosive needs for 2009 and 2010, respectively. At March 31, 2009, a $1.00 per MMBTU decrease in the price of natural gas would result in a $0.7 million increase in our expense resulting from natural gas derivatives, which would be offset by a decrease in the cost of our physical explosive purchases.

We expect to use approximately 16,000,000 gallons and 19,500,000 gallons of diesel fuel for the remainder of 2009 and in 2010, respectively. As of March 31, 2009, through our derivative swap contracts and physical forward contracts, we have fixed prices for approximately 85% and 56% of our expected diesel fuel needs for 2009 and 2010, respectively. The average fixed price per swap for diesel fuel hedges is $3.08 per gallon, $1.88 per gallon and $1.97 per gallon for calendar years 2009, 2010 and 2011, respectively. At March 31, 2009, a $5.00 per barrel decrease in the price of oil would result in a $1.1 million increase in our expense resulting from oil derivatives, which would be offset by a decrease in the cost of our physical diesel purchases.

Credit Risk

Our credit risk is primarily with electric power generators and, to a lesser extent, steel producers. Most electric power generators to whom we sell have investment grade credit ratings. Our policy is to independently evaluate each customer’s creditworthiness prior to entering into transactions and to constantly monitor outstanding accounts receivable against established credit limits. When appropriate (as determined by our credit management function), we have taken steps to reduce our credit exposure to customers that do not meet our credit standards or whose credit has deteriorated. These steps include obtaining letters of credit or cash collateral, requiring prepayments for shipments or establishing customer trust accounts held for our benefit in the event of a failure to pay.

Interest Rate Risk

Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. We have exposure to changes in interest rates through our bank term loan and our revolving credit facility. To achieve risk mitigation objectives, we have in the past managed our interest rate exposure through the use of interest rate swaps.

The weighted average interest rate on the outstanding principal of our Senior Secured Credit Facility was 1.73% as of March 31, 2009. A hypothetical 1% increase in interest rates would have increased our interest expense approximately $0.8 million for the three months ended March 31, 2009. As we continue to monitor the interest rate environment in concert with our risk mitigation objectives, consideration is being given to future interest rate risk reduction strategies.

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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 (the “Act”), as amended, is recorded, processed, evaluated, summarized and reported accurately within the time periods specified in the Securities and Exchange Commission’s rules and forms. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective and are designed to (a) ensure that information required to be disclosed by us in reports we file or submit under the Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (b) ensure that information required to be disclosed by us in reports filed or submitted under the Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or that is reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Information required by this Item is contained in Note 16, PART I, ITEM 1 entitled “Commitments and Contingencies” contained elsewhere in this Quarterly Report on Form 10-Q and is incorporated herein by reference.

ITEM 1A. RISK FACTORS.

There have been no material changes from risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2008, filed March 2, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer purchase of equity securities ⁽¹⁾

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (000’s omitted)
January 1, 2009 through January 31, 2009	5,199	$	13.62	-	$	113,587
February 1, 2009 through February 28, 2009	37,041	$	15.94	-	$	113,587
March 1, 2009 through March 31, 2009	38,258	$	15.35	-	$	113,587
	80,498	$	15.51	-	$	113,587

(1) These are shares that were purchased by the Company from employees to satisfy minimum statutory tax withholding upon vesting of restricted stock units.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

(a) None.

(b) None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to vote of security holders during the period covered by this report.

ITEM 5. OTHER INFORMATION.

(a) None.

(b) None.

ITEM 6. EXHIBITS.

The exhibits to this report are listed in the Exhibit Index.

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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 thereunto duly authorized.

Date: May 7, 2009	FOUNDATION COAL HOLDINGS, INC.
	(Registrant)

/s/ JAMES F. ROBERTS

James F. Roberts

Chief Executive Officer and Chairman

(Principal Executive Officer)

/s/ FRANK J. WOOD

Frank J. Wood

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

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Exhibit No.	EXHIBIT INDEX Description of Exhibit
3.1	Third Amended and Restated Certificate of Incorporation of the Company, previously filed as an exhibit to the Company’s Form 10-Q on August 9, 2006, and incorporated by reference.
3.2	Amended and Restated By-laws of the Company, previously filed as an exhibit to the Company’s Form 8-K on May 22, 2006, and incorporated by reference.
4.1	Form of certificate of the Company’s common stock, previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-118427) and incorporated by reference.
4.2	Amended and Restated Stockholders Agreement, dated as of October 4, 2004, by and among the Company, Blackstone FCH Capital Partners IV, L.P., Blackstone Family Investment Partnership IV-A L.P., First Reserve Fund IX, L.P., AMCI Acquisition, LLC and the management stockholders parties thereto, previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-118427) and incorporated by reference.
4.2.1	Termination Agreement, dated as of February 6, 2006, by and among the Company, Blackstone FCH Capital Partners IV, L.P., Blackstone Family Investment Partnership IV-A L.P., First Reserve Fund IX, L.P., AMCI Acquisition, LLC (nka AMCI Acquisition III, LLC), and the management stockholders parties thereto, terminating the Amended and Restated Stockholders Agreement dated as of October 4, 2004, by and among the same parties, previously filed as an exhibit to the Company’s Form 8-K on February 23, 2006 and incorporated by reference.
4.3	Senior Notes Indenture, dated as of July 30, 2004, among Foundation PA Coal Company (nka Foundation PA Coal Company, LLC), the Guarantors named therein and The Bank of New York, as Trustee, previously filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-118427) and incorporated by reference.
4.3.1	Supplemental Indenture dated as of September 6, 2005 among Foundation Mining, LP, a subsidiary of Foundation Coal Corporation, Foundation PA Coal Company, LLC and The Bank of New York, as Trustee, previously filed as an exhibit to the Company’s Form 10-Q on November 14, 2005 and incorporated by reference.
4.3.2	Supplemental Indenture dated as of October 5, 2007, among Foundation PA Coal Terminal, LLC, a subsidiary of Foundation Coal Corporation, Foundation PA Coal Company, LLC and The Bank of New York, as Trustee, filed as an exhibit to the Company’s 10-Q on November 9, 2007 and incorporated by reference..
10.1*	Award Agreement by and among Foundation Coal Holdings, Inc. and James A. Olsen effective January 12, 2009
10.2*	Award Agreement by and among Foundation Coal Holdings, Inc. and Michael R. Peelish effective January 12, 2009
10.3*	Award Agreement by and among Foundation Coal Holdings, Inc. and Greg A. Walker effective January 12, 2009
10.4*	Employment Agreement by and among Foundation Coal Holdings, Inc. and James A. Olsen effective January 1, 2009
10.5*	Employment Agreement by and among Foundation Coal Corporation and Michael R. Peelish effective January 1, 2009
10.6*	Employment Agreement by and among Foundation Coal Corporation and Greg A. Walker effective January 1, 2009
10.7*	Form of Independent Directors Initial Restricted Stock Unit Agreement
10.8*	Form of Independent Directors Annual Restricted Stock Unit Agreement
31.1*	Certification of periodic report by the Company’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of periodic report by the Company’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of periodic report by the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of periodic report by the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

38

EX-10.1

Exhibit 10.1

FOUNDATION COAL HOLDINGS, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

AWARD AGREEMENT

THIS AGREEMENT, is made effective as of January 12, 2009 (the “Award Date”), between Foundation Coal Holdings, Inc. (the “Company”) and James A. Olsen (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that the Participant be awarded the Restricted Stock Units, Cash Performance Units, and Cash Upside Units provided for herein pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1.        Definitions.    Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

 (a) Actual EBITDA:  “EBITDA” as defined in the Credit Agreement dated as of July 30, 2004 by and among Foundation PA Coal Company, as borrower, FC 2 Corp. and Foundation Coal Corporation, as guarantors, and the lenders named therein, as amended and as in effect on the date hereof (the “Credit Agreement”). More specifically defined as income (or loss) from continuing operations, plus interest expense, net of interest income, income tax expense (benefit), accretion on asset retirement obligations, and depreciation, depletion and amortization plus or minus other adjustments as specified in the Credit Agreement.

 (b) Actual Free Cash Flow:  In respect of a fiscal year, EBITDA less the sum of capital expenditures as set forth in the Company’s unaudited financial statements; provided that the Committee may make such equitable adjustments to capital expenditures as it reasonably deems to be appropriate in order to achieve the intention of this Agreement after giving effect to significant events including, without limitation, operational circumstances, acquisitions, dispositions, mergers or similar transactions.

 (c) Cash Performance Units:    Collectively, the EBITDA Cash Performance Units and the FCF Cash Performance Units.

Senior Manager - Long Term Incentive

Award Agreement

 (d) Cash Performance Upside Unit.  Collectively, the EBITDA Cash Performance Upside Units and the FCF Cash Performance Upside Units.

 (e) Cash Upside Units:  Collectively, the EBITDA Cash Upside Units and the FCF Cash Upside Units.

 (f) Cash-type Units.  Collectively, the EBITDA Cash Performance Units, FCF Cash Performance Units, EBITDA Cash Performance Upside Units, FCF Cash Performance Upside Units, EBITDA Cash Upside Units, and FCF Cash Upside Units,

 (g) Disability:  Participant becomes physically or mentally incapacitated so as to be unable to perform the essential functions of Participant’s duties of Employment.

 (h) EBITDA Performance Date:  Each of December 31, 2009, December 31, 2010 and December 31, 2011. EBITDA Restricted Stock Units, EBITDA Cash Performance Units, EBITDA Cash Performance Upside Units, and EBITDA Cash Upside Units earned on these dates do not vest until February 27, 2012.

 (i) EBITDA Restricted Stock Unit:  A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(b) of this Agreement.

 (j) EBITDA Cash Performance Unit:  A Cash Performance Unit with respect to which the terms and conditions are set forth in Section 3(c) of this Agreement.

 (k) EBITDA Cash Performance Upside Unit.  A Cash Performance Upside Unit with respect to which the terms and conditions are set forth in Section 3(d) of this Agreement.

 (l) EBITDA Cash Upside Unit:  A Cash Upside Unit with respect to which the terms and conditions are set forth in Section 3(e) of this Agreement.

 (m) Earned Portion:  At any time, the portion of the EBITDA or FCF Restricted Stock Units, EBITDA or FCF Cash Performance Units, EBITDA or FCF Cash Performance Upside Units, and EBITDA or FCF Cash Upside Units which have become earned, as described in Section 3 of this Agreement.

 (n) Employment.  The period from the date of hire to the date of termination as determined by the policies and practices administered solely by the Company’s human resources department.

 (o) FCF Performance Date:  Each of December 31, 2009, December 31, 2010 and December 31, 2011. FCF Restricted Stock Units, FCF Cash Performance Units, FCF Cash Performance Upside Units, and FCF Cash Upside Units earned on these dates do not vest until February 27, 2012.

 (p) FCF Restricted Stock Unit:  A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(f) of this Agreement.

Senior Manager - Long Term Incentive Award Agreement 2

 (q) FCF Cash Performance Unit:  A Cash Performance Unit with respect to which the terms and conditions are set forth in Section 3(g) of this Agreement.

 (r) FCF Cash Performance Upside Unit.  A Cash Performance Upside Unit with respect to which the terms and conditions are set forth in Section 3(h) of this Agreement.

 (s) FCF Cash Upside Unit:   A Cash Upside Unit with respect to which the terms and conditions are set forth in Section 3(i) of this Agreement.

 (t) Plan:    The Foundation Coal Holdings, Inc. Amended and Restated 2004 Stock Incentive Plan, as the same may be amended, supplemented or modified from time to time.

 (u)  Restricted Stock Units:  Collectively, the EBITDA Restricted Stock Units and the FCF Restricted Stock Units.

 (v) Retirement:    Voluntary termination by the Participant on or after the attainment of age 55.

 (w) Severance. Involuntary termination of the Participant by the Company for reasons unrelated to the Participant individually, including but not limited to job elimination, consolidation of departments, offices, or business units, reorganization, mergers, or closing of operations.

 (x) Target Free Cash Flow: The Target Free Cash Flow shall be established each budget year by the Board of Directors of the Company based on the Company’s annual budget and the Plan shall be administered by the Compensation Committee accordingly.

 (y) Target EBITDA: The Target EBITDA shall be established each budget year by the Board of Directors of the Company based on the Company’s annual budget and the Plan shall be administered by the Compensation Committee accordingly.

 (z) Time Performance Date: Each of December 31, 2009, December 31, 2010 and December 31, 2011. Time Restricted Stock Units earned on these dates vest on January 1, 2010, January 1, 2011 and January 1, 2012, respectively.

 (aa)    Time Restricted Stock Units: A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(a) of this Agreement.

2.        Award of Restricted Stock Units, Cash-type Units. The Company hereby awards to the Participant, subject to the terms and conditions of this Agreement and the Plan, 8,145 Time Restricted Stock Units, 4,176 EBITDA Restricted Stock Units, 4,176 FCF Restricted Stock Units, 1,935 EBITDA Cash Performance Units, 1,935 FCF Cash Performance Units, 0 EBITDA Cash Performance Upside Units, 0 FCF Cash Performance Upside Units, and 0 EBITDA Cash Upside Units and 0 FCF Cash Upside Units. The Participant shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in Shares in respect of the Restricted Stock Units until such Restricted Stock Units have vested and been distributed to the Participant in the form of Shares. A Restricted Stock Unit is an unfunded, unsecured right of

Senior Manager - Long Term Incentive Award Agreement 3

the Participant to receive a share of the Company’s common stock, par value $0.01 per share (the “Shares”). The Participant shall not possess any incidents of ownership in Units in respect of the Cash-type Units until such Cash-type Units have vested and been distributed to the Participant in the form of Units which are immediately converted into cash. Each Cash-type Unit is equal to $14.02 and is an unfunded, unsecured right of the Participant to receive a net cash payment equal to the number of Cash-type Units vested multiplied by $14.02 minus all applicable taxes. (the Cash-type Units are also referred to as “Units”).

3.        Earning of the Restricted Stock Units, Cash-type Units.

 (a) Time Restricted Stock Units.     Subject to the Participant’s continued Employment with the Company and its Affiliates (except as provided in Section 3(k)) through the applicable Time Performance Date, the Time Restricted Stock Units shall be earned with respect to one-third of the Shares on December 31, 2009 and one-third on December 31, 2010 and one-third on December 31, 2011.

 (b) EBITDA Restricted Stock Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Restricted Stock Units shall be earned with respect to one-third of the Shares subject to the EBITDA Restricted Stock Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date equals the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Restricted Stock Units can be earned is one hundred percent (100%) of Actual EBITDA. Above this target level of performance, the EBITDA Cash Upside Units will be earned as explained in Section 3(e). The minimum level of performance at which EBITDA Restricted Stock Units can be earned is eighty-five percent (85%) of Actual EBITDA. At this minimum level of performance, fifty percent (50%) of the one-third of the EBITDA Restricted Stock Units can be earned on each EBITDA Performance Date. Below the minimum level of performance, zero percent (0%) EBITDA Restricted Stock Units can be earned. EBITDA Restricted Stock Units will be straight line interpolated for performance falling between target and minimum levels.

 (c) EBITDA Cash Performance Units.   Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Performance Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Performance Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date equals the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Performance Units can be earned is one hundred percent (100%) of Actual EBITDA. Above this target level of performance, the EBITDA Cash Performance Upside Units will be earned as explained in Section 3(d). The minimum level of performance at which EBITDA Cash Performance Units can be earned is eighty-five percent (85%) of Actual EBITDA. At this minimum level of performance, fifty percent (50%) of the one-third of the EBITDA Cash Performance Units can be earned on each EBITDA Performance Date. Below the minimum level of performance, zero percent (0%) EBITDA Cash Performance Units can be earned. EBITDA Cash Performance Units will be straight line interpolated for performance falling between target and minimum levels.

Senior Manager - Long Term Incentive Award Agreement 4

 (d) EBITDA Cash Performance Upside Units.      Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Performance Upside Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Performance Upside Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Performance Upside Units can be earned is one hundred twenty percent (120%) of Actual EBITDA. At this maximum level of performance, fifty percent (50%) of the one-third of the EBITDA Cash Performance Units earned at target performance level can be earned as EBITDA Cash Performance Upside Units on each EBITDA Performance Date. Above this maximum level of performance, zero percent (0%) EBITDA Cash Performance Upside Units can be earned. The minimum level of performance at which EBITDA Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual EBITDA. EBITDA Cash Performance Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance.

