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IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF KENTUCKY (Owensboro Division)

In re: ) Chapter 11 ) Hartshorne Holdings, LLC, et al., ) Case No. 20-40133 (ACS) ) Debtors.1 ) (Jointly Administered)

OMNIBUS REPLY OF PERELLA WEINBERG PARTNERS LP TO OBJECTIONS OF TRIBECA AND UNITED STATES TRUSTEE TO SECOND INTERIM FEE APPLICATION

Perella Weinberg Partners LP (“PWP”), the investment banker to the Debtors in these

chapter 11 cases, hereby respectfully replies to the objections (collectively, the “Objections”) of

Tribeca [Docket No. 656] (the “Tribeca Objection”) and the United States Trustee [Docket No.

667] (the “UST Objection”) to its Second Interim Fee Application, and incorporates by reference

the Declaration of Kevin Cofsky in support of this reply attached as Exhibit 1 hereto (the

“Cofsky Declaration”).

Preliminary Statement

1. The Debtors engaged PWP to provide general financial advisory, investment

banking, restructuring, sale and financing services to the Debtors in these chapter 11 cases

pursuant to that certain Engagement Letter dated January 24, 2020 (the “Engagement Letter”)

attached as Exhibit 2 hereto. The terms of the Engagement Letter were heavily negotiated

between the Debtors, PWP and Tribeca—all sophisticated parties negotiating at arm’s length—

and resulted in a fee structure designed to compensate PWP for the range of services the Debtors

requested that PWP provide, while accounting for a number of material uncertainties which

1 The Debtors in these chapter 11 cases and the last four digits of each Debtors’ taxpayer identification number are as follows: Hartshorne Holdings, LLC (3948); Hartshorne Mining Group, LLC (0063); Hartshorne Mining, LLC (1941); and Hartshorne Land, LLC (5582). The Debtors’ headquarters are located at 373 Whobry Road, Rumsey, Kentucky 42371.

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could alter the direction of the Debtors’ chapter 11 cases. Those uncertainties included (i)

whether the Debtors’ chapter 11 cases would proceed down a sale or restructuring path, (ii)

whether a third-party buyer would be willing to pay more for the Debtors’ assets than the amount

of Tribeca’s secured debt or even dedicate the resources to participate in the sale process in light

of Tribeca’s secured debt, and (iii) whether Tribeca would decide to credit bid for the Debtors’

assets after a full sale process had been run.

2. In the face of such uncertainties, and recognizing the time and effort that PWP

was going to expend on a dual-track sale and restructuring process, the Engagement Letter

provided a fair way to compensate PWP for the work that the Debtors and Tribeca requested that

PWP undertake, regardless of the outcome. Under the terms of the Engagement Letter, PWP

would be paid a monthly fee for its services. PWP would also be paid a “Sale Process Fee” for

running a comprehensive sale process, even if such process did not result in a sale to a third

party. (A separate “Sale Incentive Fee” would be paid upon a successful sale (subject to certain

carve-outs including for a Tribeca credit bid), but has not been triggered.) PWP would also be

paid a “Restructuring Fee” in the case of a “Restructuring”, but 75% of the Sale Process Fee and

a significant portion of the monthly fees would be credited against the Restructuring Fee. This

significant crediting mechanism provided a substantial benefit to the Debtors and their creditors

(including Tribeca) by effectively combining the Sale Process Fee, the Restructuring Fee and the

monthly fees into one fee, notwithstanding PWP’s obligation to provide general financial

advisory, investment banking, restructuring and sale services to the Debtors.

3. When negotiating the Engagement Letter, PWP was also concerned about the

timing of payment of its fees. If the Restructuring Fee was only payable upon consummation of a

“Restructuring”, and if the value of the Debtors’ business turned out to be less than the amount

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of the Debtors’ secured debt, it was predictable that in the later stages of the Debtors’ chapter 11

cases Tribeca might seek to litigate over whether the Restructuring Fee should be paid. For this

reason, PWP specifically negotiated the Sale Process Fee to be earned and payable earlier in the

chapter 11 cases, and after a comprehensive sale process had been run, so as to avoid a fight over

distribution of value, and ensure that PWP was paid for services rendered pursuant to the terms

of its Engagement Letter.

4. Unfortunately, while PWP ran a fulsome sale process, there was at the end of the

day no viable third party buyer for this distressed coal asset, and the auction was cancelled. The

outcome does not change the fact that PWP earned its monthly fees and its Sale Process Fee per

the terms of the Engagement Letter.

5. Tribeca has objected to payment of PWP’s Sale Process Fee, even though Tribeca

played an integral role in the negotiation of PWP’s fee structure (resulting in a substantial

reduction in the fees that PWP could earn pursuant to this engagement), and argued for PWP’s

retention under Bankruptcy Code section 328 at the March 26, 2020 hearing on PWP’s retention.

While PWP understands that Tribeca is disappointed with its economic result in these cases,

Tribeca lacks a valid basis under section 328 (which is binding on Tribeca per the terms of the

Retention Order (defined below)) or otherwise to set aside fees validly earned and payable to

PWP under the terms of the Engagement Letter.

6. The United States Trustee has also objected to PWP’s Sale Process Fee under

section 330 of the Bankruptcy Code. Its right to do so was reserved under PWP’s Retention

Order. It appears that the United States Trustee is seeking a more fulsome record in support of a

finding by the Bankruptcy Court that PWP’s fees are reasonable compensation for actual,

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necessary services. PWP is confident that the section 330 reasonableness factors have been

satisfied as described in detail below.

7. Per Bankruptcy Code section 330(a)(3)(F), professionals participating in the

bankruptcy process are to be paid in line with market rates. And the focus under section 328 is to

incentivize “the most competent professionals . . . to be available for complicated capital

restructuring and the development of successful corporate reorganization”. Donaldson Lufkin &

Jenrette Sec. Corp. v. Nat’l Gypsum Co. (In re Nat’l Gypsum Co.), 123 F.3d 861, 862-63 (5th

Cir. 1997). Investment banking fees reflect the market rate and the opportunity cost for the

professionals’ time and skills, which are in high demand. PWP has skilled professionals, and due

to its familiarity with the Debtors and their industry was in the best position of any investment

bank to run the Debtors’ sale process. The rates it charged for this engagement were if anything

below market.

8. PWP should receive the benefit of its bargain for the services it has provided to

the Debtors and their estates in these chapter 11 cases. The fees sought in the Second Interim Fee

Application are reasonable and should be approved.

Background

9. On March 2, 2020, the Debtors applied to retain PWP as their investment banker

in these chapter 11 cases [Docket No. 91] (the “Retention Application”).

10. On March 23, 2020, the Official Committee of Unsecured Creditors (the

“Committee”) objected to PWP’s retention [Docket No. 167].

11. On March 26, 2020, the Debtors replied to the Committee’s objection [Docket

No. 210] (the “Retention Reply”), including by attaching an analysis of precedent comparable

investment banking fees, which analysis is re-attached as Exhibit A to the Cofsky Declaration

(the “Precedent Debtor Fee Analysis”).

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12. Also on March 26, 2020, the Bankruptcy Court heard oral argument on the

Retention Application and overruled the Committee’s objection. The hearing transcript is

attached as Exhibit 3 hereto (the “Transcript”).

13. Following the hearing, on March 27, 2020, the Bankruptcy Court entered an order

granting the Retention Application and authorizing PWP’s retention pursuant to the terms of the

Engagement Letter [Docket No. 218] (the “Retention Order”).

14. On June 12, 2020, PWP submitted its first interim fee application [Docket No.

403] (the “First Interim Fee Application”).

15. On July 20, 2020, the Bankruptcy Court granted the First Interim Fee Application

[Docket No. 514].

16. On September 17, 2020, PWP submitted its second interim fee application

[Docket No. 615] (the “Second Interim Fee Application”).

17. On October 8, 2020, the “Tribeca Entities” (as defined in the Tribeca Objection)

(collectively “Tribeca”) filed the Tribeca Objection, objecting to the Second Interim Fee

Application.

18. On October 19, 2020, the United States Trustee filed the UST Objection,

objecting to the Second Interim Fee Application.

19. On October 20, 2020, the Bankruptcy Court filed a notice of hearing scheduling

the Second Interim Fee Application to be heard on November 4, 2020 [Docket No. 668].

The Terms of Retention

20. Pursuant to the Engagement Letter, PWP agreed to provide the Debtors with the

following services:

(i) General financial advisory and investment banking services;

(ii) Restructuring services;

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(iii) Financing services; and

(iv) Sale services.

21. The Engagement Letter provides that PWP will be compensated for such services

as follows:

(i) A monthly fee of $150,000. The first two monthly fees are 100% creditable against the Restructuring Fee, and $100,000 of each subsequent monthly fee is creditable against the Restructuring Fee.

(ii) A “Restructuring Fee” of $1.5 million, payable upon the earlier of consummation or court approval of a “Restructuring”, meaning a recapitalization, modification, or restructuring of the equity and/or debt of debtor Hartshorne Mining Group, LLC and its subsidiaries.

(iii) A “Financing Fee” payable based on gross proceeds of a financing, subject to certain carve-outs, including no Financing Fee payable on DIP financing received from Tribeca, even if the Debtors instructed PWP to conduct a broad DIP marketing process.

(iv) A “Sale Incentive Fee” of 0.50% of the transaction value from a sale (excluding a credit bid by Tribeca in which no other party bid).

(v) A “Sale Process Fee” of $1,000,000, payable following an auction or court approval of a sale. The Engagement Letter specifically contemplated that if the auction were cancelled, the Sale Process Fee would also be payable. 75% of the Sale Process Fee is creditable against the Restructuring Fee.

The Fee Applications

22. The First Interim Fee Application sought fees of $450,000. This reflected three

monthly fees of $150,000 each for the months of March, April and May 2020. The First Interim

Fee Application was granted [Docket No. 514]. (Reimbursement of PWP’s expenses was also

sought and approved. However, a portion has not been paid.)

23. The Second Interim Fee Application sought fees of $1.45 million. This reflected

three monthly fees of $150,000 each for the period from June 1, 2020, through August 31, 2020,

plus the Sale Process Fee of $1,000,000. The Sale Process Fee became payable on June 15, 2020,

because, as explained below, in spite of a comprehensive sale process run by PWP, no qualified

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bids for the Debtors’ assets were received, and the Debtors cancelled the auction [Docket No.

409].

24. Payment of a Restructuring Fee will be triggered (subject to Bankruptcy Court

approval) upon a Restructuring, which includes any restructuring of the Debtors’ equity and/or

debt. The Restructuring Fee is $1.5 million per the terms of the Engagement Letter. However, it

is subject to significant crediting of other fees earned by PWP in these cases. Specifically, 75%

of the Sale Process Fee ($750,000) is credited against the Restructuring Fee. In addition, 100%

of the first two monthly fees ($300,000) are credited against the Restructuring Fee, and 66.7% of

subsequent monthly fees ($100,000 each, or a total of $400,000 for the following four months

covered in the first and second interim fee applications) are credited against the Restructuring

Fee. Therefore, based on the six monthly fees and the Sale Process Fee applied for in PWP’s two

interim fee applications, credits against the Restructuring Fee will total $1.45 million, reducing

the Restructuring Fee to $50,000.

25. To date PWP has sought approval of $1.9 million in total fees. Assuming six

monthly fees, the Sale Process Fee, and an eventual Restructuring, PWP’s total fees for the case

would be $1.95 million. If any further monthly fees are sought and approved, the Restructuring

Fee will be reduced to $0 per the crediting mechanism described above.

Argument

I. Tribeca’s Objection Should Be Overruled On The Facts And As A Matter Of Law.

A. Tribeca actively participated in the negotiation of PWP’s fees and supported PWP’s retention on the terms and conditions that it is now contesting.

26. Tribeca does not get to have its cake and eat it too. At the hearing on March 26,

2020, Tribeca’s counsel stated “Tribeca believes that PWP is going to bring value to the deal,

that they deserve to be compensated for that, that they need the assurance Mr. Lerner has

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represented to the Court they need to proceed forward [section 328 treatment except as regards

the United States Trustee], and I’ve got a grave concern that if we delay their appointment, it’s

going to have a dramatic [materially] adverse impact on this case going forward.” Transcript at

21:24-22:4 (emphasis added).

27. Indeed, Tribeca not only supported PWP’s retention but was active in negotiating

PWP’s compensation structure: “Tribeca . . . over an extended time period negotiated with

PWP to try to arrive at what it hoped could be the best possible fee arrangement with PWP,

and we ended up where we ended up. . . . [W]e really would urge the Court to approve the

application as submitted on a going-forward basis.” Id. at 21:20-22:10 (emphasis added).

28. Thus, Tribeca was keenly aware that PWP’s services were essential to the success

of these chapter 11 cases and believed that the terms of PWP’s retention were reasonable.

Indeed, as the secured lender, hoping for a third-party bid in excess of its secured debt, Tribeca

believed that it was the primary beneficiary of the sale process services PWP would provide:

“We are the party injecting the money into the deal to make the sale process go, and I

understand that that is for our benefit, as well as the rest of the creditor body in this case . . . .”

Id. at 22:5-22:8 (emphasis added).

29. Why was PWP’s retention important to the Debtors, Tribeca and the chapter 11

cases? At the same hearing, counsel for the Committee stated “we’re not convinced that even an

investment banker is needed here”. Id. at 18:17-18:18. In response, counsel to the Debtors

strongly disagreed, explaining that “if the Court doesn’t approve the retention on this basis, then

we will not have an investment banker. I’m frankly shocked to hear the Committee say that there

is no need for an investment banker. This is not an easy asset to sell in this environment and if

the Committee believes that either Squire or FTI or the Debtors’ management, which is very,

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very thin, can somehow market these assets to the benefit of the creditors, they are as dead

wrong as any committee position I have ever heard. If they want this case to liquidate

tomorrow, this is a wonderful way to do that, and this is in the backdrop of a heavily-negotiated

fee in which Perella Weinberg dramatically reduced the amount of its fees at the request of

our lender, Tribeca, so that it’s already below market. There is no other investment banker that

will come into this case now, in any event, so it’s not like we can replace them.” Id. at 19:19-

20:9 (emphasis added).

30. Unfortunately, although PWP ran a fulsome sale process, leveraging its

experience as a seasoned investment banker both in restructurings and in the coal sector, no

qualified bids were received. But if PWP had not performed its work, the result would have been

guaranteed failure. Tribeca wanted PWP to run a sale process, and PWP did so. Tribeca’s

objection rings hollow—that PWP should not be paid pursuant to the terms of its Engagement

Letter, which Tribeca negotiated and supported and pursuant to which PWP provided critical

services for the benefit of the Debtors and Tribeca, now that a third party bid has not

materialized and Tribeca is seeking to protect its own recovery in these cases.

B. The terms of PWP’s retention were approved by the Bankruptcy Court under Bankruptcy Code section 328 other than with respect to the United States Trustee. Under applicable law, Tribeca has no basis to object to PWP’s fees.

31. The Retention Order authorized PWP’s retention under Bankruptcy Code section

328(a) which provides that a debtor in possession,

“with the court’s approval, may employ . . . a professional person . . . on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis. Notwithstanding such terms and conditions, the court may allow compensation different from the compensation provided under such terms and conditions after the conclusion of such employment, if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions.”

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32. The compensation provisions of Bankruptcy Code section 330 are explicitly

“subject to section[] . . . 328”. That means that when a professional person seeks reasonable

compensation, the Bankruptcy Court has already implicitly found that the terms and conditions

of its employment were reasonable. See, e.g., In re Relativity Fashion, LLC, 2016 WL 8607005,

at *7 (Bankr. S.D.N.Y. Dec. 16, 2016) (Wiles, J.) (“I approved the fees . . . . I could not do that

without finding that the fees were reasonable and consistent with market standards.”). Therefore,

the Bankruptcy Court does not need to treat the factual record as blank or act “as though . . . no

pre-approval of the transaction fees had been given at all, and as though there had been no prior

determination as to the reasonableness of the fees or as to whether the fees were consistent with

market standards”. Id.

33. Of course, under section 328, the Bankruptcy Court may nonetheless allow

compensation different from the original compensation contemplated, if such terms and

conditions prove to have been improvident in light of developments not capable of being

anticipated at the time of the fixing of such terms and conditions.

34. It is striking that the Tribeca Objection does not include a single citation to statute

or case law, or make any attempt to engage with these statutory provisions and the standards of

review created by them. If it had, it would have been obvious for the reasons above that the terms

and conditions of PWP’s compensation were provident, and that the very things that have

occurred—the possible infeasibility of selling the Debtors’ assets to a third party for value in

excess of the secured debt; the fight on the back end of the cases over how to distribute value—

were the factors specifically anticipated in the Engagement Letter and that resulted in the present

fee structure.

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35. In the Sixth Circuit, the controlling precedent for interpretation of section 328 is

Nischwitz v. Miskovic (In re Airspect Air, Inc.), 385 F.3d 915, 917, 920 (6th Cir. 2004). See also

The Cadle Company II, Inc. v. Fashion Shop of Kentucky, Inc. (In re Fashion Shop of Kentucky,

Inc.), 350 Fed. App’x 24, 27-28 (6th Cir. 2009) (applying the Airspect “totality of the

circumstances” test).

36. The issues before the Sixth Circuit in Airspect and in Fashion Shop were whether

fees had been pre-approved under section 328, or whether fees were subject to section 330

review, and if they had been pre-approved whether they had become improvident.

37. The Sixth Circuit standard annunciated in Airspect is that whether a court “pre-

approves” a fee arrangement under section 328 should be judged “by the totality of the

circumstances, looking at both the application and the bankruptcy court’s order”. Relevant

factors may include whether either the application or the order expressly invoked section 328.

385 F.3d at 922.

38. In Airspect, the Sixth Circuit observed that neither the application nor the order

referred to section 328, nor discussed the reasonableness of the fee. Nor did either party invoke

section 328 in briefing and arguing the objection to the fee application. Id.

39. In contrast, in Fashion Shop, the Sixth Circuit applied the Airspect test and found

that the fees had been pre-approved, because the retention application had stated a fixed rate of

compensation, and had been approved in its entirety, incorporating a statement as to

reasonableness. 350 Fed. App’x 24, 27-28 (6th Cir. 2009).

40. Looking at the “totality of the circumstances”, including the Retention

Application, the Retention Reply, the Transcript, and the Retention Order, it is clear that section

328 is applicable in the present case. See Retention Application ¶¶ 4, 32-36 (“The Debtors seek

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approval of the terms of the Engagement Letter under section 328(a) of the Bankruptcy

Code . . . .”); Retention Reply ¶¶ 4, 7, 16-20 (explaining that retention was being sought under

section 328); Transcript at 13:14-13:21, 15:2-15:23, 17:1-17:25, 23:14-23:19 (discussing the

difference between section 328 retention approval, and the section 330 review right being sought

by the Committee, which was denied); Retention Order ¶¶ 2, 4 (“PWP shall be compensated and

reimbursed pursuant to section 328(a) of the Bankruptcy Code, and . . . PWP’s fees and expenses

shall not be evaluated under the standard set forth in section 330 of the Bankruptcy Code” except

that the United States Trustee “shall have the right to object . . . based on . . . section 330”).

41. Further, “developments not capable of being anticipated at the time of the fixing”

of the fee structure have not occurred. PWP’s fees flow straight from the terms of its

Engagement Letter, which was negotiated with Tribeca, and approved by the Bankruptcy Court.

In the similar case of In re HNRC Dissolution Co., the district court evaluated whether

unanticipated circumstances rendered the fee structure improvident. While parties had argued

that a credit bid should not be included in the sale price used for a fee calculation, credit bidding

(and its inclusion in the calculation) had been specifically agreed to by the parties. Thus, the

circumstance was clearly anticipated, and the fees were valid under section 328. 340 B.R. 818,

822, 827-28 (E.D. Ky. 2006). There is no reason under the facts here to reach a different result.

42. For the reasons explained above, PWP’s fee structure was specifically designed to

account for the risk that no one other than Tribeca would be willing to bid for the assets of the

Debtors and that the auction would be cancelled, notwithstanding a robust sale process run by

PWP. The parties agreed, and the Engagement Letter contemplated, that PWP would be

compensated for running a sale process for the Debtors regardless of whether such process

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resulted in a successful sale to a third party. It would be unfair to sustain the Tribeca Objection

and set aside PWP’s duly earned Sale Process Fee now that PWP has completed its work.

