Exhibit 10.1

 

FORM OF
CLOUD PEAK ENERGY INC.
2009 LONG TERM INCENTIVE PLAN
PERFORMANCE SHARE UNIT AWARD AGREEMENT

 

THIS AGREEMENT, made as of the        day of                 , 2012 (the “Grant
Date”), between Cloud Peak Energy Inc., a Delaware corporation (the “Company”),
and                      (the “Grantee”).

 

WHEREAS, the Company has adopted the Cloud Peak Energy Inc. 2009 Long Term
Incentive Plan (the “Plan”) in order to provide an additional incentive to
certain employees and directors of the Company and its Subsidiaries; and

 

WHEREAS, the Committee responsible for administration of the Plan has determined
to grant Performance Share Units to the Grantee as provided herein.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                       Grant of Performance Share Units.

 

The Company hereby grants to the Grantee an award of        Performance Share
Units (the “Award”).  Upon fulfillment of the requirements set forth below, the
Grantee shall have the right to receive one share of common stock of the Company
(“Share”) for each vested Performance Share Unit.  This grant is in all respects
limited and conditioned as hereinafter provided, and is subject in all respects
to the terms and conditions of the Plan now in effect and as it may be amended
from time to time (but only to the extent that such amendments apply to
outstanding grants of Performance Share Units).  Except as otherwise expressly
set forth herein, such terms and conditions are incorporated herein by
reference, made a part hereof, and shall control in the event of any conflict
with any other terms of this Agreement, and the capitalized terms used in this
Agreement shall have the same definitions set forth in the Plan.

 

2.                                       Performance Share Unit Vesting.

 

The performance period for this Award shall commence on January 1, 2012 and
shall end on December 31, 2014 (the “Performance Period”).  The Award shall be
subject to performance vesting requirements based upon the achievement of
Performance Goals as set forth in Appendix A to this Agreement.

 

3.                                       Dividends.

 

The Grantee shall be entitled to receive dividend equivalents, which represent
the right to receive Shares measured by the dividend payable with respect to
Performance Share Units (“Dividend Equivalent Rights”).  Dividend Equivalents
Rights on Performance Share Units will accrue and be reinvested into additional
Performance Share Units through the Performance

 

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Period.  The additional Shares will be subject to the vesting conditions and
other terms and restrictions that apply to the Performance Share Units granted
in Section 1 and will be paid as set forth in Section 4 of this Agreement.

 

4.                                       Payment of Vested Performance Share
Units.

 

For each vested Performance Share Unit, one Share shall be delivered to the
Grantee as soon as administratively practicable following vesting at the
completion of the Performance Period, but no later than the fifteenth day of the
third month following the end of the calendar year in which such vesting date
occurs.

 

5.                                       Termination of Employment.

 

5.1                                 Termination—Generally.  Subject to Sections
5.2 and 7 hereof, if the Grantee’s employment with the Company or any of its
Subsidiaries is terminated on or before the last day of the Performance Period,
the Performance Share Units granted hereunder shall immediately be forfeited to
the Company in their entirety without payment of consideration therefor to the
Grantee and the Grantee shall not be entitled to any Shares under this
Agreement.

 

5.2                                 Qualifying Terminations.  If the Grantee’s
employment with the Company or any of its Subsidiaries is terminated for any of
the reasons set forth below (and subject to Section 7 hereof), in each case if
such termination occurs on or before the last day of the Performance Period, the
Grantee, or the Grantee’s legatee or legatees under his or her will, or his or
her distributees, as applicable, shall be entitled to a Pro Rata Portion (as
defined below) of the Award.  The “Pro Rata Portion” shall mean the total number
of Shares which otherwise would have vested and become payable pursuant to
Section 4 hereof had the Grantee remained employed to the end of the Performance
Period, multiplied by a fraction, the numerator of which is the number of days
between (A) the Grant Date and (B) the date of the Grantee’s termination of
employment, and the denominator of which is 1,095.  The Grantee’s Pro Rata
Portion of the Award shall be paid following the completion of the Performance
Period, based on actual performance achieved, in accordance with Section 4 of
this Agreement.

