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, 


 

















 


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.


 

















 


“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.


 

















 


“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.


 

















 


(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 


 

















 


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.


 

















 


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 


 

















 


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, 


 

















 


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 


 

















 


“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 


 

















 


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 


 

















 


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;


 
















 


(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.


 

















 


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


 

















 


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.


 

















 


(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]


 

















 


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

  	
   

  



 

















 


	
  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

  	
   

  



 

















 


	
  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]