 (e) EBITDA Cash Upside Unit.  Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Upside Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Upside Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Upside Units can be earned is one hundred twenty percent (120%) of Actual EBITDA. At this maximum level of performance, fifty percent (50%) of the one-third of the EBITDA Restricted Stock Units earned at target performance level can be earned as EBITDA Cash Upside Units on each EBITDA Performance Date. Above this maximum level of performance, zero percent (0%) EBITDA Cash Upside Units can be earned. EBITDA Cash Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance. The minimum level of performance at which EBITDA Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual EBITDA.

 (f) FCF Restricted Stock Units.      Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Restricted Stock Units shall be earned with respect to one-third of the Shares subject to the FCF Restricted Stock Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date equals the Target Free Cash Flow for such fiscal year. The maximum level of performance at which FCF Restricted Stock Units can be earned is one hundred percent (100%) of Actual FCF. Above this target level of performance, the FCF Cash Upside Units will be earned as explained in Section 3(h). The minimum level of performance at which FCF Restricted Stock Units can be earned is eighty-five percent (85%) of Actual FCF. At the minimum level of performance, fifty percent (50%) of the one-third of the FCF Restricted Stock Units can be earned on each FCF Performance Date. Below this minimum level of performance, zero percent (0%) FCF Restricted Stock Units can be earned. FCF Restricted Stock Units will be straight line interpolated for performance falling between target and minimum levels.

Senior Manager - Long Term Incentive Award Agreement 5

 (g) FCF Cash Performance Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Performance Units shall be earned with respect to one-third of the Units subject to the FCF Cash Performance Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date equals the Target Free Cash Flow for such fiscal year. The maximum level of performance at which FCF Cash Performance Units can be earned is one hundred percent (100%) of Actual FCF. Above this target level of performance, the FCF Cash Performance Upside Units will be earned as explained in Section 3(h). The minimum level of performance at which FCF Cash Performance Units can be earned is eighty-five percent (85%) of Actual FCF. At this minimum level of performance, fifty percent (50%) of the one-third of the FCF Cash Performance Units can be earned on each FCF Performance Date. Below the minimum level of performance, zero percent (0%) FCF Cash Performance Units can be earned. FCF Cash Performance Units will be straight line interpolated for performance falling between target and minimum levels.

 (h) FCF Cash Performance Upside Units.  Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Performance Upside Units shall be earned with respect to one-third of the Units subject to the FCF Cash Performance Upside Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target FCF for such fiscal year. The maximum level of performance at which FCF Cash Performance Upside Units can be earned is one hundred twenty percent (120%) of Actual FCF. At this maximum level of performance, fifty percent (50%) of the one-third of the FCF Cash Performance Units earned at target performance level can be earned as FCF Cash Performance Upside Units on each FCF Performance Date. Above this maximum level of performance, zero percent (0%) FCF Cash Performance Upside Units can be earned. The minimum level of performance at which FCF Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual FCF. FCF Cash Performance Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance.

 (i) FCF Cash Upside Units.  Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Upside Units shall be earned with respect to one-third of the Units subject to the FCF Cash Upside Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target FCF for such fiscal year. The maximum level of performance at which FCF Cash Upside Units can be earned is one hundred twenty percent (120%) of Actual FCF. At this maximum level of performance, fifty percent (50%) of the one-third of the FCF Restricted Stock Units can be earned as FCF Cash Upside Units on each FCF Performance Date. Above this maximum level of performance, zero percent (0%) FCF Cash Upside Units can be earned. FCF Cash Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance. The minimum level of performance at which FCF Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual FCF.

Senior Manager - Long Term Incentive Award Agreement 6

 (j)  Catch-Up.    Notwithstanding the foregoing and subject to the Participant’s continued Employment with the Company or one of its Affiliates, if Actual EBITDA and Actual FCF do not exceed the applicable Target EBITDA and Target FCF respectively with respect to fiscal years 1 or 2 (a “Missed Year”) but the sum of the Actual EBITDA or Actual FCF for the Missed Year and the subsequent fiscal year (the “Excess Year”) equals or exceeds the sum of the applicable Target EBITDA or Target FCF for such Missed Year and Excess Year, then the EBITDA and FCF Restricted Stock Units and the EBITDA and FCF Cash Performance Units shall become earned with respect to one-sixth (1/6) the Shares subject to the applicable Performance Target in respect of such Missed Year and with respect to one-sixth (1/6) the Shares and Units subject to the applicable Performance Target in respect of such Excess Year.

 (j) Retirement, Death, Disability, or Severance. Notwithstanding the foregoing and notwithstanding any contrary provisions in Section 4 below, in the event that the Participant’s Employment terminates due to death, Disability, Retirement, or Severance as defined in this Agreement, the Participant shall be deemed earned in the EBITDA and FCF Restricted Stock Units, the EBITDA and FCF Cash Performance Units, the EBITDA and FCF Cash Performance Upside Units, and the EBITDA and FCF Cash Upside Units that would have been earned on the respective EBITDA and FCF Performance Dates prior to Participant’s termination. These earned EBITDA and FCF Restricted Stock Units, EBITDA and FCF Cash-type Units will become vested on February 27, 2012 and the Earned Portion of the EBITDA and FCF Restricted Stock Units shall be issued or transferred to the Participant, or the Participant’s estate in the event of death, pursuant to Section 4(a). In the case of Cash-type Units, the Earned Portion of the EBITDA and FCF Cash-type Units shall be converted to a cash payment and transferred to the Participant, or the Participant’s estate in the event of death, pursuant to Section 4(a).

 (k) Change in Control. Upon a Change in Control, the Time Restricted Stock Units shall, to the extent not previously cancelled or expired, immediately become one hundred percent (100%) earned and vested. Upon a Change in Control, the Performance Restricted Stock Units shall, to the extent not previously cancelled or expired, immediately become earned and vested with respect to one hundred percent (100%) of the number of Restricted Stock Units subject to the Performance Targets. Upon a Change in Control, the Cash-type Units shall, to the extent not previously cancelled or expired, immediately become earned and vested with respect to one hundred percent (100%) of the number of Cash-type Units subject to the Performance Targets.

 4.      Delivery of Shares Underlying the Restricted Stock Units and Cash Payments.

(a) In General.  Unless earlier cancelled pursuant to Section 4(b) below, on or about each of January 1, 2010, January 1, 2011 and January 1, 2012, the Company shall issue or cause there to be transferred to the Participant a number of Shares equal to the Earned Portion of the Time Restricted Stock Units awarded to the Participant under this Agreement. Further, unless earlier cancelled pursuant to Section 4(b) below, on or about February 27, 2012, the Company shall issue or cause there to be transferred to the Participant a number

Senior Manager - Long Term Incentive Award Agreement 7

of Shares equal to the Earned Portion of the EBITDA Restricted Stock Units and the FCF Restricted Stock Units awarded to the Participant under this Agreement and all the unearned Restricted Stock Units subject to this Agreement shall be cancelled. Further again, unless earlier cancelled pursuant to Section 4(b) below, on or about February 27, 2012, the Company shall pay to the Participant an amount equal to the Earned Portion of the Cash-type Units awarded to the Participant under this Agreement multiplied by $14.02, less applicable taxes, and all the unearned Cash-type Units subject to this Agreement shall be cancelled.

 (b) Termination of Employment.   If the Participant’s Employment terminates for any reason, the Restricted Stock Units, Cash-type Units, to the extent not then earned, be deemed to be immediately cancelled by the Company without any payment or other consideration. Any such cancellation shall be self-executing and the Company shall not be required to take any action to effectuate the same.

 (c) Registration or Qualification.   Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, a Restricted Stock Unit may not be delivered prior to the completion of any registration or qualification of the Restricted Stock Units or the Shares to which they relate under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable.

 (d) Certificates.   As soon as practicable following the vesting of the Shares subject to the Restricted Stock Units, the Company shall issue Shares (electronically) in the Participant’s name for such Shares. In the event the Company issues a certificate at the Participant’s request, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificate to the Participant, any loss by the Participant of the certificate, or any mistakes or errors in the issuance of the certificate or in the certificate itself.

5.        Legend on Certificates.   The certificates representing the Shares issued to the Participant in respect of the Restricted Stock Units may be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws or the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

6.        Transferability.     Unless otherwise determined by the Committee, a Restricted Stock Unit, a Cash Performance Unit, and a Cash Upside Unit may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary by will or by the laws of descent and distribution shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

Senior Manager - Long Term Incentive Award Agreement 8

7.        Withholding.    Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company or its Affiliate shall have the right to withhold from any transfer of the Shares or payments due on the Units made with respect to the Restricted Stock Units or Cash-type Units, any applicable withholding taxes in respect of the Restricted Stock Units or Cash-type Units, or any payment or transfer with respect to the Restricted Stock Units or Cash-type Units, or under the Plan and to take such action as may be necessary as determined in their sole discretion to satisfy all obligations for the payment of such taxes.

8.        Securities Laws.    Upon the acquisition of any Shares in respect of the Restricted Stock Units, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws, with applicable provisions of the Plan, or with this Agreement.

9.        Notices.    Any notice under this Agreement shall be addressed to the Company in care of its General Counsel at 999 Corporate Boulevard, Suite 300, Linthicum Heights, Maryland, 21090 and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

10.        Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws.

11.        Restricted Stock Units and Cash-type Units Subject to the Plan.    By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Restricted Stock Units and any Shares received in respect of the Restricted Stock Units are subject to the Plan. The Cash Performance Units, Cash Performance Upside Units, and Cash Upside Units and any Units received in respect of these Cash-type Units are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

12.        Counterparts.     This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

FOUNDATION COAL HOLDINGS, INC.

By:                                                                       

  Its: Sr. VP Safety and Human Resources

Date:  January 12, 2009

James A. Olsen

Date:                                                                   

Senior Manager - Long Term Incentive Award Agreement 10

EX-10.2

Exhibit 10.2

FOUNDATION COAL HOLDINGS, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

AWARD AGREEMENT

THIS AGREEMENT, is made effective as of January 12, 2009 (the “Award Date”), between Foundation Coal Holdings, Inc. (the “Company”) and Michael R. Peelish (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that the Participant be awarded the Restricted Stock Units, Cash Performance Units, and Cash Upside Units provided for herein pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1.      Definitions.    Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

 (a) Actual EBITDA: “EBITDA” as defined in the Credit Agreement dated as of July 30, 2004 by and among Foundation PA Coal Company, as borrower, FC 2 Corp. and Foundation Coal Corporation, as guarantors, and the lenders named therein, as amended and as in effect on the date hereof (the “Credit Agreement”). More specifically defined as income (or loss) from continuing operations, plus interest expense, net of interest income, income tax expense (benefit), accretion on asset retirement obligations, and depreciation, depletion and amortization plus or minus other adjustments as specified in the Credit Agreement.

 (b) Actual Free Cash Flow: In respect of a fiscal year, EBITDA less the sum of capital expenditures as set forth in the Company’s unaudited financial statements; provided that the Committee may make such equitable adjustments to capital expenditures as it reasonably deems to be appropriate in order to achieve the intention of this Agreement after giving effect to significant events including, without limitation, operational circumstances, acquisitions, dispositions, mergers or similar transactions.

 (c) Cash Performance Units:    Collectively, the EBITDA Cash Performance Units and the FCF Cash Performance Units.

Senior Manager - Long Term Incentive

Award Agreement

 (d) Cash Performance Upside Unit. Collectively, the EBITDA Cash Performance Upside Units and the FCF Cash Performance Upside Units.

 (e) Cash Upside Units: Collectively, the EBITDA Cash Upside Units and the FCF Cash Upside Units.

 (f) Cash-type Units. Collectively, the EBITDA Cash Performance Units, FCF Cash Performance Units, EBITDA Cash Performance Upside Units, FCF Cash Performance Upside Units, EBITDA Cash Upside Units, and FCF Cash Upside Units,

 (g) Disability: Participant becomes physically or mentally incapacitated so as to be unable to perform the essential functions of Participant’s duties of Employment.

 (h) EBITDA Performance Date: Each of December 31, 2009, December 31, 2010 and December 31, 2011. EBITDA Restricted Stock Units, EBITDA Cash Performance Units, EBITDA Cash Performance Upside Units, and EBITDA Cash Upside Units earned on these dates do not vest until February 27, 2012.

 (i) EBITDA Restricted Stock Unit: A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(b) of this Agreement.

 (j) EBITDA Cash Performance Unit: A Cash Performance Unit with respect to which the terms and conditions are set forth in Section 3(c) of this Agreement.

 (k) EBITDA Cash Performance Upside Unit. A Cash Performance Upside Unit with respect to which the terms and conditions are set forth in Section 3(d) of this Agreement.

 (l) EBITDA Cash Upside Unit: A Cash Upside Unit with respect to which the terms and conditions are set forth in Section 3(e) of this Agreement.

 (m)Earned Portion: At any time, the portion of the EBITDA or FCF Restricted Stock Units, EBITDA or FCF Cash Performance Units, EBITDA or FCF Cash Performance Upside Units, and EBITDA or FCF Cash Upside Units which have become earned, as described in Section 3 of this Agreement.

 (n) Employment. The period from the date of hire to the date of termination as determined by the policies and practices administered solely by the Company’s human resources department.

 (o) FCF Performance Date: Each of December 31, 2009, December 31, 2010 and December 31, 2011. FCF Restricted Stock Units, FCF Cash Performance Units, FCF Cash Performance Upside Units, and FCF Cash Upside Units earned on these dates do not vest until February 27, 2012.

 (p) FCF Restricted Stock Unit: A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(f) of this Agreement.

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 (q) FCF Cash Performance Unit: A Cash Performance Unit with respect to which the terms and conditions are set forth in Section 3(g) of this Agreement.

 (r) FCF Cash Performance Upside Unit. A Cash Performance Upside Unit with respect to which the terms and conditions are set forth in Section 3(h) of this Agreement.

 (s) FCF Cash Upside Unit: A Cash Upside Unit with respect to which the terms and conditions are set forth in Section 3(i) of this Agreement.

 (t) Plan: The Foundation Coal Holdings, Inc. Amended and Restated 2004 Stock Incentive Plan, as the same may be amended, supplemented or modified from time to time.

 (u) Restricted Stock Units: Collectively, the EBITDA Restricted Stock Units and the FCF Restricted Stock Units.

 (v) Retirement:    Voluntary termination by the Participant on or after the attainment of age 55.

 (w)Severance. Involuntary termination of the Participant by the Company for reasons unrelated to the Participant individually, including but not limited to job elimination, consolidation of departments, offices, or business units, reorganization, mergers, or closing of operations.

 (x) Target Free Cash Flow: The Target Free Cash Flow shall be established each budget year by the Board of Directors of the Company based on the Company’s annual budget and the Plan shall be administered by the Compensation Committee accordingly.

 (y) Target EBITDA: The Target EBITDA shall be established each budget year by the Board of Directors of the Company based on the Company’s annual budget and the Plan shall be administered by the Compensation Committee accordingly.

 (z) Time Performance Date: Each of December 31, 2009, December 31, 2010 and December 31, 2011. Time Restricted Stock Units earned on these dates vest on January 1, 2010, January 1, 2011 and January 1, 2012, respectively.

 (aa)    Time Restricted Stock Units: A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(a) of this Agreement.

