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  Exhibit 10.31    
    

TAX
RECEIVABLE AGREEMENT 

dated
as of 

November     ,
2009 

 

 
 

  Table of Contents    
    

 

 

			
	 ARTICLE I

DEFINITIONS
	 	 
	 Section 1.01. Definitions
	 	

1
	 ARTICLE II

DETERMINATION OF EXCHANGE BASIS SCHEDULE AND REALIZED TAX BENEFIT
	 	 
	 Section 2.01. Basis Adjustment
	 	

10
	 Section 2.02. Duff & Phelps Schedule
	 	10
	 Section 2.03. Exchange Basis Schedule
	 	10
	 Section 2.04. Tax Benefit Schedule
	 	10
	 Section 2.05. Procedures, Amendments
	 	11
	 Section 2.06. Costs and Expenses
	 	11
	 ARTICLE III

TAX BENEFIT PAYMENTS
	 	 
	 Section 3.01. Payments
	 	

12
	 Section 3.02. No Duplicative Payments
	 	12
	 ARTICLE IV

TERMINATION AND CHANGE OF CONTROL
	 	 
	 Section 4.01. Early Termination and Breach of Agreement
	 	

12
	 Section 4.02. Early Termination Notice
	 	13
	 Section 4.03. Payment upon Early Termination
	 	13
	 Section 4.04. Transfers of Assets, Change of Control, Change of Structure
	 	14
	 ARTICLE V

LATE PAYMENTS
	 	 
	 Section 5.01. Late Payments
	 	

15
	 ARTICLE VI

PARTICIPATION; CONSISTENCY; COOPERATION
	 	 
	 Section 6.01. Participation in Buyer's Tax Matters
	 	

16
	 Section 6.02. Consistency
	 	16
	 Section 6.03. Cooperation
	 	16
	 Section 6.04. Section 754 Elections
	 	16
	 ARTICLE VII

MISCELLANEOUS
	 	 
	 Section 7.01. Notices
	 	

17
	 Section 7.02. Counterparts
	 	17
	 Section 7.03. Entire Agreement; No Third Party Beneficiaries
	 	17
	 Section 7.04. Governing Law
	 	17
	 Section 7.05. Severability
	 	18
	 Section 7.06. Successors; Assignment; Amendments; Waivers
	 	18
	 Section 7.07. Titles and Subtitles
	 	19
	 Section 7.08. Resolution of Disputes
	 	19
	 Section 7.09. Reconciliation
	 	19
	 Section 7.10. Withholding
	 	20
	 Section 7.11. Present and Future Values
	 	20
	 Section 7.12. Confidentiality
	 	20
	 Section 7.13. No Other Tax Receivable Agreements
	 	20

 

 i

 

 

        This TAX RECEIVABLE AGREEMENT (as amended from time to time, this "Agreement"), dated as of November , 2009, is hereby entered into by and
among Cloud Peak Energy Inc., a Delaware corporation ("Buyer") and Rio Tinto Energy America, Inc., a Delaware corporation
("RTEA"). 

 RECITALS  

WHEREAS,
RTEA and its Affiliates hold membership units of Cloud Peak Energy Resources LLC, a Delaware limited liability company
("CPE LLC"), and RTEA is selling some of its membership units to Buyer (including any exercise by the underwriter of its overallotment option,
the "Initial Sale") as described in the Registration Statement; 

WHEREAS,
CPE LLC and several of its Subsidiaries are Partnerships; 

WHEREAS,
after the Initial Sale, Buyer will be the managing member of CPE LLC, and will therefore have Control of CPE LLC and its Subsidiaries, and CPE LLC and its Subsidiaries
will become Subsidiaries of Buyer; 

WHEREAS,
the RTEA Units are redeemable, at the option of their holders, for cash from CPE LLC, and upon the exercise of such redemption right, Buyer will have the right to assume the rights and
obligations of CPE LLC with respect to the RTEA Units being redeemed (the "Buyer Assumption Right") and to thereby acquire such RTEA Units in
exchange for cash or common stock of Buyer; 

WHEREAS,
Buyer will take a "cost" tax basis in the RTEA Units acquired in the Initial Sale, and Buyer's tax basis in the RTEA Units acquired in the Initial Sale is expected to exceed RTEA's tax basis
in such RTEA Units prior to the Initial Sale; 

WHEREAS,
pursuant to the Third Amended and Restated Limited Liability Company Agreement of CPE LLC, dated November , 2009 (the "CPE LLC Agreement"), CPE LLC and each of its
Subsidiaries that is a Partnership will have in effect or make an election under Section 754 (a "Section 754 Election") of the Internal
Revenue Code of 1986, as amended (the "Code"), for the Taxable Year in which the Initial Sale occurs and for each Taxable Year in which an Exchange
occurs; 

WHEREAS,
the structure of the Initial Sale and the Section 754 Elections of CPE LLC and each of its Subsidiaries that is a Partnership are intended generally to result in an adjustment
(with respect to the Section 754 Elections, such adjustment will be solely with respect to Buyer) to the tax basis of the Adjustable Assets as a result of the Initial Sale, of any subsequent
Exchange, or of the receipt of payments under this Agreement; 

WHEREAS,
the income, gain, loss, expense and other Tax items of (i) CPE LLC solely with respect to Buyer may be affected by the Basis Adjustment and (ii) Buyer may be affected by
the Basis Adjustment and the Imputed Interest; and 

WHEREAS,
the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustment and Imputed Interest on the actual liability for Taxes of the Buyer; 

NOW,
THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows: 

 
 

  ARTICLE I    
    
    DEFINITIONS    
    

        Section 1.01.    Definitions.    As used in this Agreement, the terms set forth in this Article I shall
have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). 

1

 

        "Accelerated RTEA Gain" is defined in Section 4.04(a)(4). 

        "Accounting Firm" means a nationally recognized, independent accounting firm, selected by RTEA, with experience in natural resource
taxation matters. 

        "Actual/Modified Payment Difference" means, with respect to a Taxable Year, (i) the payments RTEA actually received under this
Agreement with respect to such Taxable Year pursuant to Section 3.01(a) (excluding any Interest Amounts received, and any interest received pursuant to Section 5.01); minus
(ii) the payments that Buyer actually received under this Agreement with respect to such Taxable Year pursuant to Section 3.01(a) (excluding any Interest Amounts received, and any
interest received pursuant to Section 5.01); minus (iii) the net payment that the Projected Tax Benefit Schedule predicted that Buyer would have made to RTEA for such Taxable Year
(without regard to the Assumed Administrative Cost for such Taxable Year). For the avoidance of doubt, the Actual/Modified Payment Difference may be a negative number. 

        "Actual Buyer Tax Liability" for any Taxable Year means the total liability for Taxes of Buyer, as indicated on the Tax Returns filed by
Buyer (including any consolidated return in which Buyer joins) for such Taxable Year, taking into account any Determinations and adjusted to reflect U.S. federal income tax rates that are one percent
higher than the actual U.S. federal income tax rates to which Buyer is subject for such Taxable Year. Notwithstanding the foregoing, the Actual Buyer Tax Liability for any Taxable Year shall also
include any corollary adjustments to reflect any tax items for such Taxable Year that Buyer would have incurred as a result of any transactions deemed to occur by virtue of Section 4.04(a) or
Section 4.04(b). 

        "Adjustable Asset" means the RTEA Units and any asset other than cash owned by CPE LLC, either directly or indirectly through one
or more Partnerships or entities that are disregarded for U.S. federal income tax purposes. 

        "Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such first Person. 

        "Agreed Rate" means LIBOR plus 100 basis points. 

        "Agreement" is defined in the Recitals of this Agreement. 

        "Alternative Tax Benefit Payment" means, with respect to a Taxable Year and a particular Adjustable Asset that has been transferred in a
Non-Exempted Transfer that was not currently fully taxable, the Tax Benefit Payment that would be due in that Taxable Year if, starting in the Taxable Year in which such transfer took
place, such Adjustable Asset had produced the tax items it would have produced had such transfer not occurred instead of the tax items that it actually produced. 

        "Amended Schedule" is defined in Section 2.05(b). 

        "Assumed Administrative Cost" means the average cost incurred by RTEA pursuant to Section 2.06, calculated with respect to the most
recent three Taxable Years preceding an Early Termination Notice Date for which a Tax Benefit Schedule has become final pursuant to Section 2.05(a). If an Early Termination Notice Date occurs
prior to the finalization of Tax Benefit Schedules pursuant to Section 2.05(a) with respect to three Taxable Years, then the Assumed Administrative Cost shall be
[$25,500]. 

        "Average Maximum RTEA Tax Rate" means, as of any given date, the arithmetic mean of the various Maximum RTEA Tax Rates to which RTEA has
been subject during the course of this Agreement through such date, weighted by the amount of Accelerated RTEA Gain that RTEA has recognized while subject to each such Maximum RTEA Tax Rate. 