C. Tribeca’s arguments about the reasonableness of PWP’s fees miss the mark.

43. Finally, Tribeca “question[s] whether the services rendered by PWP merit the

payments requested”. Tribeca Objection, p. 3. Tribeca argues there should be more information

about whether the fees requested are reasonable.

44. As explained above, PWP was retained under section 328, its terms of retention

were and are reasonable, the Engagement Letter remains in effect, and Tribeca does not have

standing to challenge specific PWP time entries for section 330 reasonableness review.

Nonetheless, since the United States Trustee is also objecting to PWP’s fees on the grounds of

reasonableness, as is its right under the Retention Order, PWP believes that the response below

to the UST Objection demonstrates the reasonableness of the compensation sought.

II. The UST Objection Should Be Overruled Because PWP’s Fees Are Reasonable Under Section 330 Of The Bankruptcy Code.

45. The UST Objection should be overruled because PWP’s fees are reasonable under

section 330 of the Bankruptcy Code. As explained above, while Tribeca cannot challenge PWP’s

fees under section 330, the United States Trustee can. Accordingly, PWP hereby supplements the

time entries included in its fee applications to demonstrate satisfaction of the section 330 factors

and explain the reasonableness of its fees. Prior to doing so, some background is helpful about

investment banking fees more generally, and their review by bankruptcy courts.

A. Monthly fees are not a base measure of the value of PWP’s services. The Sale Process Fee is not a fee enhancement.

46. The United States Trustee does not object to PWP’s monthly fees. Rather, the

UST Objection is limited to PWP’s Sale Process Fee. The United States Trustee’s argument—

that the $450,000 in monthly fees sought by PWP is the appropriate measure of compensation for

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PWP’s services—is misplaced. The fee structure is a package deal. The Sale Process Fee is not a

“fee enhancement” or “bonus”.

47. Investment bank retention arrangements generally include both monthly and

transactional fee elements. In re Relativity Fashion, LLC, 2016 WL 8607005, at *1-5 (Bankr.

S.D.N.Y. Dec. 16, 2016) (Wiles, J.). The primary compensation for services rendered is via

transaction fees, as is the case for investment bankers both in and outside of chapter 11. Id. These

fees are standard and enforced by state courts in non-bankruptcy matters. Id. The United States

Trustee’s assertion that the monthly fee is equivalent to a standard hourly rate, whereas a

transaction fee is a “fee enhancement” or a “bonus”, or must be triggered by “a special kind of

success” is incorrect. Id. Rather, transaction fees such as the Sale Process Fee are “part of the

standard, negotiated, base compensation for the investment banker”. Id. As explained in the

Cofsky Declaration, it is standard in the investment banking industry to charge fees in this way.

The monthly fees are only a part of the aggregate fee package for which PWP negotiated and

which is traditional practice in the industry. Investment banker fees are structured that way to

motivate the banker to achieve specific objectives, such as, in this case, running a comprehensive

sale process.

B. The section 330 factors have been satisfied.

48. Bankruptcy Code section 330 provides that, after notice and hearing, and subject

to section 328, the bankruptcy court may award to a professional person “reasonable

compensation for actual, necessary services rendered”. 11 U.S.C. §330. In determining the

amount of reasonable compensation, the bankruptcy court shall consider the nature, the extent,

and the value of such services, taking into account all relevant factors, including those that

follow. On the basis of these factors, PWP’s fees are reasonable.

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a. The time spent by PWP was substantial.

49. The First Interim Fee Application identified 739.5 hours of work by PWP from

February 20, 2020 through May 31, 2020. The Second Interim Fee Application identified 262.0

hours of work from June 1, 2020 through August 31, 2020. Thus, PWP spent a total of 1,001.5

hours during the two interim fee periods providing services to the Debtors. The time expended

was significant, including in relation to the sale process, work for which spanned both interim

fee periods.

b. The rates charged by PWP were reasonable.

50. PWP’s rate structure is reasonable. Notably, PWP made significant concessions to

its fees from a previous engagement letter with the Debtors (the “Previous Engagement Letter”).

The Previous Engagement Letter was heavily renegotiated among the Debtors, PWP and Tribeca

resulting in the current Engagement Letter. The Previous Engagement Letter provided the

potential for PWP to earn up to an estimated $3.5 million in total fees. PWP is currently looking

at a reduced estimated total fee of $1.95 million (based on the calculation above), or $1.55

million less than under its Previous Engagement Letter.

51. In fact, as discussed at the March 26, 2020 hearing, PWP’s fees under the

Engagement Letter are below market. As counsel to the Debtors explained, “from an economic

perspective, PWP is kind of at their bottom line dollar of what they would take an engagement

like this for . . . . [T]his is in the backdrop of a heavily-negotiated fee in which Perella Weinberg

dramatically reduced the amount of its fees at the request of our lender, Tribeca, so that it’s

already below market.” Transcript at 14:7-14:15, 18:4-18:6, 20:4-20:18.

52. PWP made clear that while a restructuring of this size, with the fees at issue,

would normally be outside of PWP’s targeted transactions, PWP would nonetheless be willing to

provide investment banking services, if Tribeca approved the fee structure and agreed not to

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object to PWP’s fees, which it did, and PWP had certainty as to its fees in Bankruptcy Court by

way of retention under section 328.

53. As discussed above, that fee structure provided that PWP would be compensated

for providing financial advisory, investment banking, sale, restructuring and financing services,

but that a large portion of PWP’s monthly fees and Sale Process Fee would be credited against

the Restructuring Fee. In addition, PWP’s fee structure carved out payment of the Financing Fee

and Sale Incentive Fee in certain cases relating to Tribeca.

54. The United States Trustee takes issue with the “hourly rate” of PWP’s

professionals. But PWP, as is customary in its industry, does not bill hourly, and the specific

amount of work put into a specific case does not translate into an hourly rate that is comparable

to that charged by other professionals in the case. As explicitly stated in the Retention

Application, “Investment bankers such as PWP do not customarily charge for their services on

an hourly basis. Instead, they charge a monthly advisory fee, plus additional fees contingent on

the occurrence of specified transactions or events. The Engagement Letter follows this fee

structure . . .” Retention Application ¶ 14. As the district court explained in In re HNRC

Dissolution Co., in the context of section 328, there is no windfall when an investment bank

receives the equivalent of a high hourly rate—“simply the need to protect the professional’s

expectation of compensation and ensure that the most highly qualified professionals remain

willing to participate in the bankruptcy process.” 340 B.R. 818, 827-28 (E.D. Ky. 2006). The

facts here are the same as in HNRC: the objectors do not contend that PWP “failed to perform

any one specific function required in the engagement letter”. Id. “[T]he terms of this fee structure

were negotiated at arm’s length by sophisticated parties, approved by the Bankruptcy Court . . .

and unaffected by any circumstances that . . . were unforeseeable.” Id. As is well-understood,

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bankruptcy courts do not award fees based on “conservation of the estate”. Id. Rather, since

1978, the focus has been on incentivizing “the most competent professionals . . . to be available

for complicated capital restructuring and the development of successful corporate

reorganization”. Donaldson Lufkin & Jenrette Sec. Corp. v. Nat’l Gypsum Co. (In re Nat’l

Gypsum Co.), 123 F.3d 861, 862-63 (5th Cir. 1997).

c. The services provided were necessary for case administration and beneficial at the time at which the services were rendered.

55. PWP was engaged to provide valuable services to the Debtors, and did indeed

provide those services, which were beneficial at the time rendered, although the sale process

ultimately was not successful. While the auction ultimately did not go forward, section 330 looks

not at results but at process. A good process should be appropriately compensated, and the

United States Trustee does not assert that PWP failed to run a robust process. In contrast,

services that were not reasonably likely to benefit the Debtors’ estates, or necessary to the

administration of the case, should not be compensated. As explained above, both the Debtors and

Tribeca emphasized at the hearing on PWP’s retention that they strongly supported the retention

of PWP because of the importance of having an investment banker to run a sale process for this

difficult-to-sell asset and to maximize value for the Debtors, their estates and creditors.

56. As the Fifth Circuit explained in Barron & Newburger, P.C. v. Texas Skyline, Ltd.

(In re Woerner), the section 330(a)(3)(C) compensation standard is “necessary . . . or beneficial

at the time . . . rendered”, as contrasted with the section 330(a)(4)(A)(ii) bar on compensation for

services not necessary or reasonably likely to benefit the debtor’s estate. 783 F.3d 266, 272 (5th

Cir. 2015). Accordingly, compensation is appropriate for services that “were reasonable when

rendered but which ultimately may fail to produce an actual, material benefit”. Id. at 274. These

are “good gambles” that “were objectively reasonable at the time they were made”. Id. Given the

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past support of PWP’s retention by the Debtors and Tribeca, it is clear that PWP’s retention and

services were “reasonable at the time”. Id. at 276-77. Tribeca’s change in tune reflects sour

grapes over an unfavorable outcome.

57. PWP performed numerous and significant services which were beneficial for the

Debtors and their estates including the following:

• PWP developed a comprehensive financial model for the Debtors from the ground up. Because of changes to the Debtors’ operations, the Debtors’ earlier financial model was no longer useful, and the Debtors did not have the in-house capacity to recreate it. A sale process could not begin in earnest until the Debtors had a working, flexible, go-forward financial model in place, useful for both management and potential buyers in evaluating the Debtors’ assets. PWP spent a significant amount of time developing this new financial model. This work was significantly different, and substantially more work for PWP, than in a typical engagement where company management already has a viable financial model in place.

• PWP prepared marketing materials and other presentations for potential buyers (and for potential DIP lenders), including operational updates.

• PWP organized and maintained a virtual data room that contained approximately 400 documents. See Exhibit B to the Cofsky Declaration for a data room index.

• In order to prepare its financial model, marketing materials, and data room, PWP undertook extensive diligence to understand the Debtors’ business financially and operationally, including the Debtors’ projections, liquidity, and capital structure.

• PWP executed a thorough post-petition section 363 sale process pursuant to the process timeline attached to the Cofsky Declaration as Exhibit C.

• PWP identified and contacted 38 parties, and tracked status and progress with each of them. Specifically, PWP identified both strategic (i.e., mining) and financial (i.e., non-mining) parties as potential buyers. 27 of the 38 parties passed in the first instance. Of the remainder, nine parties executed non-disclosure agreements (“NDAs”) for data room access. PWP then worked with those parties who executed NDAs to try to obtain viable bids for the Debtors’ assets.

• PWP updated the Debtors and Tribeca weekly as to the status of the sale process.

• PWP answered questions and coordinated due diligence issues that arose out of potential buyers’ review of the data room. PWP also coordinated presentations by management to interested parties.

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• PWP evaluated the indications of interest and bids that were received, and summarized them for the board, management, and lenders.

• PWP performed the ground work necessary to support an auction and a sale hearing.

• In addition to all of this necessary sale process work, PWP also performed other investment banking services including general corporate advice, communications, and updates with the Debtors and other parties in interest about strategic alternatives, the restructuring process, the M&A process, DIP financings, and lender negotiations. PWP was hired to evaluate, and did evaluate, strategic alternatives; was active in the DIP financing process; and participated in negotiations between the Debtors and their creditors.

• Finally, Mr. John Messina of PWP testified at length at the sale hearing on July 22, 2020, providing both direct testimony and testimony upon cross-examination by counsel to Tribeca and counsel to certain utility companies. His testimony from the hearing transcript is attached as Exhibit 4 hereto (the “Sale Hearing Transcript”). Mr. Messina had also been deposed prior to that hearing. Some of the key points elaborating on the work done by PWP and on the difficulty of a sale to a third party are reiterated below. See generally Sale Hearing Transcript at 1-26.

– Mr. Messina explained how prepetition PWP had been engaged by the Debtors’ parent to run a quiet sale process and how PWP contacted ten parties through that process. PWP was very familiar with the Debtors because of its prepetition relationship with them, making PWP significantly more effective for the Debtors to retain than a firm that did not know the management team, the financial information, the business plan, the operations, the mine, and the equipment.

– Post-petition, PWP reviewed all of that information again, helped the management team prepare information to include in the virtual data room, and worked extensively with management to prepare for a sale process.

– Mr. Messina explained that the majority of the 38 parties that it contacted, it identified through its industry knowledge, and a few additional parties were suggested by management because they had approached the company in the past to suggest a strategic transaction.

– Mr. Messina explained that the most important element of the data room that was not publicly available was the financial model (which PWP developed).

– Of the nine parties who signed NDAs, no qualifying bids were received. There was one highly conditional, non-binding indication of interest, but it was interested in being assigned contracts but not in operating the mine.

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Its bid was conditional on modification of contractual terms, among other things. No one expressed interest in the go-forward business, because of the cost structure, and lack of interest in thermal coal.

– Mr. Messina explained how coal prices are very low given over-supply and a decline in demand, and that the mine’s operating margins were very negative and without a clear path to improvement. The contracts to sell coal at a fixed price higher than the current market price did have value, but due to contractual provisions regarding the sourcing of the coal, could not be assigned to the operator of a different mine without being modified, limiting their salability. The sourcing limitation also likely affected interest in the Debtors’ assets more generally from other parties.

– Mr. Messina testified that the Debtors had done everything reasonably possible to maximize the chances of success of the sale process.

58. Running the sale process described above also provided significant value in the

case because it demonstrated to the Debtors and all stakeholders the market’s view of the value

of the Debtors’ estates.

59. The Debtors highly valued PWP’s services in these cases in part because PWP

was already familiar with the business and could hit the ground running. No other investment

bank could have been ready on Day 1 of the chapter 11 cases to render the services described

above. As was explained at the March 26 hearing, “running a multi-million-dollar substantial

sale process over a period of several months is a very time- and expense-intensive endeavor.”

Transcript at 17:25-18:2. The services that PWP provided were significant, necessary and

beneficial to the Debtors’ estates.

d. The services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problems, issues, and tasks addressed.

60. Because PWP did not bill using hourly rates (which as noted above is customary

for investment banker retentions), this factor is of limited relevance. That said, PWP acted timely

in performing its duties, which were complex and substantial, and documented over 1,000 hours

for the work performed. The time records and descriptions of services included with the fee

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applications substantiate that PWP put meaningful effort into this engagement. As described in

more detail above, PWP performed a variety of value-added tasks over the course of these cases,

which were complex and important for the Debtors’ estates.

e. The professionals involved have demonstrated skill and experience in the bankruptcy field and in their other professional fields of expertise.

61. PWP brought to this engagement an experienced team of leading restructuring

and mining investment bankers.

62. The engagement is being led by Mr. Kevin Cofsky

(https://pwpartners.com/employee/kevin-m-cofsky), a partner in the restructuring practice in

New York. He has more than 25 years of banking and legal experience. Engagements in the

energy sector include Energy Future Holdings, Sunbury Generation, Calpine, USPowerGen,

Legacy Reserves, Blackhawk Mining, Peabody, Gastar, Memorial Production, and Atlas

Resources. Other engagements include Georgia Gulf Corp., Del Monte, Pernix Therapeutics,

Texas Rangers, Global Crossing, Haights Cross Communications, Macy’s, New World

Networks, Ormet Aluminum, Plum Point, Triangle Wire and Cable, and the Texas Rangers. Mr.

Cofsky was previously a principal at Kramer Capital, a managing director at Evercore, an

associate with The Beacon Group, an attorney at Cravath, Swaine & Moore, a banking analyst at

Houlihan Lokey, and a clerk on the New Jersey Supreme Court. In short, Mr. Cofsky has

extensive restructuring experience including in the energy sector. He holds a BSE from the

Wharton School of Business, a MGA from the Fels Center of Government, and a JD from the

Law School at the University of Pennsylvania.

63. The mining and coal industrial team is led by Mr. Brennan Smith

(https://pwpartners.com/employee/brennan-smith) and Mr. John Messina

(https://pwpartners.com/employee/john-messina).

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64. As described in more detail in the team bios and coal credentials attached as

Exhibit D to the Cofsky Declaration, PWP and its team have impressive coal and energy

experience, including with Peabody Energy, Arch Coal, Rio Tinto, Alpha Natural Resouces,

Foundation Coal, Foresight Energy, Warrior Met Coal, and Massey Energy, in mergers,

acquisitions, restructurings, and financings.

65. Mr. Smith is a partner and the head of PWP’s Chicago office. He focuses on

metals and mining and other industrial M&A and financing transactions. He was previously a

managing director at Citigroup. He holds a BBA from Notre Dame and an MBA from Chicago.

66. Mr. Messina is a managing director in Chicago. He focuses on metals and mining

and other industrial M&A and financing transactions. He was previously a director at

PricewaterhouseCoopers, and also worked in the metals and mining team at Citigroup. He holds

a bachelor’s degree from the University of Virginia.

67. In summary, the PWP team is well-qualified and has demonstrated skill and

experience relevant for this engagement, with excellent credentials and experience in

restructuring and the coal and energy industries.

f. The compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than bankruptcy cases.

68. Investment banking fees are expensive. There is no question about that. But

sophisticated parties enter into such engagements in the exercise of their business judgment

because of the value that investment bankers bring to the table in terms of industry expertise and

experience, financial modeling skill, marketing ability, business contacts and network, and work

ethic, among other reasons.

69. PWP’s fees are reasonable and comparable to those of its peers. Indeed, the

$150,000 monthly fees and the $1 million Sale Process Fee sought here are small in comparison

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to the fees in other cases, both in and out of chapter 11. Notably, as explained above, the

crediting mechanism is on track to reduce the Restructuring Fee from $1.5 million to $50,000,

meaning that there are not hidden fees, and PWP will not be coming back to the Bankruptcy

Court for further significant transactional fees.

70. For example, in recent chapter 11 cases, where market data is transparent and

publicly available, Judge Isgur in the Southern District of Texas recently approved the retention

of Lazard as investment banker to Valaris plc, with a monthly fee of $250,000, and a

restructuring fee of $17 million (subject to various additional provisions both crediting against it,

on the one hand, or enhancing it, on the other). In re Valaris plc, Case No. 20-34114 (MI)

(Bankr. S.D. Tex. Oct. 16, 2020), ECF No. 351.

71. In California Resources Corp., Judge Jones in the Southern District of Texas

recently approved the retention of PWP as investment banker, with a monthly fee of $300,000,

and a restructuring fee of $16 million (again, subject to various provisos). Case No. 20-33568

(DRJ) (Bankr. S.D. Tex. July 21 & Aug. 18, 2020), ECF Nos. 170 & 351.

72. In Ascena Retail Group, Inc., Judge Huennekens in the Eastern District of

Virginia recently approved the retention of Guggenheim Securities as investment banker, with a

monthly fee of $200,000, and a “recapitalization transaction fee” of $9 million (subject to

various provisos). Case No. 20-33113 (KRH) (Bankr. E.D. Va. Sept. 8, 2020), ECF No. 552.

73. These cases may not be directly comparable to the Debtors, due to factors

including company size, capital structure, and the unique dynamics in this case given the

uncertainties regarding the value of the Debtors’ assets in relation to the secured debt and

whether Tribeca would credit bid. However, these cases are illustrative of the potential

magnitude of investment banker fees in chapter 11 engagements.

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74. For more comparable cases, PWP previously presented to the Bankruptcy Court

the attached Precedent Debtor Fee Analysis, which specifically indicates that PWP’s fees are

comparable to, or lower than, fees charged by peer firms. Those comparable cases involved

similarly sized filings, with below $100 million of debt, where investment banks billed using

monthly and transactional rates. Evaluation of the Precedent Debtor Fee Analysis reveals the

following:

• PWP’s illustrative all-in fee of $1.95 million calculated above is reasonable in comparison to the combined restructuring and sale fees of the comparable cases, not even counting any monthly fees for those other cases.

• While PWP’s monthly fees were higher than for the comparable set, the monthly crediting mechanism in this case is considerably better for the Debtors than under the comparable deal structures, and lowers the effective cost of the $150,000 monthly fee, and of the overall fee structure, to be comparable to the other cases.

• Given that, as explained above, there is effectively little or no Restructuring Fee being paid in these cases, the fee structure in this case is cheaper than the comparable cases’ fee structures. The peer set did not include any crediting mechanism between the restructuring and sale fees. In contrast, PWP’s crediting concession means that, for the Debtors, the Restructuring Fee and the Sale Process Fee represent one market-based aggregate fee in consideration for PWP’s work during the cases on sale process and restructuring issues. PWP’s aggregate transaction fees on a net basis, i.e., adjusted for crediting of the Sale Process Fee against the Restructuring Fee, are in-line to slightly lower than the comparable set’s median and mean, when accounting for the restructuring fees and sale fees able to be earned by the peer set.

