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 Exhibit 10.32  


 
 

  CLOUD PEAK ENERGY INC.    
    
    2009 LONG TERM INCENTIVE PLAN    
    

(Effective                        , 2009)    
    



        1.     Purpose.  


        The purpose of the Plan is to strengthen Cloud Peak Energy Inc., a Delaware corporation (the "Company"), by
providing an incentive to its and its Subsidiaries' (as defined herein) employees, officers, consultants and directors, thereby encouraging them to devote their abilities and industry to the success
of the Company's business enterprise. It is intended that this purpose be achieved by extending to employees (including future employees who have received a formal written offer of employment),
officers, consultants and directors of the Company and its Subsidiaries an added incentive for high levels of performance and unusual efforts through the grant of Restricted Stock, Restricted Stock
Units, Options, Stock Appreciation Rights, Dividend Equivalent Rights, Performance Awards, and Share Awards (as each term is herein defined). 


        2.     Definitions.  


        For purposes of the Plan: 



        2.1   "Agreement" means a written or electronic agreement between the Company and a Grantee evidencing the grant of an Option
or Award and setting forth the terms and conditions thereof. 


        2.2   "Award" means a grant of Restricted Stock, a Restricted Stock Unit, a Stock Appreciation Right, a Performance Award, a
Dividend Equivalent Right, a Share Award or any or all of them. 


        2.3   "Beneficiary" means an individual designated as a Beneficiary pursuant to Section 20.4. 


        2.4   "Board" means the Board of Directors of the Company. 


        2.5   "Cause" means (i) if the Grantee is at the time of termination a party to an employment agreement with the Company
or any Subsidiary of the Company, the meaning set forth therein, or (ii) in all other cases, (1) any indictment for, conviction of, or plea of guilty or nolo contendere to (x) any
felony (except for vehicular-related felonies, other than a felony DUI, manslaughter or homicide) or (y) any crime (whether or not a felony) involving dishonesty, fraud, or breach of fiduciary
duty; (2) willful misconduct or gross negligence by the Grantee in connection with the performance of services to the Company; (3) any breach of the Company's written policies other than
an inadvertent breach that is promptly remedied by the Grantee; (4) ongoing failure or refusal after written notice, other than by reason of Disability or ill health, to faithfully and
diligently perform the usual and customary duties of his employment; (5) failure or refusal after written notice to comply with the reasonable written policies, standards and regulations of the
Company which, from time to time, may be established and disseminated; or (6) a material breach by the Grantee of any terms related to his employment in any applicable agreement. 



        2.6   "Change in Capitalization" means any increase or reduction in the number of Shares, any change (including, but not
limited to, in the case of a spin-off, extraordinary dividend or other extraordinary distribution in respect of Shares, a change in value) in the Shares or any exchange of Shares for a
different number or kind of shares or other securities of the Company or another corporation, by reason of a reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants, rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of
shares, repurchase of shares, change in corporate structure or otherwise. 








 

        2.7   "Change in Control" means the occurrence of any of the following: 



        (a)   An
acquisition (other than directly from the Company) of any common stock, par value $0.01 per share, of the Company ("Common
Stock") or other voting securities of the Company by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of
either (i) the then outstanding Common Stock (provided, however, that an acquisition of common units of Cloud Peak Energy LLC shall not be considered an acquisition of Common Stock) or
(ii) the combined voting power of the Company's then outstanding voting securities entitled to vote for the election of directors (the "Voting
Securities"); provided, however, that, in determining whether a Change in Control has occurred, Common Stock or Voting
Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause
a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Company or Cloud Peak Energy LLC or (B) any Related Entity (as hereinafter defined) of the Company or Cloud Peak Energy LLC, (ii) the
Company, Rio Tinto plc, or any of their respective Related Entities, including through the exercise of a redemption right under the LLC Agreement or otherwise or (iii) any Person
in connection with a "Non-Control Transaction" (as hereinafter defined); provided, however,
that any acquisition by Rio Tinto plc or any Related Entity of Rio Tinto plc following the Rio Tinto Member Non-Approval Trigger Date pursuant to clause (ii) or
(iii) shall not constitute a Non-Control Acquisition. A "Related Entity" of any Person or corporation shall mean any other
corporation or other Person, a majority of the voting power, voting equity securities or equity interests of which is owned, directly or indirectly, by such Person or corporation. 


        (b)   The
individuals who, as of the Effective Date, are members of the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the members of the Board or, following a Merger (as defined below), the board of directors of (i) the corporation resulting from such Merger (the
"Surviving Corporation"), if fifty percent (50%) or more of the combined voting power of the then-outstanding voting securities of the
Surviving Corporation is not Beneficially Owned, directly or indirectly, by another Person (a "Parent Corporation") or (ii) if there is one or
more than one Parent Corporation, the ultimate Parent Corporation; provided, however, that if the election, or nomination for election by the Company's
common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered a member of
the Incumbent Board; and provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy
Contest"), including by reason of any agreement intended to avoid or settle any Proxy Contest; or 


        (c)   The
consummation of: 



        (i)    A
merger, consolidation or reorganization with or into the Company, or a direct or indirect subsidiary of the Company, or any other similar transaction in which
securities of the Company are issued (a "Merger"), unless the Merger is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a Merger if: 



        (A)  the
stockholders of the Company immediately before such Merger own, directly or indirectly, including through one or more subsidiaries or entities, immediately following
the Merger at least fifty percent (50%) of the outstanding 






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common
stock and the combined voting power of the outstanding voting securities of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more than
one Parent Corporation, the ultimate Parent Corporation; 


        (B)  the
individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for the Merger constitute at least a majority of
the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more than one Parent Corporation, the ultimate Parent
Corporation; and 


        (C)  no
Person other than (1) the Company, another corporation that is a party to the agreement of Merger or, prior to the Rio Tinto Member Non-Approval
Trigger Date, Rio Tinto plc, (2) any Related Entity of the Company or, prior to the Rio Tinto Member Non-Approval Trigger Date, Rio Tinto plc, (3) any employee
benefit plan (or any trust forming a part thereof) that, immediately prior to the Merger, was maintained by the Company, Cloud Peak Energy LLC or any of their respective Related Entities or
(4) any Person who, immediately prior to the Merger, had Beneficial Ownership of thirty percent (30%) or more of the then outstanding Common Stock or Voting Securities, has Beneficial
Ownership, directly or indirectly, of thirty percent (30%) or more of the outstanding common stock or the combined voting power of the outstanding voting securities of (x) the Surviving
Corporation, if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly, by a
Parent Corporation, or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; 




        (ii)   A
complete liquidation or dissolution of the Company; or 


        (iii)  The
sale or other disposition of all or substantially all of the assets of the Company to any Person (unless such sale or disposition is (A) to Rio
Tinto plc prior to the Rio Tinto Member Non-Approval Trigger Date, (B) to a Related Entity of the Company or, prior to the Rio Tinto Member Non-Approval Trigger
Date, a Related Entity of Rio Tinto plc, (C) to any subsidiary of the Company or (D) under conditions that would constitute a Non-Control Transaction with the
disposition of assets being regarded as a Merger for this purpose). 






        Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Company
which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Common Stock or Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional Common Stock or Voting Securities thereby increasing the percentage of the then outstanding Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur unless the Subject Person is (i) a Related Entity of the Company or (ii) prior to the Rio Tinto Member
Non-Approval Trigger Date, Rio Tinto plc or a Related Entity of Rio Tinto plc. 



        2.8   "Code" means the Internal Revenue Code of 1986, as amended. 


        2.9   "Committee" means the Committee which administers the Plan as provided in Section 3. 


        2.10 "Company" means Cloud Peak Energy Inc., a Delaware corporation. 



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        2.11 "Director" means a member of the Board. 