2

 

        "Basis Adjustment" means the adjustment to the tax basis of an Adjustable Asset under any provision of the Code, including
Section 732 of the Code (in situations where, as a result of one or more Exchanges, CPE LLC becomes an entity that is disregarded as separate from its owner for tax purposes),
Section 1012 of the Code, or Sections 743(b) and 754 of the Code (in situations where, following an Exchange, CPE LLC remains in existence as an entity for tax purposes) as a
result, in each case, of an Exchange, the Distribution, and/or payments made pursuant to this Agreement. For the avoidance of doubt, payments made under this Agreement shall not be treated as
resulting in a Basis Adjustment to the extent that such payments are treated as Imputed Interest. Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting
from an Exchange of one or more RTEA Units shall be determined without regard to any Pre-Exchange
Transfer of such RTEA Units and as if any such Pre-Exchange Transfer had not occurred. 

        "Business Day" means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United
States of America or the State of New York shall not be regarded as a Business Day. 

        "Buyer" is defined in the Recitals of this Agreement. 

        "Buyer Assumption Right" is defined in the Recitals of this Agreement. 

        "Buyer Audit" means any audit or other judicial or administrative proceeding of Buyer, any of its Subsidiaries, or of any consolidated
group of which Buyer is a member, brought by a Taxing Authority. 

        "Change of Control" means, with respect to any entity, (1) any acquisition, merger or consolidation of such entity with or into any
other entity or any other similar transaction, whether in a single transaction or series of related transactions, where (A) the members, partners, or shareholders of such entity immediately
prior to such transaction in the aggregate cease to own more than 50% of the general voting power of the entity surviving or resulting from such transaction (or the owners, partners, or members of
such entity) or (B) any Person or Group becomes the beneficial owner of more than 50% of the general voting power of the entity surviving or resulting from such transaction (or the owners,
partners, or members of such entity), (2) any transaction or series of related transactions or open market purchases or tenders in which more than 50% of such entity's general voting power is
transferred to or acquired by any other Person or Group, or (3) the sale or transfer by such entity of all or substantially all of its assets; provided,
however, that, in determining whether a Change of Control of Buyer or CPE LLC has occurred, common stock of Buyer and RTEA Units (A) acquired pursuant to the
exercise by RTEA of its redemption right (including such an exercise in which Buyer exercises the Buyer Assumption Right) or (B) transferred to any Affiliate of RTEA or (C) transferred
by RTEA shall not constitute an event which could cause a Change of Control. 

        "Change of Control Date" means the date of a Change of Control of Buyer. 

        "Change of Control Payment Modifier" means, as of a Change of Control Date, 100% minus a fraction (expressed as a percentage) equal to
(i) the Total Actual/Modified Payment Difference as of such date divided by (ii) the present value, as of such date, of all future payments that the Projected Tax Benefit Schedule
provides that RTEA should receive from Buyer pursuant to this Agreement, using the Early Termination Rate as a discount rate. 

        "Change of Structure" is defined in Section 4.04(d). 

        "Code" is defined in the Recitals of this Agreement. 

        "Control" (including the terms "Controlled by" and "under common
Control with"), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the ownership of voting Equity Interests, as trustee or executor, by contract or otherwise. 

3

 

        "CPE LLC" is defined in the Recitals of this Agreement. 

        "CPE LLC Agreement" is defined in the Recitals of this Agreement. 

        "Cumulative Net Realized Tax Benefit" for a Taxable Year (the "Current Taxable Year") means the difference between (x) the sum of
the Realized Tax Benefits for all Taxable Years of Buyer, up to and including the Current Taxable Year; and (y) the sum of the Realized Tax Detriments for such Taxable Years of Buyer. The
Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on (i) in the case of the Current Taxable Year, the final Tax Benefit Schedule for the Current
Taxable Year and (ii) in the case of each prior Taxable Year, the final Tax Benefit Schedule or, if applicable, the most recent Amended Schedule for such prior Taxable Year in existence as of
the date that the Tax Benefit Schedule for the Current Taxable Year becomes final. 

        "Default Rate" means LIBOR plus 500 basis points. 

        "Deferred Basis Reduction" means, with respect to any Adjustable Asset at the time of an Exchange, the smaller of (i) the tax basis
of CPE LLC (or of any Partnership through which CPE LLC holds its interest in such Adjustable Asset) in such Adjustable Asset immediately prior to the Exchange and (ii) an amount
equal to (A / B) * (C / D), where A is the Notional Loan Repayment Amount; B is the Average Maximum RTEA Tax Rate; C is the fair market value of CPE LLC's interest in such Adjustable
Asset; and D is the sum of the fair market values of CPE LLC's ownership interests in all Adjustable Assets (ignoring any value attributable to cash). For purposes of calculating the
Hypothetical Buyer Tax Liability, the Deferred Basis Reduction with respect to CPE LLC's direct or
indirect interest in any Adjustable Asset (and the interest of any Partnership through which CPE LLC holds its interest in such Adjustable Asset) shall be allocated solely to CPE LLC (or
such Partnership). 

        "Deferred Partnership Interest Basis Reduction" means, with respect to any Partnership interest with respect to an Exchange, the extent,
if any, by which the sum of the Deferred Basis Reductions with respect to the Adjustable Assets owned by such Partnership exceeds the Deferred Basis Reduction with respect to such Partnership
interest. For the avoidance of doubt, the Deferred Partnership Interest Basis Reduction shall not be a negative number. 

        "Determination" shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar Tax Law, as applicable, or
any other event (including the execution of a Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax. 

        "Distribution" means the distribution of cash or property from CPE LLC to RTEA pursuant to Section [5.4(e)]
of the CPE LLC Agreement. 

        "Duff & Phelps Schedule" is defined in Section 2.02. 

        "Early Termination Notice Date" means the date of an Early Termination Notice. 

        "Early Termination Notice" is defined in Section 4.02. 

        "Early Termination Objection Notice" is defined in Section 4.02. 

        "Early Termination Payment" is defined in Section 4.03(b). 

        "Early Termination Payment Date" means the date on which any Early Termination Schedule becomes final and binding pursuant to
Section 4.02. 

        "Early Termination Rate" means 7%. 

        "Early Termination Schedule" is defined in Section 4.02. 

        "Exchange" means a redemption of RTEA Units pursuant to an exercise by RTEA of its right to have its units in CPE LLC redeemed, or
any acquisition of RTEA Units by Buyer, whether acquired in 

4

 

the
Initial Sale, by Buyer exercising the Buyer Assumption Right with respect to RTEA Units being redeemed by RTEA, or otherwise. 

        "Exchange Basis Schedule" is defined in Section 2.03. 

        "Exchange Date" means the closing date of any Exchange. 

        "Exchanging Fraction" means, with respect to an Exchange, the number of RTEA Units being Exchanged divided by the number of RTEA Units
that had not been Exchanged immediately before such Exchange. 

        "Exempted Transfer" means a transfer by Buyer, or any of its Subsidiaries, of one or more Adjustable Assets to any Person (i) in
which the total gross value of the Adjustable Assets transferred is less than $10 million; (ii) that is made in the ordinary course of business; (iii) in which the transferee is a
Pass-Through Buyer Subsidiary; (iv) that qualifies under Section 1031 of the Code; or (v) that qualifies under Section 368(a)(1)(F) of the Code. For purposes of
this definition, any series of related transfers shall be treated as a single transfer. 

        "Expert" is defined in Section 7.09. 

        "Governmental Authority" means any United States federal, state or local or any foreign government, supranational, governmental,
regulatory or administrative authority, instrumentality, agency or commission, political subdivision, self-regulatory organization or any court, tribunal or judicial or arbitral body or
other governmental authority. 

        "Group of Persons" means any group of Persons which would constitute a "group" for purposes of Section 13(d) of the Securities and
Exchange Act of 1934, or any successor provisions thereto, excluding any such group that includes RTEA or any of its Affiliates. 