 

5.2.1                        death

 

5.2.2                        Disability (as defined in the Plan)

 

5.2.3                        Redundancy (as defined below)

 

5.2.4                        Retirement (as defined below)

 

5.2.5                        If the Grantee is not subject to an Employment
Agreement, termination for any other reason, other than a termination by the
Company for Cause (as defined in the Plan), if there are exceptional
circumstances and the Committee so decides prior to the date of the termination
of the Grantee’s employment.

 

5.2.6                        If the Grantee is subject to an Employment
Agreement, termination by the Company for any reason other than for Cause as
defined therein.

 

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5.2.7                        If the Grantee is subject to an Employment
Agreement, termination by the Grantee for Good Reason as defined therein.

 

5.3                                 Definitions.  For purposes of this
Agreement:

 

(a)  “Employment Agreement” means an effective, written employment agreement
between the Grantee and the Company.  Notwithstanding any provision herein to
the contrary, in the event of any inconsistency between this Section 5 or
Section 7 and any Employment Agreement, the terms of the Employment Agreement
shall control.

 

(b)  “Redundancy” means the Company or any of its Subsidiaries, as applicable,
has ceased, or intends to cease, to carry on the business or particular business
function for the purposes of which the Grantee is or was employed by it, or has
ceased, or intends to cease, to carry on that business or particular business
function in the place where the Grantee is or was employed.

 

(c)  “Retirement” means retirement at or after age 65, or early retirement at or
after age 55 with 10 years of service with the Company.

 

6.                                       Adjustments.  In the event of a Change
in Capitalization, the Committee shall make equitable adjustments to the number
and class of Shares subject to this Agreement as provided under the terms of the
Plan.  The Committee’s adjustment shall be made in accordance with the
provisions of Article 12 of the Plan and shall be final, binding and conclusive
for all purposes of the Plan and this Agreement.  Unless the Committee
determines otherwise, the number of Performance Share Units subject to this
Award shall always be a whole number.

 

7.                                       Effect of a Change in Control.

 

7.1  Change in Control—Generally.  In the event a Change in Control (as defined
in the Plan) occurs, the surviving or successor entity is expected to assume
this Agreement.  If, however, the surviving or successor entity does not assume
this Agreement, the Committee may, in its sole discretion, exercise its
authority under the Plan to modify the Award under this Agreement, including,
but not limited to, by providing for the end of the Performance Period in
connection with the occurrence of such Change in Control and the deemed
achievement of Performance Goals at target, with payment of shares with respect
to vested Performance Share Units occurring in connection with the occurrence of
such Change in Control, which payment shall be made in accordance with the
schedule described in Section 4 of this Agreement.

 

7.2  Termination Following a Change in Control.  If there is a Change in Control
and the surviving or successor entity has assumed this Agreement, and within two
(2) years after such Change in Control the Grantee’s employment with the Company
or any of its Subsidiaries is terminated (i) by the Company or any of its
Subsidiaries without Cause (as defined in the Plan or, if applicable, an
Employment Agreement) or (ii) if the Grantee is subject to an Employment
Agreement, by the Grantee for Good Reason as defined therein, the Grantee shall
be entitled, following the completion of the Performance Period, to the total
number of Shares which otherwise would have vested and become payable had he or
she remained employed to the end of the Performance Period, based on actual
performance achieved, in accordance with Section 4 of this Agreement.

 

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8.                                       Restrictions on Transfer.  Performance
Share Units may not be sold, assigned, hypothecated, pledged or otherwise
transferred or encumbered in any manner except by will or the laws of descent
and distribution.

