Document:

exv10w45

Exhibit 10.45

ADMINISTRATIVE SERVICES AGREEMENT

     This
Administrative Services Agreement (the
“Agreement”) entered into this 11th day
of October, 2011, but effective as of the 1st day
of January, 2011 (the “Effective Date”) by and among Armstrong
Energy, Inc. (“Armstrong Energy”), a Delaware corporation formerly known as Armstrong Land Company,
LLC with an address of 7733 Forsyth Boulevard, Suite 1625, St. Louis, Missouri 63105,
Armstrong Resource Partners, L.P. (“ARP”), a Delaware
limited partnership formerly known as Elk Creek, L.P., having an
address of 7733 Forsyth Boulevard, Suite 1625, St. Louis, Missouri 63105,
and Elk Creek GP, LLC (“Elk Creek GP”),
a Delaware limited liability company and the managing general partner of ARP having an address
of 7733 Forsyth Boulevard, Suite 1625, St. Louis, Missouri 63105.

     Whereas,
The Parties hereto desire, by their execution of this Agreement, to evidence the terms and conditions upon which
Armstrong Energy will provide certain services to the ARP Entities.

	 	 	Now, Therefore, in consideration
of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

ARTICLE 1: DEFINITIONS AND CONSTRUCTION

     1.1 Definitions. The definitions set forth below shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

     “Adjusted Administrative Services Fee” shall have the meaning set forth in Section 2.5.

     “Administrative Services Fee” shall have the meaning set forth in Section 2.3(a).

     “Affiliate” shall mean, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or is under common control
with, the Person in question. As used herein, the term “control” means the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise. Notwithstanding the
foregoing, a Person shall only be considered an “Affiliate” of the general partner of ARP, as
applicable, if such Person owns, directly or indirectly, 50% or more of the voting securities of
such general partner or otherwise possesses the sole power to direct or cause the direction of the
management and policies of such general partner; further provided, however, that for purposes of
this Agreement, Armstrong Energy nor any of its Affiliates shall be deemed to be Affiliates of the
ARP Entities and vice versa.

     “Agreement” shall mean this Administrative Services Agreement, as it may be amended,
modified, or supplemented from time to time.

     “Armstrong Energy” shall have the meaning set forth in the introductory paragraph of this
Agreement.

     “ARP” shall have the meaning set forth in the introductory paragraph of this Agreement.

 

 

     “ARP Entities” shall mean ARP, Elk Creek GP, and any Affiliate controlled (and only so
long as such Affiliates are controlled) by ARP or Elk Creek GP (as the term “control” is used in
the definition of “Affiliate”) but excluding Armstrong Energy or any of its Affiliates.

     “Confidential Information” shall mean information not generally known or publicly available
about the operations of a Entity relating to sales, marketing, or other services provided to
customers; operation of or proposed changes to, such Entity’s assets; the plans and strategies
dealing with the business of the Entity; or other competitively sensitive information of any
Entity. Confidential Information includes non-public information regarding prices, costs, margins,
volumes and contractual terms for any particular customer; any method, tool or computer program
used to determine prices for any asset; all plans or strategies used or adopted to negotiate,
target or identify a particular customer for any asset; all information regarding plans and
prospective budgets to expand or build a new facility or mineral reserve; all information
regarding a proposal to buy an existing facility or mineral reserve; and capacity, production or
utilization of any facility or mineral reserve.

     “Effective Date” shall have the meaning set forth in the introductory paragraph of this
Agreement.

     “Elk Creek GP” shall have the meaning set forth in the introductory paragraph of this
Agreement.

     “Entities” shall mean Armstrong Energy or any of its Affiliates and the ARP Entities and any
of their Affiliates.

     “Fixed Charges Fee” shall have the meaning set forth in Section 2.3(b).

     “Independent Director” shall mean an individual director who meets the independence,
qualification and experience requirements established by the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission thereunder and by
the Nasdaq National Market.

     “Party” shall mean any one of the Persons that executes this Agreement.

     “Payment Default” shall mean the failure of an Entity or Party as applicable to pay the
invoices described in Section 2.4 on or before the 30th day following the end of each
fiscal quarter.

     “Person” means an individual or a corporation, limited liability company, partnership, joint
venture, trust, unincorporated organization, association, government agency or political
subdivision thereof or other entity.

     “Proposed Fee” shall have the meaning set forth in Section 2.5.

     “Screening Officer” shall mean the chief legal officer or general counsel for each of
Armstrong Energy and ARP Entities, or in the absence of such a Person, outside legal counsel
selected by the President of any of the foregoing Entities.

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     “Services Standard” shall mean, with respect to the performance of the Services, the good
faith undertaking, on a commercially reasonable basis, to perform the Services in all material
respects in compliance with applicable laws and prudent industry practices.

