Item
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Amended and Restated Term Sheet between Contura and ESM
On October 18, 2019, Contura Energy, Inc. (“Contura”)
and Eagle Specialty Materials, LLC (“ESM”), an affiliate of FM Coal, LLC (“FM Coal”), amended and restated
the binding term sheet between the parties dated as of September 15, 2019, which was reported by Contura on a Form 8-K filed on
September 18, 2019 (such term sheet, as amended and restated on October 18, 2019, the “Term Sheet”). The Term Sheet
was entered into in connection with the acquisition of the Belle Aye and Eagle Butte Mines (the “Western Mines”) by
ESM from Blackjewel, L.L.C. (“Blackjewel”) and certain of its subsidiaries and affiliates (collectively with Blackjewel,
the “Seller Parties,” and the acquisition of the Western Mines by ESM from the Seller Parties, the “ESM Acquisition”).
The closing of the ESM Acquisition (the “Closing”) occurred on October 18, 2019 (the “Closing Date”).
Pursuant to the Term Sheet, Contura agreed, as described below,
to make two cash payments to ESM and to convey to ESM its interests in ranches known as the Belle Ayr Ranch and the Black Thunder
Ranch (together, the “Ranches”). On the Closing Date, Contura made the first cash payment to ESM in the amount of approximately
$81.3 million (the “Closing Cash Consideration”). Contura has agreed to make a second cash payment in the amount of
approximately $8.7 million into an escrow account within 15 business days of the Closing Date, which escrow payment is to be used to make payment
in respect of a certain claim for royalties related to the Western Mines that has been asserted against Contura by the federal government.
Within 10 business days of the Wyoming Department of Environmental Quality (“DEQ”) releasing its collateral interest
in the Ranches, Contura has agreed to convey its interests in the Ranches to ESM.
Contura Coal West, LLC (“Contura Coal West”),
a Contura affiliate, holds certain permits related to the Western Mines (the “Contura Permits”). Those permits
did not transfer at Closing but rather will transfer when all applicable approvals for their transfer have been obtained.
Following the Closing and until the earlier of the date of the permit transfers and August 30, 2020 (as may be extended by
mutual agreement of the parties with Contura not to unreasonably withhold its approval), Contura has consented to ESM operating the Western Mines under the Contura Permits subject
to and in compliance by ESM with a permit operating agreement previously entered into between Contura Coal West and
Blackjewel and with certain operations-related covenants. In connection with the Closing, ESM posted with DEQ substitute
bonds in the amount of approximately $238 million (the “Substitute Bonds”) and DEQ released the bonds Contura had
previously posted with DEQ to secure its obligations under the Contura Permits (the “Contura Bonds”).
Prior to or contemporaneously with the execution of the Term
Sheet, Contura and/or ESM entered into certain agreements (such agreements, the “Additional Agreements”) with certain
parties including (i) Blackjewel, (ii) the State of Wyoming, (iii) Campbell County in Wyoming (“Campbell County”),
(iv) the sureties issuing the Substitute Bonds (the “Sureties” and the Additional Agreement with the Sureties, the
“Sureties Supplemental Agreement”) and (v) the United States Department of Interior’s Office of Surface Mining,
Reclamation and Enforcement (“OSMRE”, and the Additional Agreement with OSMRE, the “OSMRE Agreement”).
Pursuant to the Additional
Agreement with Blackjewel, Contura waived at Closing its claim against Blackjewel in respect of a $3.05 million deposit previously
provided to Blackjewel in connection with the previously proposed acquisition by Contura of the Western Mines, and Blackjewel released
Contura and its affiliates from certain claims. Pursuant to the Additional Agreements with Wyoming and Campbell County, Wyoming
and Campbell County, respectively, released Contura from liability for certain claims related to the Western Mines and Contura
paid $13.5 million to Campbell County at Closing. The OSMRE Agreement and the Sureties Supplemental Agreement are described further
below.
ESM has agreed to certain
covenants relating to the transfer of certain government leases and the Contura Permits, including a covenant to use commercially
reasonable efforts to cause the Contura Permits to be transferred as promptly as possible. ESM has agreed to satisfy the reclamation
obligations relating to the Western Mines (the “Reclamation Obligations”). ESM has agreed to indemnify Contura and
its affiliates in respect of losses arising from or related to (i) the Reclamation Obligations or (ii) for the period beginning
on December 8, 2017, claims by the federal government, Wyoming or Campbell County in respect of any royalties, taxes, penalties
and other amounts owing in respect of the Western Mines.
Prior to the transfer
of the Contura Permits to ESM, Contura Coal West will continue to have potential liability related to the Contura Permits, including
in respect of the Reclamation Obligations. Given (i) the substitution of the Substitute Bonds for the Contura Bonds, (ii) the agreement
of the Sureties that Contura Coal West and its affiliates will have no liability with respect to the Substitute Bonds or the obligations
secured thereby as described below under “Sureties Supplemental Agreement”, (iii) the terms of the OSMRE Agreement,
(iv) the terms on which ESM is authorized to operate pursuant to the Contura Permits and (v) the ESM indemnity with respect to
the Reclamation Obligations, Contura expects the risk to Contura from the Contura Permits not transferring at Closing to be low.
