Exhibit 10.4

 

EXECUTION COPY

 

EMPLOYEE MATTERS AGREEMENT

 

THIS EMPLOYEE MATTERS AGREEMENT (this “Agreement”) is made and entered into as
of November 19, 2009 by and among CLOUD PEAK ENERGY RESOURCES LLC (“CPE LLC”), a
Delaware limited liability company, CLOUD PEAK ENERGY SERVICES COMPANY, a
Delaware corporation (“CPESC”, and together with CPE LLC and their respective
subsidiaries, the “CPE GROUP”), CLOUD PEAK ENERGY INC., a Delaware corporation
(“CPE”), RIO TINTO AMERICA INC, a Delaware corporation (“RTA”), and RIO TINTO
ENERGY AMERICA INC., a Delaware corporation (“RTEA”) (RTA and RTEA, each a
“Company” and collectively, the “Companies”) and, solely for purposes of
Section 3.2 of this Agreement, RIO TINTO PLC, a corporation incorporated in
England and Wales (“RIO”) and RIO TINTO LIMITED (“RIO LTD”), an Australian
corporation.  CPE LLC, CPESC, CPE, each Company, RIO and RIO LTD are sometimes
referred to herein separately as a “Party” and together as the “Parties.”

 

RECITALS

 

WHEREAS, as contemplated by the terms of the Limited Liability Company Operating
Agreement of CPE LLC dated as of  , 2009 (the “LLC Agreement”), the Companies,
CPE, CPESC and the members of the CPE Group have approved this Agreement; and

 

WHEREAS, the Parties have agreed to enter into this Agreement to allocate
between them assets, liabilities and responsibilities with respect to certain
employee compensation, benefit plans and programs, and certain employment
matters with respect to their employees.

 

NOW, THEREFORE, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:

 

1.           Definitions.

 

The following terms shall have the indicated meaning:

 

“Affiliate” means with respect to a Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person. As used in this definition, the word
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.  For purposes
of clarity, neither CPE nor any member of the CPE Group shall be considered an
Affiliate of any of the Companies and none of the Companies or RIO or RIO LTD
shall be considered an Affiliate of CPE or any member of the CPE Group.

 

“Agreement” is defined in the introductory paragraph.

 

“Benefit Plans” means,  with respect to an entity, any “employee pension benefit
plan” (as defined in Section 3(2) of ERISA), “employee welfare benefit plan” (as
defined in Section 3(1) of ERISA) and any other plan or arrangement of any kind,
whether qualified or non-qualified,

 

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relating to stock options, incentive compensation, bonus, profit sharing,
retirement, pension, deferred compensation, severance benefits, leave of
absence, vacation, life, health, accident, disability, sick pay, workers’
compensation or other insurance severance, separation, fringe or any other
benefits.

 

“COBRA” means the continuation coverage requirements for group health plans
under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” means the common stock, $0.01 par value per share, of CPE.

 

“Companies” is defined in the introductory paragraph.

 

“CPE” is defined in the introductory paragraph.

 

“CPE Group” is defined in the introductory paragraph.

 

“CPE LLC” is defined in the introductory paragraph.

 

“CPESC” is defined in the introductory paragraph.

 

“Effective Date” means the date on which the Underwriting Agreement is executed
and delivered by each of the Parties thereto.

 

“Employment Related Obligations” means all claims, liabilities and obligations,
whether contingent or otherwise, fixed or absolute, known or unknown, present or
future or otherwise, arising from an employment relationship or an alleged
employment relationship relating to the Executive Employees and the Transferred
Employees, including compensation for services (and related employment and
withholding taxes), workers’ compensation or similar benefits and payments on
account of occupational illnesses and injuries, provision of leave under the
Family and Medical Leave Act or similar Law, and claims, liabilities and
obligations arising out of any such Executive Employee’s or Transferred
Employee’s employment, terms of employment, transfers, compensation, termination
of employment, harassment or employee benefits.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means, with respect to any Person, each business or entity
that is a member of a “controlled group of corporations,” under “common control”
or a member of the “affiliate service group” with such Person within the meaning
of Section 414(b), (c) or (m) of the Code or required to be aggregated with such
Person under Section 414(o) of the Code or under “common control” with such
Person within the meaning of Section 4001(a)(14) of ERISA.

 

“Executive Employees” is defined in Section 2.1(a).

 

“FSA Cost Invoice” is defined in Section 4.11.

 

“Health and Welfare Plans” is defined in Section 4.1.

 

“Health Plan Continuation Period” is defined in Section 4.1.

 

“Health Plan Cost Invoice” is defined in Section 4.3.

 

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“HIPAA” shall mean the Health Insurance Portability and Accountability Act of
1996, as amended.

 

“Initial Public Offering” means the initial public offering registered under the
Securities Act of the Common Stock.