     “Services” shall have the meaning set forth in Section 2.1.

     “Shared Employees” shall mean employees of Armstrong Energy or its Affiliates providing
Shared Services.

     “Shared Services” shall mean services provided by employees of Armstrong Energy or its
Affiliates to both Armstrong Energy Entities and the ARP Entities, and such services shall
include, but not be limited to, management, human resources, information technology, financial and
accounting services, legal services and such other services.

     1.2 Construction. Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to
Articles and Sections refer to Articles and Sections of this Agreement; (c) the terms “include”,
“includes”, “including” or words of like import shall be deemed to be followed by the words
“without limitation”; and (d) the terms “hereof, “herein” or “hereunder” refer to this Agreement
as a whole and not to any particular provision of this Agreement. The table of contents and
headings contained in this Agreement are for reference purposes only, and shall not affect in any
way the meaning or interpretation of this Agreement.

ARTICLE 2: SERVICES

     2.1 Services. Beginning on the Effective Date, subject to the terms of this Article 2 and in
exchange for the payment described in Section 2.3, Armstrong Energy hereby agrees to provide each
of the ARP Entities with such general administrative and management services, including but not
limited to human resources, information technology, financial and accounting services, legal
services and other services (the “Services”) as may be necessary to manage the business of the ARP
Entities, as applicable, in accordance with the Services Standard; it being understood and agreed
by the Parties that in connection with the provision of such Services, Armstrong Energy shall
employ or otherwise retain such personnel as may be necessary to provide the Services.

     2.2 Provision of Insurance. Armstrong Energy hereby agrees to cause each of the ARP Entities
to be named as additional insureds in Armstrong Energy’s insurance program, as in effect from time
to time. Each of the ARP Entities shall be allocated, and pay for, such insurance coverage in an
amount equal to Armstrong Energy’s cost of insuring the assets and operations of such partnership
entities.

     2.3 Payment for Services.

     (a) As remuneration for the provision to the ARP Entities of the Services, Armstrong
Energy shall be entitled to receive, and the ARP Entities agree to pay to Armstrong Energy,
an amount equal to the percentage of each Armstrong Energy employee’s compensation
allocable to the ARP Entities, which shall be equal to $60,000.00 per month until December
31, 2011. In addition the ARP Entities shall pay all sales, use,

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excise, value added or similar taxes, if any, that may be applicable from time to time in
respect of the Services provided to such entities by Armstrong Energy. The aggregate amount
payable by the ARP Entities to Armstrong Energy pursuant to this Section 2.3(a) with
respect to a given period of time shall be referred to herein as the “Administrative
Services Fee.” It is the intention of the Parties that the Administrative Services Fee
represents fair and reasonable compensation to Armstrong Energy for the ARP Entities’
allocable share of the base salaries, employer costs for employee benefits, bonuses paid
and provided to such personnel by Armstrong Energy or any of its Affiliates. The amount of
the Administrative Services Fee shall not be adjusted except in accordance with Section
2.5, notwithstanding any change in personnel or the Services provided to any of the ARP
Entities.

     (b) In addition, the ARP Entities shall pay Armstrong Energy an aggregate annual
amount of $279,996.00 ($69,999.00 per quarter) for certain shared fixed costs including,
but not limited to, overhead expenses, office leases, telephone and office equipment
leases, and other similar items (the “Fixed Charges Fee”). It is the intention of the
Parties that the Fixed Charges Fee represents fair and reasonable remuneration to Armstrong
Energy for the ARP Entities’ use of the facilities and equipment of Armstrong Energy and
its Affiliates. The amount of the Fixed Charges Fee shall not be adjusted except in
accordance with Section 2.5.

     2.4 Invoices. Armstrong Energy shall invoice the ARP Entities on or before ten days following
the end of each fiscal quarter for the Administrative Services Fee and the Fixed Charges Fee for
such quarter. All invoices shall be due and payable on the 30th day following the end of
each fiscal quarter.

     2.5 Annual Reallocation. On or about December 1 of each year, Armstrong Energy shall submit
for approval a new estimate of the Administrative Service Fee and the Fixed Charges Fee (together,
the “Proposed Fee”) to the Conflicts Committee of the Board of Directors of Armstrong Energy. The
Proposed Fee will reflect any changes in personnel of Armstrong Energy or its Affiliates who are
performing the Services, changes in each such employee’s compensation and Armstrong Energy’s good
faith estimate of the time each such employee will spend performing Services on behalf of each of
the ARP Entities taking into account prior performance and future expectations. The Proposed Fee
shall also reflect Armstrong Energy’s good faith estimate of the amount of fixed costs allocable to
the ARP Entities. Once approved by the Conflicts Committee of the Board of Directors of Armstrong
Energy, or pursuant to the provisions of Section 2.6, the Proposed Fee shall become part of this
Agreement and replace the existing Administrative Service Fee and the Fixed Charges Fee until such
time as a new Proposed Fee is approved in accordance with the provisions of this Section 2.5 or
Section 2.6.