75. As noted above, and at the March 26, 2020 hearing, PWP already significantly

reduced its fees, based on negotiations with Tribeca, to the point that it viewed the engagement

as below market. These negotiations, and the reduction of PWP’s potential fees under the

Previous Engagement Letter, which was a market rate negotiated outside of bankruptcy by

sophisticated parties, further indicate that the fees sought are reasonable and below market.

76. Investment banks outside of chapter 11 generally bill flat or percentage fees rather

than on an hourly basis. While they generally bill based on completed transactions rather than

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based on pursuit of a sale process, the specific fee structure in this case was reasonable and

appropriate, and in line with the market on an overall cost basis, for the following reasons:

• A non-distressed client does not need to engage in a full-blown sale process. If indications of interest are weak, the investment bank can scale back efforts. However, a distressed client is different. It must either complete a sale or restructuring process or otherwise liquidate. As explained above, PWP accepted an economically marginal transaction that was smaller than typical for PWP. There was a lower than normal likelihood of a successful sale to a third party, including due to the state of the coal industry, the specific issues facing the Debtors, the high amount of secured debt, and the possibility of a Tribeca credit bid. However, PWP would have to expend the normal amount of resources in running a full sale process, regardless of result.

• Accordingly, the parties contracted up front to bifurcate the Sale Process Fee and the Sale Incentive Fee. However, the parties also contracted for a very Debtor- friendly crediting mechanism that effectively combined the Sale Process Fee and the Restructuring Fee into a single combined fee.

• The fee structure aligned the interests of PWP, the Debtors, Tribeca and other parties in interest, in running a fulsome sale process and seeking to maximize estate value. PWP was to be paid for its work, with the opportunity for additional compensation contingent on certain events such as a sale or financing.

77. Finally, PWP’s fees were neither lowered nor increased based on the geographic

location of the bankruptcy case. The professionals for large bankruptcy cases operate on a

national basis. Cf. Appendix B Guidelines for Reviewing Applications for Compensation and

Reimbursement of Expenses Filed Under United States Code by Attorneys in Larger Chapter 11

Cases, 78 Fed. Reg. 36,248, 36,250-51 (June 17, 2013) (the “Fee Guidelines”) (“The United

States Trustee will not object to ‘non-forum’ rates of professionals when the ‘non-forum’ rates

are based on the reasonable rates where the professionals maintain their primary office, even if

the locally prevailing rates where the case is pending are lower . . . .”). PWP’s New York and

Chicago-based professionals negotiated their Engagement Letter in the same way as they would

have for any client. And transaction fees for investment bankers generally are either a percentage

of debtor debt or assets, or are sized roughly to reflect the size of the business at issue. While the

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size of the case may be unusual in this district, penalizing PWP for the lack of comparable cases

and fees in this district would be out of line with section 330 and with the United States Trustee’s

Fee Guidelines.

78. In summary, PWP performed actual, necessary services for the Debtors and their

estates. The professionals providing the services were skilled. PWP’s fees were reasonable and

in line with the market. PWP’s fees should be approved.

Notice

79. PWP will serve this reply by email on all “Application Recipients” as defined in

the interim compensation order [Docket No. 186], and by email on all parties whose email

addresses are listed in the Master Service List dated as of October 16, 2020, available on the

website of the claims and noticing agent. The Bankruptcy Court’s CM/ECF system will also

serve notice on all parties registered to receive notice. PWP submits that such service is

reasonable and sufficient, and that no further service or notice is required.

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Conclusion

80. For the reasons stated above, PWP respectfully requests that the Bankruptcy

Court grant the Second Interim Fee Application and overrule the Objections.

Dated: October 30, 2020 New York, NY

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

/s/ Christine A. Okike Christine A. Okike (admitted pro hac vice) Edward P. Mahaney-Walter (admitted pro hac vice) One Manhattan West New York, NY 10001 Telephone: (212) 735-3000 Fax: (212) 735-2000 Email: [email protected] Email: [email protected]

Counsel for Perella Weinberg Partners LP

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Exhibit 1

Declaration of Kevin Cofsky

Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 29 of 143

IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF KENTUCKY (Owensboro Division)

In re: ) Chapter 11 ) Hartshorne Holdings, LLC, et al., ) Case No. 20-40133 (ACS) ) Debtors.1 ) (Jointly Administered)

DECLARATION OF KEVIN COFSKY IN SUPPORT OF OMNIBUS REPLY OF PERELLA WEINBERG PARTNERS LP TO OBJECTIONS OF TRIBECA AND UNITED STATES TRUSTEE TO SECOND INTERIM FEE APPLICATION

I, Kevin M. Cofsky, pursuant to 28 U.S.C. § 1746, declare under penalty of perjury that

the following is true and correct:

1. I am a partner in the restructuring practice of Perella Weinberg Partners LP

(“PWP”), the investment banker to the Debtors, based out of New York. I am the leader of this

restructuring engagement and am familiar with the Debtors, these chapter 11 cases, and the

matters set forth herein. I am submitting this declaration (the “Declaration”) in support of the

omnibus reply (the “Reply”) of PWP to the objections of Tribeca and the United States Trustee

to PWP’s Second Interim Fee Application, which is being filed concurrently with this

Declaration.2 If called as a witness, I would testify as follows.

2. I have more than 25 years of experience in investment banking and legal practice,

with a focus on corporate restructuring and chapter 11 bankruptcies. I have experience from

working with numerous debtors, including in the energy sector, such as Energy Future Holdings,

1 The Debtors in these chapter 11 cases and the last four digits of each Debtors’ taxpayer identification number are as follows: Hartshorne Holdings, LLC (3948); Hartshorne Mining Group, LLC (0063); Hartshorne Mining, LLC (1941); and Hartshorne Land, LLC (5582). The Debtors’ headquarters are located at 373 Whobry Road, Rumsey, Kentucky 42371. 2 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Reply.

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Sunbury Generation, Calpine, USPowerGen, Legacy Reserves, Blackhawk Mining, Peabody,

Gastar, Memorial Production, and Atlas Resources. My professional background, experience,

and capabilities, along with those of my colleagues, are set forth in more detail in the Reply. I

agree with the facts and arguments set forth in the Reply.

3. PWP was first retained by the Debtors under the Previous Engagement Letter.

The Previous Engagement Letter was negotiated at arms-length among the Debtors and PWP.

Under the terms of the Previous Engagement Letter, PWP could earn up to an estimated $3.5

million in potential fees. The Previous Engagement Letter and its terms were reasonable and

market for comparable investment banking engagements.

4. Leading up to these chapter 11 cases, the Debtors, Tribeca and PWP heavily

renegotiated the terms of PWP’s engagement, resulting in a substantial reduction in PWP’s

potential fees under the Previous Engagement Letter, and the fee structure set forth in the current

Engagement Letter. The following aspects of those negotiations and the deal reached among the

Debtors, PWP and Tribeca are worth noting:

A. At the time the parties were renegotiating the terms of PWP’s engagement, there were a number of material uncertainties, including (i) whether the Debtor’s chapter 11 cases would proceed with a sale or restructuring, (ii) whether a third-party buyer would be willing to pay more for the Debtors’ assets than the amount of Tribeca’s secured debt or even dedicate the resources to participate in the sale process in light of Tribeca’s secured debt, and (iii) whether Tribeca would decide to credit bid for the Debtors’ assets after a full sale process had been run, which informed the agreement reached among the parties on PWP’s fee structure.

B. In order to compensate PWP for providing financial advisory, investment banking, sale, restructuring and financing services, the Engagement Letter provided for the fee structure described in detail in the Reply. Among other things, PWP would be paid a monthly fee for its services. PWP would be paid a Sale Process Fee for running a fulsome sale process, even if such process did not result in a sale to a third party, given the uncertainties noted above. A separate Sale Incentive Fee would be paid upon a successful sale to a third party other than Tribeca. PWP would also be paid a Restructuring Fee in the case of a Restructuring. The

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Engagement Letter provided for substantial crediting of the monthly fees and the Sale Process Fee against the Restructuring Fee so that PWP would not receive separate fees for the same work—rather, these fees would represent a single economic arrangement.

C. PWP was not willing to undertake the engagement without the certainty that it would be paid the Sale Process Fee for running a comprehensive sale process regardless of outcome.

D. The specific fee structure used here was important in aligning the interests of PWP, the Debtors, Tribeca and other parties. PWP would be paid for running a fulsome sale process through the Sale Process Fee and would be incentivized to maximize value for the benefit of the Debtors and their creditors through the potential upside in the form of the Sale Incentive Fee.

E. The Sale Process Fee was specifically designed to be payable before the (smaller, net of credits) Restructuring Fee, so as to avoid a fight over distribution of value in the later stages of the Debtors’ cases, and ensure that PWP was paid for services rendered pursuant to the terms of its Engagement Letter.

F. PWP was to be paid, as is standard in restructuring investment banking engagements, a smaller monthly fee for its services, plus larger, back- ended amounts to motivate PWP to deliver on the specific goals set forth in the Engagement Letter such as running a fulsome sale process.

5. The Engagement Letter was negotiated at arm’s length by sophisticated parties.

6. I am unaware of any alternative investment banker that was willing to provide the

same services to the Debtors on terms more favorable than those set forth in the Engagement

Letter.

7. The rates under the Engagement Letter are below market. The Precedent Debtor

Fee Analysis, the Reply, and the Retention Reply analyzed fees from comparable cases in

support of the conclusion that the revised rates were below market when taking into account the

significant crediting mechanisms that PWP agreed to in this case. Numerous examples of much

higher fees for similar services can be found in districts around the country.

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8. No conditions have arisen since the Retention Order that would make the terms of

PWP’s retention improvident and that were not capable of being anticipated at the time.

9. Investment bank retention arrangements generally include both monthly and

transactional fee elements as is the case here. The primary compensation for services rendered is

via transaction fees. The United States Trustee’s assertion that the monthly fee is equivalent to a

standard hourly rate, whereas a transaction fee is a “fee enhancement” or a “bonus”, or must be

triggered by “a special kind of success” is incorrect. Rather, transaction fees such as the Sale

Process Fee are part of the standard, negotiated, base compensation for investment bankers.

10. PWP and its peer firms do not bill by the hour. It is not standard in our industry.

Given the nature of our work, our fees do not always translate into hourly rates that are

comparable to those charged by other estate or committee professionals. We have limited

staffing resources, and our services are in high demand, especially in recent times given the

problems created by the COVID-19 pandemic and the weakness in energy commodity prices

such as coal, oil, and natural gas. Accordingly, we view our rates and our staffing as reflecting

the value provided by our services, and the opportunity cost of not working on alternative

engagements.

11. PWP provided significant services and significant value for the Debtors that were

necessary and beneficial when rendered. The services are set forth in more detail in the Reply,

but included building a robust financial model for the go-forward business from scratch, which

would serve as the cornerstone for potential bidders to value the Debtors’ assets. We also

identified and contacted numerous potential bidders, and prepared and presented marketing

presentations to them, as well as regularly updated the Debtors and Tribeca on the status of the

sale process. PWP did everything asked of it in the Engagement Letter, and everything standard

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in an engagement of this type. If PWP had not done its work, no one would have done it—

management and the other professionals did not have the time or expertise to market the

Debtors’ assets—and the sale process would have certainly failed. Because PWP ran a

comprehensive sale process, there was at least a reasonable chance of success. It was prudent and

necessary for PWP to run the sale process, and Tribeca and the Debtors supported PWP’s

retention under the terms of the Engagement Letter. Moreover, the fact that no party was willing

to participate in the auction provided valuable information to the Debtors—and to Tribeca—

regarding the market’s view of the Debtors’ assets. PWP should be compensated for the work

that it did.

12. I incorporate into this Declaration the exhibits attached hereto, which contain

PWP’s comparable fee analysis (Exhibit A), the virtual data room index (Exhibit B), the section

363 sale process timeline that we developed for the Debtors (Exhibit C) and PWP’s coal

industry marketing materials showing our expertise (Exhibit D).

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5 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 34 of 143

I declare under penalty of perjury that the foregoing is true and correct.

Executed on: October 30, 2020 New York, NY

/s/ Kevin M. Cofsky Kevin M. Cofsky

6 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 35 of 143

Exhibit A

Precedent Debtor Fee Analysis Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 36 of PRIVILEGED & CONFIDENTIAL 143 PREPARED AT THE DISCRETION OF COUNSEL Precedent Debtor Fee Analysis SUBJECT TO FRE 408 ($ in millions) Represents recent filings between approximately $0 - $100M of debt with investment bankers similar to PWP

Filing Total Monthly Fee Financing Fees Financing Fees (Calc) Date Company Advisor Debt $ ('000) Crediting RX Fee % of Debt Sale Fee Sr Debt Jr Debt Equity

Mar-18 Randolph Houlihan Lokey $24 $65(1) 25% after 6mos - 75% after 11 mos $1.0(1) 4.2% $1.0 NA NA NA

Jul-18 Neighbors Houlihan Lokey $109 $75 50% after 2 mos $0.5(2) 0.5% $0.9 NA NA NA

Nov-19 HRI Piper Jaffery $42 $50 100% against Sale Fee after 4 mos $- 0.0% $1.1 NA NA NA

Feb-20 Valeritas Lincoln International $21 $100 N/A $1.3 6.0% $1.3 3.00% 4.00% 5.00%

Mean $49 $73 $0.7 2.6% $1.1 3.00% 4.00% 5.00% Median 33 70 0.8 2.3% 1.1 3.00% 4.00% 5.00%

High 109 100 1.3 6.0% 1.3 3.00% 4.00% 5.00%

Low 21 50 0.0 0.0% 0.9 3.00% 4.00% 5.00%

Hartshorne 40 150 2 mos 100%; $100K thereafter 1.5 3.8% 1.0 1.00% 1.00% 4.00%

Total Post Crediting Debt Monthly RX Fee % of Debt Sale Fee (3) Hartshorne - Effective Fee (Illustrative 6 month case) $40 $33 $0.75 1.9% $1.0

Source: Court Filings, Reorg Research Notes: (1) Does not include initial $500K upfront retainer; Restructuring Fee includes $400K for Supplemental Sale Transaction Fee (2) Does not include additional 2.5% fee for Aggregate Gross Consideration between $60M-$80M; 5% in excess of $80M (3) Sale Fee 75% creditable against RX Fee 1 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 37 of PRIVILEGED & CONFIDENTIAL PREPARED AT THE DISCRETION OF COUNSEL 143 SUBJECT TO FRE 408 Legal Disclosures

This Presentation has been provided to you by Perella Weinberg Partners and its affiliates (collectively “Perella Weinberg Partners” or the “Firm”) and may not be used or relied upon for any purpose without the written consent of Perella Weinberg Partners. The information contained herein (the “Information”) is confidential information. By accepting this Information, you agree that you will, and you will cause your directors, partners, officers, employees, attorney(s), agents and representatives to, use the Information only for your informational purposes and for no other purpose and will not divulge any such Information to any other party. Any reproduction of this Information, in whole or in part, is prohibited. These contents are proprietary information and products of Perella Weinberg Partners. The Information contained herein is not an offer to buy or sell or a solicitation of an offer to buy or sell any corporate advisory services or security or to participate in any corporate advisory services or trading strategy. Any decision regarding corporate advisory services or to invest in the investments described herein should be made after, as applicable, reviewing such definitive offering memorandum, conducting such investigations as you deem necessary and consulting the investor's own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment or service. Nothing contained herein should be construed as tax, accounting or legal advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction. Perella Weinberg Partners LP, Tudor, Pickering, Holt & Co. Securities, Inc., and Tudor, Pickering, Holt & Co. Advisors, LLC are each members of FINRA (www.finra.org) and SIPC.

