Exhibit
10.2


 


EXECUTION
COPY


 


TRANSITION SERVICES AGREEMENT


 


This TRANSITION SERVICES AGREEMENT (this “Agreement”),
is made and entered into as of November 19, 2009 (the “Effective Date”), between Rio Tinto Services Inc., a
Delaware corporation (“RTS”), Cloud
Peak Energy Resources LLC, a Delaware limited liability company (“CPE LLC”) and Cloud Peak Energy Inc., a Delaware corporation
(together with its subsidiaries, “CPE” and,
together with CPE LLC, the “Company”).  RTS, CPE LLC and CPE  are
sometimes referred to herein separately as a “Party”
and together as the “Parties.”


 


RECITALS


 


WHEREAS, CPE is conducting an initial public offering of its common
stock (the “IPO”);


 


WHEREAS, CPE LLC owns the western United States coal business (other
than the Colowyo mine) of Rio Tinto America Inc., a Delaware corporation (“RTA”), an indirect wholly-owned subsidiary of Rio Tinto plc
and its “Affiliates” (which, for
purposes of this Agreement, means any entity that, directly or indirectly,
controls, is controlled by, or is under common control with any specified
entity or person; provided, however, that for purposes of
this Agreement, except to the extent expressly provided for herein, the
determination of whether an entity or person is an Affiliate shall be made
assuming that Rio Tinto plc and its Affiliates and RTS are not Affiliates of
the Company and vice versa);


 


WHEREAS, immediately prior to the IPO, CPE will acquire an interest in
RTA’s western United States coal business (other than the Colowyo mine) through
the purchase of membership units of CPE LLC indirectly held by RTA;


 


WHEREAS, following the completion of the IPO, CPE will be a holding
company, its sole asset will be its managing member interest in CPE LLC and its
only business will be acting as the sole manager of CPE LLC; and


 


WHEREAS, CPE desires that RTS provide CPE LLC with certain agreed upon
transitional services for a period following the consummation of the IPO, and
RTS has agreed to provide such services on the terms and subject to the
conditions set forth herein (CPE LLC is herein referred to as the (“Service Recipient”) in its capacity as the
recipient of Transition Services (as defined below) and RTS is herein referred
to as the (“Service Provider”) in
its capacity as the provider of Transition Services).


 

















 


AGREEMENT


 


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


 


ARTICLE 1

DEFINITIONS; INTERPRETATION


 


1.1          Defined Terms. 
Capitalized terms shall have the meanings given them herein.  Capitalized terms not defined herein shall
have the meanings ascribed to such terms in the Master Separation Agreement dated
as of the date hereof by and among, RTEA, KMS, CPE, CPE LLC and the
Subsidiaries named therein (the “Master Separation
Agreement”).


 


1.2          Interpretation. 
When a reference is made in this Agreement to Articles or Sections, such
reference shall be to an Article or Section of this Agreement unless
otherwise indicated.  Whenever the words
“include,” “includes,” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation”, whether or not so
stated.  The words “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a
whole and not to a particular Article, Section or other subdivision.  Any singular term in this Agreement shall be
deemed to include the plural, and any plural term the singular.  The use of a particular gender in this
Agreement is for convenience of reference only and shall not affect the
interpretation of this Agreement.  The
titles, captions or headings of the Sections and Articles herein are for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.  Annex A, Annex B and the
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.


 


ARTICLE 2

PROVISION OF TRANSITION SERVICES


 


2.1          Agreement.  Upon the
terms and subject to the conditions contained herein, the Service Provider
agrees to provide or cause to be provided to the Service Recipient or its
Affiliates the services listed on Annex A hereto at the locations that
such transition services were provided to the Service Recipient or its
predecessors immediately prior to the Effective Date (or at such locations as
are otherwise agreed to by the Parties), together with any additional services
that they may mutually agree to in writing (including the term of such
services) from time to time (each a “Transition Service”
and collectively the “Transition Services”).  For the avoidance of doubt, the Service
Provider will use its commercially reasonable efforts to provide the Transition
Services to the Service Recipient under the terms of this Agreement.


 


2.2          Transition Period. 
Subject to Section 2.3, the Service Provider shall provide
the Transition Services for a period shown for the applicable Transition
Services on Annex A (each, a “Transition Period”).  The applicable Transition Period for any
particular Transition Service, other than those identified as a P&OS
function on Annex A, may be 


 


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extended one time for a period of up to six months
upon 30 calendar days’ written notice from the Service Recipient to the Service
Provider unless the Parties otherwise agree to extend the Transition Period for
such Transition Service by mutual written agreement and on mutually
satisfactory terms.  Any Transition
Services identified with a finance function designation under Annex A
will be automatically extended one time upon request of the Service Recipient
to the Service Provider if the Transition Period for such Transition Services
as set forth on Annex A will expire within (i) 30 calendar days of
a fiscal period end or (ii) (30) calendar days of any applicable reporting
deadline of the U.S. Securities and Exchange Commission (the “Commission”) until, in the case of subclause (i), the report
relating to such fiscal period is required to be filed with the Commission and
in the case of subclause (ii), the expiration of such reporting deadline.