     In addition, Armstrong Energy shall prepare a schedule detailing the variance between the
estimated allocation of time spent by its personnel on behalf of each of the ARP Entities in the
past fiscal year (the “Adjusted Administrative Services Fee”) and submit such schedule for
approval to the Conflicts Committee of the Board of Directors of Armstrong Energy. Upon approval
by the Conflicts Committee of the Board of Directors of Armstrong Energy, or pursuant to the
provisions of Section 2.6, the difference between the Administrative Services Fee paid and the
Adjusted Administrative Services Fee shall be paid by or reimbursed (as applicable by the context)
within 60 days of the fiscal year end.

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     2.6 Disputes. Should there be a dispute over the nature or quality of the Services, the
calculation and allocation of the Administrative Services Fee in connection with a Proposed Fee,
the allocation of fixed charge in connection with the Fixed Charges Fee or the Adjusted
Administrative Services Fee, or a request for reimbursement of expenses pursuant to Section 2.11,
Armstrong Energy and the ARP Entities shall first attempt to resolve such dispute, acting
diligently and in good faith, using the past practices of such Parties and documentary evidence of
costs as guidelines for such resolution. If, following good faith negotiation, the Parties cannot
resolve any dispute after thirty (30) days, the dispute shall be resolved by binding arbitration in
St. Louis, Missouri or another location mutually agreeable to the parties. The arbitration shall be
conducted on a confidential basis pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Any decision or award as a result of any such arbitration proceeding shall
be in writing and shall provide an explanation for all conclusions of law and fact and shall
include the assessment of costs, expenses, and reasonable attorneys’ fees. Any such arbitration
shall be conducted by an arbitrator experienced in the coal mining industry and shall include a
written record of the arbitration hearing. The parties reserve the right to object to any
individual who shall be employed by or affiliated with either of the Parties. An award of
arbitration may be confirmed in a court of competent jurisdiction.

     2.7 Representations Regarding Use of Services. The ARP Entities and represent and agree that
it will use the Services only in accordance with all applicable federal, state and local laws and
regulations, and in accordance with the reasonable conditions, rules, regulations, and
specifications that may be set forth in any manuals, materials, documents, or instructions
furnished from time to time by Armstrong Energy to such entities. Armstrong Energy reserves the
right to take all actions, including, without limitation, termination of any portion of the
Services, that it reasonably believes is required to assure compliance with applicable laws and
regulations.

     2.8 Warranties; Limitation of Liability. The Services shall be provided in accordance
with the Services Standard. EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE, ARMSTRONG ENERGY MAKES
NO (AND HEREBY DISCLAIMS AND NEGATES ANY AND ALL) WARRANTIES OR REPRESENTATIONS WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE SERVICES. IN NO EVENT SHALL ARMSTRONG ENERGY OR ANY OF ITS
AFFILIATES BE LIABLE TO ANY OF THE PERSONS RECEIVING ANY SERVICES OR TO ANY OTHER PERSON FOR ANY
EXEMPLARY, PUNITIVE, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES RESULTING FROM ANY
ERROR IN THE PERFORMANCE OF SUCH SERVICE, REGARDLESS OF WHETHER THE PERSON PROVIDING SUCH
SERVICE, ITS AFFILIATES, OR OTHERS MAY BE WHOLLY, CONCURRENTLY, PARTIALLY, OR SOLELY NEGLIGENT OR
OTHERWISE AT FAULT, EXCEPT TO THE EXTENT SUCH EXEMPLARY, PUNITIVE, INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES ARE PAID BY THE PARTY INCURRING SUCH DAMAGES TO A THIRD PARTY.

     2.9 Force Majeure. Armstrong Energy shall have no obligation to perform the Services if its
failure to do so is caused by or results from any act of God, governmental action, natural
disaster, strike, failure of essential equipment, or any other cause or circumstance, whether
similar or dissimilar to the foregoing causes or circumstances, beyond the reasonable control of
Armstrong Energy.

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     2.10 Affiliates. At its election, Armstrong Energy may cause one or more of its Affiliates or
third party contractors reasonably acceptable to the Party receiving any Services to provide such
Services; provided, however, Armstrong Energy shall remain responsible for the provision of such
Services in accordance with this Agreement.

     2.11 Expenses. Notwithstanding anything to the contrary, the ARP Entities agree to reimburse
Armstrong Energy for any services provided by third parties (including, without limitation, legal
services, accounting and audit services, engineering services or other professional services)
performed on or for the benefit of the ARP Entities, within thirty (30) days of a request for such
reimbursement by Armstrong Energy.

