FORMATION AND TRANSFER AGREEMENT
Exhibit
10.72
THIS FORMATION AND TRANSFER AGREEMENT (this “Agreement”) is made, entered into and
effective as of the 29th day of December, 2011 by and among Cyprus Creek Land
Resources, LLC, a Delaware limited liability company with principal offices at 000 Xxxxxx Xxxxxx,
Xxxxx 000, Xx. Xxxxx, Xxxxxxxx 00000 (“Cyprus”) and Cyprus Creek Land Company, a Delaware
corporation with its offices at 000 Xxxxxx Xxxxxx, Xxxxx 000, Xx. Xxxxx, Xxxxxxxx 00000; and
Xxxxxxxxx Coal Company, Inc., a Delaware corporation with principal offices at 0000 Xxxxxxx
Xxxxxxxxx, Xxxxx 0000, Xx. Xxxxx, Xxxxxxxx 00000 (herein “Xxxxxxxxx”), and Western Land Company,
LLC, a Kentucky limited liability company with its office at 000 Xxxxx Xxxx, Xxxxxxxxxxxx,
Xxxxxxxx 00000.
RECITALS
A. Cyprus and Xxxxxxxxx desire to form a limited liability company under the laws of
the State of Delaware and intend to enter into a Certificate of Formation and a Limited Liability
Company Agreement, as described herein (collectively, the “Organization Documents”), to form the
proposed limited liability company under the name Xxxxxxx Mining Company, LLC (herein the
“Company”). The parties acknowledge and ratify the filing of the Certificate of Formation for the
Company on November 29, 2011 with the Secretary of State of Delaware.
B. Cyprus and Xxxxxxxxx desire to set out in this Agreement the documents and procedures to be
taken in connection with the formation of the Company and the fulfillment of the initial capital
contributions and scheduled capital contributions to the Company as further described in the
Organization Documents.
C. The parties to this Agreement further desire to set out in this Agreement (i) certain
conditions to the closing of the formation of the Company and the completion of the initial capital
contributions and scheduled capital contributions, and (ii) certain other terms, provisions,
representations and warranties relating to the formation of the Company and the assets comprising
the initial capital contributions and scheduled capital contributions to the Company.
D. Cyprus Creek Land Company is an affiliate of Cyprus and desires to join in the execution of
this Agreement for the purpose of acknowledging its agreement to join in the execution of the
Conveyance Documents.
E. Western Land Company, LLC is an affiliate of Xxxxxxxxx and desires to join in the execution
of this Agreement for the purpose of acknowledging its agreement to join in the execution of the
Conveyance Documents. Pursuant to Section 4 of that certain Royalty Deferment and Option
Agreement dated October 11, 2011, Western Mineral Development, LLC is contractually obligated to
quitclaim its interests in the Xxxxxxxxx Assets to Western Land
Company, LLC.
AGREEMENT
In consideration of the foregoing Recitals which are incorporated herein, the mutual
covenants contained in this Agreement and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
12/28/11
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1. Definitions. As used herein, the following terms shall have the
following meanings:
1.1 Agreement: This Formation and Transfer Agreement, including all exhibits hereto.
1.2 Xxxxxxxxx: Xxxxxxxxx Coal Company, Inc., a Delaware corporation.
1.3 Xxxxxxxxx Assets: As defined in Section 4.2.
1.4 Xxxxxxxxx Representations and Warranties: As defined in Section 9.
1.5 Closing: As defined in Section 8.
1.6 Closing Agenda: As defined in Section 7.
1.7 Closing Date: As defined in Section 8.
1.8 Closing Documents: As defined in Section 7.
1.9 Company: Xxxxxxx Mining Company, LLC, a Delaware limited liability company to be
formed pursuant to the terms of this Agreement.
1.10 Conveyance Documents: The deeds, leases, subleases, agreements and instruments
listed on Schedule 1 attached hereto, substantially in the forms attached hereto but with such
modifications that are reasonably requested by either party that do not alter in any material
respect the nature or extent of the Scheduled Capital Contributions or the substantive rights of
the parties pursuant to the Organization Documents.
1.11 Cyprus: Cyprus Creek Land Resources, LLC, a Delaware limited liability
company.
1.12 Cyprus Assets: As defined in Section 4.1.
1.13 Cyprus Representations and Warranties: As defined in Section 10.
1.14 Indemnity Claim: As defined in Section 11.2.
1.15 Initial Capital Contributions: The Initial Capital Contributions described in Section 4.
1.16 Members: Cyprus and Xxxxxxxxx and their respective successors, if any, under the
Organization Documents.
1.17 Notices: As defined in Section 13.7.
1.18 Organization Documents: As defined in Recital A.
1.18 Scheduled Capital Contributions: The Scheduled Capital Contributions
described in Section 4.
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2. Formation of the Company. Subject to the terms and conditions of this
Agreement, Cyprus and Xxxxxxxxx hereby agree to form the Company under the laws of the State of
Delaware, and further agree to make their respective Initial Capital Contributions and Scheduled
Capital Contributions to the Company as described in Section 4. The Company shall be established
upon the execution of the Limited Liability Company Agreement attached hereto as Exhibit A. The
terms of the Organization Documents shall govern the rights, interests, duties and obligations of
the Members relative to the Company, and shall govern over any conflicting provisions contained in
this Agreement.
3. Members’ Interest in the Company. Upon the Closing and formation of the Company,
Xxxxxxxxx shall have a member interest in the Company of 51% and Cyprus shall have a member
interest in the Company of 49%, as further set forth in, and governed by the terms of, the Limited
Liability Company Agreement.
4. Initial Capital Contributions and Scheduled Capital Contributions to
the Company. Subject to the terms and provisions of this Agreement and upon the fulfillment of
the conditions precedent set out or described in Section 6 and the execution of the Organization
Documents by both Members, (a) each Member shall, upon execution of the Organization Documents by
both members, make its initial capital contribution to the Company of $30,000.00 in cash (the
“Initial Capital Contributions”), and (b) on the milestone dates set forth in the “Contribution
Schedule” attached as Exhibit A to the Limited Liability Company Agreement (the “Contribution
Schedule”), each Member shall make their respective additional contributions of property as
indicated in the Contribution Schedule (collectively, the “Scheduled Capital Contributions”).
4.1 Scheduled Capital Contribution by Cyprus. Cyprus shall contribute to the Company,
by means of the applicable Conveyance Documents, those assets, agreements and interests in real
property described on the Contribution Schedule (“Cyprus Assets”), consisting primarily of coal
reserves and property rights located in Muhlenberg County, Kentucky. The parties agree that the
fair market value of the Cyprus Assets is $44,492,000.00. Cyprus Creek Land Company hereby agrees
to join in the execution of the Conveyance Documents.
4.2 Scheduled Capital Contribution by Xxxxxxxxx. Xxxxxxxxx shall contribute to the
Company, by means of the applicable Conveyance Documents, those assets, agreements and
interests in real property described on the Contribution Schedule (the “Xxxxxxxxx Assets”).
The parties agree that the fair market value of the Xxxxxxxxx Assets is $46,308,000.00. Western
Land Company, LLC hereby agrees to join in the execution of the Conveyance Documents.
5. Closing. The Closing of the transactions contemplated by this Agreement shall be
conducted in accordance with Section 8 hereto and the operations of the Company shall commence as
of the Closing Date.
6. Conditions Precedent to Formation. The obligations of both Cyprus and
Xxxxxxxxx to execute (or cause the execution of) the Organization Documents and make, or cause to
be made, the Initial Capital Contributions and complete the other transactions described in this
Agreement are subject to the completion of all of the items comprising the Closing Agenda, or the
mutual waiver by Cyprus and Xxxxxxxxx of completion of any items not so completed. It is a
further condition each party’s obligation to close the transactions set forth
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in this Agreement that all representations and warranties made by the other party in Subsection 9
and 10 respectively remain true and accurate as of the Closing Date.
7. Closing Agenda. The contribution by the Company Members of their respective Initial
Capital Contributions, and the completion of the other transactions set forth herein, shall be
effected by the execution and delivery of all the documents listed on Schedule 7 to this Agreement
and such other documents as are necessary or desirable in connection therewith or which are
otherwise referred to in this Agreement (the “Closing Documents”). The Closing Documents shall be
in form and substance acceptable to both Cyprus and Xxxxxxxxx and shall be consistent with the
terms of this Agreement. Cyprus and Xxxxxxxxx acknowledge that included within the Closing
Documents are certain third-party consents, certificates, opinions and approvals. The parties agree
to cooperate and proceed diligently with the acquisition of such third-party items, but do not
waive the requirement that all Closing Documents, including the third-party consents listed in the
Closing Documents, be obtained or be hereafter waived in writing by Cyprus and Xxxxxxxxx as a
condition to Closing. All of the activities described in this Section 7 are collectively described
as the “Closing Agenda.”
8. Closing Date. The parties shall proceed diligently with the preparation of the
Closing Documents, and the fulfillment of the other conditions precedent set out in Section 6, so
that the formation and effectiveness of the Company, and the completion of the Initial Capital
Contributions by the Company Members (collectively, the “Closing”) occurs on or prior to December
29th, 2011 (the “Closing Date”). If the Closing does not occur by the Closing Date for
any reason, and the Closing is not extended by the mutual agreement of Cyprus and Xxxxxxxxx, then
this Agreement shall terminate and be null and void and of no further force or effect.
9. Representation and Warranties of Xxxxxxxxx. Xxxxxxxxx hereby represents and
warrants to Cyprus as follows, which representations and warranties constitute a material
inducement to Cyprus’s entering into this Agreement, and performing hereunder, including, without
limitation, making its Initial Capital Contribution and Scheduled Capital Contributions. The
representations and warranties of Xxxxxxxxx set forth herein or in any of the Closing Documents
(collectively the “Xxxxxxxxx Representations and Warranties”) shall be deemed to be remade as of
the Closing and shall survive the Closing, including the execution and delivery of the Closing
Documents.
9.1 Due Organization. Xxxxxxxxx is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has the power and authority to own
its property and carry on its business as owned and carried on as of the date hereof.
9.2 Due Authorization. Xxxxxxxxx has the requisite power and authority to execute
and deliver this Agreement and the Closing Documents to which it is a party and to perform its
obligations hereunder and thereunder. The execution, delivery, and performance of this Agreement
and the Closing Documents to which Xxxxxxxxx is a party have been duly authorized by Xxxxxxxxx.
This Agreement has been, and the Closing Documents when executed and delivered by Xxxxxxxxx will
be, duly executed and delivered by Xxxxxxxxx. This Agreement constitutes, and the Closing Documents
when so executed shall constitute, the legal, valid and binding obligations of Xxxxxxxxx
enforceable in accordance with their respective terms.
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9.3
No Conflict with Restrictions; No Default. Neither the execution, delivery or
performance of this Agreement or the Closing Documents by Xxxxxxxxx
shall: (i) conflict with,
violate or result in a breach of any of the terms, conditions or provisions of any law, regulation,
order, writ, injunction, decree, determination or award of any court, any governmental
department, board, agency or instrumentality, domestic or foreign, or any arbitrator which are
applicable to Xxxxxxxxx; (ii) conflict with or violate any of the terms, conditions or provisions
of the certificate of incorporation of Xxxxxxxxx; or (iii) result in the creation or imposition of
any lien upon the Company (except the pledge of members interests in favor of PNC Bank, as
contemplated in the Limited Liability Company Agreement) or any of the Xxxxxxxxx Assets.
9.4 Governmental Authorizations and Third-Party Consents. There is no registration,
declaration or filing with, or consent, approval, license, permit or authorization or order by any
governmental or regulatory authority, domestic or foreign, or by any third party which is required
in connection with the valid execution, delivery and acceptance by Xxxxxxxxx of this Agreement or
the Closing Documents that has not been obtained.
9.5 Permittee Status. Xxxxxxxxx represents and warrants that, to
Xxxxxxxxx’x knowledge, neither it nor any of its owners, nor any entity owned or controlled by any
of its owners, has been notified by any state or federal agency that any of the entities listed
above is ineligible to receive coal mining permits in any state.
9.6 Litigation. Except as disclosed on Schedule 9.6 to this Agreement, there are no
claims, actions, suits, proceedings or investigations pending before or being conducted by any
court, government officer or agency, or arbitrator relating to Xxxxxxxxx which could reasonably be
expected to materially affect Xxxxxxxxx’x ability to enter into this Agreement, to complete the
actions contained in the Closing Agenda, or to make its Initial Capital Contribution. To the best
of the knowledge of Xxxxxxxxx, no such claims, actions, suits, proceedings or investigations are
threatened.
10. Representation and Warranties of Cyprus. Cyprus hereby represents and warrants to
Xxxxxxxxx as follows, which representations and warranties constitute a material inducement to
Xxxxxxxxx entering into this Agreement and making its Initial Capital Contribution and Scheduled
Capital Contributions. The representations and warranties of Cyprus set forth herein or in any of
the Closing Documents (collectively the “Cyprus Representations and Warranties”) shall be deemed
to be remade as of the Closing and shall survive the Closing, including the execution and delivery
of the Closing Documents.
10.1 Due Formation. Cyprus is a Delaware limited liability company and has the power
and authority to own its property and carry on its business as owned and carried on as of the date
hereof.
10.2 Due Authorization. Cyprus has the power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and thereunder. The execution and delivery
of this Agreement has been duly authorized by its sole member. This Agreement has been, and the
Closing Documents when authorized, executed and delivered by Cyprus will have been, duly executed
and delivered by Cyprus. This Agreement constitutes, and the Closing Documents when so executed
shall constitute, the legal, valid and binding obligations of Cyprus enforceable in accordance with
their respective terms.
10.3
No Conflict With Restrictions; No Default. Neither the execution, delivery or
performance of this Agreement or the Closing Documents by Cyprus shall: (i) conflict with,
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violate or result in a breach of any of the terms, conditions or provisions of any law,
regulation, order, writ, injunction, decree, determination or award of any court, any governmental
department, board, agency or instrumentality, domestic or foreign, or any arbitrator which are
applicable to Cyprus; (ii) conflict with or violate any of the terms, conditions or provisions of
the organizational agreements of Cyprus; or (iii) result in the creation or imposition of any lien
upon the Company or any of the Cyprus Assets.
10.4 Governmental Authorizations and Third-Party Consents. There is no registration,
declaration or filing with, or consent, approval, license, permit or authorization or order by any
governmental or regulatory authority, domestic or foreign, or by any third party which is required
in connection with the valid execution, delivery or acceptance by Cyprus of this Agreement or the
Closing Documents that has not been obtained.
10.5
Permittee Status. Cyprus represents and warrants that, to its knowledge,
neither it nor any of its owners, nor any entity owned or controlled by any of its owners, has been
notified by any state or federal agency that any of the entities listed above is ineligible to
receive coal mining permits in any state.
10.6 Litigation. Except as disclosed on Schedule 10.6 to this Agreement, there are
no claims, actions, suits, proceedings or investigations pending before or being conducted by any
court, government officer or agency, or arbitrator relating to Cyprus which could reasonably be
expected to materially affect Cyprus’s ability to enter into this Agreement, to complete the
actions contained in the Closing Agenda, or to make its Initial Capital Contribution. To the
best of the knowledge of Cyprus, no such claims, actions, suits, proceedings or investigations
are threatened.
11. Indemnification. In addition to any other indemnity obligations set out in this
Agreement, Xxxxxxxxx hereby agrees to indemnify and hold Cyprus harmless, and Cyprus hereby agrees
to indemnify and hold Xxxxxxxxx harmless, from and against any and all claims, demands, suits,
proceedings, judgments, losses, liabilities, damages, costs and expenses of every kind and nature
(including, but not limited to, reasonable attorneys’ fees and any and all related litigation
costs and expenses as a consequence of any such proceedings described in this Section 11), imposed
upon or incurred by the indemnified party as a result of or in connection with (i) any
misrepresentation or breach of warranty or failure of any of the representations and warranties
made by the indemnifying party in or pursuant to this Agreement (or any Closing Document) to have
been true and complete in all material respects as of the Closing (“Representation Indemnity
Claim”) or (ii) any breach of any covenant or agreement of the indemnifying party set forth herein
or in any of the Closing Documents (“Covenant Indemnity Claim”; Representation Indemnity Claims
and Covenant Indemnity Claims are collectively referred to as “Indemnity Claims”).
11.1 Notice of Indemnity Claim. If a party intends to assert an Indemnity Claim, it
shall provide the other party with written notice of such Indemnity Claim promptly after the facts
providing the basis for such Indemnity Claim are known. No Representation Indemnity Claim may be
asserted after 18 months from the Closing Date, but any Representation Indemnity Claim made prior
to 18 months from the Closing Date shall remain valid and enforceable. Except for statutes of
limitation under applicable law, there are no time limits for Covenant Indemnity Claims. An
Indemnity Claim notice shall set forth, in detail, the specific character and factual basis for
each individual Indemnity Claim asserted therein. At the time the Indemnity Claim is made and
thereafter, any party asserting the Indemnity Claim shall provide
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the other party with copies of any materials in its possession describing the facts or containing
information providing the basis for the Indemnity Claim. If the indemnity Claim involves a claim by
a third party, the party against which the Indemnity Claim is asserted may assume, at its sole
expense, the defense of the claim by the third party if such party against which the Indemnity
Claim is asserted agrees in writing with respect to such Indemnity Claim that it is obligated
hereunder to indemnify and hold the party asserting the Indemnity Claim harmless in accordance with
the terms of this Section 11.1. The failure of the party against which the Indemnity Claim is
asserted to assume the defense of any such claim shall not affect any indemnification obligation
under this Agreement.
12. Brokers. Each party hereto hereby represents and warrants to the other parties
hereto that there are no claims for brokerage or other commissions or finders or other similar fees
as of the date hereof in connection with the transactions contemplated by this Agreement. Each
party hereto hereby agrees to indemnify and hold harmless the other party and the Company from and
against all liabilities, costs, damages, and expenses from any such claim resulting from its
action.
13. Miscellaneous.
13.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky.
13.2 Entire Agreement; Modification. This Agreement and the Closing
Documents constitute the entire agreement of the parties hereto pertaining to the subject matter
hereof and supersede any previously written or oral discussions or representations. No supplement,
modification or waiver (except as provided herein relative to conditions precedent) of this
Agreement or the Closing Documents, or any provision hereof or thereof, shall be binding unless in
writing and executed by the parties.
13.3 No Third-Party Beneficiaries. Nothing in this Agreement shall entitle any person
other than the parties named in and executing this Agreement to any claim, cause of action, remedy
or right of any kind except that the Company shall be beneficiaries of this Agreement.
13.4 Expenses. Except as set forth below, each party shall be liable for its own
expenses in connection with the preparation and performance of this Agreement, the Closing
Documents, and the acquisition of government approvals for the Closing.
13.5
Assignment. This Agreement may not be assigned, in whole or in part, by any party
without the consent of the other parties. Any attempted assignment without the consent of all
parties shall be void. Subject to the foregoing, this Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and assigns.
13.6 Further Assurances. The parties hereto shall take such further actions and
execute such further documents after the Closing as may be required to fulfill the intentions of
the parties expressed herein and in the Closing Documents relative to the formation of the Company
and the Initial Capital Contributions and Scheduled Capital Contributions.
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13.7 Notices. All notices, consents, elections, requests, reports, demands and other
communications hereunder (collectively, “Notices”) shall be in writing and shall be personally
delivered or mailed by registered or certified mail, postage prepaid and addressed as follows:
Cyprus Creek Land Resources, LLC
|
Xxxxxxxxx Coal Company, Inc. | |
000 Xxxxxx Xxxxxx, Xxxxx 000
|
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 0000 | |
Xx. Xxxxx, Xxxxxxxx 00000
|
Xx. Xxxxx, Xxxxxxxx 00000 | |
| Xxxxxxxxx Energy, Inc. | ||
| Attn: Xxxxxx X. Xxxxxx, President | ||
| 0000 Xxxxxxx Xxxxxxxxx, Xxxxx 0000 | ||
| Xx. Xxxxx, Xxxxxxxx 00000 |
or to such other address or to such other person as any party hereto shall have last
designated by notice to the other party in accordance with the foregoing. All such Notices shall
be effective as of the date received by the addressee. If such addressee refuses to accept
delivery of any such Notice, such Notice shall be deemed to have been delivered on the date of
such refusal.
13.8 Survival. The terms of this Agreement shall survive the closing and the
formation of the Company.
-remainder of page intentionally left blank-
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and date first
above written.
| CYPRUS CREEK LAND RESOURCES, LLC | ||||||
| By: | /s/ X.X. Xxxxxx | |||||
| Its: | VP | |||||
| CYPRUS CREEK LAND COMPANY | ||||||
| By: | /s/ X.X. Xxxxxx | |||||
| Its: | XX | |||||
| XXXXXXXXX COAL COMPANY, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| It: | President | |||||
| WESTERN LAND COMPANY, LLC | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| It: | Manager | |||||
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| 1. | Execution of Organization Documents |
| - | Certificate of Formation | ||
| - | Limited Liability Company Agreement |
| 2. | Execution of the Company agreements |
| - | the Management Agreement (attached hereto as Appendix 1) | ||
| - | the Sales Representation Agreement (attached hereto as Appendix 2) |
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Appendix 1
MANAGEMENT AGREEMENT
This is a Management Agreement (this “Agreement”) dated December 29, 2011, between Xxxxxxx Mining Company, LLC, a Delaware
limited liability company (the “Company”) and Xxxxxxxxx Coal Company, Inc., a Delaware corporation (the “Manager”).
RECITALS
A. Whereas, the Company desires to enter into a contractual arrangement setting
forth the terms and conditions for the Manager’s management of the Company pursuant to
Section 7 of the Company’s Limited Liability Company Agreement, also called
the Operating Agreement (the “Operating Agreement”), a copy of which has been provided to
Manager, and is attached hereto and made a part hereof as Exhibit A; and
B. Whereas, the Manager desires to enter into such contractual arrangement and to provide
management services to the Company on the terms and conditions herein set forth; and
C. Whereas, even though the Company will have its own workforce, it is anticipated
that employees of the Manager will be involved in the operations, budgeting, accounting,
permitting, human resources, maintenance and other areas of the management of the Company
and its day-to-day operations (“Technical Services”); and
D. Whereas, even though the Company will generally operate using its own leased or
owned equipment and enter into its own vendor and supplier contracts, it is anticipated
that the Manager or third-party suppliers contracted by the Manager will, from time to
time, arrange for services, equipment or supplies to be provided to
the Company (“Pass-Through Services”), and that the Manager will provide needed equipment to the Company on a
short-term basis (“Borrowed Equipment”).
NOW, THEREFORE, in consideration of the foregoing and of the covenants herein
contained, the parties hereto agree as follows:
1. Management. The Company hereby retains the Manager as the manager of the Company,
and vests all authority and responsibility for the management of the day-to-day operations
of the Company in the Manager (except as may otherwise be provided in the Operating
Agreement), and the Manager accepts such position, all on the terms and conditions set
forth herein. The Manager initially appoints Xxxxxxx Xxxxx, Vice President of Operations of
the Manager, as the individual who will be responsible for the day-to-day management of
the Company. The Manager may appoint replacement or additional individuals to be
responsible for the day-to-day management of the Company, provided such individuals shall
be selected with the input and consent of the Board of Managers of the Company.
2. Term. The term of this Agreement shall be a one-year (1) period
commencing on the date hereof (the “Initial Term”) unless
terminated sooner pursuant to
Section 7 below. After the Initial Term, this Agreement shall be automatically
renewed on a year-to-year basis (the
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“Additional Term(s)”), unless the Manager or the Managing Member (as such term is defined in
the Operating Agreement) of the Company provides prior written notice of its intention for this
Agreement not to be renewed, which written notice shall be provided not less than ninety (90) days
prior to the expiration of the Initial Term or any Additional Term. The Initial Term and any
Additional Term, if any, will each be referred to as a
“Term” and collectively as the “Term”).
3. Duties; Limitation on Liability; Indemnification.
(a)Duties. The Manager shall have full, exclusive, and complete
discretion, power and authority to manage, control, administer, and operate the
business and affairs of the Company and to make decisions affecting the business
and affairs of the Company; provided, however, that the Manager shall not enter
into or conduct any transactions that require either unanimous or majority consent
of the Board of Managers or unanimous consent of the Members as established
under Sections 3.2, 7.4 or 7.5 of the Operating Agreement, or take any
actions inconsistent with the Operating Agreement, and shall use its
commercially reasonable efforts to ensure that the Company at all
times engages in prudent mining operations, hiring and reclamation practices and
complies with all applicable laws in all material respects. The Manager shall
perfom its duties hereunder, including those set forth in the Operating
Agreement, in good faith, using good faith efforts and reasonable diligence.