 


2.3          Term of Agreement; Early Termination of
Transition Services.  This Agreement shall commence on the
Effective Date and continue for so long as any Transition Services are provided
to the Service Recipient unless sooner terminated by the Parties or as
otherwise provided in this Agreement. 
The Service Recipient may elect to terminate the provision of all or any
portion of the Transition Services (or any Transition Service) prior to the
expiration of the Transition Period by delivering written notice of such
election to the Service Provider.  Unless
the Service Provider otherwise agrees in writing, and except as set forth
below, any such termination shall be deemed to be effective no earlier than
thirty (30) calendar days following the Service Provider’s receipt of such
notice and the Transition Period for the affected Transition Services shall be
deemed to terminate upon such effective date; provided, however, that if such
termination would result in an obligation by the Service Provider to pay an
early-termination or other similar fee to a third-party, such termination shall
be deemed to be effective no earlier than sixty (60) calendar days
following the Service Provider’s receipt of such notice and the Transition
Period for the affected Transition Service shall be deemed to terminate upon
such effective date.  Upon the occurrence
of a change in control of CPE or CPE LLC, this
Agreement shall terminate effective upon the date of such change in control,
unless the Service Provider otherwise agrees in writing.  For purposes of this Agreement, the term “change in control” (i) with respect to
CPE, shall have the meaning ascribed to the term “Change in Control” under the
CPE 2009 Long-Term Incentive Plan or any similar successor equity incentive
plan of Cloud Peak Energy Inc. and (ii) with respect to the Service
Recipient, means a “Change in Control” as defined in the Third Amended and
Restated Limited Liability Company Agreement of the Service Recipient.  Each of the service level agreements with RTS
set forth on Annex B hereto (each a “Service
Level Agreement”) shall terminate upon the termination of the
relevant Transition Service.


 


2.4          Continuation of Certain Obligations and
Duties.  Neither the expiration of the Transition
Period, nor the termination of this Agreement pursuant to Section 2.3
above, shall terminate or modify any duty or obligation of the Parties which
are specifically intended to continue beyond the Transition Period or pursuant
to any other agreement, including without limitation those duties and
obligations of the Parties specified on Annex A hereto.


 


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2.5          Service Boundaries.


 


(a)           The Service
Provider shall be obligated to provide the Transition Services as set forth on Annex
A.  Any special specifications with
respect to any Transition Services shall be set forth on Annex A.  The Transition Services required to be
provided by the Service Provider will be limited to providing services of
personnel based on the maximum time per full time employee (“FTE”) per category of Transition Services,
as specified in Annex A, whether or not required by the Service
Recipient or needed to provide services at a requested level, unless the
Parties otherwise agree.  The Service
Provider, unless otherwise agreed by the Parties, shall not be obligated to
provide any Transition Services to relocate the corporate headquarters and
personnel of the Company.


 


(b)           The Service
Recipient acknowledges that the personnel engaged in providing the Transition
Services are engaged in other duties for the Service Provider and its
Affiliates.  Such personnel will seek to
provide reasonable allocation of time during their normal daily work schedule
based on their judgment to perform the Transition Services, but, except as
otherwise expressly provided in the applicable Service Level Agreement, the
Service Provider makes no guarantee of priority of service to the Service
Recipient.  If a conflict in priorities
arises as determined by a Service Provider acting reasonably, the Service
Provider shall be entitled to give priority to the requirements of the Service
Provider and its Affiliates.  Service
Provider personnel shall not, absent prior agreement and under a separate cost
schedule to be agreed in advance, provide Transition Services during
non-business hours, weekends, holidays, or vacation periods, except for
Priority 1 critical issues, as such term is defined in the IS&T Service
Level Agreement attached hereto.


 


(c)           Except as
required to maintain the Transition Services as provided for in this Agreement,
the Service Provider shall be under no obligation to obtain any third party
consent or approval, purchase, lease, license or sublicense any additional
equipment, software or other asset or to maintain any existing lease, license,
sublicense or other asset.  In the event
that any equipment, software or asset is required, in the Service Provider’s
reasonable judgment, to be purchased, leased or licensed for use in connection
with the Transition Services, the Service Recipient shall be notified by the
Service Provider in advance and in writing (including notification of the
estimated related costs of such purchase, lease or license).  The Service Provider, in its reasonable
judgment, shall approve or reject such purchase, lease or license.  The Service Recipient shall pay its pro rata
share of the costs of such equipment, software or asset, as reasonably
determined by the Service Provider.


