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                                                                   EXHIBIT 10.27

                           PEABODY ENERGY CORPORATION

                          EMPLOYEE STOCK PURCHASE PLAN

                            SECTION 1 - INTRODUCTION

         1.1 PURPOSE. The purpose of the Peabody Energy Corporation Employee
Stock Purchase Plan is to provide eligible employees of Peabody Energy
Corporation (the "Company") and its Participating Subsidiaries the opportunity
to acquire a proprietary interest in the Company and thereby provide employees
with an additional incentive to contribute to the long-term profitability and
success of the Company and its Subsidiaries. The Plan is for the exclusive
benefit of eligible employees of the Company and its Subsidiaries.

         1.2 STOCK PURCHASE PLAN. The Plan is a stock purchase plan that is
intended to satisfy all requirements of Section 423 of the Internal Revenue Code
of 1986, as amended. Any provision of the Plan inconsistent with Code Section
423 will, without further act or amendment by the Company, be deemed reformed to
comply with Code Section 423.

         1.3 EFFECTIVE DATE AND TERM. The Plan will be effective on the date of
the initial sale of shares of the Company's stock to the public (the "Initial
Public Offering") pursuant to an effective registration statement filed under
the Securities Act of 1933, as amended, which results in such shares being
listed or quoted on a national securities exchange or the Nasdaq Stock Market,
as designated by the Committee, subject to approval of the Plan by the
shareholders of the Company within twelve months of its adoption by the Board of
Directors (the "Effective Date"). The Plan shall continue in effect until the
earlier of the date the Company terminates the Plan or the date all of the
shares of Stock subject to the Plan, as amended from time to time, are
purchased.

         1.4 PARTICIPATING SUBSIDIARIES. A Subsidiary of the Company as of the
Effective Date will be deemed to have adopted the Plan for its eligible
Employees as of the Effective Date and any corporation that becomes a Subsidiary
after the Effective Date will be deemed to have adopted the Plan for its
eligible Employees immediately upon becoming a Subsidiary, unless the Company
acts to exclude the Subsidiary and its eligible Employees from participation in
the Plan.

         1.5 STOCK SUBJECT TO PLAN.

             (a) The Stock subject to purchase under the Plan will be shares of
the Company's authorized but unissued shares, or previously issued shares of
Stock reacquired and held by the Company, or shares acquired in the market. The
aggregate number of shares of Stock that may be purchased under the Plan shall
not exceed one million five hundred thousand (1,500,000) shares. All shares of
Stock purchased under the Plan will count against this limitation.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
================================================================================

             (b) In case of a reorganization, recapitalization, stock split,
reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights or other change in the capital structure of
the Company, the Committee may make such adjustment as it deems appropriate in
the number, kind and purchase price of shares of Stock available for purchase
under the Plan, subject to Section 7.1.

                             SECTION 2 - DEFINITIONS

         For purposes of this Plan, the following words and phrases, whether or
not capitalized, have the meanings specified below, unless the context plainly
requires a different meaning:

         2.1 "BENEFICIARY" means a person to whom all or a portion of the cash
amounts due to the Employee under this Plan will be paid if the Employee dies
before receiving such cash amounts.

         2.2 "BOARD" means the Board of Directors of the Company.

         2.3 "CHANGE IN CONTROL" means any one of the following:

             (a) any Person (other than a Person holding securities representing
10% or more of the combined voting power of the Company's outstanding securities
as of the Effective Date, the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company), becomes the
Beneficial Owner, directly or indirectly, of securities of the Company,
representing 50% or more of the combined voting power of the Company's
then-outstanding securities;

             (b) during any period of twenty-four consecutive months (not
including any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new director (other than
(A) a director nominated by a Person who has entered into an agreement with the
Company to effect a transaction described in clause 2.3(a), (c) or (d) or (B) a
director nominated by any Person (including the Company) who publicly announces
an intention to take or to consider taking actions (including, but not limited
to, an actual or threatened proxy contest) which if consummated would constitute
a Change in Control) whose election by the Board or nomination for election by
the Company's shareholders was approved by a vote of at least three-fourths
(3/4) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;

             (c) the consummation of any merger, consolidation, plan of
arrangement, reorganization or similar transaction or series of transactions in
which the Company is involved,

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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other than such a transaction or series of transactions which would result in
the shareholders of the Company immediately prior thereto continuing to own
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the
securities of the Company or such surviving entity (or the parent, if any)
outstanding immediately after such transaction(s) in substantially the same
proportions as their ownership immediately prior to such transaction(s); or

             (d) the shareholders of the Company approve a plan of complete
liquidation of the Company or the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a liquidation of the
Company into a wholly owned subsidiary.

         As used in herein, "Person" (including a "group"), has the meaning as
such term is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (or any successor section thereto).

         2.4 "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.

         2.5 "COMMITTEE" means the individuals appointed by the Board to
administer the Plan.

         2.6 "COMPANY" means Peabody Energy Corporation, and any successor.

         2.7 "COMPENSATION" means straight-time wages or base salary
(inclusively) paid for services rendered by an Employee to the Company or any
Participating Subsidiary during the applicable period specified in the Plan,
including any such amounts contributed by the Employee to any plan or plans
established by the Company or Participating Subsidiary in accordance with
sections 125 or 401(k) of the Code. Bonuses, incentive compensation, overtime,
commissions and shift premiums paid to an Employee shall not be included in
Compensation.

         2.8 "CUSTODIAN" means the custodian for the Plan appointed by the
Company.

         2.9 "EFFECTIVE DATE" shall have the meaning set forth in Section 1.3.

         2.10 "EMPLOYEE" means any employee (as defined for purposes of Section
423 of the Code) of the Company or a Participating Subsidiary.

