Document:

BTU_EX_2014.04.25.10.5

Exhibit 10.5
Greg Boyce Cash-Settled Performance Unit Agreement
2014 Award

CASH-SETTLED PERFORMANCE UNITS AGREEMENT
THIS AGREEMENT (the “Agreement”), effective April 25, 2014 (the “Grant Date”), is made by and between PEABODY ENERGY CORPORATION, a Delaware corporation (the “Company”), and the undersigned employee of the Company or a Subsidiary (as defined below) or an Affiliate (as defined below) of the Company (the “Grantee”).
WHEREAS, the Company wishes to afford the Grantee the opportunity to participate in future increases in Company value; and
WHEREAS, the Committee (as hereinafter defined) has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the Performance Units provided for herein to the Grantee as an incentive for increased efforts during his or her term of office with the Company or its Subsidiaries or Affiliates, and has advised the Company thereof and instructed the undersigned officer to issue said Performance Units;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS

Whenever the following terms are used in this Agreement, they shall have the meanings specified below.
Section 1.1 -     “Affiliate” shall mean any other Person directly or indirectly controlling, controlled by, or under common control with the Company.  For the purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

Section 1.2 -     “Board” means the Board of Directors of the Company.

Section 1.3 -     “Cause” shall mean “Cause” as defined in the Grantee’s employment agreement with the Company.

Section 1.4 -     “Change of Control” For purposes hereof, “Change of Control” shall mean:

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

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(b)during any period of twenty-four consecutive months, individuals who at the beginning of such period constitute the Board, and any new director (other than (i) a director nominated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section 1.4 or (ii) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if consummated would constitute a Change of Control) whose election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least three-fourths (3/4) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

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

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

As used in this Section 1.4, “Person” (including a “group”), has the meaning as such term is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (or any successor section thereto).

Section 1.5 -     “Committee” shall mean the Compensation Committee of the Board.

Section 1.6 -     “Common Stock” shall mean the common stock of the Company, par value $0.01.

Section 1.7 -     “Determination Date” shall mean the earliest to occur of the following events: (i) December 31, 2016; (ii) a Termination of Employment on account of death or Disability; or (iii) a Termination of Employment by the Company without Cause, or by the Grantee for Good Reason, in either case within the twelve (12) month period following a Change of Control.  Solely for purposes of this Section 1.7, (a) the term “Change of Control” shall mean a Change of Control as defined in Section 1.4, but only to the extent the events constituting such Change of Control also constitute a “change of control event” (as defined in Treasury Regulations Section 1.409A-3(i)(5)(i)) with respect to the Company, and (b) the term “Disability” shall mean Disability as defined in Section 1.8, but only to the extent such Disability also constitutes a “disability” (as determined pursuant to Treasury Regulations Section 1.409A-3(i)(4)).

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Section 1.8 -     “Disability” shall mean the Grantee’s absence from the full-time performance of the Grantee’s duties pursuant to a reasonable determination made in accordance with the Company’s disability plan that the Grantee is disabled as a result of incapacity due to physical or mental illness that lasts, or is reasonably expected to last, for at least six months.

Section 1.9 -     “FMV per Share” shall mean the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately preceding the Determination Date. Notwithstanding the foregoing, in the event of a Trade Ceasing Transaction, “FMV per Share” shall mean the per share value of equity based on amounts paid in the Trade Ceasing Transaction.

Section 1.10 -     “Good Reason” shall mean “Good Reason” as defined in the Grantee’s employment agreement with the Company.

Section 1.11 -     “Incentive Amount” shall mean the amount payable to the Grantee hereunder with respect to the Performance Units, if any, as calculated under Article IV.

Section 1.12 -     “Mining Assets” shall mean the assets of the Company related to its worldwide mining operations.

Section 1.13 -     “Performance Units” shall mean the cash-settled units granted on a performance basis under this Agreement.  

Section 1.14 -     “Person” shall mean an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

Section 1.15 -     “Retirement” shall mean “Retirement” as defined in the Grantee’s employment agreement with the Company.

Section 1.16 -     “Return on Mining Assets” shall mean the average annual adjusted operating profit on the Mining Assets between the Grant Date and the Determination Date, expressed as a percentage of the Mining Assets employed (calculated as the average of the assets employed at the beginning and the end of each year (or, if earlier, the Determination Date)) by the Company.  For purposes hereof, adjusted operating profit shall include actual operating profit before taxes, as wells as add-backs for (a) net selling, general and administrative expenses, and (b) operating losses (or profits) associated with the operation of the Company’s Middlemount facility.

Section 1.17 -     “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations, or group of commonly controlled corporations, other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations below it in such chain.

Section 1.18 -     “Termination of Employment” shall mean a termination of the Grantee’s employment with the Company, a Subsidiary or an Affiliate (regardless of the reason therefor) that constitutes a “separation from service” as defined in Section 409A of the Internal Revenue Code 

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of 1986, as amended, or applicable regulations or other guidance issued thereunder (“Section 409A”).

Section 1.19 -     “Trade Ceasing Transaction” means a Change of Control following which shares of Common Stock cease to be publicly traded on a securities exchange, irrespective of whether any equity of an acquiring or surviving entity is publicly traded on a securities exchange.

ARTICLE II
GRANT OF PERFORMANCE UNITS

Section 2.1 -     Grant of Performance Units.  For good and valuable consideration, the Company hereby grants to the Grantee the number of Performance Units set forth on the signature page hereof upon the terms and subject to the conditions set forth in this Agreement.

Section 2.2 -     No Obligation of Employment.  Nothing in this Agreement shall confer upon the Grantee any right to continue in the employ of the Company or any Subsidiary or Affiliate or interfere with or restrict in any way the rights of the Company and its Subsidiaries or Affiliates, which are hereby expressly reserved, to terminate the employment of the Grantee at any time for any reason whatsoever, with or without Cause.

Section 2.3 -     Adjustments in Performance Units.  In the event of any Company stock dividend, stock split, combination or exchange of shares, recapitalization or other change in the capital structure of the Company, corporate separation or division of the Company (including, but not limited to, a split-up, spin-off, split-off or distribution to Company stockholders other than a normal cash dividend), sale by the Company of all or a substantial portion of its assets (measured on either a stand-alone or consolidated basis), reorganization, rights offering, partial or complete liquidation, or any other corporate transaction, Company share offering or other event involving the Company and having an effect similar to any of the foregoing, the Committee may make such substitution or adjustments in the characteristics or terms of the Performance Units as it may determine appropriate in its sole discretion to equitably reflect such corporate transaction, share offering or other event.  Any such adjustment made by the Committee shall be final and binding upon the Grantee, the Company and all other interested persons.

Section 2.4 -     Special Treatment In the Event of a Change of Control.  In addition to any adjustment that may be made pursuant to Section 2.3 hereof, in order to maintain the Grantee’s rights upon a Change of Control with respect to the Performance Units, the Committee, as constituted before such event, may, in its sole discretion, in connection with a Change of Control, take any one of the following actions: (i) make any adjustment to the Performance Units as the Committee deems appropriate to reflect such Change of Control, (ii) cause the Performance Units to be assumed, or have new rights substituted therefore, by the acquiring or surviving entity after such Change of Control, or (iii) subject to the requirements of Section 409A, accelerate the vesting of the Performance Units and/or payment of the Incentive Amount so that the Performance Units become fully vested and non-forfeitable and the Incentive Amount is paid in connection with such Change of Control, but only if such Change of Control is also a “change of control event” (as defined in Treasury Regulations Section 1.409A-3(i)(5)(i)) with respect to the Company.