        2.12 "Disability" occurs when the Grantee is entitled to receive payments under the Company's long-term
disability insurance plan, if one is in effect at the time. If there is no long
term disability insurance plan in effect, then Disability shall occur when the Grantee is unable to perform his duties hereunder as a result of illness or mental or physical injury for a period of at
least 180 days. 


        2.13 "Division" means any of the operating units or divisions of the Company designated as a Division by the Committee. 


        2.14 "Dividend Equivalent Right" means a right to receive cash or Shares based on the value of dividends that are paid with
respect to Shares. 


        2.15 "Effective Date" means the date of approval of the Plan by the Company's shareholders' pursuant to Section 19.5. 



        2.16 "Eligible Individual" means any of the following individuals: (a) any Director, officer or employee of the
Company or a Subsidiary, (b) any individual to whom the Company or a Subsidiary has extended a formal, written offer of employment, and (c) any consultant or advisor of the Company or a
Subsidiary. 


        2.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 


        2.18 "Fair Market Value" on any date means: 



        (a)   if
the Shares are listed for trading on the New York Stock Exchange, the closing price at the close of the primary trading session of the Shares on such date on the New
York Stock Exchange, or if there has been no such closing price of the Shares on such date, on the next preceding date on which there was such a closing price; 


        (b)   if
the Shares are not listed for trading on the New York Stock Exchange, but are listed on another national securities exchange, the closing price at the close of the
primary trading session of the Shares on such date on such exchange, or if there has been no such closing price of the Shares on such date, on the next preceding date on which there was such a closing
price; 


        (c)   if
the Shares are not listed for trading on a national securities exchange or are not authorized for quotation on NYSE, the fair market value of the Shares as determined
in good faith by the Committee, and in the case of Incentive Stock Options, in accordance with Section 422 of the Code. 




        2.19 "Full Value Award" means a grant of Restricted Stock, a Restricted Stock Unit, a Performance Award, a Share Award or any
or all of them. 


        2.20 "Grantee" means a person to whom an Award or Option has been granted under the Plan. 



        2.21 "Incentive Stock Option" means an Option satisfying the requirements of Section 422 of the Code and designated by
the Committee as an Incentive Stock Option. 


        2.22 "Initial Public Offering" means the consummation of the first public offering of Shares pursuant to a registration
statement (other than a Form S-8 or successor forms) filed with, and declared effective by, the Securities and Exchange Commission. 


        2.23 "LLC Agreement" means The Third Amended and Restated Limited Liability Company Operating Agreement of Cloud Peak
Energy LLC, entered into as of            , 2009, by and 



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between
Rio Tinto Energy America Inc., Kennecott Management Services Company, a Delaware corporation and the Company. 


        2.24 "Nonemployee Director" means a Director who is a "nonemployee director" within the meaning of
Rule 16b-3 promulgated under the Exchange Act. 


        2.25 "Nonqualified Stock Option" means an Option which is not an Incentive Stock Option. 


        2.26 "Option" means a Nonqualified Stock Option and/or an Incentive Stock Option. 


        2.27 "Outside Director" means a Director who is an "outside director" within the meaning of Section 162(m) of the Code
and the regulations promulgated thereunder. 


        2.28 "Parent" means any corporation which is a "parent corporation" (within the meaning of Section 424(e) of the Code)
with respect to the Company. 


        2.29 "Performance Awards" means Performance Share Units, Performance Units, Performance-Based Restricted Stock or any or all
of them. 


        2.30 "Performance-Based Compensation" means any Option or Award that is intended to constitute "performance based
compensation" within the meaning of Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder. 



        2.31 "Performance-Based Restricted Stock" means Shares issued or transferred to an Eligible Individual under
Section 9.2. 


        2.32 "Performance Cycle" means the time period specified by the Committee at the time Performance Awards are granted during
which the performance of the Company, a Subsidiary or a Division will be measured. 


        2.33 "Performance Objectives" means the objectives set forth in Section 10.3 for the purpose of determining the degree
of payout and/or vesting of Performance Awards. 


        2.34 "Performance Share Units" means Performance Share Units granted to an Eligible Individual under Section 9.1. 


        2.35 "Performance Units" means Performance Units granted to an Eligible Individual under Section 9.1. 


        2.36 "Plan" means this 2009 Cloud Peak Energy Inc. Long Term Incentive Plan, as amended from time to time. 



        2.37 "Restricted Stock" means Shares issued or transferred to an Eligible Individual pursuant to Section 8. 


        2.38 "Restricted Stock Units" means rights granted to an Eligible Individual under Section 8 representing a number of
hypothetical Shares. 


        2.39 "Rio Tinto Member Non-Approval Trigger Date" shall have the meaning set forth in the LLC Agreement. 



        2.40 "Share Award" means an Award of Shares granted pursuant to Section 11. 


        2.41 "Shares" means the common stock, par value $.01 per share, of the Company and any other securities into which such
shares are changed or for which such shares are exchanged. 


        2.42 "Stock Appreciation Right" means a right to receive all or some portion of the increase, if any, in the value of the
Shares as provided in Section 6 hereof. 


        2.43 "Subsidiary" means (a) except as provided in subsection (b) below, any corporation which is a subsidiary
corporation within the meaning of Section 424(f) of the Code with respect to the 



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Company,
and (b) in relation to the eligibility to receive Options or Awards other than Incentive Stock Options and continued employment for purposes of Options and Awards (unless the Committee
determines otherwise), any entity, whether or not incorporated, in which the Company directly or indirectly owns at least 20% or more of the total combined voting power of the entity's outstanding
voting securities or such other threshold ownership percentage permitted under Section 409A of the Code. 


        2.44 "Ten-Percent Shareholder" means an Eligible Individual who, at the time an Incentive Stock Option is to be
granted to him or her, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the
Company, a Parent or a Subsidiary. 


        2.45 "Termination Date" means the date that is ten (10) years after the Effective Date, unless the Plan is earlier
terminated by the Board pursuant to Section 14 hereof. 


        2.46 "Transition Period" means the period beginning with an Initial Public Offering and ending as of the earlier of
(i) the date of the first annual meeting of shareholders of the Company at which directors are to be elected that occurs after the close of the third calendar year following the calendar year
in which the Initial Public Offering occurs and (ii) the expiration of the "reliance period" under Treasury Regulation Section 1.162-27(f)(2). 




        3.     Administration.  



        3.1    Committees; Procedure.    The Plan shall be administered by a Committee which,
initially, shall be the Board, and then, upon the appointment by the Board, the Compensation Committee of the Board unless the Board appoints a different Committee in its sole discretion. The
Committee may adopt such rules, regulations and guidelines as it deems are necessary or appropriate for the administration of the Plan. The Committee shall consist of at least two (2) Directors
and may consist of the entire Board; provided, however, that from and after the date of an Initial Public Offering (a) if the Committee consists
of less than the entire Board, then, with respect to any Option or Award granted to an Eligible Individual who is subject to Section 16 of the Exchange Act, the Committee shall consist of at
least two Directors, each of whom shall be a Non-Employee Director, and (b) to the extent necessary for any Option or Award intended to qualify as Performance-Based Compensation to
so qualify, the Committee shall consist of at least two Directors, each of whom shall be an Outside Director. For purposes of the preceding sentence, if one or more members of the Committee is not a
Nonemployee Director and an Outside Director but recuses himself or herself or abstains from voting with respect to a particular action taken by the Committee, then the Committee, with respect to that
action, shall be deemed to consist only of the members of the Committee who have not recused themselves or abstained from voting. 