         2.11 "FAIR MARKET VALUE" means the fair market value of one share of
Stock as of a particular day, which shall be the closing price per share of
Stock on the New York Stock Exchange on that day, or, if such day is not a
trading day, the last preceding trading day; provided however, that the fair
market value on the Effective Date shall be the price per share of Stock used in
connection with the Initial Public Offering.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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         2.12 "INITIAL PUBLIC OFFERING" shall have the meaning set forth in
Section 1.3.

         2.13 "OFFERING DATE" means the first day of the Offering Period.

         2.14 "OFFERING PERIOD" means any of the following time periods: the
Effective Date through September 30, 2001; October 1, 2001 through March 31,
2002; and each consecutive six-month period thereafter; or such other period
designated by the Committee in its sole discretion.

         2.15 "OPTION" means an option to purchase shares of Stock under the
Plan, based on the contributions credited to each Employee's Option Account.

         2.16 "OPTION ACCOUNT" means the Account maintained on behalf of the
Employee under Section 3.4 to which contributions to the Plan are credited and
from which amounts are withdrawn to exercise options on a Termination Date.

         2.17 "PARTICIPATING SUBSIDIARY" means a Subsidiary which is
participating in the Plan in accordance with Section 1.4.

         2.18 "PLAN" means this Peabody Energy Corporation Employee Stock
Purchase Plan, as described in this document and as amended from time to time.

         2.19 "STOCK" means the common stock, $0.01 par value, of the Company.

         2.20 "SUBSIDIARY" means any corporation (other than the Company) 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 owns 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.

         2.21 "TERMINATION DATE" means the last day of an Offering Period, or if
earlier, the date of a Change in Control that occurs during such Offering
Period.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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                    SECTION 3 - ENROLLMENT AND CONTRIBUTIONS

         3.1 ELIGIBILITY FOR ENROLLMENT.

             (a) An Employee may enroll in the Plan for an Offering Period
unless one of the following applies:

                 (i) The customary employment of the Employee on the Offering
Date is twenty (20) hours or less per week; or

                 (ii) The customary employment of the Employee on the Offering
Date is for not more than five months in any calendar year; or

                 (iii) The Employee is not employed by the Company or a
Participating Subsidiary on the Offering Date; or

                 (iv) The Employee would, immediately upon enrollment, own
directly or indirectly, or hold options or rights to acquire, an aggregate of
five percent (5%) or more of the total combined voting power or value of all
outstanding shares of all classes of the Company or any Subsidiary, with
ownership determined in accordance with the rules of Section 424(d) of the Code
and treating stock which the Employee may purchase under outstanding options as
owned by the Employee.

             (b) The Committee or its designee will notify an Employee that the
Employee is first eligible to enroll in the Plan and, except as otherwise
provided herein with respect to the Offering Period beginning on the Effective
Date, make available to each eligible Employee the necessary enrollment forms
before the Offering Date.

         3.2 ENROLLMENT PROCEDURE.

             (a) To enroll in the Plan for an Offering Period, an Employee must
file an enrollment form with the Company and elect to make contributions under
the Plan in accordance with Section 3.3. The enrollment form must be received by
the Company at least fifteen (15) calendar days prior to the Offering Date and
must state the contribution rate elected by the Employee for the Offering
Period. An Employee who does not enroll in the Plan for an Offering Period will
receive no shares of Stock under the Plan for such Offering Period.
Notwithstanding the foregoing, with respect to the Offering Period beginning on
the Effective Date, any Employee eligible to enroll in the Plan as of the
Effective Date pursuant to Section 3.1 shall be automatically enrolled in the
Plan at the maximum contribution rate permitted under Section 3.3(b), subject to
such Employee's right to increase, decrease or discontinue contributions under
Section 3.3(d).

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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             (b) An Employee whose enrollment in, and contributions under, the
Plan continue throughout an Offering Period will automatically be enrolled in
the Plan for the next Offering Period unless (i) the Employee files a written
notice of discontinuance of contributions with the Company before the Offering
Date for the next Offering Period in accordance with Section 5.1(a)(i), or (ii)
on the Offering Date for such Offering Period the Employee is described in
Section 3.1(a). The contribution rate for an Employee who is automatically
enrolled for an Offering Period (other than the Offering Period beginning on the
Effective Date) pursuant to this Section will be the contribution rate in effect
for the immediately preceding Offering Period, unless the Employee files an
amended enrollment form with the Company at least fifteen (15) calendar days
prior to the next subsequent Offering Period designating a different
contribution rate.

         3.3 CONTRIBUTIONS.

             (a) To enroll for the first time in the Plan for an Offering Period
(other than the Offering Period beginning on the Effective Date), an Employee
must elect to make a contribution under the Plan, subject to the terms and
conditions prescribed below, by means of payroll deduction for each payroll
period within the Offering Period. Notwithstanding the foregoing, with respect
to the Offering Period beginning on the Effective Date, contributions to the
Plan by any Employee who is automatically enrolled in the Plan pursuant to
Section 3.2(a) shall be made by means of payroll deductions only for payroll
periods within such Offering Period which begin after the date of the effective
registration statement filed on Form S-8 under the Securities Act of 1933, as
amended, with respect to the shares of Stock available under the Plan (the "S-8
Registration Date"). An Employee may make contributions to the Plan in the form
of a check or payroll deductions (including deductions at a rate higher than the
maximum rate permitted under Section 3.3(b)) to make-up for the period from the
Effective Date to the end of the pay period in which the S-8 Registration
occurs. Such additional contributions may be made at any time during the portion
of such Offering Period beginning on the S-8 Registration Date, and ending on
the first Termination Date.

