UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

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1 Main Document Page 1 of 13 UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION ) In re: ) Chapter 11 ) MISSION COAL COMPANY, LLC, et al., 1 ) Case No TOM11 ) Debtors. ) (Jointly Administered) ) DECLARATION OF LEON SZLEZINGER IN SUPPORT OF CONFIRMATION OF THE SECOND AMENDED JOINT CHAPTER 11 PLAN OF MISSION COAL COMPANY, LLC AND CERTAIN OF ITS DEBTOR AFFILIATES I, Leon Szlezinger, hereby declare under penalty of perjury as follows: 1. I am a Managing Director and the Joint Global Head of Restructuring & Recapitalization at Jefferies LLC ( Jefferies ), an investment banking firm which has its principal office located at 520 Madison Avenue, New York, New York 10022, as well as at other locations worldwide. I am over the age of 18 and authorized to submit this declaration (the Declaration ) in support of confirmation of the Second Amended Joint Chapter 11 Plan of Mission Coal Company, LLC and Certain of Its Debtor Affiliates (as may be amended, modified, or supplemented from time to time, the Plan ) Except where specifically noted, the statements in this Declaration are based on my personal knowledge, belief, or opinion; information that I have received from the Debtors 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: Mission Coal Company, LLC (8465); Beard Pinnacle, LLC (0637); Oak Grove Land Company, LLC (6068); Oak Grove Resources, LLC (0300); Pinnacle Land Company, LLC (6070); Pinnacle Mining Company, LLC (7780); Seminole Alabama Mining Complex, LLC (6631); Seminole Coal Resources, LLC (1795); Seminole West Virginia Mining Complex, LLC (7858); Seneca Coal Resources, LLC (1816); and Seneca North American Coal, LLC (5102). The location of the Debtors service address is: 7 Sheridan Square, Suite 300, Kingsport, Tennessee Capitalized terms not defined herein shall have the meanings ascribed to them in the Plan.

2 Main Document Page 2 of 13 employees or advisors and/or employees of Jefferies working directly with me or under my supervision, direction, or control; or from the Debtors records which I am advised are maintained in the ordinary course of their business. As a professional retained by the Debtors, 3 Jefferies is charging for services provided in this matter, including certain fees due upon consummation of a sale transaction, but neither I nor Jefferies is being specifically compensated for providing this Declaration or testimony. If I were called upon to testify, I could and would testify competently to the facts set forth herein. I am authorized to submit this Declaration on behalf of the Debtors. Professional Background and Qualifications 3. Jefferies provides a broad range of corporate advisory services to its clients including, without limitation, services relating to the following: (a) general financial advice; (b) mergers, acquisitions, and divestitures; (c) special committee assignments; (d) capital raising; and (e) corporate restructurings. Jefferies and its senior professionals have extensive experience in the reorganization and restructuring of troubled companies, both out of court and in chapter 11 proceedings. Jefferies has advised debtors, creditor and equity constituencies, and purchasers in numerous reorganizations in the United States and worldwide. Since 2007, Jefferies has been involved in over 200 restructurings representing over $475 billion in restructured liabilities. 4. Since joining Jefferies in January 2009, I have advised on numerous complex restructurings, including recent chapter 11 cases in the coal industry, such as Westmoreland Coal, Peabody Energy, Armstrong Energy, Arch Coal, Alpha Natural Resources, and Patriot Coal and, in other industries, ERP Iron Ore, iheartmedia, Westinghouse, Avaya, Caesars Entertainment 3 On November 30, 2018, the Bankruptcy Court entered the Order (I) Authorizing the Retention and Employment of Jefferies LLC as Investment Banker for the Debtors and Debtors in Possession Effective Nunc Pro Tunc to the Commencement Date, (II) Waiving Certain Time-Keeping Requirements, and (III) Granting Related Relief [Docket No. 364]. 2