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ARTICLE III
VESTING AND FORFEITURE OF PERFORMANCE UNITS

Section 3.1 -     Performance Units.  Unless the Grantee incurs a Termination of Employment with the Company for Cause or due to his Retirement without the Grantee giving six (6) months written notice, then regardless of whether the Grantee remains employed, the Performance Units shall vest on the fifteenth (15th) day of each calendar month, in equal monthly increments, during the period beginning on January 2, 2014 and ending on December 31, 2016 (the “Performance Cycle”), such that 11.1111% of the Performance Units are vested as of the Grant Date.  For the avoidance of doubt, (a) if the Grantee incurs a Termination of Employment with the Company for Cause then all Performance Units (whether or not they are vested) shall terminate and the Grantee shall not become entitled to the Incentive Amount hereunder, and (b) if the Grantee incurs a Termination of Employment with the Company due to his Retirement without the Grantee giving six (6) months written notice, no further Performance Units shall become vested following such Termination of Employment and the Grantee shall become entitled to the Incentive Amount calculated and payable pursuant to Article IV hereof with respect to the Performance Units that are vested as of the date of his Termination of Employment.

Section 3.2 -     Effect of Certain Events.  Notwithstanding the foregoing Section 3.1, during the Performance Cycle, upon the Grantee’s Termination of Employment either (a) within twelve months following a Change of Control, provided such Termination of Employment is by the Company without Cause or by the Grantee for Good Reason; or (b) on account of the Grantee’s death or Disability, all of the Performance Units shall become immediately vested and the Grantee shall become entitled to the Incentive Amount calculated and payable pursuant to Article IV hereof with respect to the Performance Units that are or become vested as of the date of his Termination of Employment.

ARTICLE IV
CALCULATION AND PAYMENT OF INCENTIVE AMOUNT

Section 4.1 -     Calculation of Incentive Amount.  Calculation of Incentive Amount.  The Incentive Amount, if any, payable to the Grantee hereunder shall be calculated as of the Determination Date in accordance with this Section 4.1.

(a)Pre-Change of Control.  The Incentive Amount shall equal the result of the following formula: 

(0.5 x A x B x C) + (0.5 x A x B x D); 
where 
“A” = the number of Performance Units that are vested as of the Determination Date pursuant to Article III hereof;
“B” = the FMV per Share as of the Determination Date;

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“C” = the applicable composite total shareholder return payout percentage determined under Section 4.2 below (the “Composite TSR Percentage”) as of the Determination Date; and
“D” = the applicable ROMA payout percentage determined under Section 4.3 below (the “ROMA Percentage”) as of the Determination Date.  
(b)Post-Change of Control that is not a Trade Ceasing Transaction.  Notwithstanding Section 4.1(a) hereof, if a Change of Control that is NOT a Trade Ceasing Transaction occurs, then on the Determination Date, the Incentive Amount shall be equal to the sum of the amounts determined pursuant to clauses (i) and (ii) immediately below: 

(i)Pre-Transaction Amount.  The pre-transaction amount shall equal the result of the following formula:

(0.5 x A x B x C) + (0.5 x A x B x D)
Where:
“A” = the number of Performance Units that are vested as of the date of the Change of Control;
“B” = the FMV per Share as of the date of the Change of Control;
“C” = the Composite TSR Percentage as of the date of the Change of Control; and
“D” = the ROMA percentage as of the date of the Change of Control.
(ii)Post-Transaction Amount.  The post-transaction amount shall equal the result of the following formula:

(0.5 x E x F x G) + (0.5 x  E x F x H)
Where:
“E” = the number of Performance Units that became vested after the date of the Change of Control through the Determination Date;
“F” = the FMV per Share as of the date of the Determination Date;
“G” = the Composite TSR Percentage as of the Determination Date; and
“H” = 100%.
An example of how the Incentive Amount is intended to be determined if the Determination Date is after a Change of Control that is not a Trade Ceasing Transaction is attached as Exhibit A.

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(c)Post-Trade Ceasing Transaction.  Notwithstanding Section 4.1(a) hereof, if a Change of Control that is ALSO a Trade Ceasing Transaction occurs, then on the Determination Date, the Incentive Amount shall be equal to the sum of the amounts determined pursuant to clauses (i) and (ii) immediately below:

(i)Pre-Transaction Amount.  The pre-transaction amount shall equal the result of the following formula:
(0.5 x A x B x C) + (0.5 x A x B x D)
Where:
“A” = the number of Performance Units that are vested as of the date of the Trade Ceasing Transaction;
“B” = the FMV per Share as of the date of the Trade Ceasing Transaction;
“C” = the Composite TSR Percentage as of the date of the Trade Ceasing Transaction; and
“D” = the ROMA percentage as of the date of the Trade Ceasing Transaction.
(ii)Post-Transaction Amount.  The post-transaction amount shall equal the result of the following formula:
(0.5 x E x F x G) + (0.5 x  E x F x H)
Where:
“E” = the number of Performance Units that became vested after the date of the Trade Ceasing Transaction through the Determination Date;
“F” = the FMV per Share as of the date of the date of the Trade Ceasing Transaction;
“G” = 100%; and
“H” = 100%.
An example of how the Incentive Amount is intended to be determined if the Determination Date is after a Trade Ceasing Transaction is attached as Exhibit B.

(d)Multiple Transactions.  In the event that multiple Change of Control transactions occur, the Committee shall equitably determine how the Incentive Amount shall be calculated based on the principles set forth in Sections 4.1(b) and 4.1(c) hereof.

Section 4.2 -     Composite TSR Percentage.  The Composite TSR Percentage equals the sum of the weighted payout percentages derived under paragraphs (a) and (b) below as of the Determination Date.

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(a)Cumulative TSR - Peer Group Weighted Payout Percentage.  The Cumulative TSR - Peer Group measure represents the Company’s average total shareholder return (based on the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately preceding the Determination Date compared to the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately following the Grant Date), expressed as a percentile ranking in an industry peer group (which peer group shall include Alpha Natural Resources, Inc.; Arch Coal Inc.; Cloud Peak Energy, Inc.; Consol Energy, Inc.; Market Vectors Coal ETF (KOL); and Walter Energy) that corresponds with a specified payout percentage.  

The table below is used to determine the applicable payout percentage, which is then multiplied by 50% to determine the Cumulative TSR - Peer Group weighted payout percentage for purposes of the Composite TSR Percentage.

Cumulative TSR - Peer Group
	
							
	Total Shareholder Return Percentile Ranking1
	< 35th
	35th
	42.5th
	50th
	62.5th
	≥ 75th

	Payout Percentage
	0%
	40%
	70%
	100%
	150%
	200%

Notwithstanding the foregoing, if the Company’s average total shareholder return as of the Determination Date (based on the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately preceding the Determination Date compared to the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately following the Grant Date) is negative, the following shall apply:
(i)If the Company’s total shareholder return percentile ranking is at or above the 50th percentile of the peer group, then the applicable payout percentage used to determine the Cumulative TSR - Peer Group weighted payout percentage for purposes of the Composite TSR Percentage shall be 100%. 

(ii)If the Company’s total shareholder return percentile ranking is below the 50th percentile of the peer group, then the Cumulative TSR - Peer Group weighted payout percentage shall be 0%.

(b)Cumulative TSR - S&P 500 Index Weighted Payout Percentage.  The Cumulative TSR - S&P 500 Index measure represents the Company’s average total shareholder return (based on the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately preceding the Determination Date compared to the average of the closing prices of the shares of Common Stock for the four (4) weeks 

________________________
		
	1 
	To the extent the Total Shareholder Return Percentile Ranking is between the listed rankings, then the Payout Percentage shall be interpolated.  For example, if the Total Shareholder Return Percentile Ranking is at the 56.25th percentile, then the Payout Percentage shall equal 125%. 