2.        Award of Restricted Stock Units, Cash-type Units. The Company hereby awards to the Participant, subject to the terms and conditions of this Agreement and the Plan, 8,820 Time Restricted Stock Units, 4,521 EBITDA Restricted Stock Units, 4,521 FCF Restricted Stock Units, 2,097 EBITDA Cash Performance Units, 2,097 FCF Cash Performance Units, 0 EBITDA Cash Performance Upside Units, 0 FCF Cash Performance Upside Units, and 0 EBITDA Cash Upside Units and 0 FCF Cash Upside Units. The Participant shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in Shares in respect of the Restricted Stock Units until such Restricted Stock Units have vested and been distributed to the Participant in the form of Shares. A Restricted Stock Unit is an unfunded, unsecured right of

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the Participant to receive a share of the Company’s common stock, par value $0.01 per share (the “Shares”). The Participant shall not possess any incidents of ownership in Units in respect of the Cash-type Units until such Cash-type Units have vested and been distributed to the Participant in the form of Units which are immediately converted into cash. Each Cash-type Unit is equal to $14.02 and is an unfunded, unsecured right of the Participant to receive a net cash payment equal to the number of Cash-type Units vested multiplied by $14.02 minus all applicable taxes. (the Cash-type Units are also referred to as “Units”).

3.        Earning of the Restricted Stock Units, Cash-type Units.

 (a) Time Restricted Stock Units.    Subject to the Participant’s continued Employment with the Company and its Affiliates (except as provided in Section 3(k)) through the applicable Time Performance Date, the Time Restricted Stock Units shall be earned with respect to one-third of the Shares on December 31, 2009 and one-third on December 31, 2010 and one-third on December 31, 2011.

 (b) EBITDA Restricted Stock Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Restricted Stock Units shall be earned with respect to one-third of the Shares subject to the EBITDA Restricted Stock Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date equals the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Restricted Stock Units can be earned is one hundred percent (100%) of Actual EBITDA. Above this target level of performance, the EBITDA Cash Upside Units will be earned as explained in Section 3(e). The minimum level of performance at which EBITDA Restricted Stock Units can be earned is eighty-five percent (85%) of Actual EBITDA. At this minimum level of performance, fifty percent (50%) of the one-third of the EBITDA Restricted Stock Units can be earned on each EBITDA Performance Date. Below the minimum level of performance, zero percent (0%) EBITDA Restricted Stock Units can be earned. EBITDA Restricted Stock Units will be straight line interpolated for performance falling between target and minimum levels.

 (c) EBITDA Cash Performance Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Performance Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Performance Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date equals the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Performance Units can be earned is one hundred percent (100%) of Actual EBITDA. Above this target level of performance, the EBITDA Cash Performance Upside Units will be earned as explained in Section 3(d). The minimum level of performance at which EBITDA Cash Performance Units can be earned is eighty-five percent (85%) of Actual EBITDA. At this minimum level of performance, fifty percent (50%) of the one-third of the EBITDA Cash Performance Units can be earned on each EBITDA Performance Date. Below the minimum level of performance, zero percent (0%) EBITDA Cash Performance Units can be earned. EBITDA Cash Performance Units will be straight line interpolated for performance falling between target and minimum levels.

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 (d) EBITDA Cash Performance Upside Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Performance Upside Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Performance Upside Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Performance Upside Units can be earned is one hundred twenty percent (120%) of Actual EBITDA. At this maximum level of performance, fifty percent (50%) of the one-third of the EBITDA Cash Performance Units earned at target performance level can be earned as EBITDA Cash Performance Upside Units on each EBITDA Performance Date. Above this maximum level of performance, zero percent (0%) EBITDA Cash Performance Upside Units can be earned. The minimum level of performance at which EBITDA Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual EBITDA. EBITDA Cash Performance Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance.

 (e) EBITDA Cash Upside Unit. Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Upside Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Upside Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Upside Units can be earned is one hundred twenty percent (120%) of Actual EBITDA. At this maximum level of performance, fifty percent (50%) of the one-third of the EBITDA Restricted Stock Units earned at target performance level can be earned as EBITDA Cash Upside Units on each EBITDA Performance Date. Above this maximum level of performance, zero percent (0%) EBITDA Cash Upside Units can be earned. EBITDA Cash Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance. The minimum level of performance at which EBITDA Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual EBITDA.

 (f) FCF Restricted Stock Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Restricted Stock Units shall be earned with respect to one-third of the Shares subject to the FCF Restricted Stock Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date equals the Target Free Cash Flow for such fiscal year. The maximum level of performance at which FCF Restricted Stock Units can be earned is one hundred percent (100%) of Actual FCF. Above this target level of performance, the FCF Cash Upside Units will be earned as explained in Section 3(h). The minimum level of performance at which FCF Restricted Stock Units can be earned is eighty-five percent (85%) of Actual FCF. At the minimum level of performance, fifty percent (50%) of the one-third of the FCF Restricted Stock Units can be earned on each FCF Performance Date. Below this minimum level of performance, zero percent (0%) FCF Restricted Stock Units can be earned. FCF Restricted Stock Units will be straight line interpolated for performance falling between target and minimum levels.

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 (g) FCF Cash Performance Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Performance Units shall be earned with respect to one-third of the Units subject to the FCF Cash Performance Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date equals the Target Free Cash Flow for such fiscal year. The maximum level of performance at which FCF Cash Performance Units can be earned is one hundred percent (100%) of Actual FCF. Above this target level of performance, the FCF Cash Performance Upside Units will be earned as explained in Section 3(h). The minimum level of performance at which FCF Cash Performance Units can be earned is eighty-five percent (85%) of Actual FCF. At this minimum level of performance, fifty percent (50%) of the one-third of the FCF Cash Performance Units can be earned on each FCF Performance Date. Below the minimum level of performance, zero percent (0%) FCF Cash Performance Units can be earned. FCF Cash Performance Units will be straight line interpolated for performance falling between target and minimum levels.

 (h) FCF Cash Performance Upside Units. Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Performance Upside Units shall be earned with respect to one-third of the Units subject to the FCF Cash Performance Upside Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target FCF for such fiscal year. The maximum level of performance at which FCF Cash Performance Upside Units can be earned is one hundred twenty percent (120%) of Actual FCF. At this maximum level of performance, fifty percent (50%) of the one-third of the FCF Cash Performance Units earned at target performance level can be earned as FCF Cash Performance Upside Units on each FCF Performance Date. Above this maximum level of performance, zero percent (0%) FCF Cash Performance Upside Units can be earned. The minimum level of performance at which FCF Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual FCF. FCF Cash Performance Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance.

 (i) FCF Cash Upside Units. Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Upside Units shall be earned with respect to one-third of the Units subject to the FCF Cash Upside Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target FCF for such fiscal year. The maximum level of performance at which FCF Cash Upside Units can be earned is one hundred twenty percent (120%) of Actual FCF. At this maximum level of performance, fifty percent (50%) of the one-third of the FCF Restricted Stock Units can be earned as FCF Cash Upside Units on each FCF Performance Date. Above this maximum level of performance, zero percent (0%) FCF Cash Upside Units can be earned. FCF Cash Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance. The minimum level of performance at which FCF Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual FCF.

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 (j)  Catch-Up.    Notwithstanding the foregoing and subject to the Participant’s continued Employment with the Company or one of its Affiliates, if Actual EBITDA and Actual FCF do not exceed the applicable Target EBITDA and Target FCF respectively with respect to fiscal years 1 or 2 (a “Missed Year”) but the sum of the Actual EBITDA or Actual FCF for the Missed Year and the subsequent fiscal year (the “Excess Year”) equals or exceeds the sum of the applicable Target EBITDA or Target FCF for such Missed Year and Excess Year, then the EBITDA and FCF Restricted Stock Units and the EBITDA and FCF Cash Performance Units shall become earned with respect to one-sixth (1/6) the Shares subject to the applicable Performance Target in respect of such Missed Year and with respect to one-sixth (1/6) the Shares and Units subject to the applicable Performance Target in respect of such Excess Year.

 (j)  Retirement, Death, Disability, or Severance.    Notwithstanding the foregoing and notwithstanding any contrary provisions in Section 4 below, in the event that the Participant’s Employment terminates due to death, Disability, Retirement, or Severance as defined in this Agreement, the Participant shall be deemed earned in the EBITDA and FCF Restricted Stock Units, the EBITDA and FCF Cash Performance Units, the EBITDA and FCF Cash Performance Upside Units, and the EBITDA and FCF Cash Upside Units that would have been earned on the respective EBITDA and FCF Performance Dates prior to Participant’s termination. These earned EBITDA and FCF Restricted Stock Units, EBITDA and FCF Cash-type Units will become vested on February 27, 2012 and the Earned Portion of the EBITDA and FCF Restricted Stock Units shall be issued or transferred to the Participant, or the Participant’s estate in the event of death, pursuant to Section 4(a). In the case of Cash-type Units, the Earned Portion of the EBITDA and FCF Cash-type Units shall be converted to a cash payment and transferred to the Participant, or the Participant’s estate in the event of death, pursuant to Section 4(a).

 (k)  Change in Control.    Upon a Change in Control, the Time Restricted Stock Units shall, to the extent not previously cancelled or expired, immediately become one hundred percent (100%) earned and vested. Upon a Change in Control, the Performance Restricted Stock Units shall, to the extent not previously cancelled or expired, immediately become earned and vested with respect to one hundred percent (100%) of the number of Restricted Stock Units subject to the Performance Targets. Upon a Change in Control, the Cash-type Units shall, to the extent not previously cancelled or expired, immediately become earned and vested with respect to one hundred percent (100%) of the number of Cash-type Units subject to the Performance Targets.

4.        Delivery of Shares Underlying the Restricted Stock Units and Cash Payments.

(a)  In General.    Unless earlier cancelled pursuant to Section 4(b) below, on or about each of January 1, 2010, January 1, 2011 and January 1, 2012, the Company shall issue or cause there to be transferred to the Participant a number of Shares equal to the Earned Portion of the Time Restricted Stock Units awarded to the Participant under this Agreement. Further, unless earlier cancelled pursuant to Section 4(b) below, on or about February 27, 2012, the Company shall issue or cause there to be transferred to the Participant a number

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of Shares equal to the Earned Portion of the EBITDA Restricted Stock Units and the FCF Restricted Stock Units awarded to the Participant under this Agreement and all the unearned Restricted Stock Units subject to this Agreement shall be cancelled. Further again, unless earlier cancelled pursuant to Section 4(b) below, on or about February 27, 2012, the Company shall pay to the Participant an amount equal to the Earned Portion of the Cash-type Units awarded to the Participant under this Agreement multiplied by $14.02, less applicable taxes, and all the unearned Cash-type Units subject to this Agreement shall be cancelled.

 (b)    Termination of Employment.    If the Participant’s Employment terminates for any reason, the Restricted Stock Units, Cash-type Units, to the extent not then earned, be deemed to be immediately cancelled by the Company without any payment or other consideration. Any such cancellation shall be self-executing and the Company shall not be required to take any action to effectuate the same.

 (c)    Registration or Qualification.    Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, a Restricted Stock Unit may not be delivered prior to the completion of any registration or qualification of the Restricted Stock Units or the Shares to which they relate under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable.

 (d)    Certificates.    As soon as practicable following the vesting of the Shares subject to the Restricted Stock Units, the Company shall issue Shares (electronically) in the Participant’s name for such Shares. In the event the Company issues a certificate at the Participant’s request, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificate to the Participant, any loss by the Participant of the certificate, or any mistakes or errors in the issuance of the certificate or in the certificate itself.

5.        Legend on Certificates.    The certificates representing the Shares issued to the Participant in respect of the Restricted Stock Units may be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws or the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

6.        Transferability.    Unless otherwise determined by the Committee, a Restricted Stock Unit, a Cash Performance Unit, and a Cash Upside Unit may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary by will or by the laws of descent and distribution shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

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7.        Withholding.    Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company or its Affiliate shall have the right to withhold from any transfer of the Shares or payments due on the Units made with respect to the Restricted Stock Units or Cash-type Units, any applicable withholding taxes in respect of the Restricted Stock Units or Cash-type Units, or any payment or transfer with respect to the Restricted Stock Units or Cash-type Units, or under the Plan and to take such action as may be necessary as determined in their sole discretion to satisfy all obligations for the payment of such taxes.

8.        Securities Laws.    Upon the acquisition of any Shares in respect of the Restricted Stock Units, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws, with applicable provisions of the Plan, or with this Agreement.

9.        Notices.    Any notice under this Agreement shall be addressed to the Company in care of its General Counsel at 999 Corporate Boulevard, Suite 300, Linthicum Heights, Maryland, 21090 and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

10.        Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws.

11.        Restricted Stock Units and Cash-type Units Subject to the Plan.    By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Restricted Stock Units and any Shares received in respect of the Restricted Stock Units are subject to the Plan. The Cash Performance Units, Cash Performance Upside Units, and Cash Upside Units and any Units received in respect of these Cash-type Units are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

12.        Counterparts.    This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

FOUNDATION COAL HOLDINGS, INC.

By:

  Its: Chairman of the Board of Directors & CEO

Date: January 12, 2009

Michael R. Peelish

Date:

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EX-10.3

Exhibit 10.3

FOUNDATION COAL HOLDINGS, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

AWARD AGREEMENT

THIS AGREEMENT, is made effective as of January 12, 2009 (the “Award Date”), between Foundation Coal Holdings, Inc. (the “Company”) and Greg A. Walker (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that the Participant be awarded the Restricted Stock Units, Cash Performance Units, and Cash Upside Units provided for herein pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1.        Definitions.    Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

(a)  Actual EBITDA:  “EBITDA” as defined in the Credit Agreement dated as of July 30, 2004 by and among Foundation PA Coal Company, as borrower, FC 2 Corp. and Foundation Coal Corporation, as guarantors, and the lenders named therein, as amended and as in effect on the date hereof (the “Credit Agreement”). More specifically defined as income (or loss) from continuing operations, plus interest expense, net of interest income, income tax expense (benefit), accretion on asset retirement obligations, and depreciation, depletion and amortization plus or minus other adjustments as specified in the Credit Agreement.

(b)  Actual Free Cash Flow:  In respect of a fiscal year, EBITDA less the sum of capital expenditures as set forth in the Company’s unaudited financial statements; provided that the Committee may make such equitable adjustments to capital expenditures as it reasonably deems to be appropriate in order to achieve the intention of this Agreement after giving effect to significant events including, without limitation, operational circumstances, acquisitions, dispositions, mergers or similar transactions.

(c)  Cash Performance Units:     Collectively, the EBITDA Cash Performance Units and the FCF Cash Performance Units.

Senior Manager - Long Term Incentive

Award Agreement

(d)  Cash Performance Upside Unit.    Collectively, the EBITDA Cash Performance Upside Units and the FCF Cash Performance Upside Units.

(e)  Cash Upside Units:    Collectively, the EBITDA Cash Upside Units and the FCF Cash Upside Units.

(f)  Cash-type Units.    Collectively, the EBITDA Cash Performance Units, FCF Cash Performance Units, EBITDA Cash Performance Upside Units, FCF Cash Performance Upside Units, EBITDA Cash Upside Units, and FCF Cash Upside Units,

(g)  Disability:  Participant becomes physically or mentally incapacitated so as to be unable to perform the essential functions of Participant’s duties of Employment.

(h)  EBITDA Performance Date:    Each of December 31, 2009, December 31, 2010 and December 31, 2011. EBITDA Restricted Stock Units, EBITDA Cash Performance Units, EBITDA Cash Performance Upside Units, and EBITDA Cash Upside Units earned on these dates do not vest until February 27, 2012.

(i)  EBITDA Restricted Stock Unit:    A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(b) of this Agreement.

(j)  EBITDA Cash Performance Unit:    A Cash Performance Unit with respect to which the terms and conditions are set forth in Section 3(c) of this Agreement.

(k)  EBITDA Cash Performance Upside Unit.    A Cash Performance Upside Unit with respect to which the terms and conditions are set forth in Section 3(d) of this Agreement.

(l)  EBITDA Cash Upside Unit:    A Cash Upside Unit with respect to which the terms and conditions are set forth in Section 3(e) of this Agreement.

(m)  Earned Portion:  At any time, the portion of the EBITDA or FCF Restricted Stock Units, EBITDA or FCF Cash Performance Units, EBITDA or FCF Cash Performance Upside Units, and EBITDA or FCF Cash Upside Units which have become earned, as described in Section 3 of this Agreement.

(n)  Employment.    The period from the date of hire to the date of termination as determined by the policies and practices administered solely by the Company’s human resources department.

