Limited Liability Company Agreement (2012)Full Document 

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NOTICE: THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION
SURVANT MINING COMPANY, LLC
LIMITED LIABILITY COMPANY AGREEMENT
(THE OPERATING AGREEMENT
)
     THIS LIMITED LIABILITY COMPANY AGREEMENT, also called the “Operating Agreement” (collectively herein, the “Agreement”) effective as of the __ day of December, 2011, is entered into by and among Cyprus Creek Land Resources, LLC (“Cyprus”) and Armstrong Coal Company, Inc. (“Armstrong”).
     WHEREAS, the Members (hereafter defined) desire to form a limited liability company under the laws of the State of Delaware to be known as Survant Mining Company, LLC (the “Company”) for the purposes set out in this Agreement, and to carry on such other legally permissible business and activities as the Company, in accordance with applicable laws and this Limited Liability Company Agreement, shall determine from time to time;
     WHEREAS, the Members desire to enter into this Limited Liability Company Agreement to govern the conduct of the business and affairs of the Company and to set forth the understanding of the Members regarding all other matters concerning the Company which may be covered in a Limited Liability Company Agreement;
     NOW, THEREFORE, in consideration of mutual promises and covenants contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, do hereby agree as follows:
     1. Certain Definitions.
          When used herein, the following terms shall have the meanings set forth below:
          1.1 “Act” means the Delaware Limited Liability Company Act, Title 6, Chapter 18 of the Delaware Code (as amended). All references herein to specific sections of the Act shall be deemed to refer to the corresponding provisions of succeeding law.
          1.2 “Affiliate” means: (i) any Person which, directly or indirectly, is in Control of, is Controlled by or is under common Control with the party for whom an affiliate is being determined; or (ii) any Person who is a director or officer (or comparable position) of any Person described in clause (i) above or of the party for whom an affiliate is being determined.
          1.3 “Agreement” means this Limited Liability Company Agreement as the same may be amended and supplemented from time to time.
          1.4 “Armstrong” means Armstrong Coal Company, Inc., a Delaware corporation.
          1.5 “Available Cash” means all cash determined by the Managing Member to be available to the Company for distribution to the Members after the payment of all current expenses and other liabilities then due, establishing reserves for capital improvements, working capital needs, contingent liabilities and unforeseen contingencies, all determined reasonably and in good faith by the Managing Member.
          1.6 “Board of Managers” has the meaning set forth in Section 7.1.

 


 

          1.7 “Capital Expenditure” means all expenditures (excluding interest capitalized during construction) which must be capitalized under generally accepted accounting principles (GAAP).
          1.8 “Certificate” means the Certificate of Formation, and all amendments thereto, executed and filed pursuant to applicable laws and the terms of this Agreement.
          1.9 “Change of Control,” with respect to Armstrong, means any transfer or other action that results in (a) Armstrong ceasing to be Controlled, directly or indirectly, by the Yorktown Parties unless as a result of an initial or secondary public offering of stock, (b) any Person, other than the Yorktown Parties or Persons Controlled by the Yorktown Parties, acquiring a 50% or greater ownership interest, directly or indirectly, in Armstrong, or (c) any private or public company or entity primarily engaged in the business of coal mining gaining Control, directly or indirectly, over Armstrong or over Yorktown Parties that have Control over Armstrong. “Change of Control,” with respect to a Member other than Armstrong, means any transfer or other action that results in such Member ceasing to be Controlled, directly or indirectly, by the same Persons or an Affiliate of the Persons who Controlled such Member as of the date of such Member’s admission to the Company.
          1.10 “Closing” means the execution of the Operating Agreement, Management Agreement, Sales Representation Agreement and the contributions of initial capital as set forth in Milestone I of Exhibit A hereto by Cyprus and Armstrong,
          1.11 “Closing Date” means the date set for the Closing.
          1.12 “Code” means the Internal Revenue Code of 1986, as amended. All references herein to specific sections of the Code shall be deemed to refer also to the corresponding provisions of succeeding law.
          1.13 “Company” means Survant Mining Company, LLC, a Delaware limited liability company,
          1.14 “Company Minimum Gain” has the same meaning as the phrase “Partnership minimum gain” as set forth in treasury regulation § 1,704-2(d),
          1.15 “Consideration Period” has the meaning set forth in Section 8.3(a).
          1.16 “Control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of equity interests, by contract or otherwise and either alone or in conjunction with others.
          1.17 “Cyprus” means Cyprus Creek Land Resources, LLC, a Delaware limited liability company,
          1.18 “Deficit Capital Account” means with respect to any Member, the deficit balance, if any, in such Member’s capital account as of the end of the taxable year, after giving effect to the following adjustments:
     (a) credit to such capital account that amount which such Member is obligated to restore under Section 1.704-1 (b)(2)(ii)(c) of the treasury regulations, as well as any addition