2 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 38 of 143

Exhibit B

Data Room Index Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 39 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS 01 Company Presentations, Management Reports, and Public Documents 01.01 Company Presentations Capital Raising Presentation (May 2018) Provided Capital Raising Presentation (Sept 2019) Provided Capital Raising Presentation (June 2019) Provided 01.02 Annual and Quarterly Reports Paringa Resources - 2019 20-F (with Exhibits) Provided Paringa Resources - 2019 Annual Report to Shareholders Provided Paringa Resources - September 2019 Quarterly Report Provided 01.03 Management Reports Hartshorne - Operations Improvement Charts (March 2020) Provided Hartshorne - Operations Improvements (March 2020) Provided Paringa Monthly Report (August 2019) Provided Paringa Monthly Report (September 2019) Provided Paringa Monthly Report (October 2019) Provided Paringa Monthly Report (November 2019) Provided Paringa Monthly Report (December 2019) Provided Poplar Grove Mine Improvements 03302020 Provided 01.04 Research Reports PNRL - H.C. Wainwright (October 2018).pdf Provided PNRL - H.C. Wainwright (September 2018).pdf Provided PNRL - Roth (June 2019).pdf Provided PNRL - Roth (October 2018).pdf Provided PNRL - Roth (September 2018).pdf Provided PNRL - Roth (September 2019).pdf Provided PNL - Argonaut (August 2019).pdf Provided PNL - Argonaut (December 2018).pdf Provided PNL - Argonaut (June 2018).pdf Provided PNL - Argonaut (March 2019).pdf Provided PNRL - H.C. Wainwright (April 2019).pdf Provided PNRL - H.C. Wainwright (February 2019).pdf Provided PNRL - H.C. Wainwright (July 2019).pdf Provided 02 Feasibility Studies and Technical Reports 02.01 Feasibility Studies Buck Creek Combined Complex BFS (November 2016) Provided Paringa Cypress Mine BFS (November 2015) Provided Poplar Grove Bankable Feasibility Study (March 2017) Provided 02.02 Independent Technical Reports Poplar Grove Independent Review - William Meister (February 2017) Provided 03 Marketing Reports Energy Ventures - ILB Market Study (July 2019) Provided Wood Mackenzie Data (2017) Provided 03.01 Historical (2016) Hanou Energy - ILB Coal Price & Demand Forecast Executive Summary (April 2016) Provided Hanou Energy - ILB Coal Supply Study Executive Summary (April 2016) Provided 03.02 Historical (2017) EVA Analysis of Kentucky Purchases (February 2017) Provided 04 Resources, Reserves, and Coal Quality 04.01 Resources and Reserves Final Hartshorne Update JORC Report (October 2019) Provided Hartshorne JORC Resource Estimate (March 2017) Provided Hartshorne Resoure Estimate MMA SEC Letter (December 2017) Provided 04.02 Coal Quality Poplar Ridge Prep Plant Raw Coal Plant Feed Raw Head Sample (September 2019) Provided Poplar Grove Circuit Performance Test (September 2019) Provided Poplar Grove Prep Plant Raw Coal Plant Feed Sample (September 2019) Provided Poplar Grove UGC Samples (September 2019) Provided 05 Land, Mineral and Equipment 05.01 Coal Leases Lease 104 Provided Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 40 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS Lease 105 Provided Lease 106 Provided Lease 107 Provided Lease 108 Provided Lease 109 Provided Lease 110A Provided Lease 110B Provided Lease 111 Provided Lease 112 Provided Lease 113 Provided Lease 114 Provided Lease 115 Provided Lease 116 Provided Lease 117 Provided Lease 118 Provided Lease 119 Provided Lease 120 Provided Lease 121 Provided Lease 122 Provided Lease 123 Provided Lease 124 Provided Lease 125A Provided Lease 125B Provided Lease 126 Provided Lease 127 Provided Lease 128 Provided Lease 129 Provided Lease 130 Provided Lease 131 Provided Lease 132 Provided Lease 132 A Provided Lease 133 Provided Lease 134 Provided Lease 135 Provided Lease 136 Provided Lease 137 Provided Lease 138 Provided Lease 139 Provided Lease 140 Provided Lease 141 Provided Lease 142 Provided Lease 143 Provided Lease 144 Provided Lease 144A Provided Lease 144B Provided Lease 144C Provided Lease 145 Provided Lease 146 Provided Lease 147 Provided Lease 148 Provided Lease 149 Provided Lease 150 Provided Lease 151 Provided Lease 152 Provided Lease 153 Provided Lease 154 Provided Lease 155 Provided Lease 156 Provided Lease 156B Provided Lease 157 Provided Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 41 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS Lease 158 Provided Lease 159 Provided Lease 160 Provided Lease 161 Provided Lease 162 Provided Lease 163 Provided Lease 164A Provided Lease 164B Provided Lease 164C Provided Lease 164D Provided Lease 165 Provided Lease 166 Provided Lease 167 Provided Lease 168 Provided Lease 169A Provided Lease 169B Provided Lease 169C Provided Lease 169D Provided Lease 170 Provided Lease 171 Provided Lease 172 Provided Lease 173 Provided Lease 174 Provided Lease 175 Provided Lease 176 Provided Lease 177 Provided Lease 178 Provided Lease 179 Provided Lease 180 Provided Lease 181 Provided Lease 182 Provided Lease 183 Provided Lease 183A Provided Lease 183B Provided Lease 183C Provided Lease 183D Provided Lease 184 Provided Lease 185 Provided Lease 186 Provided Lease 186A Provided Lease 186B Provided Lease 186C Provided Lease 186D Provided Lease 186E Provided Lease 187 Provided Lease 188 Provided Lease 189 Provided Lease 190 Provided Lease 191 Provided Lease 192 Provided Lease 193 Provided Lease 194 Provided Lease 195 Provided Lease 196 Provided Lease 197 Provided Lease 198 Provided Lease 199 Provided Lease 200 Provided Lease 201 Provided Lease 202 Provided Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 42 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS Lease 203 Provided Lease 204 Provided Lease 205 Provided Lease 206 Provided Lease 207 Provided Lease 208 Provided Lease 209 Provided Lease 210A Provided Lease 210B Provided Lease 211 Provided Lease 212 Provided Lease 213 Provided Lease 214 Provided Lease 216 Provided Lease 217 Provided Lease 218A Provided Lease 218B Provided Lease 219 Provided Lease 220 Provided Lease 221 Provided Lease 222 Provided Lease 223 Provided Lease 224 Provided Lease 225 Provided Lease 226 Provided Lease 227 Provided Lease 228A Provided Lease 228B Provided Lease 229A Provided Lease 229B Provided Lease 230 Provided Lease 231 Provided Lease 233 Provided Lease 234 Provided Lease 235 Provided Lease 236 Provided Lease 237 Provided Lease 238 Provided Lease 239 Provided Lease 240 Provided Lease 241 Provided Lease 242 Provided Lease 243 Provided Lease 244 Provided Lease 245 Provided Lease 246 Provided Lease 247 Provided Lease 248 Provided Lease 250 Provided Lease 251 Provided Lease 252 Provided Lease 253 Provided Lease 254 Provided Lease 255 Provided Lease 256 Provided Lease 257 Provided Lease 258 Provided Lease 259 Provided Lease 260 Provided Lease 261 Provided Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 43 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS Lease 262 Provided Lease 263 Provided Lease 264 Provided Lease 265 Provided Lease 266 Provided Lease 267 Provided Lease 268 Provided Lease 269 Provided Lease 270 Provided Lease 271 Provided Lease 272 Provided Lease 273 Provided Lease 274 Provided Lease 275 Provided Lease 276 Provided Lease 277 Provided Lease 278 Provided Lease 279 Provided Lease 280 Provided Lease 281 Provided Lease 282 Provided Lease 283 Provided Lease 284 Provided Lease 285A Provided Lease 285B Provided Lease 285C Provided Lease 286A Provided Lease 286B Provided Lease 286C Provided Lease 287 Provided Lease 288 Provided Lease 289 Provided Lease 292A Provided Lease 292B Provided Lease 293 Provided Lease 294 Provided Lease 295 Provided Lease 296 Provided Lease 297 Provided Lease 298A Provided Lease 298B Provided Lease 299 Provided Lease 300 Provided Lease 301A Provided Lease 301B Provided Lease 302 Provided Lease 303 Provided Lease 304 Provided Lease 305 Provided Lease 306 Provided Lease 307 Provided Lease 308 Provided Lease 309 Provided Lease 310 Provided Lease 311 Provided Lease 312 Provided Lease 313 Provided Lease 314 Provided Lease 315 Provided Lease 316 Provided Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 44 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS Lease 317 Provided Lease 318 Provided Lease 319 Provided Lease 320A Provided Lease 320B Provided Lease 100 Provided Lease 101 Provided Lease 102 Provided Lease 103 Provided 05.02 Dock Tract 26-18 Dock Title Opinion.pdf Provided Addendum to Agreement - ET Woosley Farms.pdf Provided Dock Title - Amended Restated.pdf Provided Memorandum - Dock Property.pdf Provided Option Agreement - E.T. Woosley Farms, LLC.pdf Provided Recorded Memo of Option Agreement.pdf Provided Tract 26-18 Dock Title - Amended Restated.pdf Provided 05.03 Surface Option Properties Tract 36-23A Provided Tract 36-25A-1 Provided Tract 36-37 Provided Tract 36-38 Provided Tract 36-40 Provided Tracts 36-25 & 36-25A Provided Closing Documents Provided Tract 19-21A Provided Tract 36-21B-1 Provided 05.04 Title Opinions 7 Year Mine Plans Provided 05.05 Equipment 04__Updated Equipment Listing.xlsx Provided 04__Updated Equipment Listing.pdf Provided Delivered Equipment List (March 2019) Provided 05.06 Permits and Material Authorizations Permit 875-6001 MI1 Provided Permit 875-6001 MI2 Provided Permit 875-6001 NW Provided Permit 875-8002 MI1 Provided Permit 875-8002 MI2 Provided Permit 875-8002 NW Provided da.docx Provided da.xlsx Provided Army Corps of Engineers Permits Provided Coal Exploration Permit Provided Kentucky Division of Water Permits Provided Kentucky State Mine License Provided KPDES Water Discharge Permits Provided KY Department of Highways Permits Provided KY Division of Air Quality Permits Provided MSHA Legal Identity Provided Permit 875-5007 NW - Buck Creek Resources Provided Permit 875-5009 MA1 Provided Permit 875-5009 MI2 Provided Permit 875-5009 SU1 Provided Permit 875-5010 NW Provided 05.07 Mine Maps and Diagrams Active Works w Properties Provided LoM Timing - 9 Seam (January 2020) Provided LoM Timing - 11 Seam (January 2020) Provided 05.08 Site Photos 06 Coal Supply Contracts 06.01 AEP Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 45 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS IKEC Successful Test Burn Official Notification (November 2019).pdf Provided OVEC HMG PO No. 31-10-18-003 CO 2 (June 2019).pdf Provided Hartshorne AEP PO 31-10-18-003 Executed (October 2018).pdf Provided HMG Indiana-Ketucky Electric Payment Instructions - Executed (October 2018).pdf Provided 06.02 LG&E Hartshorne LGE Contract Amendment - Fully Executed (May 2016).pdf Provided HMG LGE Coal Sales Agreement - Fully Executed (October 2015).pdf Provided Payment Direction - Hartshorne and LG&E KU - Executed (July 2018).pdf Provided Milestone Extensions Provided Hartshorne J18001 Amendment No. 2 (October 2019).pdf Provided Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 46 of 143

Project Power Strictly Private & Confidential [DRAFT] Data Room Index

REFERENCE DOCUMENT STATUS COMMENTS 07 Environmental and Bonding 07.01 Bonding Paringa Bonding Summary (December 2019).pdf Provided Supporting Documentation Provided Paringa Bonding Summary (April 2020).pdf Provided 07.02 Environmental Final Hartshorne ESA Report - APO120 (December 2017) Provided Appendices Provided 08 Insurance 2019 Renewal Policies - Hartshorne.pdf Provided Certificate of Insurance - Tribeca.pdf Provided Rockwood Workers Compensation Policy.pdf Provided 2018 Hartshorne Policies.pdf Provided 2019 Mining Policy Binder.pdf Provided 09 Financial Information 09.01 Financial Model 5-Year Mine Plan Provided Cost per Ton Analysis Provided Poplar Grove Bankable Feasibility Study Economic Model Final 032717 Provided 200402 Project Power - Financial Model_vMaster Provided DIP Liquidity Model (February 2020) Provided Paringa 25 Year Plan (December 2019) Provided 09.02 Financial Statements ASX Provided Includes Annual and Quarterly reports beginning in 2018 NASDAQ Provided 2018 Annual Report and 2019 Annual Report Key Balance Sheet Items Provided Balance Sheet as of June 2019 and September 2019 09.03 Capital Raising Paringa - Capital Raise History (November 2019) Provided Paringa - Capital Structure - Entitlement Offer (November 2019) Provided 09.04 Term Loan Facility Term Loan Facility Agreement Provided Term Loan Facility - Amendment & Royalty Provided 09.05 Equipment Financing Facility Hartshorne Komatsu LCM Agreement Feb 2019 Provided 09.06 Book Asset Detail Book Asset Detail (Deember 2019) Provided 10 Human Resources Paringa - Group Structure Provided Paringa Employee Census (March 2020) Provided Paringa Org Chart (March 2020) Provided Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 47 of 143

Exhibit C

Process Timeline Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 48 of 143 Confidential Proposed §363 Sale Process Timeline Based on Approved Bid Procedures Due to the condensed timeline, due diligence should begin as soon as practicable and will continue until final bids are submitted

Week (1) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Contact Potential Buyers y y y

Execute NDAs and Provide VDR Access y y y y

Chapter 11 Filing(1) X

Deadline to File Bid Procedures Motion – Filing + 20 Days X

Due Diligence Period y y y y y y y

Host Management Presentations y y y Y Y Y Y

Deadline to Approve Final DIP Order – Filing + 35 Days x

Initial Indications of Interest Deadline – Filing + 50 Days X

Deadline to Approve Bid Procedures – Filing + 50 Days X

Discussion of Bids with the Board and Lenders y y y y

Qualified Bids Deadline – Filing + 75 Days X

Auction (If Required) – Filing + 90 Days X

Objection Deadline X

Sale Approval Hearing – Filing + 95 Days(2) X

Consummation of Sale - Filing + 115 Days(2) X

These dates may be affected by a number of factors, including the due diligence process, court scheduling, negotiations, cross-border regulations, and possible litigation, among others

Notes: (1) Assumes Interim DIP Order and DIP Facility’s Closing Date occur at Chapter 11 Filing (2) Subject to court calendar

1 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 49 of 143 Confidential Legal Disclaimer

This Presentation has been provided to you by Perella Weinberg Partners and its affiliates (collectively “Perella Weinberg Partners” or the “Firm”) and may not be used or relied upon for any purpose without the written consent of Perella Weinberg Partners. The information contained herein (the “Information”) is confidential. By accepting this Information, you agree that you and your directors, partners, officers, employees, attorney(s), agents and representatives agree to use it for informational purposes only and will not divulge any such Information to any other party. Reproduction of this Information, in whole or in part, is prohibited. These contents are proprietary and a product of Perella Weinberg Partners. The Information contained herein is not an offer to buy or sell or a solicitation of an offer to buy or sell any corporate advisory services or security or to participate in any corporate advisory services or trading strategy. Any decision regarding corporate advisory services or to invest in the investments described herein should be made after, as applicable, reviewing such definitive offering memorandum, conducting such investigations as you deem necessary and consulting the investor’s own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment or service. The information used in preparing these materials may have been obtained from or through you or your representatives or from public sources. Perella Weinberg Partners assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and/or forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed or discussed with the managements of your company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). The Firm has no obligation (express or implied) to update any or all of the Information or to advise you of any changes; nor do we make any express or implied warranties or representations as to the completeness or accuracy or accept responsibility for errors. Nothing contained herein should be construed as tax, accounting or legal advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction.

2 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 50 of 143

Exhibit D

PWP Team Bios and Coal Experience Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 51 of 143

Team Bios and Coal Credentials October 2020 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 52 of 143 Select Metals & Mining Team Members

BRENNAN SMITH JOHN MESSINA Partner, Head of Chicago Office Managing Director (312) 796-2400 (312) 796-2420 [email protected] [email protected]

▪ Mr. Smith is a Partner and Head of Perella Weinberg Partners’ Chicago office, ▪ Mr. Messina is a Managing Director at Perella Weinberg’s Chicago office which he opened upon joining the firm in 2018 ▪ Mr. Messina is a member of PWP’s Global Industrials franchise with a focus on ▪ Mr. Smith leads PWP’s Global Industrials franchise with a focus on Metals & Metals & Mining Mining ▪ Prior to joining PWP, Mr. Smith spent 22 years with Citigroup Global Markets Inc. ▪ Prior to joining the firm, Mr. Messina spent two years at PwC Corporate Finance in (and its predecessor companies Salomon Smith Barney and Salomon Brothers) Chicago as a Director advising companies in the Industrial Products sector on in both New York and Chicago mergers and acquisitions ▪ At Citi, Mr. Smith served as a Managing Director in the Global Industrials group ▪ Previously, Mr. Messina spent 14 years at Citigroup Global Markets Inc. in both focused on Metals & Mining and Co-Head of the Chicago Office Chicago and New York as member of the global Metals & Mining team focused ▪ Prior to joining Citi, Mr. Smith spent three years with Continental Bank and Bank primarily on metals (steel, aluminum, specialty metals) of America in corporate banking ▪ Mr. Messina received a Bachelor of Science in Systems Engineering from the ▪ Mr. Smith received a Bachelor of Business Administration from the University of University of Virginia Notre Dame and a Master of Business Administration from the University of Chicago

Selected Recent Transactions: Selected Recent Transactions: ▪ Novelis on its sale of Aleris Aluminium Duffel BVBA to GFG Alliance ▪ Novelis on its sale of Aleris Aluminium Duffel BVBA to GFG Alliance

▪ Severstal on its sale of US steel assets to AK Steel and Steel Dynamics ▪ SHV Energy on the acquisition of the Propane Marketing and Services business of American Midstream Partners ▪ Rain CII Carbon on its acquisition of Rutgers NV ▪ Material Handling Systems on sale to Thomas H Lee Partners ▪ Alpha Natural Resources on its acquisition of Massey Energy ▪ Severstal on the sale of its Dearborn and Columbus assets to AK Steel and Steel ▪ Novelis on the sale of its consumer foil business to Reynolds Consumer Products Dynamics ▪ Arch Coal on its acquisition of Jacobs Ranch ▪ Oak Hill on the sale of Firth Rixson to Alcoa ▪ Alpha Natural Resources on its acquisition of Foundation Coal ▪ Novelis on the sale of its consumer foil business to Reynolds

▪ Rain CII Carbon on the acquisition of Rutgers

▪ Norsk Hydro on the acquisition of Vale’s aluminum assets

▪ Alcoa on the acquisition of TransDigm Fasteners

2 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 53 of 143 Longstanding Relationships and Deep Coal Expertise

CAPITAL COMPANY ADVISORY MARKETS LENDING COMMENTS

▪ Longstanding relationship with Joe Craft and Brian Cantrell ✔ ✔ ✔ ▪ Completed IPO and worked on virtually every deal since

▪ Longstanding relationship with Rob Moore ✔ ✔ ✔ ▪ Worked on multiple recapitalizations post Murray ownership

✔ ▪ Longstanding relationship with Glenn Kellow and Pat Forkin ✔ ✔ ▪ Lead senior secured lender bank in bankruptcy process

▪ Longstanding relationship with John Eaves and John Drexler ✔ ✔ ✔ ▪ Advised Arch on acquisition of Jacobs Ranch

▪ Longstanding relationship with Jimmy Brock ✔ ✔ ✔ ▪ Worked on MLP IPO and financed spin-off

▪ Longstanding relationship with historical management teams ✔ ✔ ✔ (Old Alpha) ▪ Worked on virtually every deal in creation and growth of Alpha

▪ Longstanding relationship with Drummond family and Mike Tracy ✔ ✔ ✔ ▪ Recently worked on Shoal Creek and Colombia

▪ Longstanding relationship with Corby Robertson and Craig Nunez ✔ ✔ ✔ ▪ Lead IPO, subsequent financings, and advisory roles

▪ Longstanding relationship with Walt Scheller ✔ ✔ ✔ ▪ Worked on IPO, debt and dividend deals

▪ Longstanding relationships with Trafigura and new management team ✔ ✔ ▪ Worked extensively with old management team on Twenty Mile

Note: Includes transactions led by team members at prior firms 3 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 54 of 143 Selected Coal Credentials

(Shoal Creek Mine) Advised Drummond Company Advised Board of Directors in Advised Arch Coal in connection with Advised Alpha Natural Resources in Advised Foresight Energy in on Sale of Shoal Creek Mine connection with a potential sale of its acquisition of Rio Tinto’s connection with its acquisition of connection with its IPO and to Peabody Energy Drummond Colombia Jacobs Ranch Mine Foundation Coal Holdings subsequent debt financings (Unconsummated)

(Jacobs Ranch Mine)

$400,000,000 $764,000,000 $1,500,000,000 $350,000,000

Advised Warrior Met in connection Advised Alliance Resources in Advised Alpha Natural Advised Alpha Natural Resources with its IPO and subsequent debt connection with its IPO Resources on Acquisition Lead Bookrunner in on Contemplated merger with financings of Massey Energy(1) Initial Public Offering and Cleveland-Cliffs (Unconsummated) Secondary Equity Offering(2)

$315,000,000 $150,000,000 $8,500,000,000 $262,000,000 $10,000,000,000

Note: Transactions referenced include those executed at prior institutions (1) Current PWP employees also advised Massey Energy on the sale to Alpha Natural Resources (2) Value includes $52M IPO and $210M Secondary Offering 4 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 55 of 143 Legal Disclosures

This Presentation has been provided to you by Perella Weinberg Partners and its affiliates (collectively “Perella Weinberg Partners” or the “Firm”) and may not be used or relied upon for any purpose without the written consent of Perella Weinberg Partners. The information contained herein (the “Information”) is confidential information. By accepting this Information, you agree that you will, and you will cause your directors, partners, officers, employees, attorney(s), agents and representatives to, use the Information only for your informational purposes and for no other purpose and will not divulge any such Information to any other party. Any reproduction of this Information, in whole or in part, is prohibited. These contents are proprietary information and products of Perella Weinberg Partners. The Information contained herein is not an offer to buy or sell or a solicitation of an offer to buy or sell any corporate advisory services or security or to participate in any corporate advisory services or trading strategy. Any decision regarding corporate advisory services or to invest in the investments described herein should be made after, as applicable, reviewing such definitive offering memorandum, conducting such investigations as you deem necessary and consulting the investor’s own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment or service. Nothing contained herein should be construed as tax, accounting or legal advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction.

5 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 56 of 143

Exhibit 2

Engagement Letter Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 57 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 58 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 59 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 60 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 61 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 62 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 63 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 64 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 65 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 66 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 67 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 68 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 69 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 70 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 71 of 143 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 72 of 143

Exhibit 3

Hearing Transcript for March 26, 2020 Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 73 of 143

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF KENTUCKY

. Case No. 20-40133-THF IN RE: . Chapter 11 . HARTSHORNE HOLDINGS, LLC, . 601 West Broadway and HARTSHORNE LAND, LLC, . Louisville, KY 40202 . Debtors. . Thursday, March 26, 2020 . 1:30 p.m......

TRANSCRIPT OF TELEPHONIC HEARING RE: APPLICATION TO EMPLOY SQUIRE PATTON BOGGS (US) LLP AS LEAD BANKRUPTCY COUNSEL FILED BY DEBTOR HARTSHORNE HOLDINGS, LLC [89]; APPLICATION TO EMPLOY FTI CONSULTING, INC. AS FINANCIAL ADVISOR FILED BY DEBTOR HARTSHORNE HOLDINGS, LLC [90] BEFORE THE HONORABLE THOMAS H. FULTON UNITED STATES BANKRUPTCY COURT JUDGE

TELEPHONIC APPEARANCES:

For the Debtors: Frost Brown Todd, LLC By: EDWARD M. KING, ESQ. 400 West Market Street, 32nd Floor Louisville, KY 40202 (502) 589-5400

Squire, Patton, Boggs, LLP By: STEPHEN D. LERNER, ESQ. TRAVIS McROBERTS, ESQ. NORMAN N. KINEL, ESQ. 201 East Fourth Street, Suite 1900 Cincinnati, OH 45202 (513) 361-1200

For Louisville Gas and Stoll, Keenon, Ogden, PLLC Electric: By: EMILY PAGORSKI, ESQ. 500 West Jefferson Street, Suite 2000 Louisville, KY 40402 (502) 333-6000

APPEARANCES CONTINUED.