        3.2    Board Reservation and Delegation.    Except to the extent necessary for any Award or Option intended to qualify
as Performance-Based Compensation to so qualify, the Board may, in its discretion, reserve to itself or exercise any or all of the authority and responsibility of the Committee hereunder and may also
delegate to another committee of the Board any or all of the authority and responsibility of the Committee with respect to Awards or Options to Eligible Individuals who are not subject to
Section 16(b) of the Exchange Act at the time any such delegated authority or responsibility is exercised. Such other committee may consist consist of one or more Directors who may, but need
not be officers or employees of the Company. To the extent the Board has reserved to itself, or exercised the authority and responsibility of the Committee, all references to the Committee in the Plan
shall be to the Board. 



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        3.3    Committee Powers.    Subject to the express terms and conditions set forth herein, and the terms of any
applicable Agreements, the Committee shall have the power from time to time to: 



        (a)   select
those Eligible Individuals to whom Options shall be granted under the Plan and the number of such Options to be granted and prescribe the terms and conditions
(which need not be identical) of each such Option, including the exercise price per Share, the vesting schedule and the duration of each Option, and make any amendment or modification to any Option
Agreement consistent with the terms of the Plan; 


        (b)   select
those Eligible Individuals to whom Awards shall be granted under the Plan and determine the number of Shares or amount of cash in respect of which each Award is
granted, the terms and conditions (which need not be identical) of each such Award, and make any amendment or modification to any Agreement consistent with the terms of the Plan; 


        (c)   construe
and interpret the Plan and the Options and Awards granted hereunder and establish, amend and revoke rules and regulations for the administration of the Plan,
including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Agreement, in the manner and to the extent it shall deem
necessary or advisable, including so that the Plan and the operation of the Plan comply with Rule 16b-3 under the Exchange Act, the Code to the extent applicable and other
applicable law, and otherwise to make the Plan fully effective; 


        (d)   determine
the duration and purposes for leaves of absence which may be granted to a Grantee on an individual basis without constituting a termination of employment or
service for purposes of the Plan; 


        (e)   accelerate
the exercisability or vesting of any Option or Award; 


        (f)    cancel,
with the consent of the Grantee, outstanding Awards and Options; 


        (g)   exercise
its discretion with respect to the powers and rights granted to it as set forth in the Plan; and 


        (h)   generally,
exercise such powers and perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan. 





        All
decisions and determinations by the Committee in the exercise of the above powers shall be final, binding and conclusive upon the Company, its Subsidiaries, the Grantees and all
other persons having any interest therein. 



        3.4   Notwithstanding
anything herein to the contrary, with respect to Grantees working outside the United States, the Committee may determine the terms and conditions of
Options and Awards and make such adjustments to the terms thereof as are necessary or advisable to fulfill the purposes of the Plan taking into account matters of local law or practice, including tax
and securities laws of jurisdictions outside the United States. 


        3.5    Indemnification.    No member of the Committee shall be liable for any action, failure to act, determination or
interpretation made in good faith with respect to the Plan or any transaction hereunder. The Company hereby agrees to indemnify each member of the Committee for all costs and expenses and, to the
extent permitted by applicable law, any liability incurred in connection with defending against, responding to, negotiating for the settlement of or otherwise dealing with any claim, cause of action
or dispute of any kind arising in connection with any actions in administering the Plan or in authorizing or denying authorization to any transaction hereunder. 


        3.6    No Repricing of Options or Stock Appreciation Rights.    The Committee shall have no authority to make any
adjustment (other than in connection with a change in capitalization or 



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other
transaction where an adjustment is permitted or required under the terms of the Plan) or amendment, and no such adjustment or amendment shall be made, that reduces or would have the effect of
reducing the exercise price of an Option or Stock Appreciation Right previously granted under the Plan, whether through amendment, cancellation or replacement grants, or other means, unless the
Company's shareholders shall have approved such adjustment or amendment. 




        4.     Stock Subject to the Plan; Grant Limitations.  



        4.1    Aggregate Number of Shares Authorized for Issuance.    Subject to any adjustment as
provided in the Plan, the Shares to be issued under the Plan may be, in whole or in part, authorized but unissued Shares or issued Shares which shall have been reacquired by the Company and held by it
as treasury shares. The aggregate number of Shares that may be made the subject of Awards or Options granted under the Plan shall not exceed            , no more
than            of which may
be granted as Incentive Stock Options. 


        4.2    Individual Limit.    Following the Transition Period, the number of Shares that may be the subject of Options
and Stock Appreciation Rights granted to an Eligible Individual in any calendar year may not exceed            . Following the Transition Period, the number of Shares that may be the subject
of
Performance Share Units or Performance-Based Restricted Stock granted to an Eligible Individual in any calendar year may not exceed            . Following the Transition Period, the dollar
amount
of cash that may be the subject of Performance Units granted to an Eligible Individual in any calendar year may not exceed $            . 


        4.3    Calculating Shares Available.    



        (a)   Upon
the granting of an Award or an Option, the number of Shares available under this Section 4 for the granting of further Awards and Options shall be reduced as
follows: 



        (i)    In
connection with the granting of an Option, Stock Appreciation Right (other than a Stock Appreciation Right Related to an Option), Restricted Stock Unit, Share Award
or Award of Restricted Stock, Performance-Based Restricted Stock or Performance Share Units, the number of Shares available under this Section 4 for the granting of further Options and Awards
shall be reduced by the number of Shares in respect of which the Option or Award is granted or denominated. 



        (ii)   In
connection with the granting of a Performance Unit, the number of Shares available under this Section 4 for the granting of further Options and Awards
initially shall be reduced by the Share Equivalent number of Performance Units granted, with a corresponding adjustment if the Performance Unit is ultimately settled in whole or in part with a
different number of Shares. For purposes of this Section 4, the "Share Equivalent" number of Performance Units shall be equal to the quotient of
(i) the aggregate dollar amount in which the Performance Units are denominated, divided by (ii) the Fair Market Value of a Share on the date of grant. 



        (iii)  In
connection with the granting of a Dividend Equivalent Right, the number of Shares available under this Section 4 shall not be reduced;  provided, however, that if Shares are issued in settlement of
a Dividend Equivalent Right, the number of Shares available for the granting of further
Options and Awards under this Section 4 shall be reduced by the number of Shares so issued. 




        (b)   Notwithstanding
Section 4.3(a), in the event that an Award is granted that, pursuant to the terms of the Agreement, cannot be settled in Shares, the aggregate
number of Shares that may be made the subject of Awards or Options granted under the Plan shall not be reduced. Whenever any outstanding Option or Award or portion thereof expires, is canceled, is
settled in cash or is otherwise terminated for any reason without having been exercised or 




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payment
having been made in respect of the entire Option or Award, the number of Shares available under this Section 4 shall be increased by the number of Shares previously allocable under
Section 4.3(a) to the expired, canceled, settled or otherwise terminated portion of the Option or Award. 



        (c)   Notwithstanding
anything in this Section 4.3 to the contrary, (i) Shares withheld or tendered as full or partial payment of the Option Price shall not
increase the number of Shares available under this Section 4 and, (ii) Shares withheld or tendered as settlement of tax withholding obligations shall not increase the number of Shares
available under this Section 4. 


        (d)   Where
two or more Awards are granted with respect to the same Shares, such Shares shall be taken into account only once for purposes of this Section 4.3. 





        5.     Stock Options.  



        5.1    Authority of Committee.    Subject to the provisions of the Plan, the Committee shall
have full and final authority to select those Eligible Individuals who will receive Options, and the terms and conditions of the grant to any such Eligible Individual shall be set forth in an
Agreement. Incentive Stock Options may be granted only to Eligible Individuals who are employees of the Company or any Subsidiary on the date the Incentive Stock Option is granted. 