ARTICLE 3: CONFLICTS OF INTEREST; CONFIDENTIALITY

     3.1 Shared Services. Employees of Armstrong Energy or its Affiliates may be assigned
to perform Shared Services for all or any of the ARP Entities and Armstrong Energy. Employees of
Armstrong Energy or its Affiliates performing Shared Services may be appointed to officer
positions (including executive officer positions) at the ARP Entities or their respective
controlled Affiliates. As a result of their performance of Shared Services, Shared Employees may
obtain Confidential Information that relates to the ARP Entities and Armstrong Energy. To the
extent any Shared Employee becomes privy to Confidential Information of any Parties or their
respective Entities for which such employee does not perform Services, such Shared Employee must
report that fact and the nature of the Confidential Information to the Screening Officers who will
maintain a record of the name of the person, the date of the report, and the nature of the
Confidential Information obtained by the Shared Employee.

     3.2. Confidential Information. Except as expressly permitted by the Screening Officers and to
the extent required to effectively perform the Shared Services, (i) Shared Employees shall not
disclose Confidential Information of Armstrong Energy or its Affiliates to any director, officer or
employee associated solely with the ARP Entities, including Independent Directors of any of the ARP
Entities; and (ii) Shared Employees shall not disclose Confidential Information of the ARP Entities
or their Affiliates to any director, officer or employee associated solely with Armstrong Energy,
including Independent Directors of Armstrong Energy. Shared Employees should seek guidance on the
foregoing restrictions from the Screening Officers to the extent that they are uncertain as to an
appropriate course of action.

ARTICLE 4: MISCELLANEOUS

     4.1 Choice of Law. This Agreement shall be subject to and governed by the laws of the
State of Delaware.

     4.2 Termination. Any party hereto may terminate this Agreement by providing written notice to
the other Parties of its intention to terminate this Agreement, which notice must be provided at
least 90 days prior to such termination. Armstrong Energy may terminate this Agreement by providing
30 days’ prior written notice to any of the ARP Entities at any time during which a Payment Default
has occurred and is continuing for a period of more than 30 days.

     4.3 Notices. All notices or requests or consents provided for or permitted to be given

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pursuant to this Agreement must be in writing and must be given by depositing same in the United
States mail, addressed to the Party to be notified, postpaid, and registered or certified with
return receipt requested or by delivering such notice in person, by facsimile or electronic mail to
such Party. Notice given by personal delivery or mail shall be effective upon actual receipt.
Notice given by facsimile or by electronic mail shall be effective upon actual receipt if received
during the recipient’s normal business hours, or at the beginning of the recipient’s next business
day after receipt if not received during the recipient’s normal business hours. All notices to be
sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth above,
or at such other address as such Party may stipulate to the other Parties in the manner provided in
this Section 4.3.

     4.4 Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating
to the matters contained herein, superseding all prior contracts or agreements, whether oral or
written, relating to the matters contained herein.

     4.5 Waiver. No Party’s express or implied waiver of, or consent to, any breach or default by
any Party in the performance by such Party 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 by such
Party of the same or any other obligations of such Party hereunder. Failure on the part of a Party
to complain of any act of any Party or to declare any Party in default, irrespective of how long
such failure continues, shall not constitute a waiver by such Party of its rights hereunder until
the applicable statute of limitations period has run.

     4.6 Amendment or Modification. This Agreement may be amended or modified from time to time
only by the agreement of all the Parties affected by any such amendment.

     4.7 Assignment. No Party shall have the right to assign its rights or obligations under this
Agreement without the consent of the other Parties.

     4.8 Counterparts. This Agreement may be executed in any number of counterparts with the same
effect as if all Parties had signed the same document. All counterparts shall be construed together
and shall constitute one and the same instrument.

     4.9 Severability. If any provision of this Agreement or the application thereof to any Party
or circumstance shall be held invalid or unenforceable to any extent, the remainder of this
Agreement and the application of such provision to other Parties or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

     4.10 Further Assurances. In connection with this Agreement and all transactions contemplated
by this Agreement, each Party hereto agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or appropriate to effectuate,
carry out and perform all of the terms, provisions and conditions of this Agreement and all such
transactions.

     4.11 Withholding or Granting of Consent. Unless the consent or approval of a Party is
expressly required not to be unreasonably withheld (or words to similar effect), each Party may,
with respect to any consent or approval that it is entitled to grant pursuant to this Agreement,
grant or withhold such consent or approval in its sole and uncontrolled discretion, with or without
cause, and subject to such conditions as it shall deem appropriate.

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     4.12 Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no
Party hereto shall be required to take any act, or fail to take any act, under this Agreement if
the effect thereof would be to cause such Party to be in violation of any applicable law, statute,
rule or regulation.