        "Hypothetical Buyer Tax Liability" means, with respect to any Taxable Year, the total liability for Taxes of the Buyer, or any
consolidated group of which Buyer is a member, as would be shown on its Tax Return (including any consolidated return in which Buyer joins) if all items of income, gain, loss, and deduction and credit
(and all methods, elections, conventions and practices) were the same as reflected in the Tax Return actually filed for such Taxable Year except that (1) it shall be adjusted to reflect U.S.
federal income tax rates that are one percent higher than the actual U.S. federal income tax rates to which Buyer is subject; (2) amortization, depletion, depreciation, and gain and loss with
respect to the Adjustable Assets (including, with respect to Adjustable Assets that are Partnership interests, each Partner's distributive share of such items) shall be the same as though there had
been no Basis Adjustments and, with respect to any Adjustable Assets that pertain to the period of time before the Initial Sale, no Determinations, but shall be reduced (or, in the case of gain,
increased) with respect to each Adjustable Asset to reflect the amount of all Deferred Basis Reductions with respect to that asset with respect to all Exchanges that have occurred as of the end of
that Taxable Year; (3) Reclamation Costs and LBA Payments shall be the same as though there had been no Basis Adjustments, but shall be reduced to reflect the amount of all Deferred Basis
Reductions with respect to all Adjustable Assets with respect to all Exchanges that have occurred as of the end of that Taxable Year; (4) correlative changes flowing directly from the
exceptions of clauses (2) and (3) of this definition shall be taken into account (e.g., adjustments to the Section 199 credit or minimum tax credits); (5) no
deduction for Imputed Interest shall be taken into account with respect to payments pursuant to this Agreement; and (6) it shall include any corollary adjustments to reflect any tax items for
such Taxable Year that Buyer, or any consolidated group of which Buyer is a member, would have incurred for such Taxable Year as a result of any transactions deemed to occur by virtue of
Section 4.04(a) or Section 4.04(b). 

5

 

        "Imputed Interest" shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code and any similar
provision of Tax Law with respect to Buyer's payment obligations under this Agreement. 

        "Incalculable Year" is defined in Section 4.04(a)(3). 

        "Initial Duff & Phelps Schedule" is defined in Section 2.02. 

        "Initial Sale" is defined in the Recitals of this Agreement. 

        "Interest Amount" is defined in Section 3.01(b). 

        "Irreducible Basis Amount" means, with respect to an Exchange, (i) the Notional Loan Repayment Amount with respect to such Exchange
divided by the Average RTEA Maximum Tax Rate as of the Exchange Date, plus (ii) the sum of the Deferred Partnership Interest Basis Reductions with respect to such Exchange, minus
(iii) the sum of the Deferred Basis Reductions with respect to such Exchange with respect to all Adjustable Assets that are not Partnership interests. For the avoidance of doubt, the
Irreducible Basis Amount shall not be a negative number. 

        "Irreducible Basis Amount Payment" means, with respect to an Exchange, the product of (i) 85%; (ii) the highest marginal
U.S. federal income tax rate to which Buyer is subject for the Taxable Year containing the Exchange Date plus one percent; and (iii) the Irreducible Basis Amount. 

        "Law" means any law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, executive order or other similar
authority enacted, adopted, promulgated or applied by any Governmental Authority, each as amended from time to time. 

        "LBA Payments" means any payment made by Buyer or its Subsidiaries in connection with the acquisition of a mineral lease in effect on the
date of the Initial Sale that was (or is) required to be capitalized for U.S. federal income tax purposes into the tax basis of the lease and amortized as a reduction to the gross income from mining
from that mineral property. 

        "LIBOR" means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on
the date two calendar days prior to the first calendar day of such month, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page
"LIBO" or by any other publicly available source of such market rate) for London interbank offered rates for U.S. dollar deposits for such month (or portion thereof). 

        "Life of Mine Tax Model" means the model, prepared in conjunction with the most recent Exchange (including the Initial Sale) to predict
the future economic performance of Buyer and its Subsidiaries after such Exchange and certain corollary tax consequences. The Life of Mine Tax Model shall be consistent with the information that is
provided by CPE LLC to third parties in connection with its business (including any information provided to third-party lenders, for purposes of obtaining and negotiating financing or
otherwise). RTEA shall prepare the Life of Mine Tax Model with respect to the Initial Sale, and Buyer shall prepare the Life of Mine Tax Model with respect to subsequent Exchanges. Models produced by
Buyer shall be susbtantially identical in form, methodology and content to the model produced by RTEA with respect to the Initial Sale. In each case, the Life of Mine Tax Model shall be prepared in a
manner that is consistent with the methodology used to produce, and shall reflect the information and assumptions contained in, the Duff & Phelps Schedule and the Exchange Basis Schedule with
respect to such Exchange. An example of the form, methodology and content to be reflected in the Life of Mine Tax Model is attached as Exhibit A to this Agreement. 

        "Master Separation Agreement" means the Master Separation Agreement by and among Rio Tinto America, Inc., RTEA, Kennecott
Management Services Company, Buyer and CPE LLC dated                        , 2009. 

6

 

        "Maximum RTEA Tax Rate" means, at any given time, the highest combined marginal U.S. federal, state, and local income tax rates to which
RTEA is subject. 

        "Net Benefits Already Paid" is defined in Section 3.01(b). 

        "Net Tax Benefit" is defined in Section 3.01(b). 

        "New York Courts" is defined in Section 7.04(b). 

        "Non-Exempted Transfer" means a transfer by Buyer, or any of its Subsidiaries, of one or more Adjustable Assets to any Person
that is not an Exempted Transfer. 

        "Notional Interest Rate" shall mean the RTEA cost of borrowing divided by four (4). 

        "Notional Loan Balance" means an amount initially equal to zero and increased as provided in Section 4.04(a)(4) and decreased as
provided in Section 4.04(a)(5). 

        "Notional Loan Repayment Amount" means, with respect to any Exchange, an amount equal to the product of (x) the Exchanging
Fraction; and (y) the Notional Loan Balance. 

        "Objection Notice" is defined in Section 2.05(a). 

        "Partner" means, with respect to any Partnership, a Person that is a partner in such Partnership for U.S. federal income tax purposes. 

        "Partnership" means any entity that is treated as partnership for U.S. federal income tax purposes. 

        "Pass-Through Buyer Subsidiary" means CPE LLC, or an entity that is wholly owned by CPE LLC, directly or
indirectly, and that is not (i) treated as a corporation for U.S. federal income tax purposes or (ii) indirectly owned by CPE LLC, in whole or in part, through an entity that is
treated as a corporation for U.S. federal income tax purposes. 

        "Payment Date" means any date on which a payment is required to be made pursuant to this Agreement. 

        "Person" means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business
association, organization, governmental entity or other entity. 

        "Pre-Exchange Transfer" means any transfer of one or more RTEA Units that occurs prior to an Exchange of such RTEA Units. 

        "Projected Tax Benefit Schedule" means, as of the Early Termination Notice Date or a Change of Control Date, as applicable (the "Freeze
Date"), a model, prepared by an Accounting Firm, designed to predict all payments required to be made pursuant to this Agreement beginning at the last Exchange Date, based on the Life of Mine Tax
Model and (i) taking into account all changes to U.S. federal tax law, including, but not limited to, changes in tax rates, the rules governing percentage and cost depletion, and the
Section 199 Rules enacted or promulgated after the date of the Life of Mine Tax Model and on or before the Freeze Date (including any such changes that are not scheduled to take effect until
after the Freeze Date); (ii) incorporating the assumption that all non-amortizable, non-depletable, non-depreciable Adjustable Assets will be deemed to be
disposed of, at a price equal to their tax basis, on the later of the Freeze Date and the fifteenth anniversary of the date of the Initial Sale and (iii) if a carryback from a Taxable Year
gives rise to a refund with respect to a prior Taxable Year, such refund shall, for purposes of computing payments required to be made pursuant to this Agreement, be treated as an offset to the tax
liability for the Taxable Year in which the carryback arises (and if the refund exceeds such tax liability, a negative tax liability for such year) and not as an adjustment to the tax liability of the
prior Taxable Year. For the avoidance of doubt, if, in any year projected, there is calculated to be a greater actual tax liability than hypothetical tax liability (or if both actual and hypothetical
tax liabilities are negative, a lesser negative actual tax liability than negative 

7

 

hypothetical
tax liability), then pursuant to Sections 4.03(b)(i) and 4.04(c)(iii), the Projected Tax Benefit Schedule shall show a payment due from RTEA to CPE of zero for such projected year.
Further, in the case of an early termination, the Projected Tax Benefit Schedule: (i) shall treat all RTEA Units that have not yet been Exchanged as being Exchanged on the Early Termination
Notice Date for the cash purchase price Buyer would have paid under the Buyer Assumption Right had such Exchange actually
occurred on the Early Termination Notice Date; (ii) shall subtract from each taxable year for which the model predicts a payment an amount equal to the Assumed Administrative Cost; and
(iii) shall not reflect any adjustments for inflation with respect to any factual input. 

        "Realized Tax Benefit" means, for a Taxable Year, the excess, if any, of the Hypothetical Buyer Tax Liability over the Actual Buyer Tax
Liability. If all or a portion of the Actual Buyer Tax Liability for the Taxable Year arises as a result of a Buyer Audit, such liability shall not be included in determining the Realized Tax Benefit
unless and until there has been a Determination. 

        "Realized Tax Detriment" means, for a Taxable Year, the excess, if any, of the Actual Buyer Tax Liability over the Hypothetical Buyer Tax
Liability. If all or a portion of the Actual Buyer Tax Liability for the Taxable Year arises as a result of a Buyer Audit, such liability shall not be included in determining the Realized Tax
Detriment unless and until there has been a Determination. 