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immediately following the Grant Date), expressed as a percentile ranking in the Standard & Poor’s 500 Index that corresponds with a specified payout percentage.

The table below is used to determine the applicable payout percentage, which is then multiplied by 50% to determine the Cumulative TSR - S&P 500 Index weighted payout percentage for purposes of the Composite TSR Percentage.

Cumulative TSR - S&P 500 Index
	
							
	Total Shareholder Return Percentile Ranking2
	< 35th
	35th
	42.5th
	50th
	62.5th
	≥ 75th

	Payout Percentage
	0%
	40%
	70%
	100%
	150%
	200%

Notwithstanding the foregoing, if the Company’s average total shareholder return as of the Determination Date (based on the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately preceding the Determination Date compared to the average of the closing prices of the shares of Common Stock for the four (4) weeks immediately following the Grant Date) is negative, the following shall apply:
(i)If the Company’s total shareholder return percentile ranking is at or above the 50th percentile of the Standard & Poor’s 500 Index, then the applicable payout percentage used to determine the Cumulative TSR - S&P 500 Index weighted payout percentage for purposes of the Composite TSR Percentage shall be 100%. 

(ii)If the Company’s total shareholder return percentile ranking is below the 50th percentile of the Standard & Poor’s 500 Index, then the Cumulative TSR - S&P 500 Index weighted payout percentage shall be 0%.

(c)For purposes of this Section 4.2, references to the S&P 500 Index shall be deemed to be references to such index, but in all cases excluding the financial services companies that would otherwise be included in such index.

Section 4.3 -     ROMA Percentage.  The ROMA Percentage equals the payout percentage derived pursuant to this Section 4.3 as of the Determination Date.  The ROMA Percentage measure represents the Company’s aggregate Return on Mining Assets, expressed as a percentage that corresponds with a specified payout percentage.  The table below is used to determine the applicable payout percentage.

_________________________
		
	2 
	To the extent the Total Shareholder Return Percentile Ranking is between the listed rankings, then the Payout Percentage shall be interpolated.  For example, if the Total Shareholder Return Percentile Ranking is at the 56.25th percentile, then the Payout Percentage shall equal 125%.

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Return on Mining Assets
	
					
	Return on Mining Assets3 
	< 5.6%
	5.6%
	7.5%
	≥ 9.4%

	Payout Percentage
	0%
	50%
	100%
	200%

Section 4.4 -     Form and Time of Payment.  

(a)General.  Subject to Section 4.4(b) hereof, the Incentive Amount shall be paid to the Grantee in cash as soon as administratively feasible, but not later than the ninetieth (90th) day following, the Determination Date.

(b)Specified Employee.  If the Determination Date is triggered by a Termination of Employment other than due to death and at the time of such Termination of Employment the Grantee is a “specified employee” (as such term is defined in Section 409A, but generally meaning one of the Company’s key employees within the meaning of Code Section 416(i)), the Incentive Amount shall be paid to the Grantee on the first day of the seventh month after the Determination Date.

ARTICLE V
MISCELLANEOUS

Section 5.1 -     Administration.  The Committee has the power to interpret this Agreement and to adopt such rules for the administration, interpretation and application of this Agreement as are consistent herewith and to interpret or revoke any such rules.  All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other interested persons.  No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Performance Units or this Agreement.  In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Agreement.

Section 5.2 -     Performance Units Not Transferable.  Neither the Performance Units nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Grantee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition is voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.

_________________________
		
	3 
	To the extent the Return on Mining Assets is between the listed percentages, then the Payout Percentage shall be interpolated.  For example, if the Return on Mining Assets is 6.55%, then the Payout Percentage shall equal 75%.

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Section 5.3 -     Withholding.  In connection with the payment of the Incentive Amount, unless the Grantee makes alternative arrangements satisfactory to the Company to personally remit required withholding amounts, then as of the date that all or a portion of the Incentive Amount is paid, the Company will withhold a portion of such Incentive Amount equal to the aggregate amount required by law to be withheld by the Company in connection with such payment for applicable federal, state, local and foreign taxes of any kind.

Section 5.4 -     Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Grantee shall be addressed to him at the address set forth in the records of the Company.  By a notice given pursuant to this Section 5.4, either party may hereafter designate a different address for notices to be given to him or it.  Any notice which is required to be given to the Grantee shall, if the Grantee is then deceased, be given to the Grantee’s personal representative if such representative has previously informed the Company of his, her or its status and address by written notice under this Section 5.4.  Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.  Notwithstanding the foregoing, any notice required or permitted hereunder from the Company to the Grantee may be made by electronic means, including by electronic mail to the Company-maintained electronic mailbox of the Grantee, and the Grantee hereby consents to receive such notice by electronic delivery.  To the extent permitted in an electronically delivered notice described in the previous sentence, the Grantee shall be permitted to respond to such notice or communication by way of a responsive electronic communication, including by electronic mail.

Section 5.5 -     Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

Section 5.6 -     Pronouns ‐ The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.

Section 5.7 -     Amendment.

(a)This Agreement may be amended only by a writing executed by the parties hereto that specifically states that it is amending this Agreement.

(b)This Agreement is intended to comply with Section 409A and shall, to the extent practicable, be construed in accordance therewith.  If either party to this Agreement reasonably determines that any amount payable pursuant to this Agreement would result in adverse tax consequences under Section 409A, then such party shall deliver written notice of such determination to the other party, and the parties hereby agree to work in good faith to amend this Agreement so it complies with the requirements of Section 409A and preserves as nearly as possible the original intent and economic effect of the affected provisions.

Section 5.8 -     Dispute Resolution.  Any dispute or controversy arising under or in connection with this Agreement shall be resolved by arbitration in St. Louis, Missouri.  Arbitrators shall be selected, and arbitration shall be conducted, in accordance with the rules of the American Arbitration Association.  The Company shall pay or reimburse any legal fees in connection with such arbitration in the event that the Grantee prevails on a material element of his claim or defense.  

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Payments or reimbursements of legal fees made under this Section 5.8 that are provided during one calendar year shall not affect the amount of such payments or reimbursements provided during a subsequent calendar year, payments or reimbursements under this Section 5.8 may not be exchanged or substituted for another form of compensation to the Grantee, and any such reimbursement or payment will be paid within sixty (60) days after the Grantee prevails, but in no event later than the last day of the Grantee’s taxable year following the taxable year in which he incurred the expense giving rise to such reimbursement or payment.  This Section 5.8 shall remain in effect throughout the Grantee’s employment with the Company and for a period of five (5) years following the Grantee’s Termination of Employment.