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thereto pursuant to the next to last sentence of treasury regulation §§1.704-2(g)(l) and (i)(5), after taking into account thereunder any changes during such year in Partnership (Company) Minimum Gain (as determined in accordance with treasury regulation § 1.704-2(d) and in the minimum gain attributable to any Partner (Member) for nonrecourse debt (as determined under treasury regulation §l,704-2(i)(3); and
(b) debit to such capital account items described in treasury regulation §§1.704-l(b)(2)(ii)(d)(4), (5) and (6).
          The definition of Deficit Capital Account is intended to comply with the provisions of treasury regulations §§1.704-l(b)(2)(ii)(d) and 1,704-2, and will be interpreted consistently with those provisions.
          1.19 “Designated Representative” has the meaning set forth in Section 6.8(d).
          1.20 “Distributional Interest” has the meaning set forth in Section 8.1,
          1.21 “Fair Value” has the meaning set forth in Section 8.7.
          1.22 “Fiscal Year” means the Company’s fiscal year which shall correspond to the calendar year, except that (i) the Company’s first fiscal year shall commence on the date of the filing of the Certificate and (ii) such term shall also include any period for which the Company is required to allocate net profits, net losses and other items of Company income, gain, loss or deduction pursuant to this Agreement or the Code.
          1.23 “Foreclosure Assignment” has the meaning set forth in Section 8.7.
          1.24 “Indemnitee” shall mean (i) any Manager, (ii) any Managing Member, (iii) any Member, or (iv) any officer, director, employee, agent, stockholder, member or partner of the Company, or a Member.
          1.25 “Lender” has the meaning set forth in Section 8.1.
          1.26 “Lender Interest Holder” has the meaning set forth in Section 8.7.
          1.27 “Lien” means any mortgage, deed of trust, security agreement, pledge, hypothecation, assignment, deposit arrangement, lien (statutory or otherwise), security interest, financing statement, overriding royalty agreement or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement,
          1.28 “Major Decisions” shall mean those acts and decisions described in the subsections of Section 7.4.
          1.29 “Managing Member” shall have the meaning set forth in Section 7.2.
          1.30 “Manager” and “Managers” shall have the meanings set forth in Section 7.1.
          1.31 “Member Interest” shall include any and all rights of a Member under this Agreement, the Act and other applicable law, including without limitation all Distributional Rights, economic rights, voting and consent rights, notice rights, contract rights and management rights.