        "Reclamation Costs" means obligations assumed by CPE LLC as part of the liabilities assumed (pursuant to Treasury
Regulation 1.752-1(a)(4)(ii)) that may not be accrued for U.S. federal income tax purposes as they fail to meet the all events and economic performance requirements of Treasury
Regulation 1.446-1(c)(1)(ii) and Treasury Regulation 1.461-1(a)(2) as of the date of this Agreement, and which are added to the tax basis of the Adjustable Assets
when they are paid or otherwise meet the all events and economic performance tests (see Treasury Regulation 1.461-4). For this purpose, the obligation assumed by the Buyer or CPE LLC for
the closure of the mines is assumed to meet the all events and economic performance tests when the mines are closed. The current cost to reclaim acreage disturbed as of the transaction date is assumed
to meet the all events and economic performance tests as those acres are reclaimed. 

        "Reconciliation Dispute" is defined in Section 7.09. 

        "Reconciliation Procedures" shall mean the reconciliation procedures set forth in Section 7.09 of this Agreement. 

        "Registration Statement" means the Form S-1 (SEC File No. 333-161293), including the prospectus
related thereto, filed by Buyer with the SEC, together with all amendments and supplements thereto. 

        "Restricted Transfer" means any Non-Exempted Transfer (i) that is not fully taxable to the transferor; and
(ii) in which the transferee is either (x) treated as a corporation for U.S. federal income tax purposes; or (y) owned by CPE LLC, directly or indirectly, wholly or partly
through any entity that is treated as a corporation for U.S. federal income tax purposes. For the avoidance of doubt, (i) the granting of any lien on any Adjustable Asset or the pledging of any
Adjustable Asset shall not constitute a Restricted Transfer so long as such pledge or lien is permitted under the terms of the
CPE LLC Agreement; and (ii) a transfer to any entity owned directly or indirectly in part by Cloud Peak Energy Services, Inc. ("CPESC") shall not constitute a Restricted Transfer
so long as CPESC holds (taking into account both direct and indirect interests), less than a 1% interest in the capital of such entity and less than a 1% interest in the profits and losses (and each
item thereof) of such entity. 

        "RTEA" is defined in the Recitals of this Agreement. 

        "RTEA Units" shall mean any membership units in CPE LLC that were owned by RTEA or its Affiliate prior to the Initial Sale. 

        "Schedule" means any Exchange Basis Schedule, Tax Benefit Schedule, Amended Schedule or Tax Benefit Computation Schedule. 

8

 

        "Section 199 Rules" means, as of a given date, Section 199 of the Code, any successor provisions, the Treasury Regulations
thereunder, and similar provisions of Tax Law as of such date. 

        "Section 754 Election" is defined in the Recitals of this Agreement. 

        "Subsidiary" means, as of any date of determination, any other Person as to which Buyer owns, directly or indirectly, or otherwise
controls, 50% or more of (x) the voting power or other similar rights, or (y) the general partner interests or managing member or similar interests. 

        "Surviving Entity" is defined in Section 4.04(c). 

        "Tax Benefit Computation Schedule" is defined in Section 2.04. 

        "Tax Benefit Payment" is defined in Section 3.01(b). 

        "Tax Benefit Schedule" is defined in Section 2.04. 

        "Tax Law" means the Code, Treasury Regulations, applicable state, local and foreign taxing statutes and regulations, and other published
guidance thereunder. 

        "Tax Return" means a return, declaration, report or similar statement required to be filed with respect to U.S. federal income taxes
(including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated U.S. federal income tax. 

        "Taxable Year" means a taxable year as defined in Section 441(b) of the Code or comparable section, as applicable, (and, therefore,
for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is made) ending on or after the date of the Initial Sale. 

        "Taxes" means U.S. federal income taxes and any interest related thereto. 

        "Taxing Authority" shall mean any domestic, foreign, federal, national, state, county or municipal or other local government, any
subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising regulatory authority with respect to any and all
U.S. federal, state, local and foreign taxes, assessments or similar charges measured by or with respect to net income or profits, in whole or in part, whether as an exclusive or on an alternative
basis, and any interest related thereto. 

        "Total Actual/Modified Payment Difference" means: 

          (i)  as
of an Early Termination Notice Date, the sum of the future values (and, if the Early Termination Payment Date is after the end of a Taxable Year but before the due
date (without extensions) for filing the U.S. federal income tax return of the Buyer with respect to such Taxable Year, the present value) to the Early Termination Payment Date of the Actual/Modified
Payment Differences for all Taxable Years ending on or before the Early Termination Notice Date but on or after the most recent Exchange Date, calculated using the Early Termination Rate as a discount
rate and assuming for purposes of computing such future (or present) values that the Actual/Modified Payment Difference with respect to Taxes for each Taxable Year accrues on the due date (without
extensions) for filing the U.S. federal income tax return of Buyer with respect to such Taxable Year; or 

         (ii)  as
of a Change of Control Date, the sum of the future values (and, if the Change of Control Date is after the end of a Taxable Year but before the due date (without
extensions) for filing the U.S. federal income tax return of the Buyer with respect to such Taxable Year, the present value) to the Change of Control Date of the Actual/Modified Payment Differences
for all Taxable Years ending on or before the Change of Control Date but on or after the most recent Exchange Date, calculated using the Early Termination Rate as a discount rate and assuming for
purposes of computing such future (or present) values that the Actual/Modified Payment 

9

 

Difference
with respect to Taxes for each Taxable Year accrues on the due date (without extensions) for filing the U.S. federal income tax return of Buyer with respect to such Taxable Year. 

        "Treasury Regulations" means the final, temporary and proposed regulations under the Code promulgated from time to time (including
corresponding provisions and succeeding provisions) as in effect for the relevant taxable period. 

 
 

  ARTICLE II    
    
    DETERMINATION OF EXCHANGE BASIS SCHEDULE AND REALIZED TAX BENEFIT    
    

        Section 2.01.    Basis Adjustment.    Buyer and RTEA acknowledge that, as a result of an Exchange, Buyer's tax
basis in the applicable Adjustable Assets shall be adjusted to reflect a Basis Adjustment, if any. The parties hereby acknowledge that, generally, Buyer's tax basis in the applicable Adjustable Assets
shall be increased by the excess, if any, of (i) the sum of (x) the amount of cash or other consideration transferred to RTEA, its Affiliate, or any direct or indirect successor pursuant
to the Exchange as payment for the redeemed or transferred RTEA Units (including the fair market value of any Buyer common stock, if applicable), plus (y) the amount of payments made pursuant
to this Agreement with respect to such Exchange plus (z) the amount of debt allocated to the RTEA Units acquired pursuant to such Exchange over (ii) RTEA's (or its Affiliate's) share of
the tax basis of the Adjustable Assets immediately prior to the Exchange attributable to the RTEA Units Exchanged. 

        Section 2.02.    Duff & Phelps Schedule.    Within 30 calendar days after any Exchange Date, Buyer shall
cause Duff & Phelps LLC, or another Person that has nationally recognized expertise in valuation matters and that is acceptable to both RTEA and Buyer, to prepare and deliver to Buyer
and RTEA a schedule (the "Duff & Phelps Schedule") that allocates the purchase price of the RTEA Units being acquired by CPE or redeemed by
CPE LLC in such Exchange among the various assets that CPE LLC owns, directly
and indirectly. Buyer and RTEA shall agree on the methodology to be used in the preparation of the Duff & Phelps Schedule with respect to the Initial Sale (the "Initial
Duff & Phelps Schedule"). The Duff & Phelps Schedule with respect to all subsequent Exchanges shall be prepared in a manner that is consistent with the
methodology used to produce the Initial Duff & Phelps Schedule. If Buyer and RTEA cannot agree as to whether a Duff & Phelps Schedule was produced consistently with the methodology used
to produce the Initial Duff & Phelps Schedule within 60 days after an Exchange, the parties shall employ the Reconciliation Procedures. 

        Section 2.03.    Exchange Basis Schedule.    Within 45 calendar days after Buyer and RTEA receive the
Duff & Phelps Schedule, a schedule (the "Exchange Basis Schedule") shall be produced that shall show, for purposes of Taxes, (i) the
actual unadjusted tax basis of the Adjustable Assets as of each applicable Exchange Date, (ii) the amount by which each Adjustable Asset's tax basis is reduced pursuant to the Deferred Basis
Reduction, (iii) the Basis Adjustment with respect to the Adjustable Assets as a result of the Exchange, (iv) the Irreducible Basis Amount with respect to the Exchange, (v) the
period or periods, if any, over which the Adjustable Assets are amortizable and/or depreciable, and (vi) the period or periods, if any, over which each Basis Adjustment is amortizable and/or
depreciable. The Exchange Basis Schedule shall be prepared in accordance with the information and assumptions contained in the Duff & Phelps Schedule, as well as Sections 743 and 755 of
the Code, the Treasury Regulations thereunder, and any similar provisions of Tax Law, as appropriate. RTEA shall prepare the Exchange Basis Schedule with respect to the Initial Sale, and Buyer shall
prepare the Exchange Basis Schedule with respect to each subsequent Exchange. 