 


(d)           The Service
Provider shall not be obligated to (i) perform any Transition Service it
believes in good faith results or would result in (x) a violation of
applicable Law, (y) a conflict of interest between the Parties or (z) a
breach of contract or other obligation owed to a third party by the Service
Provider or (ii) hire any additional employees (other than to replace
existing employees) or maintain the employment of any specific employee.


 


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(e)           The Service
Provider will comply with substantially the same performance measurement
metrics, if any, for Transition Services that it uses for its own operations,
other than to the extent required by applicable Law.  Where the Service Provider does not use
similar services for its own operations, the Service Provider shall use
commercially reasonable efforts to provide Transition Services in accordance
with the Service Provider’s policies, procedures and practices in effect
immediately prior to the Effective Date.


 


2.6          No Secondment. 
For the avoidance of doubt, the Service Provider is not under any
obligation to second or procure the secondment to the Service Recipient of any
employee or other personnel in connection with the provision of the Transition
Services.  The Parties agree that such
individuals providing services are employees, contract employees or secondees
of the Service Provider.


 


2.7          Compliance with Policies; Safety of Personnel. 
All Transition Services must be reasonably capable of being performed in
a manner that is consistent with policies and procedures of the Service
Provider, including those relating to compliance with all applicable
competition, antitrust, health, safety and environmental laws.  The Service Provider shall use commercially
reasonable efforts to provide the Service Recipient with advance written notice
in the event it believes any Transition Service is not consistent with such
policies or procedures if it would materially impact the Transition Services to
be provided.  To the extent Transition
Services are performed on site, the Service Provider will be permitted to
withdraw any personnel providing Transition Services at that time if it
believes that such personnel face any risk to their personal safety and prior
notice (to the extent possible) has been given to the Service Recipient.  The Service Provider and its personnel shall
comply, in all material respects, with all applicable Laws in providing the
Transition Services.


 


2.8          Responsibility for Errors. 
The Service Provider’s sole responsibility for errors or omissions
committed by it in performing the Transition Services shall be to correct such
errors or omissions in the Transition Services; provided, however, that the
Service Recipient must as promptly as practicable under the circumstances
advise the Service Provider of any such error or omission of which it becomes
aware after having used commercially reasonable efforts to detect any such errors
or omissions.  NOTWITHSTANDING
THE FOREGOING, AND AS SET FORTH IN SECTION 6.12 OF THIS AGREEMENT, THE
SERVICE PROVIDER SPECIFICALLY EXCLUDES ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY TRANSITION SERVICES PROVIDED
UNDER THIS AGREEMENT, AND EXCEPT AS OTHERWISE SET FORTH HEREIN, THE TRANSITION
SERVICES ARE PROVIDED ON AN “AS IS,” “WHERE IS” BASIS.


 


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ARTICLE
3

PAYMENT FOR TRANSITION SERVICES


 


3.1          Payment Obligation. 
The Service Recipient shall pay the Service Provider for the Transition
Services the amounts set forth in Annex A, in accordance with the terms
set forth in Annex A.  The Service
Recipient shall also reimburse the Service Provider for all reasonable out-of-pocket
expenses incurred in connection with the provision of the Transition Services
to the Service Recipient.  If the term of
any Transition Service is extended or if there is any material change in the
assumptions used by the Parties in originally determining the costs to be
charged, the Service Recipient shall pay the Service Provider adjusted charges
that are determined in a manner consistent with such changed assumptions and as
mutually agreed in writing and in advance by the Service Provider and Service
Recipient acting in good faith.  If no
agreement is reached, the Service Provider shall not be required to provide any
Transition Services for any adjusted charges based on such changed assumptions.  Any payments owed to the Service Provider as
set forth in Annex A may be reduced commensurately on thirty (30)
calendar days’ written notice by the Service Recipient to the Service Provider
if the related Transition Services are terminated by the Service Recipient
pursuant to Section 2.3 hereto.


 


3.2          Invoices; Payment Due Date. 
The Service Provider shall provide the Service Recipient on a monthly
basis with a monthly invoice reflecting in reasonable detail (a) the
Transition Services, and (b) fees owed for such Transition Services
provided during the preceding month and all reasonable out-of-pocket expenses
incurred.  All amounts shall be due and
payable within thirty (30) days after the date of the invoice.  This Section shall survive any
termination of this Agreement with respect to Transition Services performed
pursuant to this Agreement for which the Service Provider has not yet been
paid.  The fees and charges payable under
this Agreement and set forth on Annex A are exclusive of any sales tax
or excise taxes or any customs or import charges or duties or any similar
charges or duties.


 


3.3          Interest on Late Payment. 
Any amounts owed by the Service Recipient under this Agreement that are
not paid when due shall bear interest, from the time the payment was due until
the time paid, at a rate of 10% per annum compounded annually.