 

9.                                       Withholding of Taxes.  The Grantee
shall pay to the Company, or the Company and the Grantee shall agree on such
other arrangements necessary for the Grantee to pay, the applicable federal,
state and local income taxes required by law to be withheld (the “Withholding
Taxes”), if any, upon the vesting of Performance Share Units and delivery of the
Shares.  The Company shall have the right to deduct from any distribution of
cash to any Grantee, an amount equal to the Withholding Taxes with respect to
the Shares delivered pursuant to the terms of this Agreement.  In satisfaction
of the obligation to pay Withholding Taxes to the Company upon the delivery of
any Shares following the vesting of Performance Share Units, the Grantee may
make a written election which may be accepted or rejected in the discretion of
the Company, to have withheld a portion of such Shares then deliverable to the
Grantee having an aggregate Fair Market Value as of the date such Restrictions
lapse equal to the Withholding Taxes.

 

10.                                 No Rights as a Shareholder.  Until Shares
are issued, if at all, in satisfaction of the Company’s obligations under this
Award, in the time and manner specified above, the Grantee shall have no rights
as a shareholder.

 

11.                                 Dodd-Frank Clawback Policies.  This
Agreement is subject to any clawback policies the Company may adopt in order to
conform to the Dodd-Frank Act and resulting rules issued by the Securities and
Exchange Commission and that the Company determines should apply to this
Agreement. These clawback policies may subject the Grantee’s rights and benefits
under this Agreement to reduction, cancellation, forfeiture or recoupment if
certain specified events occur, including, but not limited to, an accounting
restatement due to the Company’s material noncompliance with financial reporting
regulations.

 

12.                                 No Right to Continued Employment.  Nothing
in this Agreement or the Plan shall be interpreted or construed to confer upon
the Grantee any right with respect to continuance of employment by the Company,
any Subsidiary or any Division, nor shall this Agreement or the Plan interfere
in any way with the right of the Company, any Subsidiary or any Division to
terminate the Grantee’s employment therewith at any time.

 

13.                                 Grantee Bound by the Plan.  The Grantee
hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all
the terms and provisions thereof.

 

14.                                 Severability.  Should any provision of this
Agreement be held by a court of competent jurisdiction to be unenforceable or
invalid for any reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in accordance with
their terms.

 

15.                                 Governing Law.  Except as to matters of
federal law, the validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without giving
effect to the conflicts of laws principles thereof.

 

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

 

17.                                 Successors in Interest.  This Agreement
shall inure to the benefit of and be binding upon any successor to the Company. 
This Agreement shall inure to the benefit of the Grantee’s legal
representatives.  All obligations imposed upon the Grantee and all rights
granted to the Company under this Agreement shall be final, binding and
conclusive upon the Grantee’s beneficiaries, heirs, executors, administrators
and successors.

 

18.                                 Modification of Agreement.  This Agreement
may be modified, amended, suspended or terminated, and any terms or conditions
may be waived, but only by a written instrument executed by the parties hereto. 
No waiver by either party hereto of any breach by the other party hereto of any
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions at the time or at any prior or
subsequent time.

 

19.                                 Resolution of Disputes.  Any dispute or
disagreement which may arise under, or as a result of, or in any way relate to,
the interpretation, construction or application of this Agreement shall be
determined by the Committee.  Any determination made hereunder shall be final,
binding and conclusive on the Grantee and the Company for all purposes; provided
however, that this dispute resolution provision shall not interfere with
Grantees rights to pursue and protect his legal rights in a court of competent
jurisdiction.

 

20.                                 Sections and Other Headings.  The section
and other headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.

 

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first
written above.

 

 

CLOUD PEAK ENERGY INC.

 

GRANTEE

 

 

 

 

 

 

 

 

 

By:

 

Print Name:

Title:

 

 

 

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Appendix A

 

Cloud Peak Energy Inc.
Performance Share Plan
FY2012 through FY2014

 

The Committee has established the following Performance Share Plan terms for
Performance Share Unit grants. All Performance Share Award grants are made
pursuant to the Cloud Peak Energy Inc. 2009 Long Term Incentive Plan.

 

Performance Metric:  Relative Total Shareholder Return

 

Performance for the purposes of determining the vesting of the Performance Share
Unit Awards will be based on relative Total Shareholder Return (TSR).  Relative
TSR measures the Cloud Peak Energy share price movement over a performance
period relative to the share price movement of peer companies.