(b)
Limitation on Liability. Neither the Manager nor any officer, director,
employee, agent, stockholder, or partner of the Manager (each, an “Indemnitee”)
shall be liable to the Company or to any other person or entity for any debts owed
by the Company, or for any actions taken or omissions made in good faith and
reasonably believed to be in the best interests of the Company, except for acts or
omissions of gross negligence, willful misconduct, intentional misconduct, or a
knowing violation of the law.
(c) Indemnification. The Company shall indemnify and hold harmless any
Indemnitee, from and against any claim, loss, damage, liability, or reasonable
expense (including reasonable attorneys’ fees, court costs, and costs of
investigation and appeal) actually incurred by any such Indemnitee by reason of,
or arising from, the operations, business, or affairs of, or any action taken or
failure to act on behalf of, the Company, except to the extent any of the
foregoing (A) is determined by final, nonappealable order of a court of competent
jurisdiction (or by any other means approved by the Board of Managers) to have
been primarily caused by any fraud, breach of fiduciary duties established under
this Agreement, gross negligence or willful misconduct of such person or (B) is
actually incurred as a result of any claim (other than a claim for indemnification
under this Agreement) asserted by the Indemnitee as plaintiff against the Company;
provided that if (for purposes of clause (A) immediately above) the fraud, breach
of fiduciary duties established under this Agreement, gross negligence or willful
misconduct of any person claiming indemnification shall consist of a conviction of
or plea of no contest to a felony, then such person shall not be entitled to
indemnification unless it is determined, by final, nonappealable order of a court
of competent jurisdiction (or by any other means approved by the Board of
Managers), that indemnification should be granted in whole or part.
4. Reporting
Relationship. The Manager shall report to the Board of
Managers of the Company.
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5. Management
Fee. The Manager shall receive a management fee of fifty
cents ($0.50) per ton (the “Management Fee”) of #8 seam coal sold by the Company on a
monthly basis and shall be payable by the 25th day of the following month. The
Management Fee shall be the compensation of the Manager for duties performed under this
Agreement (other than as provided in Section 6).
6. Payment
for Technical Services, Borrowed Equipment and Pass-Through
Services. As
and when needed by the Company, in the reasonable discretion of the Manager, the
Manager may furnish or arrange for Technical Services, Borrowed Equipment and
Pass-Through Services to be provided to the Company. The Company agrees to reimburse the
Manager for such services on a monthly basis, payable on or before
the 25th day of the
following month. The Manager shall submit a written reimbursement request to the Board
of Managers for review and, upon request of the Company or any of its Managers or
Members, provide back-up documents and other reasonable verification for the expenses and
charges being requested. The following additional provisions shall govern reimbursement
for such services; provided, however, that the method for determining amounts to be paid
may be modified from time to time by the Board of Managers.
(a)
Technical Services. For Technical Services provided by each
employee of the Manager during a given month, the amount shall be
determined as follows: (i) for the employees identified on Schedule
1 attached hereto, the amount set forth on Schedule 1;
(ii) for employees not listed on Schedule 1, the product of (a) the
percentage of such employee’s time in such month spent on the business of
the Company, multiplied by (b) the total cost to the
Manager of salary and benefits, excluding bonuses, for such employee
during such month. The amount of employee time allocated to the Company
shall be determined by the Manager using commercially reasonable
practices and using its best efforts to fairly and equitably allocate such
time.
(b)
Pass-Through Services. Pass-Through Services shall be charged to
the Company on a direct pass-through basis, with no xxxx-up for profit
or administrative fees. If allocation is necessary because the contract
underlying the Pass-Through Services is common to the Company and other
operations run by the Manager, the amount allocated to the Company shall
be determined by the Manager using commercially reasonable practices and
using its best efforts to fairly and equitably allocate such services
with full disclosure to the Board of Managers.
(c)
Borrowed Equipment. For Borrowed Equipment, the amount shall be a
fair and equitable charge reasonably set by the Manager, but not to exceed
the amount for which the Company could have obtained use of equivalent
equipment from a third party at prevailing market rates.
7. Termination.
(a) Events
of Termination. Notwithstanding any other provision of this
Agreement to the contrary, this Agreement and the Manager’s retention under the
terms of this Agreement will terminate immediately upon the first of the
following events to occur:
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(i) the
Manager’s corporate dissolution or liquidation;
(ii) the Manager ceasing to be the Managing Member pursuant to the
Operating Agreement; or
(iii) the occurrence of a Triggering Event, as defined under the
Operating Agreement.
(b) Compensation Upon Termination. In the event of termination of the
Manager due to an event of termination pursuant to Section 7(a) above, the Manager
shall be entitled to be paid for services rendered up to the time of actual
termination.
8. Use
of Company Facilities by the Manager. The Manager shall have the
right to utilize the Company’s surface facilities and employees for processing and
handling coal from Xxxxxxxxx’x Parkway mining operations in the
#9 seam of coal and from
adjacent mining operations, provided (i) such utilization is at such times and in such
manner as will not interfere with the Company’s operations or reduce the coal output of
the Company, and (ii) the Manager pays the Company for usage of the surface facilities,
which charge shall be charged to the Manager on a direct pass-through basis, with no
xxxx-up for profit or administrative fees.
9. No Assignment by Manager. The services to be rendered by the Manager
under this Agreement are unique and personal, and the Manager shall not assign any of its
rights or delegate any of its duties under this Agreement, except to
an employee or a
corporate affiliate of Manager.
10. Assumption
by Cyprus. In the event Cyprus Creek Land Resources, LLC (“Cyprus”)
exercises its rights to assume this Management Agreement pursuant to Section 7.1 of the
Operating Agreement then this Agreement shall be construed and enforced to provide Cyprus
with all of the Manager’s rights and entitlements hereunder, including but not limited to
the right to receive the Management Fee provided for hereunder. In the event Cyprus
assumes the status as “Manager” hereunder, Cyprus shall have no obligation to continue to
utilize the goods or services previously provided by or through Xxxxxxxxx under Section 6,
and shall be authorized to make arrangements and outsource such services in its sole
discretion, subject to the limitations on the authority of the Manager contained in
Section 6 and elsewhere in this Agreement and the Operating Agreement.
11. Severability and No Violation. If any provision of this Agreement or
its application shall be invalid, illegal, or unenforceable in any respect, the validity,
legality, and enforceability of all other applications of that provision and of all other
provisions and applications hereof shall not in any way be affected or impaired. The
Manager represents that in signing this Agreement it will not violate any other agreement
to which it is a party.
12. Governing
Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Kentucky.
4
13. Non-Waiver. A delay or failure by either party to exercise a right under this
Agreement, or a partial or single exercise of that right, shall not constitute a waiver of
that or any other right.
14. Counterparts. This Agreement may be executed in two or more
counterparts (including via facsimile), each of which shall be deemed
an original but all of which together shall constitute one and the same agreement.
15. Entire Contract. This Agreement and the Operating Agreement constitute
the entire understanding and agreement between the parties hereto with regard to all
matters herein and supersedes any prior agreements and discussions between the parties.
There are no other agreements, conditions or representations, oral or written, expressed or
implied with regard thereto. In the event of a conflict between this Agreement and the
Operating Agreement, the terms contained in the Operating Agreement shall control. This
Agreement may be amended only in writing, signed by both parties. Any further agreement of
the parties on any matter, including matters unrelated to this Agreement, shall be binding
and enforceable only if in writing, and signed by both parties.
16. Headings.
The headings in this Agreement have been inserted solely
for convenience of reference and shall not be considered in the interpretation or
construction of this Agreement.
[remainder of page intentionally left blank]
5
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement effective as of the date set forth above.
| Xxxxxxxxx Coal Company, Inc. (the “Manager”) |
||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Xxxxxxx Xxxxx, Vice President of Operations | ||||
| Xxxxxxx Mining Company, LLC (the “Company”)
|
||||
| By: | Xxxxxxxxx Coal Company, Inc., its Managing Member |
|||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Xxxxxxx Xxxxx, Vice President of Operations |
| Approved by: | ||||
| Cyprus Creek Land Resources, LLC, Member of Xxxxxxx Mining Company, LLC |
||||
| By: | /s/ X.X. Xxxxxx | |||
| Title: | VP | |||
6
Schedule 1
Technical Services
(Specified Xxxxxxxxx Employees)
(Specified Xxxxxxxxx Employees)
| Employee | Amount to Be Reimbursed | |||
Vice President of Operations |
$0 – included in the Management Fee | |||
Vice President of Corporate Development |
$0 – included in the Management Fee | |||
Underground Mine Superintendent |
$0 – included in the Management Fee | |||
Chief Electrician (1) |
$0 – included in the Management Fee | |||
Director of Training |
$0 – included in the Management Fee | |||
Director of Safety |
$0 – included in the Management Fee | |||
Underground Engineer |
$0 – included in the Management Fee | |||
IT Director |
$0 – included in the Management Fee | |||
Manager of Underground IT |
$0 – included in the Management Fee | |||
HR Director |
$0 – included in the Management Fee | |||
Transportation Sales Coordinator |
$0 – included in the Management Fee | |||
7
Exhibit A
NOTICE: THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION
XXXXXXX MINING COMPANY, LLC
LIMITED LIABILITY COMPANY AGREEMENT
(THE OPERATING AGREEMENT)
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 Xxxxxxxxx Coal Company, Inc. (“Xxxxxxxxx”).
WHEREAS, the Members (hereafter defined) desire to form a limited liability company under the
laws of the State of Delaware to be known as Xxxxxxx 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 “Xxxxxxxxx” means Xxxxxxxxx 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 Xxxxxxxxx, means any transfer or other action that
results in (a) Xxxxxxxxx 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 Xxxxxxxxx, or (c) any private or public company or
entity primarily engaged in the business of coal mining gaining Control, directly or indirectly,
over Xxxxxxxxx or over Yorktown Parties that have Control over Xxxxxxxxx. “Change of Control,” with
respect to a Member other than Xxxxxxxxx, 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 Xxxxxxxxx,
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 Xxxxxxx 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
- 2 -
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.
- 3 -
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 “Xxxxxxx 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 Xxxxxxxxx.
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 Xxxxxxxxx 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) Xxxxxxxxx
resigns as the Managing Member, (b) Xxxxxxxxx is removed from the Managing Member position by the
Board of Managers acting upon the majority consent of all of the Managers, (c) Xxxxxxxxx ceases to
be a Member, (d) Xxxxxxxxx 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 Xxxxxxxxx occurs, (g)
- 4 -
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, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. The Company’s primary business office shall be at 000 Xxxxx
Xxxx, Xxxxxxxxxxxx, XX 00000, 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, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
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.
- 5 -
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
- 6 -
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
without the written consent of the Member who made the Member Loan.
3.4 Withdrawal of Capital. The Members shall only be entitled to withdraw or to
receive distributions of capital in accordance with the terms and conditions of this Agreement.
3.5 Capital Accounts. A single capital account shall be maintained for each Member in
accordance with the capital accounting rules of section 704(b) of the Code and the tax regulations
thereunder (including treasury regulation 1.704(b)(2)(iv)), The capital account of each Member
shall be credited with the fair market value of such Member’s capita! contributions, such Member’s
distributive share of profits, income or gain, and the amount of any Company liabilities assumed by
such Member or which are secured by any property distributed to such Member. The capital account of
each Member shall be debited with the amount of cash and the value of any property distributed to
such Member pursuant to any provision of this Agreement, such Member’s distributive share of losses
and expense, and the amount of any liabilities of such Member assumed by the Company or which are
secured by any property contributed by such Member to the Company.
3.6 Revaluation of Capital Accounts. The capital accounts of the Members shall be
adjusted to reflect revaluation of Company assets in all cases required by treasury regulation §
1.704-l(b) and in all optional circumstances to the extent allowed by treasury regulation §
1.704-l(b)(2)(iv)(f) unless the Board of Managers determines that such revaluation would not be
beneficial or fair under the circumstances. If there is a revaluation under this Section 3.6, then
the Company shall make special allocations consistent with the principles of Section 704(c) of the
Code. In determining such allocations, the Company shall use the traditional method with curative
allocations described in treasury regulation § 1,704~3(c) for any Contributed Asset.
4. Allocations.
4.1
Allocation of Profit Loss. Income, Gain. Deduction, and Credit. Subject to Section 4.2,
profits and losses of the Company and, items of taxable income, gain, loss, deduction and credit,
shall be apportioned among the Members in accordance with each Member’s Profit Distribution Share.
4.2 Tax Allocations Contributed Property. With respect to any asset contributed by a
Member to the Company (“Contributed Asset”) that has a tax basis different from its agreed upon
fair market value on the date of the contribution, the Company shall make the special allocations
required by Section 704(c) of the Code, These special allocations apply solely for Federal, state,
and local income tax purposes. They shall not affect or be taken into account in computing a
Member’s capital account, or share of profits, losses, or distributions pursuant to any provision
of this Agreement. In making these special allocations, the Company shall use the traditional
method with curative allocations described in treasury regulation § 1.704-3(c) for any Contributed
Asset.
4.3 754 Election and Other Tax Elections. In the event of a distribution of property to a
Member, or a transfer of any interest in the Company permitted under the Act or this Agreement, the
Company, upon written request of the transferor or transferee, shall file a timely election under
this section 754 of the Code and the regulations thereunder to adjust the basis of the Company’s
assets under section 734(b) or 743(b) of the Code and a corresponding election under the applicable
provisions of state and local law, and the Person making such request shall pay all costs incurred by the
Company in connection therewith, including reasonable ??? accountants’ fees. Other tax elections and
elections relating to Taxes not specifically governed by another provision of this Agreement shall be made as
agreed by the Board of Managers.
- 7 -
5. Distributions.
5.1 Distribution to Members. On or before the last business day of each calendar
quarter, the Company may make distributions of cash or cash equivalents to the Members based upon
the Available Cash of the Company. The Managing Member shall first determine the amount of
Available Cash of the Company available for distribution, and then the Board of Managers shall
determine the aggregate amount of distributions which may be made to the Members and the Members
shall share in such total distributions in accordance with each Member’s Profit Distribution Share.
5.2 Distributions in Kind. Except as may be provided in this Agreement or an amendment
to this Agreement, no Member, regardless of the nature of the Member’s contribution to capital, may
demand or receive a distribution from the Company in any form other than cash or cash equivalents.
5.3 Limitation on Distributions. No distribution shall be made by the Company if after
giving effect to the distribution; (a) the Company would not be able to pay its debts as they
become due in the usual course of business; or (b) the assets of the Company would be less than the
sum of its liabilities plus, the amount that would be needed, if the Company were to be dissolved
at the time of the distribution, to satisfy the preferential rights of other Members upon
dissolution which are superior to the rights of the Member receiving the distribution.
6. Members.
6.1 Representations and Warranties. Each Member hereby represents and warrants to the
Company and each other Member that: (a) it is duly organized, validly existing and in good standing
under the laws of its formation and is duly qualified and in good standing in the jurisdiction of
its principal place of business; (b) it has full power and authority to execute and agree to this
Agreement and to perform its obligations hereunder; (c) it has duly executed and delivered this
Agreement; and (d) its authorization, execution, delivery, and performance of this Agreement does
not conflict with any other agreement or arrangement to which that Member is a party or by which it
is bound.
6.2 Additional Members. It is not intended that additional Members will be admitted
into the Company. Nonetheless, if the Members unanimously agree, additional Members may be admitted
on such terms and conditions as the Members may determine at the time of admission,
6.3 Prohibited Transfers. No Member may transfer all or any part of such Member’s
Percentage Interests if such transfer will (a) violate in any material respect any applicable
federal or state securities laws or regulations, or subject the Company to registration as an
investment company or election as a “business development company” under the Investment Company Act
of 1940; (b) require any Member or any Affiliate of a Member to register as an investment adviser
under the Investment Advisers Act of 1940; (c) effect a termination of the Company under Section
708 of the Code; or (d) cause the Company to be treated as an association taxable as a corporation
for federal income tax purposes.
6.4 Information. The Members acknowledge that from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that otherwise is
confidential, the release of which may be damaging to the Company or Persons with which it does
business. Each Member shall hold in strict confidence any information it receives regarding the
Company that is identified as being confidential (and if that information is provided in writing,
that is so marked) and may not disclose it to any Person other than another Member, except for
disclosures (i) compelled by law (but the Member must notify the other Members, as appropriate,
promptly of any request for that information, before disclosing it, if
- 8 -
practicable), (ii) to advisers or representatives of the Member or Persons to which that Member’s
interest may be disposed as permitted by this Agreement, but only if the recipients have agreed to
be bound by the provisions of this Section, or (iii) of information that Member also has received
from a source independent of the Company that the Member reasonably believes obtained that
information without breach of any obligation of confidentially. The Members acknowledge that breach
of the provisions of this Section may cause irreparable injury to the Company for which monetary
damages are inadequate, difficult to compute, or both. The Members agree that the provisions of
this section may be enforced by specific performance,
6.5 Liabilities to Third Parties; Indemnification. Except as otherwise expressly
agreed in writing, no Member shall be liable for the debts, obligations or liabilities of the
Company, including under a judgment decree or order of a court; provided, however, that
notwithstanding any other provision of this Agreement, each Member shall indemnify and hold
harmless the Company and the other Member from and against any claim, loss, damage, liability, or
reasonable expense (including reasonable attorneys’ fees, court costs, and costs of investigation
and appeal) actually incurred by the Company or the other Member by reason of, or arising from, the
operations, business, or affairs of, or any action taken or failure to act, of or by the other
Member or its Affiliates prior to formation of this Company. The parties acknowledge that a claim
has been filed against the Xxxxxxxxx Parties in XX Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx of Kentucky,
Civil Action No. 4:11 cv 114, alleging the existence of an existing overriding royalty that is
alleged to apply to #8 seam coal to be mined by the Company, and the parties agree in the event
that such claims are adjudged to apply to any #8 seam coal mined by the Company (but only with
respect to #8 seam coal mined by the Company), the Company shall not be entitled to be indemnified
or held harmless by Xxxxxxxxx relating to such obligations.
6.6 Fiduciary Duties.
(a) Duty of Loyalty. Each Member’s, Manager’s and Managing Member’s
duty of loyalty to the Company and the other Members is limited to account to the
Company and to hold as trustee for the Company any property, profit or benefit
derived by the Member, Manager or Managing Member in the conduct or winding up of
the Company’s business. A Member, Manager or Managing Member does not violate the
duty of loyalty by engaging in a competing business or pursuing other business
opportunities, even if the business opportunity could have been pursued by the
Company.
(b) Duty of Care. Each Member’s, Manager’s and Managing Member’s duty
of care to the Company and the other Members in the conduct of and winding up of the
Company’s business is limited to refraining from engaging in gross negligence,
reckless conduct, intentional misconduct, or a knowing violation of law,
(c) Good Faith and__Fair_Dealing. Each Member, Manager and Managing
Member shall discharge its duties and exercise any of its rights consistently with
the obligation of good faith and fair dealing which it owes to the Company and the
other Members, A Member, Manager or Managing Member does not violate a duty of good
faith or fair dealing to the Company merely because the Member’s, Manager’s or
Managing Member’s conduct furthers the Member’s, Manager’s or Managing Member’s, as
the case may be, own interest. Further, a Member, Manager, or Managing Member does
not violate the duty of good faith and fair dealing by engaging in a competing
business or pursing other business opportunities, even if the business opportunity
could have been pursued by the Company; provided, however, that each Member, Manager
and Managing Member shall not engage in a competing business involving any coal
reserves described in the Xxxxxx #8 Lease of Kentucky #8 Reserves identified on
Exhibit B hereto without the express written consent of the other Member.
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(d) Indemnification of Members, Managers and Managing Member. To the
fullest extent allowed by law, the Members, Managers, and Managing Member shall be
indemnified and held harmless by the Company for any liability resulting from any
act performed or omission made by them in good faith on behalf of the Company,
except for acts or omissions of gross negligence, willful misconduct, intentional
misconduct, or a knowing violation of the law. Notwithstanding anything contained in
this Agreement to the contrary, no Member, Manager or Managing Member, nor any
officer, director, employee, agent, stockholder, member or partner of any Member or
the Managing Member shall be liable, responsible, or accountable in monetary damages
to the Company or any Member by reason of, or arising from, the operations,
business, or affairs of, or any action taken or failure to act on behalf of, the
Company, except to the extent that any of the foregoing is primarily caused by any
acts or omissions of gross negligence, willful misconduct, intentional misconduct,
or knowing violation of the law of such Person; provided, however, that the rights
of either Member with respect to the buy-sell triggers set forth in Section 8.3
shall not be limited to or conditioned upon acts or omissions of gross negligence,
willful misconduct, intentional misconduct, or knowing violation of the law.
(e) Duty of Care for Managing Member. The Managing Member shall perform
its duties hereunder, including but not limited to those expressly stated in Section
7.6, in good faith, using reasonable good faith efforts and with reasonable
diligence. In the event the other Member (“Non-Managing Member”) determines that the
Managing Member is not performing its duties hereunder consistent with the standards
set forth in this Section 6.6(e), the Non-Managing Member may deliver written notice
of such determination to the Managing Member, which notice shall set forth in
reasonable detail the basis for the Non-Managing Member’s determination that the
Managing Member is not performing its duties hereunder consistent with the standards
set forth in this Section 6.6(e). If, after sixty (60) days after delivery of the
foregoing notice, the Non-Managing Member reasonably determines that the Managing
Member continues to not perform its duties hereunder consistent with the standards
set forth in this Section 6.6(e), the Non-Managing Member may exercise the buy-sell
option set forth in Section 8.3 hereof.
6.7 Alternate Dispute Resolution. If a dispute, controversy or claim (whether based
upon contract, tort, statute, common law or otherwise) (collectively a “Dispute”) arises from or
relates directly or indirectly to the subject matter hereof, and if the Dispute cannot be settled
through direct discussions, the parties shall first endeavor to resolve the Dispute by
participating in a mediation administered by the American Arbitration Association (“AAA”) under its
Commercial Mediation Rules before resorting to arbitration. Thereafter, any unresolved Dispute
shall be settled by binding arbitration administered by the AAA in accordance with its Commercial
Arbitration Rules and judgment on the award rendered by the arbitrator, after the review rights set
forth below have been exhausted, may be entered in any court having jurisdiction. Any arbitration
proceeding shall be conducted in St. Louis, Missouri on an expedited basis before a neutral
arbitrator (or multiple arbitrators if called for by the Commercial Arbitration Rules), Each
arbitrator shall be selected in the manner determined by the AAA. Upon the request of either party,
the arbitrator’s award shall include findings of fact and conclusions of law provided that such
findings may be in summary form. Either party may seek review of the arbitrator’s award before an
arbitrations review panel comprised of three arbitrators qualified in the same manner as the
initial arbitrator(s) (as set forth above) by submitting a written request to the AAA. The right of
review shall be deemed waived unless requested in writing within ten (10) days of the receipt of
the initial arbitrator’s award. The arbitration review panel shall be entitled to review all
findings of fact and conclusions of law in whatever manner it deems appropriate and may modify the
award of the initial arbitrator(s) in its discretion. The prevailing party in any arbitration
proceeding shall be entitled to
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an award of all reasonable out of pocket costs and expenses (including attorneys’ and arbitrators
tees) related to the entire arbitration proceeding (including review if applicable). Upon request
of either party, the arbitrator(s) may require that the subject arbitration proceedings be kept
confidential and no party shall disclose or permit the disclosure of any information produced or
disclosed in the arbitration proceedings until the award is final. A party shall not be prevented
from seeking temporary injunctive relief before a court of competent jurisdiction in an emergency
situation, but responsibility for resolution of the Dispute shall be appropriately transferred to
the arbitrator(s) upon appointment in accordance with the provisions hereof.
6.8 Meetings of Members.
(a) Meetings. The Members will have an annual meeting as may be
established by the Managing Member. The Members will have such special meetings as
are called in accordance with the provisions of this Agreement. Any annual or
special meeting of the Members is to be held at such place as may be designated by
the Managing Member or in a waiver of notice executed by all Members, If there is a
failure to designate a place for any such meeting, the same is to be held at the
principal place of business of the Company. The annual meeting of the Members is to
be held each year within sixty (60) days of the beginning of the Fiscal Year for the
transaction of such other business as may come before the meeting. Special meetings
of the Members may be called at any time by the Managing Member or by Members
possessing not less than one-third of the Percentage Interests and are to be held on
such dates and at such times as are set forth in the notice calling the meeting.
(b) Quorum. A majority of ail the Percentage Interests represented in
person or by proxy at such meeting constitutes a quorum of Members for all purposes.
Less than such quorum has the right to adjourn the meeting to a specified date not
longer than ninety (90) days after such adjournment, with notice of such adjournment
to Members to be given in the manner for special meetings of the Members. Except
where the affirmative vote of all of the Members or unanimous agreement of the
Members is required herein, the act of a majority (computed with reference to
Percentage Interests) of the Members present at any duly called meeting at which a
quorum of Members is present is the act of the Members.