 


ARTICLE 4

RIO TINTO SERVICES PERSONNEL


 


4.1          Availability. 
During the entire Transition Period, the Service Provider shall use its
commercially reasonable efforts to maintain the personnel necessary to provide
the Transition Services from time to time; provided, however, there is no
assurance that the same personnel as have been used to provide previous
services will be available throughout any Transition Period.


 


4.2          Subcontractors. 
The Service Provider may engage a subcontractor (a “Subcontractor”) to perform all or any of
the Transition Services, provided that any such Subcontractor agrees in writing
to be bound by confidentiality obligations at least as protective as terms of Section 6.8
regarding confidentiality and non-use of information, and provided further 


 


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that the Service Provider remains responsible for the
performance of such Subcontractor and for paying the Subcontractor.


 


ARTICLE 5

GOOD FAITH COOPERATION


 


5.1          Intent of the Parties. 
The intent of the Parties is (a) that the level and quality of the
Transition Services provided by the Service Provider to the Service Recipient
be maintained at and result in a quality and level of service that is
reasonably equivalent to that performed by the Service Provider prior to the
IPO and (b) that the Service Provider be fully and promptly paid in
accordance with this Agreement for providing such Transition Services.


 


5.2          Cooperation. 
The Parties agree to cooperate in good faith in all matters relating to
the provision and receipt of Transition Services.  Each Party shall act in good faith to achieve
the benefits expected and to resolve any problems that may occur in a
commercially reasonable way.  The Parties
agree for this purpose as follows:


 


(a)           Each Party agrees to appoint and maintain
a coordinator with responsibility for ensuring that the overall intent of this
Agreement is achieved.  In that regard,
RTS shall initially assign Brian Oldham as its coordinator and CPE  and CPE LLC shall initially assign Tracy Breinholt as their
coordinator.


 


(b)           The Service Provider shall supervise the
activities of its officers, employees and representatives with respect to the
Transition Services in a manner reasonably consistent with past practice.


 


(c)           The Service Provider shall maintain
accurate and complete books and records concerning the provision and charges
for the Transition Services and will make such books and records available to
the Service Recipient, or its designated representatives for inspection and
copying at any time during the Service Provider’s regular business hours.


 


(d)           The Service Recipient shall provide all
information and access reasonably required or requested by the Service Provider
to perform its obligations under this Agreement and shall make available, as
requested by the Service Provider, sufficient resources, access to the Service
Recipient’s employees and timely decisions, approvals and acceptances in order
that the Service Provider may perform its obligations hereunder in a timely
manner.


 


(e)           The Parties covenant and agree that they
shall not knowingly take any action or enter into any commitment or agreement
in connection with the transactions and activities contemplated hereunder that
would result in a contravention of any provisions of applicable Law.


 


(f)            The Parties
agree to use commercially reasonable efforts in seeking to obtain all third
party consents, licenses, sublicenses or approvals necessary to permit each 


 


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Party
to perform its obligations hereunder, including, rights to use third party
software needed for the performance of Transition Services.


 


ARTICLE 6

GENERAL PROVISIONS


 


6.1          Mutual Representations. 
Each Party represents and warrants to the other that it has the
corporate power and authority to enter into and perform its obligations under
this Agreement and has taken all corporate and any other action necessary to
execute and deliver this Agreement, to consummate the transactions contemplated
hereby and to perform its obligations hereunder.


 


6.2          Record Retention. 
To facilitate the possible exchange of information pursuant to this
Agreement, the applicable Service Level Agreement or in accordance with
applicable Law, the Parties agree to comply with the record retention
requirements as set forth in Section 7.10 of the Master Separation
Agreement.


 


6.3          Indemnification Against Third Party
Claims.


 


(a)           Subject to the limitations and other
provisions in Sections 6.5 and 6.6, the Service Recipient shall
indemnify and hold harmless the Service Provider, its successors and Affiliates
and their respective officers, directors, employees, and agents (the “Service Provider’s Indemnified Parties”)
from and against any claims, loss, damage, cost, liability, injury or expense
(including reasonable attorney’s fees) asserted by a third party (a “Third Party Claim”) against the Service Provider’s
Indemnified Parties if and only to the extent that such Third Party Claim
arises out of or results from the acts or omissions of the Service Recipient
related to the Transition Services provided under this Agreement.


 


(b)           Subject to the limitations and other
provisions in Sections 6.5 and 6.6, the Service Provider shall indemnify
and hold harmless the Service Recipient and its successors and Affiliates and
their respective officers, directors, employees and agents (the “Service Recipient’s Indemnified Parties”) with respect to
any Third Party Claim asserted against the Service Recipient’s Indemnified
Parties if and only to the extent that such Third Party Claim arises out of or
results from the acts or omissions of the Service Provider related to the
Transition Services provided under this Agreement.


 


(c)           The obligations
under this Section 6.3 shall survive expiration or earlier
termination of this Agreement until fifteen (15) months after such expiration
or termination.