Audio Operator: Angela M. Gudgel, ECR

TRANSCRIBED BY: Access Transcripts, LLC 10110 Youngwood Lane Fishers, IN 46038 (855) 873-2223 www.accesstranscripts.com

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TELEPHONIC APPEARANCES (Continued):

For Official Committee Dentons, Bingham, Greenebaum, LLP of Unsecured Creditors: By: JAMES IRVING, ESQ. APRIL A. WIMBERG, ESQ. 101 South Fifth Street, 34th Floor Louisville, KY 40202 (502) 587-3719

Whiteford, Taylor & Preston, LLP By: MICHAEL J. ROESCHENTHALER, ESQ. RICHARD RILEY, ESQ. 200 First Avenue, Third Floor Pittsburgh, PA 15222 (412) 618-5601

For Tribeca Entities: Wyatt Tarrant & Combs, LLP By: JOHN P. BRICE, ESQ. BRIAN WELLS, ESQ. 250 West Main Street, Suite 1600 Lexington, KY 40507 (859) 233-2012

For the U.S. Trustee: U.S. Department of Justice By: TIMOTHY RUPPEL, ESQ. 601 West Broadway, Room 512 Louisville, KY 40202 (502) 582-6000

For Frontier-Kemper Faegre Drinker Biddle & Reath, LLP Constructors, Inc.: By: KAYLA D. BRITTON, ESQ. 600 East 96th Street, Suite 600 Indianapolis, IN 46240 (317) 237-1155

For Commonwealth of By: LENA K. SEWARD, ESQ. Kentucky, Energy and TIMOTHY J. MAYER, ESQ. Environment Cabinet: 300 Sower Boulevard, Third Floor Frankfort, KY 40601 (502) 782-7067

For Komatsu Financial: Pietragallo Gordon Alfano Bosick & Raspa By: RICHARD J. PARKS, ESQ. Seven West State Street, Suite 100 Sharon, PA 16146 (724) 981-1397

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TELEPHONIC APPEARANCES (Continued):

For Minova, USA: Jackson Kelly, PLLC By: CHACEY MALHOUITRE, ESQ. 100 West Main, Suite 700 Lexington, KY 40507 (859) 288-2817

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1 (Proceedings commence at 1:30 p.m.)

2 THE CLERK: This is in case 20-40133, Hartshorne

3 Holdings, LLC, and Hartshorne Land, LLC. Could the parties

4 please enter their appearances.

5 MR. KING: Good afternoon, Your Honor. This is Ted

6 King for the Debtors and their affiliates. On the phone is

7 Stephen Lerner, as well as Travis McRoberts from the Squire

8 Patton Boggs firm, and Normal Kinel, as well. Thank you.

9 MR. IRVING: Good afternoon, Your Honor. This is Jim

10 Irving from Dentons, Bingham, Greenbaum. Also on the phone

11 from Dentons is my partner April Wimberg and Michael

12 Roeschenthaler and Richard Riley from Whiteford, Taylor, the

13 Committee's other proposed counsel.

14 MS. PAGORSKI: Good afternoon, this is --

15 MR. BRICE: Good afternoon, Your Honor --

16 THE COURT: Go ahead.

17 MS. PAGORSKI: Thank you. Good afternoon, Your

18 Honor. This is Emily Pagorski for Louisville Gas and Electric

19 Company and Kentucky Utilities Company.

20 MR. BRICE: Good afternoon, Your Honor. It's John

21 Brice and Brian Wells on behalf of the Tribeca DIP Lenders and

22 Tribeca prepetition secured creditors.

23 MR. RUPPEL: Good afternoon, Your Honor. Tim Ruppel

24 on behalf of the United States Trustee.

25 MS. BRITTON: Kayla Britton with Faegre Drinker on

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1 behalf of Frontier-Kemper Constructors.

2 MS. SEWARD: Good afternoon, Your Honor. Lena Seward

3 and Tim Mayer on behalf of the Commonwealth of Kentucky Energy

4 and Environment Cabinet.

5 MR. PARKS: Good afternoon, Your Honor. Richard

6 Parks on behalf of Komatsu Finance.

7 MS. MALHOUITRE: Good afternoon. This is Chacey

8 Malhouitre on behalf of Minova, USA, Inc., from the firm of

9 Jackson Kelly.

10 THE CLERK: Is there anyone else on the line?

11 (No audible response)

12 THE CLERK: Judge Fulton.

13 THE COURT: Yes.

14 THE CLERK: Okay.

15 THE COURT: Mr. Lerner, do you or Mr. King wish to

16 bring the Court up to date?

17 MR. LERNER: Yes. Good afternoon, Your Honor. This

18 is Stephen Lerner from Squire Patton Boggs for the Debtors.

19 Thank you, again, for accommodating us with this telephonic

20 hearing this afternoon. I'm pleased to report that we've made

21 a fair amount of progress on many but not all of the remaining

22 matters to be heard today and so if I could, I'll run through,

23 initially, what remains unresolved and the balance being

24 resolved.

25 We have resolved, subject to further review of some

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1 revisions to the order, but we have resolved the debtor-in-

2 possession financing objection of the Creditors' Committee

3 which was the one remaining objection. We do need -- and

4 literally, we were up until the beginning of the hearing in

5 conversations with committee counsel and also working with the

6 other parties to review drafts of the -- of a redlined order.

7 So -- and I'll come back and explain the resolution in a

8 minute, but that's been resolved, subject to all the parties

9 reviewing the order.

10 We -- then there are three of the remaining matters

11 that were on for hearing were retention applications. The

12 retention applications were Stretto and for Frost Brown Todd

13 have been resolved.

14 There are objections to the Squire retention

15 application from the United States Trustee. There's a

16 resolution -- I misspoke already. There's a resolution of the

17 FTI matter, which I'll explain to the Court, on an interim

18 basis. And the Perella Weinberg partners application remains

19 subject to an objection by the Committee. The objection by the

20 United States Trustee has been resolved.

21 So we really just have the Squire and Perella

22 Weinberg retention applications that we would ask the Court to

23 address today. That's the lineup and what I would propose to

24 do is explain the debtor-in-possession financing resolution,

25 then describe the resolution on an interim basis of the FTI

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1 retention order, then have Mr. McRoberts from my firm address

2 the Court on the Perella Weinberg objection raised by the

3 Committee, and then we would end with the Squire objection

4 raised by the U.S. Trustee.

5 THE COURT: All right. Go ahead.

6 MR. LERNER: Okay. Your Honor, on the debtor-in-

7 possession financing, we had one remaining issue, as the Court

8 will recall, from Monday, relating to the amount of fees that

9 would be made available in the budget to the Official Committee

10 of Unsecured Creditors professionals. We have now agreed that

11 they will receive $700,000 under the budget, which will consist

12 of an agreed-upon amount from the budget in cash during the

13 life of the budget and with a -- an increase in the carve-out

14 amount, which was originally a 100,000 to $250,000. So there

15 are some not so relatively minor changes that we need to make

16 to the order to do that, but that would resolve, in principle,

17 the Committee's objection. And again, we just need to cross

18 the T's and dot the I's for the -- for all the parties who are

19 involved to review and sign off on the order.

20 THE COURT: That would be after a fee application was

21 approved from the --

22 MR. LERNER: That's right. This is simply what the

23 budget -- yeah, no, no. Yeah, the --

24 THE COURT: The retainer or whatever --

25 (Simultaneous speaking)

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1 THE COURT: -- which one.

2 MR. LERNER: The Court is not being asked to approve

3 any fees. This is simply what the budget --

4 THE COURT: I know.

5 MR. LERNER: -- provides for that --

6 THE COURT: Up to that amount.

7 MR. LERNER: Correct.

8 THE COURT: Provide --

9 MR. LERNER: Correct.

10 THE COURT: Go ahead.

11 MR. LERNER: The cash component and a carve-out

12 component, just like for the other professionals, for the

13 Debtors there's a cash component and a carve-out component.

14 So that's the resolution. Again, we need to get the

15 order completed, which we would then present to the Court,

16 hopefully, yet this afternoon.

17 THE COURT: Let me ask a question to the Official

18 Unsecured Creditors' Committee. Did you receive a retainer

19 from the members of the Committee?

20 MR. ROESCHENTHALER: Your Honor, Mike Roeschenthaler

21 on behalf -- proposed counsel for the Committee. No, we've

22 received no retainers or any other payments or remuneration

23 from the Committee members.

24 THE COURT: All right. Go ahead, Mr. Lerner.

25 MR. LERNER: And Your Honor, I neglected --

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1 MR. BRICE: Your Honor --

2 (Simultaneous speaking)

3 MR. BRICE: Yeah, I apologize. This is John Brice,

4 Your Honor. If I may? We have tentatively agreed to this. I

5 do want to beg the Court's indulgence, however. As you may

6 recall, my clients are in Australia. I just want them to take

7 a look at the final proposed budget.

8 THE COURT: Certainly.

9 MR. BRICE: I don't think there are going to be

10 issues, but I just need them to say yes, the final proposed

11 budget is in line with what we've agreed to. I doubt that

12 Debtors' counsel or Committee counsel will have an objection to

13 it.

14 THE COURT: Okay. Well, I don't --

15 UNIDENTIFIED: Your Honor, it's --

16 THE COURT: -- and so I will -- what we'll do is if

17 you can't get it worked out, we'll hear it in Monday.

18 MR. BRICE: Oh, I don't think there'll be an issue,

19 Your Honor --

20 (Simultaneous speaking)

21 THE COURT: Well, I'm just letting you know --

22 MR. BRICE: -- (Indiscernible) numbers --

23 THE COURT: I'm just letting you know if your client

24 doesn't agree to it, we'll hear it on Monday.

25 MR. BRICE: Okay. Thank you, Your Honor. I

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1 appreciate that.

2 THE COURT: Yeah.

3 MR. LERNER: And Your Honor, it's Stephen Lerner. I

4 neglected to mention one important element of the resolution

5 here, and that is that Mr. Brice's client, Tribeca, who is the

6 DIP lender, has agreed to increase the amount of the DIP loan

7 by $125,000, and that -- those -- there -- that amount of funds

8 will then enable us to have the Committee receive the maximum

9 $700,000, so the loan is being increased by that amount, and

10 we're appreciative to Tribeca to do that, and we understand

11 Tribeca and the other parties need to review the budget and the

12 order. And given the time difference with Australia where

13 Mr. Brice's client resides, that means we won't be able to

14 present an agreed order until tomorrow at the earliest, and we

15 understand that if for some reason that falls apart, we would

16 have a hearing on Monday, which we appreciate.

17 THE COURT: Yes. All right. Okay. So next.

18 MR. LERNER: If it turned out to be FTI retention, we

19 -- the objection was raised by the office of the United States

20 Trustee. We worked out virtually all of their concerns, other

21 than the entitlement of FTI to an indemnification. The

22 resolution, on an interim basis, is that the Court will be

23 presented with an agreed interim order approving FTI's

24 retention on the current terms that are proposed, including

25 indemnification, and those terms will apply to FTI's retention

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1 through the date of a final hearing on this motion that we

2 would ask the Court to set next week. And the U.S. Trustee's

3 objection on a final basis would be fully preserved, but the

4 terms of FTI's retention would not be subject to any further

5 review in terms of objections, and FTI would get the benefit of

6 the terms through the date of the final hearing. If the Court

7 doesn't approve it on a final basis, then on -- from that date

8 forward, all bets are off, but at least until the date of the

9 final hearing, FTI would have the benefit of an order.

10 We prepared the form of interim order and have sent

11 that to the office of the U.S. Trustee, and this is subject to

12 their, you know, review of that, which we would appreciate if

13 we could knowing during the hearing today that the U.S. Trustee

14 has signed off on that.

15 THE COURT: All right.

16 MR. RUPPEL: Your Honor, Tim Ruppel.

17 THE COURT: Yes.

18 MR. RUPPEL: Tim Ruppel, United States Trustee. That

19 generally recites it. I have -- I passed it onto my clients.

20 I want them to review it. I've received it. Thank you, guys,

21 for the timeliness. We ask -- we would ask that it be set for

22 a hearing if not next week, you know, very, very quickly. If

23 that -- you know, the week after. And that, generally, I

24 believe that's where we are right now on the FTI retention.

25 THE COURT: All right.

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1 MR. LERNER: And, Your Honor, if I could add one

2 thing? The benefits to FTI and the Debtors of having the

3 interim order approved is that then they're not at risk

4 continuing to work up until the final hearing. But I need to

5 know, for the benefit of the Debtors and FTI, before this

6 hearing concludes, that the U.S. Trustee has signed off on the

7 order, because if they come back and say it's not acceptable,

8 then we do have to go forward right now on the FTI matter

9 because otherwise, FTI is at risk if their retention is

10 ultimately not approved on a final basis. So I'm hoping that

11 the U.S. Trustee, in the next course of minutes as we continue

12 the other two contested matters, will be able to sign off.

13 THE COURT: So you're asking if --

14 MR. RUPPEL: Understood. I will --

15 THE COURT: -- allow it to go forward --

16 MR. RUPPEL: -- do my best --

17 THE COURT: -- on an interim basis.

18 MR. RUPPEL: Yeah.

19 THE COURT: Okay.

20 MR. RUPPEL: And I believe we are. I really do. I'd

21 like (indiscernible) for my own sake (indiscernible)

22 acknowledgment and I will continue to focus on that, and I'll

23 get you an answer here as soon as I can.

24 One benefit to doing this by phone, we've already got

25 the emails in front of you.

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1 MR. LERNER: Okay. Okay. Thank you, Mr. Ruppel.

2 Your Honor, then that leaves us the retention

3 objections, first, to the Perella Weinberg partners retention

4 application. My colleague, Travis McRoberts, will address that

5 now.

6 THE COURT: Okay.

7 MR. McROBERTS: Good afternoon, Your Honor. This is

8 Travis McRoberts with Squire Patton Boggs on behalf of the

9 Debtors.

10 Your Honor, as Mr. Lerner indicated, the only live

11 objection to PWP's retention at this point is the one found by

12 the Committee. The U.S. Trustee had submitted us informal

13 comments and requested some changes to the order. We were able

14 to accommodate all of that. I believe, truthfully, that that

15 actually addressed most of the issues in the Committee's

16 objection, as well, with two notable exceptions. The Committee

17 is continuing, at least to my understanding, to press

18 objections related to the amount of PWP's fees and a kind of

19 continued demand for the Sections 330 reasonableness review at

20 the end of the process.

21 With respect to the 330 review --

22 THE COURT: Let me ask a question. On the fees, can

23 you let the Court and the Official Unsecured Creditors know

24 exactly what those fees are for?

25 MR. McROBERTS: The fees that will be earned by

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1 Perella, Your Honor, are a result of conducting the sale

2 process that we're embarking on in these cases. The way the

3 fees are structured essentially has different fees for

4 different outcomes, and then there's a monthly fee for their

5 services. I think it's important to note a few things about

6 the total quantum of their fees.

7 I think, first, Perella had a prepetition

8 relationship with the Debtor and the Debtor's parent and

9 actually had a prepetition engagement letter where they would

10 provide roughly equivalent services, and they could have earned

11 up to three and a half million dollars under that engagement

12 letter. Prior to filing these cases, though, that engagement

13 letter was renegotiated by the Debtors, as well as the Debtors'

14 secured lender, Tribeca, such that the various success fees

15 that could be triggered have all been significantly reduced.

16 I think, also, it's very important to note that the

17 monthly fee payable to Perella is also subject to crediting

18 now, such that the first two months of what they would earn on

19 a monthly basis would have to be credited against any

20 restructuring fee earned and two-thirds of their monthly fee is

21 credited against the restructuring fee for all months going

22 forward after that. And even to the extent they do earn the

23 sale process fee, 75 percent of that is credited against the

24 restructuring fee. And when I say "crediting," I'm talking

25 about dollar-for-dollar reduction based on that.

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1 THE COURT: All right.

2 MS. WIMBERG: Your Honor, this is April Wimberg on

3 behalf -- I don't know if the Court would like to hear, you

4 know, just basically the Committee's outstanding objection and

5 where our concerns are. I think Travis -- Mr. McRoberts

6 started to give out the outlay, but really it does come down to

7 the issue of the 328 versus the -- where the Committee just

8 doesn't feel comfortable.

9 As the Court knows, that if the Court approves these

10 fees on a 328 basis, we don't have any ability to look back and

11 say were these fees reasonable. And where, again, the

12 Committee's concerned about is that this is a fast sale process

13 but still, the investment banker, as Mr. McRoberts indicated,

14 has -- was engaged this November, and there have been no

15 schedules. The Committee doesn't have a list of assets, so

16 it's really hard for us to gauge prospectively are these fees

17 reasonable. And in more -- we've expressed to the Debtors that

18 we're okay to say all right, as long as we get an opportunity

19 -- and it's even a difficult thing for us to prove, you know,

20 in hindsight, that they weren't reasonable, but as long as we

21 get that opportunity to have that seat at the table later, then

22 we're not going to have any objection to the investment

23 banker's fees.

24 And based, again, on all the things that haven't been

25 disclosed to date for the group of creditors that bear the most

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1 risk, we think that that's a fair offer.

2 THE COURT: When are the schedules going to be filed,

3 Mr. Lerner?

4 MR. McROBERTS: Your Honor, this is Mr. McRoberts --

5 (Simultaneous speaking)

6 MR. McROBERTS: -- I believe our deadlines --

7 UNIDENTIFIED: Go ahead, Mr. --

8 MR. McROBERTS: I'm sorry --

9 UNIDENTIFIED: No, no, no. That's okay. I was on

10 mute. Go ahead.

11 MR. McROBERTS: No, I -- Your Honor, this is Travis

12 McRoberts, again. I believe our deadline to file our schedules

13 and statements is the second or third week in April. I believe

14 it's the second week in April. That's currently --

15 UNIDENTIFIED: Your Honor --

16 MR. McROBERTS: -- the company --

17 UNIDENTIFIED: I apologize. It is April 10th.

18 MR. McROBERTS: Yeah --

19 THE COURT: There's --

20 MR. McROBERTS: -- there's currently progress at the

21 company. The company is working on that daily.

22 THE COURT: Yeah. So the list of assets will be --

23 the assets will be scheduled in Schedule B or somewhere in the

24 schedules, I presume?

25 MR. McROBERTS: Your Honor, can I -- can we take a

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1 step back and I can address the 330 point that Ms. Wimberg just

2 made because I think it would be helpful.

3 THE COURT: All right.

4 MR. McROBERTS: The -- with respect to Section 330,

5 one of the things we agreed to with the U.S. Trustee is that

6 the U.S. Trustee has that 330 right. That is typical and

7 frankly, that's typically how these things are resolved, and I

8 would tell you that it's what I believe to be a market outcome

9 when there's a dispute over this. And honestly, it's evidenced

10 by some recent cases, even in this circuit, including the

11 Cambrian case in the Eastern District of Kentucky and even more

12 recently in Murray in the Southern District of Ohio. And I

13 think one interesting thing about Cambrian and I think it's

14 instructive is that an objection was filed there in Cambrian

15 where -- I believe it was the U.S. Trustee that filed it that

16 asked that the Committee and the U.S. Trustee be granted that

17 right, and the order that was ultimately entered only granted

18 it to the U.S. Trustee. That's our outcome in almost every

19 case, and it's honestly what's market.

20 I think it's important to note here, too, that as a

21 matter of what I would call "corporate policy," PWP is not in a

22 position to agree to a 330 review or continue their engagement

23 if the Committee is granted 330 review. It's a situation where

24 -- it creates a situation for them where there's no certainty

25 of their fee. And as we all know, running a multi-million-

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1 dollar substantial sale process over a period of several months

2 is a very time- and expense-intensive endeavor.

3 So really kind of where it's at, and I know -- I

4 understand Ms. Wimberg's point, but from an economic

5 perspective, PWP is kind of at their bottom line dollar of what

6 they would take an engagement like this for. And I think it's

7 relatively important to note that --

8 THE COURT: Let me interrupt you.

9 Ms. Wimberg, what is it you need to see before you

10 can agree to anything? What information do you need?

11 MS. WIMBERG: Well, I think -- and this is one of the

12 things that we had spoken about right before the call is that

13 if the Debtors turn -- file their schedules, give us a list of

14 assets, they can give us comparable fees for the

15 (indiscernible). And you know, Mr. McRoberts talked about

16 Cambrian. That's a substantially different case. It's

17 numerous mines. I mean, we're not convinced that even an

18 investment banker is needed here. So just again, some of those

19 comparables that a case this size, in statements made from the

20 Debtor that they looked at other investment bankers -- banking

21 services. Again, just something that would show us -- if we're

22 going to agree, again, prospectively, there's nothing in the

23 application that says that these things -- that this, I guess,

24 economic recovery is justified. It just states what the

25 copy-and-paste services of this investment banker is.

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1 THE COURT: Well, let me ask --

2 MR. McROBERTS: This is Mr. McRoberts. To that

3 point --

4 THE COURT: -- this -- okay. No, no. I'm going to

5 interject something here.