 

“Law” or “Laws” means all applicable federal, state, tribal and local laws
(statutory or common), rules, ordinances, regulations, grants, concessions,
franchises, licenses, orders, directives, judgments, decrees, restrictions and
other similar requirements, whether legislative, municipal, administrative or
judicial in nature.

 

“LLC Agreement” is defined in the Recitals.

 

“Option One Benefits” is defined in Section 4.9.

 

“Person” means an individual, corporation, joint venture, partnership, limited
partnership, limited liability company, trust, estate, business trust,
association, governmental authority or any other entity.

 

“RIO” is defined in the introductory paragraph.

 

“RIO LTD” is defined in the introductory paragraph.

 

“Rio Tinto Equity Compensation Plans” means the (i) Rio Tinto plc Share Option
Plan 2004, (ii) Rio Tinto Limited Share Option Plan 2004, (iii) Rio Tinto plc
Management Share Plan 2007, (iv) Rio Tinto Limited Management Share Plan 2007,
(v) Rio Tinto plc Mining Companies Comparative Plan 2004, (vi) Rio Tinto Limited
Mining Companies Comparative Plan 2004, (vii) Rio Tinto plc Share Savings Plan,
(viii) Rio Tinto Bonus Deferral Plan 2008, and (ix) Rio Tinto Share Savings
Plan.

 

“Rio Tinto Non-Equity Incentive Compensation Plans” means the (i) Rio Tinto
Short Term Incentive Plan, (ii) Rio Tinto Energy America Quarterly Incentive
Plan and (iii) Rio Tinto Energy America Retention Bonus.

 

“RTA” is defined in the introductory paragraph.

 

“RTA Flex Plans” is defined in Section 4.10.

 

“RTA Pension Plan” means the Rio Tinto America, Inc. Retirement Plan.

 

“RTA’s Retiree Benefits” means those benefits provided to eligible retirees
under the Rio Tinto America Inc. Health and Welfare Plan in effect from time to
time.

 

“RTA Savings Plan” means the Rio Tinto America, Inc. 401(k) Savings Plan and
Investment Partnership Plan.

 

“Rio Tinto SERP” means the Rio Tinto America Inc. Supplemental Executive
Retirement Plan.

 

“Rio Tinto NQ Saving Plan” means the Non-Qualified 401(k) component of the Rio
Tinto America Inc. Executive Deferred Compensation Plan.

 

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“Rio Tinto NQIPP” means the Non-Qualified Investment Partnership Plan component
of the Rio Tinto America Inc. Executive Deferred Compensation Plan.

 

“RTEA” is defined in the introductory paragraph.

 

“Senior Executives” shall mean the chief executive officer of CPE and any
individual employed by any of the Companies, CPESC, RIO or RIO LTD prior to the
Effective Date that becomes an officer of CPE or any member of the CPE Group
reporting directly to the chief executive officer of CPE.

 

“Transferred Employees” means (i) those employees of the Companies and their
Affiliates listed on Exhibit A and identified as Transferred Employees who
accept offers of employment from any member of the CPE Group as of or prior to
the Effective Date; provided any such employee on long-term disability pursuant
to any of the Benefit Plans of Rio Tinto shall not become a Transferred Employee
and (ii) those individuals employed by any entity that is or becomes a member of
the CPE Group as of the Effective Date.

 

“Underwriting Agreement” means the underwriting agreement entered into among CPE
and the several underwriters of the Initial Public Offering.

 

2.           Employment and Employee Benefits.

 

2.1.          Employment; Cooperation.

 

(a)           Effective as of the Effective Date, CPE shall assume or retain, as
applicable, responsibility as employer for those employees of the Companies and
their Affiliates listed on Exhibit B and identified as Executive Employees who
accept offers of employment from CPE as of or prior to the Effective Date (the
“Executive Employees”) and the applicable member of the CPE Group shall assume
or retain, as applicable, responsibility as employer of the Transferred
Employees; provided that nothing contained herein shall be construed to limit
the ability of the CPE Group, CPE or the Companies or any of their respective
subsidiaries to terminate the employment of any of their employees at any time
and for any or no reason.  Other than with respect to the Rio Tinto Equity
Compensation Plans, the assumption or retention of responsibility as employer
described in this Section 2.1(a) shall not, of itself, constitute a severance or
a termination of employment under any plan of severance or of income extension
maintained by the Companies, and no such severance, separation or termination
shall be deemed to occur.  The CPE Group shall indemnify the Companies and hold
the Companies harmless from and against any damages, liabilities, costs or
expenses which may be incurred or suffered by any of the Companies relating to,
or arising from, any individual listed on Exhibit A or Exhibit B becoming
entitled to separation pay, benefit continuation or eligibility for enhanced
retirement benefits (other than as provided in Section 5.2) on or after the
Effective Date by reason of (i) the transfer of employment from any of the
Companies to CPE or any member of the CPE Group, (ii) any termination of
employment arising from the failure of any such individual to accept an offer of
employment with CPE or any member of the CPE Group or (iii) any termination of
employment of an such individual that has become an Executive Employee or a
Transferred Employee occurring after the Effective Date.