        5.2    Exercise Price.    The purchase price or the manner in which the exercise price is to be determined for Shares
under each Option shall be determined by the Committee and set forth in the Agreement; provided, however, that the exercise price per Share under each
Option shall not be less than the greater of (i) the par value of a Share and (ii) 100% of the Fair Market Value of a Share on the date the Option is granted (110% in the case of an
Incentive Stock Option granted to a Ten-Percent Shareholder). 


        5.3    Maximum Duration.    Options granted hereunder shall be for such term as the Committee shall determine;  provided that an
Incentive Stock Option shall not be exercisable after the expiration of ten (10) years from the date it is granted (five
(5) years in the case of an Incentive Stock Option granted to a Ten-Percent Shareholder) and a Nonqualified Stock Option shall not be exercisable after the expiration of ten
(10) years from the date it is granted; provided, further, however, that unless the Committee provides otherwise, an Option (other than an
Incentive Stock Option) may, upon the death of the Grantee prior to the expiration of the Option, be exercised for up to one (1) year following the date of the Grantee's death, even if such
period extends beyond ten (10) years from the date the Option is granted. The Committee may, subsequent to the granting of any Option, extend the term thereof, but in no event shall the term as
so extended exceed the maximum term provided for in the preceding sentence. 



        5.4    Vesting.    The Committee shall determine the time or times at which an Option shall become vested and
exercisable. Unless otherwise determined by the Committee and set forth in an Agreement, to the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time
after becoming exercisable, but not later than the date the Option expires. The Committee may accelerate the exercisability of any Option or portion thereof at any time. 


        5.5    Limitations on Incentive Stock Options.    To the extent that the aggregate Fair Market Value (determined as of
the date of the grant) of Shares with respect to which Incentive Stock Options granted under the Plan and "incentive stock options" (within the meaning
of Section 422 of the Code) granted under all other plans of the Company or its Subsidiaries (in either case determined without regard to this Section 5.5) are exercisable by a Grantee
for the first time during any calendar year exceeds $100,000, such Incentive Stock Options shall be treated as Nonqualified Stock Options. In applying the limitation in the preceding sentence in the
case of multiple Option grants, unless otherwise required by applicable law, Options which were intended to be Incentive Stock Options shall be treated as Nonqualified Stock Options according to the 



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order
in which they were granted such that the most recently granted Options are first treated as Nonqualified Stock Options. 


        5.6    Transferability.    Except to the extent permitted by the Committee with respect to a Nonqualified Stock
Options, no Option shall be transferrable by the Grantee other than by will or by the laws of descent and distribution or, in the case of an Option other than an Incentive Stock Option, pursuant to a
domestic relations order (within the meaning of Rule 16a-12 promulgated under the Exchange Act), and an Option shall be exercisable during the lifetime of the Grantee or his or her
guardian or legal representative. 


        5.7    Method of Exercise.    The exercise of an Option shall be made only by giving written notice delivered in
person or by mail to the person designated by the Company, specifying the number of Shares to be exercised and, to the extent applicable, accompanied by payment therefor and otherwise in accordance
with the Agreement pursuant to which the Option was granted. The exercise price for any Shares purchased pursuant to the exercise of an Option shall be paid in any or any combination of the following
forms: (a) cash or its equivalent (e.g., a check) or (b) if permitted by the Committee, the transfer, either actually or by attestation, to the Company of Shares that have been
held by the Grantee for at least six (6) months (or such lesser period as may be permitted by the Committee) prior to the exercise of the Option, such transfer to be upon such terms and
conditions as determined by the Committee or (c) in the form of other property as determined by the Committee and in accordance with applicable law. In addition, Options may be exercised
through a registered broker-dealer pursuant to such cashless exercise procedures that are, from time to time, deemed acceptable by the Committee. Any Shares withheld or transferred to the Company as
payment of the exercise price under an Option shall be valued at their Fair Market Value on the last business day preceding the date of exercise of such Option. If requested by the Committee, the
Grantee shall deliver the Agreement evidencing the Option to the Company, which shall endorse thereon a notation of such exercise and return such Agreement to the Grantee. No fractional Shares (or
cash in lieu thereof) shall be issued upon exercise of an Option and the number of Shares that may be purchased upon exercise shall be rounded to the nearest number of whole Shares. 


        5.8    Rights of Grantees.    No Grantee shall be deemed for any purpose to be the owner of any Shares subject to any
Option unless and until (a) the Option shall have been exercised pursuant to the terms thereof, (b) the Company shall have issued and delivered Shares (whether or not certificated) to
the Grantee, a securities broker acting on behalf of the Grantee or such other nominee of the Grantee,
and (c) the Grantee's name, or the name of his or her broker or other nominee, shall have been entered as a shareholder of record on the books of the Company. Thereupon, the Grantee shall have
full voting, dividend and other ownership rights with respect to such Shares, subject to such terms and conditions as may be set forth in the applicable Agreement. 


        5.9    Effect of Change in Control.    The effect of a Change in Control on an Option, if any, may be set forth in the
applicable Agreement. 




        6.     Stock Appreciation Rights.  



        6.1    Grant.    The Committee may in its discretion, either alone or in connection with the
grant of an Option, grant Stock Appreciation Rights to Eligible Individuals in accordance with the Plan, the terms and conditions of which shall be set forth in an Agreement. A Stock Appreciation
Right may be granted (a) at any time if unrelated to an Option or (b) if related to an Option, either at the time of grant or at any time thereafter during the term of the Option. 



        6.2    Stock Appreciation Right Related to an Option.    If granted in connection with an Option, a Stock Appreciation
Right shall cover the same Shares covered by the Option (or such lesser 



10







 




number
of Shares as the Committee may determine) and shall, except as provided in this Section 6, be subject to the same terms and conditions as the related Option. 



        (a)    Exercise; Transferability.    A Stock Appreciation Right granted in connection with an Option (i) shall
be exercisable at such time or times and only to the extent that the related Option is exercisable, (ii) shall be exercisable only if the Fair Market Value of a Share on the date of exercise
exceeds the exercise price specified in the Agreement evidencing the related Option and (iii) shall not be transferable except to the extent the related Option is transferable. 


        (b)    Amount Payable.    Upon the exercise of a Stock Appreciation Right related to an Option, the Grantee shall be
entitled to receive an amount determined by multiplying (i) the excess of the Fair Market Value of a Share on the last business day preceding the date of exercise of such Stock Appreciation
Right over the per Share exercise price under the related Option, by (ii) the number of Shares as to which such Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the
Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in the Agreement evidencing the Stock Appreciation Right at the time it is
granted. 


        (c)    Treatment of Related Options and Stock Appreciation Rights Upon Exercise.    Upon the exercise of a Stock
Appreciation Right granted in connection with an Option, the Option shall be canceled to the extent of the number of Shares as to which the Stock Appreciation Right is exercised, and upon the exercise
of an Option granted in connection with a Stock Appreciation Right, the Stock Appreciation Right shall be canceled to the extent of the number of Shares as to which the Option is exercised or
surrendered. 




        6.3    Stock Appreciation Right Unrelated to an Option.    A Stock Appreciation Right unrelated to an Option shall
cover such number of Shares as the Committee shall determine. 



        (a)    Terms; Duration.    Stock Appreciation Rights unrelated to Options shall contain such terms and conditions as
to exercisability, vesting and duration as the Committee shall determine, but in no event shall they have a term of greater than ten (10) years; provided  that unless the Committee provides
otherwise a Stock Appreciation Right may, upon the death of the Grantee prior to the expiration of the Award, be exercised for up to one
(1) year following the date of the Grantee's death even if such period extends beyond ten (10) years from the date the Stock Appreciation Right is granted. 



        (b)    Amount Payable.    Upon exercise of a Stock Appreciation Right unrelated to an Option, the Grantee shall be
entitled to receive an amount determined by multiplying (i) the excess of the Fair Market Value of a Share on the last business day preceding the date of exercise of such Stock Appreciation
Right over the Fair Market Value of a Share on the date the Stock Appreciation Right was granted, by (ii) the number of Shares as to which the Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in the Agreement evidencing the Stock
Appreciation Right at the time it is granted. 