Section 5.9 -     Governing Law.  The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

	
			
	GRANTEE
	 
	PEABODY ENERGY CORPORATION

	/s/ Gregory H. Boyce
_______________________________
	 
	        /s/ Andrew P. Slentz
By: _________________________________

	Gregory H. Boyce
	 
	Name:  Andrew P. Slentz

	 
	 
	Its: Executive Vice President & Chief Human Resources Officer

	 
	 
	 

	 
	 
	Aggregate number of Performance Units granted hereunder: 172,240

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EXHIBIT A
EXAMPLE OF HOW THE INCENTIVE AMOUNT
IS DETERMINED IF THE DETERMINATION DATE
IS AFTER ACHANGE OF CONTROL THAT IS NOT 
A TRADE CEASING TRANSACTION (SECTION 4.1(b))

Facts for purposes of this example:

	
		
	Aggregate number of Performance Units
	180

	Grant Date 
	1/1/2014

	Date of Change of Control  
	4/1/2015

	Determination Date 
	12/31/2016

	FMV per Share on the date of Change of Control
	$25.00

	FMV per Share on the Determination Date
	$30.00

	Composite TSR Percentage as of the date of Change of Control
	70%

	Composite TSR Percentage as of the date of Change of Control
	120%

	ROMA Percentage as of the date of Change of Control
	110%

Calculation:  
Pre-Transaction Amount  (determined pursuant to Section 4.1(b)(i)):  $1,687.50
Units vested as of the Change of Control:  75 (5 units per month for 15 months)
FMV per Share as of date of Change of Control:  $25.00
Composite TSR Percentage as of the date of Change of Control:  70%
ROMA Percentage as of the date of Change of Control:  110%
Calculation:  (0.5 x 75 x $25.00 x 70%) + (0.5 x 75 x $25.00 x 110%) = ($656.25 + $1,031.25) $1,687.50 

Post-Transaction Amount (determined pursuant to Section 4.1(b)(ii)):  $3,465
Units vested between Change of Control and the Determination Date:  105
FMV per Share as of as of the Determination Date:  $30.00
Composite TSR Percentage as of Determination Date:  120%
Calculation:  (0.5 x 105 x $30.00 x 120%) + (0.5 x 105 x $30.00 x 100%) = ($1,890 + 
$1,575) $3,465

Incentive Amount (sum of Pre-Transaction Amount and Post-Transaction Amount):  $5,152.50

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EXHIBIT B
EXAMPLE OF HOW THE INCENTIVE AMOUNT
IS DETERMINED IF THE DETERMINATION DATE IS AFTER
A TRADE CEASING TRANSACTION (SECTION 4.1(c))

Facts for purposes of this example:

	
		
	Aggregate number of Performance Units
	180

	Grant Date 
	1/1/2014

	Date of Trade Ceasing Transaction  
	4/1/2015

	Determination Date 
	12/31/2016

	FMV per Share on the date of Trade Ceasing Transaction
	$25.00

	Composite TSR Percentage as of the date of Trade Ceasing Transaction
	70%

	ROMA Percentage as of the date of Trade Ceasing Transaction
	110%

Calculation:  
Pre-Transaction Amount  (determined pursuant to Section 4.1(c)(i)):  $1,687.50
Units vested as of the Trade Ceasing Transaction:  75 (5 units per month for 15 months)
FMV per Share as of date of Trade Ceasing Transaction:  $25.00
Composite TSR Percentage as of the date of Trade Ceasing Transaction:  70%
ROMA Percentage as of the date of Trade Ceasing Transaction:  110%
Calculation:  (0.5 x 75 x $25.00 x 70%) + (0.5 x 75 x $25.00 x 110%) = ($656.25 + $1,031.25) $1,687.50 

Post-Transaction Amount (determined pursuant to Section 4.1(c)(ii)):  $2,625
Units vested between Trade Ceasing Transaction and Determination Date:  105
FMV per Share as of as of date of Trade Ceasing Transaction:  $25.00
Calculation:  (0.5 x 105 x $25.00 x 100%) + (0.5 x 105 x $25.00 x 100%) = ($1,312.50 + $1,312.50) $2,625

Incentive Amount (sum of Pre-Transaction Amount and Post-Transaction Amount):  $4,312.50

15EXHIBIT 4.1

THIS  SECURITY  HAS  NOT  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE
COMMISSION  (THE "SEC") OR THE  SECURITIES  COMMISSION  OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION   REQUIREMENTS  OF  THE  SECURITIES  ACT  AND  IN  ACCORDANCE  WITH
APPLICABLE  STATE  SECURITIES  LAWS AND,  UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT,  AS  EVIDENCED  BY A LEGAL  OPINION OF COUNSEL TO THE  TRANSFEROR  AND
REASONABLY  ACCEPTABLE TO THE COMPANY TO SUCH EFFECT,  THE FORM AND SUBSTANCE OF
WHICH SHALL BE  REASONABLY  SATISFACTORY  TO THE COMPANY.  THIS  SECURITY MAY BE
PLEDGED  IN  CONNECTION  WITH A  BONA  FIDE  MARGIN  ACCOUNT  WITH A  REGISTERED
BROKER-DEALER  OR OTHER BONA FIDE LOAN WITH A FINANCIAL  INSTITUTION  THAT IS AN
"ACCREDITED INVESTOR"AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT.

                           COMPETITIVE COMPANIES, INC.
                          COMMON STOCK PURCHASE WARRANT

Warrant Number: [  ]                             Issuance Date: April [  ], 2014

         THIS COMMON STOCK PURCHASE WARRANT (the "WARRANT")  certifies that, for
value received,  WILLIAM H. GRAY (the "HOLDER") is entitled,  upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after APRIL [ ], 2014 (the "ISSUANCE DATE") and on or prior to
the close of business on the ten (10) year  anniversary of the Issuance Date but
not  thereafter  (the  "TERMINATION  Date"),  to subscribe for and purchase from
Competitive Companies, Inc., a Nevada corporation (the "COMPANY"), up to [INSERT
NUMBER]  shares of the  Company's  common  stock  ("Common  Stock"),  subject to
adjustment  hereunder  (the "WARRANT  SHARES") in accordance  with the following
vesting schedule:

                                VESTING SCHEDULE

       [insert number]:    The date on which all of the following conditions are
                           satisfied: (i) the average per share closing price of
                           the  Company's  common  stock as  quoted  on a United
                           States public  securities  trading market or exchange
                           is $[ ] for at  least  ten (10)  consecutive  trading
                           days immediately  preceding the vesting date and (ii)
                           the average  trading volume for the Company's  common
                           stock on a United  States public  securities  trading
                           market or exchange is at least [ ] shares per day for
                           at  least  fifteen  (15)  consecutive   trading  days
                           immediately  preceding the vesting date (the "Vesting
                           Date").

The purchase  price  ("Exercise  Price") of one share of Common Stock under this
Warrant shall be equal to $0.025.

                                      -1-
<PAGE>

         SECTION 1. EXERCISE OF WARRANT.
         -------------------------------

         (a) EXERCISE OF WARRANT. Exercise of the purchase rights represented by
this Warrant may be made,  in whole or in part, at any time or times on or after
the  Issuance  Date and on or before the  Termination  Date by  delivery  to the
Company (or such other  office or agency of the Company as it may  designate  by
notice  in  writing  to the  registered  Holder  at the  address  of the  Holder
appearing on the books of the Company) of a duly executed  facsimile copy of the
Notice of Exercise Form annexed  hereto;  and,  within three (3) Trading Days of
the date said Notice of Exercise is delivered to the Company,  the Company shall
have received  payment of the  aggregate  Exercise  Price of the shares  thereby
purchased by wire transfer or, if available,  pursuant to the cashless  exercise
procedure  specified in Section 1(b) below.  Notwithstanding  anything herein to
the  contrary,  the Holder shall not be required to  physically  surrender  this
Warrant to the Company until the Holder has purchased all of the Warrant  Shares
available  hereunder  and the Warrant has been  exercised in full, in which case
the Holder shall surrender this Warrant to the Company for  cancellation  within
three (3) Trading  Days of the date the final Notice of Exercise is delivered to
the  Company.  Partial  exercises  of this  Warrant  resulting in purchases of a
portion of the total number of Warrant Shares available hereunder shall have the
effect  of  lowering  the  outstanding  number  of  Warrant  Shares  purchasable
hereunder  in an  amount  equal  to the  applicable  number  of  Warrant  Shares
purchased.  The Holder may not exercise  this  Warrant more than ten times.  The
Holder and the  Company  shall  maintain  records  showing the number of Warrant
Shares  purchased and the date of such purchases.  The Company shall deliver any
objection to any Notice of Exercise  Form within one (1) Business Day of receipt
of such notice.  In the event of any dispute or discrepancy,  the records of the
Company shall be controlling and determinative in the absence of manifest error.
THE HOLDER AND ANY ASSIGNEE,  BY ACCEPTANCE  OF THIS  WARRANT,  ACKNOWLEDGE  AND
AGREE  THAT,  BY REASON  OF THE  PROVISIONS  OF THIS  PARAGRAPH,  FOLLOWING  THE
PURCHASE OF A PORTION OF THE  WARRANT  SHARES  HEREUNDER,  THE NUMBER OF WARRANT
SHARES  AVAILABLE FOR PURCHASE  HEREUNDER AT ANY GIVEN TIME MAY BE LESS THAN THE
AMOUNT STATED ON THE FACE OF THIS WARRANT.

