Exhibit 10.1

 

THIS RESTRUCTURING SUPPORT AGREEMENT IS NOT AN OFFER OR ACCEPTANCE WITH RESPECT
TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN WITHIN
THE MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE. ANY SUCH OFFER OR
SOLICITATION WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS
OF THE BANKRUPTCY CODE. Nothing contained in thIS RESTRUCTURING SUPPORT
AGREEMENT shall be an admission of fact or liability OR, UNTIL THE OCCURRENCE OF
THE AGREEMENT EFFECTIVE DATE ON THE TERMS DESCRIBED HEREIN, DEEMED BINDING ON
ANY OF THE PARTIES HERETO.

 

RESTRUCTURING SUPPORT AGREEMENT

 

This RESTRUCTURING SUPPORT AGREEMENT (including all exhibits, annexes, and
schedules attached hereto in accordance with Section 13.02, this “Agreement”) is
made and entered into as of June 15, 2020 (the “Execution Date”), by and among
the following parties (each of the following described in
sub-clauses (i) through (ii) of this preamble, collectively, the “Parties”):[1]

 

i.Extraction Oil & Gas, Inc., a company incorporated under the Laws of Delaware
(“Parent”), and each of its affiliates listed on Exhibit A to this Agreement
that have executed and delivered counterpart signature pages to this Agreement
to counsel to the Consenting Senior Noteholders (the Entities in this
clause (i), collectively, the “Company Parties”); and

 

ii.the undersigned holders or beneficial holders of, or investment advisors,
sub-advisors, or managers of discretionary accounts that hold, Senior Notes
Claims that have executed and delivered counterpart signature pages to this
Agreement, a Joinder, or a Transfer Agreement to counsel to the Company Parties
(the Entities in this clause (ii), collectively, the “Consenting Senior
Noteholders”).

 

RECITALS

 

WHEREAS, the Company Parties and the Consenting Senior Noteholders have in good
faith and at arms’ length negotiated or been apprised of certain restructuring
and recapitalization transactions with respect to the Company Parties’ capital
structure on the terms set forth in this Agreement and as specified in the term
sheet attached as Exhibit B hereto (including all exhibits, annexes, and
schedules thereto, the “Restructuring Term Sheet” and, such transactions as
described in this Agreement and the Restructuring Term Sheet, the “Restructuring
Transactions”);

 

WHEREAS, the Company Parties intend to implement the Restructuring Transactions,
including through the commencement by the Debtors of voluntary cases under
chapter 11 of the Bankruptcy Code in the Bankruptcy Court (the cases commenced,
the “Chapter 11 Cases”) to effectuate (i) a sale to, or a combination or merger
with, a third party involving all or substantially all of the Company Parties’
restructured equity or assets pursuant to a Successful Proposal
(the “Combination Transaction”) or (ii) a stand-alone reorganization (the
“Stand-Alone Restructuring”); and

 

 

1   Capitalized terms used but not defined in the preamble and recitals to this
Agreement have the meanings ascribed to them in Section 1.

 

 

 

WHEREAS, the Parties have agreed to take certain actions in support of the
Restructuring Transactions on the terms and conditions set forth in this
Agreement and the Restructuring Term Sheet;

 

NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each Party, intending to be legally bound hereby,
agrees as follows:

 

AGREEMENT

 

Section 1.            Definitions and Interpretation.

 

1.01.      Definitions. The following terms shall have the following
definitions:

 

“2024 Senior Notes Indenture” means that certain indenture, dated as of
August 1, 2017, by and among Parent, as issuer, each of the guarantors named
therein, and Wells Fargo Bank, National Association, as trustee, as amended,
modified, or otherwise supplemented from time to time.

 

“2026 Senior Notes Indenture” means that certain indenture, dated as of
January 25, 2018, by and among Parent, as issuer, each of the guarantors named
therein, and Wells Fargo Bank, National Association, as trustee, as amended,
modified, or otherwise supplemented from time to time.

 

“Ad Hoc Noteholder Group” means the ad hoc group or committee of Consenting
Senior Noteholders represented by the Ad Hoc Noteholder Group Representatives.

 

“Ad Hoc Noteholder Group Representatives” means Paul Weiss, Houlihan Lokey, and
Young Conaway Stargatt & Taylor, LLP.

 

“Agent” means any administrative agent, collateral agent, or similar Entity
under the Revolving Credit Agreement and/or the Senior Notes Indentures,
including any successors thereto.

 

“Agents/Trustees” means, collectively, each of the Agents and Trustees.

 

“Agreement” has the meaning set forth in the preamble to this Agreement and, for
the avoidance of doubt, includes all the exhibits, annexes, and schedules
attached hereto in accordance with Section 13.02 (including the Restructuring
Term Sheet).

 

“Agreement Effective Date” means the date on which the conditions set forth in
Section 2 have been satisfied or waived by the appropriate Party or Parties in
accordance with this Agreement.

 

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“Agreement Effective Period” means, with respect to a Party, the period from the
Agreement Effective Date to the Termination Date applicable to that Party.

  

“Alternative Restructuring Proposal” means any inquiry, proposal, offer, bid,
term sheet, discussion, or agreement with respect to a sale, disposition,
new-money investment, restructuring, reorganization, merger, amalgamation,
acquisition, consolidation, dissolution, debt investment, equity investment,
liquidation, asset sale, share issuance, tender offer, exchange offer,
recapitalization, plan of reorganization, share exchange, business combination,
joint venture, or similar transaction involving any one or more Company Parties
or the debt, equity, or other interests in any one or more Company Parties that
is an alternative to one or more of the Restructuring Transactions.

 

“Backstop Commitment Agreement” means that certain backstop commitment
agreement, to be entered into by and among the Backstop Parties and Parent,
setting forth, among other things, the terms and conditions of the Equity Rights
Offering, the Backstop Commitment, and the payment of the Backstop Commitment
Premium, and pursuant to which certain parties therein will backstop 100% of the
Equity Rights Offering in accordance with the terms thereof.

 

“Backstop Commitment” has the meaning ascribed to such term in the Backstop
Commitment Agreement.

 

“Backstop Commitment Premium” has the meaning ascribed to such term in the
Restructuring Term Sheet.

 

“Backstop Motion” means the motion filed by the Debtors seeking entry of the
Backstop Order.

 

“Backstop Order” means the order entered in the Chapter 11 Cases granting the
Backstop Motion, including authorizing the Debtors’ entry into the Backstop
Commitment Agreement and the payment of the Backstop Commitment Premium.

 

“Backstop Parties” means at any time and from time to time, the Consenting
Senior Noteholders that have committed to backstop the Equity Rights Offering
and are signatories to the Backstop Commitment Agreement, solely in their
capacities as such, to the extent provided in the Backstop Commitment Agreement.

 

“Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§
101–1532, as amended.

 

“Bankruptcy Court” means the United States Bankruptcy Court in which the Chapter
11 Cases are commenced or another United States Bankruptcy Court with
jurisdiction over the Chapter 11 Cases.

 

“Business Day” means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state of New York.

 

“Chapter 11 Cases” has the meaning set forth in the recitals to this Agreement.

 

3

 

 

“Claim” has the meaning ascribed to it in section 101(5) of the Bankruptcy Code.

  

“Combination Transaction” has the meaning set forth in the recitals to this
Agreement and the Restructuring Term Sheet.

 

“Combination Transaction Agreement” means any asset purchase agreement, merger
agreement, plan of merger, stock purchase agreement, or other agreement
memorializing the Combination Transaction.

 

“Combination Transaction Documents” means, collectively, the Combination
Transaction Agreement, the Combination Transaction Order, the Combination
Transaction Motion, and any and all other agreements, documents, certificates,
designations, and instruments delivered, relating to, executed in connection
with the Combination Transaction, including, but not limited to, any agreement
and plan of merger, or stock or asset purchase agreements, and any related
pleadings or documents.

 

“Combination Transaction Motion” means the motion filed by the Debtors seeking
entry of the Combination Transaction Order.

 

“Combination Transaction Order” means the order entered in the Chapter 11 Cases
authorizing the Debtors’ entry into the Combination Transaction Documents.

 

“Company Claims” means any Claim against a Company Party, including the the
Senior Notes Claims.

 

“Company Parties” has the meaning set forth in the recitals to this Agreement.

 

“Confidentiality Agreement” means an executed confidentiality agreement,
including with respect to the issuance of a “cleansing letter” or other public
disclosure of material non-public information agreement, in connection with any
proposed Restructuring Transactions.

 

“Confirmation Order” means the confirmation order with respect to the Plan.

 

“Consenting Senior Noteholders” has the meaning set forth in the preamble of
this Agreement.

 

“Consenting Senior Noteholder Restructuring Expenses” means the reasonable and
documented fees and expenses incurred through the effective date of a
termination of this Agreement by the Ad Hoc Noteholder Group Representatives
pursuant to the terms of their respective engagement letters related to the
Restructuring Transactions and not previously paid by, or on behalf of, the
Company Parties.

 

“Debtors” means the Company Parties that commence Chapter 11 Cases.

 

“Definitive Documents” means the documents listed in Section 3.01.

 

“Disclosure Statement” means the related disclosure statement with respect to
the Plan.

 

4

 

 

“DIP Agent” means the “Administrative Agent,” as defined in the DIP Credit
Agreement.

  

“DIP Claims” means any Claim against a Debtor arising under, derived from, based
on, or related to the DIP Facility Documents.

 

“DIP Credit Agreement” means that certain the postpetition debtor-in-possession
credit agreement evidencing the DIP Facility in accordance with the terms, and
subject in all respect to the conditions, as set forth in this Agreement, and
pursuant to the terms and conditions to be set forth in the DIP Orders.

 

“DIP Facility” means that certain debtor-in-possession financing facility to be
provided to the Company Parties in accordance with the terms, and subject in all
respects to the conditions, as set forth in this Agreement, and pursuant to the
terms and conditions of the DIP Facility Term Sheet and the DIP Orders.

 

“DIP Facility Documents” means, collectively, the DIP Credit Agreement and all
other agreements, documents, and instruments delivered or entered into in
connection therewith, including any guarantee agreements, pledge and collateral
agreements, intercreditor agreements, subordination agreements, fee letters, and
other security documents.

 

“DIP Facility Term Sheet” means the term sheet setting forth the terms of a $125
million debtor in possession financing facility incorporated herein by reference
and attached as Annex 2 to the Restructuring Term Sheet.

