TRANSITION SERVICES AGREEMENT

Exhibit 10.1

EXECUTION COPY

TRANSITION SERVICES AGREEMENT

by and among

PEABODY ENERGY CORPORATION

and

PATRIOT COAL CORPORATION

Dated as of October 22, 2007

TRANSITION SERVICES AGREEMENT

ARTICLE I DEFINITIONS							1
		Section 1.01.		Definitions			1
		Section 1.02.		Currency			4
ARTICLE II TRANSITION SERVICE SCHEDULES							4
ARTICLE III SERVICES							4
		Section 3.01.		Services Generally			4
		Section 3.02.		Service Levels			4
		Section 3.03.		Impracticability			5
		Section 3.04.		Additional Resources			5
ARTICLE IV OPERATING COMMITTEE							5
		Section 4.01.		Organization			5
		Section 4.02.		Decision Making			5
		Section 4.03.		Meetings			5
ARTICLE V TERM							5
ARTICLE VI COMPENSATION							6
		Section 6.01.		Charges for Services			6
		Section 6.02.		Payment Terms			6
		Section 6.03.		Taxes			7
		Section 6.04.		Performance under Ancillary Agreements			7
		Section 6.05.		Error Correction; True up; Accounting			7
ARTICLE VII GENERAL OBLIGATIONS							7
		Section 7.01.		Performance Metrics			7
		Section 7.02.		Disclaimer of Warranties			8
		Section 7.03.		Transitional Nature of Services; Changes			8
		Section 7.04.		Responsibilities for Errors; Changes			8
		Section 7.05.		Cooperation and Consents			8
		Section 7.06.		Alternatives			9
		Section 7.07.		Personnel			9
		Section 7.08.		Insurance			10
ARTICLE VIII TERMINATION							10
		Section 8.01.		Termination			10
		Section 8.02.		Survival			11
		Section 8.03.		Payment			11
		Section 8.04.		User ID; Passwords			11
ARTICLE IX RELATIONSHIP BETWEEN THE PARTIES							12
ARTICLE X SUBCONTRACTORS							12

		Section 10.01.		Subcontractors			12
		Section 10.02.		Assignment			12
ARTICLE XI INTELLECTUAL PROPERTY							12
		Section 11.01.		Allocation of Rights by Ancillary Agreements			12
		Section 11.02.		Existing Ownership Rights Unaffected			13
		Section 11.03.		Third Party Software			13
		Section 11.04.		Termination of Licenses			13
ARTICLE XII NO OBLIGATION							13
ARTICLE XIII CONFIDENTIALITY							13
		Section 13.01.		Confidentiality			13
		Section 13.02.		PCC Confidential Information			14
		Section 13.03.		Permitted Purpose			14
		Section 13.04.		Disclosure			14
		Section 13.05.		Custody			14
		Section 13.06.		Expiration of Confidentiality Provisions			14
ARTICLE XIV LIMITATION OF LIABILITY AND INDEMNIFICATION							15
		Section 14.01.		Indemnification			15
		Section 14.02.		Limitation of Liability			16
		Section 14.03.		Exclusions			16
		Section 14.04.		Provisions Applicable with respect to Indemnification Obligations			16
		Section 14.05.		Survival			17
ARTICLE XV DISPUTE RESOLUTION							17
ARTICLE XVI ASSIGNMENT							17
		Section 16.01.		Prohibition of Assignment			17
		Section 16.02.		Assignment to PEC Group Company			17
ARTICLE XVII MISCELLANEOUS							17
		Section 17.01.		Notices			17
		Section 17.02.		Governing Law			17
		Section 17.03.		Judgment Currency			17
		Section 17.04.		Entire Agreement			17
		Section 17.05.		Conflicts			18
		Section 17.06.		Force Majeure			18
		Section 17.07.		Amendment and Waiver			18
		Section 17.08.		Further Assurances			18
		Section 17.09.		Severability			19
		Section 17.10.		Counterparts			19

TRANSITION SERVICES AGREEMENT

     TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of October 22, 2007, by and between Peabody Energy Corporation, a Delaware corporation (“PEC”) and Patriot Coal Corporation, a Delaware corporation (“PCC” and together with PEC, the “Parties”, and each individually, a “Party”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Separation Agreement (as defined below).