 

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(b)           To the maximum extent permitted under applicable Law, the
Companies, the CPE Group and CPE shall share and shall cause each of their
respective Affiliates to share, with each other and their respective agents and
vendors all participant information reasonably necessary for the efficient and
accurate administration of each of the Benefit Plans of the Companies and the
CPE Group.  The Companies, the CPE Group, CPE and their respective authorized
agents shall, subject to applicable Law on confidentiality, be given reasonable
and timely access to, and may make copies of, all information relating to the
subjects of this Agreement in the custody or control of the other parties, to
the extent necessary for such administration.  To the extent a party requests
information pursuant to this section that cannot be shared lawfully, the parties
will cooperate, to the extent practical and reasonable, to offer assistance to
the other.

 

(c)           Except as otherwise explicitly provided herein, effective as of
the Effective Date, the Companies shall be responsible for, and do hereby, for
themselves, and will cause each of their Affiliates and subsidiaries to, and
their respective successors and assigns to, relinquish, release, forever
discharge and indemnify and hold harmless CPE and the CPE Group and each member
of the CPE Group’s respective Affiliates, subsidiaries, assigns, current and
former directors, officers, employees, agents and representatives (including,
without limitation, any such person who may have served on the investment
committee for the RTA Savings Plan) to the same extent such indemnification is
provided to current directors, officers, employees, agents and representatives
of the Companies, in each case, from (i) all Employment Related Obligations
arising prior to the Effective Date, and whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed before the
Effective Date and (ii) any damages, costs, expenses, losses or liabilities to
the extent arising from, relating to or otherwise in respect of any third party
claims relating to any investment vehicle under the RTA Savings Plan.

 

(d)           Except as otherwise explicitly provided herein, effective as of
the Effective Date, the members of the CPE Group shall be responsible for, and
do hereby, for themselves, and will cause each of their Affiliates and
subsidiaries to, and their respective successors and assigns to, relinquish,
release, forever discharge and indemnify and hold harmless the Companies and
each of their respective Affiliates, subsidiaries, assigns, current and former
directors, officers, employees, agents and representatives to the same extent
such indemnification is provided to directors, officers, employees, agents and
representatives of the CPE Group, in each case, from all Employment Related
Obligations arising on or after the Effective Date and whether arising under any
contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or after the Effective Date.

 

(e)           The Companies shall indemnify CPE and the CPE Group and hold CPE
and the CPE Group harmless from and against any damages, liabilities, costs or
expenses which may be incurred or suffered by CPE or any member of the CPE Group
as a result of any such entity being held jointly and/or severally liable, on,
before or after the Effective Date by reason

 

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of being considered to have been an ERISA Affiliate of any of the Companies, RIO
or RIO LTD, and each of their Affiliates and subsidiaries before the Effective
Date.

 

(f)            The CPE Group shall reimburse RIO or RIO LTD for any reasonable,
fees, direct costs and expenses associated with immigration and tax services
actually incurred by such entities after the Effective Date as result of any of
the Executive Employees or Transferred Employees being assigned by RIO or RIO
LTD to the Companies.  Notwithstanding anything in Section 6 to the contrary,
RIO and RIO LTD shall be considered 3rd party beneficiaries to this
Section 2.1(f).

 

3.             Incentive Plans.

 

3.1.        Non-Equity Incentive Plans.  Executive Employees and Transferred
Employees who participated in Rio Tinto’s Non-Equity Incentive Compensation
Plans shall receive the full amount of their bonus under such plans for the
performance period in which the Effective Date occurs to the extent that the
objectives established under such plans are satisfied at the end of the relevant
performance period, as determined by the applicable Company in accordance with
past practice and the terms and conditions of the applicable Rio Tinto
Non-Equity Incentive Compensation Plans (the “Bonus Amount”).  The Companies
shall be liable for the portion of the Bonus Amount equal to the number of days
in the performance period prior to the Effective Date divided by the number of
days in the performance period and the CPE Group (or CPE) shall be liable for
the portion of the Bonus Amount equal to the number of days in the performance
period on and after the Effective Date divided by the number of days in the
performance period.  At the same time that payments are made to all other
participants in such Rio Tinto Non-Equity Incentive Compensation Plans, the
Companies shall provide funds to the CPE Group equal to the Companies pro rata
share of the Bonus Amount as determined pursuant to the preceding sentence and
the CPE Group (or CPE) shall make the payments to Executive Employees and
Transferred Employees.  Notwithstanding anything in this Section 3.1 to the
contrary, with respect to any discretion under the terms of the Rio Tinto
Non-Equity Incentive Compensation Plans that may be exercised under the terms of
the Rio Tinto Non-Equity Incentive Compensation Plans by the Companies, such
discretion with respect to the Bonus Amounts for Senior Executives will be
exercised by the Companies prior to the Effective Date but otherwise in
accordance with past practice and the terms and conditions of the applicable Rio
Tinto Non-Equity Incentive Compensation Plans.  Prior to the Effective Date, the
Companies shall inform the CPE Group of its decision and the CPE Group shall,
prior to the Effective Date, inform the Senior Executives that such decision has
been made which, for the avoidance of doubt, is to make clear that no
discretionary action by the Companies taken after the Effective Date will have
an impact on the Bonus Amount for the Senior Executives.