 

“DIP Lenders” means the lenders providing the DIP Facility under the DIP
Facility Documents.

 

“DIP Motion” means the motion filed by the Debtors seeking entry of the DIP
Orders.

 

“DIP Orders” means, collectively, the Interim DIP Order and the Final DIP Order.

 

“Entity” shall have the meaning set forth in section 101(15) of the Bankruptcy
Code.

 

“Equity Rights Offering” means the rights offering of New Common Shares to be
issued by Reorganized XOG in exchange for an amount to be agreed among the
Company Parties and the Required Consenting Senior Noteholders (such amount to
be subject to the reasonable consent of the Required Consenting Senior
Noteholders) on the terms and conditions set forth in the Restructuring Term
Sheet and the Equity Rights Offering Documents.

 

“Equity Rights Offering Documents” means, collectively, the Backstop Commitment
Agreement, the Backstop Motion, the Backstop Order, and any and all other
agreements, documents, and instruments delivered or entered into in connection
with the Equity Rights Offering, including the Equity Rights Offering
Procedures.

 

“Equity Rights Offering Procedures” means those certain rights offering
procedures with respect to the Equity Rights Offering, which rights offering
procedures shall be set forth in the Equity Rights Offering Documents.

 

5

 

 

“Execution Date” has the meaning set forth in the preamble to this Agreement.

 

“Existing Common Interests” means, collectively, all Interests in Parent arising
from or related to the shares of the class of common stock of Parent that
existed immediately prior to the Effective Date, including any restricted stock
of Parent that vests prior to the Effective Date.

 

“Existing Preferred Interests” means, collectively, all Interests in Parent
arising from or related to the shares of the Series A Convertible Preferred
Stock, $0.01 par value, of the Parent that existed immediately prior to the
Effective Date.

 

“Exit Credit Agreement” means that certain credit agreement evidencing the Exit
Facility in accordance with the terms, and subject in all respects to the
conditions, as set forth in this Agreement and the Restructuring Term Sheet.

 

“Exit Facility” means that certain credit facility to be provided to the Company
Parties in accordance with the terms, and subject in all respects to the
conditions, as set forth in this Agreement and the Restructuring Term Sheet.

 

“Exit Facility Documents” means, collectively, the Exit Credit Agreement, and
all other agreements, documents, and instruments delivered or entered into in
connection with the Exit Facility, including any guarantee agreements, pledge
and collateral agreements, intercreditor agreements, subordination agreements,
fee letters, and other security documents.

 

“Final DIP Order” means the final order entered in the Chapter 11 Cases
authorizing the Debtors’ entry into the DIP Facility Documents.

 

“Fiduciary Out” has the meaning set forth in Section 11.02(b).

 

“First Day Pleadings” means the first-day pleadings that the Company Parties
determine are necessary or desirable to file.

 

“Houlihan Lokey” means Houlihan Lokey Capital, Inc.

 

“Interest” means any equity interest (as defined in section 101(16) of the
Bankruptcy Code) in any Company Party, including the Existing Common Interests,
the Existing Preferred Interests, all ordinary shares, units, common stock,
preferred stock, membership interest, partnership interest or other instrument,
evidencing any fixed or contingent ownership interest in the Parent, whether or
not transferable, including any option, warrant, or other right, contractual or
otherwise, to acquire any such interest in the Parent, that existed immediately
before the Plan Effective Date.

 

“Interim DIP Order” means the interim order entered in the Chapter 11 Cases
authorizing the Debtors’ entry into the DIP Facility Documents.

 

“Joinder” means a joinder to this Agreement substantially in the form attached
hereto as Exhibit D.

 

6

 

 

“Law” means any federal, state, local, or foreign law (including common law),
statute, code, ordinance, rule, regulation, order, ruling, or judgment, in each
case, that is validly adopted, promulgated, issued, or entered by a governmental
authority of competent jurisdiction (including the Bankruptcy Court).

  

“M&A Process” has the meaning set forth in the Restructuring Term Sheet.

 

“Management Incentive Plan” means the post-emergence management incentive plan
to be implemented with respect to Reorganized XOG by the Reorganized XOG Board
on or as soon as reasonably practicable after the Plan Effective Date.

 

“Milestones” has the meaning set forth in the Restructuring Term Sheet.

 

“New Common Shares” means the new common stock or common equity to be issued on
the Plan Effective Date by Reorganized XOG.

 

“New Common Shares Documents” means any and all documents required to implement,
issue, and distribute the New Common Shares.

 

“New Corporate Governance Documents” means the organizational and governance
documents for the Reorganized Debtors and any subsidiaries thereof, including,
as applicable, the certificates or articles of incorporation, certificates of
formation or certificates of limited partnership, bylaws, limited liability
company agreements, or limited partnership agreements, stockholder or
shareholder agreements, or other similar organizational documents, as
applicable, which shall be in form and substance acceptable to the Required
Consenting Senior Noteholders.

 

“Outside Date” the Outside Date shall mean the date that is 180 days after the
Petition Date.

 

“Paul Weiss” means Paul, Weiss, Rifkind, Wharton & Garrison LLP.

 

“Parties” has the meaning set forth in the preamble to this Agreement.

 

“Permitted Transferee” means each transferee of any Company Claims who meets the
requirements of Section 8.01.

 

“Petition Date” means the first date any of the Company Parties commences a
Chapter 11 Case.

 

“Plan” means the joint plan of reorganization filed by the Debtors under
chapter 11 of the Bankruptcy Code that embodies the Restructuring Transactions.

 

“Plan Effective Date” means the occurrence of the effective date of the Plan
according to its terms.

 

“Plan Supplement” means the compilation of documents and forms of documents,
schedules, and exhibits to the Plan that will be filed by the Debtors with the
Bankruptcy Court.

 

7

 

 

“Proposal Submission Guidelines” means the guidelines governing the submission
of firm proposals pursuant to the M&A Process and the marketing process for the
Combination Transaction.

  

“Proposal Submission Guidelines Documents” means the Proposal Submission
Guidelines, the Proposal Submission Guidelines Motion, the Proposal Submission
Guidelines Order, and all related documents, agreements, exhibits, annexes, and
schedules, as such documents may be amended, modified, or supplemented from time
to time.

 

“Proposal Submission Guidelines Motion” means the motion filed by the Debtors
seeking entry of the Proposal Submission Guidelines Order.

 

“Proposal Submission Guidelines Order” means the order entered in the
Chapter 11 Cases granting the Proposal Submission Guidelines Motion.

 

“Qualified Marketmaker” means an entity that (a) holds itself out to the public
or the applicable private markets as standing ready in the ordinary course of
business to purchase from customers and sell to customers Company Claims (or
enter with customers into long and short positions in Company Claims), in its
capacity as a dealer or market maker in Company Claims and (b) is, in fact,
regularly in the business of making a market in claims against issuers or
borrowers (including debt securities or other debt).

 

“Registration Rights Agreement” has the meaning set forth in the Restructuring
Term Sheet.

 

“Reorganized Debtor” means either (a) each Debtor, as reorganized pursuant to
and under the Plan, or any successor or assign thereto, by merger, amalgamation,
consolidation, or otherwise, on or after the Plan Effective Date or (b) a new
corporation or limited liability company that may be formed to, among other
things, directly or indirectly acquire substantially all of the assets and/or
stock of any Debtor in the Chapter 11 Cases pursuant to the Plan.

 

“Reorganized XOG” means either (a) Parent, as reorganized pursuant to and under
the Plan, or any successor or assign thereto, by merger, amalgamation,
consolidation, or otherwise, on or after the Plan Effective Date, or (b) a new
corporation or limited liability company that may be formed to, among other
things, directly or indirectly acquire substantially all of the assets and/or
stock of the Debtors in the Chapter 11 Cases and issue the New Common Shares to
be distributed pursuant to the Plan.

 

“Reorganized XOG Board” means the board of directors (or other applicable
governing body) of Reorganized XOG.

 

“Required Consenting Senior Noteholders” means, as of the relevant date,
Consenting Senior Noteholders holding at least 50.01% of the aggregate
outstanding principal amount of Senior Notes that are held by Consenting Senior
Noteholders.

 

“Restructuring Term Sheet” has the meaning set forth in the recitals to this
Agreement.

 

“Restructuring Transactions” has the meaning set forth in the recitals to this
Agreement.

 

8

 

 

“Revolving Credit Agreement” means that certain Amended and Restated Credit
Agreement, dated August 16, 2017 among Parent, as borrower, the lenders from
time to time party thereto and Wells Fargo Bank, National Association, as
administrative agent and issuing lender (as amended, restated, amended and
restated, supplemented, or otherwise modified from time to time).

 

“Revolving Credit Agreement Claims” means any Claim on account of or arising
under the Revolving Loans.

 

“Revolving Loans” means loans outstanding under the Revolving Credit Agreement.

 

“Rules” means Rule 501(a)(1), (2), (3), and (7) of the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Senior Notes” means, collectively, (a) the 7.375% unsecured senior notes due
2024, issued pursuant to the 2024 Senior Notes Indenture, and (b) the 5.625%
unsecured senior notes due 2026, issued pursuant to the 2026 Senior Notes
Indenture.

 

“Senior Notes Claim” means any Claim on account of or arising under the Senior
Notes.

 

“Senior Notes Indentures” means, collectively, the 2024 Senior Notes Indenture
and the 2026 Senior Notes Indenture.

 

“Solicitation Materials” means all materials provided in connection with the
solicitation of votes on the Plan pursuant to sections 1125 and 1126 of the
Bankruptcy Code.

 

“Successful Proposal” has the meaning ascribed to such term in the Restructuring
Term Sheet.

 

“Termination Date” means the date on which termination of this Agreement as to a
Party is effective in accordance with Sections 11.01, 11.02, 11.03, or 11.04.

 

“Transfer” means to sell, resell, reallocate, use, pledge, assign, transfer,
hypothecate, participate, donate or otherwise encumber or dispose of, directly
or indirectly (including through derivatives, options, swaps, pledges, forward
sales or other transactions).

 

“Transfer Agreement” means an executed form of the transfer agreement providing,
among other things, that a transferee is bound by the terms of this Agreement
and substantially in the form attached hereto as Exhibit C.

 

“Trustee” means any indenture trustee, collateral trustee, or other trustee or
similar entity under the Senior Notes.