RECITALS

     WHEREAS PEC and PCC have entered into a Separation Agreement, Plan of Reorganization and Distribution dated October 22, 2007 pursuant to which the Parties set out the terms and conditions relating to the separation of the Eastern Business (such that the Eastern Business is to be held, as at the Effective Time, directly or indirectly, by PCC (such agreement, as amended, restated or modified from time to time, the “Separation Agreement”).

     WHEREAS in connection therewith, PCC desires that PEC and other members of the PEC Group, as applicable, provide PCC and other members of the PCC Group, as applicable, with certain transitional services with respect to the operation of the PCC Group following the Effective Date, subject to the terms and conditions of this Agreement.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and covenants contained in this Agreement and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I
DEFINITIONS

          Section 1.01. Definitions . For the purposes of this Agreement, the following words and expressions and variations thereof, unless a clearly inconsistent meaning is required under the context, shall have the meanings specified or referred to in this Section 1.01:

     “Affiliate” of any Person means any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such first Person as of the date on which or at any time during the period for when such determination is being made. For purposes of this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise, and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

     “Agreement” has the meaning set forth in Article II.

     “Applicable Law” means any applicable law, statute, rule or regulation of any Governmental Authority or any outstanding order, judgment, injunction, ruling or decree by any Governmental Authority.

     “Business Concern” means any corporation, company, limited liability company, partnership, joint venture, trust, unincorporated association or any other form of association.

     “Business Day” means any day excluding (i) Saturday, Sunday and any other day which, in St. Louis, Missouri, is a legal holiday or (ii) a day on which banks are authorized by Applicable Law to close in St. Louis, Missouri.

     “Chief Representative” has the meaning set forth in Section 7.07(c).

     “Commercially Reasonable Efforts” means the efforts that a reasonable and prudent Person desirous of achieving a business result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible in the context of commercial relations of the type envisaged by this Agreement; provided, however, that an obligation to use Commercially Reasonable Efforts under this Agreement does not require the Person subject to that obligation to assume any material obligations or pay any material amounts to a Third Party.

     “Consent” means any approval, consent, ratification, waiver or other authorization.

     “Contract” means any contract, agreement, lease, license, commitment, consensual obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding on any Person or any part of its property under Applicable Law.

     “Dollars” or “$” means the lawful currency of the United States of America.

     “Event of Default” has the meaning set forth in Section 8.01.

     “Expiration Date” has the meaning set forth in Article V.

     “Fair Market Value” means, in relation to the pricing of services under this Agreement, terms that would be agreed between non-affiliated third parties for comparable services on a comparable scale, determined in the reasonable judgment of PEC.

     “Force Majeure Event” has the meaning set forth in Section 17.07.

     “Governmental Authority” means any court, arbitration panel, governmental or regulatory authority, agency, stock exchange, commission or body.

     “Governmental Authorization” means any Consent, license, certificate, franchise, registration or permit issued, granted, given or otherwise made available by, or under the authority of, any Governmental Authority or pursuant to any Applicable Law.

     “Group” means PEC Group or PCC Group, as the context requires.

     “Impracticability” has the meaning set forth in Section 3.03.

     “Operating Committee” has the meaning set forth in Section 4.01.

     “PCC Confidential Information” has the meaning set forth in Section 13.02.

     “PCC Group” means PCC and its Subsidiaries from time to time after the Effective Time.

     “PCC Indemnified Parties” has the meaning set forth in Section 14.01.

     “PEC Group” means PEC and its Subsidiaries from time to time after the Effective Time.

     “PEC Group Company” means any Person forming part of the PEC Group.

     “PEC Indemnified Parties” has the meaning set forth in Section 14.01.

     “Permitted Purpose” has the meaning set forth in Section 13.03.

     “Person” means any individual, Business Concern or Governmental Authority.

     “Prime Rate” means the rate of interest announced by Bank of America, Inc. from time to time as its “prime rate,” “prime lending rate,” “base rate” or similar reference rate. In the event the Prime Rate is discontinued as a standard, the holder hereof shall designate a comparable reference rate as a substitute therefor. For purposes hereof, the Prime Rate in effect at the close of business on each business day of Bank of America, Inc. shall be the Prime Rate for that day and any immediately succeeding non-business day or days.