(o)  FCF Performance Date:    Each of December 31, 2009, December 31, 2010 and December 31, 2011. FCF Restricted Stock Units, FCF Cash Performance Units, FCF Cash Performance Upside Units, and FCF Cash Upside Units earned on these dates do not vest until February 27, 2012.

(p)  FCF Restricted Stock Unit:    A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(f) of this Agreement.

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(q)  FCF Cash Performance Unit:    A Cash Performance Unit with respect to which the terms and conditions are set forth in Section 3(g) of this Agreement.

(r)  FCF Cash Performance Upside Unit.    A Cash Performance Upside Unit with respect to which the terms and conditions are set forth in Section 3(h) of this Agreement.

(s)  FCF Cash Upside Unit:    A Cash Upside Unit with respect to which the terms and conditions are set forth in Section 3(i) of this Agreement.

(t)  Plan:    The Foundation Coal Holdings, Inc. Amended and Restated 2004 Stock Incentive Plan, as the same may be amended, supplemented or modified from time to time.

(u)  Restricted Stock Units:    Collectively, the EBITDA Restricted Stock Units and the FCF Restricted Stock Units.

(v)  Retirement:    Voluntary termination by the Participant on or after the attainment of age 55.

(w)  Severance.    Involuntary termination of the Participant by the Company for reasons unrelated to the Participant individually, including but not limited to job elimination, consolidation of departments, offices, or business units, reorganization, mergers, or closing of operations.

(x)  Target Free Cash Flow:    The Target Free Cash Flow shall be established each budget year by the Board of Directors of the Company based on the Company’s annual budget and the Plan shall be administered by the Compensation Committee accordingly.

(y)  Target EBITDA:    The Target EBITDA shall be established each budget year by the Board of Directors of the Company based on the Company’s annual budget and the Plan shall be administered by the Compensation Committee accordingly.

(z)  Time Performance Date:    Each of December 31, 2009, December 31, 2010 and December 31, 2011. Time Restricted Stock Units earned on these dates vest on January 1, 2010, January 1, 2011 and January 1, 2012, respectively.

(aa)    Time Restricted Stock Units:    A Restricted Stock Unit with respect to which the terms and conditions are set forth in Section 3(a) of this Agreement.

2.        Award of Restricted Stock Units, Cash-type Units.    The Company hereby awards to the Participant, subject to the terms and conditions of this Agreement and the Plan, 11,979 Time Restricted Stock Units, 6,138 EBITDA Restricted Stock Units, 6,138 FCF Restricted Stock Units, 2,844 EBITDA Cash Performance Units, 2,844 FCF Cash Performance Units, 0 EBITDA Cash Performance Upside Units, 0 FCF Cash Performance Upside Units, and 0 EBITDA Cash Upside Units and 0 FCF Cash Upside Units. The Participant shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in Shares in respect of the Restricted Stock Units until such Restricted Stock Units have vested and been distributed to the Participant in the form of Shares. A Restricted Stock Unit is an unfunded, unsecured right of

Senior Manager - Long Term Incentive Award Agreement 3

the Participant to receive a share of the Company’s common stock, par value $0.01 per share (the “Shares”). The Participant shall not possess any incidents of ownership in Units in respect of the Cash-type Units until such Cash-type Units have vested and been distributed to the Participant in the form of Units which are immediately converted into cash. Each Cash-type Unit is equal to $14.02 and is an unfunded, unsecured right of the Participant to receive a net cash payment equal to the number of Cash-type Units vested multiplied by $14.02 minus all applicable taxes. (the Cash-type Units are also referred to as “Units”).

3.        Earning of the Restricted Stock Units, Cash-type Units.

(a)  Time Restricted Stock Units.    Subject to the Participant’s continued Employment with the Company and its Affiliates (except as provided in Section 3(k)) through the applicable Time Performance Date, the Time Restricted Stock Units shall be earned with respect to one-third of the Shares on December 31, 2009 and one-third on December 31, 2010 and one-third on December 31, 2011.

(b)  EBITDA Restricted Stock Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Restricted Stock Units shall be earned with respect to one-third of the Shares subject to the EBITDA Restricted Stock Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date equals the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Restricted Stock Units can be earned is one hundred percent (100%) of Actual EBITDA. Above this target level of performance, the EBITDA Cash Upside Units will be earned as explained in Section 3(e). The minimum level of performance at which EBITDA Restricted Stock Units can be earned is eighty-five percent (85%) of Actual EBITDA. At this minimum level of performance, fifty percent (50%) of the one-third of the EBITDA Restricted Stock Units can be earned on each EBITDA Performance Date. Below the minimum level of performance, zero percent (0%) EBITDA Restricted Stock Units can be earned. EBITDA Restricted Stock Units will be straight line interpolated for performance falling between target and minimum levels.

(c)  EBITDA Cash Performance Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Performance Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Performance Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date equals the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Performance Units can be earned is one hundred percent (100%) of Actual EBITDA. Above this target level of performance, the EBITDA Cash Performance Upside Units will be earned as explained in Section 3(d). The minimum level of performance at which EBITDA Cash Performance Units can be earned is eighty-five percent (85%) of Actual EBITDA. At this minimum level of performance, fifty percent (50%) of the one-third of the EBITDA Cash Performance Units can be earned on each EBITDA Performance Date. Below the minimum level of performance, zero percent (0%) EBITDA Cash Performance Units can be earned. EBITDA Cash Performance Units will be straight line interpolated for performance falling between target and minimum levels.

Senior Manager - Long Term Incentive Award Agreement 4

(d)  EBITDA Cash Performance Upside Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Performance Upside Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Performance Upside Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Performance Upside Units can be earned is one hundred twenty percent (120%) of Actual EBITDA. At this maximum level of performance, fifty percent (50%) of the one-third of the EBITDA Cash Performance Units earned at target performance level can be earned as EBITDA Cash Performance Upside Units on each EBITDA Performance Date. Above this maximum level of performance, zero percent (0%) EBITDA Cash Performance Upside Units can be earned. The minimum level of performance at which EBITDA Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual EBITDA. EBITDA Cash Performance Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance.

(e)  EBITDA Cash Upside Unit.  Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the EBITDA Cash Upside Units shall be earned with respect to one-third of the Units subject to the EBITDA Cash Upside Units on each EBITDA Performance Date to the extent that the Actual EBITDA for the fiscal year ending on such EBITDA Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target EBITDA for such fiscal year. The maximum level of performance at which EBITDA Cash Upside Units can be earned is one hundred twenty percent (120%) of Actual EBITDA. At this maximum level of performance, fifty percent (50%) of the one-third of the EBITDA Restricted Stock Units earned at target performance level can be earned as EBITDA Cash Upside Units on each EBITDA Performance Date. Above this maximum level of performance, zero percent (0%) EBITDA Cash Upside Units can be earned. EBITDA Cash Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance. The minimum level of performance at which EBITDA Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual EBITDA.

(f)  FCF Restricted Stock Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Restricted Stock Units shall be earned with respect to one-third of the Shares subject to the FCF Restricted Stock Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date equals the Target Free Cash Flow for such fiscal year. The maximum level of performance at which FCF Restricted Stock Units can be earned is one hundred percent (100%) of Actual FCF. Above this target level of performance, the FCF Cash Upside Units will be earned as explained in Section 3(h). The minimum level of performance at which FCF Restricted Stock Units can be earned is eighty-five percent (85%) of Actual FCF. At the minimum level of performance, fifty percent (50%) of the one-third of the FCF Restricted Stock Units can be earned on each FCF Performance Date. Below this minimum level of performance, zero percent (0%) FCF Restricted Stock Units can be earned. FCF Restricted Stock Units will be straight line interpolated for performance falling between target and minimum levels.

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(g)  FCF Cash Performance Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Performance Units shall be earned with respect to one-third of the Units subject to the FCF Cash Performance Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date equals the Target Free Cash Flow for such fiscal year. The maximum level of performance at which FCF Cash Performance Units can be earned is one hundred percent (100%) of Actual FCF. Above this target level of performance, the FCF Cash Performance Upside Units will be earned as explained in Section 3(h). The minimum level of performance at which FCF Cash Performance Units can be earned is eighty-five percent (85%) of Actual FCF. At this minimum level of performance, fifty percent (50%) of the one-third of the FCF Cash Performance Units can be earned on each FCF Performance Date. Below the minimum level of performance, zero percent (0%) FCF Cash Performance Units can be earned. FCF Cash Performance Units will be straight line interpolated for performance falling between target and minimum levels.

(h)  FCF Cash Performance Upside Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Performance Upside Units shall be earned with respect to one-third of the Units subject to the FCF Cash Performance Upside Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target FCF for such fiscal year. The maximum level of performance at which FCF Cash Performance Upside Units can be earned is one hundred twenty percent (120%) of Actual FCF. At this maximum level of performance, fifty percent (50%) of the one-third of the FCF Cash Performance Units earned at target performance level can be earned as FCF Cash Performance Upside Units on each FCF Performance Date. Above this maximum level of performance, zero percent (0%) FCF Cash Performance Upside Units can be earned. The minimum level of performance at which FCF Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual FCF. FCF Cash Performance Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance.

(i)  FCF Cash Upside Units.    Subject to the Participant’s continued Employment with the Company or one of its Affiliates (except as provided in Section 3(k)) through February 27, 2012, the FCF Cash Upside Units shall be earned with respect to one-third of the Units subject to the FCF Cash Upside Units on each FCF Performance Date to the extent that the Actual FCF for the fiscal year ending on such FCF Performance Date is between one hundred percent (100%) and one hundred twenty percent (120%) of the Target FCF for such fiscal year. The maximum level of performance at which FCF Cash Upside Units can be earned is one hundred twenty percent (120%) of Actual FCF. At this maximum level of performance, fifty percent (50%) of the one-third of the FCF Restricted Stock Units can be earned as FCF Cash Upside Units on each FCF Performance Date. Above this maximum level of performance, zero percent (0%) FCF Cash Upside Units can be earned. FCF Cash Upside Units will be straight line interpolated for performance falling between target and maximum levels of performance. The minimum level of performance at which FCF Cash Upside Units can begin to be earned is greater than one hundred percent (100%) of Actual FCF.

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(j)  Catch-Up.    Notwithstanding the foregoing and subject to the Participant’s continued Employment with the Company or one of its Affiliates, if Actual EBITDA and Actual FCF do not exceed the applicable Target EBITDA and Target FCF respectively with respect to fiscal years 1 or 2 (a “Missed Year”) but the sum of the Actual EBITDA or Actual FCF for the Missed Year and the subsequent fiscal year (the “Excess Year”) equals or exceeds the sum of the applicable Target EBITDA or Target FCF for such Missed Year and Excess Year, then the EBITDA and FCF Restricted Stock Units and the EBITDA and FCF Cash Performance Units shall become earned with respect to one-sixth (1/6) the Shares subject to the applicable Performance Target in respect of such Missed Year and with respect to one-sixth (1/6) the Shares and Units subject to the applicable Performance Target in respect of such Excess Year.

(j)  Retirement, Death, Disability, or Severance.    Notwithstanding the foregoing and notwithstanding any contrary provisions in Section 4 below, in the event that the Participant’s Employment terminates due to death, Disability, Retirement, or Severance as defined in this Agreement, the Participant shall be deemed earned in the EBITDA and FCF Restricted Stock Units, the EBITDA and FCF Cash Performance Units, the EBITDA and FCF Cash Performance Upside Units, and the EBITDA and FCF Cash Upside Units that would have been earned on the respective EBITDA and FCF Performance Dates prior to Participant’s termination. These earned EBITDA and FCF Restricted Stock Units, EBITDA and FCF Cash-type Units will become vested on February 27, 2012 and the Earned Portion of the EBITDA and FCF Restricted Stock Units shall be issued or transferred to the Participant, or the Participant’s estate in the event of death, pursuant to Section 4(a). In the case of Cash-type Units, the Earned Portion of the EBITDA and FCF Cash-type Units shall be converted to a cash payment and transferred to the Participant, or the Participant’s estate in the event of death, pursuant to Section 4(a).

(k)    Change in Control.    Upon a Change in Control, the Time Restricted Stock Units shall, to the extent not previously cancelled or expired, immediately become one hundred percent (100%) earned and vested. Upon a Change in Control, the Performance Restricted Stock Units shall, to the extent not previously cancelled or expired, immediately become earned and vested with respect to one hundred percent (100%) of the number of Restricted Stock Units subject to the Performance Targets. Upon a Change in Control, the Cash-type Units shall, to the extent not previously cancelled or expired, immediately become earned and vested with respect to one hundred percent (100%) of the number of Cash-type Units subject to the Performance Targets.

4.        Delivery of Shares Underlying the Restricted Stock Units and Cash Payments.

(a)  In General.    Unless earlier cancelled pursuant to Section 4(b) below, on or about each of January 1, 2010, January 1, 2011 and January 1, 2012, the Company shall issue or cause there to be transferred to the Participant a number of Shares equal to the Earned Portion of the Time Restricted Stock Units awarded to the Participant under this Agreement. Further, unless earlier cancelled pursuant to Section 4(b) below, on or about February 27, 2012, the Company shall issue or cause there to be transferred to the Participant a number

Senior Manager - Long Term Incentive Award Agreement 7

of Shares equal to the Earned Portion of the EBITDA Restricted Stock Units and the FCF Restricted Stock Units awarded to the Participant under this Agreement and all the unearned Restricted Stock Units subject to this Agreement shall be cancelled. Further again, unless earlier cancelled pursuant to Section 4(b) below, on or about February 27, 2012, the Company shall pay to the Participant an amount equal to the Earned Portion of the Cash-type Units awarded to the Participant under this Agreement multiplied by $14.02, less applicable taxes, and all the unearned Cash-type Units subject to this Agreement shall be cancelled.

(b)  Termination of Employment.    If the Participant’s Employment terminates for any reason, the Restricted Stock Units, Cash-type Units, to the extent not then earned, be deemed to be immediately cancelled by the Company without any payment or other consideration. Any such cancellation shall be self-executing and the Company shall not be required to take any action to effectuate the same.

(c)  Registration or Qualification.    Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, a Restricted Stock Unit may not be delivered prior to the completion of any registration or qualification of the Restricted Stock Units or the Shares to which they relate under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable.

(d)  Certificates.    As soon as practicable following the vesting of the Shares subject to the Restricted Stock Units, the Company shall issue Shares (electronically) in the Participant’s name for such Shares. In the event the Company issues a certificate at the Participant’s request, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificate to the Participant, any loss by the Participant of the certificate, or any mistakes or errors in the issuance of the certificate or in the certificate itself.

5.        Legend on Certificates.    The certificates representing the Shares issued to the Participant in respect of the Restricted Stock Units may be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws or the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

6.        Transferability.        Unless otherwise determined by the Committee, a Restricted Stock Unit, a Cash Performance Unit, and a Cash Upside Unit may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary by will or by the laws of descent and distribution shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

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7.        Withholding.    Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company or its Affiliate shall have the right to withhold from any transfer of the Shares or payments due on the Units made with respect to the Restricted Stock Units or Cash-type Units, any applicable withholding taxes in respect of the Restricted Stock Units or Cash-type Units, or any payment or transfer with respect to the Restricted Stock Units or Cash-type Units, or under the Plan and to take such action as may be necessary as determined in their sole discretion to satisfy all obligations for the payment of such taxes.

8.        Securities Laws.    Upon the acquisition of any Shares in respect of the Restricted Stock Units, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws, with applicable provisions of the Plan, or with this Agreement.

9.        Notices.    Any notice under this Agreement shall be addressed to the Company in care of its General Counsel at 999 Corporate Boulevard, Suite 300, Linthicum Heights, Maryland, 21090 and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

10.        Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws.

11.        Restricted Stock Units and Cash-type Units Subject to the Plan.    By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Restricted Stock Units and any Shares received in respect of the Restricted Stock Units are subject to the Plan. The Cash Performance Units, Cash Performance Upside Units, and Cash Upside Units and any Units received in respect of these Cash-type Units are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

12.        Counterparts.    This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

FOUNDATION COAL HOLDINGS, INC.