 

9

 

 

1.02.        Interpretation. For purposes of this Agreement:

 

(a)            in the appropriate context, each term, whether stated in the
singular or the plural, shall include both the singular and the plural, and
pronouns stated in the masculine, feminine, or neuter gender shall include the
masculine, feminine, and the neuter gender;

 

(b)            capitalized terms defined only in the plural or singular form
shall nonetheless have their defined meanings when used in the opposite form;

 

(c)            unless otherwise specified, any reference herein to a contract,
lease, instrument, release, indenture, or other agreement or document being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions;

 

(d)            unless otherwise specified, any reference herein to an existing
document, schedule, or exhibit shall mean such document, schedule, or exhibit,
as it may have been or may be amended, restated, supplemented, or otherwise
modified from time to time; provided that any capitalized terms herein which are
defined with reference to another agreement, are defined with reference to such
other agreement as of the date of this Agreement, without giving effect to any
termination of such other agreement or amendments to such capitalized terms in
any such other agreement following the date hereof;

 

(e)            unless otherwise specified, all references herein to “Sections”
are references to Sections of this Agreement;

 

(f)             the words “herein,” “hereof,” and “hereto” refer to this
Agreement in its entirety rather than to any particular portion of this
Agreement;

 

(g)            captions and headings to Sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the
interpretation of this Agreement;

 

(h)            references to “shareholders,” “directors,” and/or “officers”
shall also include “members” and/or “managers,” as applicable, as such terms are
defined under the applicable limited liability company Laws;

 

(i)             the use of “include” or “including” is without limitation,
whether stated or not; and

 

(j)             the phrase “counsel to the Consenting Senior Noteholders” refers
in this Agreement to each counsel specified in Section 13.10 other than counsel
to the Company Parties.

 

Section 2.              Effectiveness of this Agreement. This Agreement shall
become effective and binding upon each of the Parties at 12:00 a.m., prevailing
Eastern Standard Time, on the Agreement Effective Date, which is the date on
which all of the following conditions have been satisfied or waived in
accordance with this Agreement:

 

(a)           each of the Company Parties shall have executed and delivered
counterpart signature pages of this Agreement to counsel to each of the Parties;

 

10

 

 

 

(b)            the holders of at least two thirds of the aggregate outstanding
principal amount of Senior Notes shall have executed and delivered counterpart
signature pages of this Agreement; and counsel to the Company Parties shall have
given notice to counsel to the Ad Hoc Noteholder Group in the manner set forth
in Section 13.10 hereof (by email or otherwise) that the other conditions to the
Agreement Effective Date set forth in this Section 2(a) have occurred; and

 

(c)            the funding of any retainers to the Ad Hoc Noteholder Group
Representatives in accordance with the Restructuring Term Sheet and
Section 13.20.

 

Section 3.               Definitive Documents.

 

3.01.         The Definitive Documents governing the Restructuring Transactions
shall include the following: (A) the Plan; (B) the Confirmation Order; (C) the
Disclosure Statement; (D) the order of the Bankruptcy Court approving the
Disclosure Statement and the other Solicitation Materials; (E) the DIP Facility
Documents; (F) the DIP Orders; (G) the Exit Facility Documents; (H) the
operational First Day Pleadings and the orders approving the same; (I) any other
material pleadings or material motions the Company Parties plan to file in
connection with the Chapter 11 Cases, and all orders sought pursuant thereto,
including (i) any and all motions filed to assume, assume and assign, or reject
an executory contract or unexpired lease and the order or orders of the
Bankruptcy Court approving such motions and (ii) any and all motions seeking
approval of a KEIP and/or KERP and the order or orders of the Bankruptcy Court
approving such motions (for the avoidance of doubt, the following are not
material pleadings or material motions: ministerial notices and similar
ministerial documents; retention applications; fee applications; fee statements;
any similar pleadings or motions relating to the retention or fees of any
professional; statements of financial affairs and schedules of assets and
liabilities); (J) the Plan Supplement; (K)  the New Common Shares Documents;
(L) the New Corporate Governance Documents and other organizational documents of
Reorganized XOG and the Reorganized Debtors; (M) the Equity Rights Offering
Documents; (N) the Combination Transaction Documents; (O) the Proposal
Submission Guidelines Documents; (P) the Management Incentive Plan and related
documents or agreements; (Q) the Registration Rights Agreement, if any; and
(R) such other agreements and documentation desired or necessary to consummate
and document the transactions contemplated by this Agreement and the
Restructuring Term Sheet.

 

3.02.         The Definitive Documents not executed or in a form attached to
this Agreement as of the Execution Date remain subject to negotiation and
completion. Upon completion, the Definitive Documents and every other document,
deed, agreement, filing, notification, letter or instrument related to the
Restructuring Transactions shall contain terms, conditions, representations,
warranties, and covenants consistent with the terms of this Agreement, as they
may be modified, amended, or supplemented in accordance with Section 12.
Further, the Definitive Documents not executed or in a form attached to this
Agreement as of the Execution Date shall otherwise be in form and substance
reasonably acceptable to the Company Parties and the Required Consenting Senior
Noteholders; provided that the Equity Rights Offering Documents shall be
reasonably acceptable to the Required Consenting Senior Noteholders.

 

11

 

 

Section 4.             Commitments of the Consenting Senior Noteholders.

 

4.01.        General Commitments, Forbearances, and Waivers.

 

(a)           During the Agreement Effective Period, each Consenting Senior
Noteholders agrees, in respect of all of its Company Claims, to:

 

(i)             support the Restructuring Transactions and vote and exercise any
powers or rights available to it (including in any board, shareholders’, or
creditors’ meeting or in any process requiring voting or approval to which they
are legally entitled to participate) in each case in favor of any matter
requiring approval to the extent necessary to implement the Restructuring
Transactions;

 

(ii)            use commercially reasonable efforts to cooperate with and assist
the Company Parties in obtaining additional support for the Restructuring
Transactions from the Company Parties’ other stakeholders;

 

(iii)           give any notice, order, instruction, or direction to the
applicable Agents/Trustees necessary to give effect to the Restructuring
Transactions;

 

(iv)           negotiate in good faith and use commercially reasonable efforts
to execute and implement the Definitive Documents that are consistent with this
Agreement to which it is required to be a party;

 

(v)            timely file a formal objection, or joinder to the Debtors’
opposition, to any motion filed with the Bankruptcy Court by a third party
seeking the entry of an order (A) directing the appointment of a trustee or
examiner (with expanded powers beyond those set forth in sections 1106(a)(3) and
(4) of the Bankruptcy Code), (B) converting the Chapter 11 Cases to cases under
chapter 7 of the Bankruptcy Code, or (C) dismissing the Chapter 11 Cases; and

 

(vi)           timely file a formal objection, or joinder to the Debtors’
opposition, to any motion filed with the Bankruptcy Court by a third party
seeking the entry of an order modifying or terminating the Company Parties’
exclusive right to file and/or solicit acceptances of a plan of reorganization,
as applicable.

 

(b)           During the Agreement Effective Period, each Consenting Senior
Noteholder agrees, in respect of all of its Company Claims, that it shall not
directly or indirectly:

 

(i)             object to, delay, impede, or take any other action to interfere
with acceptance, implementation, or consummation of the Restructuring
Transactions;

 

(ii)            propose, file, support, or vote for any Alternative
Restructuring Proposal;

 

(iii)           file any motion, pleading, or other document with the Bankruptcy
Court or any other court (including any modifications or amendments thereof)
that, in whole or in part, is not materially consistent with this Agreement or
the Plan;

 

12

 

 

(iv)           initiate, or have initiated on its behalf, any litigation or
proceeding of any kind with respect to the Chapter 11 Cases, this Agreement, or
the other Restructuring Transactions contemplated herein against the Company
Parties or the other Parties other than to enforce this Agreement or any
Definitive Document or as otherwise permitted under this Agreement;

 

(v)            exercise, or direct any other person to exercise, any right or
remedy for the enforcement, collection, or recovery of any of Claims against the
Company Parties; or

 

(vi)           object to, delay, impede, or take any other action to interfere
with the Company Parties’ ownership and possession of their assets, wherever
located, or interfere with the automatic stay arising under section 362 of the
Bankruptcy Code.

 

4.02.        Commitments with Respect to Chapter 11 Cases.

 

(a)           During the Agreement Effective Period, each Consenting Senior
Noteholder that is entitled to vote to accept or reject the Plan pursuant to its
terms agrees that it shall, subject to receipt by such Senior Noteholder and
Section 11.01(k), whether before or after the commencement of the Chapter 11
Cases, of the Solicitation Materials:

 

(i)             vote each of its Company Claims to accept the Plan by delivering
its duly executed and completed ballot accepting the Plan on a timely basis
following the commencement of the solicitation of the Plan and its actual
receipt of the Solicitation Materials and the ballot;

 

(ii)             to the extent it is permitted to elect whether to opt out of
the releases set forth in the Plan, elect not to opt out of the releases set
forth in the Plan by timely delivering its duly executed and completed
ballot(s) indicating such election; and

 

(iii)           not change, withdraw, amend, or revoke (or cause to be changed,
withdrawn, amended, or revoked) any vote or election referred to in clauses
(i) and (ii) above.

 

(b)          During the Agreement Effective Period, each Consenting Senior
Noteholder, in respect of each of its Company Claims, will support, and will not
directly or indirectly object to, delay, impede, or take any other action to
interfere with any motion or other pleading or document filed by a Company Party
in the Bankruptcy Court that is consistent with this Agreement.

 

Section 5.              Additional Provisions Regarding the Consenting Senior
Noteholders’ Commitments. Notwithstanding anything contained in this Agreement,
nothing in this Agreement shall: (a) affect the ability of any Consenting Senior
Noteholder to consult with any other Consenting Senior Noteholder, the Company
Parties, or any other party in interest in the Chapter 11 Cases (including any
official committee and the United States Trustee); (b) impair or waive the
rights of any Consenting Senior Noteholder to assert or raise any objection
permitted under this Agreement in connection with the Restructuring
Transactions; (c) prevent any Consenting Senior Noteholder from enforcing this
Agreement or contesting whether any matter, fact, or thing is a breach of, or is
inconsistent with, this Agreement; or (d) impair or waive the rights of any
Consenting Senior Noteholder to appear as a party in interest in an matter to be
adjudicated in order to be heard concerning any matter arising in the Chapter 11
Cases if the exercise of any such right is not in violation of or inconsistent
with this Agreement. Nothing in this Agreement shall require any Consenting
Senior Noteholder to incur any expenses, liabilities or other obligations, or
agree to any commitments, undertakings, concessions, indemnities or other
arrangements that would reasonably be expected to result in expenses,
liabilities or other obligations to any Consenting Senior Noteholder; provided
that the foregoing shall not limit, alter, or modify any Consenting Senior
Noteholder’s express obligations under this Agreement.