A copy of the Term Sheet
is attached hereto as Exhibit 10.1, and is incorporated by reference herein. The foregoing description of such agreement does not
purport to be complete and is qualified in its entirety by reference to such exhibit.
OSMRE Agreement
On October 18, 2019, Contura Coal West, the OSMRE, FM Coal
and ESM entered into the OSMRE Agreement, providing that, among other things:
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1.
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Neither ESM nor FM Coal will operate the Contura Permits until such time as ESM or FM Coal posts reclamation bonds for the
Contura Permits in an amount that satisfies the Wyoming regulatory authority and meets all other federal, state, and local requirements
that will allow ESM to operate the Contura Permits.
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2.
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OSMRE will not attempt to link Contura Coal West to any Surface Mining Control and Reclamation Act of 1977, as revised (“SMCRA”)
violation created by ESM from the time ESM or its designee or contractor, or any other ESM affiliate assumes operational responsibility
for the Contura Permits through and until the time that the Contura Permits are transferred to ESM.
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3.
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OSMRE will not attempt to make Contura Coal West or any of the owners or controllers of Contura Coal West liable for the abatement
of any SMCRA violation created by ESM from the time ESM or its designee or contractor, or any other ESM affiliate assumes operational
responsibility for the Contura Permits through and until the time that the Contura Permits are transferred to ESM or its designee
or any other ESM affiliate.
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4.
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ESM will use its best efforts to avoid creating mining conditions that will lead to the issuance of SMCRA violations and will
promptly abate any such violation cited or pointed out by OSMRE or the Wyoming regulatory authority.
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5.
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Contura Coal West and ESM will work expeditiously in accordance with SMCRA and the Wyoming regulatory program to complete the
transfer of the Contura Permits;
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6.
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ESM will operate the Western Mines consistent with the current mining and reclamation plans for the Western Mines and will
re-employ as many of the Seller Parties’ miners as possible.
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7.
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As long as Contura Coal West is the primary bonded party on the Contura Permits, the Contura Coal West reclamation bonds can
be called or forfeited in accordance with Wyoming's counterpart to SMCRA and the rules and regulations that implement it; provided,
however, any such bond forfeiture shall not be linked to or held against Contura Coal West or any of its affiliates, officers,
directors, owners or controllers under the Applicant Violator System. Contura Coal West's liability as the primary bonded entity
will continue until such time as those reclamation bonds posted as of the date of the OSMRE Agreement are released or replaced
under Wyoming law.
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8.
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The OSMRE Agreement does not establish any precedent and cannot be used by Contura Coal West or ESM or any other organization
in an attempt to justify similar terms in any subsequent SMCRA case,
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administrative appeal, complaint, claim, case, or
matter before the courts or administrative tribunals of the United States of America or any state.
A copy of the OSMRE Agreement
is attached hereto as Exhibit 10.2, and is incorporated by reference herein. The foregoing description of such agreement does not
purport to be complete and is qualified in its entirety by reference to such exhibit.
Sureties Supplemental Agreement
On October 18, 2019, the Sureties, Contura, Contura Coal West
and ESM entered into the Sureties Supplemental Agreement, providing that, among other things:
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If DEQ makes a demand for payment pursuant to some or all of the Substitute Bonds, the Sureties will promptly act in accordance
with the terms of such Substitute Bonds.
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2.
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Notwithstanding (x) anything in the Substitute Bonds (including any language in the Substitute Bonds making or purporting to
make Contura Coal West jointly and severally liable thereon), (y) any obligation under applicable law or (z) anything otherwise
to the contrary, neither Contura nor Contura Coal West nor any of their affiliates will have any liability in respect of or relating
to the Substitute Bonds or the obligations secured thereby and none of the Sureties will make any claim or seek any payment from
Contura, Contura Coal West or any of their affiliates (or any collateral previously provided by Contura Coal West) arising from
or relating to the Substitute Bonds or the obligations secured thereby.
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3.
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The Sureties acknowledge and consent to the OSMRE Agreement.
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4.
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The Sureties acknowledge and agree that none of Contura, Contura Coal West or any of their affiliates (i) have entered into
or will enter into any general indemnity agreement, or any other similar agreement, with any of the Sureties in connection with
the Substitute Bonds or (ii) have posted or will post any collateral in connection with the Substitute Bonds.
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A copy of the Sureties
Supplemental Agreement is attached hereto as Exhibit 10.3, and is incorporated by reference herein. The foregoing description of
such agreement does not purport to be complete and is qualified in its entirety by reference to such exhibit.