 

TSR = End of Period Share Price — Beginning of Period Share Price + Dividend(1)
Beginning of Period Share Price

 

The Beginning of Period Share Price and the End of Period Share Price for Cloud
Peak Energy and the peer companies will be calculated by using the first and
last, respectively, twenty (20) trading days of the performance period.

 

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(1) For purposes of calculating the dividend element of TSR, the Committee will
assume the reinvestment of dividends paid in the applicable shares during the
performance period as of the last trading day of each applicable fiscal quarter
in which dividends are paid.

 

Grant Date

 

As defined above in the first paragraph of the Award Agreement

Performance Period

 

As defined above in Section 2 of the Award Agreement

Vesting

 

3-year cliff vest from Grant Date

Peer Companies

 

As set forth below

Target Performance

 

Median of the Peer Companies

Payout Range

 

0% to 200% of Target Performance, provided in no event can the payout exceed 15
times the “Target Opportunity” (which is defined as the Cloud Peak Energy
closing share price on the Grant Date multiplied by the target number of
Performance Share Units awarded). In the event the payout would otherwise exceed
15 times the Target Opportunity, the number of shares delivered will be reduced
to the number of whole shares such that the total payout is equal to 15 times
the Target Opportunity.

 

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Peer Companies:

 

1.             Alliance Resource Partners

 

2.             Alpha Natural Resources

 

3.             Arch Coal

 

4.             Berry Petroleum

 

5.             Cabot Oil & Gas

 

6.             Consol Energy

 

7.             EQT Corp.

 

8.             Forest Oil Corp.

 

9.             James River Coal

 

10.           Newfield Exploration Co.

 

11.           Noble Energy

 

12.           Patriot Coal

 

13.           Peabody Energy

 

14.           Penn Virginia Corporation

 

15.           Sandridge Energy

 

16.           SM Energy

 

17.           Walter Energy

 

18.           Whiting Petroleum Corp.

 

The Committee, in its sole discretion, will make such changes to the list of
Peer Companies as may be required to appropriately and equitably reflect the
merger, consolidation, acquisition or other similar event involving a Peer
Company.  For the 2012-2014 performance cycle, International Coal and Massey
Energy have been removed from the peer group.

 

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Target Performance

 

TSR for each of the Peer Companies is calculated and ranked highest to lowest.
The Median TSR performance of the Peer Companies is the TSR at which half the
Peer Companies’ TSR results are below and half the Peer Companies’ TSR results
are above.

 

Payout Range

 

Grants of Performance Share Awards will be made at the Target Performance amount
defined as the Median performance of the Peer Companies. The amount vested at
Vesting will range from 0% to 200% of the Target Performance amount depending
upon the final positioning of CPE’s TSR to the median of the Peer Companies at
the end of the Performance Period (but in no event will the payout exceed 15
times the Target Opportunity, as described above).

 

The extent to which Performance Share Units will vest will be determined as
follows:

 

Outcome Relative to Peer Group TSR

 

 

 

CPE Three-Year Percentile
Ranking in TSR

 

Percentage of Performance Share
Units Vesting

 

 

 

Below 25th Percentile

 

0

%

Threshold

 

25th Percentile

 

50

%

Target

 

50th Percentile

 

100

%

Maximum

 

90th Percentile

 

200

%

 

·                                          If the Company’s Total Shareholder
Return (TSR) is below the 25th percentile of the Company’s Performance Peer
Group, then the payout is 0%.

 

·                                          The payout is linear between the
25th percentile and the 50th percentile.

 

·                                          The payout is linear between the
50th percentile and the 90th percentile

 

·                                          Irrespective of where the Company’s
TSR is in relation to its Performance Peer Group, if the Company’s TSR is
negative during the Performance Period, then the payout shall be reduced by 50%
compared to what it otherwise would have been pursuant to this Appendix A.

 

The Committee, in its sole discretion, will determine the number of Performance
Share Units that have vested at the end of the Performance Period based on the
performance of the Company, calculated using the performance grid and guidelines
set forth above.

 

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