 

13

 

 

Section 6.              Commitments of the Company Parties.

 

6.01.        Affirmative Commitments. Except as set forth in Section 7, during
the Agreement Effective Period, the Company Parties agree to:

 

(a)            do all things reasonably necessary to (i) support and take all
steps reasonably necessary and desirable to consummate the Restructuring
Transactions in accordance with this Agreement, (ii) prosecute and defend any
appeals relating to the Confirmation Order, and (iii) comply with the
Milestones.

 

(b)            to the extent any legal or structural impediment arises that
would prevent, hinder, or delay the consummation of the Restructuring
Transactions contemplated herein, take all steps reasonably necessary and
desirable to address any such impediment;

 

(c)            use commercially reasonable efforts to obtain any and all
required regulatory and/or third-party approvals for the Restructuring
Transactions;

 

(d)            negotiate in good faith and use commercially reasonable efforts
to execute and deliver the Definitive Documents and any other required
agreements to effectuate and consummate the Restructuring Transactions as
contemplated by this Agreement;

 

(e)            use commercially reasonable efforts to seek additional support
for the Restructuring Transactions from their other material stakeholders to the
extent reasonably prudent;

 

(f)            (1) provide counsel for the Consenting Senior Noteholders a
reasonable opportunity to review draft copies of all First Day Pleadings and,
(2) to the extent reasonably practicable, provide a reasonable opportunity to
counsel to any Consenting Senior Noteholder materially affected by such filing
to review draft copies of other documents that the Company Parties intend to
file with Bankruptcy Court, as applicable;

 

(g)            use commercially reasonable efforts to provide draft copies of
all material substantive motions, documents, and other pleadings to be filed in
the Chapter 11 Cases to counsel to the Consenting Senior Noteholders at least
three (3) business days prior to the date when any Company Parties intend to
file such documents with the Bankruptcy Court; provided that if three
(3) business days in advance is not reasonably practicable, such initial draft
Definitive Document shall be provided as soon as reasonably practicable
thereafter, without limiting any approval rights set forth in this Agreement,
consult in good faith with counsel to the Consenting Senior Noteholders
regarding the form and substance of any such proposed filing in accordance with
Sections 3 and 12;

 

(h)            use commercially reasonable efforts to provide, and direct their
employees, officers, advisors, and other representatives to provide, to the
Consenting Senior Noteholders, and each of their respective legal and financial
advisors (i) reasonable access to the Company Parties’ books and records during
normal business hours on reasonable advance notice to the Company Parties’
representatives and without disruption to the operation of the Company Parties’
business, (ii) reasonable access to the management and advisors of the Company
Parties on reasonable advance notice to such persons and without disruption to
the operation of the Company Parties’ business, and (iii) such other information
as reasonably requested by the Consenting Senior Noteholders or their legal and
financial advisors, including with respect to the M&A Process and M&A Materials
in accordance with the Restructuring Term Sheet; notwithstanding the foregoing,
in no event shall the Company be required (x) to permit any inspection, or to
disclose any information, that in the reasonable judgment of the Company, would
cause the Company to violate its respective obligations with respect to
confidentiality to a third party if the Company used its commercially reasonable
efforts to obtain, but failed to obtain, the consent of such third party to such
inspection or disclosure, (y) to disclose any legally privileged information of
the Company, or (z) to violate applicable Law;

 

14

 

 

(i)            provide counsel to the Consenting Senior Noteholders, subject to
confidentiality restrictions, information as reasonably necessary to evaluate
each of the material executory contracts or unexpired leases of the Company
Parties for the purposes of concluding which such material executory contracts
or unexpired leases the Company Parties or the Debtors, as applicable, intend to
assume, assume and assign, or reject in the Chapter 11 Cases, subject to the
consent rights set forth herein and in the Plan;

 

(j)            timely file a formal objection to any motion filed with the
Bankruptcy Court by a third party seeking the entry of an order (i) directing
the appointment of a trustee or examiner (with expanded powers beyond those set
forth in sections 1106(a)(3) and (4) of the Bankruptcy Code), (ii) converting
the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, or
(iii) dismissing the Chapter 11 Cases; and

 

(k)            timely file a formal objection to any motion filed with the
Bankruptcy Court by a third party seeking the entry of an order modifying or
terminating the Company Parties’ exclusive right to file and/or solicit
acceptances of a plan of reorganization, as applicable.

 

6.02.         Negative Commitments. Except as set forth in Section 7, during the
Agreement Effective Period, each of the Company Parties shall not directly or
indirectly:

 

(a)            object to, delay, impede, or take any other action to interfere
with acceptance, implementation, or consummation of the Restructuring
Transactions;

 

(b)            take any action that is inconsistent in any material respect
with, or is intended to frustrate or impede approval, implementation and
consummation of the Restructuring Transactions described in, this Agreement or
the Plan;

 

(c)            modify the Plan, in whole or in part, in a manner that is not
consistent with this Agreement in all material respects; or

 

(d)            file any motion, pleading, or Definitive Documents with the
Bankruptcy Court or any other court (including any modifications or amendments
thereof) that, in whole or in part, is not materially consistent with this
Agreement or the Plan.

 

15

 

 

Section 7.               Additional Provisions Regarding Company Parties’
Commitments.

 

7.01.         Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement shall require a Company Party or the board of
directors, board of managers, or similar governing body of a Company Party,
after consulting with counsel, to take any action or to refrain from taking any
action with respect to the Restructuring Transactions to the extent taking or
failing to take such action would be inconsistent with applicable Law or its
fiduciary obligations under applicable Law, and any such action or inaction
pursuant to this Section 7.01 shall not be deemed to constitute a breach of this
Agreement.

 

7.02.         Notwithstanding anything to the contrary in this Agreement (but
subject to Section 7.01), each Company Party and their respective directors,
officers, employees, investment bankers, attorneys, accountants, consultants,
and other advisors or representatives shall have the rights to: (a) consider,
respond to, and facilitate Alternative Restructuring Proposals; (b) provide
access to non-public information concerning any Company Party to any Entity or
enter into Confidentiality Agreements or nondisclosure agreements with any
Entity; (c) maintain or continue discussions or negotiations with respect to
Alternative Restructuring Proposals in good faith and in accordance with any
applicable fiduciary duties; (d) otherwise cooperate with, assist, participate
in, or facilitate any inquiries, proposals, discussions, or negotiation of
Alternative Restructuring Proposals; and (e) enter into or continue discussions
or negotiations with holders of Claims against or Interests in a Company Party
(including any Consenting Senior Noteholder), any other party in interest in the
Chapter 11 Cases (including any official committee and the United States
Trustee), or any other Entity regarding the Restructuring Transactions or
Alternative Restructuring Proposals. If any Company Party receives a written or
oral proposal or expression of interest regarding any Alternative Restructuring
Proposal that a majority of the board of directors, board of managers, or such
similar governing body of any Company Party determines in good faith and
following consultation with counsel is a bona fide committed proposal that
represents higher or otherwise better economic recovery to the Company’s
stakeholders than the Restructuring Transactions taken as a whole, within five
(5) Business Days, the Company Party shall notify (with email being sufficient)
counsel to the Senior Notes of any such proposal or expression of interest, with
such notice to include a copy of such proposal, if it is in writing, or
otherwise a summary of the material terms thereof. If the board of directors of
the Company Parties decides to exercise a Fiduciary Out (as defined herein), the
Company Parties shall notify counsel to the Consenting Senior Noteholders within
two (2) Business Days of such decision. Upon any determination by any Company
Party to exercise a Fiduciary Out, the other Parties to this Agreement shall be
immediately and automatically relieved of any obligation to comply with their
respective covenants and agreements herein in accordance with Section 11.05
hereof.

 

7.03.         Nothing in this Agreement shall: (a) impair or waive the rights of
any Company Party to assert or raise any objection permitted under this
Agreement in connection with the Restructuring Transactions; or (b) prevent any
Company Party from enforcing this Agreement or contesting whether any matter,
fact, or thing is a breach of, or is inconsistent with, this Agreement.

 

7.04.         The Company Parties, to the extent enforceable, waive any right to
assert that the exercise of termination rights under this Agreement is subject
to the automatic stay provisions of the Bankruptcy Code and expressly stipulate
and consent hereunder to the prospective modification of the automatic stay
provisions of the Bankruptcy Code for purposes of exercising termination rights
under this Agreement, to the extent the Bankruptcy Court determines that such
relief is required.

 

16

 

 

Section 8.               Transfer of Interests and Securities.

 

8.01.         During the Agreement Effective Period, no Consenting Senior
Noteholder shall Transfer any ownership (including any beneficial ownership as
defined in the Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
in any Company Claims to any affiliated or unaffiliated party, including any
party in which it may hold a direct or indirect beneficial interest, unless
(i) the transferee executes and delivers to counsel to the Company Parties, at
or before the time of the proposed Transfer, a Transfer Agreement or (ii) the
transferee is a Consenting Senior Noteholder and the transferee provides notice
of such Transfer (including the amount and type of Company Claim Transferred) to
counsel to the Company Parties at or before the time of the proposed Transfer.

 

8.02.         Upon compliance with the requirements of Section 8.01, the
transferor shall be deemed to relinquish its rights (and be released from its
obligations) under this Agreement to the extent of the rights and obligations in
respect of such transferred Company Claims. Any Transfer in violation of
Section 8.01 shall be void ab initio.

 

8.03.         This Agreement shall in no way be construed to preclude the
Consenting Senior Noteholders from acquiring additional Company Claims;
provided, however, that (a) such additional Company Claims shall automatically
and immediately upon acquisition by a Consenting Senior Noteholder be deemed
subject to the terms of this Agreement (regardless of when or whether notice of
such acquisition is given to counsel to the Company Parties or counsel to the
Consenting Senior Noteholders) and (b) such Consenting Senior Noteholder must
provide notice of such acquisition (including the amount and type of Company
Claim acquired) to counsel to the Company Parties within five (5) Business Days
of such acquisition.