By:

   Its: Sr. VP Safety and Human Resources

Date: January 12, 2009

Greg A. Walker

Date:

Senior Manager - Long Term Incentive Award Agreement 10

EX-10.4

Exhibit 10.4

EMPLOYMENT AGREEMENT

Senior Manager

THIS AGREEMENT by and among Foundation Coal Corporation, a Delaware corporation (the “Company”) and James A. Olsen (“Executive”) is entered into and effective dated as of January 1, 2009.

WHEREAS, the Company desires to continue the employment of Executive as a full-time employee of the Company and Executive desires to serve the Company in such capacity; and

WHEREAS, the Company and Executive desire to enter into an Employment Agreement to memorialize the terms and conditions of such employment;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Executive hereby agree as follows:

1.        Term.  Subject to the provisions of Section 7 of this Agreement, Executive shall continue to be employed by the Company for a period commencing on the date hereof and ending on December 31, 2011 (the “Employment Term”) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing on December 31, 2011 and on each anniversary thereafter (each an “Extension Date”), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days’ prior written notice before the next Extension Date that the Employment Term shall not be so extended.

2.        Position.  During the Employment Term, Executive shall serve as the Company’s Senior Vice President, Chief Information Officer. In such position, Executive shall report directly to the Chief Executive Officer (the “CEO”) of the Company and shall have such duties and authority as shall be determined from time to time by the CEO. During the Employment Term, Executive will devote Executive’s full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the CEO; provided that nothing herein shall preclude Executive from (i) subject to the prior approval of the CEO (which shall not unreasonably be withheld), accepting appointment to or continuing to serve on any board of directors or trustees of any business or corporation, (ii) engaging in charitable activities and community affairs or (iii) managing his personal investments and affairs; provided that in each case, and in the aggregate, such activities do not conflict or interfere with the performance of Executive’s duties hereunder or conflict with the provisions contained in Section 9.

3.        Base Salary.  During the Employment Term, the Company shall pay Executive a base salary at the annual rate of $211,500, payable in regular installments in accordance with the Company’s usual payment practices. Executive shall be entitled to increases (but not decreases) in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Board of Directors of the Company (the “Board”) and the Board shall be obligated to annually review Executive’s base salary for increases but not decreases. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary.”

4.        Annual Bonus.  With respect to each full calendar year of the Company during the Employment Term, Executive shall be eligible to earn an annual bonus award (an “Annual Bonus”) based upon the achievement of certain individual and Company performance targets established by the Board, in consultation with the CEO (such targets to be established no later than 90 days following the beginning of the year in which they relate); provided that, Executive’s target Annual Bonus shall be not less than 65% of his Base Salary (the “Target Annual Bonus”). With respect to each full calendar year of the Company during the Employment Term, the amount of the Annual Bonus (if any) shall be paid as soon as practicable but no later than March 15 of the calendar year following the calendar year for which such Annual Bonus is earned.

5.        Employee Benefits.  During the Employment Term, Executive shall be entitled to participate in the Company’s employee benefit plans (other than annual bonus plans) as in effect from time to time (collectively “Employee Benefits”), on terms no less favorable than those generally made available to other senior executives of the Company. Executive will be provided paid vacation pursuant to the Vacation Summary Plan Description.

6.        Business Expenses.  During the Employment Term, reasonable travel and other expenses incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies.

7.        Termination.  The Employment Term and Executive’s employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 60 days’ advance written notice of any resignation of Executive’s employment. Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Company and its affiliates.

a.        By the Company For Cause or By Executive Resignation Without Good Reason.

(i)    The Employment Term and Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) and shall terminate automatically upon Executive’s resignation without Good Reason (as defined in Section 7(c)(ii)).

(ii)    For purposes of this Agreement, “Cause” shall mean (A) Executive’s continued and willful, intentional or grossly negligent failure to substantially perform Executive’s duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness), (B) Executive’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, deceit, dishonesty or fraud that relates to the Company property, (C) the willful, intentional or grossly negligent conduct of Executive which is demonstrably and materially injurious to the Company, monetarily or otherwise or (D) Executive’s material breach of the provisions of Sections 8 or 9 of this Agreement. For purposes of this definition of Cause, no act, or failure to

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act, on Executive’s part shall be deemed willful, intentional or grossly negligent if Executive acted in good faith and in a manner that Executive reasonably believed to be in, or not opposed to, the best interests of the Company.

(iii)    If Executive’s employment is terminated by the Company for Cause, or if Executive resigns without Good Reason, Executive shall be entitled to receive:

(A)    the Base Salary through the date of termination;

(B)    any Annual Bonus earned but unpaid as of the date of termination for any previously completed fiscal year;

(C)    reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and

(D)    such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company (the amounts described in clauses (A) through (D) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment by the Company for Cause or resignation by Executive without Good Reason, except as set forth in this Section 7(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

b.        Disability or Death.

(i)    The Employment Term and Executive’s employment hereunder shall terminate upon Executive’s death. If Executive becomes physically or mentally incapacitated so as to be unable to perform the essential functions of Executive’s duties (such incapacity is hereinafter referred to as “Disability”), then (A) the CEO may allow another officer of the Company to perform Executive’s duties and responsibilities during the period of such Disability, and (B) if such Disability continues for 120 consecutive days or 180 days during any consecutive 360 day period, the CEO may terminate Executive’s employment under this Agreement. If any question shall arise as to whether, during any period Executive is disabled so as to be unable to perform the essential functions of Executive’s then existing position or positions with or without reasonable accommodation, Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company, to whom Executive or Executive’s guardian has no reasonable objection, as to whether Executive is so disabled and how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on Executive. Nothing in this Section 7(b) shall be construed to waive Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1933, 29 U.S.C. ss.2601 et seq. and the Americans With Disabilities Act, 424 S.C. ss.12101 et seq.

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(ii)    Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive:

(A)  the Accrued Rights; and

(B)  Target Annual Bonus multiplied by a fraction, the numerator of which is the number of days of the calendar year of termination that shall have elapsed through the date of Executive’s termination of employment and the denominator of which is 365.

Following Executive’s termination of employment due to Disability or death, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

c.        By the Company Without Cause or Resignation by Executive for Good Reason.

(i)    The Employment Term and Executive’s employment hereunder may be terminated by the Company without Cause or by Executive’s resignation for Good Reason.

(ii)    For purposes of this Agreement, “Good Reason” shall mean (A) the failure of the Company to pay or cause to be paid Executive’s Base Salary or Annual Bonus, when due hereunder, (B) any substantial diminution in Executive’s authority or responsibilities from those described in Section 2 hereof, (C) the requirement by the Company that Executive’s principal office be located more than 50 miles outside of the greater Baltimore, Maryland metropolitan area, or (D) any failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the business or assets of the Company upon a merger, consolidation, sale or similar transaction (other than an assumption that occurs by operation of law); provided that any of the events described in clauses (A) through (D) of this Section 7(c)(ii) shall constitute Good Reason only if Executive provides written notice to the Company of the existence of any such event within 90 days of the initial existence of the event and the Company fails to cure such event within 30 days after receipt from Executive of such written notice.

(iii)    If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability and other than any termination by the Company following the Company’s receipt of a Notice of Termination from Executive setting forth Executive’s intention to resign without Good Reason, as described in Section 7(a)(i)) or if Executive resigns for Good Reason, in either case whether or not such termination occurs in connection with a Change in Control, Executive shall be entitled to receive:

(A)  the Accrued Rights;

(B)  an amount equal to the Annual Bonus that Executive would have been entitled to receive in respect of the fiscal year in which Executive’s termination date occurs, had Executive continued in employment until the end of such fiscal year, which amount, determined based on the Company’s actual performance for such year relative to the performance goals applicable to Executive, shall be multiplied by a fraction (A) the numerator of which is the number of days in such fiscal year through termination date and (B) the denominator of which is 365 and shall be payable in a lump sum payment at the time such bonus or incentive awards are payable to other participants; and

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(C)  subject to Executive’s continued compliance with the provisions of Sections 8 and 9, an amount equal to the sum of (x) the Base Salary and (y) the Target Annual Bonus, payable in equal bi-monthly installments over the Restricted Period (as defined in Section 8) in accordance with the Company’s usual payroll practices; provided that the aggregate amount described in this clause (C) shall be reduced, but not below zero, by the present value of any other cash severance or cash termination benefits payable to Executive under any other plans, programs or arrangements of the Company or its affiliates, including, without limitation, any severance plan of the Company in which Executive is entitled to participate.

(iv)    Notwithstanding the foregoing in Section 7(c)(iii), if Executive would be entitled to receive aggregate severance payments and/or benefits under an applicable severance plan or policy of the Company (the “Applicable Severance Policy”) in effect at the time of Executive’s termination which are greater than the payments provided in Section 7(c)(iii), then Executive shall instead receive the payments and benefits provided by the Applicable Severance Policy and shall not be entitled to receive the payments provided in Section 7(c)(iii).

(v)    For purposes of this Agreement, “Change in Control” shall mean the consummation of any transaction (including any merger or consolidation), the result of which is that (i) any Group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) or Person, as described in Section 8(a)(1), becomes the beneficial owner, directly or indirectly, of more than 25% of the voting securities of the Company or its successor entity, (ii) any Group or Person becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities of the Company or its successor entity or (iii) any Person becomes the beneficial owner, directly or indirectly, of all or substantially all of the assets of the Company or its successor entity.

(vi)    Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, in either case whether or not in connection with a Change in Control, and except as set forth in Section 7(c)(iii) or Section 7(c)(iv), as applicable, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

d.        Expiration of Employment Term.  Unless the parties otherwise agree in writing, continuation of Executive’s employment with the Company beyond the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company; provided that the provisions of Sections 8, 9 and 10 of this Agreement shall survive any termination of this Agreement or Executive’s termination of employment hereunder.

e.        Notice of Termination.  Any purported termination of employment by the Company or by Executive (other than due to Executive’s death) during the Employment Term shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12(i) hereof. For purposes of

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this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.

f.        Board/Committee Resignation.  Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from (i) any position as an officer of the Company and any of the Company’s affiliates, and (ii) the Board (and any committees thereof) and the board of directors of any of the Company’s affiliates (and any committees thereof).

8.      Non-Competition.

a.        Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

(1)        During the Employment Term and for a period of nine months following the date Executive ceases to be employed by the Company for any reason (the “Restricted Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any customer of the Company or prospective customer of the Company:

(i) with whom Executive had personal contact or dealings on behalf of the Company during the one year period preceding Executive’s termination of employment;

(ii) with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one year immediately preceding Executive’s termination of employment; or

(iii) for whom Executive had direct or indirect responsibility during the one year immediately preceding Executive’s termination of employment.

(2)          During the Restricted Period, Executive will not directly or indirectly:

(i) engage in any coal-related business that competes with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(ii) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

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(iii) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant;

(iv) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers partners, members or investors of the Company or its affiliates, or

(v) disparage the Company or any of its stockholders, directors, officers, employees or agents.

(3)          Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(4)          During the Employment Term and, for a period of two years following the date Executive ceases to be employed by the Company, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(i) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(ii) hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

(5)          During the Restricted Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

b.        It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

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9.        Confidentiality; Intellectual Property.

  a.        Confidentiality.

(i)    Executive will not at any time (whether during or after Executive’s employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information — including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“Confidential Information”) without the prior written authorization of the Board; provided, that Executive may disclose such information to Executive’s legal and/or financial advisor for the limited purpose of enforcing Executive’s rights under this Agreement; provided, that Executive shall request that such legal and/or financial advisors not disclose such information.

(ii)    Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation; or (c) required by law to be disclosed; provided that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

(iii)    Except as required by law, Executive will not disclose to anyone, other than Executive’s immediate family, legal or financial advisors or members of the Company’s senior management, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.

(iv)    Upon termination of Executive’s employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

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  b.        Intellectual Property.

(i)    If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (“Works”), either alone or with third parties, prior to Executive’s employment by the Company, that are relevant to or implicated by such employment (“Prior Works”), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Company’s current and future business.

(ii)    If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executive’s employment by the Company and within the scope of such employment and/or with the use of any the Company resources (“Company Works”), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.

(iii)    Executive agrees to keep and maintain adequate and current written records (in the form of notes, sketches, drawings, and any other form or media requested by the Company) of all Company Works. The records will be available to and remain the sole property and intellectual property of the Company at all times.

(iv)    Executive shall take all requested actions and execute all requested documents (including any licenses or assignments required by a government contract) at the Company’s expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Company’s rights in the Prior Works and Company Works. If the Company is unable for any other reason to secure Executive’s signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and in Executive’s behalf and stead to execute any documents and to do all other lawfully permitted acts in connection with the foregoing.

(v)    Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company regarding the protection of Confidential Information and intellectual property and

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potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version that has been communicated to Executive.

(vi)    The provisions of Section 9 shall survive the termination of Executive’s employment for any reason.

10.        Specific Performance. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

11.         Gross-Up.

      a.        In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, any other plan, arrangement or agreement, including but not limited to the Nonqualified Stock Option Agreement, with the Company or any of its affiliates, or otherwise) (each a “Payment” and all such Payments, the “Total Payments”) is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the “Excise Tax”), Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of the Excise Tax imposed on the Payments and any income, employment and other taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 11(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the portion of the Total Payments that would be treated as “parachute payments” under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to Executive. For purposes of reducing the Total Payments to the Safe Harbor Cap, any amounts that are not “deferred compensation” within the meaning of Section 409A of the Code shall be reduced first.

      b.        All determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP or such other nationally

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recognized certified public accounting firm as may be designated by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided, that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive’s residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive’s behalf) when the associated Excise Tax is due; provided that in no event shall any payment under this Section 11 be made later than the end of the calendar year following the year in which the Excise Tax is paid. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (“Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 11(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.

c.        Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 11(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings,

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hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall (to the extent permitted by law) indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, such extension shall be limited solely to such contested amount. The Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

    d.        If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Section 11, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company’s complying with the requirements of Section 11(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 11(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

12.        Miscellaneous.

    a.        Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such jurisdiction. Except as provided in Section 10 of this Agreement, any controversy or claim arising out of or relating to this Agreement or Executive’s employment with the Company or the termination thereof shall be resolved by binding confidential arbitration, to be held in New York, New York, in accordance with the Employee Dispute Resolution Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The costs and expenses incurred in connection with such arbitration shall be borne by the party that does not prevail in such arbitration. Each party shall be responsible for such party’s legal fees and expenses incurred in connection with such arbitration.

    b.        Entire Agreement; Amendments.  This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

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c.        No Mitigation; No Offset.  In the event of any termination of Executive’s employment under Section 7 of this Agreement, Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due Executive under this Agreement, or otherwise, on account of any remuneration or other benefit attributable to any subsequent employment that Executive may obtain.

d.        Indemnification; D&O Insurance.  Executive shall be indemnified to the same extent as other senior executives, officers and directors with respect to Executive’s service as an employee and director of the Company or any of the Company’s affiliates. During the Employment Term, the Company shall keep in place a directors and officers’ liability insurance policy (or policies) providing comprehensive coverage to Executive to the extent that the Company provides such coverage for any other senior executive, officer or director of the Company and following the Employment Term, Executive shall be entitled to such coverage to the extent that the Company provides such coverage for any other current and former senior executive, officer or director of the Company.

e.        No Waiver.  The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

f.        Severability.  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

g.        Assignment.  This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement shall be assigned by the Company to a person or entity which is an affiliate or a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.

h.        Successors; Binding Agreement.  This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

i.        Notice.  For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

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If to the Company:

Foundation Coal Corporation

999 Corporate Boulevard, Suite 300

Linthicum Heights, Maryland 21090

Attention: General Counsel

If to Executive:

To the most recent address of Executive set forth in the personnel records of the

Company.

j.        Representations.