             (b) Except as otherwise provided in Section 3.3(a), an Employee may
elect to make payroll deduction contributions in amounts not less than one
percent (1%) of Compensation per payroll period and not more than the lesser of
(i) fifteen percent (15%) of Compensation per Offering Period (or such other
amount as the Committee may establish from time to time and communicate to
Employees before the Offering Date) or (ii) a percentage of Compensation for
each payroll period that ensures that the limit on the purchase of shares of
Stock specified in Section 4.1 is not exceeded for the Offering Period.

             (c) Except as otherwise provided in Section 3.3(a), payroll
deductions will commence with the first payroll period that begins during the
Offering Period and will be made in conformity with the Company's payroll
deduction schedule and practices.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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             (d) Except as provided in Section 5.1, an Employee may elect to
increase, decrease or discontinue contributions once each Offering Period as of
the first day of the first payroll period beginning in the Offering Period by
giving written notice to the Committee at least fifteen (15) calendar days
before such date. Notwithstanding the foregoing, with respect to the Offering
Period beginning on the Effective Date, any Employee who is automatically
enrolled in the Plan pursuant to Section 3.2(a) shall have one opportunity to
increase, decrease or discontinue contributions at any time during the portion
of such Offering Period beginning on the S-8 Registration Date and ending
fifteen (15) calendar days before the end of such Offering Period.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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         3.4 OPTION ACCOUNTS. All contributions made by an Employee under the
Plan will be credited to an Option Account maintained by the Company or the
Custodian on behalf of the Employee. The Company will make the credit as soon as
practicable after the contributions are withheld from the Employee's
Compensation.

         3.5 WITHDRAWAL OF CONTRIBUTIONS. An Employee may elect to withdraw
contributions made during an Offering Period by giving written notice to the
Committee at least fifteen (15) calendar days before the end of such Offering
Period, in which case the cash credited to the Employee's Option Account will be
refunded to the Employee without interest as soon as administratively feasible
after the Committee receives such notice, and the Employee may not re-enroll in
the Plan until the next Offering Period.

         3.6 NO FUNDING OF ACCOUNTS. No cash shall be set aside with respect to
an Option Account until it is credited thereto. Nothing contained in this Plan
and no action taken pursuant to the provisions hereof shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Company and any Employee or any other person with respect to an Option Account.
Amounts credited to an Option Account at any time and from time to time shall be
general assets of the Company. To the extent that any person acquires a right to
receive the benefit of amounts credited to an Option Account, such right shall
be that of an unsecured general creditor of the Company.

                    SECTION 4 - GRANT AND EXERCISE OF OPTION

         4.1 GRANT OF OPTIONS; TERMS. Enrollment in the Plan with respect to any
Offering Period will constitute the grant by the Company of an Option to
purchase shares of Stock under the Plan during such Offering Period. All
Employees granted Options shall have the same rights and privileges as required
by section 423(b)(5) of the Code. Each Option will be subject to the following
terms:

             (a) The exercise price will be as specified in Section 4.2.

             (b) Except as limited in (e) below, the number of shares of Stock
subject to the option will equal the number of shares of Stock that can be
purchased at the exercise price specified in Section 4.2 with the aggregate
amount credited to the Employee's Option Account as of the Termination Date.

             (c) The Option with respect to an Offering Period will be exercised
on the Termination Date of such Offering Period.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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             (d) The payment by an Employee for the shares of Stock purchased
upon exercise of an option will be made only through payroll deduction, unless
otherwise provided herein with respect to the Offering Period beginning on the
Effective Date, all in accordance with Section 3.3.

             (e) No Employee shall be granted an option to the extent the number
of shares of Stock that may be purchased for such Employee (when taken together
with all other options exercisable by such Employee under any other stock
purchase plan of the Company or a Subsidiary that is qualified under Section 423
of the Code) in the aggregate during a calendar year exceeds twenty five
thousand dollars ($25,000) in Fair Market Value of such shares of Stock
determined on the Offering Date for the Offering Period with respect to which
the purchase is made.

         4.2 EXERCISE OF OPTION; EXERCISE PRICE.

             (a) As soon as practicable after the Termination Date of each
Offering Period, the Company or Custodian will apply to the purchase of the
number of shares of Stock the exercise price of which is covered by the amounts
credited to each Employee's Option Account as of such Termination Date. In the
event the aggregate amount credited to the Employees' Option Accounts as of such
Termination Date exceeds the exercise price of the shares available for purchase
as of such date under this Plan, the Company or Custodian shall purchase for
each Employee his or her proportional share of the shares available for
purchase, based on the percentage that the cash allocated to his or her Option
Account represents of the total cash allocated to the Option Accounts of all
Employees for the Offering Period ending on such date, and the excess of the
amount so credited shall be returned to the Employee without interest. The Stock
so purchased shall be allocated to the Option Account for the Employee. The
Stock shall be held by the Custodian on behalf of the Employee and registered in
the name of a nominee.

             (b) The exercise price of each share of Stock purchased with
respect to any Offering Period shall be the lower of:

                 (i) Eighty five percent (85%) of the Fair Market Value of the
Stock on the Offering Date for such Offering Period, or

                 (ii) Eighty five percent (85%) of the fair market value of the
Stock on the Termination Date for such Offering Period.

         4.3 OPTION ACCOUNTS.

                 (a) All shares of Stock purchased on behalf of an Employee as
of a Termination Date shall be credited to such Employee's Option Account as of
such date. Dividends payable with respect to shares of Stock credited to the
Employee's Option Account

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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will be credited to the Employee's Option Account and used by the Custodian to
purchase additional shares of Stock on the open market as soon as
administratively feasible following receipt of the dividend payment by the
Custodian.