 


6.4          Claim Procedure for Third Party Claims.


 


(a)           If any party
entitled to indemnification under Section 6.3 (an “Indemnified Party”)  receives
notice or otherwise learns of the assertion of any Third Party Claim with
respect to which the Service Recipient or Service Provider may be obligated to
provide indemnification under Section 6.3, the party entitled to 


 


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indemnification shall
promptly give written notice (but no later than thirty (30) calendar days after
the circumstances giving rise to the claim first become known to the
Indemnified Party or could, with reasonable diligence, have become known to the
Indemnified Party) to the Party from whom indemnification is sought (and “Indemnifying Party”) of the Third Party Claim.  Such notice shall be accompanied by
reasonable supporting documentation submitted by such third party (to the
extent then in the possession of the Indemnified Party) and shall describe in
reasonable detail (to the extent known by the Indemnified Party) the facts
constituting the basis for such Third Party Claim and the amount of the claimed
liabilities.  Within twenty (20) days
after delivery of such notification, the Indemnifying Party (if it agrees that
the Third Party Claim is subject to indemnification under this Agreement) may,
upon written notice thereof to the Indemnified Party, assume control of the
defense of such Third Party Claim with counsel reasonably satisfactory to the
Indemnified Party, such consent not to be unreasonably withheld, delayed or
conditioned.  During any period in which
the Indemnifying Party has not so assumed control of such defense, the
Indemnified Party shall control such defense.


 


(b)           The party not
controlling such defense (the “Non-Controlling Party”)
may participate therein at its own expense; provided, however, that if the
Indemnifying Party assumes control of such defense and the Indemnified Party
reasonably concludes that the Indemnifying Party and the Indemnified Party have
material conflicting interests or different defenses available with respect to
such Third Party Claim, the reasonable fees and expenses of separate counsel to
the Indemnified Party shall be considered liabilities for purposes of this
Agreement; provided, further, that the Indemnifying Party shall not be
responsible for the fees or expenses of more than one legal firm in any single
jurisdiction, unless otherwise agreed to, for all of the Indemnified Parties;
provided, however, that in the event that such legal firm is conflicted amongst
the Indemnified Parties, then the Indemnifying Party shall be responsible for
the fees or expenses of up to two legal firms in any single jurisdiction for all
of the Indemnified Parties.  The party
controlling such defense (the “Controlling Party”)
shall keep the Non-Controlling Party reasonably advised of the status of such
Third Party Claim and the defense thereof and shall consider in good faith
recommendations made by the Non-Controlling Party with respect thereto. The
Non-Controlling Party shall furnish the Controlling Party with such information
as it may have with respect to such Third Party Claim (including copies of any
summons, complaint or other pleading that may have been served on such Party
and any written claim, demand, invoice, billing or other document evidencing or
asserting the same) and shall otherwise cooperate with and assist the
Controlling Party in the defense of such Third Party Claim.  If the Indemnifying Party has elected to
assume the defense of the Third Party Claim, as set forth in Section 6.4(a) above,
but has specified, and continues to assert, any reservations or exceptions in
such notice to the Indemnified Party then, in any such case, the reasonable
fees and expenses of one separate counsel for all Indemnified Parties shall be
borne by the Indemnifying Party, but the Indemnifying Party shall be entitled
to reimbursement by the 


 


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Indemnified
Party for payment of any such fees and expenses to the extent that it
establishes that such reservations and exceptions were proper.


 


(c)           If an
Indemnifying Party elects not to assume responsibility for defending a Third
Party Claim, or fails to notify an Indemnified Party of its election as
provided in Section 6.4(a), the cost and expense of the Indemnified
Party incurred in defending such Third Party Claim shall be additional
indemnified liabilities.


 


(d)           The
Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such Third Party Claim without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed; provided, however, that the consent of the Indemnified
Party shall not be required if (i) the Indemnifying Party agrees in
writing to pay any amounts payable pursuant to such settlement or judgment, (ii) such
settlement or judgment includes a full, complete and unconditional release of
the Indemnified Party from further liability, (iii) such settlement does
not create any financial or other obligation on the part of the Indemnified
Party and (iv) such settlement does not include a statement as to, or an
admission of, fault, culpability or a failure to act by or on behalf of an
Indemnified Party.  Unless the
Indemnifying Party has failed to assume the defense of the Third Party Claim
within the time periods required under this Agreement, the Indemnified Party
shall not agree to any settlement of, or the entry of any judgment arising
from, any such Third Party Claim without the prior written consent of the
Indemnifying Party.


 


(e)           The provisions
of this Section 6.4 shall survive expiration or earlier termination
of this Agreement until fifteen (15) months after such expiration or
termination.