     “Results” has the meaning set forth in Section 11.02.

     “Sales Taxes” means any sales, use, consumption, goods and services, value added or similar tax, duty or charge imposed pursuant to Applicable Law.

     “Separation Agreement” has the meaning set out in the Preamble to this Agreement.

     “Service(s)” has the meaning set forth in Section 3.01.

     “Service Manager” has the meaning set forth in Section 7.07(c).

     “Service Provider” means PEC or a member of PEC Group when it is providing a Service to PCC or a member of PCC Group hereunder in accordance with a Transition Service Schedule.

     “Service Recipient” means PCC or a member of PCC Group when it is receiving a Service from PEC or a member of PEC Group hereunder in accordance with a Transition Service Schedule.

     “Subcontractor” has the meaning set forth in Section 10.01.

     “Subsidiary” of any Person means any corporation, partnership, limited liability entity, joint venture or other organization, whether incorporated or unincorporated, of which of a majority of the total voting power of capital stock or other interests entitled (without the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person.

     “Term” has the meaning set forth in Article V.

     “Third Party” means a Person that is not a Party to this Agreement, other than a member of the PEC Group or a member of the PCC Group or an Affiliate of either Group.

     “Transition Service Schedule” has the meaning set forth in Article II.

          Section 1.02. Currency . Except as otherwise specified in a Transition Service Schedule, all references to currency herein are to lawful money of the United States of America.

ARTICLE II
TRANSITION SERVICE SCHEDULES

          This Agreement will govern individual transitional Services as requested by PCC or any other member of PCC Group, and provided by PEC or any other member of PEC Group, the details of which are set forth in the Transition Service Schedules attached to and forming part of this Agreement. Each Service shall be covered by this Agreement upon execution of a transition service schedule in the form attached hereto (each transition service schedule, a “Transition Service Schedule”).

          For each Service, the Parties shall set forth in a Transition Service Schedule substantially in the form of Schedule 1 hereto, among other things, (i) the time period during which the Service will be provided if different from the Term of this Agreement; (ii) a summary of the Service to be provided; and (iii) the method for determining the charge, if any, for the Service and any other terms applicable thereto. Obligations regarding a Transition Service Schedule shall be effective upon the later of the Effective Date of this Agreement or the date of execution of the applicable Transition Service Schedule. This Agreement and all the Transition Service Schedules shall be defined as the “Agreement” and incorporated herein wherever reference to it is made.

ARTICLE III
SERVICES

          Section 3.01. Services Generally . Except as otherwise provided herein, for the Term hereof, PEC and other members of the PEC Group shall provide to PCC and the other members of PCC Group, and shall cause the other applicable members of PEC Group to provide or cause to be provided to PCC and the other members of PCC Group, the Services described in the Transition Service Schedule(s) attached hereto identified on such Schedules as Services to be provided by members of the PEC Group. The Service(s) described on a single Transition Service Schedule shall be referred to herein as a “Service”. Collectively, the services described on all the Transition Service Schedules shall be referred to herein as the “Services”. PEC and PCC shall cause the members of their respective Groups to, if applicable, comply with the terms and conditions set forth in this Agreement or in the Transition Services Schedules.

          Section 3.02. Service Levels . Except as otherwise provided in a Transition Service Schedule for a specific service: (i) the Service Provider shall provide the Services only to the extent such Services are being provided by PEC or any other member of the PEC Group immediately prior to the Effective Date and at a level of service substantially similar to that provided by PEC or the applicable member of the PEC Group immediately prior to the Effective Date; and (ii) the Services will be available only for purposes of conducting the business of the

Service Recipient substantially in the manner it was conducted prior to the Effective Time; provided, however, that nothing in this Agreement will require a Party to favor the other Party over its other business operations. Except as otherwise provided in a Transition Service Schedule in respect of a specific Service, PCC will not be entitled to any new service.