(i)    Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

(ii)    The Company represents and warrants that (A) it is fully authorized by action of its Board (and of any other person or body whose action is required) to enter into this Agreement and to perform its obligations under it; (B) to the best of its knowledge and belief, the execution, delivery and performance of this Agreement by the Company does not violate any law, regulation, order, judgment or decree or any agreement, plan or corporate governance document of the Company or its affiliates or shareholders; and (C) to the best of its knowledge and belief, upon the execution and delivery of this Agreement by the parties, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

k.        Prior Agreements.  This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executive’s employment with the Company and/or its affiliates.

l.        Cooperation.  Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder and does not unreasonably interfere with Executive’s subsequent employment. This provision shall survive any termination of this Agreement. The Company agrees to reimburse, in accordance with Company policies, Executive promptly for Executive’s reasonable and documented out-of-pocket expenses incurred in connection with the cooperation obligation set forth in this Section 12(l). Notwithstanding the foregoing the preceding cooperation obligation shall not apply to any actions proceeding or controversy between Executive and the Company or as to which it could reasonably be determined that Executive’s right to subsequently enforce Executive’s rights under this Agreement could be prejudiced.

m.        Withholding Taxes.  The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

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n.        Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

o.        Section 409A Compliance.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code (“Section 409A”). This Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause this Agreement to fail to satisfy Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A). Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement and no payments shall be due to Executive under this Agreement which are payable upon Executive’s termination of employment unless Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A. To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following Executive’s termination of employment shall instead be paid on the first business day after the date that is six months following Executive’s termination of employment (or upon Executive’s death, if earlier). In addition, for purposes of this Agreement, each amount to be paid or benefit to be provided to Executive pursuant to this Agreement shall be construed as a separate identified payment for purposes of Section 409A. With respect to expenses eligible for reimbursement under the terms of this Agreement, (i) the amount of such expenses eligible for reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year and (ii) any reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409A; provided, however, that with respect to any reimbursements for any taxes to which Executive becomes entitled under the terms of this Agreement, the payment of such reimbursements shall be made by the Company no later than the end of the calendar year following the calendar year in which Executive remits the related taxes. Upon the expiration of the applicable Section 409A(a)(2) deferral period, all payments deferred pursuant to this Agreement shall be paid to Executive in a lump sum (less applicable tax withholdings).

[Remainder of Page is Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

Foundation Coal Corporation		James A. Olsen
By:	Michael R. Peelish
Title:	Senior Vice President,
	Safety and Human Resources

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EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

Senior Manager

THIS AGREEMENT by and among Foundation Coal Corporation, a Delaware corporation (the “Company”) and Michael R. Peelish (“Executive”) is entered into and effective dated as of January 1, 2009.

WHEREAS, the Company desires to continue the employment of Executive as a full-time employee of the Company and Executive desires to serve the Company in such capacity; and

WHEREAS, the Company and Executive desire to enter into an Employment Agreement to memorialize the terms and conditions of such employment;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Executive hereby agree as follows:

1.        Term.  Subject to the provisions of Section 7 of this Agreement, Executive shall continue to be employed by the Company for a period commencing on the date hereof and ending on December 31, 2011 (the “Employment Term”) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing on December 31, 2011 and on each anniversary thereafter (each an “Extension Date”), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days’ prior written notice before the next Extension Date that the Employment Term shall not be so extended.

2.        Position.  During the Employment Term, Executive shall serve as the Company’s Senior Vice President, Safety and Human Resources. In such position, Executive shall report directly to the Chief Executive Officer (the “CEO”) of the Company and shall have such duties and authority as shall be determined from time to time by the CEO. During the Employment Term, Executive will devote Executive’s full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the CEO; provided that nothing herein shall preclude Executive from (i) subject to the prior approval of the CEO (which shall not unreasonably be withheld), accepting appointment to or continuing to serve on any board of directors or trustees of any business or corporation, (ii) engaging in charitable activities and community affairs or (iii) managing his personal investments and affairs; provided that in each case, and in the aggregate, such activities do not conflict or interfere with the performance of Executive’s duties hereunder or conflict with the provisions contained in Section 9.

3.        Base Salary.  During the Employment Term, the Company shall pay Executive a base salary at the annual rate of $229,000, payable in regular installments in accordance with the Company’s usual payment practices. Executive shall be entitled to increases (but not decreases) in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Board of Directors of the Company (the

“Board”) and the Board shall be obligated to annually review Executive’s base salary for increases but not decreases. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary.”

4.        Annual Bonus.  With respect to each full calendar year of the Company during the Employment Term, Executive shall be eligible to earn an annual bonus award (an “Annual Bonus”) based upon the achievement of certain individual and Company performance targets established by the Board, in consultation with the CEO (such targets to be established no later than 90 days following the beginning of the year in which they relate); provided that, Executive’s target Annual Bonus shall be not less than 65% of his Base Salary (the “Target Annual Bonus”). With respect to each full calendar year of the Company during the Employment Term, the amount of the Annual Bonus (if any) shall be paid as soon as practicable but no later than March 15 of the calendar year following the calendar year for which such Annual Bonus is earned.

5.        Employee Benefits.  During the Employment Term, Executive shall be entitled to participate in the Company’s employee benefit plans (other than annual bonus plans) as in effect from time to time (collectively “Employee Benefits”), on terms no less favorable than those generally made available to other senior executives of the Company. Executive will be provided paid vacation pursuant to the Vacation Summary Plan Description.

6.        Business Expenses.  During the Employment Term, reasonable travel and other expenses incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies.

7.        Termination.  The Employment Term and Executive’s employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 60 days’ advance written notice of any resignation of Executive’s employment. Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Company and its affiliates.

a.        By the Company For Cause or By Executive Resignation Without Good Reason.

(i)    The Employment Term and Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) and shall terminate automatically upon Executive’s resignation without Good Reason (as defined in Section 7(c)(ii)).

(ii)    For purposes of this Agreement, “Cause” shall mean (A) Executive’s continued and willful, intentional or grossly negligent failure to substantially perform Executive’s duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness), (B) Executive’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, deceit, dishonesty or fraud that relates to the Company property, (C) the willful, intentional or grossly negligent conduct of Executive which is demonstrably and materially injurious to the Company, monetarily or otherwise or (D) Executive’s material breach of the

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provisions of Sections 8 or 9 of this Agreement. For purposes of this definition of Cause, no act, or failure to act, on Executive’s part shall be deemed willful, intentional or grossly negligent if Executive acted in good faith and in a manner that Executive reasonably believed to be in, or not opposed to, the best interests of the Company.

(iii)    If Executive’s employment is terminated by the Company for Cause, or if Executive resigns without Good Reason, Executive shall be entitled to receive:

(A)  the Base Salary through the date of termination;

(B)  any Annual Bonus earned but unpaid as of the date of termination for any previously completed fiscal year;

(C)  reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and

(D)  such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company (the amounts described in clauses (A) through (D) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment by the Company for Cause or resignation by Executive without Good Reason, except as set forth in this Section 7(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

b.        Disability or Death.

(i)    The Employment Term and Executive’s employment hereunder shall terminate upon Executive’s death. If Executive becomes physically or mentally incapacitated so as to be unable to perform the essential functions of Executive’s duties (such incapacity is hereinafter referred to as “Disability”), then (A) the CEO may allow another officer of the Company to perform Executive’s duties and responsibilities during the period of such Disability, and (B) if such Disability continues for 120 consecutive days or 180 days during any consecutive 360 day period, the CEO may terminate Executive’s employment under this Agreement. If any question shall arise as to whether, during any period Executive is disabled so as to be unable to perform the essential functions of Executive’s then existing position or positions with or without reasonable accommodation, Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company, to whom Executive or Executive’s guardian has no reasonable objection, as to whether Executive is so disabled and how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on Executive. Nothing in this Section 7(b) shall be construed to waive Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1933, 29 U.S.C. ss.2601 et seq. and the Americans With Disabilities Act, 424 S.C. ss.12101 et seq.

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(ii)    Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive:

(A)  the Accrued Rights; and

(B)  Target Annual Bonus multiplied by a fraction, the numerator of which is the number of days of the calendar year of termination that shall have elapsed through the date of Executive’s termination of employment and the denominator of which is 365.

Following Executive’s termination of employment due to Disability or death, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

c.        By the Company Without Cause or Resignation by Executive for Good Reason.

(i)    The Employment Term and Executive’s employment hereunder may be terminated by the Company without Cause or by Executive’s resignation for Good Reason.

(ii)    For purposes of this Agreement, “Good Reason” shall mean (A) the failure of the Company to pay or cause to be paid Executive’s Base Salary or Annual Bonus, when due hereunder, (B) any substantial diminution in Executive’s authority or responsibilities from those described in Section 2 hereof, (C) the requirement by the Company that Executive’s principal office be located more than 50 miles outside of the greater Baltimore, Maryland metropolitan area, or (D) any failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the business or assets of the Company upon a merger, consolidation, sale or similar transaction (other than an assumption that occurs by operation of law); provided that any of the events described in clauses (A) through (D) of this Section 7(c)(ii) shall constitute Good Reason only if Executive provides written notice to the Company of the existence of any such event within 90 days of the initial existence of the event and the Company fails to cure such event within 30 days after receipt from Executive of such written notice.

(iii)    If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability and other than any termination by the Company following the Company’s receipt of a Notice of Termination from Executive setting forth Executive’s intention to resign without Good Reason, as described in Section 7(a)(i)) or if Executive resigns for Good Reason, in either case whether or not such termination occurs in connection with a Change in Control, Executive shall be entitled to receive:

(A)  the Accrued Rights;

(B)  an amount equal to the Annual Bonus that Executive would have been entitled to receive in respect of the fiscal year in which Executive’s termination date occurs, had Executive continued in employment until the end of such fiscal year, which amount, determined based on the Company’s actual performance for such year relative to the performance goals applicable to Executive, shall be multiplied by a fraction (A) the numerator of which is the number of days in

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such fiscal year through termination date and (B) the denominator of which is 365 and shall be payable in a lump sum payment at the time such bonus or incentive awards are payable to other participants; and

(C)  subject to Executive’s continued compliance with the provisions of Sections 8 and 9, an amount equal to the sum of (x) the Base Salary and (y) the Target Annual Bonus, payable in equal bi-monthly installments over the Restricted Period (as defined in Section 8) in accordance with the Company’s usual payroll practices; provided that the aggregate amount described in this clause (C) shall be reduced, but not below zero, by the present value of any other cash severance or cash termination benefits payable to Executive under any other plans, programs or arrangements of the Company or its affiliates, including, without limitation, any severance plan of the Company in which Executive is entitled to participate.

(iv)    Notwithstanding the foregoing in Section 7(c)(iii), if Executive would be entitled to receive aggregate severance payments and/or benefits under an applicable severance plan or policy of the Company (the “Applicable Severance Policy”) in effect at the time of Executive’s termination which are greater than the payments provided in Section 7(c)(iii), then Executive shall instead receive the payments and benefits provided by the Applicable Severance Policy and shall not be entitled to receive the payments provided in Section 7(c)(iii).

(v)    For purposes of this Agreement, “Change in Control” shall mean the consummation of any transaction (including any merger or consolidation), the result of which is that (i) any Group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) or Person, as described in Section 8(a)(1), becomes the beneficial owner, directly or indirectly, of more than 25% of the voting securities of the Company or its successor entity, (ii) any Group or Person becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities of the Company or its successor entity or (iii) any Person becomes the beneficial owner, directly or indirectly, of all or substantially all of the assets of the Company or its successor entity.

(vi)    Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, in either case whether or not in connection with a Change in Control, and except as set forth in Section 7(c)(iii) or Section 7(c)(iv), as applicable, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

d.        Expiration of Employment Term. Unless the parties otherwise agree in writing, continuation of Executive’s employment with the Company beyond the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company; provided that the provisions of Sections 8, 9 and 10 of this Agreement shall survive any termination of this Agreement or Executive’s termination of employment hereunder.

e.        Notice of Termination.  Any purported termination of employment by the Company or by Executive (other than due to Executive’s death) during the Employment Term shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12(i) hereof. For purposes of

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this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.

f.        Board/Committee Resignation.  Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from (i) any position as an officer of the Company and any of the Company’s affiliates, and (ii) the Board (and any committees thereof) and the board of directors of any of the Company’s affiliates (and any committees thereof).

8.      Non-Competition.

a.        Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

(1)          During the Employment Term and for a period of nine months following the date Executive ceases to be employed by the Company for any reason (the “Restricted Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any customer of the Company or prospective customer of the Company:

(i) with whom Executive had personal contact or dealings on behalf of the Company during the one year period preceding Executive’s termination of employment;

(ii) with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one year immediately preceding Executive’s termination of employment; or

(iii) for whom Executive had direct or indirect responsibility during the one year immediately preceding Executive’s termination of employment.

(2)          During the Restricted Period, Executive will not directly or indirectly:

(i) engage in any coal-related business that competes with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(ii) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

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(iii) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant;

(iv) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers partners, members or investors of the Company or its affiliates, or

(v) disparage the Company or any of its stockholders, directors, officers, employees or agents.

(3)          Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(4)          During the Employment Term and, for a period of two years following the date Executive ceases to be employed by the Company, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(i) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(ii) hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

(5)          During the Restricted Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

b.        It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

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9.      Confidentiality; Intellectual Property.

a.        Confidentiality.

(i)    Executive will not at any time (whether during or after Executive’s employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information — including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“Confidential Information”) without the prior written authorization of the Board; provided, that Executive may disclose such information to Executive’s legal and/or financial advisor for the limited purpose of enforcing Executive’s rights under this Agreement; provided, that Executive shall request that such legal and/or financial advisors not disclose such information.

(ii)    Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation; or (c) required by law to be disclosed; provided that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

(iii)    Except as required by law, Executive will not disclose to anyone, other than Executive’s immediate family, legal or financial advisors or members of the Company’s senior management, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.

(iv)    Upon termination of Executive’s employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

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    b.        Intellectual Property.

(i)    If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (“Works”), either alone or with third parties, prior to Executive’s employment by the Company, that are relevant to or implicated by such employment (“Prior Works”), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Company’s current and future business.

(ii)    If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executive’s employment by the Company and within the scope of such employment and/or with the use of any the Company resources (“Company Works”), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.

(iii)    Executive agrees to keep and maintain adequate and current written records (in the form of notes, sketches, drawings, and any other form or media requested by the Company) of all Company Works. The records will be available to and remain the sole property and intellectual property of the Company at all times.

(iv)    Executive shall take all requested actions and execute all requested documents (including any licenses or assignments required by a government contract) at the Company’s expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Company’s rights in the Prior Works and Company Works. If the Company is unable for any other reason to secure Executive’s signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and in Executive’s behalf and stead to execute any documents and to do all other lawfully permitted acts in connection with the foregoing.

(v)    Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company regarding the protection of Confidential Information and intellectual property and

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potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version that has been communicated to Executive.

(vi)    The provisions of Section 9 shall survive the termination of Executive’s employment for any reason.

10.      Specific Performance.  Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

11.      Gross-Up.

  a.        In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, any other plan, arrangement or agreement, including but not limited to the Nonqualified Stock Option Agreement, with the Company or any of its affiliates, or otherwise) (each a “Payment” and all such Payments, the “Total Payments”) is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the “Excise Tax”), Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of the Excise Tax imposed on the Payments and any income, employment and other taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 11(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the portion of the Total Payments that would be treated as “parachute payments” under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to Executive. For purposes of reducing the Total Payments to the Safe Harbor Cap, any amounts that are not “deferred compensation” within the meaning of Section 409A of the Code shall be reduced first.

  b.        All determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP or such other nationally

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recognized certified public accounting firm as may be designated by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided, that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive’s residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive’s behalf) when the associated Excise Tax is due; provided that in no event shall any payment under this Section 11 be made later than the end of the calendar year following the year in which the Excise Tax is paid. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (“Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 11(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.

  c.        Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 11(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals,

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proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall (to the extent permitted by law) indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, such extension shall be limited solely to such contested amount. The Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

  d.        If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Section 11, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company’s complying with the requirements of Section 11(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 11(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

12.      Miscellaneous.

  a.         Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such jurisdiction. Except as provided in Section 10 of this Agreement, any controversy or claim arising out of or relating to this Agreement or Executive’s employment with the Company or the termination thereof shall be resolved by binding confidential arbitration, to be held in New York, New York, in accordance with the Employee Dispute Resolution Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The costs and expenses incurred in connection with such arbitration shall be borne by the party that does not prevail in such arbitration. Each party shall be responsible for such party’s legal fees and expenses incurred in connection with such arbitration.

  b.        Entire Agreement; Amendments.  This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

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  c.        No Mitigation; No Offset.  In the event of any termination of Executive’s employment under Section 7 of this Agreement, Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due Executive under this Agreement, or otherwise, on account of any remuneration or other benefit attributable to any subsequent employment that Executive may obtain.

  d.        Indemnification; D&O Insurance.  Executive shall be indemnified to the same extent as other senior executives, officers and directors with respect to Executive’s service as an employee and director of the Company or any of the Company’s affiliates. During the Employment Term, the Company shall keep in place a directors and officers’ liability insurance policy (or policies) providing comprehensive coverage to Executive to the extent that the Company provides such coverage for any other senior executive, officer or director of the Company and following the Employment Term, Executive shall be entitled to such coverage to the extent that the Company provides such coverage for any other current and former senior executive, officer or director of the Company.

  e.        No Waiver.  The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

  f.        Severability.  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

  g.        Assignment.  This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement shall be assigned by the Company to a person or entity which is an affiliate or a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.

  h.        Successors; Binding Agreement.  This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

  i.        Notice.  For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

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If to the Company:

Foundation Coal Corporation

999 Corporate Boulevard, Suite 300

Linthicum Heights, Maryland 21090

Attention: General Counsel

If to Executive:

To the most recent address of Executive set forth in the personnel records of the Company.

j.        Representations.