             (b) The Committee may determine whether cash in an amount
representing the price of a fractional share shall be carried over to the next
Offering Period, or applied to the purchase of a fractional share at the end of
an Offering Period; provided that such determination shall apply uniformly to
all Employees for each Offering Period.

         4.4 NO INTEREST ON ACCOUNT BALANCES. No interest or other earnings will
be credited to any Option Account with respect to (a) amounts credited thereto
during an Offering Period or (b) amounts to be returned to the Employee. Neither
the Committee nor the Company shall have any obligation to invest or otherwise
manage amounts credited to an Option Account, other than to apply such amounts
to the purchase of Stock in accordance with the terms of this Plan.

                      SECTION 5 - TERMINATION OF ENROLLMENT

         5.1 TERMINATION OF ENROLLMENT.

             (a) An Employee's enrollment in the Plan will terminate under the
following circumstances:

                 (i) as of the beginning of the Offering Period that is at least
fifteen (15) calendar days after the Employee files with the Company a written
notice of discontinuance of contributions (except as provided in 5.1(a)(ii));

                 (ii) immediately upon the Employee filing with the Company a
written notice of discontinuance of contributions with respect to the Offering
Period beginning on the Effective Date as provided in Section 3.3(d);

                 (iii) following the termination of employment with the Company
and all Participating Subsidiaries;

                 (iv) as of the date on which the Employee would own directly or
indirectly, or hold options or rights to acquire, an aggregate of five percent
(5%) or more of the total combined voting power or value of all outstanding
shares of all classes of the Company or any Subsidiary, determined in accordance
with Section 424(d) of the Code; and

                 (v) upon termination of the Plan or as of the date the relevant
Participating Subsidiary ceases to be a Subsidiary.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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             (b) An Employee whose enrollment in the Plan terminates under
this Section, other than by reason of termination of the Plan, may again enroll
in the Plan as of any subsequent Offering Date if the Employee satisfies the
eligibility conditions of Section 3.1 as of such date.

         5.2 DISTRIBUTIONS TO EMPLOYEE.

             (a) Subject to the eighteen month holding period prescribed in
subsection 5.2(c), as soon as administratively feasible after an Employee's
enrollment in the Plan terminates under Section 5.1:

                 (i) The Company will pay to the Employee all cash credited to
the Employee's Option Account as of the date of termination without interest;
and

                 (ii) The Committee will direct the Custodian to distribute to
the Employee shares of Stock then credited to the Employee's Option Account that
have been credited to the Employee's Option Account for at least eighteen months
in the form of certificates representing whole shares of Stock (and cash equal
to the Fair Market Value of any fractional share), or a nominee account, as
requested by the Employee or former Employee.

             (b) If an Employee's enrollment terminates as a result of death, or
if the Employee's death occurs before the Employee receives a distribution under
this Section, all cash amounts payable under this Section to the Employee will
be paid to the Employee's Beneficiary; and shares of Stock credited to the
Option Account of a deceased Employee may be distributed to the personal
representative of the deceased employee without regard to the eighteen month
holding period prescribed in subsection 5.2(c).

             (c) An Employee or former Employee may, from time to time, request
distribution of shares of Stock then credited to the Employee's Option Account
that have been credited to the Employee's Option Account for at least eighteen
months. Notwithstanding the above, in the event of a Change in Control an
Employee or former Employee may request distribution of shares of Stock then
credited to the Employee's Option Account. Distribution may be made as soon as
administratively practicable in the form of a stock certificates representing
whole shares of Stock (and cash equal to the Fair Market Value of any fractional
share), or a nominee account, as requested by the Employee or former Employee.

         5.3      BENEFICIARIES.

             (a) An Employee may designate a Beneficiary. Any such designation
must be made on a form provided by the Company for this purpose, will be
effective on the date received by the Company and may be revoked by the Employee
at any time.

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
================================================================================

             (b) If the Employee fails to designate a Beneficiary or if no
designated beneficiary survives the Employee, then any cash amounts shall be
made to the Employee's estate.

                         SECTION 6 - PLAN ADMINISTRATION

         6.1 COMMITTEE.  The Plan will be administered by the Committee.

         6.2 COMMITTEE POWERS.

             (a) The Committee will have all powers appropriate to administer
the Plan including, but not limited to, the following:

                 (i) To determine all questions that may arise under the Plan,
including the power to determine the rights or eligibility of Employees or their
Beneficiaries;

                 (ii) To construe the terms of the Plan and to remedy
ambiguities, inconsistencies or omissions;

                 (iii) To adopt such rules of procedure and prescribe such forms
as it considers appropriate for the proper administration of the Plan and are
consistent with the Plan;

                 (iv) To enforce the Plan provisions and the rules of procedure
which it adopts;

                 (v) To employ agents, attorneys, accountants, actuaries or
other persons, and to allocate or delegate to them such powers, rights and
duties as it considers appropriate for the proper administration of the Plan.

             (b) The Committee will have such further powers and duties as may
be elsewhere specified in the Plan.

         6.3 COMMITTEE ACTIONS. The actions of the Committee may be taken at a
meeting by a majority of its members, in writing without a meeting if a majority
of its members sign such writing or by the use of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other and participation in such a meeting in this
manner shall constitute attendance and presence in person at the meeting of the
person or persons so participating for all purposes. In taking action:

             (a) The Committee may allocate authority to a specific member(s) of
the Committee to carry out such duties as the Committee may assign;

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                                                      PEABODY ENERGY CORPORATION
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             (b) A member of the Committee may by writing delegate any or all of
such member's rights, powers, duties and discretions to any other member of the
Committee, with the consent of the latter;

             (c) The Committee may delegate to any agents such duties and powers
as it deems appropriate, by an instrument in writing which specifies which
duties are so delegated and to whom each such duty is so delegated; and

             (d) When there is an even division of opinion among the members of
the Committee as to a matter, the Board of Directors of the Company will decide
the matter, provided, however, that no member of the Board of Directors may vote
on such a matter if it concerns such member's individual rights, privileges or
obligations under the Plan.