          Section 3.03. Impracticability . A Service Provider shall not be required to provide any Service to the extent the performance of such Service becomes impracticable as a result of a cause or causes outside the reasonable control of the Service Provider, including unfeasible technological requirements, or to the extent the performance of such Services would require the Service Provider to violate any Applicable Law, or would result in the breach of any license, Governmental Authorization or Contract (an “Impracticability”).

          Section 3.04. Additional Resources . In accordance with Section 7.07 below and except as specifically provided in a Transition Service Schedule for a specific Service, in providing the Services, a Service Provider shall not be obligated to: (i) hire any additional employees; (ii) maintain the employment of any specific employee; (iii) purchase, lease or license any additional facilities, equipment or software; or (iv) pay any costs related to the transfer or conversion of the Service Recipient’s data to the Service Provider or any alternate supplier of Services.

ARTICLE IV
OPERATING COMMITTEE

          Section 4.01. Organization . The Parties shall create an operating committee (the “Operating Committee”) and shall each appoint one (1) employee to the Operating Committee for the Term. The Operating Committee will oversee the implementation and application of this Agreement and shall attempt to resolve any dispute between the Parties. Each of the Parties shall have the right to change its Operating Committee member at any time with employees of comparable knowledge, expertise and decision-making authority.

          Section 4.02. Decision Making . All Operating Committee decisions shall be taken unanimously. If the Operating Committee fails to make a decision, resolve a dispute, agree upon any necessary action, or if a Party so requests, in the event of a material breach of this Agreement, a senior officer of PEC and a senior officer of PCC, neither of whom shall have any direct oversight or responsibility for the subject matter in dispute, shall attempt within a period of fourteen (14) days to conclusively resolve any such unresolved issue.

          Section 4.03. Meetings . During the Term, the Operating Committee members shall meet, in person or via teleconference, at least once in each week, or less frequently if agreed by the members of the Operating Committee. In addition, the Operating Committee shall meet as often as necessary in order to promptly resolve any disputes submitted to it by any representative of either Party.

ARTICLE V
TERM

          The term of this Agreement shall commence on the Effective Date and end six (6) months following the Effective Date, unless earlier terminated under Article VIII or extended as

hereinafter provided (the “Term”). PCC shall have the right to extend the term of the agreement for a renewal term of three months upon written notice to PEC no later than thirty (30) days prior to the expiration of the initial term (the last day of the initial term or renewal term, as applicable, the “Expiration Date”). Under certain circumstances and for certain Services, as specified in the applicable Transition Service Schedule, PCC shall have the right to extend the term of the agreement for a second renewal term of three (3) additional months. The Parties may agree on an earlier expiration date respecting a specific Service by specifying such date on the Transition Service Schedule for that Service. Services shall be provided up to and including the date set forth in the applicable Transition Service Schedule, subject to earlier termination as provided in Article VIII. It shall be the sole responsibility of the Service Recipient, upon and after expiration or early termination of this Agreement with respect to a specific Service, to perform, render and provide for itself (or to make arrangements with one or more Third Party service providers to perform, render and provide) such Service, and to do all necessary planning and make all necessary preparations in connection therewith.

ARTICLE VI
COMPENSATION

          Section 6.01. Charges for Services . The Service Recipient shall pay the Service Provider the charges, if any, set forth on the Transition Service Schedules for each of the Services listed therein as adjusted, from time to time, in accordance with the processes and procedures established under Section 7.01 hereof, or, if no such charges are specifically indicated otherwise on a Transition Service Schedule, the Fair Market Value of the Services; provided that actual charges for the Services shall be, during the period beginning 181 days after the Effective Date and ending 270 days after the Effective Date, 125% of such amounts and, during the period beginning 271 days after the Effective Date and continuing through the remaining term of this Agreement, 150% of such amounts. If there is any inconsistency between the Transition Service Schedule and this Section 6.01, the terms of the Transition Service Schedule shall govern. The Parties also intend, having regard to the reciprocal and transitional nature of this Agreement and other factors, for charges to be easy to administer and justify; and, therefore, they hereby acknowledge that it may be counterproductive to try to recover every cost, charge or expense, particularly those that are insignificant or de minimis.