 


6.5          Limitations on Liability.


 


(a)           Notwithstanding any other provision of
this Agreement, and with respect to any and all claims (whether or not by a
third party pursuant to Section 6.3 and whether or not for breach
or nonperformance of contract, negligence, indemnification, or any other theory
of liability) in no event shall the Service Provider’s aggregate liability to
the Service Recipient or the Service Recipient’s Indemnified Parties exceed the
aggregate payments made to the Service Provider by the Service Recipient under
this Agreement except that this limitation shall not apply to liabilities
caused solely by actions of the Service Provider constituting gross negligence
or willful misconduct.


 


(b)           Notwithstanding any other provision of
this Agreement, and with respect to any and all claims (whether for breach or
nonperformance of contract, negligence, indemnification, or any other theory of
liability), neither the Service Provider nor the Service Recipient shall be
liable to make any payment to the other in respect of any individual claim or
series of related claims for losses in an amount which is less than $50,000 per
claim or series of related claims unless and until the aggregate amount of such
claims exceeds, in the aggregate, $200,000 (the “Deductible”),
in which event the Party requesting payment shall be entitled to 


 


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recover all losses resulting from or arising out of
such claims only to the extent the aggregate amount of such losses exceeds
$200,000.  However, claims for losses of
more than $50,000 per claim or series of related claims shall not be subject to
this limitation and shall not be counted toward satisfaction of the Deductible.


 


(c)           Notwithstanding any other provision of
this Agreement, and with respect to any and all claims (whether for breach or
nonperformance of contract, negligence, indemnification, or any other theory of
liability), in no event shall any damages or losses payable under this
Agreement include, and no Party shall be liable to the other Parties for, any
punitive, incidental, consequential, indirect or special damages (including
lost profits, lost revenues and loss of business), whether foreseeable or not,
whether occasioned by any failure to perform or the breach of any
representation, warranty, covenant or other obligation under this Agreement for
any cause whatsoever.


 


(d)           Except as
otherwise expressly provided herein, none of the remedies set forth in this
Agreement is intended to be exclusive, and each Party shall have all other
remedies now or hereafter existing at law or in equity or by statute or
otherwise, and the election of any one or more remedies shall not constitute a
waiver of the right to pursue other available remedies.


 


(e)           The provisions
of this Section 6.5 shall survive expiration or earlier termination
of this Agreement.


 


6.6          Insurance.  Each Party to
this Agreement shall obtain and maintain at its own expense insurance of the
type generally maintained by it in the ordinary course of business.  Each Party further agrees with respect to any
Third Party Claim for which indemnification is available from the other Party
pursuant to Section 6.3, to first seek payment for such Third Party
Claim under such Party’s available insurance policies prior to seeking
indemnification under Section 6.3 of this Agreement.  To the extent permitted by applicable Law,
the Service Provider shall not be responsible for obtaining or maintaining
professional liability insurance.


 


6.7          Notice of Breach and Termination. 
In the event of a material breach of this Agreement by a Party, the
Party claiming the breach shall promptly give written notice (but no later than
thirty (30) calendar days after such breach first become known to Party claiming
the breach) of such breach to the other Parties, including the Party alleged to
be in breach, which Party shall have fifteen (15) calendar days to cure such
breach or, if such breach is capable of cure within a commercially reasonable
period of time but cannot reasonably be expected to be cured within fifteen
(15) calendar days, shall have fifteen (15) calendar days to undertake all
available and appropriate action to begin the cure of the breach and shall
proceed as promptly as possible thereafter to effect the cure.  In the event of such cure, the notice of
breach shall be rescinded.  If, however,
the breach is not cured as set forth herein, the Party claiming the breach may
then pursue any and all remedies available to it based on such uncured breach,
including the right to terminate this Agreement effective on a date of
termination prior to the end of the relevant Transition 


 


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Periods established by the non-breaching Party.  Notwithstanding the foregoing provisions of
this Section 6.7, the Service Provider shall have the right to
immediately terminate this Agreement if the Service Recipient fails to make any
payment due to Service Provider hereunder within thirty (30) days after receipt
of written notice of such failure, except with respect to amounts in issue that
are subject to a bona fide dispute between the Parties.


 


6.8          Mutual Confidentiality Covenants.


 


(a)           The Service Recipient’s Covenants. 
The Service Recipient acknowledges that, as a result of the Service
Provider providing the Transition Services, the Service Recipient or its
Affiliates may receive information that is confidential or that has been
created, discovered or developed by the Service Provider or its Affiliates
and/or in which property rights have been assigned or otherwise conveyed to the
Service Provider or its Affiliates, which information has value to the Service
Provider or its Affiliates, is not in the public domain and is not included in
the assets of the Service Recipient (the “Service
Provider Proprietary Information”).  The Service Provider Proprietary Information
will be and remain the sole property of Service Provider or its Affiliates and
its or their assigns and shall only be used on a royalty-free non-excusive basis
in connection with the Transition Services. 
The Service Recipient hereby agrees that it and its Affiliates will use
substantially the same degree of care which it normally uses to protect its own
proprietary information to prevent disclosing to third parties the Service
Provider Proprietary Information.  The
Service Recipient and its Affiliates will not make any use of the Service
Provider Proprietary Information except as contemplated or required by the
terms of this Agreement or any other Transaction Document or existing agreement
or applicable Law.