        (c)    Transferability.    Except to the extent permitted by the Committee, no Stock Appreciation Right shall be
transferrable by the Grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order (within the meaning of Rule 16a-12 promulgated
under the Exchange Act), and a Stock Appreciation Right shall be exercisable during the lifetime of the Grantee or his or her guardian or legal representative. 




        6.4    Method of Exercise.    Stock Appreciation Rights shall be exercised by a Grantee only by giving written notice
delivered in person or by mail to the person designated by the Company, 



11







 

specifying
the number of Shares with respect to which the Stock Appreciation Right is being exercised. If requested by the Committee, the Grantee shall deliver the Agreement evidencing the Stock
Appreciation Right being exercised and the Agreement evidencing any related Option to the Company, which shall endorse thereon a notation of such exercise and return such Agreement to the Grantee. 



        6.5    Form of Payment.    Payment of the amount determined under Section 6.2(b) or 6.3(b) may be made in the
discretion of the Committee solely in whole Shares in a number determined at their Fair Market Value on the last business day preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Shares. If the Committee decides to make full payment in Shares and the amount payable results in a fractional Share, payment for the fractional Share will be
made in cash. 



        6.6    Effect of Change in Control.    The effect of a Change in Control on a Stock Appreciation Right may be set
forth in the applicable Agreement. 




        7.     Dividend Equivalent Rights.  


        The Committee may in its discretion, grant Dividend Equivalent Rights either in tandem with an Option or Award or as a separate Award, to Eligible Individuals in
accordance with the Plan. The terms and conditions applicable to each Dividend Equivalent Right shall be specified in the Agreement under which the Dividend Equivalent Right is granted. Amounts
payable in respect of Dividend Equivalent Rights may be payable currently or, if applicable, deferred until the lapsing of restrictions on such Dividend Equivalent Rights or until the vesting,
exercise, payment, settlement or other lapse of restrictions on the Option or Award to which the Dividend Equivalent Rights relate. In the event that the amount payable in respect of Dividend
Equivalent Rights are to be deferred, the Committee shall determine whether such amounts are to be held in cash or reinvested in Shares or deemed (notionally) to be reinvested in Shares. If amounts
payable in respect of Dividend Equivalent Rights are to be held in cash, there may be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of
the year at a rate per annum as the Committee, in its discretion, may determine. Dividend Equivalent Rights may be settled in cash or Shares or a combination thereof, in a single installment or
multiple installments, as determined by the Committee. 


        8.     Restricted Stock; Restricted Stock Units.  



        8.1    Restricted Stock.    The Committee may grant to Eligible Individuals Awards of
Restricted Stock, which shall be evidenced by an Agreement. Each Agreement shall contain such restrictions, terms and conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an appropriate legend be placed on Share certificates. Awards of Restricted Stock shall be subject to the terms and
provisions set forth below in this Section 8.1. 



        (a)    Rights of Grantee.    Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the
name of the Grantee as soon as reasonably practicable after the Award is granted provided that the Grantee has executed an Agreement evidencing the Award, the appropriate blank stock powers and, in
the discretion of the Committee, an escrow agreement and any other documents which the
Committee may require as a condition to the issuance of such Shares. At the discretion of the Committee, Shares issued in connection with an Award of Restricted Stock shall be deposited together with
the stock powers with an escrow agent (which may be the Company) designated by the Committee. Unless the Committee determines otherwise and as set forth in the Agreement, upon delivery of the Shares
to the escrow agent, the Grantee shall have all of the rights of a shareholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares. 




12







 


        (b)    Non-transferability.    Until all restrictions upon the Shares of Restricted Stock awarded to a
Grantee shall have lapsed in the manner set forth in Section 8.1(c), such Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated. 



        (c)    Lapse of Restrictions.    



        (i)    Generally.    Restrictions upon Shares of Restricted Stock awarded hereunder shall lapse at such time or times
and on such terms and conditions as the Committee may determine. The Agreement evidencing the Award shall set forth any such restrictions. 


        (ii)    Effect of Change in Control.    The effect of a Change in Control on an Awards of Shares of Restricted Stock,
if any, shall be set forth in the applicable Agreement. 




        (d)    Treatment of Dividends.    At the time an Award of Restricted Stock is granted, the Committee may, in its
discretion, determine that the payment to the Grantee of dividends, or a specified portion thereof, declared or paid on such Shares by the Company shall be (i) deferred until the lapsing of the
restrictions imposed upon such Shares and (ii) held by the Company for the account of the Grantee until such time. In the event that dividends are to be deferred, the Committee shall determine
whether such dividends are to be reinvested in Shares (which shall be held as additional Shares of Restricted Stock) or held in cash. If deferred dividends are to be held in cash, there may be
credited interest on the amount of the account at such times and at a rate per annum as the Committee, in its discretion, may determine. Payment of deferred dividends in respect of Shares of
Restricted Stock (whether held in cash or as additional Shares of Restricted Stock), together with interest accrued thereon, if any, shall be made upon the lapsing of restrictions imposed on the
Shares in respect of which the deferred dividends were paid, and any dividends deferred (together with any interest accrued thereon) in respect of any Shares of Restricted Stock shall be forfeited
upon the forfeiture of such Shares. 


        (e)    Delivery of Shares.    Upon the lapse of the restrictions on Shares of Restricted Stock, the Committee shall
cause a stock certificate or evidence of book entry Shares to be delivered to the Grantee with respect to such Shares of Restricted Stock, free of all restrictions hereunder. 




        8.2    Restricted Stock Unit Awards.    The Committee may grant to Eligible Individuals Awards of Restricted Stock
Units, which shall be evidenced by an Agreement. Each such Agreement shall contain such restrictions, terms and conditions as the Committee may, in its discretion, determine. Awards of Restricted
Stock Units shall be subject to the terms and provisions set forth below in this Section 8.2. 



        (a)    Payment of Awards.    Each Restricted Stock Unit shall represent the right of the Grantee to receive a payment
upon vesting of the Restricted Stock Unit or on any later date specified by the Committee equal to the Fair Market Value of a Share as of the date the Restricted Stock Unit was granted, the vesting
date or such other date as determined by the Committee at the time the Restricted Stock Unit was granted. The Committee may, at the time a Restricted Stock Unit is granted, provide a limitation on the
amount payable in respect of each Restricted Stock Unit. The Committee may provide for the settlement of Restricted Stock Units in cash or with Shares having a Fair Market Value equal to the payment
to which the Grantee has become entitled. 


        (b)    Transferability.    The Grantee shall not sell, transfer, assign exchange, pledge, encumber or otherwise
dispose of an Award of Restricted Stock Units or any portion thereof. 




13







 


        (c)    Effect of Change in Control.    The effect of a Change in Control on an Award of Restricted Stock Units, if
any, shall be set forth in the applicable Agreement. 





        9.     Performance Awards.  



        9.1    Performance Units and Performance Share Units.    The Committee, in its discretion, may
grant Awards of Performance Units and/or Performance Share Units to Eligible Individuals, the terms and conditions of which shall be set forth in an Agreement. 



        (a)    Performance Units.    Performance Units shall be denominated in a specified dollar amount and, contingent upon
the attainment of specified Performance Objectives within the Performance Cycle, represent the right to receive payment as provided in Sections 10.1(c) and (d) of the specified dollar
amount or a percentage of the specified dollar amount depending on the level of Performance Objective attained; provided, however, that the Committee
may at the time a Performance Unit is granted specify a maximum amount payable in respect of a vested Performance Unit. Each Agreement shall specify the number of Performance Units to which it
relates, the Performance Objectives which must be satisfied in order for the Performance Units to vest and the Performance Cycle within which such Performance Objectives must be satisfied. 


