Exhibit 10.1

GRANT AGREEMENT

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS AGREEMENT, dated as of    , 20   (“Grant Date”) is made by and between
PEABODY ENERGY CORPORATION, a Delaware corporation (the “Company”), and the
undersigned employee of the Company or a Subsidiary (as defined below) or
Affiliate (as defined below) of the Company (“Optionee”).

WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase
shares of its $.01 par value Common Stock (“Common Stock”);

WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined), the
terms of which are hereby incorporated by reference and made a part of this
Agreement; and

WHEREAS, the Committee (as hereinafter defined), appointed to administer the
Plan, has determined that it would be to the advantage and best interest of the
Company and its stockholders to grant the Non-Qualified Options provided for
herein to the Optionee as an incentive for increased efforts during his term of
office with the Company or its Subsidiaries or Affiliates, and has advised the
Company thereof and instructed the undersigned officers to issue said Options;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties, hereto do hereby agree as follows:

ARTICLE I

DEFINITIONS

Whenever the following terms are used in this Agreement, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
Capitalized terms not otherwise defined in this Agreement shall have the meaning
specified in the Plan.

Section 1.1 — “Affiliate”, as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.

Section 1.2 — “Board of Directors” or “Board” shall mean the Board of Directors
of the Company.

Section 1.3 — “Cause” shall mean (i) any material and uncorrected breach by
Optionee of the terms of his employment agreement with the Company, if any,
including, but not limited to, engaging in action in violation of any
restrictive covenants therein, (ii) any willful fraud or dishonesty of Optionee
involving the property or business of the Company, (iii) a deliberate or willful
refusal or failure of Optionee to comply with any major corporate policy of the
Company which is communicated to Optionee in writing or (iv) Optionee’s
conviction of, or plea of nolo contendere to, any felony if such conviction
shall result in his imprisonment; provided that with respect to clauses (i),
(ii) or (iii) above, Optionee shall have 10 days following written notice of the
conduct which is the basis for the potential termination for Cause within which
to cure such conduct in order to prevent termination for Cause by the Company.
In the event that Optionee is terminated for failure to meet performance goals,
as determined by the initial CEO, such termination shall be considered a
termination for Cause for all purposes relating to his Options.

Section 1.4 — “Committee” shall mean the Compensation Committee of the Company,
duly appointed by the Board as the Administrator under Section 2 of the Plan.

Section 1.5 — “Good Reason” shall mean (i) a reduction by the Company in
Optionee’s Base Salary, (ii) a material reduction in the aggregate program of
employee benefits and perquisites to which Optionee is entitled (other than a
reduction which affects all executives), (iii) relocation by more than 50 miles
from Optionee’s workplace, (iv) any material diminution or material adverse
change in Optionee’s duties, responsibilities or reporting relationships, which
causes Optionee to fall below the level of the executive team, or (v) a material
decline in Optionee’s Bonus opportunity.

Section 1.6 — “Options” shall mean the non-qualified options to purchase Common
Stock granted under this Agreement.

Section 1.7 — “Person” shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.

Section 1.8 — “Plan” shall mean the Peabody Energy Corporation 2004 Long-Term
Equity Incentive Plan, as from time to time amended.

Section 1.9 — Pronouns - The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.

Section 1.10 — “Retirement” shall mean normal retirement on or after age 55 with
at least ten (10) years of service with the Company.

Section 1.11 — “Subsidiary” shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group of
commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.

Section 1.12 — “Termination of Employment” shall mean a termination of the
Optionee’s employment with the Company (regardless of the reason therefor).

ARTICLE II

GRANT OF OPTIONS

Section 2.1 — Grant of Options. For good and valuable consideration, the Company
shall grant to the Optionee an Option to purchase any part or all of an
aggregate of the number of shares set forth with respect to each such Option on
the signature page hereof of its Common Stock upon the terms and conditions set
forth in this Agreement.

Section 2.2 — Exercise Price. The exercise price of the shares of Common Stock
covered by the Option shall be such amount per share as set forth on the
signature page hereof, subject to adjustment pursuant to Section 2.4 herein
without commission or other charge.

Section 2.3 — No Obligation of Employment. Nothing in this Agreement or in the
Plan shall confer upon the Optionee any right to continue in the employ of the
Company or any Subsidiary or Affiliate or shall interfere with or restrict in
any way the rights of the Company and its Subsidiaries or Affiliates, which are
hereby expressly reserved, to terminate the employment of the Optionee at any
time for any reason whatsoever, with or without Cause.

Section 2.4 — Adjustments in Options.

(a) In the event that the outstanding shares of the stock subject to an Option
are, from time to time, changed into or exchanged for a different number or kind
of shares of the Company or other securities of the Company by reason of a
merger, consolidation, recapitalization event, reclassification, stock split,
stock dividend, combination of shares, or otherwise, the Committee shall make an
appropriate and equitable adjustment in the number and kind of shares or other
consideration as to which such Option, or portions thereof then unexercised,
shall be exercisable and the exercise price therefor. Any such adjustment made
by the Committee shall be final and binding upon the Optionee, the Company and
all other interested persons.

(b) Upon a Recapitalization Event which is not a Change of Control, each share
of Common Stock subject to an Option shall be entitled to receive any amounts
distributed in connection therewith, as if the Option had been exercised, and
any amounts so distributed shall be applied to the exercise price of Options
until the aggregate amount of such dividend equivalent has been fully applied.