     4.13 Rights of Third Parties. The provisions of this Agreement are enforceable solely by the
Parties, and no Limited Partner or other Person shall have the right to enforce any provision of
this Agreement or to compel any Party to comply with the terms of this Agreement.

     In Witness Whereof, the Parties have caused this Agreement to be duly executed by
their respective authorized officers as of the date first set forth above.

	 	 	 

	Armstrong Resource Partners, L.P.
	 	 
	 
	 	 
	By: Elk Creek GP, LLC, its general partner
	 	 
	 
	 	 
	 

/s/ Martin D. Wilson

	 	 
	 

By: Martin D. Wilson, Manager

	 	 
	 
	 	 
	Elk Creek GP, LLC
	 	 
	 
	 	 
	 

/s/ Martin D. Wilson

	 	 
	 

By: Martin D. Wilson, Manager

	 	 
	 
	 	 
	Armstrong Energy, Inc.
	 	 
	 
	 	 
	 

/s/ Martin D. Wilson

	 	 
	 

By: Martin D. Wilson, President

	 	 

8exv10w52

Exhibit 10.52

ROYALTY DEFERMENT AND OPTION AGREEMENT

     This Royalty Deferment and Option Agreement (the “Agreement”) entered into this
11th day of October, 2011, but effective as of February 9, 2011, by and between
Armstrong Coal Company, Inc. (“Armstrong”), Western Diamond LLC (“WD”) and Western Land Company,
LLC (“WLC”) (Armstrong, together with WD and WLC, collectively referred to herein as the
“Armstrong Entities”), and Western Mineral Development, LLC (“WMD”) and Ceralvo Holdings, LLC
(“Ceralvo,” and together with WMD, the “ARP Entities”) (collectively, the “Parties”).

RECITALS

     WHEREAS, with respect to each of the coal properties identified on Exhibit A
attached hereto (the “Subject Assets”), WMD, WLC and/or WD own an undivided joint interest in the
fee and/or leasehold estate associated with each of the coal reserves and other real property that
comprise the Subject Assets; and

     WHEREAS, WLC, WD and the ARP Entities have entered into certain coal mining leases and
subleases with Armstrong dated February 9, 2011 (the “Existing Leases”), pursuant to which
Armstrong has leased, inter alia, the Subject Assets and other real property, and in exchange for
which Armstrong has agreed to pay a production royalty in the amount of seven percent (7%) of the
sales price received by Armstrong (the “Production Royalty”), to the lessors upon the terms and
conditions set forth therein; and

     WHEREAS, the Parties are each subject to certain restrictions and covenants pursuant to that
certain Credit Agreement with PNC Bank, N.A., among others, dated February 9, 2011 (the “Credit
Agreement”), including certain restrictions on distributions by WMD’s indirect parent, Armstrong
Resource Partners, L.P., to its limited partners; and

     WHEREAS, WMD desires to grant to Armstrong the option to defer payment of the ARP Entities’
share of the Production Royalty until the later of such time as the aforementioned restrictions on
distributions by Armstrong Resource Partners, L.P. to its limited partners have been eliminated or
WMD has acquired 100% of the Subject Assets, and in exchange for the foregoing, the Armstrong
Entities desire to grant to WMD the option to acquire an additional joint interest in the Subject
Assets, subject to the exclusions set forth herein, by satisfying payment of the deferred portion
of the Production Royalty by engaging in a sale and leaseback transaction upon the terms set forth
herein;

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

AGREEMENT

     1. Option to Defer Production Royalty. The parties hereby agree that each
calendar year, Armstrong shall have the option to elect to defer payment (in whole or in part) of
the ARP Entities’ share of the Production Royalty until the following year (the “Deferment
Option”),

 

 

including any amounts previously deferred by Armstrong hereunder. Armstrong shall provide notice to
the ARP Entities of its intent to exercise the Deferment Option each year at least thirty (30) days
prior to the commencement of the calendar year for which the option is being exercised and the
amount of the Production Royalty being deferred. Notwithstanding anything to the contrary, the
Parties agree that Armstrong shall have been deemed to have exercised the Deferment Option with
respect to the entirety of the Production Royalty for the current year. In the event that Armstrong
does not exercise the Deferment Option for a given year, than any amounts previously deferred shall
be paid to the ARP Entities no later than April 1 of such year, and all other amounts owed to the
ARP Entities shall be paid promptly when due thereafter.

     2. Term of Deferment Option. Armstrong’s Deferment Option shall continue from
year-to-year until the later of: (a) the amendment or termination of the Credit Facility
insofar as it prohibits or restricts distributions by Armstrong Resource Partners, L.P. to its limited
partners
as set forth above; or (b) WMD has acquired sole ownership of the Subject Assets.