 

3.2.        Equity Incentive Plans.  RIO and RIO LTD hereby agree that, for
purposes of the Rio Tinto Equity Compensation Plans, each Executive Employee and
Transferred Employee shall be deemed to have terminated employment with his or
her respective RTA related employer due to his or her employment company ceasing
to be under the control of the company and such Executive Employee or
Transferred Employee shall be paid out in accordance with the applicable plan
terms.

 

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4.           Health and Welfare Benefit Plans.

 

4.1.          Effective no later than January 1, 2010, the CPE Group (or CPE)
shall adopt such health and welfare plans as it determines for the benefit of
the Executive Employees and the Transferred Employees.  From the Effective Date
until December 31, 2009, or such earlier date that the CPE Group (or CPE) adopts
the health and welfare plans described above, (the “Health Plan Continuation
Period”), the Executive Employees and the Transferred Employees and, subject to
the satisfaction of the applicable eligibility requirements, any person hired by
CPE or the CPE Group during the Health Plan Continuation Period (and, in each
case, their respective beneficiaries and dependents) will be eligible to
continue to participate in the health and welfare plans of the Companies listed
on Exhibit C (the “Health and Welfare Plans”) on the same terms and conditions
of the applicable Health and Welfare Plan as in effect immediately prior to the
Effective Date.  Prior to the Effective Date, the Companies, CPE and the CPE
Group shall take all commercially reasonable actions required (including
adopting certain amendments of the Health and Welfare Plans and the approval by
the authorized boards or committees (or authorized officers) of CPE and the
members of the CPE Group of the adoption of the Health and Welfare Plans and the
execution of an adoption agreement effecting such adoption, if requested by the
Companies) to provide that CPE and the members of the CPE Group shall adopt the
Health and Welfare Plans so that CPE and the members of the CPE Group will
become participating employers in the Health and Welfare Plans during the Health
Plan Continuation Period.   During the Health Plan Continuation Period, CPE and
the members of CPE Group shall provide, or cause to be provided, to the
Companies or the administrator, record-keeper or trustee of the Health and
Welfare Plans, all information within its control that is reasonably required to
administer and operate the Health and Welfare Plans with respect to the
Executive Employees and the Transferred Employees during the Health Plan
Continuation Period.

 

4.2.          The Companies shall be responsible for complying with the health
care continuation requirements of COBRA, the certificate of creditable coverage
requirements of HIPAA, and the corresponding provisions of their Health and
Welfare Plans with respect to Executive Employees and Transferred Employees and
their covered dependents who incur a COBRA qualifying event or loss of coverage
under such Health and Welfare Plans before January 1, 2010, provided, that the
CPE Group shall be responsible for the costs thereof (net of participant
contributions actually paid) with respect to any Executive Employee or
Transferred Employee who incur a qualifying event during the Health Plan
Continuation Period.  The CPE Group shall be responsible for complying with the
health care continuation requirements of COBRA, the certificate of creditable
coverage requirements of HIPAA, and the corresponding provisions of their health
and welfare plans with respect to Executive Employees and Transferred Employees
and their covered dependents who incur a COBRA qualifying event or loss of
coverage at any time after January 1, 2010.

 

4.3.          No later than 30 days after the date on which any invoice
(including supporting documentation in reasonable detail) (a “Health Plan Cost
Invoice”) from the Companies or any of the Health and Welfare Plans has become
final and binding as provided below, the CPE Group shall reimburse the Companies
or any of the Health and Welfare Plans, as applicable, for any reasonable fees
and direct costs and expenses actually incurred by the Companies or any of

 

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the Health and Welfare Plans for the continued administration and operation by
the Companies of the Health and Welfare Plans after the Effective Date with
respect to the Executive Employees and the Transferred Employees (net of
participant contributions actually paid), including any such amounts resulting
from a COBRA qualifying event or loss of coverage affecting an Executive
Employee or Transferred Employee during the Health Plan Continuation Period. 
The Health Plan Cost Invoice shall include any per participant fee charged by
the record-keeper for each participating Executive Employee and Transferred
Employee and any other incremental costs associated with the continued
participation by the Executive Employees and the Transferred Employees in the
Health and Welfare Plans of the Companies after the Effective Date.  The CPE
Group shall cooperate with the Companies in making all filings or reports
required under applicable law and in distributing any employee communications or
materials to the Executive Employees and the Transferred Employees.