(c)
Notice of Meetings. Written or printed notice of each meeting of Members
stating the place, day and hour of the meeting and, in the case of special meetings,
the purpose or purposes for which the meeting is called must be delivered or given:
(i) in the case of regular meetings, not less than ten (10) nor more than forty (40)
days before the date of the meeting; and (ii) in the case of special meetings, not
less than five (5) Business Days nor more than thirty (30) days before the date of
the meeting; in each case either personally or by mail. Notice of an annual meeting
of the Members is to be given by the Company, Notice of a special meeting of the
Members is to be given by the Company or the Member calling the meeting. Any notice
required by this Section may be waived by the Members by signing a waiver of notice
before or after the time of such meeting and such waiver is equivalent to the giving
of such notice.
(d) Designated Representative(s). Each Member shall designate in writing
to the Company and the other Members the names of up to two (2) officers, directors,
partner’s, members, employees or other affiliates of the Member who are to serve as
the “Designated Representatives” of the Member at all meetings and in all votes,
consents and approvals of the Members required pursuant to this Agreement. The
designated individual(s) shall be the official Designated Representative(s) of the
designating Member. One of such Designated Representatives shall be the primary
voting representative of the Member and the other (if
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any) shall be the alternative voting representative. Both Designated
Representatives of a Member may attend meetings of the Members, but only one (1)
Designated Representative shall cast the Member’s official vote on any matter. The
initial Designated Representatives of the entity Members are as follow:
Cyprus
|
X.X. Xxxxxx | |
| Vice President, Cyprus | ||
| Xxx Xxxxxx | ||
| Vice President Operations Underground, | ||
| Peabody Midwest Group | ||
Xxxxxxxxx
|
Xxxxxxx Xxxxx | |
| Vice President Operations, | ||
| Xxxxxxxxx | ||
| Xxxxxx Xxxxxx | ||
| President, | ||
| Xxxxxxxxx |
If neither Designated Representative of a Member is able to attend a
particular meeting of the Members, such Member may designate in writing another
officer, director, partner, member, employee or affiliate of the Member to have
voting privileges for that specific meeting. A Member may change either or both of
its Designated Representatives at any time by giving written notice thereof to the
Company and the other Members.
(e) Informal Action by Members. Any action required by this Agreement
to be taken at a meeting of the Members, or any action which may be taken at a
meeting of the Members, may be taken without a meeting if all of the Members sign
written consents that set forth the action so taken. Such consents have the same
force and effect as a unanimous vote of the Members at a meeting duly held. The
Company is to file such consents with the minutes of the meetings of the Members.
(f) Tele-Participation in Meetings. Members may participate in a
meeting of the Members by means of a conference telephone or similar communications
equipment whereby all individuals participating in the meeting can hear each other.
Participation in a meeting in this manner constitutes presence in person at the
meeting.
7. Management of the Company.
7.1 Board of Managers. The management of the Company is vested in a Board of
Managers consisting initially of four (4) individuals acting as Managers (individually a
“Manager” and collectively the “Managers”) of the Company, two (2) selected by Xxxxxxxxx (or its
successor or permitted assign) and the other two (2) selected by Cyprus (or its successor or
permitted assign). Initially, Xxxxxxxxx selects Xxxxxxx Xxxxx, Vice President of Operations of
Xxxxxxxxx and Xxxxxx Xxxxxx, President of Xxxxxxxxx as its representatives on the Board of
Managers and Cyprus selects X. X. Xxxxxx, Vice President of Cyprus and Xxx Xxxxxx, Vice President
Operations Underground, Peabody Midwest Group as its representatives on the Board of Managers.
Except as provided herein, the decisions of the Board of Managers shall be binding upon
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the Company and may be relied upon by other persons or entities. A Manager may at any time
be changed or removed and replaced by the Member which has appointed such Manager, but not by any
other Member. In the event that Xxxxxxxxx or Cyprus (or such party’s successor or permitted
assign) ceases to be a Member, the Managers appointed by such Member shall be removed at such time
and replaced by the affirmative vote of all of the Members. Except as set forth in Section 3.2 and
Section 7.12(e), the Board of Managers shall act solely upon the majority consent of all of the
Managers, which requires an affirmative vote of at least three (3) of the four (4) Managers,
including the affirmative vote of at least one (1) Manager appointed by each of Xxxxxxxxx and
Cyprus, and each Manager shall have one (1) vote. No Manager shall be required to devote all of
such Manager’s time or business efforts to the affairs of the Company but shall devote so much of
such Manager’s time and attention to the Company as is reasonably necessary and advisable to
manage the affairs of the Company to the best advantage of the Company. The Managing Member is
hereby authorized to execute, in such capacity, all documents and agreements that do not require
consent of the Board of Managers, For documents and agreements that require such consent, the
Board of Managers may, in connection with its approval thereof, authorize the Managing Member
and/or all or less than all of the Managers to execute any and all documents necessary or
convenient to carry out those actions approved by a majority of the Managers, If the Board of
Managers approves executing a document or agreement without specifically authorizing signers, then
the Managing Member and each of the Managers, acting individually, may execute such document or
agreement on behalf of the Company. The Company shall enter into a Management Agreement (the
“Management Agreement”) which shall initially engage Xxxxxxxxx to be the manager of the Company’s
day-to-day operations and the development of the Project, in accordance with the terms and
conditions contained in the Management Agreement and this Agreement. Pursuant to the terms of this
Agreement Xxxxxxxxx shall serve as the Managing Member until the occurrence of a Triggering Event
or is removed by the Board of Managers, at which time Cyprus shall have the authority, in its sole
discretion, to assume the position of Managing Member without consent or action from any other
Member or the Board of Managers and shall also have the authority, in its sole discretion, to
assume the position of manager under the Management Agreement, both elections being entirely
independent from the other.
7.2 Authority and Duties of the Managing Member. Except for Major Decisions, the
Managing Member shall have authority over and control and management of the day-to-day affairs of
the Company, including, without limitation, the authority to carry out the duties set forth in
Section 7,6, below. The Managing Member shall be appointed by the Board of Managers and may be
removed by the Board of Managers, with or without cause. The initial Managing Member shall be
Xxxxxxxxx. Xxxxxxxxx shall remain the Managing Member until the occurrence of a Triggering Event or
removed by the Board of Managers acting upon the majority consent of all of the Managers, Without
limiting the foregoing, the Managing Member shall have all of the following specific rights and
powers to implement the business and affairs of the Company:
(a) Execute and deliver contracts and other agreements necessary to conduct the
efficient and safe day to day operations of the Project and to facilitate the
development of the Project and in the ordinary course of business;
(b)
Retain or employ and coordinate the services (both on site and off site) of
employees, independent contractors, supervisors, accountants, attorneys and other
persons necessary or appropriate to carry out the business and purposes of the
Company, subject to the provisions of Section 7,4(d);
(c) Pay all debts and other obligations of the Company, to the extent that
funds of the Company are available therefor;
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(d) Execute for and on behalf of the Company, and with respect to the Project,
all such applications for permits and licenses as the Managing Member deems
necessary and advisable;
(e) Perform all ministerial acts and duties relating to the payment of all
indebtedness, taxes, and assessments due or to become due with regard to the
Project, and to give and receive notices, reports, and other communications arising
out of or in connection with the ownership, indebtedness, or maintenance of the
Project; and
(f) Take such other actions or execute such other documents or agreements on
behalf of the Company that do not expressly require the consent of the Board of
Managers or the Members hereunder.
7.3 Delegation of Duties. The Managing Member may delegate such authority and duties
as the Managing Member deems advisable, excluding any authority or duty which the Act requires to
be exercised by the Members or which is a Major Decision. Any delegation pursuant to this Section
may be revoked at any time by the Managing Member,
7.4 Major Decisions. Notwithstanding Sections 7,2 and 7.6, the Managing Member, on
behalf of the Company, may not enter into or conduct any of the following transactions (“Major
Decisions”) without the majority consent of the Board of Managers:
(a) admit a Person as a Member except as provided in this Agreement;
(b) change the status of the Company from one in which management of the Company
is vested in managers to one in which management of the Company is vested in the
members and vice versa;
(c) assign the Company’s property in trust for creditors or on the assignee’s
promise to pay the Debts of the Company;
(d) select, retain or employ any attorneys or legal advisors to institute or
defend any claims, litigation or other legal proceeding brought by or brought on
behalf of or against the Company, in which the amount in controversy exceeds
$250,000.00;
(e) institute or settle any litigation, arbitration or other legal proceeding by
or on behalf of the Company, or confess a judgment against the Company, in which the
amount in controversy exceeds $250,000.00, except that the Managing Member, without
consent of the Board of Managers, may negotiate and settle disputes on behalf of the
Company with the Mine Safety and Health Administration (MSHA), with authority to
commit the Company to pay any associated fines, costs or other liabilities in an
aggregate amount of $1,000,000.00 in any given Fiscal Year;
(f) sell, convey, lease, assign, exchange or otherwise dispose of any real
property or any combination thereof or any other material asset of the Company with a
fair market value in excess of $250,000.00 in the aggregate during any Fiscal Year
without consent of the Board of Managers, provided, however, that the Managing Member
shall have the authority to sell, transfer, dispose, abandon or lease any movable
equipment in the ordinary course of business which are no longer necessary or
required in the conduct of the Company’s business;
- 14 -
(g) borrow money in the name of the Company in excess of $250,000.00 in
the aggregate during any Fiscal Year which is not included within the approved
Project Budget for that Fiscal Year or issue evidences of indebtedness of the
Company, or refinance, recast, modify or extend the same, or secure the same by
mortgage, deed of trust, pledge or other Lien;
(h) commit to make, or make, any expenditure (including Capital Expenditures)
in excess of $250,000.00 in the aggregate during any Fiscal Year which is not
included within the approved Project Budget for that Fiscal Year;
(i) acquire by purchase, lease or otherwise, any real property in excess of
$250,000.00 in the aggregate during any Fiscal Year which is not included within the
approved Project Budget for that Fiscal Year or make any investment in securities or
any ownership or controlling interests in any corporation, partnership, limited
partnership, limited liability company or other Person;
(j) possess any property of the Company, or assign the rights of the Company
in specific property, for other than a Company purpose;
(k) approve the Project Budget for each Fiscal Year and any amendments
thereto;
(1) cause the Company to enter into one or more transactions with a Member
(other than in its capacity as a Member) or an Affiliate of a Member except as
otherwise specifically permitted hereunder and in the Management Agreement;
(m) change the name of the Company at any time;
(n) form, organize, acquire, sell, dispose of, reorganize or liquidate a Subsidiary;
(o) to make any loan or advance to other Persons in excess of $10,000.00
to any such Person (including Members and Affiliates of Members) or in excess of
$50,000.00 in the aggregate during any Fiscal Year, other than (i) trade credit
extended on usual and customary terms in the ordinary course of business; and (ii)
investments of Company cash in certificates of deposit, treasuries, high-grade
commercial paper or similar investment products;
(p) enter into any modification of the Management Agreement or. Sales
Representation Agreement; or
(q) enter into or modify any lease or agreement between the Company and the
Managing Member or any of its Affiliates except to the extent permitted under the
Management Agreement.
7.5 Actions Requiring Unanimous Approval of Members. Notwithstanding Sections 7.1,
7.2, 7.4 and 7,6, neither the Company, the Managers, the Managing Member nor any other Member may,
without the unanimous consent of all the Members, do any of the following:
(a) any act materially in contravention of this Agreement;
(b) amend this Agreement or the Certificate;
- 15 -
(c) approve a merger or consolidation of the Company with another
Person;
(d) modify, compromise or release the amount and character of the Scheduled
Capital Contributions which a Member is to make or promises to make hereunder;
(e)
any act which would make it impossible to carry on the ordinary business of
the Company;
(f) to dissolve or wind up the Company, except as otherwise expressly provided
in this Agreement; or
(g) any and all elections required or permitted to be made by the Company under
the Code.
7.6 Managing Member’s Duties. The Managing Member shall be responsible for the good
faith performance of the following functions in a commercially reasonable manner consistent with
practices found in the development of properties similar to the Project:
(a) Protect and preserve the title and interest of the Company with respect to
the Project and other assets now or hereafter owned by the Company;
(b) Pay from the funds of the Company in a business-like manner all taxes,
assessments and other obligations associated with the Project;
(c) Prepare and implement the Project Budget as modified from time to time in
accordance with the terms of this Agreement;
(d) Report to the Managers on a quarterly basis regarding the status of the
development of the Project and compliance with the Project Budget for that Fiscal
Year;
(e) Negotiate, enter into and supervise the performance of contracts covering
all aspects of development of the Project; provided however, that the Sales
Representation Agreement shall control the conduct of the parties regarding the sale
and marketing of coal from the Project and the Management Agreement shall control the
conduct of the parties regarding the day to day management and development of the
Project;
(f) Keep all books and accounts and other records required by the Company,
including detailed information regarding all expenditures, preserve and store in a
safe place all such books and records for at least a seven (7) year period after
termination of each fiscal year; and permit the Members, or any person designated by
any Member, with reasonable advance notice and at reasonable times to examine or
audit the books, records and accounts relating to the Company, including but not
limited to the assets of the business of the Company’s contractual obligations and
forecast for performance by the Company;
(g) Cause an annual financial statement to be prepared by a firm of certified
public accountants of recognized standing, which financial statements shall be
audited if required by any Member;
(h) Pay from funds of the Company all obligations of the Company;
- 16 -
(i) Maintain all funds of the Company in financial institutions of recognized credit
standing or in certificates of deposit, treasuries, high-grade commercial paper or similar
products;
(j) Supervise all matters coming within the terms of this Agreement, including direct
observation, inspection and supervision of the development of the Project and production of coal
therefrom in a safe and efficient manner;
(k) Develop, manage and operate the Project in a commercially reasonable and safe manner,
which includes but is not limited to 1) submitting the appropriate applications for encroachment
permits to mine the Kentucky #8 seam of coal under (i) state and federal highways, including the
Xxxxxxx Xxxx Parkway (f/k/a Western Kentucky Parkway), and (ii) the Paducah and Louisville
Railway, and 2) obtaining satisfactory opinions of title on all coal tracts prior to entering upon
or mining upon such tracts;
(1) Acquire appropriate insurance for the Company and the Project in amounts determined by
the Managing Member in consultation with the Board of Managers;
(m) Supervise the management of the Project and the production of coal therefrom;
(n) No later than one hundred twenty (120) days prior to the end of the Fiscal Year, the
Managing Member shall start the budgetary process for the next Fiscal Year and no later than
ninety (90) days prior to the end of the Fiscal Year shall prepare and deliver to the Members and
Managers the projected annual Project Budget of the Company which itemizes projected sources of
revenue and anticipated expense items for the next Fiscal Year;
(o) No later than ninety (90) days after the end of the Fiscal Year, the Managing Member
shall prepare a business report (“Annual Business Report”) of the past Fiscal Year, The Annual
Business Report shall be delivered to the Members to advise and inform each Member of the current
status of the Project. The Annual Business Report shall include: (i) description of activities
taken place during the past Fiscal Year; (ii) an annual income statement; (iii) a marketing plan
for the next Fiscal Year; (iv) a coal production schedule; and (v) any other information that the
Members reasonably request be included in the Annual Business Report;
(p) The Managing Member shall cause all required Federal, state and local income, franchise,
property and other tax returns of the Company, including information returns, to be timely filed
with the appropriate office of the relevant taxing jurisdiction or agency. With respect to the
Federal and state income tax returns of the Company, the Company shall submit to each Member
drafts of the proposed returns as soon as possible, but in no event later than March 15 of each
year, to permit review and approval of such returns by each Member prior to filing. All expenses
incurred in connection with such tax returns and information returns, as well as for the Annual
Business Report referred to in Section 7.7(o) hereof, shall be expenses of the Company;
(q) No later than one hundred eighty (180) days after formation of the Company, the Managing
Member shall cause all tracts being subdivided by the “New Division Line”, or subdivided for any
other reason, to be surveyed and to obtain a legal description and survey
- 17 -
plat of said tracts. The survey plat shall be recorded and the legal description
used in the Special Warranty Deed from Xxxxxxxxx to the Company; and
(r) In general, supervise the business and affairs of the Company for
the benefit of the Members.
7.7 Exclusion Areas. Notwithstanding any other provision of this Agreement, the
Company may not mine or enter upon any portion of the Kentucky #8 seam of coal situated within the
“No Mining Boundary” depicted on the map attached hereto and incorporated herein by reference as
Exhibit C (herein referred to as the “Exclusion Areas”) without the prior written consent of Cyprus
granting the Company the right to mine or enter upon all or any portion of the Exclusion Areas. The
granting of any such consent shall be within the sole discretion of Cyprus and its refusal to
provide any such consent shall not constitute a failure by Cyprus to remit its initial capital
contribution or otherwise constitute a material act in contravention of this Agreement. The Company
shall subordinate its interests in the coal reserves located within the Exclusion Areas upon
request of the surface owner or its lessee of those areas. In the event Cyprus, in its sole
discretion, grants consent to lift the prohibition against mining within the Exclusion Areas, the
Company shall have the first right to mine the Kentucky #8 seam of coal situated within the No
Mining Boundary.
7.8 Development and Due Diligence Expenses. Each party shall bear its own costs and
expenses for developing the Project and its own due diligence activities until this Agreement is
executed.
7.9 Conflicts of Interest. The pursuit of other ventures and activities by the
Members, Managers and Managing Member are hereby consented to by the Members and shall not be
deemed wrongful or improper. No Member, Manager or Managing Member shall be obligated to present
any particular investment opportunity to the Company, even if such opportunity is of a character
which, if presented to the Company, could be taken by the Company. The Company may enter into
agreements with a Member, or an affiliate of a Member, to provide other services to the Company;
provided such agreement must be at competitive rates and terms and, if applicable, approved by the
Board of Managers in accordance with Section 7.4.
7.10 Indemnification.
(a) Indemnities and Indemnifiable Claims. The Company shall indemnify and hold harmless any
Indemnitee, from and against any claim, loss, damage, liability, or reasonable expense (including
reasonable attorneys’ fees, court costs, and costs of investigation and appeal) actually incurred
by any such Indemnitee by reason of, or arising from, the operations, business, or affairs of, or
any action taken or failure to act on behalf of, the Company, except to the extent any of the
foregoing (A) is determined by final, nonappealable order of a court of competent jurisdiction (or
by any other means approved by the Board of Managers) to have been primarily caused by any fraud,
breach of fiduciary duties established under this Agreement, gross negligence or willful misconduct
of such person or (B) is actually incurred as a result of any claim (other than a claim for
indemnification under this Agreement) asserted by the Indemnitee as plaintiff against the Company;
provided that if (for purposes of clause (A) immediately above) the fraud, breach of fiduciary
duties established under this Agreement, gross negligence or willful misconduct of any person
claiming indemnification shall consist of a conviction of or plea of no contest to a felony, then
such person shall not be entitled to indemnification unless it is determined, by final,
nonappealable order of a court of competent jurisdiction (or by any other means approved by the
Board of Managers), that indemnification should be granted in whole or part.
(b) Advancement of Expenses, Unless a determination has been made (by final,
- 18 -
nonappealable order of a court of competent jurisdiction or by any other means approved by the
Board of Managers) that indemnification is not required, the Company shall, upon the request of
any Indemnitee and except for any claim of the type described in
clause (B) of Section 7.10(a) of
this Agreement, advance or promptly reimburse such Indemnitee’s reasonable costs of
investigation, litigation, or appeal, including reasonable attorneys’ fees; provided that the
affected Indemnitee shall, as a condition of such Indemnitee’s right to receive such advances and
reimbursements, undertake in writing to promptly repay the Company for all such advancements or
reimbursements if a court of competent jurisdiction determines, by final, nonappealable order,
that such Indemnitee is not then entitled to indemnification under this Section 7.10. The written
undertaking described in the immediately preceding sentence to repay the amount paid or reimbursed
to an Indemnitee by the Company must be an unlimited general obligation of the Indemnitee but need
not be secured and it may be accepted without reference to financial ability to make repayment,
7.11 Tax Matters Partner. Xxxxxxxxx shall be designated, as the tax matters partner of
the Company pursuant to §623 l(a)(7) of the Code, Any Member designated as tax matters partner
shall take such action as may be necessary to cause each other Member to become a notice partner
within the meaning of §6223 of the Code. The Company shall indemnify the tax matters partner of the
Company from and against any and all judgments, penalties (including excise and similar taxes and
punitive damages), fines, settlements and reasonable expenses, (including without limitation
attorneys fees) actually incurred by such Member in performing its duties as the tax matters
partner of the Company; provided that the Company shall not be liable to any Person acting as the
tax matters partner of the Company for any portion of such judgments, penalties, fines, settlements
or reasonable expenses resulting from such persons gross negligence or willful misconduct.
7.12 Meetings of the Board of Managers.
(a) Meetings. The Board of Managers will have an annual meeting and such
quarterly meetings as may be established by the Company. The Board of Managers will
have such special meetings as are called in accordance with the provisions of this
Agreement, Any annual, quarterly or special meeting of the Board of Managers is to be
held at such place as may be designated by the Company or in a waiver of notice
executed by all Managers. If there is a failure to designate a place for any such
meeting, the same is to be held at the principal place of business of the Company.
The annual and quarterly meetings of the Board of Managers is to be held each year
within sixty (60) days prior to the beginning of the Fiscal Year, but in no event
prior to the time the Managing Member delivers the projected annual Project Budget of
the Company to the Managers and the Members pursuant to Section 7.7(n), for the
establishment of the Project Budget and the transaction of such other business as may
come before the meeting. Special meetings of the Board of Managers may be called at
any time by the Company or by a Manager and are to be held on such dates and at such
times as are set forth in the notice calling the meeting.
(b) Quorum. A Manager appointed by Cyprus and a Manager appointed by
Xxxxxxxxx attending such meeting constitutes a quorum of Managers for all purposes,
and no quorum shall exist unless a Manager appointed by both Cyprus and Xxxxxxxxx
shall be in attendance.
(c) Notice of Meetings. Written or printed notice of each meeting of the
Board of Managers stating the place, day and hour of the meeting and, in the case of
special meetings, the purpose or purposes for which the meeting is called must be
delivered or given: (i) in the case of regular meetings, not less than ten (10) nor
more than forty (40) days before the date of the meeting; and (ii) in the case of
special meetings, not less than five (5) Business Days nor more than thirty (30) days
before the date of the meeting; in each case either
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personally or by mail. Notice of an annual meeting of the Board of Managers is to
be given by the Company. Notice of a special meeting of the Board of Managers is to
be given by the Company or the Manager calling the meeting. Any notice required by
this Section may be waived by the Managers by signing a waiver of notice before or
after the time of such meeting and such waiver is equivalent to the giving of such
notice.
(d) Proxies. A Manager may vote at any meeting either in person or by
proxy executed in writing by the Manager or its duly authorized attorney in fact.
Such proxy must be filed with the Company before or at the time of the meeting. No
proxy is valid after 11 months from the date of execution unless otherwise provided
in the proxy.
(e) Informal Action by Managers. Any action required by this Agreement
to be taken at a meeting of the Board of Managers, or any action which may be taken
at a meeting of the Board of Managers, may be taken without a meeting if all of the
Managers sign written consents that set forth the action so taken. Such consents
have the same force and effect as a unanimous vote of the Managers at a meeting duly
held. The Company is to file such consents with the minutes of the meetings of the
Board of Managers.
(f) Tele-Participation in Meetings. Managers may participate in a
meeting of the Board of Managers by means of a conference telephone or similar
communications equipment whereby all individuals participating in the meeting can
hear each other. Participation in a meeting in this manner constitutes presence in
person at the meeting.
8. Transfers of Interests; Admission.
8.1 Transfer Restrictions. Except as otherwise set forth in this Section 8, no Member
may sell, assign, transfer, pledge, hypothecate or otherwise dispose of its Member Interest unless
unanimously approved by the Members, including, without limitation, a Member’s distributional
interest as described in §18-702 of the Act (“Distributional Interest”). Any transfer of a
Member’s interest in violation of this Agreement shall be void and of no effect; provided, however,
that Xxxxxxxxx shall be permitted to pledge its Distributional Interest only to PNC Bank or the
successor agent of the existing PNC credit facility or successor primary lender to Xxxxxxxxx
(“Lender”). Notwithstanding the foregoing [imitations, the parties acknowledge and agree that,
under the limited circumstances set forth in Section 8.7, the Lender shall have the right to sell
and transfer all of Xxxxxxxxx’x Member Interest (not limited to its Distributional Interest) upon
compliance with the provisions of Section 8.7,
8.2 Right of First Refusal. If a Member receives a bona fide offer (“Offer”) which the
Member (“Selling Member”) proposes to accept, whether or not solicited, to sell or otherwise
dispose of its entire Member Interest in the Company, then the Selling Member shall furnish to the
non-selling Member written notice of the receipt of the Offer together with the principal terms and
conditions of the sale, including the minimum price (“Sale Price”) at which such interest is
proposed to be sold, and a statement as to the identity of the real party in interest making the
Offer. The non-selling Member, shall then have the right to purchase the Member Interest (“Offered
Interest”) proposed to be sold by the Selling Member upon and subject to the terms and conditions
as set forth in this Section 8.2. This Section 8.2 shall not apply to any sale pursuant to the
procedures of Section 8.7.