         6.4 MEMBER WHO IS PARTICIPANT. If a member of the Committee is an
Employee, such member may not decide any matter relating to the member's
participation or Option Account or how the Option Account is to be paid to the
member that the member would not have the right to decide in the absence of
membership on the Committee, and no Employee will receive any compensation for
services as a member of the Committee.

         6.5 INFORMATION REQUIRED FROM COMPANY. The Company will furnish the
Committee with such data and information as the Committee deems appropriate to
administer the Plan. The records of the Company as to an Employee's Compensation
will be conclusive on all persons unless determined by the Committee to be
clearly incorrect.

         6.6 INFORMATION REQUIRED FROM EMPLOYEES. Each person entitled to
benefits under the Plan must furnish the Company from time to time in writing
such person's mailing address, each change of mailing address and such other
data and information as the Committee deems appropriate to administer the Plan.
Any communication, statement or notice mailed with postage prepaid to any person
at the last mailing address filed with the Company will be binding upon such
person for all purposes of the Plan.

         6.7 UNIFORM RULES AND ADMINISTRATION. The Committee will administer the
Plan on a nondiscriminatory basis and will apply uniform rules to all persons
similarly situated.

                      SECTION 7 - AMENDMENT AND TERMINATION

         7.1 AMENDMENT.

             (a) The Company reserves the right to amend the Plan from time to
time subject to the following limitations:

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                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
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                 (i) To the extent necessary to comply with or get an exemption
from any provision of the Code, including regulations thereunder, or of the
Securities Exchange Act of 1934, as amended, no amendment will be made without
the prior approval of the stockholders of the Company if the amendment will (1)
increase the number of shares of Stock reserved for purchase under the Plan, or
(2) materially modify the eligibility conditions or materially increase the
benefits available under the Plan.

                 (ii) No amendment will make any change in a previously granted
and outstanding Option that adversely affects the rights of an Employee with
respect to such option.

                 (iii) No amendment will reduce the amount of an Employee's
Option Account balance.

             (b) The Company may delegate to the Committee or its officers the
power to amend the Plan as the Company deems appropriate, subject to the
limitations of this Section.

         7.2 TERMINATION. The Plan is entirely voluntary on the part of the
Company and the continuance of the Plan should not be construed as a contractual
obligation of the Company. Accordingly, the Company reserves the right to
terminate the Plan at any time. Unless sooner terminated by the Company, the
Plan shall terminate on the date all of the shares of Stock specified in Section
1.5(a) are purchased unless additional shares of Stock are authorized for the
Plan by the stockholders of the Company. No Option may be granted under the Plan
after the Plan is terminated.

         7.3 RIGHTS UPON TERMINATION.

             (a) If the Plan terminates, the Committee may elect to terminate
all outstanding Options either immediately or upon completion of the purchase of
shares of Stock on the next following Termination Date.

             (b) If the Committee terminates an Option prior to the expiration
of the Option, all amounts contributed to the Plan which remain in an Employee's
Option Account will be returned to the Employee as soon as reasonably
practicable.

                         SECTION 8 - GENERAL PROVISIONS

         8.1 NO TRANSFER OR ASSIGNMENT. The rights of an Employee under the Plan
may not be sold, pledged, assigned or transferred, voluntarily or involuntarily,
in any manner other than by will or the laws of descent and distribution. Any
such attempted sale, pledge, assignment or transfer shall be without effect. An
Employee's rights and all Options granted under the Plan shall only be
exercisable during his or her lifetime by such Employee.

                                      -14-
<PAGE>   15
                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
================================================================================

         Furthermore, except as provided in Section 5.2(b), shares purchased for
an Employee as of a Termination Date may not be sold, exchanged, assigned,
transferred, pledged, or otherwise disposed of in any way by the Employee, other
than by will or the laws of descent and distribution, until after eighteen
months after such Termination Date. The Company may place controls on the
Account of the participant to which such shares are credited as necessary or
appropriate to enforce such restrictions. Any such attempted assignment,
transfer, pledge or other disposition shall be without effect.

         8.2 RIGHTS AS STOCKHOLDER. The grant of an Option to purchase shares of
Stock under the Plan will not confer upon an Employee any rights as a
stockholder of the Company with respect to shares of Stock subject to the
Option. An Employee will become a stockholder with respect to shares of Stock
subject to an Option under the Plan only when the purchase of such shares of
Stock is completed as of a Termination Date.

         8.3 RIGHTS AS EMPLOYEE. The Plan is not a contract of employment, and
the grant of an option to purchase shares of Stock under the Plan will not
confer upon any Employee the right to be retained in the employ of the Company
or any Subsidiary.

         8.4 COSTS. All costs and expenses incurred in the administration of the
Plan will be paid by the Company and its Subsidiaries. Any brokerage fees for
the sale of shares of Stock by an Employee will be borne by the Employee.

         8.5 APPLICATION OF FUNDS. All proceeds received by the Company from the
sale of Stock under the Plan will be used for general corporate purposes.

         8.6 REPORTS. The Company will provide or cause to be provided to each
Employee an annual report of the Employee's contributions under the Plan for
each Plan Year and the shares of Stock purchased with such contributions.

         8.7 ACTIONS BY COMPANY. Any action taken by the Company with respect to
the Plan will be by resolution of its Board of Directors or by a person or
persons authorized by resolution of its Board of Directors.

         8.8 GOVERNMENTAL APPROVAL. The Plan and any offering or sale made to
Employees under the Plan is subject to any governmental approvals or consents
that are or may become applicable in connection herewith.