 

4.4.          The CPE Group shall indemnify and hold harmless the Companies and
their respective directors, officers, employees, agents and representatives, and
the Health and Welfare Plans and their fiduciaries, from and against any costs,
expenses, losses or other liabilities (net of participant contributions actually
paid) to the extent arising from, relating to or otherwise in respect of (A) the
participation of the Executive Employees and the Transferred Employees in such
Health and Welfare Plans during the Health and Welfare Plan Continuation Period,
(B) the responsibilities of the Companies to comply with the health care
continuation requirements of COBRA, the certificate of creditable coverage
requirements of HIPAA, and the corresponding provisions of the Health and
Welfare Plans with respect to Executive Employees and Transferred Employees and
their covered dependents who incur a COBRA qualifying event or loss of coverage
after the Effective Date and before January 1, 2010, (C) the adoption by CPE and
the members of the CPE Group of the Health and Welfare Plans and (D) CPE’s and
the members of the CPE Group’s status as participating employers under such
Health and Welfare Plans; provided, that no indemnification by the CPE Group
shall be required, and the Companies shall indemnify and hold harmless CPE and
the CPE Group and their directors, officers, employees, agents and
representatives from and against any such costs, expenses, losses or other
liabilities, to the extent that such costs, expenses, losses or other
liabilities result from the willful misconduct or material breach of fiduciary
duty of any of the Companies, or any of their respective directors, officers or
employees, in the maintenance or administration of the Health and Welfare Plans.

 

4.5.          Nothing in this Agreement shall be deemed to limit the Companies’
or the CPE Group’s right to amend and /or terminate any of the Benefit Plans of
the Companies or the Benefit Plans of the CPE Group, as applicable.

 

4.6.          Effective as of the end of the Health Plan Continuation Period,
the CPE Group shall provide each Executive Employee and Transferred Employee
with credit for all service with the Companies for vesting and eligibility
purposes only under each of its Benefits Plans in which such Executive Employee
or Transferred Employee is eligible to participate, except to the extent that
such service credit would result in a duplication of benefits with respect to
the same period of service with the Companies.  With respect to each Benefit
Plan provided by any member of the CPE Group that is a health and welfare plan,
as of the end of the Health Plan Continuation Period the CPE Group shall
(i) waive all limitations as to preexisting conditions,

 

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exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Executive Employees and Transferred Employees,
provided that if such plan is provided under an insured arrangement, such waiver
will occur only to the extent required by Law or otherwise permitted under the
applicable insurance contract or agreements, and (ii) for the year in which the
Health Plan Continuation Period ends, provide each Executive Employee and
Transferred Employee with credit for any co-payments and deductibles paid prior
to the end of the Health Plan Continuation Period in satisfying any applicable
deductible or out-of-pocket requirements under such group health.

 

4.7.          Except as otherwise provided in this Agreement, none of the
Companies shall have liability under any Health and Welfare Plan with respect to
any claim incurred on or after the Effective Date in respect of any Executive
Employee or Transferred Employee.  Neither CPE nor any member of the CPE Group
shall have any liability under any Health and Welfare Plan for expenses incurred
or services rendered with respect to any claim incurred prior to the Effective
Date in respect of any Executive Employee or Transferred Employee.

 

4.8.          For purposes of this Section 4, a claim shall be deemed incurred
when the event occurs or condition arises giving rise to the claim which, in the
case of claims under medical, dental, hospitalization and vision benefits, will
be deemed to occur when the applicable expense is incurred or the service
provided.

 

4.9.          Effective as of January 1, 2010, the CPE Group shall assume
responsibility for operation of the welfare benefit program consisting of health
reimbursement accounts known as “Option One” arising from benefits originally
provided in 2004 and 2005 to Executive Employees and Transferred Employees (the
“Option One Benefits”).  No later than 30 days after the date on which any
invoice (including supporting documentation in reasonable detail) from the
Companies has become final and binding, the CPE Group shall reimburse the
Companies for any reasonable fees and direct costs and expenses actually
incurred by the Companies for the continued administration and operation by the
Companies of the Option One Benefits during the Health Plan Continuation Period.