(a) The price at which the Offered Interest may be purchased shall be the price
contained in the Offer. If the price contained in the Offer shall consist (in whole
or in part) of consideration other than cash, payable at the closing thereof or at a
later date, the cash
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equivalent fair market value of such other consideration shall be included in the
price at which the Offered Interest may be so purchased.
(b) The non-selling Member shall have sixty (60) days after receipt of the
notice to elect to purchase the Offered Interest. The purchase transaction (unless
otherwise agreed to with third-party purchasers) shall be consummated at a closing
to be held at the principal executive offices of the Company, or at such other
location as may be agreed by the parties, within sixty(60) days following the date
of the non-selling Member’s election to purchase the Offered Interest. At the
closing, unless otherwise stipulated in the Offer, the non-selling Member shall
deliver to the Selling Member the full purchase price against delivery of an
instrument appropriately transferring the Offered Interest sold thereby.
(c) If the non-selling Member does not elect to purchase the Offered Interest,
then the Selling Member may accept the Offer and, pursuant thereto, sell the Offered
Interest and, notwithstanding anything to the contrary contained herein (including,
without limitation, Section 8.5 hereof), upon such sale of the Offered Interest and
the execution by the transferee of this Agreement, the transferee shall become a
Member of the Company. However, if the Selling Member does not sell the Offered
Interest pursuant to the Offer within ninety (90) days after the termination (by
passage of time or otherwise) of the rights of first refusal created under this
Section 8.2, the Selling Member may not thereafter transfer the Offered Interest,
without again complying with the provisions of this Section 8.2.
8.3 Buy-Sell Option. Except under circumstances where the procedures set forth in
Section 8.7 applies following a Foreclosure Assignment (as defined below), upon the occurrence of
any of the following events, each Member shall have the right of purchase and sale provided by this
Section 8.3 to be exercised by a Member (“Electing Member”) by delivering a written notice
(“Election Notice”) to the other Member (“Notice Member”):
(a) a Member or the Managing Member seeks in good faith for approval for an
action that requires approval of the Board of Managers or the Members pursuant to
Section 3.2, Section 6.2, Section 7.4(g), or Section 7.5, and the Board of Managers
or the Members, as applicable, reach a full and final deadlock on whether to approve
the requested action after attempting in good faith to negotiate a mutually agreed
outcome;
(b) the Notice Member, acting as a Managing Member or Member, or any Manager
appointed by the Notice Member takes any action or transaction described in Section
7.4 or 7.5 without the consent of the Board of Managers or Members, as applicable;
(c) the Notice Member has breached the Representations and Warranties in
Section 6.1;
(d) the Notice Member has breached Section 6.3;
(e) the Notice Member has breached its duties and obligations set forth
in Section 6.6(a),(b) or (c);
(f) a Member other than the Managing Member elects to exercise this provision
pursuant to the provisions set forth in Section 6.6(e);
(g) a Change of Control with respect to either Member occurs; or
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(h) the voluntary election of either Member at any time on or after January
1, 2020.
Such Election Notice shall state a dollar amount equal to the value placed by the Electing
Member on all of the issued and outstanding membership interests in the Company, calculated
on a pari passu basis taking into consideration the relative equity interest of the
Electing Member, and shall constitute an irrevocable offer by the Electing Member either to
purchase all, but not less than all, of the Member Interest in the Company of the Notice
Member from the Notice Member, or to sell all, but not less than all, of the Electing
Member’s Member Interest in the Company to the Notice Member. The purchase price at which
the Member Interest of any Member is purchased and sold under this Section 8.3 shall be the
value for all of the interests in the Company, as stated in the Election Notice, multiplied
by the selling Member’s Percentage Interest in the Company.
(i) For a period of time not exceeding sixty (60) days from the receipt of the
Election Notice by the Notice Member (“Consideration Period), the Notice Member
shall have the right to elect to purchase all of the Electing Member’s Member
Interest in the Company by providing written notice (“Purchase Notice”) to the
Electing Member of the Notice Member’s intent to purchase the Electing Member’s
Member Interest. If the Notice Member does not provide the Purchase Notice to the
Electing Member within the above referenced sixty (60) day time period, the Notice
Member shall become obligated to sell its Member Interest in the Company to the
Electing Member.
(ii) The closing of the purchase and sale shall occur within sixty (60) days
from the earlier of the expiration of the Consideration Period, or the date the
Electing Member receives a Purchase Notice from the Notice Member. In either event,
at the closing of the purchase and sale transaction described in this Section 8.3,
the purchase price must be paid in cash (either by certified check or by wire
transfer), unless otherwise agreed upon by the Electing Member and the Notice
Member.
(iii) At the closing on the sale of a Member’s Member Interest pursuant to
this Section 8.3, there shall be a final accounting among the Members with respect
to all amounts due them from the Company. With respect to the indebtedness and
obligations for which any Member is responsible, the purchasing Member shall, as a
condition to closing (but said condition may be waived in writing by the selling
Member), cause the repayment of such indebtedness. The Members agree, upon request
of any other Member, to execute such certificates or other documents and perform
such other acts as may be reasonably requested by such requesting Member from time
to time in connection with such sale.
8.4
Completion of Sale. If a Member becomes obligated to sell its Member Interest in
the Company pursuant to Sections 8.2 or 8.3 of this Agreement, each Member covenants and agrees
that it will take such actions and execute such instruments of transfer and other documents as
reasonably requested by the other Member to further evidence and complete the sale of the Member’s
Member Interest, Additionally, as a condition precedent to the consummation of the sale of the
Percentage Interest, a purchasing Member must arrange for the complete release of all guarantees
provided by the selling Member as security for indebtedness of the Company.
8.5 Admissions. All transfers of an interest in the Company by a Member shall entitle
the transferee only the rights afforded a transferee of a Distributional Interest pursuant to §
18-702 of the Act except as otherwise expressly provided herein. These rights are the rights to
receive allocations and
- 22 -
distributions to which the transferring Member would otherwise have been entitled, but shall not
allow the transferee any additional rights, nor shall the transferee become a Member of the
Company upon such transfer. The transferee shall only become a Member of the Company by receiving
the written consent of all Members of the Company and executing this Agreement. The consent of the
Members to admit any transferee of a distributional interest into the Company shall be given in
the sole and absolute discretion of each Member.
8.6
Distributions and Allocations in Respect to Transferred
Interests. If any Member’s
interest is sold, assigned or transferred, or any Person is otherwise admitted as a Member during
any Fiscal Year in compliance with the provisions of this Agreement, net profits, net losses, each
item thereof, and all other items attributable to such interest for such Fiscal Year shall be
allocated among the Members by taking into account their varying interests during such Fiscal Year
in accordance with Code §706(d). Unless otherwise required by the applicable treasury regulations,
such sale, assignment, transfer or admission shall be deemed to have occurred at the end of the
calendar month during which such event shall have actually occurred, and such allocations shall be
determined and made pursuant to a pro forma closing of the books of the Company as of the end of
such month. With respect to a transferred Member’s interest or any interest therein, all
distributions on or before the deemed date of such transfer shall be made to the transferor and all
distributions thereafter shall be made to the transferee. The Company shall not incur any liability
for making allocations and distributions in accordance with this provision.
8.7 Right of First Offer and Sale Procedure Following Foreclosure by Xxxxxxxxx’x
Lender. The procedures of this Section 8.7 shall apply only in the event Xxxxxxxxx’x interest
has been assigned to Lender or its designee (“Lender Interest Holder”) upon the exercise of
Lender’s default remedies pursuant to the pledge referenced in Section 8.1 (such event being
referred to as a “Foreclosure Assignment”), it being understood that any such Lender Interest
Holder’s are limited to that of the holder of a Distributional Interest and the Lender or its
designee or assignee may acquire all rights and attributes of Xxxxxxxxx’x Membership Interest in
the Company only pursuant to the procedures of this Section 8.7.
(a) If, at any time, the Lender Interest Holder proposes to initiate a sale of Xxxxxxxxx’x Member
Interest to a third party, it shall provide written notice of such intention to Cyprus (“Election
Notice”), and Cyprus shall have a right of first offer to purchase Lender Interest Holder’s
Percentage Interest for a price equal to the Fair Value for all the Member Interests in the Company
multiplied by the Lender Interest Holder’s Percentage Interest in the Company (the “Offer Price”),
(b) As used herein, “Fair Value” shall mean the fair market value of the entire Company, as
determined by the following process. The parties shall have a period of 60 days following the date
of the Election Notice in which to agree on the Fair Value of the Company, which period may be
extended by mutual consent, which consent shall not be unreasonably withheld. If they are unable to
so agree during such 60-day period (as such period may be extended by mutual consent), then the
parties shall submit in writing to the other a list of three neutral and impartial mining valuation
consultants. The first name that matches on both lists shall be retained to determine the Fair
Value of the Company. If there are no matches on the lists, the parties shall submit new lists of
three names within two business days, and this process shall continue until an appraiser is
selected. The selected appraiser shall have a period of sixty (60) days (which 60-day period shall
be extended if the appraiser believes it is necessary to complete its appraisal) in which to render
the appraisal and provide each of the parties with a copy, which appraisal shall be final and
binding upon all the parties. All parties agree to give the appraiser full access to the mining
operations, mine management and all requested financial, business and operational information that
the appraiser may reasonably request.
(c) The period beginning on the date on which the Fair Value is determined (whether by mutual
agreement or by appraisal) and lasting for 180 days thereafter shall constitute the “Sale Period.”
For the first thirty (30) days of the Sale Period, Cyprus shall have the option to elect to
purchase all of the Lender Interest
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Holder’s Percentage Interest for the Offer Price (the “Right of First Offer”). If Cyprus does not
deliver notice of its election to purchase within such 30-day period, Lender Interest Holder shall
have the right to sell Lender Interest Holder’s Percentage Interest to any other Person, so long as
the total purchase price is not less than 90% of the Offer Price; however, if, during the Sale
Period, Lender Interest Holder notifies Cyprus in writing of a proposed sale of Lender Interest
Holder’s Percentage Interest for a total purchase price less than 90% of the Offer Price, which
notice (the “ROFR Notice”) shall include a description of the principal terms and conditions of the
sale, then Cyprus shall have the right to elect to purchase the interest at the price identified in
the ROFR, which election shall be delivered within 60 days of
the date of its receipt of the ROFR
Notice, and if Cyprus shall fail to timely deliver written notice of its election to purchase, then
Lender Interest Holder may sell its Percentage Interest on the price and on the terms set forth in
the ROFR Notice, so long as such sale is completed within 120 days after the date of Cyprus’
receipt of the ROFR Notice. Any sale by Lender Interest Holder that conforms with the provisions of
this Section 8.7 shall be effective to vest in the purchaser all Member Interest rights relating to
the Percentage Interest sold, and such purchaser shall automatically become a Member of the Company
upon such transfer upon such the purchaser executing an agreement agreeing to be bound by the terms
of this Agreement. If, however, Lender Interest Holder does not consummate the sale during the Sale
Period (or, as applicable, within 120 days from the date of Cyprus’ receipt of the ROFR Notice),
then the Right of First Offer shall apply to any subsequent sale by Lender Interest Holder.
(d) If Cyprus elects to exercise the Right of First Offer or its rights upon receipt of an
ROFR Notice, the closing of the sale shall occur within 60 days of the start of the Sale Period.
Each of Cyprus and Lender Interest Holder covenants and agrees that it will take such actions and
execute such instruments of transfer and other documents as reasonably requested by the other to
further evidence and complete the sale of the Lender Interest Holder’s Percentage Interest. The
provisions of Section 8.6 shall apply to the interest being transferred. The purchase price shall
be paid in cash unless the parties mutually agree otherwise, and the Lender Interest Holder’s
interest shall be free and clear of any liens and encumbrances.
9. Dissolution
Acts. The Company shall only be dissolved upon the occurrence of any
one of the following events: (i) the completion of the term of the Company as set forth in the Certificate;
(ii) written consent of all Members upon exhaustion of the economically mineable coal reserves
from the Project; (iii) the sale of all or substantially all of the assets of the Company; (iv)
written consent of all Members, or (v) as required by Section 10 below. Except as otherwise agreed
to herein below in Section 10, upon dissolution, the Company shall liquidate and distribute its
assets in the following priority:
9.1 First, to pay all debts owed by the Company to non-Members;
9.2 Second, to pay any outstanding Member Loans;
9.3 Third, to each Member in accordance with the positive balance of Member’s capital account;
and
9.4 Fourth, to the Members in proportion to each Member’s Percentage Interest.
10. Withdrawal and Disassociation. Except as otherwise agreed to herein below in this
Section 10, no Member shall be allowed to withdraw or disassociate from the Company. Any attempted
disassociation or withdrawal by a Member shall be null and void and not recognized by the Company,
If an event disassociation occurs for any reason whatsoever, the Company shall not dissolve and the
Member causing the disassociation, if any, shall be liable to the Company for such wrongful
disassociation. In no event shall the disassociated Member be entitled to have its Percentage
Interest purchased by the Company. Notwithstanding any provision of this Agreement, if the Company
has not established commercially viable mining operations in the Kentucky #8 seam of coal by
January 5,2016, then either Member shall have the right to provide the other
- 24 -
Member with notice of withdrawal from the Company (“Notice of Withdrawal”). Neither Member shall
have the right to provide Notice of Withdrawal from the Company prior to January 5, 2016. In the
event either Member provides Notice of Withdrawal under this Section due to the Company’s failure
to establish commercially viable mining operations in the Kentucky #8 seam of coal by January 5,
2016, the Company shall liquidate all assets of the Company, other than the assets contributed
pursuant to the Contribution Schedule identified in Exhibit A hereto and pay all debts or other
amounts owed by the Company to: (i) non-Members; then to (ii) pay any outstanding Member Loans;
then to (iii) the Members is accordance with the positive balance of their the Member’s capital
account; then to (iv) the Members in proportion to each Member’s Percentage Interest. After all
amounts identified in subsections (i) through (iii) of the preceding sentence have been paid in
full, the Company will distribute the remaining assets identified on Exhibit A hereto to the Member
who originally contributed such assets as part of that Member’s Initial Capital Contribution. In
the event the Company is unable to satisfy its debts after liquidating all assets other than those
identified in Exhibit A hereto, then all remaining assets will be subject to the liquidation and
distribution of assets pursuant to Section 9 of this Agreement unless otherwise unanimously agreed
to by the Members. Xxxxxxxxx covenants and agrees that it will not interfere or compete with
Cyprus’ primary rights to renegotiate or seek an extension to the Xxxxxx #8 Lease during the
Non-interference Period (as defined below). Notwithstanding any disassociation hereunder or stated
herein in this Section 10, Xxxxxxxxx hereby covenants and agrees for itself, its successors and
assigns and its and their Affiliates, and any successor owner of any ownership interest in the
assets that were contributed by Xxxxxxxxx under Section 3 hereof, including without limitation, the
successors in title to the 1,977 acres of surface lands, that it and they will not, during the
Noninterference Period (as defined below), seek to or obtain a lease from the Xxxxxx of any coal
reserves described in the Xxxxxx #8 Lease of Kentucky #8 Reserves identified on Exhibit A hereto,
or accept the assignment of any sublease of the such coal reserves, or take any action which could
ultimately lead to the non-development or delayed development of the Cyprus owned Kentucky #8
Reserves either separately, jointly or in conjunction with the Xxxxxx Xxxxxxxx #0 Reserves. This
covenant and agreement shall survive the disassociation and termination of this Agreement and shall
be deemed a covenant running with said land for a period of five (5) years from the date of
withdrawal and disassociation or from the date the Company is otherwise dissolved (the
“Non-Interference Period”).
11. Management of Workforce. Managing Member shall have the right, power and
obligation to exercise any control over the hiring or supervision of the workforce of the Company,
necessary to manage the Company, including, but not limited to, any employment benefits or other
terms and conditions of employment for the employees of the Company, Cyprus shall take no part in,
and shall have no right, power or obligation with respect to, any matter relating to the hiring of
miners; provided, however, that Xxxxxxxxx shall not hire miners previously terminated by Xxxxxxxxx
without first receiving consent from the Board of Managers. The Managing Member shall provide
written notification to the Board of Managers of the lateral transfer miners from Xxxxxxxxx’x other
operations to the Company within thirty (30) days of such transfer.
12. Applicant Violator System. Each Member represents and warrants that such member,
its officers, shareholders, members, subsidiaries, affiliates and any other entity that can be
attributed to it under the “ownership and control” regulations issued by the office of Surface
Mining (collectively, “Member Entities”) are not currently permit blocked under the Surface Mining
Control and Reclamation Act of 1977 (“SMCRA”). No Member will allow to exist any violation of SMCRA
or any comparable state law at any operation of a Member Entity that would cause any other Member
or its Member Entities to be permit blocked. Any Member Entity which becomes permit blocked under
SMCRA or any comparable state law shall provide
written notice of such event to the other Members within five (5) days and shall take any and all
actions necessary for the removal of such permit block within twenty (20) days’ provided, however,
that if the permit block does not then or thereafter adversely affect the other Member(s) (by
permit block or otherwise), the permit blocked entity may contest the permit block in good faith
and by appropriate legal proceedings, provided further, however, that if the permit block does
adversely affect the other Members (by permit block or
- 25 -
| otherwise), the non-permit blocked Member(s) may (i) undertake to remove the condition causing the permit block, at the permit blocked Member’s expense or (ii) purchase such permit blocked Member’s interest in the Company at the fair market value of such permit blocked Member’s interest. |
13. Relationship with Company.
13.1 Promotion of Company. Subject to Section 7.9 above, each Member shall use
reasonable efforts to promote the activities of the Company and to ensure its success.
13.2 Information. Subject to any applicable restriction of law, all Members shall be
fully and currently informed of the activities of the Company. To the extent that there are any
applicable laws or regulations which would have the effect of limiting the right of a Member to be
so informed, the other Members) shall use all reasonable efforts to obtain waivers thereof in favor
of the Company and the member so limited and, failing the obtaining of such waivers, the Members
shall make such arrangements as shall be practicable to preserve the Company the benefits of the
contacts or projects to which such secrecy agreements or laws or regulations relate. Each Member
shall not, except as required by law and except for disclosure to its officers, directors,
employees, shareholders, members, partners, attorneys, accountants, and Affiliates (who shall be
bound by the confidentiality provisions of this Agreement), divulge to any person any confidential
or proprietary information concerning the business of the Company, including, without limitation,
the terms of this Agreement.
14. Miscellaneous Matters.
14.1 Offset. Whenever the Company is to pay any sum to any Member, any amounts that
the Member owes the Company may be deducted from that sum before payment.
14.2 Captions. Section and paragraph titles or captions contained in this Agreement
are inserted only as a matter of convenience and for reference and in no way define, limit extend
or describe the scope of this Agreement or the intent of any provision hereof.
14.3 Variation in Pronouns. All pronouns and any variation thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or
persons.
14.4 Governing Law; Severability. This Agreement is governed by and shall be construed
in accordance with the law of the State of Delaware. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or unenforceable to any extent,
the remainder of this Agreement and the application of that provision to other Persons or
circumstances is not affected thereby and that provision shall be enforced to the greatest extent
permitted by law.
14.5 Validity. In the event that any provision of this Agreement shall be held to be
invalid, the same shall not affect in any respect whatsoever the validity of the remainder of this
Agreement.
14.6 Benefit. Except as herein otherwise provided to the contrary, this Agreement
shall be binding upon and inure to the benefit of the Members, their heirs, personal
representatives, successors and assigns.
14.7
Notice. Any notice or communication required or permitted to be given by any provision of
this Agreement shall be in writing and shall be deemed to have been given and received by the person
to whom directed (a) when personally delivered, (b) when sent by telefacsimile, telecopier or similar transmission, at the
number of the recipient set forth herein, followed with mailing by regular United States
- 26 -
mail, (c) one (1) business day after deposited for overnight delivery with an overnight courier
such as Federal Express, Airborne, United Postal Service or other overnight courier service, or
(d) three (3) business days after deposited in the U. S. mail, sent by certified mail, postage
prepaid, return receipt requested, and such notices are addressed to the person to which directed
at the address or facsimile number of which such person has notified the Company and all of the
Members. The initial addresses and facsimile numbers of the parties are reflected on the signature
page of this Agreement.
14.8 Further Assurances. In connection with this Agreement and the transactions
contemplated hereby, each Member shall execute and deliver any additional documents and instruments
and perform any additional acts that may be necessary or appropriate to effectuate and perform the
provisions of this Agreement.
14.9 Entire Agreement/Amendment. This Agreement embodies the entire agreement and
understanding of the Members relating to the subject matter hereof and supersedes all prior
representations, agreements and understandings, oral or written, relating to such subject matter.
This Agreement may be amended only by a written instrument executed by all the Members.
14.10 Waiver and Consent. No consent or waiver, express or implied, by a Member to or
of any breach or default by the other Member in the performance of its obligations hereunder shall
be deemed or construed to be a consent or waiver to or of any other breach or default in the
performance of such other Member of the same or any other obligation of such member hereunder.
14.11 Legal Fees. Except as otherwise provided herein, all legal and other costs and
expenses incurred in connection with this Agreement and the transactions contemplated hereby are to
be paid by the Member incurring such costs and expenses. In the event the Company or any Member
brings suit to construe or enforce the terms hereof, or raises this Agreement as a defense in a
suit brought by the Company or another Member, the prevailing Person is entitled to recover its
attorneys’ fees and expenses.
14.12 Waiver of Dissolution under the Act. Any dissolution of the Company shall occur
only as provided herein, and each Member hereby waives and renounces its rights, if any, under the
Act to seek a court decree of dissolution, to seek the appointment of a liquidator of the Company,
and to seek a partition of the Company property.
14.13 Relationship of the Members. The relationship between the Members shall be
limited to the performance of the transactions contemplated by this Agreement and by the Formation
Agreement and in accordance with their terms. Nothing herein shall be construed to authorize a
Member to act as general agent for the other Member(s).
14.14 Agreement in Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient. Each counterpart when so executed
shall be deemed an original, but all counterparts shall constitute one and the same
instrument.
[remainder of page blank; signature page follows]
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The Members execute this Agreement effective as of the date first above written.
| Members: | ||||||
| Cyprus Creek Land Resources, LLC | ||||||
| By: | /s/ X. X. Xxxxxx | |||||
| Name: | X. X. Xxxxxx | |||||
| Its: | VP | |||||
| Official Address: | 000 Xxxxxx Xxxxxx | |||
| Xx. Xxxxx, XX 00000 | ||||
| Attention: President | ||||
| Facsimile No: (000) 000-0000 |
| Xxxxxxxxx Coal Company, Inc. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxx | |||||
| Its: | President | |||||
| Official Address: | 000 Xxxxx Xxxx | |||
| Xxxxxxxxxxxx, XX 00000 | ||||
| Attention: President | ||||
| Facsimile No: (000) 000-0000 |
| Company: | ||||||
| Xxxxxxx Mining Company, LLC | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxx | |||||
| Its: | Managing Member | |||||
| Official Address: | 000 Xxxxx Xxxx | |||
| Xxxxxxxxxxxx, XX 00000 | ||||
| Attention: Vice President | ||||
| Facsimile No.: (000) 000-0000 |
- 28 -
Exhibit ‘A’
Contribution
Schedule
Scheduled Capital Contributions:
I. Milestone 1. Initial Capital (Permitting Phase)
Milestone 1 will occur upon the execution of the Operating Agreement of the Company, the
Management Agreement and Sales Representation Agreement. Following the occurrence of Milestone 1,
the Company will work to obtain permits for the slope site, the airshaft site, the other surface
operations, and the #8 reserves being contributed by Cyprus.
Contributions:
-Xxxxxxxxx contributes $30,000 in cash
-Cyprus contributes $30,000 in cash
-Each Member grants rights of entry as necessary to facilitate permitting
II. Milestone 2
Milestone 2 will occur upon the completion of permitting as determined by the Board of Managers
(projected to occur in August 2012). Following the occurrence of Milestone 2, the Company will
begin work on slope construction and airshaft construction.
Contributions:
-Members to contribute, in proportion to each Member’s Percentage Interest, cash
sufficient to complete construction of the mine, including slope, airshafts, coal handling
equipment, power drops, communication, rock dust, etc.
-Members to contribute, in proportion to each Member’s Percentage Interest, cash sufficient
for down payments on mining equipment, as determined by the Board of Managers.
-Xxxxxxxxx to contribute surface property, equipment, buildings and facilities as follows:
Contribution by Xxxxxxxxx and/or its Affiliates by deed to the Company of the surface properties
(approximately 1977 acres) and improvements (Parkway prep plant) as described on Schedule 1
attached hereto and made a part hereof. PNC Mortgages and financing statements affecting those
properties will be released. See Exhibit D for form of deed.