         (b) CASHLESS  EXERCISE.  Notwithstanding  any provisions  herein to the
contrary,  if the Fair Market  Value (as  defined  below) of one share of Common
Stock is greater  than the  Exercise  Price (at the date of  calculation  as set
forth  below),  to the  extent  the  Holder  does not elect to pay cash upon the
deemed  exercise of this Warrant,  the Holder shall be deemed to have elected to
receive shares equal to the value (as determined  below) of this Warrant (or the
portion  thereof being  cancelled) in which event the Company shall issue to the
holder a number of shares of Common Stock computed using the following formula:

           X=Y (A-B)
             -------
                A

        Where   X=     the number of shares of Common Stock to be issued to
                       the holder

                Y=     the number of shares of Common Stock deemed  purchased
                       under the Warrant for which the Holder is not paying cash

                A=     the Fair Market Value of one share of the  Company's
                       Common Stock (at the date of such calculation)

                B=     Exercise Price (as adjusted to the date of such
                       calculation)

         For purposes of Rule 144  promulgated  under the Securities  Act, it is
intended,  subject to applicable  interpretations of the Securities and Exchange
Commission,  that the Warrant Shares issued in a cashless  exercise  transaction

                                      -2-
<PAGE>

shall be deemed to have been acquired by the Holder,  and the holding period for
the Warrant Shares shall be deemed to have  commenced,  on the date this Warrant
was originally issued.

         Fair Market Value of a share of Common  Stock as of a  particular  date
(the "Determination Date") shall mean:

                  (i) If the  Company's  Common  Stock is traded  on  registered
         national  securities  exchange such as NASDAQ,  AMEX or NYSE,  then the
         closing  or last  sale  price,  respectively,  reported  for  the  last
         business day immediately preceding the Determination Date;

                  (ii)  If  the  Company's  Common  Stock  is  not  traded  on a
         registered  national  securities   exchange,   but  is  traded  in  the
         over-the-counter  market,  then the  average of the closing bid and ask
         prices  reported for the last  Business Day  immediately  preceding the
         Determination Date;

                  (iii)  Except  as  provided  in  clause  (iv)  below,  if  the
         Company's Common Stock is not publicly  traded,  then as the Holder and
         the  Company  agree,  or in  the  absence  of  such  an  agreement,  by
         arbitration in accordance  with the rules then standing of the American
         Arbitration Association, before a single arbitrator to be chosen from a
         panel of persons  qualified  by  education  and training to pass on the
         matter to be decided; or

                  (iv) If the  Determination  Date is the date of a liquidation,
         dissolution  or winding  up, or any event  deemed to be a  liquidation,
         dissolution  or  winding  up  pursuant  to the  Company's  articles  of
         incorporation,  then all  amounts to be payable per share to holders of
         the Common Stock pursuant to the articles of incorporation in the event
         of such liquidation,  dissolution or winding up, plus all other amounts
         to be payable per share in respect of the Common  Stock in  liquidation
         under the articles of incorporation,  assuming for the purposes of this
         clause (iv) that all of the shares of Common Stock then  issuable  upon
         exercise of all of the Warrants are  outstanding  at the  Determination
         Date.

         (c) MECHANICS OF EXERCISE.

                  (i) DELIVERY OF CERTIFICATES  UPON EXERCISE.  Certificates for
         shares  purchased  hereunder  shall  be  transmitted  by the  Company's
         transfer  agent to the Holder by crediting  the account of the Holder's
         prime  broker with the  Depository  Trust  Company  through its Deposit
         Withdrawal  Agent  Commission  ("DWAC") system if the Company is then a
         participant  in such  system  and  either  (A)  there  is an  effective
         Registration  Statement  permitting the resale of the Warrant Shares by
         the  Holder or (B) the  shares  are  eligible  for resale by the Holder
         without volume or manner-of-sale  limitations pursuant to Rule 144, and
         otherwise by physical  delivery to the address  specified by the Holder
         in the Notice of Exercise  by the date that is three (3)  Trading  Days
         after the latest of (1) the  delivery  to the  Company of the Notice of
         Exercise  Form,  (2) surrender of this Warrant (if  required),  and (3)
         payment of the aggregate  Exercise Price as set forth above  (including
         by cashless  exercise,  if permitted)  (such date,  the "WARRANT  SHARE
         DELIVERY DATE"). This Warrant shall be deemed to have been exercised on
         the  first  date  on  which  all  of  the  foregoing  stated  above  in
         subsections  1(B)(1),  (2), and (3) have been delivered to the Company.
         The Warrant  Shares shall be deemed to have been issued,  and Holder or
         any other person so  designated  to be named therein shall be deemed to
         have become a holder of record of such shares for all  purposes,  as of
         the date the Warrant has been exercised, with payment to the Company of
         the Exercise  Price (or by cashless  exercise,  if  permitted)  and all
         taxes required to be paid by the Holder, if any, having been paid.

                                      -3-
<PAGE>

                  (ii) DELIVERY OF NEW WARRANTS UPON  EXERCISE.  If this Warrant
         shall have been exercised in part, the Company shall, at the request of
         a Holder and upon surrender of this Warrant certificate, at the time of
         delivery  of  the  certificate  or  certificates  representing  Warrant
         Shares, deliver to Holder a new Warrant evidencing the rights of Holder
         to purchase the unpurchased  Warrant Shares called for by this Warrant,
         which new Warrant  shall in all other  respects be identical  with this
         Warrant.

                  (iii) NO FRACTIONAL  SHARES OR SCRIP. No fractional  shares or
         scrip representing  fractional shares shall be issued upon the exercise
         of this  Warrant.  As to any fraction of a share which the Holder would
         otherwise  be  entitled  to purchase  upon such  exercise,  the Company
         shall, at its election, either pay a cash adjustment in respect of such
         final  fraction in an amount equal to such  fraction  multiplied by the
         Exercise Price or round up to the next whole share.

                  (iv) CHARGES, TAXES AND EXPENSES. Issuance of certificates for
         Warrant Shares shall be made without charge to the Holder for any issue
         or transfer tax or other incidental  expense in respect of the issuance
         of such  certificate,  all of which taxes and expenses shall be paid by
         the Company,  and such certificates  shall be issued in the name of the
         Holder  or in such  name or names  as may be  directed  by the  Holder;
         provided,  however,  that in the event  certificates for Warrant Shares
         are to be  issued in a name  other  than the name of the  Holder,  this
         Warrant when  surrendered  for  exercise  shall be  accompanied  by the
         Assignment  Form  attached  hereto duly  executed by the Holder and the
         Company  may  require,  as a  condition  thereto,  the payment of a sum
         sufficient to reimburse it for any transfer tax incidental thereto.