 

4.10.        Without limiting the foregoing, the CPE Group shall immediately,
and in any event within ten (10) business days after receipt by the CPE Group of
notice from the Companies of a claim for indemnification hereunder, fully
indemnify the Companies from any claim or demand made after the Effective Date,
or liability assumed hereunder (including all reasonable fees and expenses
incurred by the Companies arising out of or relating to the Option One Benefits)
regardless of when the event giving rise to such claim or demand occurred;
provided, however, that no indemnification by the CPE Group shall be required,
to the extent that such claim was the result of the willful misconduct or
material breach of fiduciary duty of any of the Companies, or any of their
respective directors, officers or employees, in the maintenance or
administration of the Option One Benefits.

 

4.11.        The Companies, CPE and the members of the CPE Group agree that, as
of the Effective Date through the end of the Health Plan Continuation Period,
with respect to any Benefit Plan of the Companies that has a flexible spending
account arrangement, Executive Employees and Transferred Employee will continue
to participate in such Benefit Plans (the

 

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“RTA Flex Plans”).  During the Health Plan Continuation Period, the CPE Group
shall provide, or cause to be provided, to the Companies or the record-keepers
or trustees of the RTA Flex Plans all information within its control that is
reasonably required to administer and operate the RTA Flex Plans with respect to
the Executive Employees and Transferred Employees during the Health Plan
Continuation Period.  No later than 30 days after the date on which any invoice
(including supporting documentation in reasonable detail) (an “FSA Cost
Invoice”) from the Companies or the record-keepers of the RTA Flex Plans has
become final and binding as provided below, the CPE Group shall reimburse the
Companies or the RTA Flex Plans for any reasonable fees and direct costs and
expenses actually incurred by the Companies or by the RTA Flex Plans for the
continued administration and operation by the Companies of the RTA Flex Plans
with respect to the Executive Employees and the Transferred Employees (net of
participant contributions actually paid), including, any per participant fee
charged by the record-keepers for each participating Executive Employee and
Transferred Employee during the Health Plan Continuation Period and any other
incremental costs directly associated with the continued participation by the
Executive Employees and the Transferred Employees in the RTA Flex Plans during
the Health Plan Continuation Period.  The CPE Group shall cooperate with the
Companies in making all filings or reports required under the Code or ERISA,
including, the Form 5500 for the 2009 plan year, and in distributing any
employee communications or materials to the Executive Employees and the
Transferred Employees.  The Companies shall indemnify and hold harmless the
Companies and their respective directors, officers, employees, agents and
representatives, and the RTA Flex Plans and its fiduciaries from and against any
costs, expenses, losses or other liabilities (net of participant contributions
actually paid) to the extent arising from, relating to or otherwise in respect
of (A) the participation of the Executive Employees and the Transferred
Employees in the RTA Flex Plans during the Health Plan Continuation Period,
(B) the adoption by CPE and the members of the CPE Group of the RTA Flex Plans
and (C) CPE’s and the members of the CPE Group’s status as participating
employers under the RTA Flex Plans; provided, that no indemnification by the CPE
Group shall be required, and the Companies shall indemnify and hold harmless the
CPE Group and its directors, officers, employees, agents and representatives
from and against any such costs, expenses, losses or other liabilities, to the
extent that such costs, expenses, losses or other liabilities result from the
willful misconduct or material breach of fiduciary duty of the Companies, or any
of their respective directors, officers or employees, in the maintenance or
administration of the RTA Flex Plans.

 

4.12.        CPE and the members of the CPE Group shall cease to be
participating employers in the Health and Welfare Plans, as well as the RTA Flex
Plans, on the last day of the Health Plan Continuation Period.

 

5.           Retirement Plans.

 

5.1.          All benefits accrued on or before the Effective Date in respect of
all Executive Employees and Transferred Employees who are participants in the
RTA Pension Plan and the Rio Tinto SERP shall be “locked and frozen” as of the
Effective Date and the Companies shall retain sole liability for the payment of
such benefits as and when such participants become eligible under such plans. 
For purposes of this Section, the term “locked and frozen” means that Executive
Employees and Transferred Employees who are plan participants shall retain their

 

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accrued benefits under the RTA Pension Plan and Rio Tinto SERP as of the
Effective Date but no additional benefit accruals with respect to service on and
after the Effective Date will be provided under the respective plans following
the Effective Date.  No later than the Effective Date, the Companies shall amend
the RTA Pension Plan to ensure that all Executive Employees and Transferred
Employees who are participants in such plans as of the Effective Date shall
become fully vested in their accrued benefits.  Following the Effective Date the
Executive Employees and Transferred Employees who participate in the cash
balance portion of the RTA Pension Plan shall continue to accrue additional
interest credits to their cash balance accounts for benefit accrual purposes in
accordance with the RTA Pension Plan.