         8.9 STOCKHOLDER APPROVAL. The Plan is subject to approval by the
holders of a majority of the shares present in person or by proxy and voting at
the meeting at which the Plan is considered and shall not be effective without
such approval within twelve months before or after the adoption of the Plan by
the Board of Directors.

                                      -15-
<PAGE>   16
                                                      PEABODY ENERGY CORPORATION
                                                    EMPLOYEE STOCK PURCHASE PLAN
================================================================================

         8.10 APPLICABLE LAW. The Plan will be governed by the laws of the State
of Delaware, without regard to the law of conflicts of such state, to the extent
that federal law does not preempt such laws.

         8.11 GENDER AND NUMBER. When the context permits, words in the Plan
used in the masculine gender include the feminine gender, words in the singular
include the plural and words in the plural include the singular.

         8.12 HEADINGS. All headings in the Plan are included solely for ease of
reference and do not bear on the interpretation of the text.

         The undersigned hereby certifies that this Plan was duly adopted by the
Board on ______________________________, 2001.

                                      ------------------------------------------
                                      Name

                                      ------------------------------------------
                                      Title

                                      -16-<PAGE>   1
                                                                   EXHIBIT 10.28

                           PEABODY ENERGY CORPORATION

                              EQUITY INCENTIVE PLAN
                           FOR NON-EMPLOYEE DIRECTORS

         1. PURPOSE AND NATURE OF PLAN. The purpose of this Equity Incentive
Plan for Non-Employee Directors of Peabody Energy Corporation (the "Plan") is to
align the interests of non-employee directors with shareholders through
increased stock ownership in Peabody Energy Corporation (the "Company") with the
goal of increasing shareholders value, and to provide further incentive to serve
as a director of the Company.

         2. DEFINITIONS. The following terms as used in this Plan shall have the
meanings ascribed to them below:

            (a) BOARD shall mean the Board of Directors of Peabody Energy
         Corporation.

            (b) CHANGE IN CONTROL means any one of the following:

                (i) any Person (other than a Person holding securities
            representing 10% or more of the combined voting power of the
            Company's outstanding securities as of the Effective Date, the
            Company, any trustee or other fiduciary holding securities under an
            employee benefit plan of the Company, or any company owned, directly
            or indirectly, by the shareholders of the Company in substantially
            the same proportions as their ownership of stock of the Company),
            becomes the Beneficial Owner, directly or indirectly, of securities
            of the Company, representing 50% or more of the combined voting
            power of the Company's then-outstanding securities;

                (ii) during any period of twenty-four consecutive months (not
            including any period prior to the effective date), individuals who
            at the beginning of such period constitute the Board, and any new
            director (other than (A) a director nominated by a Person who has
            entered into an agreement with the Company to effect a transaction
            described in clause 2(b)(i), (iii) or (iv) or (B) a director
            nominated by any Person (including the Company) who publicly
            announces an intention to take or to consider taking actions
            (including, but not limited to, an actual or threatened proxy
            contest) which if consummated would constitute a Change in Control)
            whose election by the Board or nomination for election by the
            Company's shareholders was approved by a vote of at least
            three-fourths (3/4) of the directors then still in office who either
            were directors at the beginning of the period or whose election or
            nomination for election was previously so approved, cease for any
            reason to constitute at least a majority thereof;

                                      1
<PAGE>   2
                                                      PEABODY ENERGY CORPORATION
                                EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
================================================================================

                (iii) the consummation of any merger, consolidation, plan of
            arrangement, reorganization or similar transaction or series of
            transactions in which the Company is involved, other than such a
            transaction or series of transactions which would result in the
            shareholders of the Company immediately prior thereto continuing to
            own (either by remaining outstanding or by being converted into
            voting securities of the surviving entity) more than 50% of the
            combined voting power of the securities of the Company or such
            surviving entity (or the parent, if any) outstanding immediately
            after such transaction(s) in substantially the same proportions as
            their ownership immediately prior to such transaction(s); or

                (iv) the shareholders of the Company approve a plan of complete
            liquidation of the Company or the sale or disposition by the Company
            of all or substantially all of the Company's assets, other than a
            liquidation of the Company into a wholly owned subsidiary.

         As used in herein, "Person" (including a "group"), has the meaning as
such term is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (or any successor section thereto).

            (c) ELIGIBLE DIRECTOR shall have the meaning set forth in Section 4.

            (d) FAIR MARKET VALUE of a share of Stock shall mean the fair market
         value of one share of Stock as of a particular day, which shall be the
         closing price per share of Stock on the New York Stock Exchange on that
         day, or, if such day is not a trading day, the last preceding trading
         day.

            (e) RESTRICTED STOCK is Stock issued under the terms of this Plan
         subject to the terms and conditions prescribed in Section 6. A holder
         of Restricted Stock shall be entitled to all dividends paid with
         respect to Restricted Stock during the period of restriction and shall
         not be required to return any such dividends to the Company in the
         event of the forfeiture of the Restricted Stock. A holder of Restricted
         Stock shall be entitled to vote the Restricted Stock during the period
         of restriction. The Board shall determine whether Restricted Stock is
         to be delivered to the Eligible Director with an appropriate legend
         imprinted on the certificate, or if the shares are to be issued in the
         name of a nominee or deposited in escrow pending removal of the
         restrictions.

            (f) STOCK shall mean common stock, $0.01 par value, of the Company.