        (b)    Performance Share Units.    Performance Share Units shall be denominated in Shares and, contingent upon the
attainment of specified Performance Objectives within the Performance Cycle, each Performance Share Unit represents the right to receive payment as provided in Sections 9.1(c) and (d) of
the Fair Market Value of a Share on the date the Performance Share Unit was granted, the date the Performance Share Unit became vested or any other date specified by the Committee or a percentage of
such amount depending on the level of Performance Objective attained; provided, however, that the Committee may at the time a Performance Share Unit is
granted specify a maximum amount payable in respect of a vested Performance Share Unit. Each Agreement shall specify the number of Performance Share Units to which it relates, the Performance
Objectives which must be satisfied in order for the Performance Share Units to vest and the Performance Cycle within which such Performance Objectives must be satisfied. 



        (c)    Vesting and Forfeiture.    Subject to Sections 9.3(c) and 9.4, a Grantee shall become vested with
respect to the Performance Share Units and Performance Units to the extent that the Performance Objectives for the Performance Cycle and other terms and conditions set forth in the Agreement are
satisfied; provided, however, that, except as may be provided pursuant to Section 9.4 or otherwise specified in an Agreement, no Performance
Cycle for Performance Share Units and Performance Units shall be less than one (1) year. 



        (d)    Payment of Awards.    Subject to Sections 9.3(c) and 9.4, payment to Grantees in respect of vested
Performance Share Units and Performance Units shall be made as soon as practicable after the last day of the Performance Cycle to which such Award relates or at such other time or times as the
Committee may determine, but in no event later than 21/2 months after the end of the calendar year in which the Performance Cycle is completed. Subject to Section 10.4, such
payments may be made entirely in Shares valued at their Fair Market Value, entirely in cash, or in such combination of Shares and cash as the Committee in its discretion shall determine at any time
prior to such payment; provided, however, that if the Committee in its discretion determines to make such payment entirely or partially in Shares of
Restricted Stock, the Committee must determine the extent to which such payment will be in Shares of Restricted Stock and the terms of such Restricted Stock at the time the Award is granted. 




14







 




        9.2    Performance-Based Restricted Stock.    The Committee, in its discretion, may grant Awards of Performance-Based
Restricted Stock to Eligible Individuals, the terms and conditions of which shall be
set forth in an Agreement. Each Agreement may require that an appropriate legend be placed on Share certificates. Awards of Performance-Based Restricted Stock shall be subject to the following terms
and provisions: 



        (a)    Rights of Grantee.    Performance-Based Restricted Stock shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted or at such other time or times as the Committee may determine; provided, however, that no
Performance-Based Restricted Stock shall be issued until the Grantee has executed an Agreement evidencing the Award, the appropriate blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Performance-Based Restricted Stock. At the discretion of the Committee, Shares issued in
connection with an Award of Performance-Based Restricted Stock shall be deposited together with the stock powers with an escrow agent (which may be the Company) designated by the Committee. Except as
restricted by the terms of the Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall have, in the discretion of the Committee, all of the rights of a shareholder with respect
to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares. Each Agreement shall specify the number of Shares of
Performance-Based Restricted Stock to which it relates, the Performance Objectives which must be satisfied in order for the Performance-Based Restricted Stock to vest and the Performance Cycle within
which such Performance Objectives must be satisfied. 


        (b)    Lapse of Restrictions.    Subject to Sections 9.3(c) and 9.4, restrictions upon Performance-Based
Restricted Stock awarded hereunder shall lapse and such Performance-Based Restricted Stock shall become vested at such time or times and on such terms, conditions and satisfaction of Performance
Objectives as the Committee may, in its discretion, determine at the time an Award is granted; provided, however, that, except as may be provided
pursuant to Section 9.4, no Performance Cycle for Performance-Based Restricted Stock shall be less than one (1) year. 


        (c)    Treatment of Dividends.    At the time the Award of Performance-Based Restricted Stock is granted, the
Committee may, in its discretion, determine that the payment to the Grantee of dividends, or a specified portion thereof, declared or paid on Shares represented by such Award which have been issued by
the Company to the Grantee shall be (i) deferred until the lapsing of the restrictions imposed upon such Performance-Based Restricted Stock and (ii) held by the Company for the account
of the Grantee until such time. In the event that dividends are to be deferred, the Committee shall determine whether such dividends are to be reinvested in Shares (which shall be held as additional
Shares of Performance-Based Restricted Stock) or held in cash. If deferred dividends are to be held in cash, there may be credited interest on the amount of the account at such times and at a rate per
annum as the Committee, in its discretion, may determine. Payment of deferred dividends in respect of Shares of Performance-Based Restricted Stock (whether held in cash or in additional Shares of
Performance-Based Restricted Stock), together with interest accrued thereon, if any, shall be made upon the lapsing of restrictions imposed on the Performance-Based Restricted Stock in respect of
which the deferred dividends were paid, and any dividends deferred (together with any interest accrued thereon) in respect of any Performance-Based Restricted Stock shall be forfeited upon the
forfeiture of such Performance-Based Restricted Stock. 


        (d)    Delivery of Shares.    Upon the lapse of the restrictions on Shares of Performance-Based Restricted Stock
awarded hereunder, the Committee shall cause a stock certificate or 




15







 





evidence
of book entry Shares to be delivered to the Grantee with respect to such Shares, free of all restrictions hereunder. 




        9.3    Performance Objectives    



        (a)    Establishment.    Performance Objectives for Performance Awards may be expressed in terms of (i) stock
price, (ii) earnings per share, (iii) operating income, (iv) return on equity or assets, (v) cash flow, (vi) earnings before interest, taxes, depreciation and
amortization (EBITDA), (vii) revenues, (viii) overall revenue or sales growth, (ix) expense reduction or management, (x) market share, (xi) total shareholder return,
(xii) return on investment, (xiii) earnings before interest and taxes (EBIT), (xiv) net income, (xv) return on net assets, (xvi) economic value added,
(xvii) shareholder value added, (xviii) cash flow return on investment, (xix) net operating profit, (xx) net operating profit after tax, (xxi) return on capital,
(xxii) return on invested capital, (xxiii) cost per ton or cost per unit, (xxiv) total material moved, (xv) tons shipped, (xvi) tire life improvement,
(xvii) increased truck, dragline or shovel OEE, (xviii) effective equipment utilization, (xix) achievement of savings from business improvement projects, (xx) capital
project deliverables, (xxi) performance against environmental targets, (xxii) safety performance and/or incident rate, (xxiii) coal pricing targets, (xxiv) coal sales
targets, (xxv) human resources management targets, including medical cost reductions and time to hire, (xxvi) achievement of warehouse and purchasing performance measurements,
(xxvii) leverage ratios, including debt to equity and debt to total capital, (xxviii) individual performance criteria (other than for covered employees as defined in
Section 162(m) of the Code) or (xxix) any combination of the foregoing. Performance Objectives may be in respect of the performance of the Company, any of its Subsidiaries, any of its
Divisions or any combination thereof. Performance Objectives may be absolute or relative (to prior performance of the Company or to the performance of one or more other entities or external indices)
and may be expressed in terms of a progression within a specified range. In the case of a Performance Award which is intended to constitute Performance-Based Compensation, the Performance Objectives
with respect to a Performance Cycle shall be established in writing by the Committee by the earlier of (i) the date on which a quarter of the Performance Cycle has elapsed and (ii) the
date which is ninety (90) days after the commencement of the Performance Cycle, and in any event while the performance relating to the Performance Objectives remain substantially uncertain. 