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          1.32 “Member Loan” means any loan to the Company by a Member.
          1.33 “Member Nonrecourse Debt Minimum Gain” has the same meaning as the phrase “Company nonrecourse debt minimum gain” as set forth in treasury regulation §1.704-2(i).
          1.34 “Member Nonrecourse Deduction” has the same meaning as the phrase “Survant nonrecourse deduction” as set forth in treasury regulation §1.704-2(i).
          1.35 “Member Nonrecourse Loan” means a loan made to, or credit arrangement for the benefit of, the Company by a Member or by any person related to a Member (as defined in treasury regulation § 1,752-4(b)) which by its terms exculpates the Members from personal liability on the debt, but under which such Member or related person bears the ultimate economic risk of loss within the meaning of treasury regulation §1.752-2.
          1.36 “Member” means any Person who becomes a Member in the Company as provided herein, initially Cyprus and Armstrong.
          1.37 “Non-Managing Member” has the meaning set forth in Section 6.6(e).
          1.38 “Offer Price” has the meaning set forth in Section 8.7.
          1.39 “Percentage Interest” means 51% for Armstrong and 49% for Cyprus, unless adjusted in accordance with Section 3.3.
          1.40 “Person” means any individual, limited liability company, limited liability partnership, partnership, corporation, trust or other person or entity.
          1.41 “Profit Distribution Share” shall mean 50% for each Member without regard to each Member’s Percentage Interest; provided, however, that if the Members’ Percentage Interests are ever adjusted pursuant to the provisions of Section 3.3, then, starting as of the date of such adjustment, the “Profit Distribution Share” for each Member shall be equal to the Percentage Interest of each Member.
          1.42 “Project” means the development of the Kentucky #8 seam of coal reserves identified on the map attached hereto as Exhibit B, located in Muhlenberg County, Kentucky.
          1.43 “Project Budget” means the pro forma revenue and expense statement for the Project approved by the Board of Managers in accordance with Section 7.4.
          1.44 “Right of First Offer” has the meaning set forth in Section 8.7.
          1.45 “Sale Period” has the meaning set forth in Section 8.7,
          1.46 “Subsidiary” means any Person, more than 50% of the voting securities of which, is owned (whether directly or indirectly through one or more Subsidiaries) by the Company.
          1.47 “Triggering Event” shall mean the occurrence of any of the following: (a) Armstrong resigns as the Managing Member, (b) Armstrong is removed from the Managing Member position by the Board of Managers acting upon the majority consent of all of the Managers, (c) Armstrong ceases to be a Member, (d) Armstrong files for bankruptcy, (e) the Management Agreement, referenced in Section 7.1, is terminated pursuant to its terms and conditions, (f) a Change of Control with respect to Armstrong occurs, (g)

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the willful engaging by the Managing Member or its principals in gross misconduct materially or demonstrably injurious to the Company, (h) the conviction of the Managing Member or its principals of a felony involving fraudulent or dishonest conduct, or (i) the occurrence of a Foreclosure Assignment pursuant to Section 8.7,
          1.48 “Yorktown Parties” shall mean Yorktown Energy Partners VI, L.P., Yorktown Energy Partners VII, L.P., Yorktown Energy Partners VIII, L.P. and their Affiliates.
          1.49 Other Definitions. Unless otherwise provided in this Agreement, any other term used in this Agreement which is elsewhere defined in this Agreement shall have the same meaning as such term is respectively given by this Agreement. The definitions in this section shall apply equally to both the singular and plural forms of the terms defined.
     2. Organization.
          2.1 Formation. The Members hereby agree to form the Company and to associate themselves as Members of the Company. Accordingly, commensurate with the execution of this Agreement, the Members of the Company shall adopt the Certificate that was filed with the Office of the Delaware Secretary of State.
          2.2 Registered Office and Agent The initial registered office of the Company in Delaware shall be located at The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The Company’s primary business office shall be at 407 Brown Road, Madisonville, KY 42431, or such other location as may hereafter be determined by the Members. The Company’s registered agent for service of process in Delaware shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
          2.3 Foreign Qualifications. Prior to the Company’s conducting business in any jurisdiction other than Delaware, the Members shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Members, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. At the request of the Managing Member, each Member shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue, and terminate the Company as a foreign limited liability company in all such other jurisdictions in which the Company may conduct business.
          2.4 Limited Liability Company. The Members intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes, and this Agreement may not be construed to suggest otherwise.
          2.5 Term. The existence of the Company shall be perpetual, unless terminated or dissolved as set forth herein,
          2.6 Annual Reporting. Beginning with the first full calendar year following the year in which the Company is organized, the Company shall prepare and file with the Delaware Secretary of State an annual report as required by the Act or Delaware law.
     3. Capital Contributions, Member Loans, and Related Matters.