6 This business is not too big to fail. And I want

7 Ms. Wimberg, the Official Unsecured Creditors' Committee, to

8 see the information she has requested. Once she has seen that,

9 then we will go forward with this. But I'm not going to bind

10 her hands to blindly accept something that she can't review. I

11 don't care what the cases in the Southern District of Ohio, or

12 wherever, what they say. If they had the information, then we

13 can proceed with this, but they don't have the information they

14 think they need.

15 MR. LERNER: Your Honor, it's Stephen Lerner. We

16 understand the point the Court is making, but it needs to be

17 clear, if it's not already. One, some of the information that

18 the Committee wants doesn't exist right now. I mean, the

19 schedules aren't prepared. Two, if the Court doesn't approve

20 the retention on this basis, then we will not have an

21 investment banker. I'm frankly shocked to hear the Committee

22 say that there is no need for an investment banker. This is

23 not an easy asset to sell in this environment and if the

24 Committee believes that either Squire or FTI or the Debtors'

25 management, which is very, very thin, can somehow market these

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1 assets to the benefit of the creditors, they are as dead wrong

2 as any committee position I have ever heard. If they want this

3 case to liquidate tomorrow, this is a wonderful way to do that,

4 and this is in the backdrop of a heavily-negotiated fee in

5 which Perella Weinberg dramatically reduced the amount of its

6 fees at the request of our lender, Tribeca, so that it's

7 already below market. There is no other investment banker that

8 will come into this case now, in any event, so it's not like we

9 can replace them.

10 And it's the Debtors' position that not only is the

11 Perella Weinberg retention terms -- not only are they, frankly,

12 below market, but the requests that the Committee is asking for

13 are, in our view, not reasonable for purposes of assessing

14 their fee. There's just -- the risk here is tremendous. The

15 gain for the Committee is minimal, in our view, but we're --

16 this -- we're on a precipice right now if this retention isn't

17 approved, and I just don't want any of the parties or the Court

18 to underestimate that.

19 And I would also say that the Committee has just

20 negotiated for days over a substantial increase in their fee in

21 a case where we hope there's a recovery for unsecured creditors

22 but if there's not, when it comes to the most important

23 professionals for actually obtaining value here in the sense of

24 the parties that's going to run the sale process, they don't

25 want to pay or don't think they should allow payment for a

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1 reasonable fee. So the Debtors are gravely concerned by this

2 position and the position is contrary to -- the outcome is

3 contrary to, you know, so many other similar circumstances.

4 And we appreciate the Court's time.

5 MS. WIMBERG: And Your Honor, if I could just respond

6 to Mr. Lerner, is that we want the investment bankers to get

7 paid, and we want them to succeed, and -- but the fact is, is

8 that one of the things that Mr. Lerner said is just not right.

9 We haven't seen that this is below market. We just haven't

10 seen that fact. And so if we can be walked through that, you

11 know, that satisfies us. Or I -- and I'll -- I hope, you know,

12 we've all worked together before, that we can look at

13 reasonableness later and as long as there is, then reasonable

14 work by the investment banker and the fees are comparable, then

15 there's no reason we're going to worry about an objection.

16 MR. BRICE: Your Honor, this is John Brice. May I

17 interject for just a moment?

18 THE COURT: Yes.

19 MR. BRICE: Thank you. Mr. Lerner has related the

20 fact that Tribeca, on a prepetition basis, over an extended

21 time period negotiated with PWP to try to arrive at what it

22 hoped could be the best possible fee arrangement with PWP, and

23 we ended up where we ended up.

24 Tribeca believes that PWP is going to bring value to

25 the deal, that they deserve to be compensated for that, that

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1 they need the assurance that Mr. Lerner has represented to the

2 Court they need to proceed forward, and I've got a grave

3 concern that if we delay their appointment, it's going to have

4 a dramatic maturely adverse impact on this case going forward.

5 We did the best we could in terms of negotiation. We

6 are the party injecting the money into the deal to make the

7 sale process go, and I understand that that is for our benefit,

8 as well as the rest of the creditor body in this case, but we

9 really would urge the Court to approve the application as

10 submitted on a going-forward basis.

11 THE COURT: I presume there's going to be an

12 accounting with the Court on what assets are being sold and --

13 as we proceed in this case, either by private sale or through

14 an auction. So I presume at some point there's going to be a -

15 - the Court's going to have a chance to review, on some level,

16 whether or not the fees were reasonable.

17 MR. RUPPEL: Your Honor --

18 MS. WIMBERG: And that's -- oh, go ahead, Tim.

19 THE COURT: I mean, is the U.S. Trustee's Office --

20 okay, let's step back. If there weren't --

21 MR. RUPPEL: Yeah, I --

22 THE COURT: -- an Official Unsecured Creditors'

23 Committee, the Office of the U.S. Trustee would be the advocate

24 for unsecured creditors. There is an Official --

25 MR. RUPPEL: Yeah --

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1 THE COURT: -- Unsecured Creditors' Committee now,

2 but Mr. Ruppel still has an obligation to ensure that unsecured

3 creditors receive the maximum that they could receive under a

4 sale or an auction. So I think the fact that --

5 MR. RUPPEL: Your Honor, I --

6 THE COURT: -- there's just -- yes, Mr. Ruppel.

7 MR. RUPPEL: I apologize. I don't mean to interrupt

8 you.

9 THE COURT: That's okay. Go ahead.

10 MR. RUPPEL: As it was mentioned earlier, through

11 Stephen or Travis -- and I apologize, I'm not sure I remember,

12 we -- one of the elements that we did raise and we did get

13 added to the agreement, and they have added and by consent,

14 we've all agreed is that the U.S. Trustee will get the 330

15 review. It wasn't at least clear in the original version.

16 It's clearer -- absolutely clear in the more updated versions

17 that have been submitted, so we will get it. The question I

18 think is is does the Unsecured Creditor Committee get that same

19 obligation.

20 Ms. Wimberg and I talked about this. We do, as the

21 trustees, get -- we will be exercising our responsibilities and

22 we'll be reviewing this. We may or may not -- likely don't

23 have the budget and the wherewithal that the Unsecured

24 Committee has and does to contest it if that gets to that

25 point. So that's probably the concern or I just don't want to

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1 be seeing the same -- you know, we would have that ability, the

2 same ability that the Creditor Committee would have to fight it

3 or to push it and there may be other reasons why we decided not

4 in the best interest to go forward or something like that, and

5 the Unsecured Creditors' Committee to disagree with us or agree

6 with us or whatever it would be in the future. But yes, we

7 would have that ability and --

8 THE COURT: And so if --

9 MR. RUPPEL: -- (indiscernible) --

10 THE COURT: Yeah, and so if the Unsecured Creditors'

11 Committee came to you with information that you may or may not

12 have, you would certainly listen to the Unsecured --

13 MR. RUPPEL: Oh --

14 THE COURT: -- Creditors' Committee, the attorneys?

15 MR. RUPPEL: -- absolutely, yes.

16 THE COURT: Yeah.

17 MR. LERNER: Your Honor, it's Stephen Lerner. We

18 certainly understand that the U.S. Trustee can consult with

19 whomever they would like with respect to their right to raise

20 reasonableness objections, and Your Honor will be the ultimate

21 arbiter if whether the fees are reasonable, with the U.S.

22 Trustee being the party who can raise them. So we don't

23 believe that there's any possibility that something that, you

24 know, would clearly be unreasonable would somehow go unseen or

25 unaddressed, and so the estate and the creditors are protected.

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1 The other comment is I wanted to respond to Your

2 Honor's question regarding the assets. No one's hiding the

3 ball here. There's no mystery as to what the assets are. This

4 is a single mine, okay, that's been in operation only since

5 March of last year. There's a data room which has all sorts of

6 information that potential buyers are already reviewing, and

7 buyers know what's out there. What we haven't done is, because

8 the Bankruptcy Code and rules require, as we all know, very

9 specific ways of identifying properties on schedules and it's a

10 very large undertaking and gets into levels of detail that

11 aren't part of the sale process, that we can't get that done.

12 But I'm not aware of any case where there's a sale from the

13 outset that schedules have to be filed and the Committee has to

14 know precisely about every single asset before a court

15 entertains the retention of an investment banker.

16 I mean, it happens in every case this way. So

17 there's nothing improper or hiding the ball here about the fact

18 that the schedules aren't available. All of -- generally,

19 everybody ought to know what the assets are. We provided a

20 very detailed first-day affidavit that describes them, so we

21 are -- we have been, I believe, and other -- and

22 Mr. Roeschenthaler can commit, you know, lead Committee

23 counsel. We are very open with the Committee. We -- we'll

24 provide them with all the information they need. But to not

25 allow this investment banker to be retained because schedules

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1 aren't filed, to me, just is not an appropriate basis on which

2 to deny the retention.

3 THE COURT: Well, it wouldn't be denied on that

4 basis. It would be denied -- it -- what I'm going to make sure

5 is the members of this Committee have had the opportunity -- or

6 the counsel for the Committee has had the opportunity to go out

7 to the mine and look at the assets. I presume they've had that

8 right.

9 MR. LERNER: Of course. We've had the Committee

10 members sign NDAs. We'll give them everything they want, but I

11 also -- if the Court doesn't approve -- I understand the Court

12 won't deny, necessarily, the retention but if the Court grants

13 the Committee the right to object on reasonableness, it's the

14 equivalent of denying the retention because our investment

15 banker will not move forward.

16 MS. WIMBERG: And Your Honor, and this is the part

17 that the Committee -- if the UST can review unreasonableness

18 and we're allow to see the information to the UST, why do they

19 care that we have the ability to look at reasonableness, as

20 well?

21 THE COURT: Well, you've got a safety net with the

22 U.S. Trustee's Office, Ms. Wimberg. So you can go, just like

23 any other creditor, if they buy, sell, they can go to the U.S.

24 Trustee's Office and present information that the U.S. Trustee

25 might not have or present their case to the U.S. Trustee, and

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1 the U.S. Trustee can raise the objection.

2 So based upon the statements of Mr. Brice -- and I

3 firmly believe that Mr. Brice's client has tried to negotiate a

4 deal that's favorable to the Debtor and to the creditors -- I'm

5 going to overrule the creditors (indiscernible) creditors'

6 objection on this one issue.

7 But I want -- Mr. Ruppel, I want you to get -- I want

8 any information you get to share with the Official Unsecured

9 Creditors' Committee and the attorneys for the Official

10 Unsecured Creditors' Committee. Likewise, if the Official

11 Unsecured Creditors' Committee finds anything that you're

12 unaware of, I want them to provide it to you.

13 MR. RUPPEL: I will do my best, Your Honor. I -- I'm

14 not sure yet. Yes, I mean I -- we've already shared

15 information back and forth with the Creditors' Committee -

16 THE COURT: Fine.

17 MR. RUPPEL: -- and with the Debtor. And I --

18 THE COURT: Yeah, no. I understand that.

19 MR. RUPPEL: Yeah, I get -- yeah, I don't know how --

20 what's -- I mean there could be limits to what I get but

21 certainly nothing that I can think of at this moment.

22 (Simultaneous speaking)

23 MR. RUPPEL: -- criminal referral that we would

24 happily go under within limits but, yeah, certainly, yes.

25 THE COURT: Have you conducted your meeting of

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1 creditors? Have you conducted your --

2 MR. RUPPEL: It cut out, Your Honor. I apologize.

3 THE COURT: Yeah. Have you conducted a meeting --

4 MR. RUPPEL: We had a meeting (indiscernible)

5 debtor --

6 THE COURT: -- with the credit -- yes.

7 MR. RUPPEL: The C41 meeting has not been conducted.

8 THE COURT: No, not the C41 meeting, but if you're

9 going to --

10 MR. RUPPEL: (Indiscernible). You're cutting out

11 bad, Your Honor.

12 THE COURT: Are --

13 MR. RUPPEL: I apologize. It's on your --

14 THE COURT: Are you --

15 MR. RUPPEL: -- end or my end --

16 MR. LERNER: Hey, Tim, he's asking you whether you've

17 done the initial debtor interview.

18 MR. RUPPEL: The IDI has been completed, yes.

19 Mr. Grimes --

20 THE COURT: So did you fill out --

21 MR. RUPPEL: -- from my office has -- Mr. Grimes from

22 my office went out to the mine, yes.

23 THE COURT: Okay. All right. Well, I'll --

24 MR. PARKS: Your Honor?

25 THE COURT: Yes.

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1 MR. PARKS: This is Richard Parks on behalf Komatsu

2 Finance. I just want to make the Court aware that Komatsu

3 Finance is the secured creditor with virtually all of the hard

4 equipment at this mine that was, again, reopened, as Mr. Lerner

5 said, last year. And I will tell the Court there is an

6 inter-creditor agreement between Komatsu and Tribeca; however,

7 we have not been included in any of the consulting of anything

8 concerning the liquidation of the assets, nor have the assets

9 been identified to us. We were told, when we made the first

10 contact, that the idea would be that a -- the other assets, not

11 the equipment of Komatsu, would be sold. I just want to make

12 sure that everyone and the Court is aware that we -- and as I

13 stated the other day, we want to reserve all of our rights,

14 including and specifically any claim of priority under 503 of

15 any administrative claim by any party, because we don't know

16 whether or not our assets, our collateral is being included in

17 the sale or excluded from the sale. We're not being provided

18 with any adequate assurance of payment, and we just want to

19 reserve all the rights. We do believe that the Debtors should

20 go forward with some sort of liquidation; however, we do want

21 to reserve our rights because we have not been included in this

22 process in any way.

23 THE COURT: Mr. Lerner, do you have information that

24 Mr. Parks's client needs?

25 MR. LERNER: I'm sure we do, Your Honor. We have not

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1 been requested to provide anything to Mr. Parks's client. He's

2 correct that they are a secured creditor in the case. It's not

3 -- the implication from Mr. Parks's comment is that somehow

4 we're actively avoiding his client. That's not the case.

5 We're happy to talk to him at any point in time. We've dealt

6 with Mr. Parks and his client in other cases and we've been

7 able to, you know, share information and communicate, you know,

8 effectively in other matters. There's -- there -- I'm not

9 aware of any issue. I'm not aware of a single request of

10 information. When Mr. Parks says he's not being paid anything

11 during the case, he's not -- his client has not requested to be

12 paid anything in this case, so we are, you know -- I understand

13 his reservation of rights and I have no issue with it, but to

14 suggest that the Debtors are ignoring him or his client,

15 that's --

16 THE COURT: No, no.

17 MR. LERNER: -- simply not the case --

18 THE COURT: No, no.

19 MR. LERNER: -- not a --

20 THE COURT: The Debtors just -- no, I --

21 MR. LERNER: -- yeah, but in --

22 THE COURT: -- understand that.

23 MR. LERNER: But one other thing I wanted to add is

24 the bid sale procedures order that Mr. Parks has read and the

25 Court entered earlier this week makes clear that the Debtors

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1 are offering for sale all of their property. It's plan as day.

2 That includes Mr. Parks's client's property. We're not -- the

3 order -- the procedures don't impair parties' rights, they

4 preserve objections. So for anybody who is unclear, every

5 conceivable asset of the Debtors is available to be sold, and

6 that's the process we're undertaking. We will need to see what

7 the responses are from potential buyers, but it shouldn't be a

8 mystery. It's been public knowledge to Mr. Parks and others

9 that all property is available to be sold here.

10 MR. PARKS: Again, the order actually says "all or

11 part," and it doesn't identify and -- but again, as long as our

12 rights are reserved, we're fine with the what the Debtors are

13 attempting to do with Tribeca, you know, fronting those costs

14 for its benefit.

15 THE COURT: Where is this equipment located? Is it

16 located on site?

17 MR. PARKS: Yes, Your Honor.

18 THE COURT: Mr. Parks, were are you located? Which

19 city?

20 MR. PARKS: Outside of Pittsburgh, Your Honor,

21 Pennsylvania.

22 THE COURT: Do you have local counsel?

23 MR. PARKS: We are attempting to get one, yes.

24 THE COURT: Okay.

25 MR. LERNER: Your Honor, should I go on to the last

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1 matter that -- our firm's retention? Your Honor, should I

2 proceed that way and turn to our retention application?

3 THE COURT: No, no, I'm still thinking about -- hold

4 on just one second.

5 MR. LERNER: I apologize, sir.

6 THE COURT: Mr. Parks, do you want to send someone

7 down to look at the equipment on Monday?

8 MR. PARKS: We have -- I mean, our clients have

9 reviewed the equipment, Your Honor. In fact, you know,

10 contrary to the statement, there's a scoop that the Debtor

11 wants to exchange out, that we've made contact with Debtors'

12 counsel about doing that, and we've not received a response.

13 We -- other than they're dealing with the equipment

14 manufacturer on this particular piece of property, but we are

15 aware of the condition of the equipment generally, Your Honor.

16 THE COURT: Okay. Well, I have no reason to believe

17 that Mr. Lerner or Mr. Brice or any of the parties here are

18 trying to hoodwink any of the parties in this case. So I am

19 going to approve --

20 MR. PARKS: And I did not mean to imply that, Your

21 Honor.

22 THE COURT: No, I understand. I understand. But if

23 you want to send someone down to look at it, they will

24 certainly allow you on site to look at it. If there's

25 something you need to see to feel more confident about, this --

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1 the Debtors' assets, then you're free to go look at them. And

2 if at some point --

3 MR. PARKS: No, I --

4 THE COURT: -- Mr. Ruppel, if you find out that

5 things are listed that aren't there or there's property there

6 that isn't listed, you can raise the objection as to

7 Ms. Wimberg. Mr. Irving can proceed and visit with you, and

8 you can raise the objection as you would in any case where

9 someone comes to you and says there's something wrong here.

10 MR. PARKS: Oh, absolutely, Your Honor.

11 THE COURT: Okay. So given that safeguard, I'm going

12 to approve the motion, grant the motion, and then if you will

13 -- I want Ms. Wimberg or Mr. Irving to look at it as having

14 seen, and I'll overrule the Committee's objection.

15 MR. PARKS: Thank you, Your Honor.

16 THE COURT: Okay. Thank you. Okay. Now Squire

17 Boggs' application.

18 MR. LERNER: Yes, thank you, Your Honor. Again,

19 Stephen Lerner on behalf of the Debtors.

20 THE COURT: Wait a minute, wait a minute --

21 MR. LERNER: Squire --

22 THE COURT: Let me ask a question. So let me ask a

23 question, and I'm sorry that we're not in a courtroom in

24 person.

25 So Squire Boggs was doing work for the Debtor only in

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1 preparation for filing these Chapter 11s. Is that correct?

2 MR. LERNER: It is, Your Honor. We had no prior

3 relationship --

4 THE COURT: I mean --

5 MR. LERNER: -- with the Debtor --

6 THE COURT: So everything --

7 MR. LERNER: -- the first time approximately

8 three --

9 THE COURT: -- you did -- so everything you were

10 doing was to go in and try to get the information in order to

11 file the petitions. So did you resolve the objection --

12 MR. LERNER: Correct.

13 THE COURT: -- with the U.S. Trustee about the

14 prepetition amount --

15 MR. LERNER: We resolved -- no, we have not, Your

16 Honor. We resolved other matters, and that was the subject of

17 the amended pleadings we filed yesterday, but the issue of

18 whether we're entitled to be paid the roughly $62,000 of fees

19 for which there was an advance payment through the retainer and

20 the larger amount is still unresolved, and that's what I was

21 going to address with the Court.

22 THE COURT: All right. Go ahead.

23 MR. LERNER: Thank you very much. So the facts

24 before the Court are that approximately $62,000 of prepetition

25 fees and expenses were not paid prior to the filing. The

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1 Debtors paid our firm three payments prior to the bankruptcy:

2 Initially, $150,000 retainer, and then we invoiced twice during

3 the prepetition period and those invoices were paid. We

4 applied some of the retainer to outstanding prepetition

5 amounts, but as the Court can imagine, a case of this size and

6 getting it ready in only a matter of a few weeks, we were,

7 especially in the last several days, consumed with completing

8 the filing. And, for example, literally until the moment we

9 started filing late at night on February I think 20th, we were

10 still negotiating the terms of the financing with Mr. Brice's

11 client.

12 This is not unusual and it's not possible for us to

13 be paid and bill, for example, every hour of the last few days

14 and then apply it to a retainer. It's physically impossible.

15 We're doing the work. We can't stop and detract from that to

16 record our time, have our accounting system enter it, prepare

17 an invoice, and then apply it against the retainer. It's just

18 not -- it's physically impossible to do that.