Grant and/or assignment by Xxxxxxxxx and/or its Affiliates of access and unlimited usage of all
waterlines and unlimited withdrawal rights from the any impoundment, reservoir or body of water
associated therewith, including but not limited to the Overland Slurry/Water Supply,Lines servicing
the Project, with rights of ingress and egress over any surface properties of Xxxxxxxxx and/or its
Affiliates for the purpose of maintaining, reconstructing, modifying or otherwise servicing the
waterlines and any impoundment, reservoir or body of water associated therewith, together with the
right to permit such facilities.
Conveyance and sublease of all equipment from Xxxxxxxxx’x Parkway #9 operations, which shall
include all substantially all of the owned and leased equipment that is primarily used in
connection with Xxxxxxxxx’x Parkway #9 operations (supporting both surface and underground
operations) on Milestone 2 (“Equipment”). At the time of conveyance and sublease of all Equipment,
Xxxxxxxxx shall prepare complete exhibits to be
- 29 -
attached as exhibits to the Xxxx of Sale and Sublease attached hereto in Exhibit D, All owned
Equipment shall be by xxxx of sale. Conveyance of leased Equipment shall be by means of a sublease
whereby the Company will receive the benefit of use of such equipment and the residual interest (if
any) in the equipment upon satisfaction of the underlying lease obligations (without xxxx-up or
additional rental owed to Xxxxxxxxx). The Company will provide Xxxxxxxxx the first-priority,
rent-free right to possess and use all of the Equipment pursuant to a Use Agreement consistent with
the terms stated herein and the further terms set forth on Exhibit X. Xxxxxxxxx shall be
responsible to pay all underlying lease obligations for so long as any leased Equipment is being
used in Xxxxxxxxx’x Parkway #9 operations. Pursuant to the Use Agreement, Xxxxxxxxx shall be
responsible to pay all operating costs associated with or arising from operation of Parkway prep
plant and Equipment, including but not limited to any utilities and maintenance costs, until such
time as the Company begins mining the #8 seam of coal. When the Company begins mining the #8 seam,
the Company and Xxxxxxxxx shall prorate the operation costs of the Parkway prep plant and related
Equipment, excluding Equipment dedicated solely to the #9 mining operations, based on their
production from both seams. As Xxxxxxxxx depletes the #9 seam reserves at Parkway and ceases using
particular items of Equipment, the Use Agreement shall terminate as to such items, and possession
will be delivered to the Company.
Contribution by Xxxxxxxxx and/or its Affiliates of rights to the Gibraltar Haulroad and Access
Road pursuant to a Non-Exclusive Haulroad Easement Agreement.
-Cyprus to contribute reserves and property rights as follows:
Contribution to the Company by Cyprus and/or its Affiliates of all Kentucky #8 coal reserves
located within the Comprehensive Mining Area, now or hereafter owned or leased by Cyprus or its
Affiliates, by the Lease and Sublease Agreement described on Exhibit D, all such leased and
subleased interests being contributed free from and not subject to any obligations of royalty
interests, overriding royalty interests, premiums or rentals to any Person, except for the royalty
obligations due to any original Lessor of the subleased interests. Company will reimburse Cyprus
for advance royalties paid in 2012 for leased Xxxxxx #8 coal
reserves. 1
Contribution by Cyprus and/or its Affiliates of rights to the Gibraltar Haulroad and Access Road
pursuant to Non-Exclusive Haulroad Easement Agreements.
III. Milestone 3
Milestone 3 occurs upon the completion of mine construction as determined by the Board of Managers
(projected to occur in August 2013).
Contributions:
-Members to contribute, in proportion to each Member’s Percentage Interest, cash sufficient
to acquire a full underground unit of equipment as determined by the Board of Managers, which is
projected to include two JOY 1415 continuous miners, four BH10 battery haulers, two Xxxxxxxx
double boom roof bolters, one BF17 JOY feeder, two scoops, two 14 place mantrips, three tow man
rides, power distribution equipment, coal handling equipment (headers, etc.) and any other
equipment or supplies necessary to operate one split air supersection.
IV. Milestone
4
| 1 | Upon completion of permitting Cyprus shall acquire a new #8 coal lease from the Xxxxxx to extend the existing 1993 lease and will subsequently sublease those leasehold interests to the Company. | |
- 30 -
Milestone 4 occurs following the completion of mine construction and prior to mining as
determined by the Board of Managers (projected to occur in August 2013). Following the occurrence
of Milestone 4, the Company will begin mining the #8 seam.
Contributions:
-Members to contribute, in proportion to each Member’s Percentage Interest, cash sufficient
to upgrade the Parkway preparation plant to allow for processing of additional tonnage as
determined by the Board of Managers. Cost of operation of the preparation plant will be shared on
a prorata basis by Xxxxxxxxx and Xxxxxxx as long as Xxxxxxxxx continues to operate in the #9 seam.
VI. TV A Contract. To the extent any coal is sold by the Company under Xxxxxxxxx’x existing
contract with Tennessee Valley Authority, TVA Contract No, 40685, Xxxxxxxxx shall remit to the
Company the net proceeds attributable to the sale of such coal, without xxxx-up or additional
costs or charges to the Company pursuant to a pass-through agreement acceptable to the Board of
Managers. The Sales Representation Agreement requires payment for all coal mined removed and sold
by the Company, including any coal passed through Xxxxxxxxx contracts.
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 contributions or be liable
to the Company or the other Member based on any subsequent determination that any portion of the
Member’s capital contributions 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 provided for herein 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 herein.
The Members agree that certain surface properties (being those tracts subdivided by the “New
Division Line”) to be contributed to the Company by Xxxxxxxxx will be surveyed to effectively
subdivide the tracts and that neither Member will be entitled to seek adjustment of their
respective Percentage Interests in the Company or otherwise be liable to the Company or the other
Member by reason of any determination of any deviation between the representations contained in the
lease and the surveyed acreage of those surface properties.
- 31 -
EXHIBIT B
COMPREHENSIVE MINING AREA
- 32 -
EXHIBIT C
EXCLUSION AREAS
- 33 -
EXHIBIT D
TO
OPERATING AGREEMENT
Forms of Contribution Conveyancing Documents
1. Coal Mining Lease and Sublease — CCLR & Xxxxxxx — Owned #8 Coal, Leased 1993 and 2013 Xxxxxx #8
Coal, and Leased Xxxxxx #8 Coal.
2. Memorandum of Coal Mining Lease and Sublease — CCLR & Xxxxxxx — Owned #8 Coal, Leased 1993 and
2013 Xxxxxx #8 Coal, and Lease Xxxxxx #8 Coal.
3. Xxxxxx Consent to Sublease 1993 #8 Leased Coal.
4. Xxxxxx Consent to Sublease 2013 #8 Leased Coal.
5. Xxxxxx Consent to Sublease Portions of #8 Coal.
6. Non-Exclusive Haulroad & Access Easement — CCLC & Xxxxxxx — Under review by Xxxxxxxxx. To
be mutually agreed by the parties within 30 days of the date of the Operating Agreement.
7. Non-Exclusive Haulroad Easement — CCLC & Xxxxxxx — Under review by Xxxxxxxxx. To be mutually
agreed by the parties within 30 days of the date of the Operating Agreement.
8. Non-Exclusive Haulroad Easement — CCLC & Xxxxxxx — Under review by Xxxxxxxxx. To be mutually
agreed by the parties within 30 days of the date of the Operating Agreement.
9. Quitclaim Deed — WMD and WLC — 39.45% interest 4,782 acres of Owned Gibraltar
Surface.
10. Quitclaim Deed — WMD and WLC — 39.45% interest in 661.54 acres of Owned Parkway Surface.
11. Special Warranty Deed — WLC and Xxxxxxx — 100% Interest in 1,977 acres of Owned Surface
with deed-in provisions (1,628 acres from Gibraltar; 349 acres from Parkway).
12. Xxxxxx Partial Release of Right of First Refusal to Purchase — Xxxxxx, WLC, Xxxxxxx.
13. Non-Exclusive Haulroad Easement (Gibraltar HR and Access Road — WLC, Xxxxxxxxx, Xxxxxxx — Under
review by Xxxxxxxxx. To be mutually agreed by the parties within 30 days of
- 34 -
the date of the Operating Agreement.
14. Xxxx of Sale — Xxxxxxxxx Owned Equipment — Xxxxxxxxx & Xxxxxxx.
15. Equipment Sublease — Xxxxxxxxx Leased Equipment — Xxxxxxxxx & Xxxxxxx.
16. Use Agreement — To be drafted post-closing and mutually agreed by the parties within 30 days of
the date of the Operating Agreement, which agreement will contain the following basic terms:
- Xxxxxxxxx shall have the first-priority, rent-free right to possess and
use all of the Equipment as needed in its #9 seam mining operations.
-Xxxxxxxxx shall have no obligation to pay rent or use fees for the Equipment.
-Xxxxxxxxx shall insure and maintain the Equipment at its cost until possession is
delivered to Xxxxxxx.
-Xxxxxxxxx shall pay operating costs.
-Xxxxxxxxx shall indemnify Xxxxxxx for any liabilities and claims related to
Xxxxxxxxx’x use of the Equipment.
-As Xxxxxxxxx depletes the #9 seam reserves at Parkway and ceases using particular
items of Equipment, the Use Agreement shall terminate as to such items, and possession will
be delivered to the Company.
- 35 -
Appendix 2
SALES REPRESENTATION AGREEMENT
THIS SALES REPRESENTATION AGREEMENT (“Agreement”) made and entered into as of the 29th day of
December, 2011, by and among Xxxxxxx Mining Company, LLC, a Delaware limited liability company
(“XXXXXXX”) with a mailing address of 000 Xxxxx Xxxx, Xxxxxxxxxxxx, XX 00000 and PEABODY COALSALES,
LLC, a Delaware limited liability company with its principal place of business at 000 Xxxxxx
Xxxxxx, Xx. Xxxxx, Xxxxxxxx 00000 (“COALSALES”).
W I T N E S S E T H:
WHEREAS, XXXXXXX is a coal company which owns, leases or otherwise controls Kentucky #8 seam
coal reserves located in Muhlenberg County, Kentucky (the “XXXXXXX Reserves”) and is jointly owned
by Xxxxxxxxx Coal Company, Inc. (“Xxxxxxxxx”) and Cyprus Creek Land Resources, LLC (“Cyprus”); and
WHEREAS, XXXXXXX is governed by the terms and conditions contained in a certain Limited
Liability Company Agreement dated the 29th day of December, 2011 (the “Operating Agreement”); and
WHEREAS, XXXXXXX desires to find customers and develop markets for coal to be produced from
the XXXXXXX Reserves; and
WHEREAS, COALSALES has particular expertise and knowledge in the area of coal sales,
marketing, domestic and export sales and related services and represents producers of similar coals
in domestic markets; and
WHEREAS, COALSALES is willing to serve as sales agent and/or to purchase coal from XXXXXXX
upon the terms and conditions set forth in this Agreement;
WHEREAS, XXXXXXX and COALSALES wish to establish the terms and conditions under which
COALSALES shall market and sell coal produced by XXXXXXX and to compensate COALSALES for the same;
NOW THEREFORE, in consideration of the foregoing premises, the mutual covenants and promises
herein contained, and for other good and valuable consideration, the reciept and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE ONE — SALES AGENCIES
1.1 XXXXXXX hereby appoints COALSALES, and COALSALES hereby accepts the appointment, to act as
Xxxxxxx’x agent for the sale of coal (subject to the procedures under Article Two) from the XXXXXXX
Reserves which is to be sold in domestic markets.
1.2 It is further expressly understood that while COALSALES will sell coal produced, owned, or
marketed by companies other than XXXXXXX and will also act as agent for such other companies in the
sale of their coal, COALSALES shall give fair representation in accordance with industry trade
practices and customs to XXXXXXX at
1
all times and will, where the coal quality and rail access requirements of a potential purchaser
can be satisfied by XXXXXXX’x coal from the XXXXXXX Reserves and COALSALES has no superior
obligation to any other company which it represents, due to a previously executed representation
agreement, give preference to XXXXXXX’x coal from the XXXXXXX Reserves.
1.3 XXXXXXX and its affiliates hereby represent and warrant to COALSALES that there is no
current sales representation agreement between XXXXXXX and any other third party with respect to
the XXXXXXX Reserves and XXXXXXX and its affiliates, hereby agree not to enter into any other new
sales representation agreement with respect to the XXXXXXX Reserves that would prevent COALSALES
from receiving its commission described in section 2.2.
1.4 The relationship of XXXXXXX and COALSALES shall be that of an independent contractor, and
nothing contained in this Agreement shall be construed or interpreted as: (i) establishing a
relationship of partners, co-owners or otherwise as participants in a joint venture; (ii) creating
a franchisor-franchisee or employer-employee relationship; (iii) constituting XXXXXXX, its
respective agents or employees as the agents or employees of COALSALES or to grant to XXXXXXX any
power or authority to act for, bind or otherwise create or assume any obligation on behalf of
COALSALES; or (iv) constituting COALSALES, its agents or employees as the agents or employees of
any of XXXXXXX (except for the appointment as sales agent as set forth herein) or to grant to
COALSALES any power or authority to act for, bind or otherwise create or assume any obligation on
behalf of XXXXXXX. All offers, proposals and other submissions to customers by COALSALES in its
sales agent capacity shall be subject to acceptance of such offer or proposal by XXXXXXX.
ARTICLE TWO — COMPENSATION
2.1 All costs and expenses of whatever kind and nature incurred by COALSALES as a result of
the sales representation of coal pursuant to Article One hereof, shall be solely for its own
account and XXXXXXX shall have no obligation to advance to COALSALES, or reimburse it for, any such
cost or expense.
2.2 For all coal produced and sold from the XXXXXXX Reserves during the Term of this
Agreement; COALSALES shall be paid a commission of Twenty-Five cents ($0.25) per ton on a monthly
basis, payable by the 25th day of the following month.
2.3 Compensation Due Under Xxxxxxxxx Sales Contracts. The parties understand and agree
that coal produced from the Xxxxxxx Reserves may be sold under supply agreements and contracts
between Xxxxxxxxx and third party customers, including but not limited to TVA, and that COALSALES
will be paid the commission described in Section 2.2 above for all coal from the Xxxxxxx Reserves
sold under any such agreement or contract.
ARTICLE THREE — RESPONSIBILITY FOR
PERFORMANCE OF COAL CONTRACTS, INDEMNIFICATION
PERFORMANCE OF COAL CONTRACTS, INDEMNIFICATION
3.1 XXXXXXX shall be solely responsible for the full and due performance of all contracts
which it enters into with COALSALES or any third party as a result of this Agreement and XXXXXXX
shall indemnify COALSALES against liability for any loss,
2
damage, or injury suffered by COALSALES arising out of or related to XXXXXXX’x performance or
non-performance of any contract, unless such liability is proximately caused by the willful acts or
gross negligence acts of COALSALES. XXXXXXX shall be solely responsible for the costs of any
analysis, washability, or reserves studies.
3.2 COALSALES shall: (i) respond promptly to any reasonable request by XXXXXXX for market
information affecting the market for all coal; (ii) cooperate with XXXXXXX in dealing with any
customer complaints concerning sales of coal hereunder; and (iii) assist XXXXXXX with other
customer support activities related to such coal sales orders.
3.3 XXXXXXX shall: (i) communicate promptly to COALSALES all inquiries from customers for
purposes of handling and quotation; (ii) comply with the terms of all such coal sales orders; and
(iii) communicate to COALSALES, in writing, at least once prior to the end of each month of their
anticipated monthly shipments by destination, coal type and tonnage, and any planned mine outages
or potential shipping/delivery problems, for the following month. This communication should
compare anticipated monthly availability of such coal products against anticipated sales to provide
COALSALES with projected supply shortfalls and/or uncommitted tonnage.
3.4 Disclaimer of Fiduciary Obligation. XXXXXXX agrees and acknowledges that
COALSALES acts as a sales agent or sales representative, or both, for other producers (including
its affiliates), brokers coal, and buys and sells coal on its own behalf and on behalf of its
affiliates. COALSALES expressly disclaims any fiduciary obligation to XXXXXXX, or any other
obligation not expressly set forth herein.
3.5 Compliance with Laws. The parties shall comply with all laws, orders, rules,
regulations, and requirements of every duly constituted governmental authority, agency, or
instrumentality, which may be applicable to this Agreement or its subject matter, including but not
limited to US Anti-trust and state unfair competition laws and the Foreign Corrupt Practices Act
and The Patriot Act.
3.6 Joint Customers. In the event a solicitation is requested from a prospective
customer which COALSALES is also submitting a bid for its own account, then XXXXXXX will deliver
the bid to such prospective customer, with its price independent of COALSALES. If XXXXXXX is
successful in obtaining the sale, COALSALES will handle the ongoing relationship with the customer
in accordance with this Agreement.
ARTICLE FOUR — TERM AND TERMINATION
4.1 Subject to earlier termination as provided for in Section 4.2 below, this Agreement shall
be for an initial term of three (3) years beginning on the date first above written, and shall be
automatically renewed from year to year thereafter without further action of the parties required,
as long as XXXXXXX remains in existence and coal is produced from the XXXXXXX Reserves (the
“Term”).
4.2 Events of Default. An event of default (“Event of Default”) with
respect to XXXXXXX shall mean any of the following: (i) the failure of XXXXXXX to pay when due
3
any required payment under this Agreement and such failure is not remedied within five (5) business
days after written notice thereof; (ii) the failure of XXXXXXX to comply with its other material
obligations under this Agreement; (iii) XXXXXXX shall be subject to a Bankruptcy Proceeding; or
(iv) any representation or warranty made by XXXXXXX under this Agreement shall prove to be untrue
when made in any material respect. An Event of Default with respect to COALSALES shall mean any of
the following: (i) the failure of COALSALES to comply with its material obligations under this
Agreement; and (ii) any representation or warranty made by COALSALES under this Agreement shall
prove to be untrue when made in any material respect. If any default, other than a payment default
(as to which the 5 business day cure period above applies), is curable, it may be cured (and no
Event of Default will have occurred) if the defaulting party (“Defaulting Party”), as the case may
be, after receiving written notice demanding cure of such default (1) shall cure the default within
thirty (30) days; or (2) if the cure requires more than thirty (30) days, shall immediately
initiate reasonable steps sufficient to cure the default and thereafter continue and complete all
reasonable and necessary steps sufficient to cure the breach as soon as reasonably practical. Upon
the occurrence and during the continuation of an Event of Default as to the Defaulting Party, the
other party (the “Non-Defaulting Party”) may, in its sole discretion, accelerate and
liquidate the Defaulting Party’s obligations under this Agreement by establishing and notifying the
Defaulting Party of, an early termination date (which shall be no earlier than the date of such
notice) on which the Term of this Agreement shall terminate (“Early Termination Date”). If
notice of an Early Termination Date is given under this Section 4.2, the Early Termination Date
will occur on the designated date, whether or not the relevant Event of Default is then continuing.
Any rights of a Non-Defaulting Party under this Section 5.2 shall be in addition to such
Non-Defaulting Party’s other rights under this Agreement. In the event Cyprus ceases to be a
member of XXXXXXX pursuant to the Operating Agreement, XXXXXXX shall have the right to terminate
the Term of this Agreement effective on the date Cyprus ceases to be a member.
ARTICLE FIVE — GENERAL PROVISIONS
5.1 ASSIGNMENT. Neither party may assign its rights or obligations under this
Agreement without the written consent of the other party.
5.2 NOTICE. Notice sent by certified mail, or hand delivered, addressed to the
president or a vice president of the party to whom such notice is given at the address listed in
this Agreement shall be sufficient notice in any case requiring notice under this Agreement. At any
time, any party may specify in writing a new address for notifications hereunder.
5.3 LIABILITY AND INDEMNIFICATION. As between the parties hereto, any party shall be
liable to the others for the death of or injury to any employee of the other parties, or loss of or
damage to the property of the other parties, unless proximately caused by the assertly liable
party’s negligence or willful action. Each party shall indemnify the other party against any
liability for the death of or injury to any of its own employees, or loss of or damage to its own
property, unless caused by the sole negligence or willful action of the other party. Each party
shall indemnify the other party against any liability for any loss, damage, or injury suffered by
any third party and arising out of the parties’ performance of this Agreement except where such
loss is proximately caused solely by one party’s negligence or willful action, and the parties
shall bear equal
4
liability for such loss, damage or injury where caused by their joint negligence or willful
actions.
5.4 COMPLIANCE WITH LAWS. XXXXXXX and COALSALES represent that they will comply with
all applicable laws and regulations.
5.5 ACCESS TO INFORMATION. Each party shall have access to applicable data in the
possession of the other parties in order to fulfill their respective obligations to third parties.
However, each party shall maintain such data on a confidential basis and not disclose such data to
third parties without the prior written consent of the other parties. This provision shall survive
termination of this Agreement.
5.6 FORCE MAJEURE. In the event the obligations of the parties under this Agreement
shall be prevented, delayed, suspended or reduced by Force Majeure, then the party experiencing
such Force Majeure shall promptly notify the other party and, to the extent caused by Force
Majeure, performance hereunder shall be excused. A “Force Majeure” event shall mean: acts of God,
acts of local, state, tribal or federal government, war, labor shortage, strikes or similar labor
interruptions, accidents, or any other cause, whether of like or dissimilar nature, beyond the
control of any party.
5.7 NON-WAIVER. The failure by any party to insist on compliance with one or more of
the provisions of this Agreement shall not serve as a waiver of any other provisions of this
Agreement.
5.8 PERMITS AND RECLAMATION. XXXXXXX represents and warrants that it will conduct all
of its mining and other operations in accordance with all federal and state requirements and abide
by the terms and conditions of all of its permits. XXXXXXX has or will acquire and maintain all of
the necessary permits and licenses required to conduct its mining and other operations on the
XXXXXXX Reserves and will perform reclamation in accordance with its permits.
5.9 COUNTERPARTS. This Agreement may be signed in counterparts, including facsimile
signatures, each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
5.10 CONSENT TO JURSIDICTION. XXXXXXX and COALSALES agree that any action or
proceeding initiated by or on behalf of any party regarding any dispute under this Agreement, shall
be commenced and maintained in the District Court of the United States for the Eastern District of
Missouri, or the Circuit Court of St. Louis County, St. Louis, Missouri, or any other court of
applicable jurisdiction located in St. Louis County, Missouri. The parties also agree that a
summons and complaint commencing an action or proceeding in any such Missouri court by or on behalf
of such party or parties shall be properly served and shall confer personal jurisdiction on a party
(to which jurisdiction each party consents and submits itself, waiving any objection based upon
forum non conveniens and any objection to venue of any action instituted
hereunder), if (i) served personally or by certified mail to each other party at its respective
address set forth in this Agreement, or (ii) as otherwise provided under the laws of the State of
Missouri.
5.11 WAIVER OF JURY TRIAL. Each of the parties hereto hereby irrevocably waives any
and all rights each may have to a trial by jury in any action, proceeding or claim of any nature
relating to this Agreement, any documents executed in connection
5
with this Agreement, or any transaction contemplated herein. Each of the parties acknowledges that
the foregoing waiver is knowing and voluntary.
5.12 GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Missouri, without regard to any conflict of laws principles.
5.13 ENTIRE AGREEMENT. This Agreement and the Operating Agreement constitute the
entire Agreement of the parties, and supersedes all prior negotiations, understandings and writings
between the parties, as to the matters covered herein. Any and all sales contracts entered into
during the term of this Agreement shall be governed solely by the provisions of such contracts and
of this Agreement. Where the provisions of a sales contract is at variance with this Agreement,
the two documents shall, to the extent possible, be interpreted in a harmonious manner; provided,
however, that where it is not possible to harmoniously interpret the two documents, the provision
of the sales contract shall prevail. In the event of a conflict between the terms of this Agreement
and the Operating Agreement, the terms of the Operating Agreement shall prevail. This Agreement may
only be modified by written amendment executed by all parties.
5.14 THIRD PARTIES. Nothing in this Agreement is intended or shall be construed to
confer any rights, remedies or benefits on any person or entity other than XXXXXXX and COALSALES.
5.15 CAPTIONS. Section and paragraph titles or captions contained in this Agreement
are inserted only as a matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly
constituted officers as of the day and year first written above.
| XXXXXXX MINING COMPANY, LLC | PEABODY COALSALES, LLC | |||||||
By:
|
By: | |||||||
Title:
|
Title: | |||||||
6
12
Exhibit A
NOTICE: THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION
XXXXXXX MINING COMPANY, LLC
LIMITED LIABILITY COMPANY AGREEMENT
(THE OPERATING AGREEMENT)
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 Xxxxxxxxx Coal Company, Inc. (“Xxxxxxxxx”).