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          3.1 Scheduled Capital. Contributions. At Closing, each Member shall make its initial capital contribution to the Company of $30,000.00 in cash and the Members shall, on the milestone dates set forth on Exhibit A attached hereto (the “Contribution Schedule”), make their respective additional contributions of property as indicated on the Contribution Schedule (collectively, the “Scheduled Capita! Contributions”), Notwithstanding any provision of this Agreement, neither Member is making any representation or warranty concerning the condition or quality of its properties being contributed hereunder, and neither Member shall be determined to have failed to remit its capital contribution or be liable to the Company or the other Member based on any subsequent determination that any portion of the Member’s capital contribution consisting of owned or leased real property is unable to be used, developed or mined for any reason or is not used, mined and/or developed for any reason or the Member’s title to any such property is found to be defective or the estimated tonnages of any coal reserves are determined to be inaccurate or due to any aspect of the condition, fitness or serviceability of any of the Equipment, Buildings, or other facilities described in Exhibit A hereto. All contributions, including but not limited to the surface properties, coal reserves, mining facilities, buildings and equipment described in Exhibit A and more particularly described in Exhibit D hereto, shall be contributed to Company free and clear of all liens and encumbrances, Each Member hereby represents and warrants to the other Member, that prior to entering into this Operating Agreement it has obtained all necessary consents, commitments and authorizations from any party holding current security interests in the properties that will be contributed to the Company pursuant to this Section 3.1 .Each Member shall make its contributions substantially in the same form of the conveyancing documents attached hereto and made a part hereof as Exhibit D.
          3.2 Additional Capital Contributions: Loans. Each Member acknowledges that, in addition to the foregoing, additional capital contributions will be required for the continued development and operation of the Company and each Member agrees to make the additional capital contributions in the amounts and at the times indicated on the Project Budget or the Contribution Schedule, as well as any additional capital contributions unanimously agreed to by the Board of Managers in a timely fashion. Any additional capital contributions to the Company shall be made in proportion to each Member’s Percentage Interest. In the event the Managing Member reasonably determines that additional cash is necessary in order to fund the Company’s operations in the ordinary course of business or to fund the cash needs in accordance with the approved Project Budget, but the Members do not unanimously agree on the amount of an additional capital contribution, the Managing Member shall have the right (but not the obligation), following reasonable notice to the other Members, to make a loan to the Company, and the terms of Section 3.3 applicable to the priority and repayment of Member Loans shall apply.
          3.3 Non-Compliance. In the event a Member (for the purposes of this Section 3.3 the “Non-Contributing Member”) fails to remit (i) its Scheduled Capital Contributions pursuant to Section 3.1, or (ii) its portion of any additional capital contribution unanimously agreed to by the Board of Managers, when due and such non-compliance is not cured within ten (10) days after written notice is delivered to the Non- Contributing Member by the other Member requesting that such funds be remitted to the Company, the other Member (for the purposes of this Section 3.3 the “Contributing Member”) may make the capital contribution or loan owed by the Non-Contributing Member and elect to treat such amount as an additional capita! contribution or as a Member Loan to the Company. Such election must be set forth in a written notice delivered to the Non-Contributing Member within thirty (30) days after the funds are contributed to the Company by the Contributing Member, on behalf of the Non-Contributing Member. If the written notice is not delivered within the thirty (30) day time period, the additional funds contributed to the Company shall be deemed a Member Loan by the Contributing Member to the Company. If the Contributing Member elects to treat the contribution as an additional capital contribution and provides written notice of election to the Non- Contributing Member, then the Percentage Interest of each Member shall be adjusted to reflect the percentage that each Member’s total capital contributions bear to the total of all capital contributions made to the Company. If such funds are classified as a Member Loan, the loan shall accrue interest at the prime rate posted

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by the lending institution at which the Company has its primary operating account, plus two (2) percentage points. AH Member Loans, whether made under this section, Section 3.2, or otherwise, shall be a priority and no distributions to the Members shall be made until such loan is repaid
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