          Section 6.02. Payment Terms . Except as otherwise specified in a Transition Service Schedule, the Service Provider shall invoice the Service Recipient monthly (or on such other basis as the Parties may mutually determine) for all charges pursuant to this Agreement. Such invoices shall specify the Services provided to the Service Recipient during the preceding month and identifying the Service fee applicable to each Service so specified, and shall be accompanied by reasonable documentation or other reasonable explanations supporting such charges. Except as otherwise specified in a Transition Service Schedule, the Service Recipient shall pay, net of applicable withholding tax, if any, the Service Provider for all Services provided hereunder within thirty (30) days after receipt of an invoice therefor by wire transfer of immediately available funds to the account designated by the Service Provider for this purpose. Late payments shall bear interest at a rate per annum equal to the Prime Rate plus 2.0%, calculated for the actual number of days elapsed, accrued from and excluding the date on which such payment was due up to and including the date of payment.

          Section 6.03. Taxes . The fees and charges payable by the Service Recipient under this Agreement and set forth on the Transition Service Schedules shall be exclusive of any Sales Taxes or excise taxes or any customs or import charges or duties or any similar charges or duties which may be imposed by any Governmental Authority in connection with the purchase or delivery of the Services or materials to the Service Recipient. The Service Recipient shall remit to the Service Provider any Sales Taxes properly payable to the Service Provider pursuant to this Agreement. Applicable Sales Taxes shall be indicated by the Service Provider separately on all of the Service Provider’s invoices. The Parties shall co-operate with each other to minimize any applicable Sales Taxes and each shall provide the other with any reasonable certificates or documents which are useful for such purpose.

          Section 6.04. Performance under Ancillary Agreements . Notwithstanding anything to the contrary contained herein, the Service Recipient shall not be charged under this Agreement for any obligations that are specifically required to be performed under the Separation Agreement or any other Ancillary Agreement; and any such other obligations shall be performed and charged for (if applicable) in accordance with the terms of the Separation Agreement or such other Ancillary Agreement.

          Section 6.05. Error Correction; True-up; Accounting . The Parties shall agree to develop, through the Operating Committee or otherwise, mutually acceptable reasonable processes and procedures for conducting internal audits and making adjustments to charges as a result of the movement of employees and functions between the Parties, the discovery of errors or omissions in charges, as well as a true-up of amounts owed. In no event shall such processes and procedures extend beyond eighteen (18) months after completion of a Service.

ARTICLE VII
GENERAL OBLIGATIONS

          Section 7.01. Performance Metrics . Subject to Sections 3.02 to 3.04 and any other terms and conditions of this Agreement, PEC shall maintain, and shall cause the relevant other members of PEC Group to maintain, sufficient resources to perform their obligations hereunder. Specific performance metrics for PEC for a specific Service may be set forth in the corresponding Transition Service Schedule. Where none is set forth, PEC and the other relevant members of PEC Group shall use Commercially Reasonable Efforts to provide Services, or to cause the Services to be provided, in accordance with PEC’s policies, procedures, service levels and practices in effect before the Effective Date and shall exercise the same care and skill as PEC exercises in performing similar services for itself or for the other members of PEC Group. To the extent within the possession and control of PCC and the other relevant members of the PCC Group, PCC shall provide, and shall cause the other relevant members of the PCC Group to provide, PEC and the other relevant members of the PEC Group with information and documentation sufficient for PEC and the other relevant members of the PEC Group to perform the Services they are obligated to perform hereunder as they were performed before the Effective Date and shall make available, as reasonably requested by PEC or the other relevant members of the PEC Group, sufficient resources and timely decisions, approvals and acceptances in order that PEC and the other relevant members of PEC Group may perform their obligations hereunder in a timely manner.

          Section 7.02. Disclaimer of Warranties . Except as expressly provided in this Agreement, PEC does not make any warranties or conditions, express, implied, conventional or statutory, including but not limited to, the implied warranties or conditions of merchantability, of quality or fitness for a particular purpose, with respect to the Services or other items or deliverables provided by it or any other member of the PEC Group hereunder or any transactions contemplated herein.

          Section 7.03. Transitional Nature of Services; Changes . The Parties acknowledge the transitional nature of the Servic