 

5.2.          Subject to the right of RTA to amend, modify, terminate or
otherwise change the provisions of the RTA Retiree Benefits in common with all
other affected employees, all Executive Employees and Transferred Employees who
will have had at least 10 years of service with any of the Companies and have
attained at least age 55, in each case, as of the Effective Date will be treated
as if they had retired from the Companies as of the Effective Date and will be
entitled to receive the RTA Retiree Benefits.  Subject to the right of the CPE
Group to amend, modify, terminate or otherwise change the provisions of its
retiree benefits, the CPE Group will offer retiree health benefits for all
Executive Employees and Transferred Employees from retirement through age 65. 
Executive Employees and Transferred Employees will be granted credit for all
service with the Companies for purposes of eligibility.  At the time of
retirement, and subject to Section 4.2, Executive Employees and Transferred
Employees who satisfy the age and service requirements set forth in the first
sentence of this Section 5.2 with respect to RTA’s Retiree Benefits will have
the option of choosing whether to receive benefits under RTA’s Retiree Benefits
or pursuant to the plan established by the CPE Group pursuant to this
Section 5.2, but may not participate in both plans.

 

5.3.          No later than the Effective Date, RTA shall cause the RTA Savings
Plan,  Rio Tinto NQ Savings Plan and Rio Tinto NQIPP to be amended, to the
extent necessary, in order to (i) provide that the Executive Employees and
Transferred Employees shall be fully vested in their accounts under such plans
and (ii) permit such individuals to elect to the extent permitted by Law to have
their interest in the RTA Savings Plan, including any participant loan balances,
rolled over to a savings plan established or maintained by the CPE Group at the
discretion of the participant.  As of the Effective Date, all employee
contributions by the Executive Employees and the Transferred Employees and
obligations of any of the Companies to make contributions in respect of such
employees (other than in respect to periods prior to the Effective Date) under
the RTA Savings Plan shall cease.  The Companies will not require any Executive
Employee or Transferred Employees to repay any participant loan balances earlier
than ninety (90) days following the Effective Date if such loan would not
otherwise be payable within such ninety (90) day period.

 

6.             Third-Party Beneficiaries.  This Agreement is solely for the
benefit of the Parties and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person or persons (including any employee or former employee of
the Companies, any Executive Employee or Transferred Employee or any individual
that becomes an employee of the Companies, CPE or the CPE Group on or after the
Effective Date, or any of their respective subsidiaries or Affiliates or any
beneficiary or

 

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dependent thereof) any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement. No provision in this Agreement shall
modify or amend any other agreement, plan, program, or document unless this
Agreement explicitly states that the provision “amends” that other agreement,
plan, program, or document. This shall not prevent the parties entitled to
enforce this Agreement from enforcing any provision in this Agreement, but no
other person shall be entitled to enforce any provision in this Agreement on the
grounds that it is an amendment to another agreement, plan, program, or document
unless the provision is explicitly designated as such in this Agreement, and the
person is otherwise entitled to enforce the other agreement, plan, program, or
document. If a person not entitled to enforce this Agreement brings a lawsuit or
other action to enforce any provision in this Agreement as an amendment to
another agreement, plan, program, or document, and that provision is construed
to be such an amendment despite not being explicitly designated as one in this
Agreement, that provision in this Agreement shall be void ad initio, thereby
precluding it from having any amendatory effect. Furthermore, nothing in this
Agreement is intended to confer upon any employee or former employee the
Companies, any Executive Employee or Transferred Employee or any individual that
becomes an employee of the Companies, CPE or the CPE Group on or after the
Effective Date, or any of their respective subsidiaries or Affiliates or any
beneficiary or dependent thereof, any right to continued employment, or any
recall or similar rights to an individual on layoff or any type of approved
leave.

 

7.           Miscellaneous.

 

7.1.          Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a)           This Agreement is to be construed in accordance with and governed
by the 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 laws of the State of New York to the rights and duties of the Parties.

 

(b)           Except for any action, suits or proceedings involving RIO and RIO
LTD in which the exclusive jurisdiction shall be in the United Kingdom, 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 transactions contemplated thereby (and
agrees not to commence any legal action or other legal proceeding relating
thereto except in such courts).  Other than any legal proceedings involving RIO
and RIO LTD (in which the exclusive jurisdiction shall be in the United
Kingdom), each of the Parties hereto agree that:

 

(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;

 

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(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 7.2 is sufficient and reasonably
calculated to give actual notice;

 

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

 

(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

 

(v)           agrees to the entry of an order to enforce any resolution,
settlement, order or award made pursuant to this Section 7.1 by the New York
Courts and in connection therewith hereby waives, and agrees not to assert by
way of motion, as a defense, or otherwise, any claim that such resolution,
settlement, order or award is inconsistent with or violative of the laws or
public policy of the laws of the State of New York or any other jurisdiction.