        Section 2.04.    Tax Benefit Schedule.    Within the later of 45 calendar days after the filing of the U.S.
federal income tax return of Buyer for any Taxable Year and 15 calendar days after the receipt by Buyer of the last Exchange Basis Schedule with respect to any Taxable Year, Buyer shall provide to
RTEA (i) a schedule showing the calculation of the Realized Tax Benefit or Realized Tax Detriment for 

10

 

such
Taxable Year (a "Tax Benefit Schedule"); (ii) a certification signed by the CFO of Buyer stating that the Tax Benefit Schedule is consistent
with the Tax Returns of Buyer and each of its Subsidiaries, and that the Tax Benefit Schedule was prepared using the same standard of care as the Tax Returns of Buyer and each of its Subsidiaries; and
(iii) a calculation of the Tax Benefit Payment due with respect to such Taxable Year, if any, with an estimate of the Interest Amount based on the expected payment date (a
"Tax Benefit Computation Schedule"). The Tax Benefit Schedule and Tax Benefit Computation Schedule will become final as provided in
Section 2.05(a) and may be amended as provided in Section 2.05(b) (subject to the procedures set forth in Section 2.05(b)). 

        Section 2.05.    Procedures, Amendments.    

        (a)    Procedure.    Every time Buyer delivers to RTEA a Tax Benefit Schedule or an Amended Schedule pursuant to
Section 2.05(b), Buyer shall also (x) deliver to RTEA schedules and work papers providing reasonable detail regarding the preparation of such Schedule and (y) allow RTEA
reasonable access, at no cost to RTEA, to the appropriate representatives at Buyer, or any Affiliate of Buyer, in connection
with a review of such Schedule. Buyer shall also allow RTEA reasonable access to third parties retained by Buyer or its Affiliates, and the costs of RTEA's access to such third parties shall be borne
85% by RTEA and 15% by Buyer. Any Schedule received by RTEA shall become final and binding on all parties unless RTEA, within 30 calendar days after receiving such Schedule, provides Buyer with notice
of a reasonable objection to such Schedule ("Objection Notice") made in good faith. If the parties, for any reason, are unable to successfully resolve
the issues raised in such notice within 30 calendar days of receipt by Buyer of an Objection Notice, Buyer and RTEA shall employ the Reconciliation Procedures. 

        (b)    Amended Schedule.    Any Exchange Basis Schedule (or amended Exchange Basis Schedule) or applicable Tax Benefit
Schedule (or amended Tax Benefit Schedule) and its corresponding Tax Benefit Computation Schedule for any Taxable Year shall be amended from time to time by Buyer (such Schedule, an
"Amended Schedule") (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule
identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to RTEA, (iii) to comply with the Expert's
determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or
carryforward of a loss or other tax item to such Taxable Year, or (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended
Tax Return filed for such Taxable Year or pursuant to a Determination for such Taxable Year. Upon the amendment of any Exchange Basis Schedule (or amended Exchange Basis Schedule) or any Tax Benefit
Schedule (or amended Tax Benefit Schedule), the corresponding Duff & Phelps Schedule (or amended Duff & Phelps Schedule) shall be amended in a consistent manner. 

        Section 2.06.    Costs and Expenses.    All reasonable third-party out of pocket costs and expenses incurred by
RTEA and Buyer to produce, evaluate, or resolve any disagreement with respect to the Duff & Phelps Schedule, the Life of Mine Model, the Projected Tax Benefit Schedule, or any Schedule required
to be produced under this Agreement that would not have been incurred by RTEA or Buyer, respectively, if RTEA and Buyer had not entered into this Agreement, shall be borne 85% by RTEA and 15% by Buyer
unless otherwise explicitly provided under this Agreement. For the avoidance of doubt, such costs or expenses shall not include time or resources spent by employees of RTEA, Buyer, or any of their
respective Affiliates. 

11

 
 
 

  ARTICLE III    
    
    TAX BENEFIT PAYMENTS    
    

        Section 3.01.    Payments.    

        (a)    Payments.    Within five (5) calendar days of a Tax Benefit Schedule and the corresponding Tax Benefit
Computation Schedule delivered to RTEA becoming final in accordance with Section 2.05(a), Buyer shall pay to RTEA the Tax Benefit Payment (if the Tax Benefit Payment is a positive number) or
RTEA shall pay to Buyer the Tax Benefit Payment (if the Tax Benefit Payment is a negative number) for such Taxable Year, determined pursuant to Section 3.01(b). Each such Tax Benefit Payment
shall be made by wire transfer of immediately available funds to a bank account of RTEA previously designated by RTEA to Buyer, to a bank account of Buyer previously designated by Buyer to RTEA, or as
otherwise agreed by Buyer and RTEA. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments and no Tax Benefit Payment shall be made in respect of an
Amended Schedule except in accordance with Section 3.01(b). At the same time that the Tax Benefit Payment is paid, the payor shall provide documentation to the recipient illustrating the
payor's calculation of the Interest Amount with respect to such Tax Benefit Payment. 

        (b)   A
"Tax Benefit Payment" with respect to a Taxable Year means an amount equal to 85% of the sum of the Net Tax Benefit and
the Interest Amount for that Taxable Year. The "Net Tax Benefit" for each Taxable Year shall be an amount equal to the difference of (i) the
Cumulative Net Realized Tax Benefit for such Taxable Year and (ii) the total amount of net payments previously made from Buyer to RTEA under this Section 3.01, excluding all payments
attributable to Interest Amount (the "Net Benefits Already Paid"). The "Interest Amount" for each
Taxable Year shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate, compounded monthly, from the due date (without extensions) for filing the U.S. federal
income tax return of Buyer with respect to Taxes for such Taxable Year until the Payment Date. For the avoidance of doubt, each of the Net Tax Benefit, the Interest Amount, and the Tax Benefit Payment
with respect to a given Taxable Year may be a negative number. Notwithstanding any other provisions of this Agreement, distributions and payments made pursuant to Section 5.4(f) of the CPE LLC
Agreement shall not be taken into account in calculating amounts due under this Section 3.01 or any other provision of this Agreement. 

        (c)   Upon
delivery of an Exchange Basis Schedule as described in Section 2.03, Buyer shall pay to RTEA an amount equal to the Irreducible Basis Amount Payment, if any. 

        (d)   Within
ten (10) calendar days of December 31, March 31, June 30, and September 30 of each year, Buyer shall pay to RTEA an amount
equal to the product of (i) the Notional Loan Balance as of the first day of the quarter ending on such date and (ii) the Notional Interest Rate. 

        Section 3.02.    No Duplicative Payments.    It is intended that the above provisions of this Agreement will
not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement provide that Buyer shall pay to RTEA 85%
of the Cumulative Net Realized Tax Benefit and Interest Amount and that RTEA pay to Buyer any excess over 85% of the Cumulative Net Realized Tax Benefit and Interest Amount that RTEA may have
received. The provisions of this Agreement shall be construed in the appropriate manner in order to realize such intentions. 

 
 

  ARTICLE IV    
    
    TERMINATION AND CHANGE OF CONTROL    
    

        Section 4.01.    Early Termination and Breach of Agreement.    

        (a)   Subject
to Section 4.03, Buyer may terminate this Agreement at any time by paying to RTEA the Early Termination Payment after the Early Termination Payment Date;
provided, however, that this 

12

 

Agreement
shall only terminate upon the receipt of the Early Termination Payment, and provided, further, that Buyer may withdraw any notice to execute its termination rights under this
Section 4.01(a) prior to the Early Termination Payment Date. Upon payment of the Early Termination Payment by Buyer, neither RTEA nor Buyer shall have any further payment obligations under this
Agreement, other than for any unpaid Tax Benefit Payment with respect Taxable Years ending on or before the Early Termination Notice Date. 

        (b)   In
the event that Buyer materially breaches this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation
required hereunder (including the provisions of Section 4.04(a)(2)), by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code, or
otherwise, then all of Buyer's obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and
shall include, but not be limited to, (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of a breach, and (2) any Tax Benefit
Payment due and payable but unpaid as of the date of a breach. Notwithstanding the foregoing, in the event that Buyer materially breaches this Agreement, RTEA shall be entitled to elect to receive the
amounts set forth in (1) and (2) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within
45 calendar days of the date such payment is due shall be deemed to be a material breach under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a
material obligation under this Agreement to make a payment due pursuant to this Agreement within 45 calendar days of the date such payment is due. Buyer and RTEA specifically agree that the remedies
provided in this Section are not intended as a penalty. 