         SECTION 2. CERTAIN ADJUSTMENTS.
         ------------------------------

         (a) STOCK DIVIDENDS AND SPLITS. If the Company,  at any time while this
Warrant  is  outstanding:  (i)  pays a  stock  dividend  or  otherwise  makes  a
distribution or  distributions on shares of its Common Stock or any other equity
or equity equivalent  securities  payable in shares of Common Stock (which,  for
avoidance  of doubt,  shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant),  (ii) subdivides  outstanding  shares of
Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv)  issues by  reclassification  of shares of the  Common  Stock any
shares of capital  stock of the Company,  then in each case the  Exercise  Price
shall be multiplied by a fraction of which the numerator  shall be the number of
shares  of  Common  Stock  (excluding   treasury  shares,  if  any)  outstanding
immediately  before such event and of which the denominator  shall be the number
of shares of Common  Stock  outstanding  immediately  after such event,  and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted  such that the  aggregate  Exercise  Price of this Warrant shall remain
unchanged.  Any  adjustment  made  pursuant to this  Section  2(a) shall  become
effective   immediately   after  the  record  date  for  the   determination  of
stockholders  entitled to receive such dividend or distribution and shall become
effective  immediately  after the effective  date in the case of a  subdivision,
combination or re-classification.

         (b) PRO RATA  DISTRIBUTIONS.  If the  Company,  at any time  while this
Warrant is outstanding, shall distribute to all holders of Common Stock (and not
to the Holders) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security other
than the Common  Stock (which  shall be subject to Section  2(b)),  then in each
such case the Exercise Price shall be adjusted by multiplying the Exercise Price
in effect  immediately  prior to the  record  date  fixed for  determination  of
stockholders  entitled to receive such  distribution  by a fraction of which the
denominator  shall be the VWAP determined as of the record date mentioned above,
and of which the numerator  shall be such VWAP on such record date less the then
per share fair market value at such record date of the portion of such assets or
evidence of indebtedness or rights or warrants so distributed  applicable to one

                                      -4-
<PAGE>

outstanding share of the Common Stock as determined by the Board of Directors in
good faith. Additionally,  the number of Warrant Shares issuable hereunder shall
be increased  such that the aggregate  Exercise Price payable  hereunder,  after
taking into account the decrease in the  Exercise  Price,  shall be equal to the
aggregate  Exercise  Price  prior  to  such  adjustment.   In  either  case  the
adjustments  shall be  described  in a  statement  provided to the Holder of the
portion  of  assets  or  evidences  of   indebtedness  so  distributed  or  such
subscription  rights  applicable to one share of Common Stock.  Such  adjustment
shall be made whenever any such  distribution is made and shall become effective
immediately after the record date mentioned above.

         "VWAP" means, for any date, (i) if the Common Stock is listed or quoted
on the OTC  Markets or a  registered  national  securities  exchange,  the daily
volume  weighted  average  price of the  Common  Stock  for such date on the OTC
Markets or a registered national securities  exchange,  as reported by Bloomberg
Financial L.P. (based on a Trading Day from 9:30 a.m.  Eastern Time to 4:02 p.m.
Eastern Time);  (ii) if the Common Stock is not then listed or quoted on the OTC
Markets or national  securities  exchange and if prices for the Common Stock are
then  reported in the "Pink  Sheets"  published  by the Pink  Sheets,  LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (iii) in
all other cases,  the fair market value of a share of Common Stock as determined
by the Board of Directors in good faith.

         (c) CALCULATIONS.  All calculations  under this Section 2 shall be made
to the nearest cent or the nearest  1/100th of a share,  as the case may be. For
purposes of this  Section 2, the number of shares of Common  Stock  deemed to be
issued  and  outstanding  as of a given  date  shall be the sum of the number of
shares  of  Common  Stock  (excluding   treasury  shares,  if  any)  issued  and
outstanding.

         (d) NOTICE TO HOLDER.  Whenever the Exercise Price is adjusted pursuant
to any  provision  of this  Section 2, the Company  shall  promptly  mail to the
Holder a notice  setting  forth the  Exercise  Price after such  adjustment  and
setting forth a brief statement of the facts requiring such adjustment.

         (e)  CANCELLATION  OF  WARRANT.  In the event  the  number of shares of
Common Stock of the Company  exceeds  500,000,000 of a fully diluted basis,  the
number of shares  issuable  upon  exercise of this  Warrant will be reduced by a
number  such that the number of shares of the Common  Stock of the  Company on a
fully diluted basis equals 500,000,000.

         SECTION 3. TRANSFER OF WARRANT.
         ------------------------------

         (a)   TRANSFERABILITY.   Subject  to  compliance  with  any  applicable
securities  laws and the  conditions  set forth in  Section  3(d)  hereof,  this
Warrant  and  all  rights  hereunder   (including,   without   limitation,   any
registration  rights) are transferable,  in whole or in part, upon five (5) days
written notice to the Company and the surrender of this Warrant at the principal
office  of the  Company  or  its  designated  agent,  together  with  a  written
assignment  of this  Warrant  substantially  in the form  attached  hereto  duly
executed by the Holder or its agent or attorney and funds  sufficient to pay any
transfer  taxes payable upon the making of such  transfer.  Upon such  surrender
and, if required,  such  payment,  the Company  shall  execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees, as applicable, and
in the denomination or denominations specified in such instrument of assignment,
and shall  issue to the  assignor a new Warrant  evidencing  the portion of this
Warrant not so  assigned,  and this Warrant  shall  promptly be  cancelled.  The
Warrant, if properly assigned in accordance herewith,  may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant issued.

         (b) NEW  WARRANTS.  This Warrant may be divided or combined  with other
Warrants  upon  presentation  hereof at the  aforesaid  office  of the  Company,
together with a written notice  specifying the names and  denominations in which
new  Warrants  are to be issued,  signed by the Holder or its agent or attorney.

                                      -5-
<PAGE>

Subject  to  compliance  with  Section  3(a),  as to any  transfer  which may be
involved in such division or combination,  the Company shall execute and deliver
a new Warrant or Warrants in exchange  for the Warrant or Warrants to be divided
or combined in accordance with such notice.  All Warrants issued on transfers or
exchanges  shall be dated the  Issuance  Date and shall be  identical  with this
Warrant except as to the number of Warrant Shares issuable pursuant thereto.

         (c) WARRANT  REGISTER.  The Company shall  register this Warrant,  upon
records to be  maintained  by the Company for that  purpose,  in the name of the
record  Holder  hereof  from time to time.  The  Company  may deem and treat the
registered  Holder of this Warrant as the absolute  owner hereof for the purpose
of any  exercise  hereof or any  distribution  to the Holder,  and for all other
purposes, absent actual notice to the contrary.

         (d)      COMPLIANCE WITH SECURITIES LAWS.

                  (i)  The  Holder  of  this  Warrant,   by  acceptance  hereof,
         acknowledges that this Warrant and the Warrant Shares to be issued upon
         exercise  hereof are being acquired solely for the Holder's own account
         and not as a nominee for any other party, and for investment,  and that
         the Holder will not offer, sell or otherwise dispose of this Warrant or
         any Warrant Shares to be issued upon exercise hereof except pursuant to
         an effective registration statement, or an exemption from registration,
         under the Securities Act and any applicable state securities laws.