 

8.04.         This Section 8 shall not impose any obligation on any Company
Party to issue any “cleansing letter” or otherwise publicly disclose information
for the purpose of enabling a Consenting Senior Noteholder to Transfer any of
its Company Claims. Notwithstanding anything to the contrary herein, to the
extent a Company Party and another Party have entered into a Confidentiality
Agreement, the terms of such Confidentiality Agreement shall continue to apply
and remain in full force and effect according to its terms, and this Agreement
does not supersede any rights or obligations otherwise arising under such
Confidentiality Agreements.

 

8.05.         Notwithstanding Section 8.01, a Qualified Marketmaker that
acquires any Company Claims with the purpose and intent of acting as a Qualified
Marketmaker for such Company Claims shall not be required to execute and deliver
a Transfer Agreement in respect of such Company Claims if (i) such Qualified
Marketmaker subsequently transfers such Company Claims (by purchase, sale
assignment, participation, or otherwise) within five (5) Business Days of its
acquisition to a transferee that is an entity that is not an affiliate,
affiliated fund, or affiliated entity with a common investment advisor; (ii) the
transferee otherwise is a Permitted Transferee under Section 8.01; and (iii) the
Transfer otherwise is a Permitted Transfer under Section 8.01. To the extent
that a Consenting Senior Noteholder is acting in its capacity as a Qualified
Marketmaker, it may Transfer (by purchase, sale, assignment, participation, or
otherwise) any right, title or interests in Company Claims that the Qualified
Marketmaker acquires from a holder of the Company Claims who is not a Consenting
Senior Noteholder without the requirement that the transferee be a Permitted
Transferee.

 

17

 

 

8.06.         Notwithstanding anything to the contrary in this Section 8, the
restrictions on Transfer set forth in this Section 8 shall not apply to the
grant of any liens or encumbrances on any claims and interests in favor of a
bank or broker-dealer holding custody of such claims and interests in the
ordinary course of business and which lien or encumbrance is released upon the
Transfer of such claims and interests.

 

Section 9.               Representations and Warranties of Consenting Senior
Noteholders. Each Consenting Senior Noteholder severally, and not jointly,
represents and warrants that, as of the date such Consenting Senior Noteholder
executes and delivers this Agreement and as of the Plan Effective Date:

 

(a)            it is the beneficial or record owner (which shall be deemed to
include any unsettled trades) of the face amount of the Company Claims or is the
nominee, investment manager, or advisor for beneficial holders of the Company
Claims reflected in, and, having made reasonable inquiry, is not the beneficial
or record owner of any Company Claims other than those reflected in, such
Consenting Senior Noteholder’s signature page to this Agreement or a Transfer
Agreement, as applicable (as may be updated pursuant to Section 8);

 

(b)            other than with respect to any Company Claims that are subject to
unsettled trades, it has the full power and authority to act on behalf of, vote
and consent to matters concerning, such Company Claims;

 

(c)            other than with respect to any Company Claims that are subject to
unsettled trades, such Company Claims are free and clear of any pledge, lien,
security interest, charge, claim, equity, option, proxy, voting restriction,
right of first refusal, or other limitation on disposition, transfer, or
encumbrances of any kind, that would materially and adversely affect in any way
such Consenting Senior Noteholder’s ability to perform any of its obligations
under this Agreement at the time such obligations are required to be performed;

 

(d)            other than with respect to any Company Claims that are subject to
unsettled trades, it has the full power to vote, approve changes to, and
transfer all of its Company Claims referable to it as contemplated by this
Agreement subject to applicable Law;

 

(e)            solely with respect to holders of Company Claims, (i) it is
either (A) a qualified institutional buyer as defined in Rule 144A of the
Securities Act, (B) not a U.S. person (as defined in Regulation S of the
Securities Act), or (C) an institutional accredited investor (as defined in the
Rules), and (ii) any securities acquired by the Consenting Senior Noteholder in
connection with the Restructuring Transactions will have been acquired for
investment and not with a view to distribution or resale in violation of the
Securities Act;

 

Section 10.            Mutual Representations, Warranties, and Covenants. Each
of the Parties represents, warrants, and covenants to each other Party, as of
the date such Party executed and delivered this Agreement, on the Plan Effective
Date:

 

18

 

 

(a)            it is validly existing and in good standing under the Laws of the
state of its organization, and this Agreement is a legal, valid, and binding
obligation of such Party, enforceable against it in accordance with its terms,
except as enforcement may be limited by applicable Laws relating to or limiting
creditors’ rights generally or by equitable principles relating to
enforceability;

 

(b)            except (i) as expressly provided in this Agreement, the Plan, and
the Bankruptcy Code or (ii) as may be necessary and/or required by the SEC or
other securities regulatory authorities under applicable securities laws, no
material registration or filing with, consent or approval of, or notice to, or
other action, with or by, any federal, state or governmental authority or
regulatory body is required in order for it to effectuate the Restructuring
Transactions contemplated by, and perform its respective obligations under, this
Agreement;

 

(c)            the entry into and performance by it of, and the transactions
contemplated by, this Agreement do not, and will not, conflict in any material
respect with any Law or regulation applicable to it or with any of its articles
of association, memorandum of association or other constitutional documents;

 

(d)            except as expressly provided in this Agreement, it has (or will
have, at the relevant time) all requisite corporate or other power and authority
to enter into, execute, and deliver this Agreement and to effectuate the
Restructuring Transactions contemplated by, and perform its respective
obligations under, this Agreement; and

 

(e)            except as expressly provided by this Agreement, it is not party
to any restructuring or similar agreements or arrangements with the other
Parties to this Agreement that have not been disclosed to all Parties to this
Agreement.

 

Section 11.            Termination Events.

 

11.01.       Consenting Senior Noteholder Termination Events. This Agreement may
be terminated with respect to the Consenting Senior Noteholders, by the Required
Consenting Senior Noteholders by the delivery to the Company Parties of a
written notice in accordance with Section 13.10 hereof upon the occurrence of
the following events:

 

(a)            the breach in any material respect by a Company Party of any of
the representations, warranties, undertakings, commitments, or covenants of the
Company Parties set forth in this Agreement that (i) is adverse to the
Consenting Senior Noteholders seeking termination pursuant to this provision and
(ii) remains uncured (to the extent curable) for five (5) Business Days after
such terminating Consenting Senior Noteholders transmit a written notice in
accordance with Section 13.10 hereof detailing any such breach;

 

(b)            the issuance by any governmental authority, including any
regulatory authority or court of competent jurisdiction, of any final,
non-appealable ruling or order that (i) enjoins the consummation of a material
portion of the Restructuring Transactions and (ii) remains in effect for fifteen
(15) Business Days after such terminating Consenting Senior Noteholders transmit
a written notice in accordance with Section 13.10 hereof detailing any such
issuance; provided, that this termination right may not be exercised by any
Party that sought or requested such ruling or order in contravention of any
obligation set out in this Agreement;

 

19

 

 

(c)            the Bankruptcy Court enters an order denying confirmation of the
Plan;

 

(d)            the entry of an order by the Bankruptcy Court, or the filing of a
motion or application by any Company Party seeking an order (without the prior
written consent of the Required Consenting Senior Noteholders, not to be
unreasonably withheld), (i) converting one or more of the Chapter 11 Cases of a
Company Party to a case under chapter 7 of the Bankruptcy Code, (ii) appointing
an examiner with expanded powers beyond those set forth in
sections 1106(a)(3) and (4) of the Bankruptcy Code or a trustee in one or more
of the Chapter 11 Cases of a Company Party, or (iii) rejecting this Agreement;

 

(e)            the failure of a Company Party to meet a Milestone, which has not
been waived or extended in a manner consistent with this Agreement, unless such
failure is the result of any act, omission, or delay on the part of the
terminating Consenting Senior Noteholder in violation of its obligations under
this Agreement;

 

(f)             the Bankruptcy Court grants relief that is inconsistent in any
material respect with this Agreement, the Definitive Documents or the
Restructuring Transactions, and such inconsistent relief is not dismissed,
vacated or modified to be consistent with this Agreement and the Restructuring
Transactions within ten (10) Business Days following written notice thereof to
the Company Parties by the Required Consenting Senior Noteholders;

 

(g)            any Company Party (i) files, amends, or modifies, or files a
pleading seeking approval of, any Definitive Document or authority to amend or
modify any Definitive Document, in a manner that is materially inconsistent
with, or constitutes a material breach of, this Agreement and is materially
adverse to the Consenting Senior Noteholder seeking termination pursuant to this
provision (including with respect to the consent rights afforded the Consenting
Senior Noteholder under this Agreement), without the prior written consent of
the Required Consenting Senior Noteholders (such consent no to be unreasonably
withheld), (ii) withdraws the Plan without the prior consent of the Required
Consenting Senior Noteholders, or (iii) publicly announces its intention to take
any such acts listed in the foregoing clause (i) or (ii), in the case of each of
the foregoing clauses (i) through (iii), which remains uncured (to the extent
curable) for ten (10) Business Days after such terminating Consenting Senior
Noteholder transmit a written notice in accordance with Section 13.10 detailing
any such breach;

 

(h)            on or after the Agreement Effective Date, any of the Company
Parties consummates or enters into a definitive agreement evidencing any merger,
consolidation, disposition of material assets, acquisition of material assets,
or similar transaction, pays any dividend, or incurs any indebtedness for
borrowed money, in each case outside the ordinary course of business, in each
case other than: (i) the Restructuring Transactions or (ii) with the prior
consent of the Required Consenting Senior Noteholders;

 

(i)            any board of directors or board of managers, as applicable, of
any Debtor or Company Party exercises a Fiduciary Out;

 

(j)            any of the following shall have occurred: (i) the Company Parties
or any affiliate of the Company Parties shall have filed any motion,
application, adversary proceeding or Cause of Action (A) challenging the
validity, enforceability, or priority of, or seek avoidance or subordination of
the Senior Notes Claims or (B) otherwise seeking to impose liability upon or
enjoin the Consenting Senior Noteholders (in each case, other than with respect
to a breach of this Agreement) or (ii) the Company Parties or any affiliate of
the Company Parties shall have supported any application, adversary proceeding
or Cause of Action referred to in this clause (j) filed by another person, or
consents (without the consent of the Consenting Senior Noteholders) to the
standing of any such person to bring such application, adversary proceeding or
Cause of Action;

 

20

 

 

 

(k)            the Debtors determine to pursue a Combination Transaction that is
not reasonably acceptable to the Required Consenting Senior Noteholders.