19 The retainer that we received was in advance of

20 earning any fees whatsoever, and we currently hold the amount

21 of 77,000 and change in our trust account, which is the balance

22 of the $150,000 retainer. That exceeds and, in effect, paid

23 the $62,000 that's remaining.

24 We understand that the U.S. Trustee believes that

25 this lender -- not disinterested and makes us a creditor. And

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1 we respectfully disagree. First of all, this -- the U.S.

2 Trustee doesn't cite a single case or statute for this

3 proposition. And while there are certain --

4 THE COURT: Well, now, let me ask a question.

5 Typically in a case where there are invoices due and owing, it

6 was for work done not related to the bankruptcy filing. The

7 debtor may have been a client of the firm, and so they would --

8 in that case, the firm would waive the fees. But in this case,

9 the sums -- the fees generated were all generated in

10 anticipation of filing the Chapter 11 petitions. It was not

11 generated for some unrelated matter. So go ahead.

12 MR. LERNER: Your Honor, that's correct, and we think

13 that's important; nor could we, as a physical matter, be paid

14 those amounts. The U.S. Trustee cites no authority at all for

15 the proposition that a law firm holding a prepayment in the

16 form of a retainer, which exceeds the amount of the fees at

17 issue can't be paid. Those fees, in a sense, is post-petition

18 out of the retainer. We cite to the Court a number of cases

19 which not only support our position, but would characterize the

20 position of the U.S. Trustee or any objector making this

21 objection as that just defies common sense. And there are no

22 cases provided that suggest that we should not be entitled to

23 apply our retainer at this point.

24 We also, attached to the order, Your Honor -- and we

25 could have attached literally a hundred more -- but examples of

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1 retention orders that courts across the country, including in

2 -- my understanding, including in your district, that have

3 allowed exactly this type of treatment recognizing, that

4 there's a practical impossibility for someone in our position

5 to be paid everything and to apply it in advance.

6 We're also clear, we're not hiding the ball. We were

7 up front about the fees, you know, that we could have -- I

8 mean, I think that some firms might provide large estimates and

9 apply a retainer to a fee that actually hasn't been earned. We

10 think this is more open and appropriate and, you know, the case

11 law supports this. The case law supports that the fact that we

12 have these relatively small amounts of unpaid fees that hold,

13 that not only are we still a disinterested person, but that we

14 are not a creditor, and this also doesn't constitute our firm

15 holding an interest that's adverse to the estate.

16 So we would ask the Court to allow us to apply the

17 retainer like we have been authorized in many cases, and which

18 we believe is consisted with the law, it doesn't stretch they

19 say, it's consisted with the law, and reflects an appropriate

20 practical reality. Thank you.

21 THE COURT: Okay. Mr. Ruppel, I'm going to give you

22 a week to respond to Mr. Lerner's statements today, and so I'll

23 give you until next Thursday to file something with the Court

24 outlining -- and you have to remember this. This is a case

25 where the fees generated related solely to the filing of the

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38

1 Chapter 11 petition. They weren't fees generated for workers'

2 comp or whatever the firm might've been retained for as the

3 prepetition law firm. So having that in mind, and I need you

4 to address what Mr. Lerner has said in his briefs. So I'll

5 give you until next Thursday and then I'll take it under

6 submission --

7 MR. RUPPEL: I thank you, Your Honor, and I will.

8 THE COURT: Yeah. I mean, Mr. Lerner is right. It's

9 the common-sensical element here and -- but I'm going to give

10 the Office of the U.S. Trustee the option to put something in

11 writing.

12 Anything else, Mr. Lerner?

13 MR. RUPPEL: Your Honor, it'll be no problem.

14 THE COURT: Okay.

15 MR. LERNER: No, Your Honor. That concludes the

16 matter. We will present to you the order on Perella Weinberg

17 and the DIP financing order after the parties can review and

18 finalize it. And again, we appreciate the Court's allowing us

19 to be heard again this week and by telephone.

20 MR. RUPPEL: Yeah, I'm --

21 THE COURT: -- let me ask a -- sure, go ahead,

22 Mr. Ruppel.

23 MR. RUPPEL: I apologize. I -- I've asked some of my

24 fellow members in my firm or the office (indiscernible) look at

25 that order while we were doing this, and I believe we -- it's

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39

1 fine. We will sign off on it.

2 THE COURT: Okay.

3 MR. RUPPEL: (Indiscernible) --

4 THE COURT: I'd have to -- yeah --

5 MR. RUPPEL: FTI CRO order.

6 THE COURT: Yeah, thank you so much.

7 MR. RUPPEL: Sorry, yeah.

8 THE COURT: Now --

9 MR. RUPPEL: I do have one -- I do have another, if

10 you don't mind. I apologize.

11 THE COURT: Go ahead.

12 MR. RUPPEL: We had come to an -- we did -- we came

13 to an agreement with regards to the Stretto retention and the

14 Frost Brown retention. Mr. Keating has uploaded a couple of

15 proposed orders. While we were getting that done, there was

16 two orders entered on those two same matters that was, you

17 know, the original orders submitted, and they've been changed.

18 So those two orders, those two documents need to be --

19 THE COURT: Set aside in the other --

20 MR. RUPPEL: Vacated, I guess.

21 THE COURT: Yes.

22 MR. RUPPEL: (Indiscernible) --

23 THE COURT: Okay.

24 MR. LERNER: Actually, Your Honor, the new orders

25 specifically provide that they restate the existing orders, so

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40

1 that'll be taken care of --

2 THE COURT: Okay.

3 MR. LERNER: -- when you enter the --

4 MR. RUPPEL: -- both of them. I know I saw --

5 MR. LERNER: -- revised orders.

6 MR. RUPPEL: -- does both of them say that? I know I

7 saw one of them say that, and I didn't think they both said

8 that.

9 MR. LERNER: I think they say it in different places,

10 Tim, but you --

11 MR. RUPPEL: Maybe --

12 MR. LERNER: -- and I can double check --

13 MR. RUPPEL: Maybe that's -- yes --

14 MR. LERNER: Let's --

15 MR. RUPPEL: -- and I apologize but yeah, that's the

16 intent is that they -- that those --

17 THE COURT: Yeah --

18 MR. RUPPEL: -- proposed orders replace the old ones.

19 So either vacating them or just signing them if they do replace

20 it. And I apologize --

21 THE COURT: All right.

22 MR. RUPPEL: -- I been too much -- got too many balls

23 in the air. Maybe I missed that paragraph as I reviewed it.

24 THE COURT: Mr. King, I'm going to put the burden on

25 you. As you file these orders, I want you to call Ms. Gudgel

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1 and --

2 MR. KING: Yes, Your Honor.

3 MR. RUPPEL: Yeah, he --

4 THE COURT: -- I want to --

5 MR. RUPPEL: He has been wonderful in helping correct

6 that --

7 THE COURT: No, I understand that, but as you file

8 them, I want you to call her and say it's filed. She will

9 alert me, and I will sign it.

10 MR. KING: Yes, Your Honor.

11 THE COURT: All right. Anything else for the Court?

12 THE CLERK: Do we still need a hearing on the

13 application employing FTI?

14 UNIDENTIFIED: Yes, we do --

15 UNIDENTIFIED: No, that -- yeah, I think --

16 UNIDENTIFIED: I think you're right. You're

17 right --

18 THE CLERK: Okay. I was going to --

19 UNIDENTIFIED: No, we need a final -- yeah, I --

20 THE CLERK: Okay, I was going to suggest April the

21 6th. We already have a docket scheduled that day, which is

22 Monday, April the 6th at two o'clock. Would that work for

23 everybody?

24 THE COURT: A week from --

25 THE CLERK: So --

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1 THE COURT: -- next -- this coming Monday?

2 THE CLERK: -- telephonic. April the 6th. That's a

3 week --

4 THE COURT: That's a week --

5 THE CLERK: It's a little over a week --

6 UNIDENTIFIED: Tim --

7 THE COURT: Yeah.

8 MR. KING: It works for the Debtors, Your Honor.

9 MR. RUPPEL: It works for the --

10 THE COURT: Okay.

11 MR. RUPPEL: -- U.S. --

12 THE COURT: Okay.

13 THE CLERK: Okay.

14 THE COURT: So -- all right. All right. I

15 appreciate it. Thank you all.

16 ALL: Thank you, Your Honor.

17 (Concluded at 2:26 p.m.)

18 * * * * *

19

20

21

22

23

24

25

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1 C E R T I F I C A T I O N 2

3 I, Christine F. Clayton, court-approved transcriber,

4 certify that the foregoing is a correct transcript from the

5 official electronic sound recording of the proceedings in the

6 above-entitled matter, and to the best of our ability.

7

8

9 /s/ Christine F. Clayton DATE: October 8, 2020

10 CHRISTINE F. CLAYTON, PP, PLS, CERT

11 AAERT NO. 299

12 ACCESS TRANSCRIPTS, LLC

13

14

15 C E R T I F I C A T I O N 16

17 I, Lisa Luciano, court-approved transcriber, hereby

18 certify that the foregoing is a correct transcript from the

19 official electronic sound recording of the proceedings in the

20 above-entitled matter, and to the best of my ability.

21

22

23 ______

24 LISA LUCIANO, AAERT NO. 327 DATE: October 9, 2020

25 ACCESS TRANSCRIPTS, LLC

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Exhibit 4

Sale Hearing Transcript for July 22, 2020 (Excerpt) Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 117 of 143

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF KENTUCKY

. Case No. 20-40133-thf IN RE: . Chapter 11 . HARTSHORNE HOLDINGS, LLC, . 601 W. Broadway and HARSHORNE LAND, LLC, . Louisville, KY 40202 . Debtors. . Wednesday, July 22, 2020 ...... 9:29 a.m.

TRANSCRIPT OF EVIDENTIARY HEARING - DAY TWO BEFORE THE HONORABLE THOMAS H. FULTON UNITED STATES BANKRUPTCY COURT JUDGE APPEARANCES:

For the Debtors: Frost Brown Todd LLC BY: EDWARD M. KING, ESQ. 32nd Floor 400 West Market Street Louisville, KY 40202 (502) 589-5400 Squire Patton Boggs, LLP BY: STEPHEN D. LERNER, ESQ. 201 E. Fourth Street, Suite 1900 Cincinnati, OH 45202 (513) 361-1200

Squire Patton Boggs, LLP BY: JON MUREEN, ESQ. 2000 McKinney Ave, Suite 1700 Dallas, TX 75201 (214) 758-1500

For Tribeca Entities: John B. Brice, Attorney At Law BY: JOHN B. BRICE, ESQ. 250 West Main Street, Suite 1600 Lexington, Ky 40507 (859) 233-2012

Audio Operator: Angela M. Gudgel, ECR

Transcription Company: Access Transcripts, LLC 10110 Youngwood Lane Fishers, IN 46038 (855) 873-2223 www.accesstranscripts.com

Proceedings recorded by electronic sound recording, transcript produced by transcription service. Case 20-40133-acs Doc 687 Filed 10/30/20 Entered 10/30/20 16:32:09 Page 118 of 143

2

APPEARANCES (Continued):

For Kentucky Utilities Stoll Keenon Ogden PLLC Company, Louisville BY: EMILY PAGORSKI, ESQ. Gas & Electric LEA PAULEY GOFF, ESQ. Company: SPENCER GRAY, ESQ. JOHN RUSSELL, ESQ. 2000 PNC Plaza 500 West Jefferson Street Louisville, KY 40202 (502) 333-6000

For Indiana-Kentucky Steptoe & Johnson PLLC Electric Corporation: BY: NATHANIEL R. KISSEL, ESQ. 2525 Harrodsburg Road, Suite 300 Lexington, Ky 40504 (859) 219-8234

TELEPHONIC APPEARANCES:

For Official Committee Dentons Bingham Greenebaum LLP of Unsecured Creditors: BY: JAMES R. IRVING, ESQ. APRIL WIMBERG, ESQ. 3500 National City Tower 101 South 5th Street Louisville, KY 40202 (502) 587-3606 Whiteford Taylor Preston LLP BY: RICHARD RILEY, ESQ. The Renaissance Centre, Suite 500 405 North King Street Wilmington, DE 19801 (302) 353-4144

For Indiana-Kentucky Law Firm of Russell R. Johnson, III, Electric Corporation: PLC BY: RUSSELL R. JOHNSON, III, ESQ. 14890 Washington Street, First Floor Haymarket, VA 20169 (804) 620-7133

For Fricke Management & Farmer Scott Ozete Robinson & Contracting: & Schmitt By: ANDREW C. OZETE, ESQ. P.O. Box 657 Evansville, IN 47704 (812) 425-1591

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3

I N D E X 7/22/20 WITNESSES FOR THE DEBTORS:

JOHN MESSINA PAGE

Direct Examination by Mr. Mureen 5 Cross-Examination by Ms. Goff 18 Cross-Examination by Mr. Brice 25

WITNESSES FOR TRIBECA:

HAYDEN SMITH PAGE

Direct Examination by Mr. Brice 27 Cross-Examination by Ms. Goff 39 Cross-Examination by Mr. Kissel 74 Cross-Examination by Mr. Mureen 85 Cross-Examination by Ms. Goff 88

PETER BRADLEY PAGE

Direct Examination by Mr. Brice 96 Cross-Examination by Ms. Goff 104 Cross-Examination by Mr. Kissel 120 Cross-Examination by Mr. Mureen 123 Cross-Examination by Ms. Goff 131

WITNESSES FOR LG&E AND KU:

CARYL PFEIFFER PAGE

Direct Examination by Ms. Goff 136

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1 (Proceedings commence at 9:29 a.m.)

2 THE CLERK: All right. The United States Bankruptcy

3 Court for the Western District of Kentucky is now in session,

4 the Honorable Thomas H. Fulton presiding.

5 THE COURT: Please be seated.

6 All right. Ms. Goff.

7 MS. GOFF: Yes, Your Honor.

8 THE COURT: Where are we on the witnesses today,

9 Mr. Mureen?

10 MR. MUREEN: We have one more witness we're going to

11 call by video.

12 THE COURT: Right.

13 MR. MUREEN: And I just saw him flash up, so I think

14 he's ready.

15 THE COURT: Okay.

16 MR. MUREEN: And then Tribeca has a couple of

17 witnesses that they would also call by video.

18 THE COURT: All right.

19 MR. MUREEN: And then it's their turn.

20 THE COURT: Okay.

21 MS. GOFF: And, Your Honor, our case, our witness

22 will be Ms. Pfeiffer, in person.

23 THE COURT: All right. Thanks.

24 How do we call up the witness?

25 MR. KISSEL: And, Your Honor, just --

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Messina - Direct/Mureen 5

1 THE CLERK: Is it Mr. Messina?

2 MR. KISSEL: -- so everyone's clear, IKEC will have a

3 witness after LG&E does, as well.

4 THE COURT: All right.

5 THE CLERK: Okay. Mr. Messina, you can go ahead and

6 call into the email that we sent you or link up to that email.

7 MR. MESSINA: Okay.

8 THE CLERK: There we go.

9 MR. MESSINA: I'm on, and I activated my camera.

10 MR. MUREEN: May I approach?

11 MR. MESSINA: Hello?

12 MR. MUREEN: Morning, John.

13 You guys want to swear -- we're going to swear him in

14 first?

15 THE COURT: Yes.

16 MR. MUREEN: Okay. They're going to swear you in,

17 and then we'll begin.

18 MR. MESSINA: Okay.

19 THE CLERK: Could you raise your right hand, please?

20 JOHN MESSINA, DEBTOR'S WITNESS, SWORN

21 DIRECT EXAMINATION

22 BY MR. MUREEN:

23 Q Okay. Mr. Messina, would you introduce yourself to the

24 Court, please?

25 A Yes. My name is John Messina. I'm a managing director at

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Messina - Direct/Mureen 6

1 Perella Weinberg Partners. I've been in the investment banking

2 industry for almost 20 years now at -- starting most of my

3 career at Citigroup, and then I've been at Perella Weinberg

4 Partners since the beginning of 2018.

5 Q And what is, for the record, Perella Weinberg Partners?

6 A We provide corporate advisory services to clients largely

7 around M&A activity and M&A advisory and restructuring, as

8 well.

9 Q And you were the investment bank that Hartshorne engaged

10 to try to sell the company.

11 A Correct.

12 Q Now, when was your first engagement with Hartshorne?

13 A So we were initially engaged in November of 2018 by

14 Paringa, the -- Hartshorne's parent company, listed parent

15 company in Australia, to run a quiet sale process and contact a

16 small number of buyers, November, early December. We contacted

17 ten parties through that process. We did not get much -- much

18 interest. We had suggested to the company at the time that we

19 thought that there were a number of reasons that a sale process

20 for Paringa, the parent company of Hartshorne, would be

21 challenging, and -- and it turns out it was and we did not get

22 -- get much interest at the time.

23 Q Now, in assessing whether or not it would be challenging,

24 did you guys have experience in the coal industry before this?

25 A Yeah. So as I mentioned, I've been in the investment

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Messina - Direct/Mureen 7

1 banking industry for almost 20 years. A partner of mine,

2 Brendan Smith, who was also very actively involved in the

3 transaction, has over 25 years of investment banking

4 experience. And through each of our collective experience,

5 we've worked on a number of, you know, M&A sale transactions

6 and -- with a number of coal companies, as well.

7 Q When you contacted those 10 strategic buyers before the

8 bankruptcy, how did you decide who to contact?

9 A It was largely based on our knowledge of companies and who

10 we thought might be interested and focused on strategic

11 parties, so parties that were also in the coal production

12 business and may have some strategic reasons to combine with,

13 with Paringa and Hartshorne. Either they were located nearby

14 or operated similar mines or other reasons why it could be a

15 logical combination with their own business already.

16 Q Now, after that first engagement before the bankruptcy

17 petition, where you engaged again?

18 A We were -- not prior to the -- not prior to the bankruptcy

19 filing. We were engaged. The second time, we were engaged

20 with the November engagement to try to sell Paringa, and then

21 Hartshorne filed for bankruptcy. And then, we were engaged by

22 Hartshorne in January of 2020.

23 Q And what was your -- what was the object of your

24 engagement by Hartshorne after the bankruptcy was filed?

25 A So me, personally, is on the -- run the sale process and

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Messina - Direct/Mureen 8

1 conduct sale process for the company. Perella Weinberg wasn't

2 engaged as investment banker. And so we were both providing

3 services related to conducting a sale process, and then also we

4 have restructuring bankers, as well, that were involved with

5 providing more restructuring specific advice.

6 Q Now, as a result of your engagement to sell Hartshorne

7 assets, did you have to become pretty familiar with what assets

8 they had?

9 A Yes. And we had already begun to done that -- begun to

10 have done that during the November/December 2019 process where

11 we spent significant time with the management team, reviewed

12 all of the publicly available information, spent time

13 discussing the model and the business plan, understanding all

14 of the operations, the mine, the equipment and through the

15 January 2020 engagement, as well. We reviewed all of that

16 information again, went through the model with the management

17 team again, helped the management team prepare information to

18 include in the virtual data room, which was eventually provided

19 to potential buyers that signed NDAs. And so we spent a good

20 bit of time with the management team preparing to launch the

21 sale process.

22 Q Now, describe for us the sale process itself. What did

23 you do?

24 A Yeah. So we identified potential buyers through a few

25 different means, one of which just our knowledge of -- we work

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Messina - Direct/Mureen 9

1 with other coal companies as part of our job as an investment

2 banker, so we have relationships and had a sense for which

3 parties would be logical and might be interested. There were a

4 few that had approached Hartshorne directly at different

5 periods of time that they suggested that we contact, and then

6 there was also public disclosure around the situation and the

7 fact that there was going to be a bankruptcy sale process with

8 contact information. And so there were some inbound queries,

9 as well. We ended up contacting 38 parties in total, 9 of

10 which signed nondisclosure agreements and got access to the

11 data room with more details on, on the assets and the

12 operations.

13 Q The 38 parties in total that you contacted, those were

14 parties that you had specific direct communications with?

15 A Correct. Those were parties that we had some form of

16 direct communication with regarding potential interest in the

17 Hartshorne sale process.

18 Q And then there may have been some beyond that indirect

19 awareness of the sales process, not because you contacted them

20 specifically, but just because of the publicity around the

21 sale.

22 A Exactly. Given the public disclosure, both from the

23 Paringa parent company in Australia and in the bankruptcy

24 filings and other public disclosure, I think it was well known

25 by anybody that would have had interest in these assets that

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Messina - Direct/Mureen 10

1 they were available for sale through this process.