(i)    Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

(ii)    The Company represents and warrants that (A) it is fully authorized by action of its Board (and of any other person or body whose action is required) to enter into this Agreement and to perform its obligations under it; (B) to the best of its knowledge and belief, the execution, delivery and performance of this Agreement by the Company does not violate any law, regulation, order, judgment or decree or any agreement, plan or corporate governance document of the Company or its affiliates or shareholders; and (C) to the best of its knowledge and belief, upon the execution and delivery of this Agreement by the parties, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

k.        Prior Agreements.  This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executive’s employment with the Company and/or its affiliates.

l.        Cooperation.  Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder and does not unreasonably interfere with Executive’s subsequent employment. This provision shall survive any termination of this Agreement. The Company agrees to reimburse, in accordance with Company policies, Executive promptly for Executive’s reasonable and documented out-of-pocket expenses incurred in connection with the cooperation obligation set forth in this Section 12(l). Notwithstanding the foregoing the preceding cooperation obligation shall not apply to any actions proceeding or controversy between Executive and the Company or as to which it could reasonably be determined that Executive’s right to subsequently enforce Executive’s rights under this Agreement could be prejudiced.

m.        Withholding Taxes.  The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

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n.        Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

o.        Section 409A Compliance.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code (“Section 409A”). This Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause this Agreement to fail to satisfy Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A). Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement and no payments shall be due to Executive under this Agreement which are payable upon Executive’s termination of employment unless Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A. To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following Executive’s termination of employment shall instead be paid on the first business day after the date that is six months following Executive’s termination of employment (or upon Executive’s death, if earlier). In addition, for purposes of this Agreement, each amount to be paid or benefit to be provided to Executive pursuant to this Agreement shall be construed as a separate identified payment for purposes of Section 409A. With respect to expenses eligible for reimbursement under the terms of this Agreement, (i) the amount of such expenses eligible for reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year and (ii) any reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409A; provided, however, that with respect to any reimbursements for any taxes to which Executive becomes entitled under the terms of this Agreement, the payment of such reimbursements shall be made by the Company no later than the end of the calendar year following the calendar year in which Executive remits the related taxes. Upon the expiration of the applicable Section 409A(a)(2) deferral period, all payments deferred pursuant to this Agreement shall be paid to Executive in a lump sum (less applicable tax withholdings).

[Remainder of Page is Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

Foundation Coal Corporation		Michael R. Peelish
By:	James F. Roberts
Title:	Chief Executive Officer

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EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

Senior Manager

THIS AGREEMENT by and among Foundation Coal Corporation, a Delaware corporation (the “Company”) and Greg A. Walker (“Executive”) is entered into and effective dated as of January 1, 2009.

WHEREAS, the Company desires to continue the employment of Executive as a full-time employee of the Company and Executive desires to serve the Company in such capacity; and

WHEREAS, the Company and Executive desire to enter into an Employment Agreement to memorialize the terms and conditions of such employment;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Executive hereby agree as follows:

1.      Term.  Subject to the provisions of Section 7 of this Agreement, Executive shall continue to be employed by the Company for a period commencing on the date hereof and ending on December 31, 2011 (the “Employment Term”) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing on December 31, 2011 and on each anniversary thereafter (each an “Extension Date”), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days’ prior written notice before the next Extension Date that the Employment Term shall not be so extended.

2.      Position.  During the Employment Term, Executive shall serve as the Company’s Senior Vice President, General Counsel and Secretary. In such position, Executive shall report directly to the Chief Executive Officer (the “CEO”) of the Company and shall have such duties and authority as shall be determined from time to time by the CEO. During the Employment Term, Executive will devote Executive’s full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the CEO; provided that nothing herein shall preclude Executive from (i) subject to the prior approval of the CEO (which shall not unreasonably be withheld), accepting appointment to or continuing to serve on any board of directors or trustees of any business or corporation, (ii) engaging in charitable activities and community affairs or (iii) managing his personal investments and affairs; provided that in each case, and in the aggregate, such activities do not conflict or interfere with the performance of Executive’s duties hereunder or conflict with the provisions contained in Section 9.

3.      Base Salary.  During the Employment Term, the Company shall pay Executive a base salary at the annual rate of $295,000, payable in regular installments in accordance with the Company’s usual payment practices. Executive shall be entitled to increases (but not decreases) in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Board of Directors of the Company (the “Board”) and the Board shall be obligated to annually review Executive’s base salary for increases but not decreases. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary.”

4.        Annual Bonus.  With respect to each full calendar year of the Company during the Employment Term, Executive shall be eligible to earn an annual bonus award (an “Annual Bonus”) based upon the achievement of certain individual and Company performance targets established by the Board, in consultation with the CEO (such targets to be established no later than 90 days following the beginning of the year in which they relate); provided that, Executive’s target Annual Bonus shall be not less than 65% of his Base Salary (the “Target Annual Bonus”). With respect to each full calendar year of the Company during the Employment Term, the amount of the Annual Bonus (if any) shall be paid as soon as practicable but no later than March 15 of the calendar year following the calendar year for which such Annual Bonus is earned.

5.        Employee Benefits.  During the Employment Term, Executive shall be entitled to participate in the Company’s employee benefit plans (other than annual bonus plans) as in effect from time to time (collectively “Employee Benefits”), on terms no less favorable than those generally made available to other senior executives of the Company. Executive will be provided paid vacation pursuant to the Vacation Summary Plan Description.

6.      Business Expenses.  During the Employment Term, reasonable travel and other expenses incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies.

7.      Termination.  The Employment Term and Executive’s employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 60 days’ advance written notice of any resignation of Executive’s employment. Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Company and its affiliates.

a.        By the Company For Cause or By Executive Resignation Without Good Reason.

(i)    The Employment Term and Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) and shall terminate automatically upon Executive’s resignation without Good Reason (as defined in Section 7(c)(ii)).

(ii)    For purposes of this Agreement, “Cause” shall mean (A) Executive’s continued and willful, intentional or grossly negligent failure to substantially perform Executive’s duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness), (B) Executive’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, deceit, dishonesty or fraud that relates to the Company property, (C) the willful, intentional or grossly negligent conduct of Executive which is demonstrably and materially injurious to the Company, monetarily or otherwise or (D) Executive’s material breach of the provisions of Sections 8 or 9 of this Agreement. For purposes of this definition of Cause, no act, or failure to act, on Executive’s part shall be deemed willful, intentional or grossly negligent if Executive acted in good faith and in a manner that Executive reasonably believed to be in, or not opposed to, the best interests of the Company.

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(iii)    If Executive’s employment is terminated by the Company for Cause, or if Executive resigns without Good Reason, Executive shall be entitled to receive:

(A)    the Base Salary through the date of termination;

(B)    any Annual Bonus earned but unpaid as of the date of termination for any previously completed fiscal year;

(C)    reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and

(D)    such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company (the amounts described in clauses (A) through (D) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment by the Company for Cause or resignation by Executive without Good Reason, except as set forth in this Section 7(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

    b.        Disability or Death.

(i)    The Employment Term and Executive’s employment hereunder shall terminate upon Executive’s death. If Executive becomes physically or mentally incapacitated so as to be unable to perform the essential functions of Executive’s duties (such incapacity is hereinafter referred to as “Disability”), then (A) the CEO may allow another officer of the Company to perform Executive’s duties and responsibilities during the period of such Disability, and (B) if such Disability continues for 120 consecutive days or 180 days during any consecutive 360 day period, the CEO may terminate Executive’s employment under this Agreement. If any question shall arise as to whether, during any period Executive is disabled so as to be unable to perform the essential functions of Executive’s then existing position or positions with or without reasonable accommodation, Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company, to whom Executive or Executive’s guardian has no reasonable objection, as to whether Executive is so disabled and how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on Executive. Nothing in this Section 7(b) shall be construed to waive Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1933, 29 U.S.C. ss.2601 et seq. and the Americans With Disabilities Act, 424 S.C. ss.12101 et seq.

(ii)    Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive:

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(A)  the Accrued Rights; and

(B)  Target Annual Bonus multiplied by a fraction, the numerator of which is the number of days of the calendar year of termination that shall have elapsed through the date of Executive’s termination of employment and the denominator of which is 365.

Following Executive’s termination of employment due to Disability or death, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

c.        By the Company Without Cause or Resignation by Executive for Good Reason.

(i)    The Employment Term and Executive’s employment hereunder may be terminated by the Company without Cause or by Executive’s resignation for Good Reason.

(ii)    For purposes of this Agreement, “Good Reason” shall mean (A) the failure of the Company to pay or cause to be paid Executive’s Base Salary or Annual Bonus, when due hereunder, (B) any substantial diminution in Executive’s authority or responsibilities from those described in Section 2 hereof, (C) the requirement by the Company that Executive’s principal office be located more than 50 miles outside of the greater Baltimore, Maryland metropolitan area, or (D) any failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the business or assets of the Company upon a merger, consolidation, sale or similar transaction (other than an assumption that occurs by operation of law); provided that any of the events described in clauses (A) through (D) of this Section 7(c)(ii) shall constitute Good Reason only if Executive provides written notice to the Company of the existence of any such event within 90 days of the initial existence of the event and the Company fails to cure such event within 30 days after receipt from Executive of such written notice.

(iii)    If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability and other than any termination by the Company following the Company’s receipt of a Notice of Termination from Executive setting forth Executive’s intention to resign without Good Reason, as described in Section 7(a)(i)) or if Executive resigns for Good Reason, in either case whether or not such termination occurs in connection with a Change in Control, Executive shall be entitled to receive:

(A)  the Accrued Rights;

(B)  an amount equal to the Annual Bonus that Executive would have been entitled to receive in respect of the fiscal year in which Executive’s termination date occurs, had Executive continued in employment until the end of such fiscal year, which amount, determined based on the Company’s actual performance for such year relative to the performance goals applicable to Executive, shall be multiplied by a fraction (A) the numerator of which is the number of days in such fiscal year through termination date and (B) the denominator of which is 365 and shall be payable in a lump sum payment at the time such bonus or incentive awards are payable to other participants; and

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(C)  subject to Executive’s continued compliance with the provisions of Sections 8 and 9, an amount equal to the sum of (x) the Base Salary and (y) the Target Annual Bonus, payable in equal bi-monthly installments over the Restricted Period (as defined in Section 8) in accordance with the Company’s usual payroll practices; provided that the aggregate amount described in this clause (C) shall be reduced, but not below zero, by the present value of any other cash severance or cash termination benefits payable to Executive under any other plans, programs or arrangements of the Company or its affiliates, including, without limitation, any severance plan of the Company in which Executive is entitled to participate.

(iv)    Notwithstanding the foregoing in Section 7(c)(iii), if Executive would be entitled to receive aggregate severance payments and/or benefits under an applicable severance plan or policy of the Company (the “Applicable Severance Policy”) in effect at the time of Executive’s termination which are greater than the payments provided in Section 7(c)(iii), then Executive shall instead receive the payments and benefits provided by the Applicable Severance Policy and shall not be entitled to receive the payments provided in Section 7(c)(iii).

(v)    For purposes of this Agreement, “Change in Control” shall mean the consummation of any transaction (including any merger or consolidation), the result of which is that (i) any Group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) or Person, as described in Section 8(a)(1), becomes the beneficial owner, directly or indirectly, of more than 25% of the voting securities of the Company or its successor entity, (ii) any Group or Person becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities of the Company or its successor entity or (iii) any Person becomes the beneficial owner, directly or indirectly, of all or substantially all of the assets of the Company or its successor entity.

(vi)    Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, in either case whether or not in connection with a Change in Control, and except as set forth in Section 7(c)(iii) or Section 7(c)(iv), as applicable, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

d.        Expiration of Employment Term.  Unless the parties otherwise agree in writing, continuation of Executive’s employment with the Company beyond the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company; provided that the provisions of Sections 8, 9 and 10 of this Agreement shall survive any termination of this Agreement or Executive’s termination of employment hereunder.

e.        Notice of Termination.  Any purported termination of employment by the Company or by Executive (other than due to Executive’s death) during the Employment Term shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12(i) hereof. For purposes of

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this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.

f.        Board/Committee Resignation.  Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from (i) any position as an officer of the Company and any of the Company’s affiliates, and (ii) the Board (and any committees thereof) and the board of directors of any of the Company’s affiliates (and any committees thereof).

8.      Non-Competition.

a.        Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

(1)            During the Employment Term and for a period of nine months following the date Executive ceases to be employed by the Company for any reason (the “Restricted Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any customer of the Company or prospective customer of the Company:

(i) with whom Executive had personal contact or dealings on behalf of the Company during the one year period preceding Executive’s termination of employment;

(ii) with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one year immediately preceding Executive’s termination of employment; or

(iii) for whom Executive had direct or indirect responsibility during the one year immediately preceding Executive’s termination of employment.

(2)            During the Restricted Period, Executive will not directly or indirectly:

(i) engage in any coal-related business that competes with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(ii) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

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(iii) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant;

(iv) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers partners, members or investors of the Company or its affiliates, or

(v) disparage the Company or any of its stockholders, directors, officers, employees or agents.

(3)        Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(4)        During the Employment Term and, for a period of two years following the date Executive ceases to be employed by the Company, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(i) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(ii) hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

(5)        During the Restricted Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

b.      It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

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9.        Confidentiality; Intellectual Property.

a.        Confidentiality.

(i)    Executive will not at any time (whether during or after Executive’s employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information — including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“Confidential Information”) without the prior written authorization of the Board; provided, that Executive may disclose such information to Executive’s legal and/or financial advisor for the limited purpose of enforcing Executive’s rights under this Agreement; provided, that Executive shall request that such legal and/or financial advisors not disclose such information.

(ii)    Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation; or (c) required by law to be disclosed; provided that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

(iii)    Except as required by law, Executive will not disclose to anyone, other than Executive’s immediate family, legal or financial advisors or members of the Company’s senior management, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.

(iv)    Upon termination of Executive’s employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information;

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and (z) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

b.        Intellectual Property.

(i)    If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (“Works”), either alone or with third parties, prior to Executive’s employment by the Company, that are relevant to or implicated by such employment (“Prior Works”), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Company’s current and future business.

(ii)    If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executive’s employment by the Company and within the scope of such employment and/or with the use of any the Company resources (“Company Works”), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.

(iii)    Executive agrees to keep and maintain adequate and current written records (in the form of notes, sketches, drawings, and any other form or media requested by the Company) of all Company Works. The records will be available to and remain the sole property and intellectual property of the Company at all times.

(iv)    Executive shall take all requested actions and execute all requested documents (including any licenses or assignments required by a government contract) at the Company’s expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Company’s rights in the Prior Works and Company Works. If the Company is unable for any other reason to secure Executive’s signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and in Executive’s behalf and stead to execute any documents and to do all other lawfully permitted acts in connection with the foregoing.