 

(c)           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 or the transactions
contemplated hereby or thereby.  Each of the Parties hereto (a) 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 (b) 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 7.1(d).

 

7.2.          Notices. All notices, demands or other communications to be given
under or by reason of this Agreement shall be in writing and shall be deemed to
have been received when delivered personally, or when transmitted by overnight
delivery service, addressed as follows:

 

If to CPE:

 

Human Resources

Cloud Peak Energy Inc.

 

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505 S. Gillett Avenue,

Gillette, Wyoming 82716
Tel: (307) 687-6000

Fax: (307) 687-6014

 

with a copy to:

 

General Counsel

Cloud Peak Energy Inc.

505 S. Gillett Avenue,

Gillette, Wyoming 82716
Tel: (307) 687-6000

Fax: (307) 687-6059

 

If to CPE LLC or CPESC:

 

Human Resources

Cloud Peak Energy Inc.

505 S. Gillett Avenue,

Gillette, Wyoming 82716
Tel: (307) 687-6000

Fax: (307) 687-6014

 

with a copy to:

 

General Counsel

Cloud Peak Energy Inc.

505 S. Gillett Avenue,

Gillette, Wyoming 82716
Tel: (307) 687-6000

Fax: (307) 687-6059

 

If to RIO, RIO LTD or RTEA:

 

Jane Craighead

Rio Tinto

1188 Sherbrooke Street West,

Montreal, Quebec, H3A 3G2, Canada
Tel: (514) 848-8441

Fax: (514) 848 1530

 

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with a copy to:

 

Craig Johnson

Rio Tinto Services Inc.

4700 Daybreak Parkway

South Jordan, UT 84095

Tel:  (801) 204-2803

Fax:  (801) 204-2892

 

Any party hereto may change its address for notices, demands and other
communications under this Agreement by giving notice of such change to the other
parties hereto in accordance with this Section 7.2.

 

7.3           Amendment. This Agreement may not be amended, modified, altered or
supplemented except by means of a written instrument executed on behalf of each
party hereto.

 

7.4           Waiver. No failure on the part of any party hereto to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any party hereto in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver thereof; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or remedy.

 

7.5           Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

 

7.6           Counterparts and Facsimiles. 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 others. The parties hereto
may execute the signature pages hereof and exchange such signature pages by
facsimile transmission.

 

7.7           Interpretation of Agreement.

 

(a)           As used in this Agreement, the words “include” and “including,”
and variations thereof, shall not be deemed to be terms of limitation, and shall
be deemed to be followed by the words “without limitation.”

 

(b)           Unless otherwise specified, references in this Agreement to
“Sections” are intended to refer to Sections of this Agreement.

 

(c)           The Section headings contained in this Agreement are solely for
the purpose of reference, are not part of the agreement of the parties and shall
not in any way affect the meaning or interpretation of this Agreement.

 

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(d)           Each party hereto and its counsel cooperated in the drafting and
preparation of this Agreement and the documents referred to in this Agreement.
Any rule of Law or any legal decision that would require interpretation of any
ambiguities in this Agreement against the party that drafted it is of no
application and is hereby expressly waived.

 

7.8           Entire Agreement. This Agreement sets forth the entire
understanding of parties hereto and supersedes all other agreements and
understandings between the parties hereto relating to the subject matter hereof.

 

[Signature page to follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.

 

CLOUD PEAK ENERGY INC.:

 

 

 

 

 

By:

/s/ Colin Marshall

 

 

 

 

Its:

President and CEO

 

 

 

 

 

 

 

CLOUD PEAK ENERGY RESOURCES LLC

 

 

 

 

 

By:

/s/ Colin Marshall

 

 

 

 

Its:

President and CEO

 

 

 

 

 

 

 

RIO TINTO AMERICA INC:

 

 

 

 

 

 

By:

/s/ James P. Berson

 

 

 

 

Its:

Authorized Agent

 

 

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CLOUD PEAK ENERGY SERVICES COMPANY

 

 

 

 

 

By:

/s/ Michael Barrett

 

 

 

 

Its:

CFO

 

 

 

 

 

 

 

RIO TINTO ENERGY AMERICA INC.:

 

 

 

 

 

 

By:

/s/ James P. Berson

 

 

 

 

Its:

Authorized Agent

 

 

 

 

 

 

 

Solely for purposes of Section 3.2,

 

 

 

 

RIO TINTO PLC:

 

 

 

 

 

 

By:

/s/ James P. Berson

 

 

 

 

Its:

Attorney-in-Fact

 

 

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Solely for purposes of Section 3.2,

 

 

 

 

RIO TINTO LTD:

 

 

 

 

 

 

By:

/s/ James P. Berson

 

 

 

 

Its:

Attorney-in-Fact

 

 

[Signature page of Employee Matters Agreement]

 

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