     3. Option to Acquire Additional Interest in Subject Assets. In the event that
Armstrong exercises the Deferment Option in any year pursuant to the terms of Paragraph 1
herein, then WMD shall have the option to acquire an additional interest in the Subject
Assets,
subject to the exclusions set forth in Paragraph 4, in complete satisfaction of the amounts
deferred by Armstrong pursuant to the sale and leaseback transaction described below (the
“Sale/Leaseback Option”) at the conclusion of the calendar year for which such amounts were
deferred. WMD shall provide notice to the Armstrong Entities of its intent to exercise the
Sale/Leaseback Option each year at least one hundred twenty (120) days after receipt of notice
from Armstrong pursuant to Paragraph 1. In the event WMD does not exercise the
Sale/Leaseback Option in a given year, then the amounts otherwise due shall remain subject to
subsequent deferment by Armstrong pursuant to the provisions of Paragraph 1.

     4. Exclusion of Ancillary Portions of Subject Assets. The Parties agree that the
Subject Assets subject to the Sale/Leaseback shall not include any portion of the mineral
reserves, mining rights, surface property or other real property associated with Armstrong’s
Parkway Mine. The Parties further acknowledge that the partial undivided in those surface
properties previously conveyed to WMD associated with the Parkway Mine do not generate any
royalty payments to WMD, and accordingly WMD agrees, in further consideration for the rights
granted herein, to quitclaim those properties to WLC and WD, and WMD hereby waives any
rights of first refusal it may have under the Credit and Collateral Support Fee,
Indemnification
and Right of First Refusal Agreement dated February 9, 2011, insofar as the parcels excluded
herein are transferred to the Survant Joint Venture as such term is defined in the Credit
Agreement.

     5. Sale and Leaseback of Subject Assets. In the event WMD exercises the
Sale/Leaseback Option for a given year, then WD and WLC shall sell an additional undivided
joint interest in the Subject Assets to WMD, and such interest shall be equal to a fraction,
the numerator of which shall be equal to the amount of the Production Royalty deferred by
Armstrong up to and including the year for which the Sale/Leaseback Option is being exercised
(the “Purchase Price”), and the denominator of which is a dollar amount the parties agree
represents the aggregate fair market value of the Subject Assets (the “Purchased Interest”).

 

 

Armstrong and WMD shall amend the Existing Leases to reflect the acquisition of the Purchased
Interest by WMD.

     6. Closing. The Parties hereby agree that the closing of the transactions
contemplated hereby (the “Closing”) shall take place on or before ninety (90) days after the
end
of year for which the Deferment Option has been exercised (the “Closing Date”), or at such
date
as the Parties shall mutually agree. The Closing shall not occur unless and until the
representations and warranties of the Parties are true and correct in all material respects as
of the
Closing Date.

     7. Representations of the Armstrong Entities. Each of the Armstrong Entities
represents and warrants as of the date hereof and the Closing Date, as follows:

	 	(a)	 	The entity is an entity duly organized or formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization.
	 
	 	(b)	 	The entity has all power and authority to enter into the Agreement and any
ancillary documents contemplated herein, and the Agreement and the transactions
contemplated herein have been approved by all requisite action by its directors,
members or managers, as applicable.
	 
	 	(c)	 	The Agreement constitutes a legal, valid and binding obligation of the entity,
enforceable against the entity in accordance with its terms.
	 
	 	(d)	 	Neither the execution, the delivery or performance of the Agreement conflicts
with any applicable law, any organizational document, or any agreement,
judgment, license, order or permit applicable to or binding upon the entity or any
of its properties, except for any consents required to be obtained by the Armstrong
Entities in respect of any leasehold interests in and to the Subject Assets.
	 
	 	(e)	 	No consent, approval, order, or authorization of, or declaration, filing, or
registration with, any governmental entity is required to be obtained or made by
the entity in connection with the execution, delivery, or performance by the entity
of the Agreement and, the consummation by it of the transactions contemplated
hereby.

     8. Representations of the ARP Entities. The ARP Entities hereby represent and
warrant as of the date hereof and the Closing Date, as follows:

	 	(a)	 	Each of the ARP Entities is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware.
	 
	 	(b)	 	Each of the ARP Entities has all power and authority to enter into the
Agreement
and any ancillary documents contemplated herein, and the Agreement and the
transactions contemplated herein have been approved by all requisite action by its
members or managers as required.

 

 

	 	(c)	 	The Agreement constitutes a legal, valid and binding obligation of each of the
ARP Entities, enforceable against each entity in accordance with its terms.
	 
	 	(d)	 	Neither the execution, the delivery or performance of the Agreement conflicts
with any applicable law, any organizational document, or any agreement,
judgment, license, order or permit applicable to or binding upon Each of the ARP
Entities.
	 