        (c)   Buyer
and RTEA agree that the aggregate fair market value of the Tax Benefit Payments cannot be ascertained with any reasonable certainty for U.S. federal income tax
purposes. 

        Section 4.02.    Early Termination Notice.    If Buyer chooses to exercise its right of early termination under
Section 4.01 above, Buyer shall deliver to RTEA notice of such intention to exercise such right ("Early Termination Notice") together with a
schedule (the "Early Termination Schedule") showing, in reasonable detail, the calculation of the Early Termination Payment. The applicable Early
Termination Schedule shall become final and binding on all parties unless RTEA, within 30 calendar days after receiving the Early Termination Schedule, provides Buyer with notice of a reasonable
objection to such Early Termination Schedule made in good faith ("Early Termination Objection Notice"). If the parties, for any reason, are unable to
successfully resolve the issues raised in such notice within 30 calendar days after receipt by Buyer of the Early Termination Objection Notice, Buyer and RTEA shall employ the Reconciliation
Procedures. If RTEA provides an Early Termination Objection Notice objection, the Early Termination Schedule shall become final upon the earlier of an agreement between the parties or the resolution
of a Reconciliation Dispute pursuant to Section 7.09. 

        Section 4.03.    Payment upon Early Termination.    

        (a)    Date Payment Due.    Within three calendar days after agreement between RTEA and Buyer with respect to the
Early Termination Schedule, Buyer shall pay to RTEA an amount equal to the Early Termination Payment. Such payment shall be made by wire transfer of immediately available funds to a bank account
designated by RTEA or as otherwise agreed by Buyer and RTEA. Failure by Buyer to pay the Early Termination Payment pursuant to this Section 4.03 shall in no event be treated as a material
breach of this Agreement but the Early Termination Notice and the Early Termination Schedule finalized pursuant to Section 4.02 given with respect to such notice shall be void. 

        (b)    Early Termination Payment.    The "Early Termination Payment" shall equal the excess, if any, of (i) the
sum of (x) the present value, as of the Early Termination Payment Date, of all payments that the Projected Tax Benefit Schedule as of the Early Termination Notice Date provides that RTEA should
receive from Buyer with respect to all Taxable Years ending after the Early Termination Notice 

13

 

Date
and that are due after the Early Termination Payment Date and (y) the future value, as of the Early Termination Payment Date, of all payments that the Projected Tax Benefit Schedule as of
the Early Termination Notice Date provides that RTEA should receive from Buyer with respect to all Taxable Years ending after the Early Termination Notice Date and that are due before the Early
Termination Payment Date, in both cases using the Early Termination Rate as a discount rate (or interest rate), over (ii) the Total Actual/Modified Payment Difference as of the Early
Termination Notice Date. For purposes of computing such present value (or future value), any payment that the Projected Tax Benefit Schedule provides that RTEA should receive from Buyer with respect
to Taxes of a Taxable Year shall be treated as payable on the due date (without extensions) for filing the U.S. federal income tax return of Buyer with respect to such Taxes for such Taxable Year. For
the avoidance of doubt, a negative Total Actual/Modified Payment Difference shall be added to the amount calculated in clause (i) of this Section 4.03(b). 

        Section 4.04.    Transfers of Assets, Change of Control, Change of Structure.    

        (a)    Transfers of Assets.    The provisions of this section 4.04(a) shall apply to any transfer that is
deemed to occur for U.S. federal income tax purposes, including any transfer that is deemed to occur under the provisions of Treasury Regulation § 301.7701-3. 

        (1)   Generally.
Buyer shall give RTEA at least 30 days' written notice prior to any Non-Exempted Transfer. 

        (2)   Restricted
Transfers. Buyer shall not, and shall not cause any of its Subsidiaries to, transfer any Adjustable Assets in a Restricted Transfer. 

        (3)   Asset
Transfers. If Buyer, or a Subsidiary of Buyer, transfers any Adjustable Assets in a Non-Exempted Transfer that is not currently fully taxable for U.S.
federal income tax purposes, then, for purposes of that Taxable Year and all subsequent Taxable Years, if the Alternative Tax Benefit Payment calculated with respect to such Adjustable Assets for a
Taxable Year is larger than the Tax Benefit Payment for that Taxable Year, Section 3.01 shall be applied to such Taxable Year as if all references to the Tax Benefit Payment were instead
references to the Alternative Tax Benefit Payment calculated with respect to such Adjustable Assets, but leaving the Net Benefits Already Paid unchanged. If the foregoing sentence cannot be applied
because Buyer is not able to calculate either the Tax Benefit Payment or the Alternative Tax Benefit Payment with respect to such Adjustable Assets for a relevant Taxable Year (the
"Incalculable Year"), then for purposes of applying Section 3.01 to the
Incalculable Year and all subsequent Taxable Years, (i) Buyer or such Subsidiary shall be treated as having disposed of such Adjustable Asset in a fully taxable transaction on the first day of
the Incalculable Year and (ii) the consideration deemed to be received by Buyer or such Subsidiary shall be equal to the gross fair market value of such Adjustable Asset. For the avoidance of
doubt, each Non-Exempted Transfer of an Adjustable Asset will be subject to this Section 4.04(a)(3) to the extent that it is not currently taxable and to Section 4.04(a)(4)
to the extent that it is currently taxable. 

        (4)   Increases
to Notional Loan Balance. If Buyer, or a Subsidiary of Buyer, transfers any Adjustable Asset with a gross value greater than $10 million in a transfer
that is taxable in whole or in part and is made outside the ordinary course of business, the Notional Loan Balance shall be increased on such date by an amount equal to the product of (i) the
taxable gain (excluding any gain attributable to any increase in the fair market value between the date of such transfer and the most recent Exchange Date) allocated to RTEA with respect to such
transfer (the "Accelerated RTEA Gain" with respect to such transaction) and (ii) the Maximum RTEA Tax Rate. Following any such transaction, Buyer
shall promptly (but in no case more than forty-five (45) days following the date of the transaction) compute the increased Notional Loan Balance and provide RTEA with written notice
thereof. For the avoidance of doubt, each Non-Exempted Transfer of an Adjustable 

14

 

Asset
will be subject to Section 4.04(a)(3) to the extent that it is not currently taxable and to this Section 4.04(a)(4) to the extent that it is currently taxable. 

        (5)   Decreases
to Notional Loan Balance. Upon each Exchange Date, the Notional Loan Balance shall be reduced by the Notional Loan Repayment Amount. Following any such
transaction, Buyer shall promptly (but in no case more than forty-five (45) days following the date of the transaction) compute the decreased Notional Loan Balance and provide RTEA
with written notice thereof. 

        (b)    Change of Control of Subsidiary of Buyer.    If there is a Change of Control with respect to any Subsidiary of
Buyer, other than CPE LLC, in any Taxable Year (other than as a result of a Change of Control of Buyer or CPE LLC), such Subsidiary shall be treated as having disposed of all of its
Adjustable Assets immediately before such Change of Control in transactions that are taxable to the same extent that the disposition of the Subsidiary is taxable, and the provisions of
Section 4.04(a) shall apply to such deemed dispositions. 

        (c)    Change of Control of Buyer or of CPE LLC.    In the event of a Change of Control of Buyer or
CPE LLC, with respect to the Taxable Year of such Change of Control and subsequent Taxable Years, (i) no payments will be due under Section 3.01(a) with respect to Taxable Years
ending after the Change of Control Date; (ii) Buyer or, if applicable, its successor (Buyer or such entity, as appropriate, the "Surviving
Entity") shall not be obligated to make any payments under Section 3.01(c); and (iii) the Surviving Entity shall be obligated to make payments to RTEA in the
amounts and on the dates provided in the Projected Tax Benefit Schedule with respect to Taxable Years ending after such Change
of Control Date, except that each such payment shall be multiplied by the Change of Control Payment Modifier as of such Change of Control Date. Notwithstanding the foregoing, if RTEA owns RTEA Units
or common stock of the Surviving Entity 180 calendar days after the Change of Control of Buyer or CPE LLC, this Agreement shall continue as if there had been no Change of Control of Buyer or
CPE LLC, as applicable. In the event that, after such Change of Control, the credit rating of the Surviving Entity is lower than Buyer's credit rating prior to the events giving rise to the
Change of Control, and this Agreement has not been terminated by the Surviving Entity exercising its right to terminate this Agreement pursuant to Section 4.01(a), the Surviving Entity shall
obtain credit support (which credit support may consist of a pledge of its assets to RTEA to secure payments under this Agreement) sufficient to cause the remaining payments under this Agreement to
have a credit rating at least as high as the rating on the most subordinated outstanding bona fide debt of CPE LLC prior to the events giving rise to the Change of Control. In the event of a
dispute arising under this Section 4.04(c), Buyer and RTEA shall employ the Reconciliation Procedures. In the event of a Change of Control, all references to Buyer herein shall be read as
references to the Surviving Entity. 