 

Notwithstanding anything to the contrary herein, unless and until there is an
unstayed order of the Bankruptcy Court providing that the giving of notice under
and/or termination of this Agreement in accordance with its terms is not
prohibited by the automatic stay imposed by section 362 of the Bankruptcy Code,
the occurrence of any of the Consenting Senior Noteholder Termination Events in
this Section 11.01 shall result in an automatic termination of this Agreement,
to the extent the Required Consenting Senior Noteholders would otherwise have
the ability to terminate this Agreement in accordance with Section 11.01, five
(5) Business Days following such occurrence unless waived (including
retroactively) in writing by the Required Consenting Senior Noteholders.

 

11.02.            Company Party Termination Events.  Any Company Party may
terminate this Agreement as to all Parties upon prior written notice to all
Parties in accordance with Section 13.10 hereof upon the occurrence of any of
the following events:

 

(a)            the breach in any material respect by one or more of the
Consenting Senior Noteholders of any of the representations, warranties,
undertakings, commitments, or covenants of the Consenting Senior Noteholders set
forth in this Agreement that remains uncured for a period of five (5) Business
Days after the Company Parties transmit a written notice in accordance with
Section 13.10 hereof detailing any such breach; provided that the Company may
not exercise such termination right if the non-breaching Consenting Senior
Noteholders represent more than two thirds of the Senior Notes Claims;

 

(b)            the board of directors, board of managers, or such similar
governing body of any Company Party determines, after consulting with counsel,
(i) that proceeding with any of the Restructuring Transactions would be
inconsistent with the exercise of its fiduciary duties or applicable Law or
(ii) in the exercise of its fiduciary duties, to pursue an Alternative
Restructuring Proposal (a “Fiduciary Out”);

 

(c)            the issuance by any governmental authority, including any
regulatory authority or court of competent jurisdiction, of any final,
non-appealable ruling or order that (i) enjoins the consummation of a material
portion of the Restructuring Transactions and (ii) remains in effect for fifteen
(15) Business Days after such terminating Company Party transmits a written
notice in accordance with Section 13.10 hereof detailing any such issuance;
provided, that this termination right shall not apply to or be exercised by any
Company Party that sought or requested such ruling or order in contravention of
any obligation or restriction set out in this Agreement; or

 

(d)            the Bankruptcy Court enters an order denying confirmation of the
Plan.

 

21

 

 

11.03.            Mutual Termination.  This Agreement, and the obligations of
all Parties hereunder, may be terminated by mutual written agreement among all
of the following: (a) the Required Consenting Senior Noteholder s; and (b) each
Company Party.

 

11.04.            Automatic Termination.  This Agreement shall terminate
automatically without any further required action or notice immediately
after the earliest to occur of (a) the Plan Effective Date and (b) the Outside
Date; provided that the Outside Date may be extended by the mutual written
agreement among the Required Consenting Senior Noteholders and each Company
Party.

 

11.05.            Effect of Termination.  Upon the occurrence of a Termination
Date as to a Party, this Agreement shall be of no further force and effect as to
such Party and each Party subject to such termination shall be released from its
commitments, undertakings, and agreements under or related to this Agreement and
shall have the rights and remedies that it would have had, had it not entered
into this Agreement, and shall be entitled to take all actions, whether with
respect to the Restructuring Transactions or otherwise, that it would have been
entitled to take had it not entered into this Agreement, including with respect
to any and all Claims or causes of action; provided that such termination shall
not relieve a Party from liability for its breach or non-performance of its
obligations hereunder before the Termination Date.  Upon the occurrence of a
Termination Date prior to the Confirmation Order being entered by a Bankruptcy
Court, any and all consents or ballots tendered by the Parties subject to such
termination before a Termination Date shall be deemed, for all purposes, to be
null and void from the first instance and shall not be considered or otherwise
used in any manner by the Parties in connection with the Restructuring
Transactions and this Agreement or otherwise; provided, however, any Consenting
Senior Noteholder withdrawing or changing its vote pursuant to this
Section 11.05 shall promptly provide written notice of such withdrawal or change
to each other Party to this Agreement and, if such withdrawal or change occurs
on or after the Petition Date, file notice of such withdrawal or change with the
Bankruptcy Court. Nothing in this Agreement shall be construed as prohibiting a
Company Party or any of the Consenting Senior Noteholders from contesting
whether any such termination is in accordance with its terms or to seek
enforcement of any rights under this Agreement that arose or existed before a
Termination Date. Except as expressly provided in this Agreement, nothing herein
is intended to, or does, in any manner waive, limit, impair, or restrict (a) any
right of any Company Party or the ability of any Company Party to protect and
reserve its rights (including rights under this Agreement), remedies, and
interests, including its claims against any Consenting Senior Noteholder, and
(b) any right of any Consenting Senior Noteholder, or the ability of any
Consenting Senior Noteholder, to protect and preserve its rights (including
rights under this Agreement), remedies, and interests, including its claims
against any Company Party or Consenting Senior Noteholder. No purported
termination of this Agreement shall be effective under this Section 11.05 or
otherwise if the Party seeking to terminate this Agreement is in material breach
of this Agreement, except a termination pursuant to Section 11.02(b) or
Section 11.02(d). Nothing in this Section 11.05 shall restrict any Company
Party’s right to terminate this Agreement in accordance with Section 11.02(b).

 

Section 12.     Amendments and Waivers.

 

(a)            This Agreement may not be modified, amended, or supplemented, and
no condition or requirement of this Agreement may be waived, in any manner
except in accordance with this Section 12.

 

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(b)            This Agreement may be modified, amended, or supplemented, or a
condition or requirement of this Agreement may be waived, in a writing signed
by: (i) each Company Party and (ii) the Required Consenting Senior Noteholders,
solely with respect to any modification, amendment, waiver, or supplement that
materially and adversely affects the rights of such Parties and unless otherwise
specified in this Agreement; provided, however, that if the proposed
modification, amendment, waiver, or supplement has a material, disproportionate,
and adverse effect on any of the Company Claims held by a Consenting Senior
Noteholder, then the consent of each such affected Consenting Senior Noteholder
shall also be required to effectuate such modification, amendment, waiver or
supplement.

 

(c)            Any modification, amendment, or change to (i) the definition of
“Required Consenting Senior Noteholders” or “Outside Date” and
(ii) Section 11.04 shall require the consent of the Required Consenting Senior
Noteholders.

 

(d)            Any modification, amendment, or change to this Section 12 shall
require the consent of each Consenting Senior Noteholder.

 

(e)            Any proposed modification, amendment, waiver or supplement that
does not comply with this Section 12 shall be ineffective and void ab initio.

 

(f)            The waiver by any Party of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No failure on the
part of any Party to exercise, and no delay in exercising, any right, power or
remedy under this Agreement shall operate as a waiver of any such right, power
or remedy or any provision of this Agreement, nor shall any single or partial
exercise of such right, power or remedy by such Party preclude any other or
further exercise of such right, power or remedy or the exercise of any other
right, power or remedy. All remedies under this Agreement are cumulative and are
not exclusive of any other remedies provided by Law.

 

Section 13.     Miscellaneous.

 

13.01.            Acknowledgement. Notwithstanding any other provision herein,
this Agreement is not and shall not be deemed to be an offer with respect to any
securities or solicitation of votes for the acceptance of a plan of
reorganization for purposes of sections 1125 and 1126 of the Bankruptcy Code or
otherwise.  Any such offer or solicitation will be made only in compliance with
all applicable securities Laws, provisions of the Bankruptcy Code, and/or other
applicable Law.

 

13.02.            Exhibits Incorporated by Reference; Conflicts. Each of the
exhibits, annexes, signatures pages, and schedules attached hereto is expressly
incorporated herein and made a part of this Agreement, and all references to
this Agreement shall include such exhibits, annexes, and schedules. In the event
of any inconsistency between this Agreement (without reference to the exhibits,
annexes, and schedules hereto) and the exhibits, annexes, and schedules hereto,
this Agreement (without reference to the exhibits, annexes, and schedules
thereto) shall govern.

 

13.03.            Further Assurances.  Subject to the other terms of this
Agreement, the Parties agree to use commercially reasonable efforts to execute
and deliver such other instruments and perform such acts, in addition to the
matters herein specified, as may be reasonably appropriate or necessary, or as
may be required by order of the Bankruptcy Court, from time to time, to
effectuate the Restructuring Transactions, as applicable.

 

23

 

 

13.04.            Complete Agreement.  Except as otherwise explicitly provided
herein, this Agreement constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes all prior agreements, oral
or written, among the Parties with respect thereto, other than any
Confidentiality Agreement.

 

13.05.            GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM.  THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF.  Each Party hereto agrees that it shall bring any action or proceeding
in respect of any claim arising out of or related to this Agreement, to the
extent possible, in the Bankruptcy Court, and solely in connection with claims
arising under this Agreement: (a) irrevocably submits to the exclusive
jurisdiction of the Bankruptcy Court; (b) waives any objection to laying venue
in any such action or proceeding in the Bankruptcy Court; and (c) waives any
objection that the Bankruptcy Court is an inconvenient forum or does not have
jurisdiction over any Party hereto.

 

13.06.            Trial by Jury Waiver. EACH PARTY HERETO IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

13.07.            Execution of Agreement.  This Agreement may be executed and
delivered in any number of counterparts and by way of electronic signature and
delivery, each such counterpart, when executed and delivered, shall be deemed an
original, and all of which together shall constitute the same agreement.  Except
as expressly provided in this Agreement, each individual executing this
Agreement on behalf of a Party has been duly authorized and empowered to execute
and deliver this Agreement on behalf of said Party.

 

13.08.            Rules of Construction.  This Agreement is the product of
negotiations among the Company Parties and the Consenting Senior Noteholders,
and in the enforcement or interpretation hereof, is to be interpreted in a
neutral manner, and any presumption with regard to interpretation for or against
any Party by reason of that Party having drafted or caused to be drafted this
Agreement, or any portion hereof, shall not be effective in regard to the
interpretation hereof. The Company Parties and the Consenting Senior Noteholders
were each represented by counsel during the negotiations and drafting of this
Agreement and continue to be represented by counsel.

 

13.09.            Successors and Assigns; Third Parties.  This Agreement is
intended to bind and inure to the benefit of the Parties and their respective
successors and permitted assigns, as applicable. There are no third party
beneficiaries under this Agreement, and (except as set forth in Section 8) the
rights or obligations of any Party under this Agreement may not be assigned,
delegated, or transferred to any other person or entity.