 


(b)           The Service Provider’s Covenants. 
The Service Provider acknowledges that, as a result of providing the
Transition Services, the Service Provider or its Affiliates may receive
information that is confidential or that has been created, discovered or
developed by the Service Recipient or its Affiliates and/or in which property
rights have been assigned or otherwise conveyed to the Service Recipient or its
Affiliates, which information has value to the Service Recipient or its
Affiliates, is not in the public domain and is not included in the assets of
the Service Provider (the “Service Recipient
Proprietary Information”). 
The Service Recipient Proprietary Information will be and remain the
sole property of the Service Recipient or its Affiliates and its or their
assigns and shall only be used in connection with the Transition Services.  The Service Provider hereby agrees that it
and its Affiliates and the personnel providing Transition Services hereunder will
use substantially the same degree of care which it normally uses to protect its
own proprietary information to prevent disclosing to third parties the Service
Recipient Proprietary Information.  The
Service Provider and its Affiliates will not make any use of Service Recipient
Proprietary Information, except as contemplated or required by the terms of
this Agreement or any other Transaction Document or existing agreement or
applicable Law.


 


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6.9                                 Intellectual Property. To the extent the Service Provider uses
any processes, technology, trade secrets or other intellectual property owned
or licensed by the Service Provider or an Affiliate (“IP”)
in providing Transition Services, such IP and any improvements to such IP shall
remain the sole property of the Service Provider or its Affiliates.  The Service Provider represents and warrants
that, to its knowledge without any due inquiry, any IP used in connection with
providing Transition Services hereunder will not infringe on any intellectual
property rights of any other individual, partnership, limited liability
company, corporation, trust, estate or other entity (a “Person”). 
If it is determined that the same does infringe on the intellectual
property rights of any other Person, then the Parties will negotiate how the
affected Transition Services can be provided without use of the infringing IP
and if the same cannot be so provided, then the Service Provider may, at its
option, cancel the affected Transition Services without further liability.


 


6.10                           Amendment and Waiver. 
This Agreement may not be altered or amended, nor may any rights
hereunder be waived, except by an instrument in writing executed by each of the
Parties hereto.  No waiver of any terms,
provision or condition of or failure to exercise or delay in exercising any
rights or remedies under this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
provision, condition, right or remedy or as a waiver of any other term,
provision or condition of this Agreement.


 


6.11                           Relationship of the Parties. 
This Agreement does not create a partnership or joint venture between
the Parties hereto and does not make any Party the agent of any other Party for
any purpose whatsoever.  No Party shall
have the authority to commit any other Party to any binding obligation or to
execute, on behalf of any other Party, any agreement, lease or other document
creating legal obligations on the part of any other Party, and no Party shall
represent to any third party that it has such authority.


 


6.12                           Disclaimer of Warranties.  EXCEPT AS OTHERWISE SET FORTH HEREIN, WITH RESPECT TO THE TRANSITION
SERVICES, THE SERVICE PROVIDER MAKES NO EXPRESS, IMPLIED OR STATUTORY
WARRANTIES OR REPRESENTATIONS AS TO THE QUANTITY OR QUALITY OF SERVICES AND
SPECIFICALLY EXCLUDES ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE.  EXCEPT AS OTHERWISE
SET FORTH HEREIN, THE TRANSITION SERVICES ARE PROVIDED ON AN “AS IS,” “WHERE
IS” BASIS.


 


6.13                           Assignment.  Except as
provided below, neither this Agreement nor any rights or obligations hereunder
may be assigned by any Party without the prior written consent of each other
Party hereto, except that (i) the Service Provider may assign its
obligations under this Agreement to an Affiliate capable, in the Service
Provider’s reasonable judgment, of undertaking any of the Transition Services
and (ii) Service Recipient may assign its rights under this Agreement to
any of its Affiliates.  In the event
written approval of an assignment is obtained, any transferee of this Agreement
or any rights or obligations hereunder shall be bound by the terms and
conditions of this Agreement.  In 


 


13

















 


addition, notwithstanding the foregoing, any
assignment of rights or obligations under this Agreement shall not relieve the
assigning Party of any of its obligations hereunder.


 


6.14                           Notices.  Any notice,
request, demand or other communication which is required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly
received (a) when actually received if personally delivered, (b) when
transmitted if transmitted by telecopy transmission only during the recipient’s
normal business hours unless arrangements have otherwise been made (with the
consent of the recipient) to receive such telecopy outside of normal business
hours or otherwise on the next business day after transmission, in each case with
confirmation of successful transmission received by the sender, (c) the
date of receipt as set forth on the tracking report, for next day delivery to a
domestic address by recognized overnight delivery service (e.g., DHL, UPS or
Federal Express); and (d) upon receipt, if sent by certified or registered
mail, return receipt requested.