                  (ii) Except as provided in paragraph (iii) below, this Warrant
         and all certificates  representing  Warrant Shares issued upon exercise
         hereof shall be stamped or imprinted with a legend in substantially the
         following form:

                  THIS  WARRANT  AND THE SHARES OF COMMON  STOCK  ISSUABLE  UPON
                  EXERCISE HEREOF HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES
                  ACT OF 1933,  AS AMENDED (THE  "SECURITIES  ACT") OR ANY STATE
                  SECURITIES LAWS AND MAY NOT BE SOLD,  TRANSFERRED OR OTHERWISE
                  DISPOSED OF UNLESS  REGISTERED  UNDER THE  SECURITIES  ACT AND
                  UNDER   APPLICABLE   STATE   SECURITIES  LAWS  OR  COMPETITIVE
                  COMPANIES, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT
                  REGISTRATION OF SUCH  SECURITIES  UNDER THE SECURITIES ACT AND
                  UNDER THE PROVISIONS OF APPLICABLE  STATE  SECURITIES  LAWS IS
                  NOT REQUIRED.

                  (iii) The restrictions imposed by this subsection (d) upon the
         transfer of this Warrant or the shares of Warrant Stock to be purchased
         upon exercise  hereof shall  terminate (A) when such  securities  shall
         have been resold pursuant to an effective  registration statement under
         the  Securities  Act, (B) upon the  Company's  receipt of an opinion of
         counsel, in form and substance reasonably  satisfactory to the Company,
         addressed  to the Company to the effect that such  restrictions  are no
         longer required to ensure  compliance with the Securities Act and state
         securities  laws or (C) upon the  Company's  receipt of other  evidence
         reasonably  satisfactory  to the  Company  that such  registration  and
         qualification  under the Securities Act and state  securities  laws are
         not required.  Whenever such restrictions  shall cease and terminate as
         to any such securities, the Holder thereof shall be entitled to receive
         from the Company (or its transfer agent and registrar), without expense
         (other than  applicable  transfer  taxes, if any), new Warrants (or, in

                                      -6-
<PAGE>

         the case of shares of Warrant Stock,  new stock  certificates)  of like
         tenor not bearing the applicable legend required by subsection 3(d)(ii)
         of this Warrant  relating to the  Securities  Act and state  securities
         laws.

         (e) REPRESENTATION BY THE HOLDER. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for  distributing or reselling such Warrant or
Warrant Shares;  provided that this representation  shall not be breached by any
act of the Holder that complies with the Securities Act and any applicable state
securities law.

         SECTION 4. REGISTRATION RIGHTS.
         ------------------------------

         If at any time  during  the term of this  Warrant,  the  Company  shall
decide to prepare and file with the SEC a registration  statement relating to an
offering of any of its equity  securities  for its own account or the account of
others  under the  Securities  Act,  other than on Form S-4 or Form S-8 (each as
promulgated  under the Securities Act) or their then  equivalents that relate to
equity  securities to be issued solely in connection with any acquisition of any
entity or business or equity  securities  issuable in connection with the equity
incentive or other employee  benefit  plans,  then the Company shall send to the
Holder a written notice of such  determination and, if within fifteen days after
the date of such  notice,  the Holder  shall so request in writing,  the Company
shall include in such registration statement all or any part of the Common Stock
underlying  the Warrants that the Holder  requests to be  registered;  provided,
however, that the Company shall not be required to register any shares of Common
Stock that are eligible for resale  pursuant to Rule 144  promulgated  under the
Securities  Act  or  that  are  the  subject  of a then  effective  registration
statement;  provided,  further,  however, if the registration so proposed by the
Company involves an underwritten  offering of the securities so being registered
for the  account of the  Company,  to be  distributed  by or through one or more
underwriters  of  recognized  standing,  and the  managing  underwriter  of such
underwritten  offering shall advise the Company in writing that, in its opinion,
the  distribution  of all or a specified  portion of the shares of Common  Stock
which the Holder has  requested  the Company to  register  will  materially  and
adversely affect the distribution of such securities by such underwriters  (such
opinion to state the reasons  therefor),  then the Company will promptly furnish
the Holder of shares of Common Stock hereto with a copy of such opinion,  and by
providing  such  written  notice to the  Holder,  such  Holder may be denied the
registration  of all or a  specified  portion  of such  shares of Common  Stock;
provided,  however,  that shares to be registered by the Company for issuance by
the Company shall have first  priority,  the Holder  hereunder shall have second
priority,  and any other  shares  being  registered  on account  of other  third
parties shall have third priority.

         SECTION 5. MISCELLANEOUS.
         ------------------------

         (a) NO RIGHTS AS  STOCKHOLDER  UNTIL  EXERCISE.  This  Warrant does not
entitle  the  Holder  to any  voting  rights,  dividends  or other  rights  as a
stockholder of the Company prior to the exercise  hereof as set forth in Section
1 of this Warrant.

         (b) LOSS,  THEFT,  DESTRUCTION  OR MUTILATION  OF WARRANT.  The Company
covenants that upon receipt by the Company of evidence  reasonably  satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction,  of indemnity or security reasonably  satisfactory to it (which, in
the case of the  Warrant,  shall not include the posting of any bond),  and upon
surrender and cancellation of such Warrant or stock  certificate,  if mutilated,
the Company  will make and deliver a new  Warrant or stock  certificate  of like
tenor  and  dated  as of such  cancellation,  in lieu of such  Warrant  or stock
certificate.

                                      -7-
<PAGE>

         (c) SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the  taking of any action or the  expiration  of any right  required  or granted
herein shall not be a Business Day, then, such action may be taken or such right
may be exercised on the next succeeding Business Day.

         (d) AUTHORIZED  SHARES.  The Company  covenants that, during the period
the Warrant is  outstanding,  it will reserve from its  authorized  and unissued
Common  Stock a  sufficient  number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant.  The
Company  further  covenants  that its issuance of this Warrant shall  constitute
full authority to its officers who are charged with the duty of executing  stock
certificates  to execute and issue the  necessary  certificates  for the Warrant
Shares upon the exercise of the purchase rights under this Warrant.  The Company
will take all such  reasonable  action as may be  necessary  to assure that such
Warrant  Shares  may be issued  as  provided  herein  without  violation  of any
applicable law or regulation,  or of any requirements of the trading market upon
which the Common  Stock may be listed.  The Company  covenants  that all Warrant
Shares which may be issued upon the exercise of the purchase rights  represented
by this Warrant will, upon exercise of the purchase  rights  represented by this
Warrant,  be duly authorized,  validly issued,  fully paid and nonassessable and
free from all taxes,  liens and charges created by the Company in respect of the
issue  thereof   (other  than  taxes  in  respect  of  any  transfer   occurring
contemporaneously with such issue).

         (e)  GOVERNING  LAW;  CONSENT TO  JURISDICTION.  This Warrant  shall be
governed by, and construed in accordance with, the internal laws of the State of
Nevada,  without reference to the choice of law provisions thereof.  The Company
and, by accepting  this Warrant,  the Holder,  each  irrevocably  submits to the
exclusive  jurisdiction  of the courts of the State of Nevada  located in Nevada
and the United States  District  Court  situated  therein for the purpose of any
suit, action,  proceeding or judgment relating to or arising out of this Warrant
and the transactions  contemplated hereby. Service of process in connection with
any such suit,  action or proceeding may be served on each party hereto anywhere
in the world by the same  methods  as are  specified  for the  giving of notices
under this Warrant. The Company and, by accepting this Warrant, the Holder, each
irrevocably  consents  to the  jurisdiction  of any such court in any such suit,
action or proceeding and to the laying of venue in such court.  The Company and,
by accepting this Warrant,  the Holder, each irrevocably waives any objection to
the  laying of venue of any such  suit,  action or  proceeding  brought  in such
courts and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum..