2 Q Now out of the nine people who responded and said -- when

3 the nine people responded expressing interest, what happened

4 next?

5 A So when they expressed interest, they signed a

6 nondisclosure agreement, and then they were given access to a

7 data room that had a lot of information on the company, some of

8 which was also publicly available but much of it which wasn't,

9 the main one being financial model that some of the parties

10 spent time reviewing and understanding. And then, from there,

11 the parties were given the bidding procedures and understood

12 sort of the sale process and the auction process and the

13 different milestones and what they needed to do in terms of

14 submitting bids, if they were interested in pursuing the

15 acquisition.

16 Q Now out of the nine prospects who responded, signed an

17 NDA, and reviewed the information, did any of them come close

18 to making a qualifying bid for the assets?

19 A No. We received no qualifying bids from, from that group.

20 The closest we got was we did get one written nonbinding

21 indication of interest that I would describe as being highly

22 conditional because there were a number of a number of caveats

23 that -- or conditions in their offer that that would need to be

24 satisfied in order -- in order for it to progress.

25 Q And why did you decide not to -- or what happened with

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Messina - Direct/Mureen 11

1 that offer?

2 A So with that offer, we inquired to assess whether or not

3 we thought those conditions could be met. And the first one

4 was the sourcing requirement. That offer was for the two

5 customer contracts, the OVEC contract and the LG&E contract,

6 and one of the conditions was the source provision would need

7 to be changed. This particular party did not intend to operate

8 the mine going forward and operate the assets, and so they were

9 interested in, in the contracts, but they would have needed to

10 supply them from a different source. And so they would have

11 needed that condition in the contract or that clause in the

12 contract to be modified along with a few other conditions that

13 they indicated in their written non-binding indication of

14 interest.

15 Q Of the nine prospects who signed the NDA. Did anybody

16 express interest in acquiring the Hartshorne assets as a whole

17 to continue operating it as a going concern?

18 A No one expressed interest in doing so. A couple of them

19 explored, I would say, the viability of doing so and the

20 economic merits of doing so and concluded that based on the

21 operating costs, based on capital that would be required to put

22 into the business to improve the economics of the operation,

23 overall lack of interest in thermal coal and lack of support

24 from investors, for thermal coal, there were a number of

25 reasons that they determined that they would not proceed with

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Messina - Direct/Mureen 12

1 any sort of offer for the assets on a going concern basis.

2 Q In your view, were there any other impediments to the sale

3 of the Hartshorne assets?

4 A No. I mean, I think as we looked at the discrete assets -

5 - so the company as a going concern, economically, just in this

6 market with coal prices being very low given the over supply

7 and decline in demand, their operating margins, you know, were

8 very negative and there was not a clear path to improve that.

9 And so I think the parties dismissed the idea of acquiring this

10 as a viable, ongoing business. And then when you looked at the

11 discrete and individual assets, the -- you know, the LG&E and

12 OVEC contracts stood out as ones that would have significant

13 economic value if you just looked at the volumes that were

14 ascribed to each of those contracts and the price, which is a

15 fixed price to sell into relative to the current market price

16 of thermal coal and where parties thought they could source

17 coal either through their own production or through a third

18 party, that those contracts had positive economic value as a

19 result. Otherwise, looking at other assets, there was not many

20 other assets that stood out or any other assets that stood out

21 as having potentially significant value as a discrete asset.

22 Q How do you think COVID-19 affected the sale process?

23 A And it's hard to say explicitly. There were a number of

24 factors. And as I mentioned, thermal coal as a whole was sort

25 of out of favor ahead of the process and for a number of years

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Messina - Direct/Mureen 13

1 now, and the demand has been declining. But we kicked off the

2 process before COVID-19 really set in in the United States, at

3 least. And I think once it set in, it did have a pretty

4 significant impact both logistically on our process because

5 some of the parties that would have otherwise -- may have

6 chosen to visit the mine, visit with the management team, and

7 spend more time assessing the opportunity chose not to do so,

8 either due to physical restrictions or just not, you know, not

9 wanting to put themselves in that position. And then, I think

10 it did further, at least for the time being, exacerbate some of

11 the overall market -- cold market dynamics with the shutdowns

12 and with the demand falling for thermal coal, and prices

13 continued to decline, which created a, you know, more negative

14 outlook for the business.

15 And then also, as I mentioned, with respect to the

16 November process, we targeted mainly strategic parties for this

17 bankruptcy -- post-bankruptcy process that was -- there were a

18 few financial oriented parties in the mix in addition to the

19 more typical sort of strategic producers, but the producers in

20 particular were having struggles with their own businesses and

21 they were facing a lot of the same impacts in their own

22 businesses. So they were really focused internally and trying

23 to manage their own businesses and not looking to take on

24 additional risk and requirements of acquiring a business and

25 spending time with that process.

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Messina - Direct/Mureen 14

1 Q I'd like to focus in now on the two supply agreements that

2 you identified as the most valuable assets that Hartshorne had.

3 Why were those the most valuable assets?

4 A As I said, they were valuable in the sense that they call

5 for a specific volume of coal to be delivered at specific

6 periods in time and at specific prices. And so mathematically,

7 you can calculate that there's some indications of market

8 pricing. The EIA has public data, and then we have

9 conversations with our other coal clients and talk about where

10 they see pricing. Companies make public statements with their

11 quarterly earnings and make comments about pricing. So I

12 think, you know, given where market pricing is, it's well below

13 the specified price for delivery in each of those two

14 contracts. And so mathematically, you can calculate the

15 difference in the price, multiply that by the volumes, and

16 calculate a surplus value, if you will, of delivering the coal

17 under the terms of the contract versus what you would pay to

18 source it at market or produce it today.

19 Q Now, there are other provisions in those contracts besides

20 price, right?

21 A Correct. When I say value, I'm speaking just about the

22 economic terms and putting aside some of the some of the other

23 requirements.

24 Q When you're valuing a contract that has other provisions,

25 why is price the bottom line in the coal -- in this coal market

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Messina - Direct/Mureen 15

1 -- in the coal industry in particular?

2 A Because the coal --

3 THE CLERK: Judge, that person is --

4 MR. MUREEN: Hold on one second. Hold on one second,

5 John. There's an objection.

6 MS. GOFF: That presumes facts not in evidence.

7 THE COURT: I'm sorry, Ms. Goff?

8 MS. GOFF: Your Honor, I said that that -- I

9 indicated that that presumes facts not in evidence.

10 MR. MUREEN: I think it -- I think I'm asking a

11 followup where he did say that price was the bottom line, and

12 now I'm asking why you.

13 THE COURT: He did ask about prices. He did ask what

14 was -- the price was -- what was important, and now you're

15 asking why.

16 MR. MUREEN: Right.

17 THE COURT: I'm going to let you ask the question.

18 BY MR. MUREEN:

19 Q Okay. So, Mr. Messina, why is price in a coal contract

20 the bottom line?

21 A For the most part, coal's a commodity, and so you can use

22 coal from one place or coal from another place and get the same

23 (audio interference). You'd want to pay the lowest price that

24 you could given you're going to get similar performance either

25 way.

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Messina - Direct/Mureen 16

1 Q Now, within those contracts, how -- there are the source -

2 - there are source provisions. We talked about that earlier.

3 How did the -- and you mentioned the one bidder that called

4 that out. Were there any other bidders that called out the

5 source provision?

6 A Another party that we had a detailed discussions with,

7 they didn't submit a formal letter, largely because they knew

8 that they would have the same issue with the source provision,

9 but this party would have been willing to make an offer for the

10 contracts, thought that they would be able to source the coal

11 to satisfy the contracts other than they also would have chosen

12 not to operate the mine. And so they would not have been able

13 to satisfy the source provision (audio interference).

14 Q If that source provision had not been in those contracts,

15 do you believe you would have been able to market those

16 contracts more broadly?

17 A Yes, I think so. I think the two parties that did still

18 take the time and focus in on it would've pursued it more

19 aggressively and more completely. And then, you know, I think

20 generally speaking, just based on some of the other

21 conversations -- those two parties were the ones that we had

22 the most in-depth and material discussion with, but we had

23 other conversations with a number of other parties. We reached

24 out to 38 parties, and the contracts were discussed in, you

25 know, a number of conversations. And the others were aware

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Messina - Direct/Mureen 17

1 that there is a source provision in these contracts. And

2 again, many or most of them would have assumed that they would

3 not be operating the Poplar Grove mine and therefore would not

4 have been able to satisfy that source provision and so didn't

5 pursue it any further because while I said there's economic

6 value by looking at the volumes and comparing the price in the

7 contract versus the current market price that you could source

8 at, if that's sort of, you know, a binary black and white issue

9 where you can't source it and so you can't satisfy the

10 contract, then it doesn't have any value because you're not

11 able to sell, sell the coal, regardless of the, you know, the

12 pricing differential.

13 Q Now after you had engaged in these discussions with the

14 nine who signed the NDA and then those two that were focused on

15 these particular supply agreements, you weren't able to find a

16 buyer for the assets, right?

17 A Correct.

18 Q Now, and then Tribeca came into the picture -- or how did

19 that come about?

20 A Yeah. So given Tribeca's position, we had had some

21 discussions with them, you know, throughout the process, but

22 they hadn't made any formal offers. They hadn't communicated

23 to us what their intentions were. It was only after we sort of

24 exhausted all of the other potential options and all of the

25 other potential prospects from the sales process perspective

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Messina - Cross/Goff 18

1 that then Tribeca did formally enter the picture and formally

2 make an offer to acquire these two contracts through a credit

3 bid.

4 Q Did you receive any other qualified bids for any assets

5 besides the one from Tribeca?

6 A No. We received no qualified bids other than Tribeca's

7 bid.

8 Q In your view, have the debtors done everything reasonably

9 possible to maximize the chances of success of this sale

10 process that you were involved in?

11 A Yes.

12 Q In your view, does this sale to Tribeca represent a

13 reasonable and appropriate exercise of business judgment?

14 A Yes.

15 Q Is there any other opportunity to shed $14 million of

16 senior secured debt in this case besides this one?

17 A Not based on what we discovered during our sales process.

18 MR. MUREEN: Pass the witness. Thank you.

19 Just hold on, and someone's going to come up and ask

20 you questions now, John.

21 THE WITNESS: Okay.

22 THE COURT: Ms. Goff.

23 MS. GOFF: Nobody? Okay.

24 CROSS-EXAMINATION

25 BY MS. GOFF:

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Messina - Cross/Goff 19

1 Q Good morning, Mr. Messina. My name is Lee Goff, and you

2 and I have not gotten to meet yet, have we?

3 A No, we haven't.

4 Q All right. I think my partner took your deposition last

5 week, didn't he?

6 A Yes.

7 Q Mr. Messina, you testified a moment ago that your first

8 engagement by Paringa was in November of 2018. Was that

9 actually November 2018, or could it have been November 2019?

10 A Sorry, I misspoke. It was November 2019.

11 Q So, Mr. Messina, I think you've testified that you did

12 have a potential bidder but that bidder would have conditioned

13 its bid on the bankruptcy court removing the source provision

14 of the contract, correct?

15 MR. MUREEN: Objection. Mischaracterizes the

16 witness's prior testimony.

17 THE COURT: I don't think he (indiscernible) it was

18 going to be the bankruptcy court.

19 MS. GOFF: All right. Let me rephrase the question.

20 BY MS. GOFF:

21 Q I believe you indicated that you had a potential bidder

22 who -- whose bid was going to be contingent on that source

23 provision not applying for whatever reason. Is that correct?

24 A Yes. We received a bid, and one of the conditions was

25 that source provision would need to be modified.

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Messina - Cross/Goff 20

1 Q And you didn't take that bid for reasons including that

2 one, correct?

3 A It was a nonbinding written indication. So it wasn't a

4 qualified bid, but we explored the ability to meet their

5 conditions. And we didn't pursue the bid that much further

6 because we determined that, you know, we were not going to be

7 able to satisfy the conditions.

8 Q Right. But that is exactly how the Tribeca bid now is

9 conditioned, isn't it? It's conditioned on changing the source

10 terms.

11 A The Tribeca bed also requires a change to the source

12 terms, yes.

13 Q And, Mr. Messina, I believe you testified that the -- that

14 some of the terms in the contract such as the volumes and

15 delivery times and price made it an attractive contract,

16 correct?

17 A Yeah. You can mathematically calculate the potential

18 value on that basis.

19 Q But if those terms made the LG&E supply contract

20 attractive, there were other terms that made it unattractive,

21 basically the source term and the terms related to that?

22 A I would say that it's kind of binary. If you can't supply

23 anything because there are other terms in the contract that

24 prevent you from doing so, then there's no value to you as a

25 buyer of that contract. There's only value if you're able to

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Messina - Cross/Goff 21

1 actually deliver the coal at those prices and at those volumes.

2 Q But now you understand that prior to the mine closing,

3 Hartshorne had actually been delivering coal at some level to

4 LG&E.

5 A Yes. I'm aware that there were sales from Hartshorne from

6 the mine to LG&E.

7 Q Okay. And that would be from the Buck Creek mine to LG&E.

8 UNIDENTIFIED: The Poplar --

9 THE WITNESS: From the Poplar Grove mine, yes.

10 BY MS. GOFF:

11 Q The Poplar Grove or Buck Creek, too. Would that be

12 correct?

13 THE COURT: Well, I think we're going to stick to

14 trees.

15 MS. GOFF: Okay. That's just fine, Your Honor.

16 BY MS. GOFF:

17 Q So -- but coal had been being supplied from Hartshorne's

18 Poplar Grove mine, correct?

19 A Yes.

20 Q And you testified a moment ago that that price is the

21 bottom line, but you can't say here today what LG&E's bottom

22 line is, can you?

23 A I don't know what LG&E's intentions or objectives are

24 specifically.

25 Q Is it the case that nobody bid on the mine properties

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Messina - Cross/Goff 22

1 themselves because it would be more expensive to produce coal

2 from those mines than to simply get it from someplace else in

3 today's market?

4 A I think, yes. Looking at the operating performance of the

5 mine and the cost of production at the mine, it was higher than

6 certainly market prices today would justify operating a mine at

7 for a new party. So they would have been producing at a loss

8 and it would not have made sense for someone to step into that

9 position.

10 Q Mr. Messina, in addition to other challenges that you

11 faced in marketing these assets, is it the case that one of

12 those challenges was also the sheer amount of leverage Tribeca

13 had in this situation?

14 A In terms of the leverage in the -- sorry, we use that term

15 a lot in finance. In terms of the amount of debt that they had

16 on the business or leveraged -- the perceived leverage that

17 they would have had over the process?

18 Q Let's do both, one at a time.

19 A I mean, I think in the November 2019 process, the leverage

20 that Tribeca had -- the debt amount that Tribeca had was a

21 significant impediment in terms of a sale at that time, given

22 the relative value or perceived value of the business overall

23 relative to the amount of debt. I think in the bankruptcy

24 process, bidders recognize that that isn't -- they can approach

25 it differently. And so I don't think that that would scare

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Messina - Cross/Goff 23

1 them away or prevent them from participating in a bankruptcy

2 sale process on that basis. You know, I think the parties that

3 we were speaking to were aware that the value that they would

4 justify ascribing, whether it be to the mine as a going concern

5 or for discrete assets, was unlikely to cover the full amount

6 of the debt that Tribeca had from its term loan on -- you know,

7 from the term loan alone on the business.

8 Q Okay. As to part two, then after the bankruptcy file --

9 was filed, it would be true that Tribeca's leverage would be

10 related to the leverage that a DIP lender has in a Chapter 11.

11 A Parties were aware that Tribeca had provided the DIP, as

12 well. And then, yes, at that point, that increased the total

13 debt owed owed to Tribeca by Hartshorne between the

14 pre-petition loan and the DIP loan.

15 Q Mr. Messina, the party that you were talking to that

16 conditioned its interest in the contracts on that source term

17 being changed, was that Alliance Coal?

18 A Yes.

19 Q And is it true that Alliance ultimately declined to make a

20 formal offer, even conditioned on a change in the source term?

21 A Yes. Through our conversations with Alliance, and as I

22 said, they conditioned their bid on a number of factors, but

23 the -- actually, the overwhelming sort of approach that they

24 took was LG&E is a good customer of theirs. And they were

25 interested in potentially acquiring these contracts for, you

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Messina - Cross/Goff 24

1 know, a good economic value, but they did not want to do

2 anything to jeopardize the ongoing relationship with LG&E. So

3 basically they said, look, we would need -- without us being

4 aggressive or without us pushing for it, we would need LG&E to

5 basically agree to these conditions that we're proposing if we

6 were going to do anything here.

7 Q And, Mr. Messina, would you agree with me that if the

8 source term and the related terms would affect a potential

9 assignee's willingness to bid, then those must have been

10 important and material terms?

11 A They were material to the parties we were talking to about

12 bidding in the sense that, as I said earlier, it's kind of

13 binary. You can do all the math you want around the

14 theoretical surplus value, but if you're not legally allowed to

15 deliver due to another term in the contract, then yeah, that's

16 certainly material to that party because they wouldn't get any

17 value from not being able to deliver coal.

18 MS. GOFF: Your Honor, subject to this -- any

19 subsequent questioning, that's all I have at the moment.

20 THE COURT: All right.

21 MS. GOFF: Thank you. Thank you, Mr. Messina.

22 THE COURT: Mr. Brice, do you have any questions?

23 MR. BRICE: A couple, Your Honor.

24 THE COURT: Mr. Kissel, do you have some after

25 Mr. Brice?

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Messina - Cross/Brice 25

1 MR. KISSEL: I have none, Your Honor.

2 THE COURT: Okay.

3 CROSS-EXAMINATION

4 BY MR. BRICE:

5 Q Mr. Messina, I'm John Brice. I represent the Tribeca

6 entities. I've just got a couple of questions for you.

7 First question, turning to Ms. Goff's questions about

8 leverage. In particular, the Tribeca debt leverage. I believe

9 your testimony was that the parties were aware of the amount

10 that was owed Tribeca as part of the sales process, correct?

11 A Well, they were aware of the amount that was owed to

12 Tribeca pre-petition, and they were aware of the DIP loan, you

13 know, irrespective of the sale process, but I think that

14 overall awareness was -- you know, buyers were aware of that as

15 we were speaking to them.

16 Q Did Tribeca ever give any kind of indication that they

17 would not be satisfied with a bid that was less than the amount

18 they were owed on both the DIP loan and their pre-petition

19 secured debt?

20 A Did not.

21 Q Okay. Thank you. That's all I have.

22 THE COURT: Anyone else have questions? Followup?

23 MR. MUREEN: We have no redirect, Your Honor.

24 Thank you, Mr. Messina.

25 THE COURT: You are now excused.

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Messina - Cross/Brice 26

1 THE WITNESS: Thank you.

2 THE COURT: Welcome.

3 (Witness excused)

4 THE COURT: Mr. Mureen.

5 MR. MUREEN: And we have -- as discussed earlier, we

6 have no further witnesses to call. The debtors do not, but

7 Tribeca does.

8 THE COURT: Okay. Why don't we take Tribeca's

9 witnesses now.

10 MS. GOFF: Pardon me, Your Honor. If these next two

11 will be on video, would the Court mind if I sat in the witness

12 chair so that I can see the witness?

13 THE CLERK: It's fine.

14 THE COURT: It's fine.

15 MS. GOFF: I promise not to testify.

16 UNIDENTIFIED: I'm going to hold you to that, Lee.

17 THE COURT: We all know that that's not true.

18 MR. BRICE: I'm going to try to contact my client to

19 get him to log in. I believe he's on the phone, but --

20 THE CLERK: Yeah. Well, what's his name?

21 MR. BRICE: Pardon?

22 THE COURT: What's his name?

23 MR. BRICE: Hayden Smith.

24 THE CLERK: Mr. Smith, if you're on, you can connect

25 your -- connect to the video conferencing.

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1 C E R T I F I C A T I O N 2

3 We, Alicia Jarrett and Ilene Watson, court-approved

4 transcribers, hereby certify that the foregoing is a correct

5 transcript from the official electronic sound recording of the

6 proceedings in the above-entitled matter, and to the best of

7 our ability.

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11 ______

12 ALICIA JARRETT, AAERT NO. 428 DATE: July 30, 2020

13 ACCESS TRANSCRIPTS, LLC

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17 ______

18 ILENE WATSON, AAERT NO. 447 DATE: July 30, 2020

19 ACCESS TRANSCRIPTS, LLC

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