 


If to the Company:


 


General Counsel


Cloud Peak Energy Inc.

505 S. Gillette Avenue

Gillette, Wyoming 82716

(307) 687-6000

Fax: (307) 687-6059


 


If to RTS:


 


Legal Department


Rio Tinto Services Inc.

4700 Daybreak Parkway

South Jordan, Utah 84095

(801) 204-2000

Fax: (801) 204-2892


 


with a copy to (which shall not
constitute notice):


 


Shane Orians, Esq.


Rio Tinto Services Inc.


4700 Daybreak Parkway


South Jordan, Utah 84095


(801) 204-2803


Fax: (801) 204-2892


 


6.15                           Governing Law.


 


(a)                                  This Agreement is to be construed in
accordance with and governed by the internal laws of the State on New York
without giving effect to any choice of law 


 


14

















 


rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of New York to the
rights and duties of the parties.


 


(b)                                 Each party hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of
the United States District Court for the Southern District of New York or, if
such court does not have 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),
including to enforce any settlement, order or award.  Each party hereto:


 


(i)            consents to service of process in
any such proceeding in any manner permitted by the laws of the State of New
York, and agrees that service of process by registered or certified mail,
return receipt requested, at its address specified pursuant to Section 6.14
is reasonably calculated to give actual notice;


 


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


 


(iii)          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.


 


(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.  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 6.15(d).


 


15

















 


6.16                           Multiple Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  This
Agreement may be executed by facsimile signature.


 


6.17                           Invalidity.  In the event
that any one or more of the provisions contained in this Agreement or in any
other agreement, certificate or instrument referred to herein, shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, then to
the maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other such instrument.


 


6.18                           No Third-Party Beneficiary.  The
provisions of this Agreement are for the benefit only of the Parties hereto,
and their Affiliates, and no third party may seek to enforce, or benefit from,
these provisions.  The Parties
specifically disavow any desire or intention to create any third party
beneficiary hereunder, and specifically declare that no person, except for the
Parties, and their Affiliates, and their respective successors, shall have any
right hereunder nor any right of enforcement hereof.


 


6.19                           Representation of Counsel; Mutual
Negotiations.  Each Party has had the opportunity to be
represented by counsel of its choice in negotiating this Agreement.  This Agreement shall therefore be deemed to
have been negotiated and prepared at the joint request, direction, and
construction of the Parties, at arm’s length, with the advice and participation
of counsel, and will be interpreted in accordance with its terms without favor
to any Party.  The Parties’ respective
counsel may not be disqualified from representing their clients in indemnification
or other disputes arising out of this transaction by virtue of such counsel’s
prior representation of the other Party in an unrelated matter.


 


6.20                           Independent Contractor. 
The Transition Services will be provided by the Service Provider or its
Affiliates as independent contractors and not as employees or seconded
employees of the Service Recipient.  It
is specifically agreed that none of the personnel utilized by the Service
Provider in connection with the Transition Services shall be or shall be
considered, for any purpose, to be employees of the Service Recipient, and the
Service Recipient and its Affiliates shall have no liability for salary,
employee benefits, options, insurance, or tax withholding for such personnel of
Service Provider.


 


6.21                           Expenses.  Except as
otherwise specified in this Agreement, each Party hereto shall pay its own
legal, accounting, out-of-pocket and other expenses incident to this Agreement
and to any action taken by such Party in carrying this Agreement into effect.


 


6.22                           Further Assurances. 
Each Party to this Agreement agrees to use commercially reasonable
efforts to execute any and all documents and to perform such other acts as may
be necessary or expedient to further the purposes of this Agreement and the
relations contemplated hereby. 
Notwithstanding the foregoing, neither Party shall be required to
provide or pay for any other Transition Services, except as otherwise
contemplated hereby.


 


16

















 


6.23                           Entire Agreement.  This Agreement contains the entire
understanding of the Parties and supersedes all prior agreements and
understandings between the Parties relating to the subject matter hereof.


 


17

















 


IN WITNESS
WHEREOF, the Parties hereto have executed this Agreement as of the date first
above written.


 


 


	
  CLOUD PEAK ENERGY INC.:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Colin Marshall

  	
   

  
	
   

  	
   

  
	
  Its:

  	
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CLOUD PEAK ENERGY RESOURCES LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael Barrett

  	
   

  
	
   

  	
   

  
	
  Its:

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  RIO TINTO SERVICES INC.:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ James P. Berson

  	
   

  
	
   

  	
   

  
	
  Its:

  	
  Authorized Agent

  	
   

  



 


[Signature page for
Transition Services Agreement]


 


18