WHEREAS, the Members (hereafter defined) desire to form a limited liability company under the
laws of the State of Delaware to be known as Xxxxxxx 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 “Xxxxxxxxx” means Xxxxxxxxx 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 Xxxxxxxxx, means any transfer or other action that
results in (a) Xxxxxxxxx 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 Xxxxxxxxx, or (c) any private or public company or
entity primarily engaged in the business of coal mining gaining Control, directly or indirectly,
over Xxxxxxxxx or over Yorktown Parties that have Control over Xxxxxxxxx. “Change of Control,” with
respect to a Member other than Xxxxxxxxx, 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 Xxxxxxxxx,
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 Xxxxxxx 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 “Xxxxxxx 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 Xxxxxxxxx.
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 Xxxxxxxxx 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) Xxxxxxxxx
resigns as the Managing Member, (b) Xxxxxxxxx is removed from the Managing Member position by the
Board of Managers acting upon the majority consent of all of the Managers, (c) Xxxxxxxxx ceases to
be a Member, (d) Xxxxxxxxx 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 Xxxxxxxxx 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, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. The Company’s primary business office shall be at 000 Xxxxx
Xxxx, Xxxxxxxxxxxx, XX 00000, 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, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
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
without the written consent of the Member who made the Member Loan.
3.4 Withdrawal of Capital. The Members shall only be entitled to withdraw or to
receive distributions of capital in accordance with the terms and conditions of this Agreement.
3.5 Capital Accounts. A single capital account shall be maintained for each Member in
accordance with the capital accounting rules of section 704(b) of the Code and the tax regulations
thereunder (including treasury regulation 1.704(b)(2)(iv)), The capital account of each Member
shall be credited with the fair market value of such Member’s capita! contributions, such Member’s
distributive share of profits, income or gain, and the amount of any Company liabilities assumed by
such Member or which are secured by any property distributed to such Member. The capital account of
each Member shall be debited with the amount of cash and the value of any property distributed to
such Member pursuant to any provision of this Agreement, such Member’s distributive share of losses
and expense, and the amount of any liabilities of such Member assumed by the Company or which are
secured by any property contributed by such Member to the Company.
3.6 Revaluation of Capital Accounts. The capital accounts of the Members shall be
adjusted to reflect revaluation of Company assets in all cases required by treasury regulation §
1.704-l(b) and in all optional circumstances to the extent allowed by treasury regulation §
1.704-l(b)(2)(iv)(f) unless the Board of Managers determines that such revaluation would not be
beneficial or fair under the circumstances. If there is a revaluation under this Section 3.6, then
the Company shall make special allocations consistent with the principles of Section 704(c) of the
Code. In determining such allocations, the Company shall use the traditional method with curative
allocations described in treasury regulation § 1,704~3(c) for any Contributed Asset.
4. Allocations.
4.1
Allocation of Profit Loss. Income, Gain. Deduction, and Credit. Subject to Section 4.2,
profits and losses of the Company and, items of taxable income, gain, loss, deduction and credit,
shall be apportioned among the Members in accordance with each Member’s Profit Distribution Share.
4.2 Tax Allocations Contributed Property. With respect to any asset contributed by a
Member to the Company (“Contributed Asset”) that has a tax basis different from its agreed upon
fair market value on the date of the contribution, the Company shall make the special allocations
required by Section 704(c) of the Code, These special allocations apply solely for Federal, state,
and local income tax purposes. They shall not affect or be taken into account in computing a
Member’s capital account, or share of profits, losses, or distributions pursuant to any provision
of this Agreement. In making these special allocations, the Company shall use the traditional
method with curative allocations described in treasury regulation § 1.704-3(c) for any Contributed
Asset.
4.3 754 Election and Other Tax Elections. In the event of a distribution of property to a
Member, or a transfer of any interest in the Company permitted under the Act or this Agreement, the
Company, upon written request of the transferor or transferee, shall file a timely election under
this section 754 of the Code and the regulations thereunder to adjust the basis of the Company’s
assets under section 734(b) or 743(b) of the Code and a corresponding election under the applicable
provisions of state and local law, and the Person making such request shall pay all costs incurred by the
Company in connection therewith, including reasonable ??? accountants’ fees. Other tax elections and
elections relating to Taxes not specifically governed by another provision of this Agreement shall be made as
agreed by the Board of Managers.
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5. Distributions.
5.1 Distribution to Members. On or before the last business day of each calendar
quarter, the Company may make distributions of cash or cash equivalents to the Members based upon
the Available Cash of the Company. The Managing Member shall first determine the amount of
Available Cash of the Company available for distribution, and then the Board of Managers shall
determine the aggregate amount of distributions which may be made to the Members and the Members
shall share in such total distributions in accordance with each Member’s Profit Distribution Share.
5.2 Distributions in Kind. Except as may be provided in this Agreement or an amendment
to this Agreement, no Member, regardless of the nature of the Member’s contribution to capital, may
demand or receive a distribution from the Company in any form other than cash or cash equivalents.
5.3 Limitation on Distributions. No distribution shall be made by the Company if after
giving effect to the distribution; (a) the Company would not be able to pay its debts as they
become due in the usual course of business; or (b) the assets of the Company would be less than the
sum of its liabilities plus, the amount that would be needed, if the Company were to be dissolved
at the time of the distribution, to satisfy the preferential rights of other Members upon
dissolution which are superior to the rights of the Member receiving the distribution.
6. Members.
6.1 Representations and Warranties. Each Member hereby represents and warrants to the
Company and each other Member that: (a) it is duly organized, validly existing and in good standing
under the laws of its formation and is duly qualified and in good standing in the jurisdiction of
its principal place of business; (b) it has full power and authority to execute and agree to this
Agreement and to perform its obligations hereunder; (c) it has duly executed and delivered this
Agreement; and (d) its authorization, execution, delivery, and performance of this Agreement does
not conflict with any other agreement or arrangement to which that Member is a party or by which it
is bound.
6.2 Additional Members. It is not intended that additional Members will be admitted
into the Company. Nonetheless, if the Members unanimously agree, additional Members may be admitted
on such terms and conditions as the Members may determine at the time of admission,
6.3 Prohibited Transfers. No Member may transfer all or any part of such Member’s
Percentage Interests if such transfer will (a) violate in any material respect any applicable
federal or state securities laws or regulations, or subject the Company to registration as an
investment company or election as a “business development company” under the Investment Company Act
of 1940; (b) require any Member or any Affiliate of a Member to register as an investment adviser
under the Investment Advisers Act of 1940; (c) effect a termination of the Company under Section
708 of the Code; or (d) cause the Company to be treated as an association taxable as a corporation
for federal income tax purposes.
6.4 Information. The Members acknowledge that from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that otherwise is
confidential, the release of which may be damaging to the Company or Persons with which it does
business. Each Member shall hold in strict confidence any information it receives regarding the
Company that is identified as being confidential (and if that information is provided in writing,
that is so marked) and may not disclose it to any Person other than another Member, except for
disclosures (i) compelled by law (but the Member must notify the other Members, as appropriate,
promptly of any request for that information, before disclosing it, if
- 8 -
practicable), (ii) to advisers or representatives of the Member or Persons to which that Member’s
interest may be disposed as permitted by this Agreement, but only if the recipients have agreed to
be bound by the provisions of this Section, or (iii) of information that Member also has received
from a source independent of the Company that the Member reasonably believes obtained that
information without breach of any obligation of confidentially. The Members acknowledge that breach
of the provisions of this Section may cause irreparable injury to the Company for which monetary
damages are inadequate, difficult to compute, or both. The Members agree that the provisions of
this section may be enforced by specific performance,
6.5 Liabilities to Third Parties; Indemnification. Except as otherwise expressly
agreed in writing, no Member shall be liable for the debts, obligations or liabilities of the
Company, including under a judgment decree or order of a court; provided, however, that
notwithstanding any other provision of this Agreement, each Member shall indemnify and hold
harmless the Company and the other Member from and against any claim, loss, damage, liability, or
reasonable expense (including reasonable attorneys’ fees, court costs, and costs of investigation
and appeal) actually incurred by the Company or the other Member by reason of, or arising from, the
operations, business, or affairs of, or any action taken or failure to act, of or by the other
Member or its Affiliates prior to formation of this Company. The parties acknowledge that a claim
has been filed against the Xxxxxxxxx Parties in XX Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx of Kentucky,
Civil Action No. 4:11 cv 114, alleging the existence of an existing overriding royalty that is
alleged to apply to #8 seam coal to be mined by the Company, and the parties agree in the event
that such claims are adjudged to apply to any #8 seam coal mined by the Company (but only with
respect to #8 seam coal mined by the Company), the Company shall not be entitled to be indemnified
or held harmless by Xxxxxxxxx relating to such obligations.
6.6 Fiduciary Duties.
(a) Duty of Loyalty. Each Member’s, Manager’s and Managing Member’s
duty of loyalty to the Company and the other Members is limited to account to the
Company and to hold as trustee for the Company any property, profit or benefit
derived by the Member, Manager or Managing Member in the conduct or winding up of
the Company’s business. A Member, Manager or Managing Member does not violate the
duty of loyalty by engaging in a competing business or pursuing other business
opportunities, even if the business opportunity could have been pursued by the
Company.
(b) Duty of Care. Each Member’s, Manager’s and Managing Member’s duty
of care to the Company and the other Members in the conduct of and winding up of the
Company’s business is limited to refraining from engaging in gross negligence,
reckless conduct, intentional misconduct, or a knowing violation of law,
(c) Good Faith and__Fair_Dealing. Each Member, Manager and Managing
Member shall discharge its duties and exercise any of its rights consistently with
the obligation of good faith and fair dealing which it owes to the Company and the
other Members, A Member, Manager or Managing Member does not violate a duty of good
faith or fair dealing to the Company merely because the Member’s, Manager’s or
Managing Member’s conduct furthers the Member’s, Manager’s or Managing Member’s, as
the case may be, own interest. Further, a Member, Manager, or Managing Member does
not violate the duty of good faith and fair dealing by engaging in a competing
business or pursing other business opportunities, even if the business opportunity
could have been pursued by the Company; provided, however, that each Member, Manager
and Managing Member shall not engage in a competing business involving any coal
reserves described in the Xxxxxx #8 Lease of Kentucky #8 Reserves identified on
Exhibit B hereto without the express written consent of the other Member.
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(d) Indemnification of Members, Managers and Managing Member. To the
fullest extent allowed by law, the Members, Managers, and Managing Member shall be
indemnified and held harmless by the Company for any liability resulting from any
act performed or omission made by them in good faith on behalf of the Company,
except for acts or omissions of gross negligence, willful misconduct, intentional
misconduct, or a knowing violation of the law. Notwithstanding anything contained in
this Agreement to the contrary, no Member, Manager or Managing Member, nor any
officer, director, employee, agent, stockholder, member or partner of any Member or
the Managing Member shall be liable, responsible, or accountable in monetary damages
to the Company or any Member by reason of, or arising from, the operations,
business, or affairs of, or any action taken or failure to act on behalf of, the
Company, except to the extent that any of the foregoing is primarily caused by any
acts or omissions of gross negligence, willful misconduct, intentional misconduct,
or knowing violation of the law of such Person; provided, however, that the rights
of either Member with respect to the buy-sell triggers set forth in Section 8.3
shall not be limited to or conditioned upon acts or omissions of gross negligence,
willful misconduct, intentional misconduct, or knowing violation of the law.
(e) Duty of Care for Managing Member. The Managing Member shall perform
its duties hereunder, including but not limited to those expressly stated in Section
7.6, in good faith, using reasonable good faith efforts and with reasonable
diligence. In the event the other Member (“Non-Managing Member”) determines that the
Managing Member is not performing its duties hereunder consistent with the standards
set forth in this Section 6.6(e), the Non-Managing Member may deliver written notice
of such determination to the Managing Member, which notice shall set forth in
reasonable detail the basis for the Non-Managing Member’s determination that the
Managing Member is not performing its duties hereunder consistent with the standards
set forth in this Section 6.6(e). If, after sixty (60) days after delivery of the
foregoing notice, the Non-Managing Member reasonably determines that the Managing
Member continues to not perform its duties hereunder consistent with the standards
set forth in this Section 6.6(e), the Non-Managing Member may exercise the buy-sell
option set forth in Section 8.3 hereof.
6.7 Alternate Dispute Resolution. If a dispute, controversy or claim (whether based
upon contract, tort, statute, common law or otherwise) (collectively a “Dispute”) arises from or
relates directly or indirectly to the subject matter hereof, and if the Dispute cannot be settled
through direct discussions, the parties shall first endeavor to resolve the Dispute by
participating in a mediation administered by the American Arbitration Association (“AAA”) under its
Commercial Mediation Rules before resorting to arbitration. Thereafter, any unresolved Dispute
shall be settled by binding arbitration administered by the AAA in accordance with its Commercial
Arbitration Rules and judgment on the award rendered by the arbitrator, after the review rights set
forth below have been exhausted, may be entered in any court having jurisdiction. Any arbitration
proceeding shall be conducted in St. Louis, Missouri on an expedited basis before a neutral
arbitrator (or multiple arbitrators if called for by the Commercial Arbitration Rules), Each
arbitrator shall be selected in the manner determined by the AAA. Upon the request of either party,
the arbitrator’s award shall include findings of fact and conclusions of law provided that such
findings may be in summary form. Either party may seek review of the arbitrator’s award before an
arbitrations review panel comprised of three arbitrators qualified in the same manner as the
initial arbitrator(s) (as set forth above) by submitting a written request to the AAA. The right of
review shall be deemed waived unless requested in writing within ten (10) days of the receipt of
the initial arbitrator’s award. The arbitration review panel shall be entitled to review all
findings of fact and conclusions of law in whatever manner it deems appropriate and may modify the
award of the initial arbitrator(s) in its discretion. The prevailing party in any arbitration
proceeding shall be entitled to
- 10 -
an award of all reasonable out of pocket costs and expenses (including attorneys’ and arbitrators
tees) related to the entire arbitration proceeding (including review if applicable). Upon request
of either party, the arbitrator(s) may require that the subject arbitration proceedings be kept
confidential and no party shall disclose or permit the disclosure of any information produced or
disclosed in the arbitration proceedings until the award is final. A party shall not be prevented
from seeking temporary injunctive relief before a court of competent jurisdiction in an emergency
situation, but responsibility for resolution of the Dispute shall be appropriately transferred to
the arbitrator(s) upon appointment in accordance with the provisions hereof.
6.8 Meetings of Members.
(a) Meetings. The Members will have an annual meeting as may be
established by the Managing Member. The Members will have such special meetings as
are called in accordance with the provisions of this Agreement. Any annual or
special meeting of the Members is to be held at such place as may be designated by
the Managing Member or in a waiver of notice executed by all Members, If there is a
failure to designate a place for any such meeting, the same is to be held at the
principal place of business of the Company. The annual meeting of the Members is to
be held each year within sixty (60) days of the beginning of the Fiscal Year for the
transaction of such other business as may come before the meeting. Special meetings
of the Members may be called at any time by the Managing Member or by Members
possessing not less than one-third of the Percentage Interests and are to be held on
such dates and at such times as are set forth in the notice calling the meeting.
(b) Quorum. A majority of ail the Percentage Interests represented in
person or by proxy at such meeting constitutes a quorum of Members for all purposes.
Less than such quorum has the right to adjourn the meeting to a specified date not
longer than ninety (90) days after such adjournment, with notice of such adjournment
to Members to be given in the manner for special meetings of the Members. Except
where the affirmative vote of all of the Members or unanimous agreement of the
Members is required herein, the act of a majority (computed with reference to
Percentage Interests) of the Members present at any duly called meeting at which a
quorum of Members is present is the act of the Members.
(c)
Notice of Meetings. Written or printed notice of each meeting of Members
stating the place, day and hour of the meeting and, in the case of special meetings,
the purpose or purposes for which the meeting is called must be delivered or given:
(i) in the case of regular meetings, not less than ten (10) nor more than forty (40)
days before the date of the meeting; and (ii) in the case of special meetings, not
less than five (5) Business Days nor more than thirty (30) days before the date of
the meeting; in each case either personally or by mail. Notice of an annual meeting
of the Members is to be given by the Company, Notice of a special meeting of the
Members is to be given by the Company or the Member calling the meeting. Any notice
required by this Section may be waived by the Members by signing a waiver of notice
before or after the time of such meeting and such waiver is equivalent to the giving
of such notice.
(d) Designated Representative(s). Each Member shall designate in writing
to the Company and the other Members the names of up to two (2) officers, directors,
partner’s, members, employees or other affiliates of the Member who are to serve as
the “Designated Representatives” of the Member at all meetings and in all votes,
consents and approvals of the Members required pursuant to this Agreement. The
designated individual(s) shall be the official Designated Representative(s) of the
designating Member. One of such Designated Representatives shall be the primary
voting representative of the Member and the other (if
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any) shall be the alternative voting representative. Both Designated
Representatives of a Member may attend meetings of the Members, but only one (1)
Designated Representative shall cast the Member’s official vote on any matter. The
initial Designated Representatives of the entity Members are as follow:
Cyprus
|
X.X. Xxxxxx | |
| Vice President, Cyprus | ||
| Xxx Xxxxxx | ||
| Vice President Operations Underground, | ||
| Peabody Midwest Group | ||
Xxxxxxxxx
|
Xxxxxxx Xxxxx | |
| Vice President Operations, | ||
| Xxxxxxxxx | ||
| Xxxxxx Xxxxxx | ||
| President, | ||
| Xxxxxxxxx |
If neither Designated Representative of a Member is able to attend a
particular meeting of the Members, such Member may designate in writing another
officer, director, partner, member, employee or affiliate of the Member to have
voting privileges for that specific meeting. A Member may change either or both of
its Designated Representatives at any time by giving written notice thereof to the
Company and the other Members.
(e) Informal Action by Members. Any action required by this Agreement
to be taken at a meeting of the Members, or any action which may be taken at a
meeting of the Members, may be taken without a meeting if all of the Members sign
written consents that set forth the action so taken. Such consents have the same
force and effect as a unanimous vote of the Members at a meeting duly held. The
Company is to file such consents with the minutes of the meetings of the Members.
(f) Tele-Participation in Meetings. Members may participate in a
meeting of the Members by means of a conference telephone or similar communications
equipment whereby all individuals participating in the meeting can hear each other.
Participation in a meeting in this manner constitutes presence in person at the
meeting.
7. Management of the Company.
7.1 Board of Managers. The management of the Company is vested in a Board of
Managers consisting initially of four (4) individuals acting as Managers (individually a
“Manager” and collectively the “Managers”) of the Company, two (2) selected by Xxxxxxxxx (or its
successor or permitted assign) and the other two (2) selected by Cyprus (or its successor or
permitted assign). Initially, Xxxxxxxxx selects Xxxxxxx Xxxxx, Vice President of Operations of
Xxxxxxxxx and Xxxxxx Xxxxxx, President of Xxxxxxxxx as its representatives on the Board of
Managers and Cyprus selects X. X. Xxxxxx, Vice President of Cyprus and Xxx Xxxxxx, Vice President
Operations Underground, Peabody Midwest Group as its representatives on the Board of Managers.
Except as provided herein, the decisions of the Board of Managers shall be binding upon
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the Company and may be relied upon by other persons or entities. A Manager may at any time
be changed or removed and replaced by the Member which has appointed such Manager, but not by any
other Member. In the event that Xxxxxxxxx or Cyprus (or such party’s successor or permitted
assign) ceases to be a Member, the Managers appointed by such Member shall be removed at such time
and replaced by the affirmative vote of all of the Members. Except as set forth in Section 3.2 and
Section 7.12(e), the Board of Managers shall act solely upon the majority consent of all of the
Managers, which requires an affirmative vote of at least three (3) of the four (4) Managers,
including the affirmative vote of at least one (1) Manager appointed by each of Xxxxxxxxx and
Cyprus, and each Manager shall have one (1) vote. No Manager shall be required to devote all of
such Manager’s time or business efforts to the affairs of the Company but shall devote so much of
such Manager’s time and attention to the Company as is reasonably necessary and advisable to
manage the affairs of the Company to the best advantage of the Company. The Managing Member is
hereby authorized to execute, in such capacity, all documents and agreements that do not require
consent of the Board of Managers, For documents and agreements that require such consent, the
Board of Managers may, in connection with its approval thereof, authorize the Managing Member
and/or all or less than all of the Managers to execute any and all documents necessary or
convenient to carry out those actions approved by a majority of the Managers, If the Board of
Managers approves executing a document or agreement without specifically authorizing signers, then
the Managing Member and each of the Managers, acting individually, may execute such document or
agreement on behalf of the Company. The Company shall enter into a Management Agreement (the
“Management Agreement”) which shall initially engage Xxxxxxxxx to be the manager of the Company’s
day-to-day operations and the development of the Project, in accordance with the terms and
conditions contained in the Management Agreement and this Agreement. Pursuant to the terms of this
Agreement Xxxxxxxxx shall serve as the Managing Member until the occurrence of a Triggering Event
or is removed by the Board of Managers, at which time Cyprus shall have the authority, in its sole
discretion, to assume the position of Managing Member without consent or action from any other
Member or the Board of Managers and shall also have the authority, in its sole discretion, to
assume the position of manager under the Management Agreement, both elections being entirely
independent from the other.
7.2 Authority and Duties of the Managing Member. Except for Major Decisions, the
Managing Member shall have authority over and control and management of the day-to-day affairs of
the Company, including, without limitation, the authority to carry out the duties set forth in
Section 7,6, below. The Managing Member shall be appointed by the Board of Managers and may be
removed by the Board of Managers, with or without cause. The initial Managing Member shall be
Xxxxxxxxx. Xxxxxxxxx shall remain the Managing Member until the occurrence of a Triggering Event or
removed by the Board of Managers acting upon the majority consent of all of the Managers, Without
limiting the foregoing, the Managing Member shall have all of the following specific rights and
powers to implement the business and affairs of the Company:
(a) Execute and deliver contracts and other agreements necessary to conduct the
efficient and safe day to day operations of the Project and to facilitate the
development of the Project and in the ordinary course of business;
(b)
Retain or employ and coordinate the services (both on site and off site) of
employees, independent contractors, supervisors, accountants, attorneys and other
persons necessary or appropriate to carry out the business and purposes of the
Company, subject to the provisions of Section 7,4(d);
(c) Pay all debts and other obligations of the Company, to the extent that
funds of the Company are available therefor;
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(d) Execute for and on behalf of the Company, and with respect to the Project,
all such applications for permits and licenses as the Managing Member deems
necessary and advisable;
(e) Perform all ministerial acts and duties relating to the payment of all
indebtedness, taxes, and assessments due or to become due with regard to the
Project, and to give and receive notices, reports, and other communications arising
out of or in connection with the ownership, indebtedness, or maintenance of the
Project; and
(f) Take such other actions or execute such other documents or agreements on
behalf of the Company that do not expressly require the consent of the Board of
Managers or the Members hereunder.
7.3 Delegation of Duties. The Managing Member may delegate such authority and duties
as the Managing Member deems advisable, excluding any authority or duty which the Act requires to
be exercised by the Members or which is a Major Decision. Any delegation pursuant to this Section
may be revoked at any time by the Managing Member,
7.4 Major Decisions. Notwithstanding Sections 7,2 and 7.6, the Managing Member, on
behalf of the Company, may not enter into or conduct any of the following transactions (“Major
Decisions”) without the majority consent of the Board of Managers:
(a) admit a Person as a Member except as provided in this Agreement;
(b) change the status of the Company from one in which management of the Company
is vested in managers to one in which management of the Company is vested in the
members and vice versa;
(c) assign the Company’s property in trust for creditors or on the assignee’s
promise to pay the Debts of the Company;
(d) select, retain or employ any attorneys or legal advisors to institute or
defend any claims, litigation or other legal proceeding brought by or brought on
behalf of or against the Company, in which the amount in controversy exceeds
$250,000.00;
(e) institute or settle any litigation, arbitration or other legal proceeding by
or on behalf of the Company, or confess a judgment against the Company, in which the
amount in controversy exceeds $250,000.00, except that the Managing Member, without
consent of the Board of Managers, may negotiate and settle disputes on behalf of the
Company with the Mine Safety and Health Administration (MSHA), with authority to
commit the Company to pay any associated fines, costs or other liabilities in an
aggregate amount of $1,000,000.00 in any given Fiscal Year;
(f) sell, convey, lease, assign, exchange or otherwise dispose of any real
property or any combination thereof or any other material asset of the Company with a
fair market value in excess of $250,000.00 in the aggregate during any Fiscal Year
without consent of the Board of Managers, provided, however, that the Managing Member
shall have the authority to sell, transfer, dispose, abandon or lease any movable
equipment in the ordinary course of business which are no longer necessary or
required in the conduct of the Company’s business;
- 14 -
(g) borrow money in the name of the Company in excess of $250,000.00 in
the aggregate during any Fiscal Year which is not included within the approved
Project Budget for that Fiscal Year or issue evidences of indebtedness of the
Company, or refinance, recast, modify or extend the same, or secure the same by
mortgage, deed of trust, pledge or other Lien;
(h) commit to make, or make, any expenditure (including Capital Expenditures)
in excess of $250,000.00 in the aggregate during any Fiscal Year which is not
included within the approved Project Budget for that Fiscal Year;
(i) acquire by purchase, lease or otherwise, any real property in excess of
$250,000.00 in the aggregate during any Fiscal Year which is not included within the
approved Project Budget for that Fiscal Year or make any investment in securities or
any ownership or controlling interests in any corporation, partnership, limited
partnership, limited liability company or other Person;
(j) possess any property of the Company, or assign the rights of the Company
in specific property, for other than a Company purpose;
(k) approve the Project Budget for each Fiscal Year and any amendments
thereto;
(1) cause the Company to enter into one or more transactions with a Member
(other than in its capacity as a Member) or an Affiliate of a Member except as
otherwise specifically permitted hereunder and in the Management Agreement;
(m) change the name of the Company at any time;
(n) form, organize, acquire, sell, dispose of, reorganize or liquidate a Subsidiary;
(o) to make any loan or advance to other Persons in excess of $10,000.00
to any such Person (including Members and Affiliates of Members) or in excess of
$50,000.00 in the aggregate during any Fiscal Year, other than (i) trade credit
extended on usual and customary terms in the ordinary course of business; and (ii)
investments of Company cash in certificates of deposit, treasuries, high-grade
commercial paper or similar investment products;
(p) enter into any modification of the Management Agreement or. Sales
Representation Agreement; or
(q) enter into or modify any lease or agreement between the Company and the
Managing Member or any of its Affiliates except to the extent permitted under the
Management Agreement.