3 Main Document Page 3 of 13 Operating Company, MPM Silicones (Momentive), AMR (American Airlines), K-V Discovery Solutions, Eastman Kodak, MSR Golf Resort, Innkeepers USA Trust, Spheris, RathGibson, and Medical Staffing Network, among others. 5. Before joining Jefferies, I was a Senior Managing Director at Mesirow Financial Consulting, specializing in Restructuring Advisory Services. Prior to that, I was a partner at KPMG LLP and PricewaterhouseCoopers LLP specializing in Financial Advisory Services. The Chapter 11 Cases I. The DIP. 6. The Debtors retained Jefferies on August 29, 2018, to assist with the Debtors liquidity constraints and significant indebtedness, including legacy liabilities and to assist in evaluating potential restructuring alternatives. Jefferies has advised and assisted the Debtors in several capacities, including procurement of the Debtors debtor in possession financing facility (the DIP Facility ) and the development and execution of the postpetition marketing process for the Debtors assets (the Assets ). 7. Shortly after being retained by the Debtors, Jefferies engaged in discussions with the Debtors prepetition first-lien lenders (the Prepetition Secured Lenders ) with respect to ongoing defaults under the first-lien credit agreement. Into the fall of 2018, the Debtors and the Prepetition Secured Lenders worked to effectuate a long-term forbearance agreement and simultaneously negotiated a DIP financing proposal. These negotiations, which were hard fought and at arm s length, ultimately resulted in the Prepetition Secured Lenders agreeing to provide $54.5 million in new money and allowing the Debtors to use the Prepetition Secured Lenders cash collateral. This offer was the best and only financing available to the Debtors under the circumstances. 3

4 Main Document Page 4 of The DIP Facility contains two important features. First, the DIP Facility effectuated a roll-up of the entire Prepetition First Lien Obligations Amount plus the First Lien Accrued Adequate Protection Payments (the Roll-Up ), 4 of which (x) the aggregate principal amount of $50,000,000 of the Prepetition First Lien Obligations were rolled up and became DIP Loans upon entry of and pursuant to the Interim DIP Order and (y) the aggregate amount of the remainder of the Prepetition First Lien Obligations Amount (including, for the avoidance of doubt, the Prepayment Premium (as defined in the First Lien Credit Agreement)), plus the First Lien Accrued Adequate Protection Payments, were rolled up and became DIP Loans on a final basis upon entry of, and subject to the terms of, the Final DIP Order. 9. The Roll-Up is a material component of the structure of the DIP Facility and was required by the DIP Lenders as a condition to their commitment to provide postpetition financing. Absent the DIP Facility, the Debtors ability to continue operating as a going concern would have been jeopardized to the detriment of all parties in interest, so it was critical for the Debtors to be able to access the DIP Facility as quickly as possible after the chapter 11 filing. In light of the marketing process for the DIP Facility, I believe that the DIP Facility represented the only viable financing available that would not require the Debtors to seek to prime the Prepetition Secured Parties on a nonconsensual basis. 4 Terms not otherwise defined in this section shall have the meaning assigned to them in the Debtors Motion for Entry of Interim and Final Orders (I) Authorizing Postpetition Secured Financing Pursuant to 11 U.S.C. 105(a), 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and 364(e), (II) Authorizing the Debtors Use of Cash Collateral Pursuant to 11 U.S.C. 363, (III) Granting Adequate Protection Pursuant to 11 U.S.C. 361, 363 and 364, and (IV) Scheduling a Final Hearing Pursuant to Bankruptcy Rules 4001(b) and 4001(c) [Docket No. 34]. 4

5 Main Document Page 5 of Second, the DIP Facility and applicable credit agreement (the DIP Credit Agreement ) contained certain milestones (the DIP Milestones ). The DIP Milestones, as amended, required the following events (among others) to occur by prescribed dates: filing a bidding procedures motion; filing a plan of reorganization and disclosure statement; entry of a bidding procedures order; occurrence of a deadline for bids to be received; occurrence of an auction (if necessary); and confirmation and effectiveness of a plan. 11. Failure to meet such milestones constitutes an event of default under the DIP Credit Agreement. These milestones were vigorously negotiated, were required by the DIP Lenders as a condition to providing the DIP Facility, and, thus, were required to obtain the financing necessary to satisfy the liquidity needs of the Debtors businesses. II. The Marketing Process and Auction. 12. The Debtors, in consultation with their advisors and as part of the negotiations around the DIP Facility, determined that a transaction or series of transactions whereby the Debtors sell substantially all of their assets was likely to maximize the value of the Debtors estates for their stakeholders. To that end, the Debtors (i) negotiated an opening bid (the Opening Bid ) to set a floor for bidding, (ii) initiated a marketing process to solicit interest from third parties for the Debtors Assets, and (iii) conducted an auction (the Auction ). (a) The Opening Bid. 13. The Debtors and their advisors engaged in extensive negotiations with the DIP Lenders regarding a structured transaction that would result in the sale of a substantial majority of the Debtors operating assets, thereby avoiding liquidation and preserving hundreds of jobs. 5