        (b)    Effect of Certain Events.    The Committee may, at the time the Performance Objectives in respect of a
Performance Award are established, provide for the manner in which performance will be measured against the Performance Objectives to reflect the effects of extraordinary items, gain or loss on the
disposal of a business segment, unusual or infrequently occurring events and transactions that have been publicly disclosed, changes in accounting principles, the impact of specified corporate
transactions (such as a stock split or stock dividend), special charges and tax law changes, all as determined in accordance with generally accepted accounting principles (to the extent applicable);  provided, that in respect of Performance Awards intended to constitute Performance-Based Compensation, such provisions shall be permitted only to the
extent permitted under Section 162(m) of the Code and the
regulations promulgated thereunder without adversely affecting the treatment of any Performance Award as Performance-Based Compensation. 


        (c)    Determination of Performance.    Prior to the vesting, payment, settlement or lapsing of any restrictions with
respect to any Performance Award, the Committee shall certify in writing that the applicable Performance Objectives have been satisfied to the extent necessary for such Award to qualify as
Performance-Based Compensation. In respect of a Performance Award, the Committee may, in its sole discretion, reduce the amount of cash paid or number of Shares issued that become vested or on which
restrictions lapse. The Committee shall not 




16







 





be
entitled to exercise any discretion otherwise authorized hereunder with respect to any Performance Award intended to constitute Performance Based Compensation if the ability to exercise such
discretion or the exercise of such discretion itself would cause the compensation attributable to such Awards to fail to qualify as Performance-Based Compensation. 




        9.4    Effect of Change in Control.    The effect of a Change in Control on a Performance Award, if any, shall be set
forth in the applicable Agreement. 


        9.5    Non-transferability.    Until the vesting of Performance Units and Performance Share Units or the
lapsing of any restrictions on Performance-Based Restricted Stock, as the case may be, such Performance Units, Performance Share Units or Performance-Based Restricted Stock shall not be sold,
assigned, exchanged, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated. 




        10.   Share Awards.  


        The Committee may grant a Share Award to any Eligible Individual on such terms and conditions as the Committee may determine in its sole discretion. Share Awards
may be made as additional compensation for services rendered by the Eligible Individual or may be in lieu of cash or other compensation to which the Eligible Individual is entitled from the Company.
The Grantee shall not sell, transfer, assign exchange, pledge, encumber or otherwise dispose of a Share Award or any portion thereof. 


        11.   Effect of a Termination of Employment.  


        The Agreement evidencing the grant of each Option and each Award shall set forth the terms and conditions applicable to such Option or Award upon (a) a
termination or change in the status of the employment of the Grantee by the Company, a Subsidiary or a Division (including a termination or change by reason of the sale of a Subsidiary or a Division),
or (b) in the case of a Director, the cessation of the Director's service on the Board, which shall be as the Committee may, in its discretion, determine at the time the Option or Award is
granted or thereafter. 


        12.   Adjustment Upon Changes in Capitalization.



        12.1 In
the event of a Change in Capitalization, the Committee shall conclusively determine the appropriate adjustments, if any, to (a) the maximum number and class
of Shares or other stock or securities with respect to which Options or Awards may be granted under the Plan, (b) the maximum number and class of Shares or other stock or securities that may be
issued upon exercise of Incentive Stock Options, (c) the maximum number and class of Shares or other stock or securities with respect to which Options or Awards may be granted to any Eligible
Individual in any calendar year, (d) the number and class of Shares or other stock or securities, cash or other property which are subject to outstanding Options or Awards granted under the
Plan and the exercise price therefore, if applicable and (e) the Performance Objectives. 


        12.2 Any
such adjustment in the Shares or other stock or securities (a) subject to outstanding Incentive Stock Options (including any adjustments in the exercise
price) shall be made in such manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of
the Code, (b) subject to outstanding Awards that are subject to Section 409A of the Code shall be made only to the extent permitted by Section 409A of the Code or
(c) subject to outstanding Options or Awards that are intended to qualify as Performance-Based Compensation shall be made in such a manner as not to adversely affect the treatment of the
Options or Awards as Performance-Based Compensation. 


        12.3 If,
by reason of a Change in Capitalization, a Grantee shall be entitled to, or shall be entitled to exercise an Option with respect to, new, additional or different
shares of stock or securities of the Company or any other corporation, such new, additional or different shares shall 



17







 




thereupon
be subject to all of the conditions, restrictions and performance criteria which were applicable to the Shares subject to the Award or Option, as the case may be, prior to such Change in
Capitalization. 




        13.   Effect of Certain Transactions.  


        Subject to the terms of an Agreement, following (a) the liquidation or dissolution of the Company or (b) a merger or consolidation of the Company (a
"Transaction"), either (i) each outstanding Option or Award shall be treated as provided for in the agreement entered into in connection with the
Transaction or (ii) if not so provided in such agreement, each Optionee and Grantee shall be entitled to receive in respect of each Share subject to any outstanding Options or Awards, as the
case may be, upon exercise of any Option or payment or transfer in respect of any Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a
Share was entitled to receive in the Transaction in respect of a Share; provided, however, that, unless otherwise determined by the Committee, such
stock, securities, cash, property, or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to the Options and Awards prior to
such Transaction. Without limiting the generality of the foregoing, the treatment of outstanding Options and Stock Appreciation Rights pursuant to this Section 13 in connection with a
Transaction may include the cancellation of outstanding Options and Stock Appreciation Rights upon consummation of the Transaction provided either (x) the holders of affected Options and Stock
Appreciation Rights have been given a period of at least fifteen (15) days prior to the date of the consummation of the Transaction to exercise the Options or Stock Appreciation Rights (whether
or not they were otherwise exercisable) or (y) the holders of the affected Options and Stock Appreciation Rights are paid (in cash or cash equivalents) in respect of each Share covered by the
Option or Stock Appreciation Right being cancelled an amount equal to the excess, if any, of the per share price paid or distributed to stockholders in the transaction (the value of any
non-cash consideration to be determined by the Committee in its sole discretion) over the exercise price of the Option or Stock Appreciation Right. For avoidance of doubt, (1) the
cancellation of Options and Stock Appreciation Rights pursuant to clause (y) of the preceding sentence may be effected notwithstanding anything to the contrary contained in this Plan or any
Agreement and (2) if the amount determined pursuant to clause (y) of the preceding sentence is zero or less, the affected Option or Stock Appreciation Right may be cancelled without any
payment therefor. The treatment of any Option or Award as provided in this Section 13 shall be conclusively presumed to be appropriate for purposes of Section 12. 


        14.   Interpretation.  



        14.1    Section 16 Compliance.    The Plan is intended to comply with
Rule 16b-3 promulgated under the Exchange Act and the Committee shall interpret and administer the provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect the validity of the Plan. 



        14.2    Section 162(m).    Unless otherwise determined by the Committee at the time of grant, each Option,
Stock Appreciation Right and Performance Award is intended to be Performance Based Compensation. Unless otherwise determined by the Committee, if any provision of the Plan or any Agreement relating to
an Option or Award that is intended to be Performance-Based Compensation does not comply or is inconsistent with Section 162(m) of the Code or the regulations promulgated thereunder (including
IRS Regulation § 1.162-27), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed
to confer upon the Committee discretion to increase the amount of compensation otherwise payable in connection with any such Option or Award upon the attainment of the Performance Objectives. 


        14.3    Compliance With Section 409A.    All Options and Awards granted under the Plan are intended either not
to be subject to Section 409A of the Code or, if subject to Section 409A of the 



18







 




Code,
to be administered, operated and construed in compliance with Section 409A of the Code and any guidance issued thereunder. Notwithstanding this or any other provision of the Plan to the
contrary, the Committee may amend the Plan or any Option or Award granted hereunder in any manner, or take any other action that it determines, in its sole discretion, is necessary, appropriate or
advisable (including replacing any Option or Award) to cause the Plan or any Option or Award granted hereunder to comply with Section 409A and any guidance issued thereunder or to not be
subject to Section 409A. Any such action, once taken, shall be deemed to be effective from the earliest date necessary to avoid a violation of Section 409A and shall be final, binding
and conclusive on all Eligible Individuals and other individuals having or claiming any right or interest under the Plan. 