	 	(e)	 	No consent, approval, order, or authorization of, or declaration, filing, or
registration with, any governmental entity is required to be obtained or made by
each of the ARP Entities in connection with the execution, delivery, or
performance by each of the ARP Entities of the Agreement and, the
consummation by it of the transactions contemplated hereby.

     9. Arbitration. Any disagreement between the Parties arising hereunder shall be
submitted to binding arbitration in accordance with the rules of the American Arbitration
Association then in effect. A panel of three arbitrators, knowledgeable with the coal industry
in the West Kentucky area, shall be named, one to be selected by the Armstrong Entities, one to
be selected by the ARP Entities, and one to be selected by the other two arbitrators. If the
two arbitrators appointed by the Armstrong Entities and the ARP Entities cannot agree on the
selection of the third neutral arbitrator selection of such arbitrator shall be made by the
American
Arbitration Association. The non-prevailing party shall be responsible for the reasonable
expenses, fees and costs (including, without limitation, reasonable attorney’s fees) incurred
by
the Parties in such arbitration. With regard to any monetary sum or quantum measurement such
as fair market values, coal tonnages or reserves, the figures determined by each of the
arbitrators
shall be averaged and the determination which differs most from said average shall be
excluded;
the remaining two determinations shall then be averaged and such average shall be final and
conclusive.

     10. Miscellaneous.

	 	(a)	 	Further Assurances. Each party to the Agreement agrees to perform such
further
acts and to execute and deliver such other and additional documents as may be
necessary to carry out the provisions of the Agreement.
	 
	 	(b)	 	Amendment. The Agreement may not be amended in whole or in part except
by
the written agreement of the parties hereto.
	 
	 	(c)	 	Assignment. Except as otherwise specifically provided, the Agreement
and any
right hereunder, shall not be assigned by any party hereunder without the prior
written consent of the other party, which shall not be unreasonably withheld.
	 
	 	(d)	 	Severability. If any clause or provision of the Agreement is illegal,
invalid, or
unenforceable under any present or future law, the remainder of the Agreement
will not be affected thereby. It is the intention of the parties that if any such
provision is held to be illegal, invalid or unenforceable, there will be added in
lieu

 

 

	 	 	 	thereof a provision as similar in terms to such provision as is possible which is legal,
valid and enforceable.
	 
	 	(e)	 	Binding Effect. The Agreement will inure to the benefit of and bind the
respective heirs, legal representatives, successors and permitted assigns of the
parties hereto.
	 
	 	(f)	 	Notices. All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
or by facsimile transmission or mailed (first class postage prepaid) to the parties
at the following addresses or facsimile numbers:

(i)    if to the Armstrong Entities:

7733 Forsyth Blvd, Suite 1625 

St. Louis, Missouri 63105

Attn: Martin D. Wilson

Facsimile: (314) 721-8211

(ii)   if to the ARP Entities:

7733 Forsyth Blvd, Suite 1625

St. Louis, Missouri 63105

Attn: J. Hord Armstrong, III

Facsimile: (314) 721-8211

	 	(g)	 	Governing Law; Venue. THE AGREEMENT SHALL BE GOVERNED,
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF KENTUCKY, EXCLUDING THAT BODY OF LAW
PERTAINING TO CONFLICTS OF LAW.
	 
	 	(h)	 	Counterparts. The Agreement may be executed in multiple counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument. Facsimile signatures shall be effective as
original signatures.

[Remainder of Page Left Intentionally Blank; Signature Page to Follow]

 

 

     IN WITNESS WHEREOF, each of the undersigned, by its duly authorized person, has executed this
Agreement as of the date first above written.

	 	 	 	 	 
	 	ARMSTRONG COAL COMPANY, INC.

 	 
	 	By:  	/s/ Martin D. Wilson
 	 
	 	 	Martin D. Wilson, President 	 

	 	 	 	 	 
	 	WESTERN DIAMOND LLC

 	 
	 	By:  	/s/ Martin D. Wilson
 	 
	 	 	Martin D. Wilson, Manager 	 

	 	 	 	 	 
	 	WESTERN LAND COMPANY, LLC

 	 
	 	By:  	/s/ Martin D. Wilson
 	 
	 	 	Martin D. Wilson, Manager 	 

	 	 	 	 	 
	 	WESTERN MINERAL DEVELOPMENT, LLC

 	 
	 	By:  	/s/ Martin D. Wilson
 	 
	 	 	Martin D. Wilson, Manager 	 

	 	 	 	 	 
	 	CERALVO HOLDINGS, LLC

 	 
	 	By:  	/s/ Martin D. Wilson
 	 
	 	 	Martin D. Wilson, Manager 	 

 

 

	 	 	 	 	 