6 Main Document Page 6 of 13 Although the Debtors and the DIP Lenders ultimately could not reach agreement on the terms of a stalking horse bid, the DIP Lenders agreed to act as the opening bidder for the Debtors Auction, utilizing a portion of their secured DIP claim and providing additional cash consideration to purchase the Oak Grove assets, the Maple assets, and certain assets at the Pinnacle facility, plus assuming certain liabilities (including, importantly, the assumption of asset retirement obligations ( AROs ) at the Pinnacle facility). The key components of such transaction, including the amount of the DIP Lenders credit bid and the elements of consideration to be provided to the Debtors creditors, are fully set forth in the DIP Lenders proposed Opening Bid. See Docket No. 512, Ex. A. (b) The Marketing Process. 14. I understand that on December 5, 2018, the Debtors filed the Debtors Motion for Entry of an Order (I) Authorizing the Debtors to Enter into and Perform Under the Stalking Horse Purchase Agreement, (II) Approving Bidding Procedures for the Sale of the Debtors Assets, (III) Scheduling Hearings and Objection Deadlines with Respect to the Sale, (IV) Scheduling Bid Deadlines and an Auction, (V) Approving the Form and Manner of Notice Thereof, (VI) Approving Contract Assumption and Assignment Procedures, and (VII) Granting Related Relief [Docket No. 393] (the Bidding Procedures Motion ), which outlined the key terms of the Opening Bid. 15. On December 21, 2018, this Court entered the order authorizing the relief sought in the Bidding Procedures Motion (the Bidding Procedures Order ), approving bidding procedures and an open auction process for the sale of substantially all of the Debtors operating assets. Under the Bidding Procedures Order, the Court set a bid deadline of February 13, 2019 (the Bid Deadline ), and, if necessary, an auction date of February 27,

7 Main Document Page 7 of Following entry of the Bidding Procedures Order, the Debtors, with their advisors, launched an extensive marketing and sale process for substantially all of the Debtors operating assets, canvassing the marketplace to identify potential financial or strategic purchasers. In total, Jefferies, in consultation with the Committee and the DIP Lenders, contacted approximately fifty-four potential purchasers. Nondisclosure agreements were entered into with thirty-nine potential purchasers, each of which were given access to an electronic data room containing diligence materials related to the Debtors assets. In addition, the Debtors conducted in-person management meetings and/or site visits for fifteen potential purchasers and received fifteen non-binding letters of intent. 17. On the Bid Deadline, the Debtors received several bids for their various asset packages. No bids, however, were submitted that contemplated the purchase of the Oak Grove assets or a combined bid for all of the Debtors assets other than the Opening Bid. Following the Bid Deadline and prior to the Auction, the Debtors reached out to a number of the potential purchasers, identifying them as having submitted a Qualified Bid and inviting them to participate in the Auction. Before the Auction, the Debtors, in consultation with their advisors, determined that the best interests of the estate dictated that, at the close of the Auction, only tentative winners would be announced for the Maple assets, the Pinnacle assets, and any potential combinations thereof. The Debtors determined that taking additional time to make a final decision as to the relative costs and benefits of the proposed bids (which did not include the Oak Grove assets) versus those of the Opening Bid (which did include the Oak Grove assets) would ultimately be beneficial to the estate and all stakeholders. Simply stated, comparing the Opening Bid to the auctioned assets was not a simple apples-to-apples comparison. The Debtors would be best served by continuing to engage with other stakeholders, namely the Committee and the DIP Lenders, in 7

