Exhibit 10.2

 

FORM OF

CLOUD PEAK ENERGY INC.

2009 LONG TERM INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AGREEMENT

 

THIS AGREEMENT, made as of the         day of                    , 2011 (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 an option to the Grantee as provided herein.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                       Grant of Option.

 

1.1.                              The Company hereby grants to the Grantee the
right and option (the “Option”) to purchase all or any part of an aggregate of
                     whole Shares subject to, and in accordance with, the terms
and conditions set forth in this Agreement.

 

1.2.                              The Option is not intended to qualify as an
Incentive Stock Option.

 

1.3.                              This Agreement shall be construed in
accordance and consistent with, and subject to, the provisions of the Plan (the
provisions of which are incorporated herein by reference); and, except as
otherwise expressly set forth herein, the capitalized terms used in this
Agreement shall have the same definitions as set forth in the Plan.

 

2.                                       Purchase Price.

 

The price at which the Grantee shall be entitled to purchase Shares upon the
exercise of the Option shall be $                     per Share.

 

3.                                       Duration of Option.

 

Except as otherwise provided in Sections 6 and 7 hereof, the Option shall be
exercisable to the extent and in the manner provided herein for a period of ten
(10) years from the Grant Date; provided, however, that in the event of the
Grantee’s death prior to the expiration of the Option, the Option may be
exercised up to one (1) year following the date of the Grantee’s death even if
such period extends beyond the ten (10) year anniversary of the Grant Date.

 

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4.                                       Vesting and Exercisability of Option.

 

Subject to Sections 6 and 7 hereof, provided that the Grantee continues to serve
as an employee of the Company or any of its Subsidiaries, the Option shall vest
and become exercisable on the third anniversary of the Grant Date.

 

5.                                       Manner of Exercise and Payment.

 

5.1.                              Subject to the terms and conditions of this
Agreement and the Plan, the Option may be exercised by delivery of written
notice to the Company, at its principal executive office, to the attention of
the General Counsel and Corporate Secretary.  Such notice shall state that the
Grantee is electing to exercise the Option and the number of Shares in respect
of which the Option is being exercised and shall be signed by the person or
persons exercising the Option.  If requested by the Committee, such person or
persons shall (i) deliver this Agreement to the Secretary of the Company who
shall endorse on this Agreement a notation of such exercise and (ii) provide
satisfactory proof as to the right of such person or persons to exercise the
Option.

 

5.2.                              The notice of exercise described in
Section 5.1 hereof shall be accompanied by the full purchase price for the
Shares in respect of which the Option is being exercised, in cash or by check
or, if indicated in the notice, such payment shall follow by check from a
registered broker acting as agent on behalf of the Grantee.  However, at the
discretion of the Committee appointed to administer the Plan, the Grantee may
pay the exercise price in part or in full by transferring to the Company
unrestricted Shares owned by the Grantee having a Fair Market Value on the day
preceding the date of exercise equal to the cash amount for which such Shares
are substituted.  In addition, the Option may be exercised through a
broker-dealer pursuant to such cashless exercise procedures that are, from time
to time, deemed acceptable by the Committee in its sole discretion.

 

5.3.                              Upon receipt of notice of exercise and full
payment for the Shares in respect of which the Option is being exercised, the
Company shall, subject to this Agreement and the Plan, take such action as may
be necessary to effect the transfer to the Grantee of the number of Shares as to
which such exercise was effective.

 

5.4.                              The Grantee shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any Shares
subject to the Option until (i) the Option shall have been exercised pursuant to
the terms of this Agreement and the Grantee shall have paid the full purchase
price for the number of Shares in respect of which the Option was exercised,
(ii) the Company shall have issued and delivered the Shares to the Grantee, and
(iii) the Grantee’s name shall have been entered as a stockholder of record on
the books of the Company, whereupon the Grantee shall have full voting and other
ownership rights with respect to such Shares.