ARTICLE III

EXERCISABILITY OF OPTIONS

Section 3.1 — Options. Unless otherwise provided in this Agreement, this Option
shall become exercisable as follows:

          Date Option   Percentage of Common Stock as to which Becomes
Exercisable   Option Is Exercisable
After the first anniversary
of the Grant Date
    33.33 %
After the second anniversary
of the Grant Date
    66.67 %
After the third anniversary
of the Grant Date
    100 %

This Option shall become exercisable, pursuant to the schedule above, with
respect to the nearest whole number of shares of Common Stock, as determined by
the Committee in its sole discretion.

Section 3.2 — Acceleration Events. Notwithstanding anything in this Article III
to the contrary, this Option shall become fully exercisable early (but only to
the extent such Option has not otherwise terminated or become exercisable) upon
(i) a Termination of Employment on account of death or Disability, (ii) a Change
of Control or (iii) a Recapitalization Event.

Section 3.3 — Effect of Termination of Employment. Except as otherwise provided
in this Article III, no Option shall become exercisable as to any additional
shares of Common Stock following Termination of Employment, and such
unexercisable Option shall terminate immediately.

Section 3.4 — Expiration of Options. This Option may not be exercised to any
extent by Optionee after the first to occur of the following events:

(a) The tenth anniversary of the date hereof; or

(b) The first anniversary of the date of Termination of Employment (i) by reason
of death or Disability or (ii) without Cause or for Good Reason; or

(c) The fifth anniversary of the date of Termination of Employment by reason of
Retirement; or

(d) The date of a Termination of Employment for Cause or without Good Reason; or

(e) The date of a Termination of Employment for any reason if the Option
exercise price per share of Common Stock, as set forth on the signature page
hereof, is higher than the fair market value per share of Common Stock on the
date of the Termination of Employment; or

(f) Upon a Change of Control, the Committee may terminate this Option, so long
as the Optionee is cashed out at the Change of Control price or is permitted to
exercise his Option prior to the Change of Control.

ARTICLE IV

EXERCISE OF OPTION

Section 4.1 — Person Eligible to Exercise. During the lifetime of the Optionee,
only he, or in the event of disability his committee or conservator, may
exercise this Option or any portion thereof. After the death of the Optionee,
any exercisable potion of an Option may, prior to the time when an Option
becomes unexercisable under Section 3.4, be exercised by his beneficiary or
estate.

Section 4.2 — Partial Exercise. Any exercisable portion of this Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.4; provided, however, that any partial exercise
shall be for whole shares of Common Stock only:

Section 4.3 — Manner of Exercise. The Option, or any exercisable portion
thereof, may be exercised solely by delivering to the Secretary of the Company
or designatee or his office (or any third party designated by the Secretary of
the Company to that effect) all of the following prior to the time when the
Option or such portion becomes unexercisable under Section 3.4:

(a) Notice in writing signed by the Optionee or the other person then entitled
to exercise the Option or portion thereof, stating that the Option or portion
thereof is thereby exercised, such notice complying with all applicable rules
established by the Committee;

(b) Full payment (in cash, in Shares, by check or by a combination thereof) for
the  shares with respect to which such Option or portion thereof is exercised;

(c) Full payment to the Company of all amounts which, under federal, state or
local law, it is required to withhold upon exercise of the Option; and

In the event the Option or portion thereof shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the option.

Section 4.4 — Conditions to Issuance of Stock Certificates. The shares of Common
Stock deliverable upon the exercise of an Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:

(a) The obtaining of approval or other clearance from any state or federal
governmental agency which the Committee shall, in its absolute discretion,
determine to be necessary or advisable; and

(b) The lapse of such reasonable period of time following the exercise of the
Option as the Committee may from time to time establish for reasons of
administrative convenience.

Section 4.5 — Rights as Stockholder. The holder of an Option shall not be, nor
have any of the rights or privileges of, a stockholder of the Company in respect
of any shares purchasable upon the exercise of the Option or any portion thereof
unless and until certificates representing such shares shall have been issued by
the Company to such holder.

ARTICLE V

MISCELLANEOUS

Section 5.1 — Administration. The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options. In
its absolute discretion, the Board of Directors may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan and
this Agreement.

Section 5.2 — Options Not Transferable. Neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution, or transfers without consideration
to a Permitted Transferee as defined in Section 13 of the Plan.

Section 5.3 — Shares to Be Reserved. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Agreement.

Section 5.4 — Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary, and
any notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this
Section 5.4, either party may hereafter designate a different address for
notices to be given to him. Any notice which is required to be given to the
Optionee shall, if the Optionee is then deceased, be given to the Optionee’s
personal representative if such representative has previously informed the
Company of his status and address by written notice under this Section 5.4. Any
notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.

Section 5.5 — Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.

Section 5.6 — Applicability of Plan. The Option and the shares of Common Stock
issued to the Optionee upon exercise of the Option shall be subject to all of
the terms and provisions of the Plan, to the extent applicable to the Option and
such shares. In the event of any conflict between this Agreement and the Plan,
the terms of the Plan shall control.

Section 5.7 — Amendment. This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it is amending
this Agreement.

Section 5.8 — Dispute Resolution. Any dispute or controversy arising under or in
connection with this Agreement shall be resolved by arbitration. Arbitrators
shall be selected, and arbitration shall be conducted, in accordance with the
rules of the American Arbitration Association. The Company shall pay any legal
fees in connection with such arbitration in the event that the Optionee prevails
on a material element of his claim or defense.

Section 5.9 — Governing Law. The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.

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

         
 
  PEABODY ENERGY CORPORATION

 
  By

 
  Its

 
  Aggregate number of shares of

 
  Common Stock for which the

 
  Option granted hereunder is

[Optionee]
  exercisable: ________

 
  Exercise Price per share of

Address
  Common Stock: $________

Optionee’s Taxpayer Identification
Number:
       
_____-____-_______