PEABODY ENERGY CORPORATION





                        Long-Term Equity Incentive Plan





     1.   Purpose. The purpose of the Peabody Energy Corporation Long-Term

Equity Incentive Plan (the "Plan") is to provide an incentive for employees to

achieve the Corporation's business objectives and to directly align the rewards

of key employees with the creation of value for shareholders of the Corporation.

The Plan serves to attract and encourage key executives to remain with, and

devote their best efforts to, the success of Peabody Energy Corporation (the

"Corporation"). The Plan encourages key employees of the Corporation and such

subsidiaries of the Corporation as the Administrator designates, to acquire

shares of common stock, $0.01 par value, of the Corporation ("Common Stock") or

to receive monetary payments based on the value of such stock or based upon

achieving certain goals related to increasing shareholder value.



     2.   Administration. The Plan shall be administered by the Board of

Directors of the Corporation ("Board") or the Compensation Committee of the

Board as determined by the Board (the "Administrator").



     In accordance with the provisions of this Plan, the Administrator has the

authority and discretion to utilize various incentive approaches to

appropriately reflect changing business conditions with the goal of increasing

shareholder value. The authority to select persons eligible to participate in

the Plan, to grant benefits in accordance with Section 5 of the Plan, and to

establish the timing, pricing, amount and other terms and conditions of such

grants (which need not be uniform with respect to the various participants or

with respect to different grants to the same participant), may be exercised by

the Administrator in its sole discretion provided, that if the Administrator is

not the Board, the Board shall in all events have authority to approve or

disapprove of the Administrator's decision, which shall be final and binding on

the Administrator. An award of a benefit under this Plan shall be evidenced by

an award agreement that shall set forth the terms and conditions applicable to

that award. In the event of any inconsistency between the terms of such an award

agreement and terms of this Plan, the terms of the Plan shall prevail. An award

of benefits under this Plan is intended to be exempt for the one million dollar

limit on deductible compensation under Section 162(m) of the Internal Revenue

Code of 1986, as amended.



     Subject to the provisions of the Plan, the Administrator shall have

exclusive authority to interpret and administer the Plan, to establish

appropriate rules relating to the Plan, to delegate some or all of its authority

under the Plan and to take all such steps and make all such determinations in

connection with the Plan and the benefits granted pursuant to the Plan as it may

deem necessary or advisable. The validity, construction, and effect of the Plan

shall be determined in accordance with the laws of the State of Delaware. Any

decision of the Administrator in the interpretation and administration of the

Plan, as described herein, shall lie within its sole and absolute discretion and

shall be final, conclusive and binding on all parties concerned (including, but

not limited to, Participants and their beneficiaries or successors) provided,

that if the Administrator is not the Board, the Board shall in all events have

authority to

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                                                      Peabody Energy Corporation

                                                 Long-Term Equity Incentive Plan



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approve or disapprove of the Administrator's decision which shall be final and

binding on the Administrator. The Administrator shall have the full power and

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