         (f)  RESTRICTIONS.  The Holder  acknowledges  that the  Warrant  Shares
acquired  upon the  exercise  of this  Warrant,  if not  registered,  will  have
restrictions upon resale imposed by state and federal securities laws.

         (g) NON  WAIVER  AND  EXPENSES.  No course of  dealing  or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding  the fact that all rights hereunder terminate on the Termination
Date. If the Company  willfully and knowingly fails to comply with any provision
of this  Warrant,  which  results in any  material  damages to the  Holder,  the
Company  shall pay to Holder such  amounts as shall be  sufficient  to cover any
costs and expenses  including,  but not limited to, reasonable  attorneys' fees,
including those of appellate  proceedings,  incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,  powers
or remedies hereunder.

         (h)  NOTICES.   Unless  otherwise  provided,  any  notice  required  or
permitted  under  this  Warrant  shall be given in  writing  and shall be deemed
effectively  given as hereinafter  described (i) if given by personal  delivery,
then such  notice  shall be deemed  given upon such  delivery,  (ii) if given by
email or  facsimile,  then such  notice  shall be deemed  given upon  receipt of
confirmation of complete  transmittal,  (iii) if given by mail, then such notice
shall be deemed  given  upon the  earlier of (A)  receipt of such  notice by the

                                      -8-
<PAGE>

recipient  or (B) three days after such notice is deposited in first class mail,
postage prepaid,  and (iv) if given by an internationally  recognized  overnight
air  courier,  then such notice  shall be deemed  given one  Business  Day after
delivery to such carrier.  All notices shall be addressed as follows:  if to the
Holder,  at its address as set forth in the Company's  books and records and, if
to the  Company,  at such  address as the  Company  may  designate  by ten days'
advance  written  notice to the other Holder,  or in the absence of such written
notice, at the current executive offices of the Company in San Antonio, Texas.

         (i) LIMITATION OF LIABILITY. No provision hereof, in the absence of any
affirmative  action by Holder to  exercise  this  Warrant  to  purchase  Warrant
Shares, and no enumeration  herein of the rights or privileges of Holder,  shall
give rise to any liability of Holder for the purchase  price of any Common Stock
or as a stockholder  of the Company,  whether such  liability is asserted by the
Company or by creditors of the Company.

         (j) REMEDIES. The Holder, in addition to being entitled to exercise all
rights  granted by law,  including  recovery  of  damages,  will be  entitled to
specific  performance of its rights under this Warrant.  The Company agrees that
monetary  damages  would not be adequate  compensation  for any loss incurred by
reason of a breach by it of the  provisions of this Warrant and hereby agrees to
waive and not to assert the defense in any action for specific  performance that
a remedy at law would be adequate.

         (k) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this
Warrant  and the rights and  obligations  evidenced  hereby  shall  inure to the
benefit of and be  binding  upon the  successors  and  permitted  assigns of the
Company and the  successors and permitted  assigns of Holder.  The provisions of
this  Warrant are intended to be for the benefit of any Holder from time to time
of this  Warrant  and shall be  enforceable  by the  Holder or holder of Warrant
Shares.

         (l)  AMENDMENT.  This  Warrant  may  be  modified  or  amended  or  the
provisions hereof waived with the written consent of the Company and the Holder.
In the event that this Warrant is  inconsistent  with that  certain  report (the
"Report")  regarding  executive  compensation  currently  being  prepared by the
Company's  auditors,  Padgett  Stratemann & Co., the Company and Holder agree to
negotiate in good faith to modify and amend this Warrant in accordance  with the
Report.

         (m)  SEVERABILITY.  Wherever  possible,  each provision of this Warrant
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable  law, but if any  provision of this Warrant shall be prohibited by or
invalid under  applicable law, such provision shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

         (n) HEADINGS. The headings used in this Warrant are for the convenience
of  reference  only and shall  not,  for any  purpose,  be deemed a part of this
Warrant.
                              ********************

                            (SIGNATURE PAGES FOLLOW)

                                      -9-

<PAGE>

                                 SIGNATURE PAGE
                                       TO
                           COMPETITIVE COMPANIES, INC.
                          COMMON STOCK PURCHASE WARRANT

         IN WITNESS WHEREOF,  the Company has caused this Warrant Number: [ ] to
be executed in its name by its duly  authorized  officer,  and to be dated as of
the date first above written.

                  COMPETITIVE COMPANIES, INC.

                  By:________________________________________
                     William H. Gray, Chief Executive Officer

                                      -10-
<PAGE>
                               NOTICE OF EXERCISE
                           COMPETITIVE COMPANIES, INC.
                               WARRANT NUMBER: [ ]

         (1) The undersigned  hereby elects to purchase  ________ Warrant Shares
of the Company  pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders  herewith payment of the exercise price in full,  together
with all applicable transfer taxes, if any.

         (2) Payment shall take the form of (check applicable box):

             /_/  in lawful money of the United States; or

             /_/  the  cancellation  of such  number  of  Warrant  Shares  as is
                  necessary, in accordance with the formula set forth in Section
                  1(b),  to exercise  this  Warrant  with respect to the maximum
                  number of Warrant Shares purchasable  pursuant to the cashless
                  exercise procedure set forth in Section 1(b).

         (3)  Please  issue a  certificate  or  certificates  representing  said
Warrant  Shares  in the  name of the  undersigned  or in such  other  name as is
specified below:

-------------------------------

         The Warrant  Shares shall be delivered  to the  following  DWAC Account
Number,  issued as DRS shares by the transfer  agent  directly to Holder,  or by
physical delivery of a certificate to:

-------------------------------

-------------------------------

         (4) ACCREDITED INVESTOR.  Unless the undersigned exercises this Warrant
by cashless  exercise  pursuant to Section 1(b) of the Warrant,  the undersigned
hereby represents and warrants that it is an "accredited investor" as defined in
Regulation D  promulgated  under the  Securities  Act of 1933,  as amended,  and
satisfies the criteria set forth in Rule 501(a) therein.

         (5) LEGEND.  Unless  otherwise  permitted under  applicable law and the
terms of this Warrant, the certificates  representing these securities will bear
a legend  restricting  transfer under the  Securities  Act and applicable  state
securities laws. In the case of a cashless exercise 12 months after the Issuance
Date,  the Company  shall  contemporaneously  deliver the  appropriate  Rule 144
opinion  letter to its  transfer  agent with  instructions  to issue the Warrant
Shares without a restrictive legend, unless applicable law, order or regulations
prohibit such issuance.

[SIGNATURE OF HOLDER]

Dated:                                    Signed:
      -------------------------------            -------------------------------

Signature guaranteed:                     Address:
                     ----------------             ------------------------------

--------------------------------------------------------------------------------

                                      -11-

<PAGE>

                                 ASSIGNMENT FORM
                           COMPETITIVE COMPANIES, INC.
                               WARRANT NUMBER: [ ]

                 (To assign the foregoing warrant, execute this
                  form and supply required information. Do not
                     use this form to exercise the warrant.)

         FOR VALUE RECEIVED,  [_] all of or [__________] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned to

                                                        whose address is
         ----------------------------------------------

         ---------------------------------------------------------------

         ---------------------------------------------------------------.

                                                 Dated:  ______________, _______

         Holder's Signature:
                             -------------------------------------------
         Holder's Address:
                             -------------------------------------------

                             -------------------------------------------

Authorized Signature:
                     ---------------------------------------------------

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change  whatsoever.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

                                      -12-

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