         3. ADMINISTRATION. The Plan shall be administered by the full Board.
Subject to the provisions of the Plan, the Board shall be authorized to
interpret the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The determination of the Board in
the administration of the Plan shall be conclusive and binding upon all persons
including, without

                                      -2-
<PAGE>   3
                                                      PEABODY ENERGY CORPORATION
                                EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
================================================================================

limitation, the Company, its stockholders and Eligible Directors granted options
and other benefits under the Plan. The Secretary of the Company shall be
authorized to implement the Plan in accordance with its terms and to take such
actions of a ministerial nature as shall be necessary to effectuate the intent
and purposes of the Plan. The validity, construction, and effect of the Plan
shall be determined in accordance with the laws of the State of Delaware.

         4. PARTICIPATION IN THE PLAN. A director of the Company who is not an
employee of the Company or any affiliate of the Company on the date an award is
granted (an "Eligible Director") shall be eligible to participate in the Plan.

         5. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in
Section 8, an aggregate of 200,000 shares Stock shall be available for issuance
under the Plan. The shares of Stock issued under the Plan may be made available
from authorized but unissued shares or shares reacquired by the Company,
including shares purchased in the open market or in private transactions. Shares
of Restricted Stock may again become available for the grant under the Plan if
such Restricted Stock is forfeited. If any option granted under the Plan shall
expire or terminate for any reason without having been exercised in full and
without compensation therefor, the shares subject to, but not delivered under,
such option may again become available for the grant of other options under the
Plan.

         6. RESTRICTED STOCK. Each Eligible Director elected or appointed as a
director of the Company after April 1, 2001 will be granted shares of Restricted
Stock when such Eligible Director is first elected or appointed as a director of
the Company. Such Restricted Stock shall be subject to the following terms and
conditions:

            (a) VESTING. Such grant of Restricted Stock shall become vested on
         the third anniversary of the date of grant; provided that all shares of
         Restricted Stock shall become vested immediately upon a Change in
         Control.

            (b) FORFEITURE FOR VOLUNTARY TERMINATION OR TERMINATION FOR CAUSE.
         In the event an Eligible Director voluntarily terminates his or her
         service with the Board without the consent of the Board, other than on
         account of permanent disability, or is involuntarily terminated for
         cause, before the third anniversary of the date of grant of such
         Restricted Stock, the Eligible Director shall forfeit his or her shares
         of Restricted Stock that are not vested on the date of such a
         termination of service on the Board, and such forfeited Restricted
         Stock shall be returned to the Company.

            (c) INVOLUNTARY TERMINATION, DISABILITY OR DEATH. In the event of
         the involuntary termination of service of an Eligible Director without
         cause, voluntary termination of an Eligible Director's service with the
         consent of the Board, or the death or permanent disability of an
         Eligible Director, all outstanding shares of Restricted Stock of such
         holder shall become fully vested immediately.

                                      -3-
<PAGE>   4
                                                      PEABODY ENERGY CORPORATION
                                EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
================================================================================

            (d) DELIVERY OF VESTED STOCK. An Eligible Director shall have the
         right to delivery of a certificate representing shares of Restricted
         Stock only after such shares have become vested as provided in this
         Section.

         7. STOCK OPTIONS. Each Eligible Director shall be awarded an option to
purchase shares of Stock as of each annual meeting of the Board. In addition, an
Eligible Director first elected or appointed as a director on a date other than
the annual meeting of the Board shall be awarded an option to purchase shares of
Stock when such Eligible Director is first elected or appointed as a director of
the Company. All options granted under the Plan shall be non-statutory options
not intended to qualify under Section 422 of the Internal Revenue Code of 1986,
as amended. Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Board shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:

            (a) PURCHASE PRICE. The purchase price per share of Stock for which
         each option is exercisable shall be the fair market value per share of
         Stock on the date the option is granted.

            (b) EXERCISABILITY OF OPTIONS. Each option granted under the Plan
         generally shall become exercisable in three equal annual installments,
         commencing on the first anniversary of the date of grant and annually
         thereafter on subsequent anniversaries of the date of grant, as
         follows:

                (i) One-third of the shares to which each option relates
            (rounded down to the nearest whole share) may be purchased
            commencing on the first anniversary of the date of grant;

                (ii) An additional one-third of the shares to which each option
            relates (rounded down to the nearest whole share), on a cumulative
            basis, may be purchased commencing on the second anniversary of the
            date of grant; and

                (iii) The balance of the shares to which each option relates, on
            a cumulative basis, may be purchased commencing on the third
            anniversary of the date of grant.

         Notwithstanding the above, all options shall be exercisable immediately
upon a Change in Control.

            (c) TERM OF OPTIONS. Each option granted under the Plan shall expire
         ten years from the date of the grant, and shall be subject to earlier
         termination as hereinafter provided.

            (d) VOLUNTARY TERMINATION OR TERMINATION FOR CAUSE. In the event an
         Eligible Director voluntarily terminates his or her service with the
         Board without the
                                      -4-
<PAGE>   5
                                                      PEABODY ENERGY CORPORATION
                                EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
================================================================================

         consent of the Board before the third anniversary of the date of grant
         of such option, or is involuntarily terminated for cause, the Eligible
         Director shall forfeit his or her options that are not exercisable on
         the date of such a termination of service on the Board. Such a former
         director may exercise options granted under this Plan that are
         exercisable on the date of such a termination of service on the Board
         no later than ninety days after such a termination of service.

            (e) INVOLUNTARY TERMINATION, DISABILITY OR DEATH. In the event of
         the involuntary termination of service of an Eligible Director without
         cause, voluntary termination of an Eligible Director's service with the
         consent of the Board, or the permanent disability of an Eligible
         Director, each of the then outstanding options of such holder will
         continue to become exercisable in accordance with paragraph (c) above
         and the holder may exercise the exercisable installments at any time
         within five years after such termination of service but in no event
         after the expiration date of the term of the option. In the event of
         the death of the holder of any option while serving on the Board, each
         of the then outstanding options of such holder shall immediately become
         exercisable in full and may be exercised by the holder's legal
         representative at any time within a period of five years after death,
         but in no event after the expiration date of the term of the option.
         However, if the holder dies within five years following termination of
         service on the Board, such option shall be exercisable for two years
         after the holder's death or five years after termination of service,
         whichever is longer, or until the expiration date of the term of the
         option, if earlier.