8 Main Document Page 8 of 13 considering the bids following the Auction and before making a final determination as to the highest and best bid for the Assets. (c) The Auction. 18. On February 27, 2019, the Debtors opened the Auction. The Debtors structured the Auction so that the bids for the Maple assets were considered first, with the bids for Pinnacle to follow. The Auction of the Maple assets concluded late on February 27, 2019, with the Auction of the Pinnacle assets beginning shortly thereafter. However, following numerous hours of discussions related to the Maple assets and multiple additional hours of discussions related to the Pinnacle assets, continuing into the early morning hours of February 28, 2019, the conclusion of the Pinnacle auction was ultimately adjourned to March 1, With respect to the Maple assets, four bidders participated in the Auction, with the Debtors ultimately declaring MC Southwork LLC ( Castlelake ) as the conditional winner based on a $35 million credit bid for the Maple assets and the assumption of certain liabilities. With respect to the Pinnacle assets, four bidders attended the Auction Contura Energy, Inc. ( Contura ), Bluestone Resources, Inc. ( Bluestone ), a third bidder ( Bidder 3 ), and a fourth bidder ( Bidder 4 ). Bidder 3 had been invited to attend the Auction, with the understanding that it would need to provide documentation demonstrating their financial ability to complete a transaction in order to be deemed a Qualified Bidder by the Debtors. Bidder 3 did not provide evidence to the satisfaction of the Debtors at the Auction and consequently the Debtors refused to accept any bid from Bidder 3. Contura and Bluestone, bidding as stand-alone bidders, provided bids that, taken together, enabled the Debtors to sell all of the Pinnacle assets. Bidder 4 declined to submit a bid. The Debtors decided to adjourn the Auction for twenty-four hours to allow Bidder 3 to provide evidence of their financial wherewithal and Bidder 3 was provided with a specific list 8

9 Main Document Page 9 of 13 of documentation to deliver to the Debtors. Bidder 3 failed to provide the requested information and, therefore, on Friday, March 1, 2019, the Debtors declared the conditional winner of the Auction for the Pinnacle assets to be the bids submitted by Contura and Bluestone (the Bluestone/Contura Bids ). 20. Pursuant to the Bluestone/Contura Bids, Bluestone will acquire assets generally related to all surface property associated with the Pinnacle mine, including the Pinnacle Preparation Plant, all surface reserves and reserves located on the surface associated with the Mine Void Area and the Green Ridge reserves, but excluding certain surface properties acquired by Contura, for an aggregate purchase price of $100, Bluestone will not acquire any contracts related to the Pinnacle mine, with the exception of certain leases as described in the Notice of Successful Bidders. Bluestone will acquire certain of the permits related to the Pinnacle mines and will assume certain liabilities associated with the Bluestone acquired assets. 21. Contura will acquire the sub-surface property rights related to the Pinnacle mine, as well as certain surface properties necessary to manage its underground operations and water discharge obligations, as well as certain additional assets, for an aggregate purchase price of $3,750, In addition, Contura would assume certain liabilities associated with the Contura acquired assets. 22. Following signing, Contura and Bluestone will use commercially reasonable efforts to obtain permits to replace the existing permits in order to reflect the division of assets between 5 As defined in Exhibit A to Docket No Amounts, if any, with respect to apportioned taxes and all amounts required to be paid to the West Virginia Department of Environmental Protection ( WV DEP ) under the proposed consent order number M dated January 14, 2019 will be a deduction to, and paid from, the purchase price at closing (or, in the case of amounts under this consent order, will remain as a liability of the estate of the Debtors and Contura will have no liability in respect thereof, and Contura will receive an acknowledgment to that effect from the WV DEP reasonably satisfactory to Contura). 9