7.5 Actions Requiring Unanimous Approval of Members. Notwithstanding Sections 7.1,
7.2, 7.4 and 7,6, neither the Company, the Managers, the Managing Member nor any other Member may,
without the unanimous consent of all the Members, do any of the following:
(a) any act materially in contravention of this Agreement;
(b) amend this Agreement or the Certificate;
- 15 -
(c) approve a merger or consolidation of the Company with another
Person;
(d) modify, compromise or release the amount and character of the Scheduled
Capital Contributions which a Member is to make or promises to make hereunder;
(e)
any act which would make it impossible to carry on the ordinary business of
the Company;
(f) to dissolve or wind up the Company, except as otherwise expressly provided
in this Agreement; or
(g) any and all elections required or permitted to be made by the Company under
the Code.
7.6 Managing Member’s Duties. The Managing Member shall be responsible for the good
faith performance of the following functions in a commercially reasonable manner consistent with
practices found in the development of properties similar to the Project:
(a) Protect and preserve the title and interest of the Company with respect to
the Project and other assets now or hereafter owned by the Company;
(b) Pay from the funds of the Company in a business-like manner all taxes,
assessments and other obligations associated with the Project;
(c) Prepare and implement the Project Budget as modified from time to time in
accordance with the terms of this Agreement;
(d) Report to the Managers on a quarterly basis regarding the status of the
development of the Project and compliance with the Project Budget for that Fiscal
Year;
(e) Negotiate, enter into and supervise the performance of contracts covering
all aspects of development of the Project; provided however, that the Sales
Representation Agreement shall control the conduct of the parties regarding the sale
and marketing of coal from the Project and the Management Agreement shall control the
conduct of the parties regarding the day to day management and development of the
Project;
(f) Keep all books and accounts and other records required by the Company,
including detailed information regarding all expenditures, preserve and store in a
safe place all such books and records for at least a seven (7) year period after
termination of each fiscal year; and permit the Members, or any person designated by
any Member, with reasonable advance notice and at reasonable times to examine or
audit the books, records and accounts relating to the Company, including but not
limited to the assets of the business of the Company’s contractual obligations and
forecast for performance by the Company;
(g) Cause an annual financial statement to be prepared by a firm of certified
public accountants of recognized standing, which financial statements shall be
audited if required by any Member;
(h) Pay from funds of the Company all obligations of the Company;
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(i) Maintain all funds of the Company in financial institutions of recognized credit
standing or in certificates of deposit, treasuries, high-grade commercial paper or similar
products;
(j) Supervise all matters coming within the terms of this Agreement, including direct
observation, inspection and supervision of the development of the Project and production of coal
therefrom in a safe and efficient manner;
(k) Develop, manage and operate the Project in a commercially reasonable and safe manner,
which includes but is not limited to 1) submitting the appropriate applications for encroachment
permits to mine the Kentucky #8 seam of coal under (i) state and federal highways, including the
Xxxxxxx Xxxx Parkway (f/k/a Western Kentucky Parkway), and (ii) the Paducah and Louisville
Railway, and 2) obtaining satisfactory opinions of title on all coal tracts prior to entering upon
or mining upon such tracts;
(1) Acquire appropriate insurance for the Company and the Project in amounts determined by
the Managing Member in consultation with the Board of Managers;
(m) Supervise the management of the Project and the production of coal therefrom;
(n) No later than one hundred twenty (120) days prior to the end of the Fiscal Year, the
Managing Member shall start the budgetary process for the next Fiscal Year and no later than
ninety (90) days prior to the end of the Fiscal Year shall prepare and deliver to the Members and
Managers the projected annual Project Budget of the Company which itemizes projected sources of
revenue and anticipated expense items for the next Fiscal Year;
(o) No later than ninety (90) days after the end of the Fiscal Year, the Managing Member
shall prepare a business report (“Annual Business Report”) of the past Fiscal Year, The Annual
Business Report shall be delivered to the Members to advise and inform each Member of the current
status of the Project. The Annual Business Report shall include: (i) description of activities
taken place during the past Fiscal Year; (ii) an annual income statement; (iii) a marketing plan
for the next Fiscal Year; (iv) a coal production schedule; and (v) any other information that the
Members reasonably request be included in the Annual Business Report;
(p) The Managing Member shall cause all required Federal, state and local income, franchise,
property and other tax returns of the Company, including information returns, to be timely filed
with the appropriate office of the relevant taxing jurisdiction or agency. With respect to the
Federal and state income tax returns of the Company, the Company shall submit to each Member
drafts of the proposed returns as soon as possible, but in no event later than March 15 of each
year, to permit review and approval of such returns by each Member prior to filing. All expenses
incurred in connection with such tax returns and information returns, as well as for the Annual
Business Report referred to in Section 7.7(o) hereof, shall be expenses of the Company;
(q) No later than one hundred eighty (180) days after formation of the Company, the Managing
Member shall cause all tracts being subdivided by the “New Division Line”, or subdivided for any
other reason, to be surveyed and to obtain a legal description and survey
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plat of said tracts. The survey plat shall be recorded and the legal description
used in the Special Warranty Deed from Xxxxxxxxx to the Company; and
(r) In general, supervise the business and affairs of the Company for
the benefit of the Members.
7.7 Exclusion Areas. Notwithstanding any other provision of this Agreement, the
Company may not mine or enter upon any portion of the Kentucky #8 seam of coal situated within the
“No Mining Boundary” depicted on the map attached hereto and incorporated herein by reference as
Exhibit C (herein referred to as the “Exclusion Areas”) without the prior written consent of Cyprus
granting the Company the right to mine or enter upon all or any portion of the Exclusion Areas. The
granting of any such consent shall be within the sole discretion of Cyprus and its refusal to
provide any such consent shall not constitute a failure by Cyprus to remit its initial capital
contribution or otherwise constitute a material act in contravention of this Agreement. The Company
shall subordinate its interests in the coal reserves located within the Exclusion Areas upon
request of the surface owner or its lessee of those areas. In the event Cyprus, in its sole
discretion, grants consent to lift the prohibition against mining within the Exclusion Areas, the
Company shall have the first right to mine the Kentucky #8 seam of coal situated within the No
Mining Boundary.
7.8 Development and Due Diligence Expenses. Each party shall bear its own costs and
expenses for developing the Project and its own due diligence activities until this Agreement is
executed.
7.9 Conflicts of Interest. The pursuit of other ventures and activities by the
Members, Managers and Managing Member are hereby consented to by the Members and shall not be
deemed wrongful or improper. No Member, Manager or Managing Member shall be obligated to present
any particular investment opportunity to the Company, even if such opportunity is of a character
which, if presented to the Company, could be taken by the Company. The Company may enter into
agreements with a Member, or an affiliate of a Member, to provide other services to the Company;
provided such agreement must be at competitive rates and terms and, if applicable, approved by the
Board of Managers in accordance with Section 7.4.
7.10 Indemnification.
(a) Indemnities and Indemnifiable Claims. The Company shall indemnify and hold harmless any
Indemnitee, from and against any claim, loss, damage, liability, or reasonable expense (including
reasonable attorneys’ fees, court costs, and costs of investigation and appeal) actually incurred
by any such Indemnitee by reason of, or arising from, the operations, business, or affairs of, or
any action taken or failure to act on behalf of, the Company, except to the extent any of the
foregoing (A) is determined by final, nonappealable order of a court of competent jurisdiction (or
by any other means approved by the Board of Managers) to have been primarily caused by any fraud,
breach of fiduciary duties established under this Agreement, gross negligence or willful misconduct
of such person or (B) is actually incurred as a result of any claim (other than a claim for
indemnification under this Agreement) asserted by the Indemnitee as plaintiff against the Company;
provided that if (for purposes of clause (A) immediately above) the fraud, breach of fiduciary
duties established under this Agreement, gross negligence or willful misconduct of any person
claiming indemnification shall consist of a conviction of or plea of no contest to a felony, then
such person shall not be entitled to indemnification unless it is determined, by final,
nonappealable order of a court of competent jurisdiction (or by any other means approved by the
Board of Managers), that indemnification should be granted in whole or part.
(b) Advancement of Expenses, Unless a determination has been made (by final,
- 18 -
nonappealable order of a court of competent jurisdiction or by any other means approved by the
Board of Managers) that indemnification is not required, the Company shall, upon the request of
any Indemnitee and except for any claim of the type described in
clause (B) of Section 7.10(a) of
this Agreement, advance or promptly reimburse such Indemnitee’s reasonable costs of
investigation, litigation, or appeal, including reasonable attorneys’ fees; provided that the
affected Indemnitee shall, as a condition of such Indemnitee’s right to receive such advances and
reimbursements, undertake in writing to promptly repay the Company for all such advancements or
reimbursements if a court of competent jurisdiction determines, by final, nonappealable order,
that such Indemnitee is not then entitled to indemnification under this Section 7.10. The written
undertaking described in the immediately preceding sentence to repay the amount paid or reimbursed
to an Indemnitee by the Company must be an unlimited general obligation of the Indemnitee but need
not be secured and it may be accepted without reference to financial ability to make repayment,
7.11 Tax Matters Partner. Xxxxxxxxx shall be designated, as the tax matters partner of
the Company pursuant to §623 l(a)(7) of the Code, Any Member designated as tax matters partner
shall take such action as may be necessary to cause each other Member to become a notice partner
within the meaning of §6223 of the Code. The Company shall indemnify the tax matters partner of the
Company from and against any and all judgments, penalties (including excise and similar taxes and
punitive damages), fines, settlements and reasonable expenses, (including without limitation
attorneys fees) actually incurred by such Member in performing its duties as the tax matters
partner of the Company; provided that the Company shall not be liable to any Person acting as the
tax matters partner of the Company for any portion of such judgments, penalties, fines, settlements
or reasonable expenses resulting from such persons gross negligence or willful misconduct.
7.12 Meetings of the Board of Managers.
(a) Meetings. The Board of Managers will have an annual meeting and such
quarterly meetings as may be established by the Company. The Board of Managers will
have such special meetings as are called in accordance with the provisions of this
Agreement, Any annual, quarterly or special meeting of the Board of Managers is to be
held at such place as may be designated by the Company or in a waiver of notice
executed by all Managers. If there is a failure to designate a place for any such
meeting, the same is to be held at the principal place of business of the Company.
The annual and quarterly meetings of the Board of Managers is to be held each year
within sixty (60) days prior to the beginning of the Fiscal Year, but in no event
prior to the time the Managing Member delivers the projected annual Project Budget of
the Company to the Managers and the Members pursuant to Section 7.7(n), for the
establishment of the Project Budget and the transaction of such other business as may
come before the meeting. Special meetings of the Board of Managers may be called at
any time by the Company or by a Manager and are to be held on such dates and at such
times as are set forth in the notice calling the meeting.
(b) Quorum. A Manager appointed by Cyprus and a Manager appointed by
Xxxxxxxxx attending such meeting constitutes a quorum of Managers for all purposes,
and no quorum shall exist unless a Manager appointed by both Cyprus and Xxxxxxxxx
shall be in attendance.
(c) Notice of Meetings. Written or printed notice of each meeting of the
Board of Managers stating the place, day and hour of the meeting and, in the case of
special meetings, the purpose or purposes for which the meeting is called must be
delivered or given: (i) in the case of regular meetings, not less than ten (10) nor
more than forty (40) days before the date of the meeting; and (ii) in the case of
special meetings, not less than five (5) Business Days nor more than thirty (30) days
before the date of the meeting; in each case either
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personally or by mail. Notice of an annual meeting of the Board of Managers is to
be given by the Company. Notice of a special meeting of the Board of Managers is to
be given by the Company or the Manager calling the meeting. Any notice required by
this Section may be waived by the Managers by signing a waiver of notice before or
after the time of such meeting and such waiver is equivalent to the giving of such
notice.
(d) Proxies. A Manager may vote at any meeting either in person or by
proxy executed in writing by the Manager or its duly authorized attorney in fact.
Such proxy must be filed with the Company before or at the time of the meeting. No
proxy is valid after 11 months from the date of execution unless otherwise provided
in the proxy.
(e) Informal Action by Managers. Any action required by this Agreement
to be taken at a meeting of the Board of Managers, or any action which may be taken
at a meeting of the Board of Managers, may be taken without a meeting if all of the
Managers sign written consents that set forth the action so taken. Such consents
have the same force and effect as a unanimous vote of the Managers at a meeting duly
held. The Company is to file such consents with the minutes of the meetings of the
Board of Managers.
(f) Tele-Participation in Meetings. Managers may participate in a
meeting of the Board of Managers by means of a conference telephone or similar
communications equipment whereby all individuals participating in the meeting can
hear each other. Participation in a meeting in this manner constitutes presence in
person at the meeting.
8. Transfers of Interests; Admission.
8.1 Transfer Restrictions. Except as otherwise set forth in this Section 8, no Member
may sell, assign, transfer, pledge, hypothecate or otherwise dispose of its Member Interest unless
unanimously approved by the Members, including, without limitation, a Member’s distributional
interest as described in §18-702 of the Act (“Distributional Interest”). Any transfer of a
Member’s interest in violation of this Agreement shall be void and of no effect; provided, however,
that Xxxxxxxxx shall be permitted to pledge its Distributional Interest only to PNC Bank or the
successor agent of the existing PNC credit facility or successor primary lender to Xxxxxxxxx
(“Lender”). Notwithstanding the foregoing [imitations, the parties acknowledge and agree that,
under the limited circumstances set forth in Section 8.7, the Lender shall have the right to sell
and transfer all of Xxxxxxxxx’x Member Interest (not limited to its Distributional Interest) upon
compliance with the provisions of Section 8.7,
8.2 Right of First Refusal. If a Member receives a bona fide offer (“Offer”) which the
Member (“Selling Member”) proposes to accept, whether or not solicited, to sell or otherwise
dispose of its entire Member Interest in the Company, then the Selling Member shall furnish to the
non-selling Member written notice of the receipt of the Offer together with the principal terms and
conditions of the sale, including the minimum price (“Sale Price”) at which such interest is
proposed to be sold, and a statement as to the identity of the real party in interest making the
Offer. The non-selling Member, shall then have the right to purchase the Member Interest (“Offered
Interest”) proposed to be sold by the Selling Member upon and subject to the terms and conditions
as set forth in this Section 8.2. This Section 8.2 shall not apply to any sale pursuant to the
procedures of Section 8.7.
(a) The price at which the Offered Interest may be purchased shall be the price
contained in the Offer. If the price contained in the Offer shall consist (in whole
or in part) of consideration other than cash, payable at the closing thereof or at a
later date, the cash
- 20 -
equivalent fair market value of such other consideration shall be included in the
price at which the Offered Interest may be so purchased.
(b) The non-selling Member shall have sixty (60) days after receipt of the
notice to elect to purchase the Offered Interest. The purchase transaction (unless
otherwise agreed to with third-party purchasers) shall be consummated at a closing
to be held at the principal executive offices of the Company, or at such other
location as may be agreed by the parties, within sixty(60) days following the date
of the non-selling Member’s election to purchase the Offered Interest. At the
closing, unless otherwise stipulated in the Offer, the non-selling Member shall
deliver to the Selling Member the full purchase price against delivery of an
instrument appropriately transferring the Offered Interest sold thereby.
(c) If the non-selling Member does not elect to purchase the Offered Interest,
then the Selling Member may accept the Offer and, pursuant thereto, sell the Offered
Interest and, notwithstanding anything to the contrary contained herein (including,
without limitation, Section 8.5 hereof), upon such sale of the Offered Interest and
the execution by the transferee of this Agreement, the transferee shall become a
Member of the Company. However, if the Selling Member does not sell the Offered
Interest pursuant to the Offer within ninety (90) days after the termination (by
passage of time or otherwise) of the rights of first refusal created under this
Section 8.2, the Selling Member may not thereafter transfer the Offered Interest,
without again complying with the provisions of this Section 8.2.
8.3 Buy-Sell Option. Except under circumstances where the procedures set forth in
Section 8.7 applies following a Foreclosure Assignment (as defined below), upon the occurrence of
any of the following events, each Member shall have the right of purchase and sale provided by this
Section 8.3 to be exercised by a Member (“Electing Member”) by delivering a written notice
(“Election Notice”) to the other Member (“Notice Member”):
(a) a Member or the Managing Member seeks in good faith for approval for an
action that requires approval of the Board of Managers or the Members pursuant to
Section 3.2, Section 6.2, Section 7.4(g), or Section 7.5, and the Board of Managers
or the Members, as applicable, reach a full and final deadlock on whether to approve
the requested action after attempting in good faith to negotiate a mutually agreed
outcome;
(b) the Notice Member, acting as a Managing Member or Member, or any Manager
appointed by the Notice Member takes any action or transaction described in Section
7.4 or 7.5 without the consent of the Board of Managers or Members, as applicable;
(c) the Notice Member has breached the Representations and Warranties in
Section 6.1;
(d) the Notice Member has breached Section 6.3;
(e) the Notice Member has breached its duties and obligations set forth
in Section 6.6(a),(b) or (c);
(f) a Member other than the Managing Member elects to exercise this provision
pursuant to the provisions set forth in Section 6.6(e);
(g) a Change of Control with respect to either Member occurs; or
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(h) the voluntary election of either Member at any time on or after January
1, 2020.
Such Election Notice shall state a dollar amount equal to the value placed by the Electing
Member on all of the issued and outstanding membership interests in the Company, calculated
on a pari passu basis taking into consideration the relative equity interest of the
Electing Member, and shall constitute an irrevocable offer by the Electing Member either to
purchase all, but not less than all, of the Member Interest in the Company of the Notice
Member from the Notice Member, or to sell all, but not less than all, of the Electing
Member’s Member Interest in the Company to the Notice Member. The purchase price at which
the Member Interest of any Member is purchased and sold under this Section 8.3 shall be the
value for all of the interests in the Company, as stated in the Election Notice, multiplied
by the selling Member’s Percentage Interest in the Company.
(i) For a period of time not exceeding sixty (60) days from the receipt of the
Election Notice by the Notice Member (“Consideration Period), the Notice Member
shall have the right to elect to purchase all of the Electing Member’s Member
Interest in the Company by providing written notice (“Purchase Notice”) to the
Electing Member of the Notice Member’s intent to purchase the Electing Member’s
Member Interest. If the Notice Member does not provide the Purchase Notice to the
Electing Member within the above referenced sixty (60) day time period, the Notice
Member shall become obligated to sell its Member Interest in the Company to the
Electing Member.
(ii) The closing of the purchase and sale shall occur within sixty (60) days
from the earlier of the expiration of the Consideration Period, or the date the
Electing Member receives a Purchase Notice from the Notice Member. In either event,
at the closing of the purchase and sale transaction described in this Section 8.3,
the purchase price must be paid in cash (either by certified check or by wire
transfer), unless otherwise agreed upon by the Electing Member and the Notice
Member.
(iii) At the closing on the sale of a Member’s Member Interest pursuant to
this Section 8.3, there shall be a final accounting among the Members with respect
to all amounts due them from the Company. With respect to the indebtedness and
obligations for which any Member is responsible, the purchasing Member shall, as a
condition to closing (but said condition may be waived in writing by the selling
Member), cause the repayment of such indebtedness. The Members agree, upon request
of any other Member, to execute such certificates or other documents and perform
such other acts as may be reasonably requested by such requesting Member from time
to time in connection with such sale.
8.4
Completion of Sale. If a Member becomes obligated to sell its Member Interest in
the Company pursuant to Sections 8.2 or 8.3 of this Agreement, each Member covenants and agrees
that it will take such actions and execute such instruments of transfer and other documents as
reasonably requested by the other Member to further evidence and complete the sale of the Member’s
Member Interest, Additionally, as a condition precedent to the consummation of the sale of the
Percentage Interest, a purchasing Member must arrange for the complete release of all guarantees
provided by the selling Member as security for indebtedness of the Company.
8.5 Admissions. All transfers of an interest in the Company by a Member shall entitle
the transferee only the rights afforded a transferee of a Distributional Interest pursuant to §
18-702 of the Act except as otherwise expressly provided herein. These rights are the rights to
receive allocations and
- 22 -
distributions to which the transferring Member would otherwise have been entitled, but shall not
allow the transferee any additional rights, nor shall the transferee become a Member of the
Company upon such transfer. The transferee shall only become a Member of the Company by receiving
the written consent of all Members of the Company and executing this Agreement. The consent of the
Members to admit any transferee of a distributional interest into the Company shall be given in
the sole and absolute discretion of each Member.
8.6
Distributions and Allocations in Respect to Transferred
Interests. If any Member’s
interest is sold, assigned or transferred, or any Person is otherwise admitted as a Member during
any Fiscal Year in compliance with the provisions of this Agreement, net profits, net losses, each
item thereof, and all other items attributable to such interest for such Fiscal Year shall be
allocated among the Members by taking into account their varying interests during such Fiscal Year
in accordance with Code §706(d). Unless otherwise required by the applicable treasury regulations,
such sale, assignment, transfer or admission shall be deemed to have occurred at the end of the
calendar month during which such event shall have actually occurred, and such allocations shall be
determined and made pursuant to a pro forma closing of the books of the Company as of the end of
such month. With respect to a transferred Member’s interest or any interest therein, all
distributions on or before the deemed date of such transfer shall be made to the transferor and all
distributions thereafter shall be made to the transferee. The Company shall not incur any liability
for making allocations and distributions in accordance with this provision.
8.7 Right of First Offer and Sale Procedure Following Foreclosure by Xxxxxxxxx’x
Lender. The procedures of this Section 8.7 shall apply only in the event Xxxxxxxxx’x interest
has been assigned to Lender or its designee (“Lender Interest Holder”) upon the exercise of
Lender’s default remedies pursuant to the pledge referenced in Section 8.1 (such event being
referred to as a “Foreclosure Assignment”), it being understood that any such Lender Interest
Holder’s are limited to that of the holder of a Distributional Interest and the Lender or its
designee or assignee may acquire all rights and attributes of Xxxxxxxxx’x Membership Interest in
the Company only pursuant to the procedures of this Section 8.7.
(a) If, at any time, the Lender Interest Holder proposes to initiate a sale of Xxxxxxxxx’x Member
Interest to a third party, it shall provide written notice of such intention to Cyprus (“Election
Notice”), and Cyprus shall have a right of first offer to purchase Lender Interest Holder’s
Percentage Interest for a price equal to the Fair Value for all the Member Interests in the Company
multiplied by the Lender Interest Holder’s Percentage Interest in the Company (the “Offer Price”),
(b) As used herein, “Fair Value” shall mean the fair market value of the entire Company, as
determined by the following process. The parties shall have a period of 60 days following the date
of the Election Notice in which to agree on the Fair Value of the Company, which period may be
extended by mutual consent, which consent shall not be unreasonably withheld. If they are unable to
so agree during such 60-day period (as such period may be extended by mutual consent), then the
parties shall submit in writing to the other a list of three neutral and impartial mining valuation
consultants. The first name that matches on both lists shall be retained to determine the Fair
Value of the Company. If there are no matches on the lists, the parties shall submit new lists of
three names within two business days, and this process shall continue until an appraiser is
selected. The selected appraiser shall have a period of sixty (60) days (which 60-day period shall
be extended if the appraiser believes it is necessary to complete its appraisal) in which to render
the appraisal and provide each of the parties with a copy, which appraisal shall be final and
binding upon all the parties. All parties agree to give the appraiser full access to the mining
operations, mine management and all requested financial, business and operational information that
the appraiser may reasonably request.