(v)    Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company regarding the protection of Confidential Information and intellectual property and

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potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version that has been communicated to Executive.

(vi)    The provisions of Section 9 shall survive the termination of Executive’s employment for any reason.

10.        Specific Performance.  Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

11.        Gross-Up.

a.        In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, any other plan, arrangement or agreement, including but not limited to the Nonqualified Stock Option Agreement, with the Company or any of its affiliates, or otherwise) (each a “Payment” and all such Payments, the “Total Payments”) is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the “Excise Tax”), Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of the Excise Tax imposed on the Payments and any income, employment and other taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 11(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the portion of the Total Payments that would be treated as “parachute payments” under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to Executive. For purposes of reducing the Total Payments to the Safe Harbor Cap, any amounts that are not “deferred compensation” within the meaning of Section 409A of the Code shall be reduced first.

b.        All determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP or such other nationally

10

recognized certified public accounting firm as may be designated by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided, that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive’s residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive’s behalf) when the associated Excise Tax is due; provided that in no event shall any payment under this Section 11 be made later than the end of the calendar year following the year in which the Excise Tax is paid. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (“Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 11(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.

c.        Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 11(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings,

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hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall (to the extent permitted by law) indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, such extension shall be limited solely to such contested amount. The Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

d.        If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Section 11, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company’s complying with the requirements of Section 11(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 11(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

12.        Miscellaneous.

a.        Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such jurisdiction. Except as provided in Section 10 of this Agreement, any controversy or claim arising out of or relating to this Agreement or Executive’s employment with the Company or the termination thereof shall be resolved by binding confidential arbitration, to be held in New York, New York, in accordance with the Employee Dispute Resolution Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The costs and expenses incurred in connection with such arbitration shall be borne by the party that does not prevail in such arbitration. Each party shall be responsible for such party’s legal fees and expenses incurred in connection with such arbitration.

b.        Entire Agreement; Amendments.  This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

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c.        No Mitigation; No Offset.  In the event of any termination of Executive’s employment under Section 7 of this Agreement, Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due Executive under this Agreement, or otherwise, on account of any remuneration or other benefit attributable to any subsequent employment that Executive may obtain.

d.        Indemnification; D&O Insurance.  Executive shall be indemnified to the same extent as other senior executives, officers and directors with respect to Executive’s service as an employee and director of the Company or any of the Company’s affiliates. During the Employment Term, the Company shall keep in place a directors and officers’ liability insurance policy (or policies) providing comprehensive coverage to Executive to the extent that the Company provides such coverage for any other senior executive, officer or director of the Company and following the Employment Term, Executive shall be entitled to such coverage to the extent that the Company provides such coverage for any other current and former senior executive, officer or director of the Company.

e.        No Waiver.  The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

f.        Severability.  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

g.        Assignment.  This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement shall be assigned by the Company to a person or entity which is an affiliate or a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.

h.        Successors; Binding Agreement.  This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

i.        Notice.  For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

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If to the Company:

Foundation Coal Corporation

999 Corporate Boulevard, Suite 300

Linthicum Heights, Maryland 21090

Attention: General Counsel

If to Executive:

To the most recent address of Executive set forth in the personnel records of the Company.

j.         Representations.

(i)    Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

(ii)    The Company represents and warrants that (A) it is fully authorized by action of its Board (and of any other person or body whose action is required) to enter into this Agreement and to perform its obligations under it; (B) to the best of its knowledge and belief, the execution, delivery and performance of this Agreement by the Company does not violate any law, regulation, order, judgment or decree or any agreement, plan or corporate governance document of the Company or its affiliates or shareholders; and (C) to the best of its knowledge and belief, upon the execution and delivery of this Agreement by the parties, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

k.        Prior Agreements.  This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executive’s employment with the Company and/or its affiliates.

l.        Cooperation.  Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder and does not unreasonably interfere with Executive’s subsequent employment. This provision shall survive any termination of this Agreement. The Company agrees to reimburse, in accordance with Company policies, Executive promptly for Executive’s reasonable and documented out-of-pocket expenses incurred in connection with the cooperation obligation set forth in this Section 12(l). Notwithstanding the foregoing the preceding cooperation obligation shall not apply to any actions proceeding or controversy between Executive and the Company or as to which it could reasonably be determined that Executive’s right to subsequently enforce Executive’s rights under this Agreement could be prejudiced.

m.        Withholding Taxes.  The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

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n.        Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

o.        Section 409A Compliance.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code (“Section 409A”). This Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause this Agreement to fail to satisfy Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A). Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement and no payments shall be due to Executive under this Agreement which are payable upon Executive’s termination of employment unless Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A. To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following Executive’s termination of employment shall instead be paid on the first business day after the date that is six months following Executive’s termination of employment (or upon Executive’s death, if earlier). In addition, for purposes of this Agreement, each amount to be paid or benefit to be provided to Executive pursuant to this Agreement shall be construed as a separate identified payment for purposes of Section 409A. With respect to expenses eligible for reimbursement under the terms of this Agreement, (i) the amount of such expenses eligible for reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year and (ii) any reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409A; provided, however, that with respect to any reimbursements for any taxes to which Executive becomes entitled under the terms of this Agreement, the payment of such reimbursements shall be made by the Company no later than the end of the calendar year following the calendar year in which Executive remits the related taxes. Upon the expiration of the applicable Section 409A(a)(2) deferral period, all payments deferred pursuant to this Agreement shall be paid to Executive in a lump sum (less applicable tax withholdings).

[Remainder of Page is Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

Foundation Coal Corporation		Greg A. Walker
By:	Michael R. Peelish
Title:	Senior Vice President,
	Safety and Human Resources

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EX-10.7

Exhibit 10.7

FOUNDATION COAL HOLDINGS, INC.

AMENDED AND RESTATED

2004 STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

THIS AGREEMENT, is made effective as of [Insert date][ (the “Date of Grant”), between Foundation Coal Holdings, Inc. (the “Company”) and [Insert director name] (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Amended and Restated Foundation Coal Holdings, Inc. 2004 Stock Incentive Plan, as amended from time to time (the “Plan”), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the Restricted Stock Units provided for herein to Participant pursuant to the Plan and the terms set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1.        Definitions.  Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

2.        Grant of Restricted Stock Units.  The Company hereby grants to Participant Restricted Stock Units worth $75,000 effective [Insert Date of Grant], subject to adjustment as set forth in the Plan. A Restricted Stock Unit is an unfunded, unsecured right of the Participant to receive a share of the Company’s common stock, par value $0.01 per share (the “Shares”). The Participant shall not possess any incidents of ownership in the Restricted Stock Units until such Restricted Stock Units have vested. The Fair Market Value on the trading day immediately preceding the Date of Grant shall be used to determine the actual number of Restricted Stock Units granted to the Participant. By entering into this Agreement, the Participant agrees to be bound by all terms and conditions of this Agreement and the Plan, as amended from time to time.

3.        Restrictions on Transfer of Shares.  Unless otherwise determined by the Committee or permitted by the Plan, a Restricted Stock Unit may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary by will or by the laws of descent and distribution shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. For purposes of this Agreement, the Restriction Period shall

Directors Initial Equity - Restricted Stock Agreement – [Insert director name]. 1

mean the period from the Date of Grant until the fifth (5th) anniversary of the Date of Grant; provided, however, that, subject to the Participant’s continued service as a director of the Company, the Restriction Period shall lapse with respect to one-fifth (1/5) of the Shares on December 31^st following the Date of Grant and with respect to an additional one-fifth (1/5) on each anniversary thereof, until the Restricted Stock Units are one hundred (100%) vested. Notwithstanding the foregoing, upon a Change in Control, the Restriction Period shall lapse with respect to the Restricted Stock Units, and the Restricted Stock Unit shall thereby be free of such restrictions.

4.        Forfeiture of Restricted Stock Units.  If Participant’s services shall terminate prior to the expiration of the Restriction Period for any reason, any Restricted Stock Units with respect to which the Restriction Period has not yet lapsed shall, upon such termination of service, be forfeited by Participant to the Company, without the payment of any consideration or further consideration by the Company, and neither Participant nor any successors, heirs, assigns, or personal representatives of Participant shall thereafter have any further rights or interest in the Restricted Stock Units under this Agreement.

5.        Delivery of Shares Underlying the Restricted Stock Units.  Unless earlier cancelled pursuant to Section 4 above, on or about the January 1^st following the Date of Grant and on each anniversary thereof, the Company shall issue or cause there to be transferred to the Participant a number of Shares equal to one fifth (1/5) of the Restricted Stock Units awarded to the Participant under this Agreement until one hundred percent (100%) of the Restricted Stock Units are vested.

6.        No Right to Continued Employment.  Neither the Plan nor this Agreement shall be construed as giving Participant the right to be retained as a non-employee director of the Company or any Affiliate.

7.        Securities Laws.  Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, a Restricted Stock Unit may not be delivered prior to the completion of any registration or qualification of the Restricted Stock Units or the Shares to which they relate under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable. Upon the acquisition of any Shares hereunder, Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement. The granting of Shares hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required.

8.        Certificates.  As soon as practicable following the vesting of the Shares underlying the Restricted Stock Units, the Company shall issue Shares (electronically) in the Participant’s name for such Shares. In the event the Company issues a certificate at the Participant’s request, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificate to the Participant, any loss by the Participant of the certificate, or any mistakes or errors in the issuance of the certificate or in the certificate itself.

Directors Initial Equity - Restricted Stock Agreement – [Insert director name]. 2

9.        Legend on Certificates.  The certificates representing the Shares issued to the Participant in respect of the Restricted Stock Units may be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws or the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

10.        Notices.  Any notice under this Agreement shall be addressed to the Company in care of its General Counsel, addressed to the principal executive office of the Company and to Participant at the address last appearing in the records of the Company for Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11.        Entire Agreement.  This Agreement, together with the Stockholders Agreement and the Plan, embodies the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof.

12.        Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws.

13.        Signature in Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

FOUNDATION COAL HOLDINGS, INC.
By:
	Michael R. Peelish
Its:	Sr. VP Safety and Human Resources

Director

Directors Initial Equity - Restricted Stock Agreement – [Insert director name]. 3

EX-10.8

Exhibit 10.8

FOUNDATION COAL HOLDINGS, INC.

2004 STOCK INCENTIVE PLAN

AMENDED AND RESTATED

RESTRICTED STOCK UNIT AGREEMENT

THIS AGREEMENT, is made effective as of January 1, 2009 (the “Date of Grant”), between Foundation Coal Holdings, Inc. (the “Company”) and [insert director name] (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Amended and Restated Foundation Coal Holdings, Inc. 2004 Stock Incentive Plan, as amended from time to time (the “Plan”), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the Restricted Stock Units provided for herein to Participant pursuant to the Plan and the terms set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1.        Definitions.  Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

2.        Grant of Restricted Stock Units.  The Company hereby grants to Participant Restricted Stock Units worth $75,000 effective January 1, 2008, and every January 1^st thereafter until the Committee decides otherwise, subject to adjustment as set forth in the Plan. A Restricted Stock Unit is an unfunded, unsecured right of the Participant to receive a share of the Company’s common stock, par value $0.01 per share (the “Shares”). The Participant shall not possess any incidents of ownership in the Restricted Stock Units until such Restricted Stock Units have vested. The Fair Market Value on the December 31^st preceding the Date of Grant shall be used to determine the actual number of Restricted Stock Units granted to the Participant. By entering into this Agreement, the Participant agrees to be bound by all terms and conditions of this Agreement and the Plan, as amended from time to time.

3.        Restrictions on Transfer of Shares.  Unless otherwise determined by the Committee or permitted by the Plan, a Restricted Stock Unit may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary by will or by the laws of descent and distribution shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. For purposes of this Agreement, the Restriction Period shall

Directors Annual Equity - Restricted Stock Agreement – [insert director name]. 1

mean the period from the Date of Grant until the December 31^st following the Date of Grant; subject to the Participant’s continued service as a director of the Company, the Restriction Period shall lapse with respect to one hundred percent (100%) of the Restricted Stock Units on the December 31st following the Date of Grant and are one hundred percent (100% ) vested. Notwithstanding the foregoing, upon a Change in Control, the Restriction Period shall lapse with respect to the Restricted Stock Units, and the Restricted Stock Unit shall thereby be free of such restrictions.

4.        Forfeiture of Restricted Stock Units.  If Participant’s services shall terminate prior to the expiration of the Restriction Period for any reason, any Restricted Stock Units with respect to which the Restriction Period has not yet lapsed shall, upon such termination of service, be forfeited by Participant to the Company, without the payment of any consideration or further consideration by the Company, and neither Participant nor any successors, heirs, assigns, or personal representatives of Participant shall thereafter have any further rights or interest in the Restricted Stock Units under this Agreement.

5.        Delivery of Shares Underlying the Restricted Stock Units.  Unless earlier cancelled pursuant to Section 4 above, on or about the January 1^st following the Date of Grant, the Company shall issue or cause there to be transferred to the Participant a number of Shares equal to the Restricted Stock Units awarded to the Participant under this Agreement.

6.        No Right to Continued Employment.  Neither the Plan nor this Agreement shall be construed as giving Participant the right to be retained as a non-employee director of the Company or any Affiliate.

7.        Securities Laws.  Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, a Restricted Stock Unit may not be delivered prior to the completion of any registration or qualification of the Restricted Stock Units or the Shares to which they relate under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable. Upon the acquisition of any Shares hereunder, Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement. The granting of Shares hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required.

8.        Certificates.  As soon as practicable following the vesting of the Shares underlying the Restricted Stock Units, the Company shall issue Shares (electronically) in the Participant’s name for such Shares. In the event the Company issues a certificate at the Participant’s request, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificate to the Participant, any loss by the Participant of the certificate, or any mistakes or errors in the issuance of the certificate or in the certificate itself.

9.        Legend on Certificates.  The certificates representing the Shares issued to the Participant in respect of the Restricted Stock Units may be subject to such stop transfer orders and other restrictions as the

Directors Annual Equity - Restricted Stock Agreement – [insert director name]. 2

Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws or the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

10.        Notices.  Any notice under this Agreement shall be addressed to the Company in care of its General Counsel, addressed to the principal executive office of the Company and to Participant at the address last appearing in the records of the Company for Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11.        Entire Agreement.  This Agreement, together with the Stockholders Agreement and the Plan, embodies the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof.

12.        Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws.

13.        Signature in Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

FOUNDATION COAL HOLDINGS, INC.
By:
	Michael R. Peelish
Its:	Sr. VP Safety and Human Resources

Director

Directors Annual Equity - Restricted Stock Agreement – [insert director name]. 3

EX-31.1

EXHIBIT 31.1

Sarbanes-Oxley Section 302 Certification

I, James F. Roberts, certify that:

1. I have reviewed this Form 10-Q for the Quarter Ended March 31, 2009 of Foundation Coal Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2009

/s/ JAMES F. ROBERTS

James F. Roberts

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Sarbanes-Oxley Section 302 Certification

I, Frank J. Wood, certify that:

1. I have reviewed this Form 10-Q for the Quarter Ended March 31, 2009 of Foundation Coal Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2009

/s/ FRANK J. WOOD

Frank J. Wood

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

SARBANES-OXLEY ACT SECTION 906 CERTIFICATION

In connection with this Report on Form 10-Q of Foundation Coal Holdings, Inc. for the period ended March 31, 2009, I, James F. Roberts, Chief Executive Officer of Foundation Coal Holdings, Inc., hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. This Form 10-Q for the period ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in this Form 10-Q for the period ended March 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of Foundation Coal Holdings, Inc.

Date: May 7, 2009

/s/ JAMES F. ROBERTS

James F. Roberts

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

SARBANES-OXLEY ACT SECTION 906 CERTIFICATION

In connection with this Report on Form 10-Q of Foundation Coal Holdings, Inc. for the period ended March 31, 2009, I, Frank J. Wood, Chief Financial Officer of Foundation Coal Holdings, Inc., hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. This Form 10-Q for the period ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in this Form 10-Q for the period ended March 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of Foundation Coal Holdings, Inc.

Date: May 7, 2009

/s/ FRANK J. WOOD

Frank J. Wood

Chief Financial Officer