EXHIBIT A 

SUBJECT ASSETS

     The Subject Assets shall mean all of the coal reserves and real property described in,
and conveyed, demised or otherwise granted in or under the following deeds and instruments, to
Western Land Company, LLC and/or Western Diamond LLC, subject to all rights-of-way, easements,
leases, deed and plat restrictions, partitions, severances, encumbrances, licenses, reservations,
conveyances and exceptions which are of record as of the date of the exercise of the Option by Elk
Creek, and to all rights of persons in possession, and to physical conditions, encroachments and
possessory rights which would be evident from an inspection of the property at such time:

     (i) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC and Beaver Dam Coal Company to Western Diamond LLC, dated September 19, 2006, of
record in Deed Book 363, page 369, in the Office of the Ohio County Clerk;

     (ii) The Partial Assignment of Coal Mining Lease from Central States Coal
Reserves of Kentucky, LLC to Western Diamond LLC dated September 19, 2006, of record in Deed Book
363, page 428, in the Office of the Ohio County Clerk;

     (iii) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC and Beaver Dam Coal Company to Western Diamond LLC, dated September 19, 2006, of
record in Deed Book 363, page 414, in the Office of the Ohio County Clerk;

     (iv) The Corporation Special Warranty Deed from Beaver Dam Coal Company to
Western Diamond LLC, dated September 19, 2006, of record in Deed Book 363, page 393, in the Office
of the Ohio County Clerk;

     (v) The Corporation Special Warranty Deed from Beaver Dam Coal Company to
Western Diamond LLC, dated September 19, 2006, of record in Deed Book 363, page 403, in the Office
of the Ohio County Clerk;

     (vi) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC to Western Diamond LLC, dated May 31, 2007, of record in Deed Book 528, page 284, in
the Office of the Muhlenberg County Clerk, and the Deed of Confirmation between Central States Coal
Reserves of Kentucky, LLC, Western Diamond LLC and Armstrong Coal Reserves, Inc., dated September
30, 2007, of record in Deed Book 531, page 205, in the Office of the Muhlenberg County Clerk;

     (vii) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC and Beaver Dam Coal Company to Western Diamond LLC, dated May 31, 2007, of record in
Deed Book 368, page 17, in the Office of the Ohio County Clerk, and the Deed of Correction between
Central States Coal Reserves of Kentucky, LLC, Beaver Dam Coal Company, LLC and Western Diamond
LLC, of record in Deed Book 369, page 759, in the Office of the Ohio County Clerk;

 

 

     (viii) The Partial Assignment and Assumption of Mineral Leasehold Estate from Central
States Coal Reserves of Kentucky, LLC to Western Diamond LLC, dated May 31, 2007, of record in Deed
Book 528, page 320, in the Office of the Muhlenberg County Clerk;

     (ix) The Partial Assignment and Assumption of Mineral Leasehold Estate from
Central States Coal Reserves of Kentucky, LLC to Western Diamond LLC, dated May 31, 2007, of record
in Deed Book 528, page 330, in the Office of the Muhlenberg County Clerk.

     (x) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC to Western Land Company, LLC, dated December 12, 2006, of record in Deed Book 524,
page 505, in the Office of the Muhlenberg County Clerk;

     (xi) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC and Beaver Dam Coal Company to Western Land Company, LLC, dated December 12,
2006, of record in Deed Book 365, page 36, in the Office of the Ohio County Clerk;

     (xii) The Partial Assignment and Assumption of Mineral Leasehold Estate from Central
States Coal Reserves of Kentucky, LLC to Western Land Company, LLC, dated November 20, 2006, of
record in Deed Book 524, page 523, in the Office of the Muhlenberg County Clerk, as amended and
restated in Deed Book 527, page 186, in the Office of the Muhlenberg County Clerk;

     (xiii) The Partial Assignment and Assumption of Surface and Mineral Leasehold Estate
from Central States Coal Reserves of Kentucky, LLC to Western Land Company, LLC, dated November 20,
2006, of record in Deed Book 365, page 57, in the Office of the Muhlenberg County Clerk;

     (xiv) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC, Beaver Dam Coal Company, Ohio County Coal Company, LLC and Grand Eagle Mining, Inc.
to Western Land Company, LLC, dated March 30, 2007, of record in Deed Book 367, page 1, in the
Office of the Ohio County Clerk;

     (xv) The Corporation Special Warranty Deed from Central States Coal Reserves of
Kentucky, LLC to Western Land Company, LLC, dated March 30, 2007, of record in Deed Book 527, page
118, in the Office of the Muhlenberg County Clerk, as corrected by Deed of Correction dated
September 30, 2007, of record in Deed Book 531, page 213, in the Office of the Muhlenberg County
Clerk; and

     (xvi) The Partial Assignment and Assumption of Surface and Mineral Leasehold Estate
from Central States Coal Reserves of Kentucky, LLC to Western Land Company, LLC, dated March 30,
2007, of record in Deed Book 527, page 161, in the Office of the Muhlenberg County Clerk.

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