 

6.                                       Termination of Employment.

 

6.1.                              Termination—Generally.  Subject to Sections
6.2 and 7 hereof, if the Grantee’s employment with the Company or any of its
Subsidiaries is terminated on or after the Grant Date for any reason, the Option
shall (a) if not vested and exercisable at the time of such termination,
immediately expire without payment of consideration therefor and (b) if vested
and

 

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exercisable at the time of termination, remain exercisable by the Grantee at any
time prior to the earlier to occur of (i) the end of the thirty (30) day period
immediately following the date of the Grantee’s termination (and such thirty
(30) day period shall be extended during any period in which the Grantee is
prohibited by law or Company insider trading policies from exercising such
Option) and (ii) the ten (10) year anniversary of the Grant Date.

 

6.2.                              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 after the Grant Date and prior to the third
anniversary of the Grant Date, a Pro Rata Portion (as defined below) of the
Option shall, if not then vested, vest and become exercisable as of the date of
such termination and the remaining portion of the Option that is not vested and
exercisable at the time of such termination shall immediately expire without
consideration therefor.  The Pro Rata Portion of the Option, or the entire
Option if such termination occurs on or after the third anniversary of the Grant
Date, shall remain exercisable by the Grantee at any time prior to the earlier
to occur of (i) the end of the ninety (90) day period immediately following the
date of the Grantee’s termination (and such ninety (90) day period shall be
extended during any period in which the Grantee is prohibited by law or Company
insider trading policies from exercising such Option) and (ii) the ten (10) year
anniversary of the Grant Date; provided, however, that in the event of a
qualified termination under Section 6.2.1 below the Pro Rata Portion of the
Option or the entire Option, as applicable, shall remain exercisable by the
Grantee’s legatee or legatees under his or her will, or by his or her personal
representatives or distributees, as applicable, for a period of one (1) year
following such qualified termination even if such period extends beyond the ten
(10) year anniversary of the Grant Date.  The “Pro Rata Portion” shall mean the
total number of Shares subject to the Option 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.

 

6.2.1                        death

 

6.2.2                        Disability (as defined in the Plan)

 

6.2.3                        Redundancy (as defined below)

 

6.2.4                        Retirement (as defined below)

 

6.2.5                        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.

 

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

 

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

 

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6.3                                 Definitions.  For purposes of this
Agreement:

 

(a)  “Employment Agreement” means an effective, written employment agreement
between the Grantee and the Company.

 

(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 with
the prior written consent of the Company.

 

7.                                       Effect of a Termination Following a
Change in Control.

 

If, within two (2) years after a 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 Option shall
immediately vest and become exercisable in its entirety and the Option shall
remain exercisable by the Grantee or by the Grantee’s legatee or legatees under
his or her will, or by his or her personal representatives or distributees, as
applicable, at any time prior to the earlier to occur of (i) the end of the
ninety (90) day period immediately following the date of the Grantee’s
termination (and such ninety (90) day period shall be extended during any period
in which the Grantee is prohibited by law or Company insider trading policies
from exercising such Option) and (ii) the ten (10) year anniversary of the Grant
Date.

 

8.                                       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.

 

9.                                       Adjustments.

 

In the event of a Change in Capitalization, the Committee shall make equitable
adjustments to the number and class of Shares or other securities, cash or
property subject to the Option and the purchase price for such Shares or other
securities.  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.

 

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10.                                 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.

 

11.                                 Withholding of Taxes.

 

The Grantee shall be required to pay to the Company, and the Company shall have
the right and is hereby authorized to withhold, any applicable withholding taxes
in respect of the Option, its exercise or any payment or transfer under, or with
respect to, the Option and to take such other action as may be necessary in the
reasonable opinion of the Committee to satisfy all obligations for the payment
of such withholding taxes.  The Grantee shall be solely responsible for the
payment of all taxes relating to the payment or provision of any amounts or
benefits hereunder.

 

12.                                 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.

 

13.                                 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.

 

14.                                 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.

 

15.                                 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.

 

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16.                                 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.

 

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.                                 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 Grantee’s rights to pursue and protect his or her legal rights in a court
of competent jurisdiction.

 

19.                                 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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