        (d)    Change of Structure.    If Buyer changes the structure of CPE LLC or its interest therein in a manner
that diminishes the benefits allocable to RTEA under this Agreement (a "Change of Structure"), including, without limitation, a sale of Adjustable
Assets to a Subsidiary that is treated as a corporation for U.S. federal income tax purposes, then, notwithstanding anything to the contrary herein, the calculation of the payments to be made to RTEA
pursuant to this Agreement shall be made as if no such Change of Structure had occurred. 

 
 

  ARTICLE V    
    
    LATE PAYMENTS    
    

        Section 5.01.    Late Payments.    The amount of all or any portion of any payment or advance not made when due
under the terms of this Agreement, including any Tax Benefit Payment not made to RTEA or Buyer, shall be payable together with any interest thereon, computed at the Default Rate, compounded monthly,
and commencing from the date on which such payment was due and payable; 

15

 

provided,
that such additional interest shall not be deemed liquidated damages and the party that is owed payment shall retain its remedies hereunder. 

 
 

  ARTICLE VI    
    
    PARTICIPATION; CONSISTENCY; COOPERATION    
    

        Section 6.01.    Participation in Buyer's Tax Matters.    Except as otherwise provided herein, Buyer shall have
full responsibility for, and sole discretion over, all tax matters concerning Buyer and its Subsidiaries, including, without limitation, the preparation, filing or amending of any U.S. federal, state,
or local or non-U.S. tax return and the defending of any issues pertaining to taxes, subject to a requirement that Buyer act in good faith in connection with its control of any matter
which is reasonably expected to affect RTEA's rights and obligations under this Agreement. Further, the Buyer shall promptly notify RTEA in writing of and keep RTEA reasonably informed with respect to
the portion of any Buyer Audit the outcome of which is reasonably expected to affect RTEA's rights and obligations under this Agreement, and shall provide RTEA reasonable opportunity to provide
information and other input to Buyer, its Subsidiaries, any consolidated group of which Buyer is a member, and their respective advisors concerning the conduct of any such portion of such Buyer Audit.
RTEA shall have the right to attend in person or by telephone (but not participate in) any Buyer Audit the outcome of which could reasonably be expected to affect the amount of net payments that RTEA
is expected to receive under this Agreement by [$10 million]. Buyer shall not settle or fail to contest any issue pertaining to taxes that is reasonably expected to
affect RTEA's rights and obligations under this Agreement without RTEA's consent, such consent not to be unreasonably withheld. 

        Section 6.02.    Consistency.    Unless there has previously been a Determination to the contrary, RTEA, Buyer,
and Buyer's Subsidiaries agree to report and cause to be reported for all purposes, including U.S. federal, state, local and foreign tax purposes and financial reporting purposes, all
tax-related items, in a manner consistent with this Agreement, including, without limitation, (1) any allocation shown on any Exchange Basis Schedule, (2) the
Section 754 Elections made with respect to any applicable Subsidiaries of Buyer (including that each such election was validly and timely made, whether or not the electing entity was a
Subsidiary of Buyer at the time of such election), and (3) the treatment of any payment made pursuant to Section 3 or Section 4 of this Agreement. Furthermore, the parties agree
to treat any payment made pursuant to Section 3 or Section 4 or this Agreement, other than payments of Imputed Interest, as an adjustment to the purchase price of the RTEA Units acquired
in an Exchange. 

        Section 6.03.    Cooperation.    (a) Each of RTEA and Buyer shall (1) furnish to the other party
in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making any determination or computation necessary or appropriate under this
Agreement, preparing any financial statement, preparing any tax return or contesting or defending any audit, examination or controversy with any Taxing Authority, (2) make itself available to
the other party and its representatives to provide explanations of documents and materials and such other information as the
other party or its representatives may reasonably request in connection with any of the matters described in clause (1) above, and (3) reasonably cooperate in connection with any such
matter. 

        (b)   RTEA
and Buyer will promptly provide to the other a copy of any written communication from or with the IRS or any other Taxing Authority that relates in any respect to
this Agreement or to the treatment of any Exchange or related transaction (including any communication that relates to the allocation shown on any Exchange Basis Schedule). 

        Section 6.04.    Section 754 Elections.    If, at any point, any Subsidiary of Buyer that is a
Partnership does not have a Section 754 Election in effect, Buyer shall cause such Subsidiary of Buyer to make a valid Section 754 Election at the time that such Subsidiary files its Tax
Return for such Taxable Year. 

16

 
 
 

  ARTICLE VII    
    
    MISCELLANEOUS    
    

        Section 7.01.    Notices.    All notices, requests, claims, demands and other communications hereunder shall be
in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile upon confirmation of transmission by the sender's fax machine if sent
on a Business Day (or otherwise on the next Business Day) or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All
notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: 

If
to Buyer, to: 

Cloud
Peak Energy Inc.

General Counsel

505 S. Gillette Avenue

Gillette, WY 82716

(307) 687-6000

Fax: (307) 687-6059 

If
to RTEA, to: 

Legal
Department

4700 Daybreak Parkway

South Jordan, UT 84095 

        Any
party may change its address or fax number by giving the other party written notice of its new address or fax number in the manner set forth above. 

        Section 7.02.    Counterparts.    This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement. 

        Section 7.03.    Entire Agreement; No Third Party Beneficiaries.    This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 

        Section 7.04.    Governing Law.    (a) This Agreement is to be construed in accordance with and governed
by the internal laws of the State of New York without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights and duties of the Parties. 

        (b)   Each
party hereby irrevocably and unconditionally consents to submit to the sole and exclusive jurisdiction of the United States District Court for the Southern District
of New York or, if such court does not have subject matter jurisdiction, the Supreme Court of the State of New York sitting in New York County (the "New York
Courts") for any legal action or other legal proceeding arising out of or relating to this Agreement, or the negotiation, validity or performance of this Agreement, or the 

17

 

transactions
contemplated thereby (and agrees not to commence any legal action or other legal proceeding relating thereto except in such courts). Furthermore, each party: 

          (i)  expressly
and irrevocably consents and submits to the jurisdiction of the New York Courts in connection with any such legal proceeding, including to enforce any
settlement, order or award; 

         (ii)  consents
to service of process in any such proceeding in any manner permitted by the laws of the State of New York, and also agrees that service of process by
registered or certified mail, return receipt requested, at its address specified pursuant to Section 7.01 is sufficient and reasonably calculated to give actual notice; 

        (iii)  agrees
that the New York Courts shall be deemed to be a convenient forum; and 

        (iv)  waives
and agrees not to assert (by way of motion, as a defense or otherwise), in any such legal proceeding commenced in the New York Courts that such party is not
subject personally to the jurisdiction of such court, that such legal proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the
subject matter hereof or thereof may not be enforced in or by such court; and 

        (c)   Except
as otherwise set forth in Section 7.09, in the event of any action or other proceeding relating to this Agreement or the enforcement of any provision of
this Agreement, the prevailing party (as determined by the court) shall be entitled to payment by the non-prevailing party of all costs and expenses (including reasonable attorneys' fees)
incurred by the prevailing party, including any costs and expenses incurred in connection with any challenge to the jurisdiction or the convenience or propriety of venue of proceedings before the New
York Courts. 

        (d)   Each
of the parties hereto hereby waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any legal action or
other legal proceeding directly or indirectly arising out of, under or in connection with this Agreement. Each of the parties hereto (i) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the
other parties hereto have been induced to enter into this Agreement and the transactions contemplated by this Agreement, as applicable, by, among other things, the mutual waivers set forth in this
Section 7.04(d). 

        Section 7.05.    Severability.    If any terms or other provision of this Agreement shall be determined by a
court, administrative agency or arbitrator to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not render the entire Agreement invalid. Rather, this
Agreement shall be construed as if not containing the particular invalid, illegal or unenforceable provision, and all other provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either party. Upon such determination that any term or
other provision is invalid, illegal or unenforceable, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent permitted under applicable Law. 

        Section 7.06.    Successors; Assignment; Amendments; Waivers.    

        (a)   RTEA
may assign its rights and obligations under this Agreement without the prior written consent of Buyer and may pledge or assign its rights under this Agreement in
connection with a financing and the enforcement of the lender's rights thereunder. Notwithstanding the foregoing, if RTEA assigns its rights and obligations under this Agreement to any Person that is
not an Affiliate of RTEA, such assignee shall not have the right to attend certain Buyer Audits that Section 6.01 provides to RTEA; however, a nationally recognized accounting or law firm
retained by such assignee shall have the same right to attend Buyer Audits that Section 6.01 provides to RTEA. 