 

24

 

 

13.10.            Notices.  All notices hereunder shall be deemed given if in
writing and delivered, by electronic mail, courier, or registered or certified
mail (return receipt requested), to the following addresses (or at such other
addresses as shall be specified by like notice):

 

(a)            if to a Company Party, to:

 

Extraction Oil & Gas, Inc.

370 17th Street Suite 5300

Denver, CO 80202

Attention: Eric Christ, VP, General Counsel and Secretary

E-mail address: echrist@extractionog.com

 

with copies to:

 

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

Attention: Christopher Marcus, P.C.

E-mail address: christopher.marcus@kirkland.com

 

(b)            if to a Consenting Senior Noteholder, to:

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019

Attention: Andrew Rosenberg, Alice Belisle Eaton, Christopher Hopkins, Douglas
Keeton, and Omid Rahnama

E-mail address: arosenberg@paulweiss.com

    aeaton@paulweiss.com

    chopkins@paulweiss.com

    dkeeton@paulweiss.com

    orahnama@paulweiss.com

 

Any notice given by delivery, mail, or courier shall be effective when received.

 

13.11.            Independent Due Diligence and Decision Making. Each Consenting
Senior Noteholder hereby confirms that its decision to execute this Agreement
has been based upon its independent investigation of the operations, businesses,
financial and other conditions, and prospects of the Company Parties.

 

13.12.            Enforceability of Agreement. Each of the Parties to the extent
enforceable waives any right to assert that the exercise of termination rights
under this Agreement is subject to the automatic stay provisions of the
Bankruptcy Code, and expressly stipulates and consents hereunder to the
prospective modification of the automatic stay provisions of the Bankruptcy Code
for purposes of exercising termination rights under this Agreement, to the
extent the Bankruptcy Court determines that such relief is required.

 

25

 

 

13.13.            Waiver. If the Restructuring Transactions are not consummated,
or if this Agreement is terminated for any reason, the Parties fully reserve any
and all of their rights. Pursuant to Federal Rule of Evidence 408 and any other
applicable rules of evidence, this Agreement and all negotiations relating
hereto shall not be admissible into evidence in any proceeding other than a
proceeding to enforce its terms or the payment of damages to which a Party may
be entitled under this Agreement.

 

13.14.            Specific Performance. It is understood and agreed by the
Parties that money damages would be an insufficient remedy for any breach of
this Agreement by any Party, and each non-breaching Party shall be entitled to
specific performance and injunctive or other equitable relief (without the
posting of any bond and without proof of actual damages) as a remedy of any such
breach, including an order of the Bankruptcy Court or other court of competent
jurisdiction requiring any Party to comply promptly with any of its obligations
hereunder.

 

13.15.            Several, Not Joint, Claims. Except where otherwise specified,
the agreements, representations, warranties, and obligations of the Parties
under this Agreement are, in all respects, several and not joint.

 

13.16.            Severability and Construction. If any provision of this
Agreement shall be held by a court of competent jurisdiction to be illegal,
invalid, or unenforceable, the remaining provisions shall remain in full force
and effect if essential terms and conditions of this Agreement for each Party
remain valid, binding, and enforceable.

 

13.17.            Remedies Cumulative. All rights, powers, and remedies provided
under this Agreement or otherwise available in respect hereof at Law or in
equity shall be cumulative and not alternative, and the exercise of any right,
power, or remedy thereof by any Party shall not preclude the simultaneous or
later exercise of any other such right, power, or remedy by such Party.

 

13.18.            Capacities of Consenting Senior Noteholders. Each Consenting
Senior Noteholders has entered into this agreement on account of all Company
Claims that it holds (directly or through discretionary accounts that it manages
or advises) and, except where otherwise specified in this Agreement, shall take
or refrain from taking all actions that it is obligated to take or refrain from
taking under this Agreement with respect to all such Company Claims.

 

13.19.            Email Consents. Where a written notice, consent, acceptance,
approval, or waiver is required pursuant to or contemplated by this Agreement,
pursuant to Section 3.02, Section 12, or otherwise, including a written approval
by the Company Parties or the Required Consenting Senior Noteholders, such
written notice, consent, acceptance, approval, or waiver shall be deemed to have
occurred if, by agreement between counsel to the Parties submitting and
receiving such consent, acceptance, approval, or waiver, it is conveyed in
writing (including electronic mail) between each such counsel without
representations or warranties of any kind on behalf of such counsel.

 

13.20.            Fees and Expenses. During the Agreement Effective Period, the
Company Parties shall pay the Consenting Senior Noteholder Restructuring
Expenses in accordance with the Restructuring Term Sheet and the applicable
Definitive Documents, including the funding of the applicable retainers.

 

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13.21.            Relationship Among Consenting Senior Noteholders.

 

(a)            None of the Consenting Senior Noteholders shall have any
fiduciary duty, any duty of trust or confidence in any form, or other duties or
responsibilities to each other, the Company Parties or their affiliates, or any
of the Company Parties’ or their affiliates’ creditors or other stakeholders,
including, without limitation, any holders of Senior Notes Claims, other Company
Claims, and, other than as expressly set forth in this Agreement, there are no
commitments among or between the Consenting Senior Noteholders. It is understood
and agreed that any Consenting Senior Noteholders may trade in any debt or
equity securities of the Company without the consent of the Company or any other
Consenting Senior Noteholders, subject to applicable securities laws and, solely
in the case of Company Claims, this Agreement (including Section 8 of this
Agreement). No prior history, pattern or practice of sharing confidences among
or between any of the Consenting Senior Noteholders and/or the Company shall in
any way affect or negate this understanding and agreement.

 

(b)            The Company Parties understand that the Consenting Senior
Noteholders are engaged in a wide range of financial services and businesses,
and, in furtherance of the foregoing, the Company Parties acknowledge and agree
that the obligations set forth in this Agreement shall only apply to the trading
desk(s) and/or business group(s) of the Consenting Senior Noteholders that
principally manage and/or supervise the Consenting Senior Noteholders’
investment in the Company Parties, and shall not apply to any other trading desk
or business group of the Consenting Senior Noteholders so long as they are not
acting at the direction or for the benefit of such Consenting Senior
Noteholders.

 

(c)            Notwithstanding anything herein to the contrary, (i) no Party
shall have any responsibility by virtue of this Agreement for any trading by any
other entity; (ii) no prior history, pattern, or practice of sharing confidences
among or between the Parties shall in any way affect or negate this Agreement;
and (iii) the Parties hereto acknowledge that this agreement does not constitute
an agreement, arrangement, or understanding with respect to acting together for
the purpose of acquiring, holding, voting, or disposing of any equity securities
of the Company, and neither the Parties nor the Consenting Senior Noteholders
constitute a “group” (within the meaning of Rule 13d-5 or Section 14(d)(2) under
the Securities Exchange Act of 1934, as amended or any successor provision). For
the avoidance of doubt, neither the existence of this Agreement, nor any action
that may be taken by a Consenting Senior Noteholders pursuant to this Agreement,
shall be deemed to constitute or to create a presumption by any of the Parties
that the Consenting Senior Noteholders are in any way acting in concert or as
such a “group” within the meaning of Rule 13d-5(b)(1).

 

13.22.            Settlement Discussions. This Agreement is part of a proposed
settlement of matters that could otherwise be the subject of litigation among
the Parties. Nothing in this Agreement shall be deemed an admission of any kind.
Pursuant to Federal Rule of Evidence 408, any applicable state rules of evidence
and any other applicable law, foreign or domestic, this Agreement, and all
negotiations relating thereto shall not be admissible into evidence in any
proceeding other than to prove the existence of this Agreement or in a
proceeding to enforce the terms of this Agreement.

 

27

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day
and year first above written.

 

28

 

 

Company Parties’ Signature Page to
the Restructuring Support Agreement

 

EXTRACTION OIL & GAS, INC.

XTR Midstream, LLC

7N, LLC

Mountaintop Minerals, LLC

8 North, LLC

XOG Services, LLC

Extraction Finance Corp.

AXIS Exploration, LLC

NORTHWEST CORRIDOR HOLDINGS, LLC

table Mountain Resources, LLC

 

By: /s/ Eric J. Christ  

 

Name: Eric J. Christ

Title: Vice President, General Counsel and Corporate Secretary

 

Authorized Signatory

 

[Signature Page to Restructuring Support Agreement]

 

[Consenting Senior Noteholder signature pages on file with the Company Parties.]

 

 

 

EXHIBIT A

 

Company Parties

 

Extraction Oil & Gas, Inc.

 

XTR Midstream, LLC

 

7N, LLC

 

Mountaintop Minerals, LLC

 

8 North, LLC

 

XOG Services, LLC

 

Extraction Finance Corp.

 

Axis Exploration, LLC

 

Northwest Corridor Holdings, LLC

 

Table Mountain Resources, LLC

 

 

 

EXHIBIT B

 

Restructuring Term Sheet

 

 

 

 

 

EXTRACTION OIL & GAS, INC.

 

RESTRUCTURING TERM SHEET

 

June 15, 2020

 

 

This restructuring term sheet (this “Term Sheet”) presents the principal terms
of a proposed financial restructuring (the “Restructuring”) of the existing
indebtedness of, and equity interests in, Extraction Oil & Gas, Inc. (“Parent”)
and its subsidiaries that are identified below (collectively, the “Company” or
the “Debtors,” as applicable), which Restructuring will be consummated by
commencing prearranged cases (the “Chapter 11 Cases”) under chapter 11 of title
11 of the United States Code (the “Bankruptcy Code”) to pursue a chapter 11 plan
of reorganization that effectuates (i) the Combination Transaction (defined
herein) or (ii) the Stand-Alone Restructuring (as defined herein) (in either
case, the “Plan”) containing the terms set forth herein. This is the Term Sheet
referred to in, and appended to, the Restructuring Support Agreement dated as of
June 15, 2020, by and among the Company and the other parties signatory thereto
(the “Consenting Senior Noteholders”) (as amended, supplemented, or otherwise
modified from time to time, the “RSA”). Capitalized terms used but not otherwise
defined herein will have the meanings ascribed to such terms in section 101 of
the Bankruptcy Code, unless otherwise specifically defined in the RSA or the
Plan.