(c) The period beginning on the date on which the Fair Value is determined (whether by mutual
agreement or by appraisal) and lasting for 180 days thereafter shall constitute the “Sale Period.”
For the first thirty (30) days of the Sale Period, Cyprus shall have the option to elect to
purchase all of the Lender Interest
- 23 -
Holder’s Percentage Interest for the Offer Price (the “Right of First Offer”). If Cyprus does not
deliver notice of its election to purchase within such 30-day period, Lender Interest Holder shall
have the right to sell Lender Interest Holder’s Percentage Interest to any other Person, so long as
the total purchase price is not less than 90% of the Offer Price; however, if, during the Sale
Period, Lender Interest Holder notifies Cyprus in writing of a proposed sale of Lender Interest
Holder’s Percentage Interest for a total purchase price less than 90% of the Offer Price, which
notice (the “ROFR Notice”) shall include a description of the principal terms and conditions of the
sale, then Cyprus shall have the right to elect to purchase the interest at the price identified in
the ROFR, which election shall be delivered within 60 days of
the date of its receipt of the ROFR
Notice, and if Cyprus shall fail to timely deliver written notice of its election to purchase, then
Lender Interest Holder may sell its Percentage Interest on the price and on the terms set forth in
the ROFR Notice, so long as such sale is completed within 120 days after the date of Cyprus’
receipt of the ROFR Notice. Any sale by Lender Interest Holder that conforms with the provisions of
this Section 8.7 shall be effective to vest in the purchaser all Member Interest rights relating to
the Percentage Interest sold, and such purchaser shall automatically become a Member of the Company
upon such transfer upon such the purchaser executing an agreement agreeing to be bound by the terms
of this Agreement. If, however, Lender Interest Holder does not consummate the sale during the Sale
Period (or, as applicable, within 120 days from the date of Cyprus’ receipt of the ROFR Notice),
then the Right of First Offer shall apply to any subsequent sale by Lender Interest Holder.
(d) If Cyprus elects to exercise the Right of First Offer or its rights upon receipt of an
ROFR Notice, the closing of the sale shall occur within 60 days of the start of the Sale Period.
Each of Cyprus and Lender Interest Holder covenants and agrees that it will take such actions and
execute such instruments of transfer and other documents as reasonably requested by the other to
further evidence and complete the sale of the Lender Interest Holder’s Percentage Interest. The
provisions of Section 8.6 shall apply to the interest being transferred. The purchase price shall
be paid in cash unless the parties mutually agree otherwise, and the Lender Interest Holder’s
interest shall be free and clear of any liens and encumbrances.
9. Dissolution
Acts. The Company shall only be dissolved upon the occurrence of any
one of the following events: (i) the completion of the term of the Company as set forth in the Certificate;
(ii) written consent of all Members upon exhaustion of the economically mineable coal reserves
from the Project; (iii) the sale of all or substantially all of the assets of the Company; (iv)
written consent of all Members, or (v) as required by Section 10 below. Except as otherwise agreed
to herein below in Section 10, upon dissolution, the Company shall liquidate and distribute its
assets in the following priority:
9.1 First, to pay all debts owed by the Company to non-Members;
9.2 Second, to pay any outstanding Member Loans;
9.3 Third, to each Member in accordance with the positive balance of Member’s capital account;
and
9.4 Fourth, to the Members in proportion to each Member’s Percentage Interest.
10. Withdrawal and Disassociation. Except as otherwise agreed to herein below in this
Section 10, no Member shall be allowed to withdraw or disassociate from the Company. Any attempted
disassociation or withdrawal by a Member shall be null and void and not recognized by the Company,
If an event disassociation occurs for any reason whatsoever, the Company shall not dissolve and the
Member causing the disassociation, if any, shall be liable to the Company for such wrongful
disassociation. In no event shall the disassociated Member be entitled to have its Percentage
Interest purchased by the Company. Notwithstanding any provision of this Agreement, if the Company
has not established commercially viable mining operations in the Kentucky #8 seam of coal by
January 5,2016, then either Member shall have the right to provide the other
- 24 -
Member with notice of withdrawal from the Company (“Notice of Withdrawal”). Neither Member shall
have the right to provide Notice of Withdrawal from the Company prior to January 5, 2016. In the
event either Member provides Notice of Withdrawal under this Section due to the Company’s failure
to establish commercially viable mining operations in the Kentucky #8 seam of coal by January 5,
2016, the Company shall liquidate all assets of the Company, other than the assets contributed
pursuant to the Contribution Schedule identified in Exhibit A hereto and pay all debts or other
amounts owed by the Company to: (i) non-Members; then to (ii) pay any outstanding Member Loans;
then to (iii) the Members is accordance with the positive balance of their the Member’s capital
account; then to (iv) the Members in proportion to each Member’s Percentage Interest. After all
amounts identified in subsections (i) through (iii) of the preceding sentence have been paid in
full, the Company will distribute the remaining assets identified on Exhibit A hereto to the Member
who originally contributed such assets as part of that Member’s Initial Capital Contribution. In
the event the Company is unable to satisfy its debts after liquidating all assets other than those
identified in Exhibit A hereto, then all remaining assets will be subject to the liquidation and
distribution of assets pursuant to Section 9 of this Agreement unless otherwise unanimously agreed
to by the Members. Xxxxxxxxx covenants and agrees that it will not interfere or compete with
Cyprus’ primary rights to renegotiate or seek an extension to the Xxxxxx #8 Lease during the
Non-interference Period (as defined below). Notwithstanding any disassociation hereunder or stated
herein in this Section 10, Xxxxxxxxx hereby covenants and agrees for itself, its successors and
assigns and its and their Affiliates, and any successor owner of any ownership interest in the
assets that were contributed by Xxxxxxxxx under Section 3 hereof, including without limitation, the
successors in title to the 1,977 acres of surface lands, that it and they will not, during the
Noninterference Period (as defined below), seek to or obtain a lease from the Xxxxxx of any coal
reserves described in the Xxxxxx #8 Lease of Kentucky #8 Reserves identified on Exhibit A hereto,
or accept the assignment of any sublease of the such coal reserves, or take any action which could
ultimately lead to the non-development or delayed development of the Cyprus owned Kentucky #8
Reserves either separately, jointly or in conjunction with the Xxxxxx Xxxxxxxx #0 Reserves. This
covenant and agreement shall survive the disassociation and termination of this Agreement and shall
be deemed a covenant running with said land for a period of five (5) years from the date of
withdrawal and disassociation or from the date the Company is otherwise dissolved (the
“Non-Interference Period”).
11. Management of Workforce. Managing Member shall have the right, power and
obligation to exercise any control over the hiring or supervision of the workforce of the Company,
necessary to manage the Company, including, but not limited to, any employment benefits or other
terms and conditions of employment for the employees of the Company, Cyprus shall take no part in,
and shall have no right, power or obligation with respect to, any matter relating to the hiring of
miners; provided, however, that Xxxxxxxxx shall not hire miners previously terminated by Xxxxxxxxx
without first receiving consent from the Board of Managers. The Managing Member shall provide
written notification to the Board of Managers of the lateral transfer miners from Xxxxxxxxx’x other
operations to the Company within thirty (30) days of such transfer.
12. Applicant Violator System. Each Member represents and warrants that such member,
its officers, shareholders, members, subsidiaries, affiliates and any other entity that can be
attributed to it under the “ownership and control” regulations issued by the office of Surface
Mining (collectively, “Member Entities”) are not currently permit blocked under the Surface Mining
Control and Reclamation Act of 1977 (“SMCRA”). No Member will allow to exist any violation of SMCRA
or any comparable state law at any operation of a Member Entity that would cause any other Member
or its Member Entities to be permit blocked. Any Member Entity which becomes permit blocked under
SMCRA or any comparable state law shall provide
written notice of such event to the other Members within five (5) days and shall take any and all
actions necessary for the removal of such permit block within twenty (20) days’ provided, however,
that if the permit block does not then or thereafter adversely affect the other Member(s) (by
permit block or otherwise), the permit blocked entity may contest the permit block in good faith
and by appropriate legal proceedings, provided further, however, that if the permit block does
adversely affect the other Members (by permit block or
- 25 -
| otherwise), the non-permit blocked Member(s) may (i) undertake to remove the condition causing the permit block, at the permit blocked Member’s expense or (ii) purchase such permit blocked Member’s interest in the Company at the fair market value of such permit blocked Member’s interest. |
13. Relationship with Company.
13.1 Promotion of Company. Subject to Section 7.9 above, each Member shall use
reasonable efforts to promote the activities of the Company and to ensure its success.
13.2 Information. Subject to any applicable restriction of law, all Members shall be
fully and currently informed of the activities of the Company. To the extent that there are any
applicable laws or regulations which would have the effect of limiting the right of a Member to be
so informed, the other Members) shall use all reasonable efforts to obtain waivers thereof in favor
of the Company and the member so limited and, failing the obtaining of such waivers, the Members
shall make such arrangements as shall be practicable to preserve the Company the benefits of the
contacts or projects to which such secrecy agreements or laws or regulations relate. Each Member
shall not, except as required by law and except for disclosure to its officers, directors,
employees, shareholders, members, partners, attorneys, accountants, and Affiliates (who shall be
bound by the confidentiality provisions of this Agreement), divulge to any person any confidential
or proprietary information concerning the business of the Company, including, without limitation,
the terms of this Agreement.
14. Miscellaneous Matters.
14.1 Offset. Whenever the Company is to pay any sum to any Member, any amounts that
the Member owes the Company may be deducted from that sum before payment.
14.2 Captions. Section and paragraph titles or captions contained in this Agreement
are inserted only as a matter of convenience and for reference and in no way define, limit extend
or describe the scope of this Agreement or the intent of any provision hereof.
14.3 Variation in Pronouns. All pronouns and any variation thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or
persons.
14.4 Governing Law; Severability. This Agreement is governed by and shall be construed
in accordance with the law of the State of Delaware. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or unenforceable to any extent,
the remainder of this Agreement and the application of that provision to other Persons or
circumstances is not affected thereby and that provision shall be enforced to the greatest extent
permitted by law.
14.5 Validity. In the event that any provision of this Agreement shall be held to be
invalid, the same shall not affect in any respect whatsoever the validity of the remainder of this
Agreement.
14.6 Benefit. Except as herein otherwise provided to the contrary, this Agreement
shall be binding upon and inure to the benefit of the Members, their heirs, personal
representatives, successors and assigns.
14.7
Notice. Any notice or communication required or permitted to be given by any provision of
this Agreement shall be in writing and shall be deemed to have been given and received by the person
to whom directed (a) when personally delivered, (b) when sent by telefacsimile, telecopier or similar transmission, at the
number of the recipient set forth herein, followed with mailing by regular United States
- 26 -
mail, (c) one (1) business day after deposited for overnight delivery with an overnight courier
such as Federal Express, Airborne, United Postal Service or other overnight courier service, or
(d) three (3) business days after deposited in the U. S. mail, sent by certified mail, postage
prepaid, return receipt requested, and such notices are addressed to the person to which directed
at the address or facsimile number of which such person has notified the Company and all of the
Members. The initial addresses and facsimile numbers of the parties are reflected on the signature
page of this Agreement.
14.8 Further Assurances. In connection with this Agreement and the transactions
contemplated hereby, each Member shall execute and deliver any additional documents and instruments
and perform any additional acts that may be necessary or appropriate to effectuate and perform the
provisions of this Agreement.
14.9 Entire Agreement/Amendment. This Agreement embodies the entire agreement and
understanding of the Members relating to the subject matter hereof and supersedes all prior
representations, agreements and understandings, oral or written, relating to such subject matter.
This Agreement may be amended only by a written instrument executed by all the Members.
14.10 Waiver and Consent. No consent or waiver, express or implied, by a Member to or
of any breach or default by the other Member in the performance of its obligations hereunder shall
be deemed or construed to be a consent or waiver to or of any other breach or default in the
performance of such other Member of the same or any other obligation of such member hereunder.
14.11 Legal Fees. Except as otherwise provided herein, all legal and other costs and
expenses incurred in connection with this Agreement and the transactions contemplated hereby are to
be paid by the Member incurring such costs and expenses. In the event the Company or any Member
brings suit to construe or enforce the terms hereof, or raises this Agreement as a defense in a
suit brought by the Company or another Member, the prevailing Person is entitled to recover its
attorneys’ fees and expenses.
14.12 Waiver of Dissolution under the Act. Any dissolution of the Company shall occur
only as provided herein, and each Member hereby waives and renounces its rights, if any, under the
Act to seek a court decree of dissolution, to seek the appointment of a liquidator of the Company,
and to seek a partition of the Company property.
14.13 Relationship of the Members. The relationship between the Members shall be
limited to the performance of the transactions contemplated by this Agreement and by the Formation
Agreement and in accordance with their terms. Nothing herein shall be construed to authorize a
Member to act as general agent for the other Member(s).
14.14 Agreement in Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient. Each counterpart when so executed
shall be deemed an original, but all counterparts shall constitute one and the same
instrument.
[remainder of page blank; signature page follows]
- 27 -
The Members execute this Agreement effective as of the date first above written.
| Members: | ||||||
| Cyprus Creek Land Resources, LLC | ||||||
| By: | /s/ X. X. Xxxxxx | |||||
| Name: | X. X. Xxxxxx | |||||
| Its: | VP | |||||
| Official Address: | 000 Xxxxxx Xxxxxx | |||
| Xx. Xxxxx, XX 00000 | ||||
| Attention: President | ||||
| Facsimile No: (000) 000-0000 |
| Xxxxxxxxx Coal Company, Inc. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxx | |||||
| Its: | President | |||||
| Official Address: | 000 Xxxxx Xxxx | |||
| Xxxxxxxxxxxx, XX 00000 | ||||
| Attention: President | ||||
| Facsimile No: (000) 000-0000 |
| Company: | ||||||
| Xxxxxxx Mining Company, LLC | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxx | |||||
| Its: | Managing Member | |||||
| Official Address: | 000 Xxxxx Xxxx | |||
| Xxxxxxxxxxxx, XX 00000 | ||||
| Attention: Vice President | ||||
| Facsimile No.: (000) 000-0000 |
- 28 -
Exhibit ‘A’
Contribution
Schedule
Scheduled Capital Contributions:
I. Milestone 1. Initial Capital (Permitting Phase)
Milestone 1 will occur upon the execution of the Operating Agreement of the Company, the
Management Agreement and Sales Representation Agreement. Following the occurrence of Milestone 1,
the Company will work to obtain permits for the slope site, the airshaft site, the other surface
operations, and the #8 reserves being contributed by Cyprus.
Contributions:
-Xxxxxxxxx contributes $30,000 in cash
-Cyprus contributes $30,000 in cash
-Each Member grants rights of entry as necessary to facilitate permitting
II. Milestone 2
Milestone 2 will occur upon the completion of permitting as determined by the Board of Managers
(projected to occur in August 2012). Following the occurrence of Milestone 2, the Company will
begin work on slope construction and airshaft construction.
Contributions:
-Members to contribute, in proportion to each Member’s Percentage Interest, cash
sufficient to complete construction of the mine, including slope, airshafts, coal handling
equipment, power drops, communication, rock dust, etc.
-Members to contribute, in proportion to each Member’s Percentage Interest, cash sufficient
for down payments on mining equipment, as determined by the Board of Managers.
-Xxxxxxxxx to contribute surface property, equipment, buildings and facilities as follows:
Contribution by Xxxxxxxxx and/or its Affiliates by deed to the Company of the surface properties
(approximately 1977 acres) and improvements (Parkway prep plant) as described on Schedule 1
attached hereto and made a part hereof. PNC Mortgages and financing statements affecting those
properties will be released. See Exhibit D for form of deed.
Grant and/or assignment by Xxxxxxxxx and/or its Affiliates of access and unlimited usage of all
waterlines and unlimited withdrawal rights from the any impoundment, reservoir or body of water
associated therewith, including but not limited to the Overland Slurry/Water Supply,Lines servicing
the Project, with rights of ingress and egress over any surface properties of Xxxxxxxxx and/or its
Affiliates for the purpose of maintaining, reconstructing, modifying or otherwise servicing the
waterlines and any impoundment, reservoir or body of water associated therewith, together with the
right to permit such facilities.
Conveyance and sublease of all equipment from Xxxxxxxxx’x Parkway #9 operations, which shall
include all substantially all of the owned and leased equipment that is primarily used in
connection with Xxxxxxxxx’x Parkway #9 operations (supporting both surface and underground
operations) on Milestone 2 (“Equipment”). At the time of conveyance and sublease of all Equipment,
Xxxxxxxxx shall prepare complete exhibits to be
- 29 -
attached as exhibits to the Xxxx of Sale and Sublease attached hereto in Exhibit D, All owned
Equipment shall be by xxxx of sale. Conveyance of leased Equipment shall be by means of a sublease
whereby the Company will receive the benefit of use of such equipment and the residual interest (if
any) in the equipment upon satisfaction of the underlying lease obligations (without xxxx-up or
additional rental owed to Xxxxxxxxx). The Company will provide Xxxxxxxxx the first-priority,
rent-free right to possess and use all of the Equipment pursuant to a Use Agreement consistent with
the terms stated herein and the further terms set forth on Exhibit X. Xxxxxxxxx shall be
responsible to pay all underlying lease obligations for so long as any leased Equipment is being
used in Xxxxxxxxx’x Parkway #9 operations. Pursuant to the Use Agreement, Xxxxxxxxx shall be
responsible to pay all operating costs associated with or arising from operation of Parkway prep
plant and Equipment, including but not limited to any utilities and maintenance costs, until such
time as the Company begins mining the #8 seam of coal. When the Company begins mining the #8 seam,
the Company and Xxxxxxxxx shall prorate the operation costs of the Parkway prep plant and related
Equipment, excluding Equipment dedicated solely to the #9 mining operations, based on their
production from both seams. As Xxxxxxxxx depletes the #9 seam reserves at Parkway and ceases using
particular items of Equipment, the Use Agreement shall terminate as to such items, and possession
will be delivered to the Company.
Contribution by Xxxxxxxxx and/or its Affiliates of rights to the Gibraltar Haulroad and Access
Road pursuant to a Non-Exclusive Haulroad Easement Agreement.
-Cyprus to contribute reserves and property rights as follows:
Contribution to the Company by Cyprus and/or its Affiliates of all Kentucky #8 coal reserves
located within the Comprehensive Mining Area, now or hereafter owned or leased by Cyprus or its
Affiliates, by the Lease and Sublease Agreement described on Exhibit D, all such leased and
subleased interests being contributed free from and not subject to any obligations of royalty
interests, overriding royalty interests, premiums or rentals to any Person, except for the royalty
obligations due to any original Lessor of the subleased interests. Company will reimburse Cyprus
for advance royalties paid in 2012 for leased Xxxxxx #8 coal
reserves. 1
Contribution by Cyprus and/or its Affiliates of rights to the Gibraltar Haulroad and Access Road
pursuant to Non-Exclusive Haulroad Easement Agreements.
III. Milestone 3
Milestone 3 occurs upon the completion of mine construction as determined by the Board of Managers
(projected to occur in August 2013).
Contributions:
-Members to contribute, in proportion to each Member’s Percentage Interest, cash sufficient
to acquire a full underground unit of equipment as determined by the Board of Managers, which is
projected to include two JOY 1415 continuous miners, four BH10 battery haulers, two Xxxxxxxx
double boom roof bolters, one BF17 JOY feeder, two scoops, two 14 place mantrips, three tow man
rides, power distribution equipment, coal handling equipment (headers, etc.) and any other
equipment or supplies necessary to operate one split air supersection.
IV. Milestone
4
| 1 | Upon completion of permitting Cyprus shall acquire a new #8 coal lease from the Xxxxxx to extend the existing 1993 lease and will subsequently sublease those leasehold interests to the Company. | |
- 30 -
Milestone 4 occurs following the completion of mine construction and prior to mining as
determined by the Board of Managers (projected to occur in August 2013). Following the occurrence
of Milestone 4, the Company will begin mining the #8 seam.
Contributions:
-Members to contribute, in proportion to each Member’s Percentage Interest, cash sufficient
to upgrade the Parkway preparation plant to allow for processing of additional tonnage as
determined by the Board of Managers. Cost of operation of the preparation plant will be shared on
a prorata basis by Xxxxxxxxx and Xxxxxxx as long as Xxxxxxxxx continues to operate in the #9 seam.
VI. TV A Contract. To the extent any coal is sold by the Company under Xxxxxxxxx’x existing
contract with Tennessee Valley Authority, TVA Contract No, 40685, Xxxxxxxxx shall remit to the
Company the net proceeds attributable to the sale of such coal, without xxxx-up or additional
costs or charges to the Company pursuant to a pass-through agreement acceptable to the Board of
Managers. The Sales Representation Agreement requires payment for all coal mined removed and sold
by the Company, including any coal passed through Xxxxxxxxx contracts.
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 contributions or be liable
to the Company or the other Member based on any subsequent determination that any portion of the
Member’s capital contributions 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 provided for herein 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 herein.
The Members agree that certain surface properties (being those tracts subdivided by the “New
Division Line”) to be contributed to the Company by Xxxxxxxxx will be surveyed to effectively
subdivide the tracts and that neither Member will be entitled to seek adjustment of their
respective Percentage Interests in the Company or otherwise be liable to the Company or the other
Member by reason of any determination of any deviation between the representations contained in the
lease and the surveyed acreage of those surface properties.
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EXHIBIT B
COMPREHENSIVE MINING AREA
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EXHIBIT C
EXCLUSION AREAS
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EXHIBIT D
TO
OPERATING AGREEMENT
Forms of Contribution Conveyancing Documents
1. Coal Mining Lease and Sublease — CCLR & Xxxxxxx — Owned #8 Coal, Leased 1993 and 2013 Xxxxxx #8
Coal, and Leased Xxxxxx #8 Coal.
2. Memorandum of Coal Mining Lease and Sublease — CCLR & Xxxxxxx — Owned #8 Coal, Leased 1993 and
2013 Xxxxxx #8 Coal, and Lease Xxxxxx #8 Coal.
3. Xxxxxx Consent to Sublease 1993 #8 Leased Coal.
4. Xxxxxx Consent to Sublease 2013 #8 Leased Coal.
5. Xxxxxx Consent to Sublease Portions of #8 Coal.
6. Non-Exclusive Haulroad & Access Easement — CCLC & Xxxxxxx — Under review by Xxxxxxxxx. To
be mutually agreed by the parties within 30 days of the date of the Operating Agreement.
7. Non-Exclusive Haulroad Easement — CCLC & Xxxxxxx — Under review by Xxxxxxxxx. To be mutually
agreed by the parties within 30 days of the date of the Operating Agreement.
8. Non-Exclusive Haulroad Easement — CCLC & Xxxxxxx — Under review by Xxxxxxxxx. To be mutually
agreed by the parties within 30 days of the date of the Operating Agreement.
9. Quitclaim Deed — WMD and WLC — 39.45% interest 4,782 acres of Owned Gibraltar
Surface.
10. Quitclaim Deed — WMD and WLC — 39.45% interest in 661.54 acres of Owned Parkway Surface.
11. Special Warranty Deed — WLC and Xxxxxxx — 100% Interest in 1,977 acres of Owned Surface
with deed-in provisions (1,628 acres from Gibraltar; 349 acres from Parkway).
12. Xxxxxx Partial Release of Right of First Refusal to Purchase — Xxxxxx, WLC, Xxxxxxx.
13. Non-Exclusive Haulroad Easement (Gibraltar HR and Access Road — WLC, Xxxxxxxxx, Xxxxxxx — Under
review by Xxxxxxxxx. To be mutually agreed by the parties within 30 days of
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the date of the Operating Agreement.
14. Xxxx of Sale — Xxxxxxxxx Owned Equipment — Xxxxxxxxx & Xxxxxxx.
15. Equipment Sublease — Xxxxxxxxx Leased Equipment — Xxxxxxxxx & Xxxxxxx.
16. Use Agreement — To be drafted post-closing and mutually agreed by the parties within 30 days of
the date of the Operating Agreement, which agreement will contain the following basic terms:
- Xxxxxxxxx shall have the first-priority, rent-free right to possess and
use all of the Equipment as needed in its #9 seam mining operations.
-Xxxxxxxxx shall have no obligation to pay rent or use fees for the Equipment.
-Xxxxxxxxx shall insure and maintain the Equipment at its cost until possession is
delivered to Xxxxxxx.
-Xxxxxxxxx shall pay operating costs.
-Xxxxxxxxx shall indemnify Xxxxxxx for any liabilities and claims related to
Xxxxxxxxx’x use of the Equipment.
-As Xxxxxxxxx depletes the #9 seam reserves at Parkway and ceases using particular
items of Equipment, the Use Agreement shall terminate as to such items, and possession will
be delivered to the Company.
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