18

 

        (b)   This
Agreement may only be amended in a writing signed by both Buyer and RTEA. No provision of this Agreement may be waived unless such waiver is in writing and signed
by the party against whom the waiver is to be effective. 

        (c)   All
of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their
respective successors and permitted assigns. Buyer shall, by written agreement, require and cause any direct or indirect successor to all or substantially all of the Adjustable Assets or the business
or assets of Buyer (whether by purchase, merger, consolidation or otherwise) expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Buyer would be
required to perform if no such succession had taken place. If Buyer does not acquire such a written agreement and present it to RTEA before such direct or indirect successor of Buyer succeeds to all
or substantially all of the Adjustable Assets or the business or assets of Buyer, the Surviving Entity shall become obligated to immediately pay to RTEA an amount equal to the present value of all
future payments owed to RTEA under this Agreement, discounted at the Early Termination Rate. 

        Section 7.07.    Titles and Subtitles.    The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this Agreement. 

        Section 7.08.    Resolution of Disputes.    Other than those disputes that are subject to Section 7.09,
any and all disputes arising out of or relating to this Agreement (including any claim of fraud, misrepresenation or fraudulent inducement or any question of validity or effectof this Agreement) shall
be resolved in accordance with Section 9.10 of the Master Separation Agreement. 

        Section 7.09.    Reconciliation.    In the event that Buyer and RTEA are unable to resolve a disagreement with
respect to the matters governed by Sections 2.01, 2.02, 2.03, 2.04, 2.05, 4.02, and 4.04 within the relevant period designated in this Agreement ("Reconciliation
Dispute"), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the "Expert") in
the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner in a nationally recognized accounting firm or law firm, and the Expert shall not, and the firm
that employs the Expert shall not, have any material relationship with Buyer, RTEA or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen
(15) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by JAMS (formerly Judical Aribtration and Mediation
Services, Inc.). The Expert shall resolve any matter relating to an Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within 30 calendar
days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter
has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement is due or any Tax Return
reflecting the subject of a disagreement is due, such payment shall be made on the date prescribed by this Agreement and such Tax Return may be filed as prepared by Buyer, subject to adjustment or
amendment upon resolution. Each of Buyer and RTEA, respectively, shall be entitled to reimbursement for the reasonable out-of-pocket costs and expenses that it incurs in
connection with such proceeding (including third-party out of pocket costs and expenses relating to the engagement of such Expert or amending any Tax Return) from the other party to the extent that
the result reached by the Expert reflects the position advocated by Buyer or RTEA, respectively. By way of example, if RTEA asserts that it is entitled to a Tax Benefit Payment of $200 with respect to
a particular Taxable Year and Buyer asserts that RTEA is entitled to a Tax Benefit Payment of $100 with respect to such Taxable Year, and the Expert concludes that RTEA is entitled to a Tax Benefit
Payment of $180 with respect to such Taxable Year, RTEA shall be entitled to reimbursement of 80% of the reasonable out-of-pocket costs and expenses that it incurred in
connection with such proceeding and Buyer shall be entitled to reimbursement of 20% of the reasonable out-of-pocket costs and expenses that it incurred in connection with such
proceeding. 

19

 

Each
party may offset its payment obligations pursuant to the previous two sentences against the payment that it is entitled to receive pursuant to the previous two sentences. Notwithstanding the
foregoing, if there is a dispute under Section 4.02 subject to these Reconciliation Procedures and the Early Termination Notice and Early Termination Schedule are voided pursuant to
Section 4.03(a), Buyer shall pay all out-of-pocket costs and expenses incurred by RTEA in engaging the Expert and all other reasonable
out-of-pocket costs and expenses incurred by RTEA in connection with the proceeding hereunder. Any dispute as to (i) whether a dispute is a Reconciliation Dispute within
the meaning of this Section 7.09, (ii) the extent that the result reached by the Expert reflects the positions advocated by Buyer and RTEA, respectively, or (iii) the amount of
the reasonable costs and expenses incurred in connection with such proceeding, shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of
the Expert pursuant to this Section 7.09 shall be binding on Buyer and RTEA and may be entered and enforced in any court having jurisdiction. 

        Section 7.10.    Withholding.    Buyer shall be entitled to deduct and withhold from any payment payable
pursuant to this Agreement such amounts as Buyer is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of Tax Law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by Buyer, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to RTEA. 

        Section 7.11.    Present and Future Values.    Present and future values shall be computed on the basis of
annual compounding (with compounding occurring on the last calendar day of each year). 

        Section 7.12.    Confidentiality.    RTEA agrees to keep information that it learns about CPE's business and
tax matters by virtue of this Agreement confidential. RTEA shall have no obligation to keep any information confidential to the extent that (i) any such information is or becomes publicly
available (except as a result of an act of RTEA in violation of this Agreement) or is generally known to the business community or (ii) RTEA reasonably believes that it is legally compelled to
disclose such information to any tribunal, agency, Governmental Authority, or self-regulatory organization, including, but not limited to, the New York Stock Exchange, or else stand liable
for contempt or suffer other censure or financial penalty or is otherwise required by Law to disclose such information. Notwithstanding anything to the contrary herein, RTEA may disclose to any and
all Persons, without limitation of any kind, the tax treatment and tax structure of Buyer and its Subsidiaries and any of its transactions, and all materials of any kind (including opinions or other
tax analyses) that are provided to RTEA relating to such tax treatment and tax structure. 

        Section 7.13.    Non-Effect of Other Tax Receivable Agreements.    RTEA and Buyer agree that if
Buyer or any of its Subsidiaries enters into any other agreement that obligates Buyer or any of its Subsidiaries to make payments to another party in exchange for tax benefits conferred upon Buyer or
any of its Subsidiaries, such tax benefits and such payments shall be ignored for all purposes of this Agreement, including for purposes of calculating the Actual Buyer Tax Liability and the
Hypothetical Buyer Tax Liability. 

[Remainder
of Page Intentionally Left Blank] 

20

 

        IN
WITNESS WHEREOF, Buyer and RTEA have duly executed this Agreement as of the date first written above. 

 

 

					
	RIO TINTO ENERGY AMERICA INC.	 	 
	
 By:	
 	

 	
 	

 
	 	 	

  Name:

Title:	 	 
	

CLOUD PEAK ENERGY INC.	
 	

 
	
 By:	
 	

 	
 	

 
	 	 	

  Name:

Title:

	 	 

 

 21

QuickLinks

Exhibit 10.31

Table of Contents

ARTICLE I DEFINITIONS

ARTICLE II DETERMINATION OF EXCHANGE BASIS SCHEDULE AND REALIZED TAX BENEFIT

ARTICLE III TAX BENEFIT PAYMENTS

ARTICLE IV TERMINATION AND CHANGE OF CONTROL

ARTICLE V LATE PAYMENTS

ARTICLE VI PARTICIPATION; CONSISTENCY; COOPERATION

ARTICLE VII MISCELLANEOUSQuickLinks
 -- Click here to rapidly navigate through this document

 
 

  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 or any Subsidiary; (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 or service to the
Company or any Subsidiary 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 Resources 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 Resources LLC or (B) any Related Entity (as hereinafter defined) of the Company or Cloud
Peak Energy Resources 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 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; 

2

 

                                        (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 Resources 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. 

                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. 

3

 

                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; provided, however, that
the Fair Market Value of any Shares subject to Options or Awards issued in connection with the Initial Public Offering shall be the price offered to the public in the Initial Public Offering. 

                        (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 Resources LLC, entered into
as of            , 2009, by and 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. 

4

 

                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 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 

5

 

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. 

                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; 

6

 

                        (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 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 3,400,000, no more than 2,000,000 of which may be granted as Incentive
Stock Options. 

7

 

                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 1,500,000. 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 500,000. 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 $6,000,000. 

                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 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. 

8

 

                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 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 

9

 

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 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. 

10

 

                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, 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 

11

 

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. 

                        (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. 

12

 

                        (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. 

                        (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 9.1(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 

13

 

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. 

                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 

14

 

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 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, (xxv) tons shipped, (xxvi) tire life improvement,
(xxvii) increased truck, dragline or shovel OEE, (xxviii) effective equipment utilization, (xxix) achievement of savings from business improvement projects, (xxx) capital
project deliverables, (xxxi) performance against environmental targets, (xxxii) safety performance and/or incident rate, (xxxiii) coal pricing targets, (xxxiv) coal sales
targets, (xxxv) human resources management targets, including medical cost reductions and time to hire, (xxxvi) achievement of warehouse and purchasing performance measurements,
(xxxvii) leverage ratios, including debt to equity and debt to total capital, (xxxviii) individual performance criteria (other than for covered employees as defined in
Section 162(m) of the Code) or (xxxix) any combination or derivative 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 

15

 

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 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 

16

 

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 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 

17

 

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 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 

18

 

                        (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.  

	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. 

19

 

                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. 

20

QuickLinks

Exhibit 10.32

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