        15.   Termination and Amendment of the Plan or Modification of Options and Awards.



        15.1    Plan Amendment or Termination.    The Board may at any time terminate the Plan and the Board may at any time
and from time to time amend, modify or suspend the Plan; provided, however, that: 



        (a)   no
such amendment, modification, suspension or termination shall impair or adversely alter any Options or Awards theretofore granted under the Plan, except with the
consent of the Grantee, nor shall any amendment, modification, suspension or termination deprive any Grantee of any Shares which he or she may have acquired through or as a result of the Plan; and 


        (b)   to
the extent necessary under any applicable law, regulation or exchange requirement, no amendment shall be effective unless approved by the shareholders of the Company
in accordance with applicable law, regulation or exchange requirement. 




        15.2    Modification of Options and Awards.    No modification of an Option or Award shall adversely alter or impair
any rights or obligations under the Option or Award without the consent of the Grantee. 




        16.   Non-Exclusivity of the Plan.  


        The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any
limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. 


        17.   Limitation of Liability.  


        As illustrative of the limitations of liability of the Company, but not intended to be exhaustive thereof, nothing in the Plan shall be construed to: 



        (a)   give
any person any right to be granted an Option or Award other than at the sole discretion of the Committee; 


        (b)   give
any person any rights whatsoever with respect to Shares except as specifically provided in the Plan; 


        (c)   limit
in any way the right of the Company or any Subsidiary to terminate the employment of any person at any time; or 


        (d)   be
evidence of any agreement or understanding, express or implied, that the Company will employ any person at any particular rate of compensation or for any particular
period of time. 



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        18.   Regulations and Other Approvals; Governing Law.



        18.1 Except
as to matters of federal law, the Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the
State of Delaware without giving effect to conflicts of laws principles thereof. 



        18.2 The
obligation of the Company to sell or deliver Shares with respect to Options and Awards granted under the Plan shall be subject to all applicable laws, rules and
regulations, including all
applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. 


        18.3 The
Board may make such changes as may be necessary or appropriate to comply with the rules and regulations of any government authority, or to obtain for Eligible
Individuals granted Incentive Stock Options the tax benefits under the applicable provisions of the Code and regulations promulgated thereunder. 



        18.4 Each
grant of an Option and Award and the issuance of Shares or other settlement of the Option or Award is subject to the compliance with all applicable federal, state
or foreign law. Further, if at any time the Committee determines, in its discretion, that the listing, registration or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any federal, state or foreign law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the
grant of an Option or Award or the issuance of Shares, no Options or Awards shall be or shall be deemed to be granted or payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained free of any conditions that are not acceptable to the Committee. Any person exercising an Option or receiving Shares in
connection with any other Award shall make such representations and agreements and furnish such information as the Board or Committee may request to assure compliance with the foregoing or any other
applicable legal requirements. 


        18.5 Notwithstanding
anything contained in the Plan or any Agreement to the contrary, in the event that the disposition of Shares acquired pursuant to the Plan is not
covered by a then current registration statement under the Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise exempt from
such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other regulations promulgated thereunder. The Committee may
require any individual receiving Shares pursuant to an Option or Award granted under the Plan, as a condition precedent to receipt of such Shares, to represent and warrant to the Company in writing
that the Shares acquired by such individual are acquired without a view to any distribution thereof and will not be sold or transferred other than pursuant to an effective registration thereof under
the Securities Act or pursuant to an exemption applicable under the Securities Act or the rules and regulations promulgated thereunder. The certificates evidencing any of such Shares shall be
appropriately amended or have an appropriate legend placed thereon to reflect their status as restricted securities as aforesaid. 




        19.   Miscellaneous.  



        19.1    Multiple Agreements.    The terms of each Option or Award may differ from other
Options or Awards granted under the Plan at the same time, or at some other time. The Committee may also grant more than one Option or Award to a given Eligible Individual during the term of the Plan,
either in addition to, or subject to Section 3.6, in substitution for, one or more Options or Awards previously granted to that Eligible Individual. 



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        19.2    Withholding of Taxes.    



        (a)   The
Company or any Subsidiary may withhold from any payment of cash or Shares to a Grantee or other person under the Plan an amount sufficient to cover any withholding
taxes which may become required with respect to such payment or shall take any other action as it deems necessary to satisfy any income or other tax withholding requirements as a result of the grant
or exercise of any Award under the Plan. The Company or any Subsidiary shall have the right to require the payment of any such taxes and require that any person furnish information deemed necessary by
the Company or any Subsidiary to meet any tax reporting obligation as a condition to exercise or before making any payment pursuant to an Award or Option. If specified in an Agreement at the time of
grant or otherwise approved by the Committee, a Grantee may, in satisfaction of his or her obligation to pay withholding taxes in connection with the exercise, vesting or other settlement of an Option
or Award, elect to (i) make a cash payment to the Company, (ii) have withheld a portion of the Shares then issuable to him or her, or (iii) surrender Shares owned by the Grantee
prior to the exercise, vesting or other settlement of an Option or Award, in each case having an aggregate Fair Market Value equal to the withholding taxes. 


        (b)   If
a Grantee makes a disposition, within the meaning of Section 424(c) of the Code and regulations promulgated thereunder, of any Share or Shares issued to such
Grantee pursuant to the exercise of an Incentive Stock Option within the two-year period commencing on the day after the date of the grant or within the one-year period
commencing on the day after the date of transfer of such Share or Shares to the Grantee pursuant to such exercise, the Grantee shall, within ten (10) days of such disposition, notify the
Company thereof, by delivery of written notice to the Company at its principal executive office. 




        19.3    Plan Unfunded.    The Plan shall be unfunded. Except for reserving a sufficient number of authorized Shares to
the extent required by law to meet the requirements of the Plan, the Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure
payment of any Award or Option granted under the Plan. 


        19.4    Beneficiary Designation.    Each Grantee may, from time to time, name one or more individuals (each, a
"Beneficiary") to whom any benefit under the Plan is to be paid in case of the Grantee's death before he or she receives any or all of such benefit. Each such designation shall revoke all prior
designations by the same Grantee, shall be in a form prescribed by the Company, and will be effective only when filed by the Grantee in writing with the Company during the Grantee's lifetime. In the
absence of any such designation, benefits remaining unpaid at the Grantee's death shall be paid to the Grantee's estate. 


        19.5    Effective Date/Term.    The effective date of the Plan shall be as determined by the Board, subject only to
the approval by the affirmative vote of the holders of a majority of the securities of the Company present, or represented, and entitled to vote at a meeting of shareholders duly held in accordance
with the applicable laws of the State of Delaware within twelve (12) months after the adoption of the Plan by the Board (the "Effective Date"). The Plan shall terminate on the Termination Date.
No Option or Award shall be granted after the Termination Date. The applicable terms of the Plan, and any terms and conditions applicable to Options and Awards granted prior to the Termination Date
shall survive the termination of the Plan and continue to apply to such Options and Awards. 


        19.6    Post-Transition Period.    Following the end of the Transition Period, any Option or Award granted
under the Plan which is intended to be Performance-Based Compensation, shall be subject to the approval of the material terms of the Plan by the stockholders of the Company in accordance with
Section 162(m) of the Code and the regulations promulgated thereunder. 



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CLOUD PEAK ENERGY INC. 2009 LONG TERM INCENTIVE PLAN (Effective , 2009)