            (f) PAYMENT. Options may be exercised only upon payment to the
         Company in full of the purchase price of the shares to be delivered.
         Such payment shall be made in cash, in Stock beneficially owned by the
         holder for at least six months before the date of exercise ("Mature
         Stock") or in a combination of cash and Mature Stock. The sum of the
         cash and the fair market value of such Mature Stock shall be at least
         equal to the aggregate price of the shares to be delivered.

         8. ADJUSTMENT UPON CHANGES IN STOCK. If there shall be any change in
the Stock subject to the Plan by reason of merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, exchange of stock
or other change in the corporate structure, appropriate adjustments shall be
made to the aggregate number and kind of shares of Stock or other securities
subject to the Plan, Restricted Stock awards and outstanding option grants, to
the purchase price of outstanding options, and to other terms of the Plan or
awards, as the Board determines to reflect such changes.

         9. NONTRANSFERABILITY. An Eligible Director may not sell, transfer,
pledge or otherwise dispose of or encumber his or her Restricted Stock (other
than by will or by the laws of descent and distribution) until after such
Restricted Stock becomes vested. Each option and all rights thereunder shall be
non-assignable and non-transferable other than by will or the laws of descent
and distribution and shall be exercisable during the holder's lifetime only by
the holder or the holder's guardian or legal representative; provided, however,
options granted under the

                                      -5-
<PAGE>   6
                                                      PEABODY ENERGY CORPORATION
                                EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
================================================================================

Plan may be transferred, without consideration, to a Permitted Transferee (as
defined below). In the event of the death of a participant, exercise or payment
shall be made only:

            (a) By or to the Permitted Transferee, executor or administrator of
         the estate of the deceased participant or the person or persons to whom
         the deceased participant's rights under the benefit shall pass by will
         or the laws of descent and distribution; and

            (b) To the extent that the deceased participant or the Permitted
         Transferee, as the case may be, was entitled thereto at the date of his
         death.

For purposes of this Section, "Permitted Transferee" shall include (i) one or
more members of the participant's family, (ii) one or more trusts for the
benefit of the participant and/or one or more members of the participant's
family, or (iii) one or more partnerships (general or limited), corporations,
limited liability companies or other entities in which the aggregate interests
of the participant and members of the participant's family exceed 80% of all
interests. For this purpose, the participant's family shall include only the
participant's spouse, children and grandchildren.

         10. BENEFICIARY. An Eligible Director may designate one or more persons
(concurrently, contingently or successively) to whom Restricted Stock will be
distributed and by whom stock options will be exercisable if the Eligible
Director dies before receiving complete payment of such amounts. Any such
designation must be made on a form acceptable to the Company for this purpose,
will be effective on the date received by the Company and may be revoked by the
Eligible Director by a subsequent written designation delivered to the Company
while the Eligible Director is alive. If the Eligible Director fails to
designate a beneficiary or if no designated beneficiary survives the Eligible
Director, then any such benefit shall be transferred to the Eligible Director's
estate.

         11. LIMITATION OF RIGHTS.

             (a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
         granting of Restricted Stock or an option, nor any other action taken
         pursuant to the Plan, shall constitute or be evidence of any agreement
         or understanding, express or implied, that the Eligible Director has a
         right to continue as a director for any period of time, or at any
         particular rate of compensation.

             (b) NO STOCKHOLDERS' RIGHTS FOR OPTIONS. Except with respect to
         adjustments upon changes in the Stock as set forth in this Plan, an
         Eligible Director shall have no rights as a stockholder with respect to
         the shares covered by options granted hereunder until the date of the
         issuance of a stock certificate therefor.

         12. EFFECTIVE DATE AND DURATION OF PLAN. The Plan shall become
effective immediately following approval by the stockholders of the Company. The
period during which grants of Restricted Stock and options shall be made under
the Plan shall terminate on the day following the tenth anniversary of the
meeting or action by written consent of stockholders at

                                      -6-
<PAGE>   7
                                                      PEABODY ENERGY CORPORATION
                                EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
================================================================================

which the Plan was approved (unless the Plan is extended or terminated at an
earlier date by stockholders) but such termination shall not affect the terms of
any then outstanding shares of Restricted Stock or options.

         13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. The Board may
suspend or terminate the Plan or revise or amend it in any respect whatsoever;
provided, however, that to the extent necessary to comply with or get an
exemption from any provision of the Code, including regulations thereunder, or
of the Securities Exchange Act of 1934, as amended, approval of the stockholders
will be required for any revision or amendment that shall change the selection
or eligibility of Eligible Directors to receive Restricted Stock or options
under the Plan, the number of shares of Stock subject to any such options or
Restricted Stock or the purchase price thereunder, or materially increase the
benefits accruing to Eligible Directors under the Plan.

         14. NOTICE. Any written notice to the Company required by any of the
provisions of this Plan shall be addressed to the Secretary of the Company and
shall become effective when it is received.

         15. USE OF PROCEEDS. Proceeds from the sale of Stock pursuant to
options granted under the Plan shall constitute general funds of the Company.

         The undersigned hereby certifies that this Peabody Energy Corporation
Equity Incentive Plan for Non-Employee Directors was adopted by the Board of
Directors of the Company on ______________________, 2001.

                            By:      ____________________________________

                            Title:   ____________________________________

                            Date:    ____________________________________

                                      -7-

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