10 Main Document Page 10 of 13 Bluestone and Contura. Bluestone s and Contura s receipt of such permits will be a condition to Bluestone s and Contura s obligation to close the Pinnacle sale. The outside date for the purchase agreement for the Contura transaction will be nine months from the date of execution. 23. The Debtors, WPP LLC ( NRP ), Bluestone, and Contura will enter into a separate agreement that provides for certain transactions, upon the completion of which NRP will waive all claims related to cure costs, termination costs, and other matters associated with the NRP lease. Bluestone and the Debtors will also enter into a Contract Mining Agreement whereby Bluestone agrees to operate the Pinnacle facility commencing concurrently with the signing of the Bluestone purchase agreement and continuing until the closing of the Bluestone and Contura transactions. (d) Post-Auction Bids and Negotiations. 24. Notwithstanding the Bid Deadline and the closing of the Auction on the Maple and Pinnacle assets, the Debtors continued to engage with parties interested in purchasing the Debtors Assets, specifically seeking bids for the Oak Grove and Maple assets. In particular, the Debtors continued discussions with Murray Energy Corporation ( Murray ), as well as certain other entities that initially expressed interest in purchasing the Oak Grove and Maple assets. Ultimately, Murray and two other entities decided to renew their diligence, leading to competing bids for the Oak Grove and Maple assets from Murray and a competing bidder (the Competing Bidder ). 25. The competing bid the Debtors received (the Competing Bid ) provided that the potential buyer would acquire all of the assets at the Oak Grove, Kellerman, North River and #3 Mine mining facilities in Alabama (collectively, the Alabama Mining Facilities ) and the Maple assets for an aggregate purchase price of (i) $60,000,000 in cash; (ii) the issuance of a promissory note from the Competing Bidder to Castlelake in the amount of $135,000,000 (the Promissory Note ); (iii) the release of certain of the Debtors obligations to the Competing 10

11 Main Document Page 11 of 13 Bidder under the First Lien Credit Documents in the amount of $17,800,000; and (iv) the assumption of certain liabilities associated with the acquired assets. The Competing Bid was judged by the Debtors to be inferior to the Murray Bid, described below. IV. The Murray Bid is the Highest and Best Offer. 26. On March 27, 2019, the Debtors filed the Notice of Successful Bidders, announcing Successful Bidders for both the Oak Grove and Maple Eagle assets, as well as for the Pinnacle assets. 7 As contemplated by the Sale Transaction, the Debtors will sell all of the Debtors assets to the Successful Bidders free and clear of claims, liens, encumbrances, and other interests pursuant to sections 363(f) and 1123 of the Bankruptcy Code. The Maple Eagle, Seminole, and the Oak Grove assets will be acquired by a newly formed entity that is 79 percent held by Murray and 21 percent held by Javelin Global Commodities (UK) Ltd. ( Javelin, and collectively, the Oak Grove and Maple Eagle Buyer ). 27. The Oak Grove and Maple Eagle Buyer will acquire substantially all of the Oak Grove, Seminole, and Maple assets providing value of $264.7 million and the assumption of approximately $70 million in reclamation liabilities. Of the $264.7 million in total consideration, $160 million will be paid in the form of take-back paper issued by the Oak Grove and Maple Eagle Buyer to the DIP Lenders, and $42.8 million will be paid in cash. The Oak Grove and Maple Eagle Buyer will also fund $31.7 million in estimated cure costs, tax liabilities, postpetition payables, and other administrative liabilities upon closing. Receivables related to the marketing agreement with Robindale remain with the estate. In addition, Javelin will cause $10 million in cash to be put on the Oak Grove and Maple Eagle Buyer s balance sheet to support the purchased assets following the closing, and Javelin and the Debtors will enter into a series of coal sales and 7 Docket No

12 Main Document Page 12 of 13 a marketing agreement after Javelin s selection as Successful Bidder in order to ensure that the Debtors have the liquidity necessary to maintain operations up to the closing of the Murray transaction. Murray and Javelin have indicated that they are prepared to complete and close the transaction prior to April 12, 2019, if possible. V. Selection of the Back-Up Bid. 28. Pursuant to the Bidding Procedures Order, the Debtors have additionally selected the Opening Bid as the back-up bid on the terms set forth in the DIP Lender's Proposed Agreement [Docket No. 512]. I understand that while the DIP Lenders have agreed to be the back-up bidder, they have revised the Proposed Agreement in certain regards. I further understand that the Debtors take the position that the DIP Lender s Proposed Agreement is binding and cannot be revised in the manner in which the DIP Lenders propose and that all parties reserve all rights with respect to this issue. 29. Based upon the extensive marketing and auction process described above, I believe that the Bluestone/Contura Bids and the Murray Bid are the best and highest offer for the Debtors assets under the circumstances and is the best avenue for avoiding a piecemeal and likely value-destructive liquidation of the Debtors Estates. [Remainder of page intentionally left blank.] 12

13 Main Document Page 13 of Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing statements are true and correct to the best of my knowledge, information, and belief. Dated: April 2, 2019 /s/ Leon Szlezinger Leon Szlezinger Managing Director and Joint Head of Restructuring & Recapitalization Jefferies LLC