 

THIS TERM SHEET DOES NOT CONSTITUTE (NOR WILL IT BE CONSTRUED AS) AN OFFER WITH
RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS AS TO
ANY PLAN OF REORGANIZATION, IT BEING UNDERSTOOD THAT SUCH AN OFFER, IF ANY, ONLY
WILL BE MADE IN COMPLIANCE WITH APPLICABLE PROVISIONS OF SECURITIES, BANKRUPTCY,
AND/OR OTHER APPLICABLE LAWS.

 

THIS TERM SHEET DOES NOT PURPORT TO SUMMARIZE ALL OF THE TERMS, CONDITIONS,
REPRESENTATIONS, WARRANTIES, AND OTHER PROVISIONS WITH RESPECT TO THE
TRANSACTIONS DESCRIBED HEREIN, WHICH TRANSACTIONS WILL BE SUBJECT TO THE
COMPLETION OF THE DOCUMENTS GOVERNING THE RESTRUCTURING AND INCORPORATING THE
TERMS SET FORTH HEREIN (OTHER THAN THE RSA) (THE “DEFINITIVE DOCUMENTS”). THE
CLOSING OF ANY TRANSACTION WILL BE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH
IN SUCH DEFINITIVE DOCUMENTS.

 

 

 

INTRODUCTION Company: Parent, XTR Midstream, LLC, 7N, LLC, Mountaintop Minerals,
LLC, 8 North, LLC, XOG Services, LLC, Extraction Finance Corp.,
Axis Exploration, LLC, Northwest Corridor Holdings, LLC, and Table Mountain
Resources, LLC. Proposed Filing Date and Venue: No later than June 15, 2020 (the
“Petition Date”) in the United States Bankruptcy Court for the District of
Delaware (the “Bankruptcy Court”). Claims and Interests to be Restructured:

Revolving Credit Agreement Claims: consisting of up to $650 million in principal
amount, including reimbursement obligations in respect of letters of credit,
plus accrued and unpaid interest (at the non-default rate), fees, and other
expenses arising and payable under that certain Amended and Restated Credit
Agreement, dated as of August 16, 2017 (as amended, modified, or otherwise
supplemented from time to time, the “Revolving Credit Agreement”), by and among
Parent, as borrower, Wells Fargo Bank, National Association, as administrative
agent, issuing lender, and lender (the “Revolving Credit Agreement Agent”), the
guarantors named therein, and the lenders named therein (the “Revolving Credit
Agreement Lenders”) (the Claims thereunder, the “Revolving Credit Agreement
Claims”) party thereto from time to time.

 

Senior Notes Claims: Approximately $1,100.189 million in aggregate principal
amount, consisting of:

 

(i)  approximately $400 million in principal amount, plus accrued and unpaid
interest, fees, and other expenses arising and payable pursuant to the 7.375%
Senior Notes due 2024 (the “2024 Senior Notes,” and the holders thereof,
the “2024 Senior Noteholders”) issued pursuant to that certain indenture, dated
as of August 1, 2017 (as amended, modified, or otherwise supplemented from time
to time, the “2024 Senior Notes Indenture,” and the Claims thereunder, the “2024
Senior Notes Claims”), by and among Parent, as issuer, each of the guarantors
named therein, and Wells Fargo Bank, National Association, as trustee; and

 

(ii) approximately $700.189 million in principal amount, plus accrued and unpaid
interest, fees, and other expenses arising and payable pursuant to the 5.625%
Senior Notes due 2026 (the “2026 Senior Notes,” and the holders thereof,
the “2026 Senior Noteholders,” and together with the 2024 Senior Noteholders,
the “Senior Noteholders,” and the ad hoc group of Senior Noteholders represented
by Paul, Weiss, Rifkind, Wharton & Garrison LLP and Houlihan Lokey
Capital, Inc., the “Ad Hoc Noteholder Group”) issued pursuant to that certain
indenture, dated as of January 25, 2018 (as amended, modified, or otherwise
supplemented from time to time, the “2026 Senior Notes Indenture,” and the
Claims thereunder, the “2026 Senior Notes Claims”), by and among Parent, as
issuer, each of the guarantors named therein, and Wells Fargo Bank, National
Association, as trustee (the “Senior Notes Trustee”);

 

2

 

 

 

Trade Claims: consisting of any ordinary course trade vendor of the Debtors
against any of the Debtors on account of ordinary course goods and/or services
provided to any of the Debtors. Trade Claims shall not include any Claim arising
from or based upon rejection of any executory contract or unexpired lease, any
Claim that is a Secured Claim, or any Claim resulting from litigation against
one or more of the Debtors (the “Trade Claims”).

 

General Unsecured Claims: consisting of any Claim against the Company that is
not a Revolving Credit Agreement Claim, a Senior Note Claim, an Intercompany
Claim, a Trade Claim, or a Claim that is secured, subordinated, or entitled to
priority under the Bankruptcy Code (the “General Unsecured Claims”).

 

Existing Preferred Interests: consisting of all Interests in Parent arising from
or related to the shares of the Series A Convertible Preferred Stock, $0.01 par
value, of the Parent that existed immediately prior to the Effective Date
(the “Existing Preferred Stock,” and the interests in Parent arising from or
related to such, the “Existing Preferred Interests”).

 

Existing Common Interests: consisting of all Interests in Parent arising from or
related to the shares of the class of common stock of Parent that existed
immediately prior to the Effective Date, including any restricted stock of
Parent that vests prior to the Effective Date (the “Existing Common Stock,” and
the interests in Parent arising from or related to such, the “Existing Common
Interests”).

 

Other Equity Interests: consisting of all Interests in Parent other than
Existing Preferred Interests and the Existing Common Interests (the “Other
Equity Interests”).

Restructuring Overview Implementation The Company will commence the Chapter 11
Cases and implement the Restructuring pursuant to the RSA and the prearranged
Plan. The transactions in this Term Sheet may be effectuated pursuant to (a) a
sale to, or combination or merger with, a third party involving all or
substantially all of the Company’s restructured equity or assets pursuant to a
Successful Proposal (the “Combination Transaction”) or (b) a stand-alone
reorganization (the “Stand-Alone Restructuring”) that is consistent with the
provisions set forth in this Term Sheet. The Plan shall provide for the
implementation of the Combination Transaction or, alternatively, the Stand-Alone
Restructuring, and shall be in form and substance reasonably acceptable to the
Required Consenting Senior Noteholders, which consent shall not be unreasonably
withheld.

 

3

 

 

Combination Transaction Combination Transaction and Required Consenting Senior
Noteholders’ Consent/Approval:

Following the Petition Date, the Company shall oversee and manage the process
related to the Combination Transaction (the “M&A Process”), including
communicating with any potentially interested parties and contacting the parties
on the Combination Transaction Contact List, exchanging diligence and other
information, and soliciting proposals for Combination Transactions, and shall
consult with the Consenting Senior Noteholders regarding the M&A Process, and,
upon request by the Consenting Senior Noteholders, promptly provide the
Consenting Senior Noteholders with all material information, diligence, and
marketing materials related to the M&A Process, including periodic high-level
informational summaries related to ongoing negotiations, conversations, and
correspondence related thereto (the “M&A Process Materials”); provided that, if
the Company determines it is necessary to retain additional advisors, it may do
so in its sole discretion. The Ad Hoc Noteholder Group and its advisors shall
have the right to review all information, diligence, and marketing materials
provided by the investment bankers or other advisors retained by the Company to
any bidder or prospective bidder with respect to any potential Combination
Transaction or merger and to consult with such investment bankers or other
advisors with respect to any potential Combination Transaction and any
counterproposals or other material documents to be provided to a prospective
Combination Transaction partner at least one (1) business day in advance of
being provided to any prospective bidder. Notwithstanding the foregoing, in no
event shall the Company be required (x) to permit any inspection, or disclose,
any information, that in the reasonable judgment of the Company, would cause the
Company to violate its respective obligations with respect to confidentiality to
a third party if the Company used its commercially reasonable efforts to obtain,
but failed to obtain, the consent of such third party to such inspection or
disclosure, (y) to disclose any legally privileged information of the Company,
or (z) to violate applicable Law. The Company and the advisors for the Ad Hoc
Noteholder Group shall consult in good faith regarding the M&A Process,
including the M&A Process Materials and other information reasonably requested
by the Ad Hoc Noteholder Group and their advisors with respect thereto.

 

The Company may consummate the Combination Transaction if the Company, in
consultation with the Required Consenting Senior Noteholders, makes a good faith
determination that the Combination Transaction is more value-maximizing than a
Stand-Alone Restructuring; provided that the Required Consenting Senior
Noteholders may terminate the RSA with respect to the Consenting Senior
Noteholders if the Company determines to pursue the consummation of a
Combination Transaction that is not reasonably acceptable to the Required
Consenting Senior Noteholders and the Consenting Senior Noteholders shall be
entitled to oppose such Combination Transaction, including by voting to reject
any chapter 11 plan implementing such transaction.

 

The Combination Transaction and the Plan solicitation process shall generally be
conducted in accordance with the procedures and timeline set forth herein and in
the Proposal Submission Guidelines, which shall be subject to the approval of
the Required Consenting Senior Noteholders (such approval not to be unreasonably
withheld).

 

4

 

 

Stand-Alone Restructuring Overview of the Stand-Alone Restructuring:

The Plan shall provide that the Stand-Alone Restructuring will be implemented
if, in consultation with the Required Consenting Senior Noteholders, the Company
determines in good faith that the Stand-Alone Restructuring is more
value-maximizing than the Combination Transaction.

 

In a Stand-Alone Restructuring, on the Effective Date, all of the Senior Notes
Claims, Existing Preferred Interests, and Existing Common Interests will be
released, cancelled, and extinguished in exchange for the recoveries set forth
below, including the issuance of New Common Shares pursuant to the Plan,
preferred equity (if applicable), and the right to participate in the Equity
Rights Offering. Votes on the Plan will be solicited from holders of (i) Senior
Notes Claims, (ii) General Unsecured Claims, (iii) Existing Preferred Interests,
and (iv) Existing Common Interests.

 

As of the Effective Date, the Revolving Credit Agreement Claims will be
(i) reinstated under an amended conforming revolving credit agreement or
(ii) paid in full in Cash from the proceeds of (x) a new reserve-based lending
facility and (y) the Equity Rights Offering, and the Senior Notes Claims,
Existing Equity Interests, and Other Equity Interests will be cancelled,
released, and extinguished and will be of no further force and effect.

Equity Rights Offering Equity Rights Offering and Backstop Commitment:

As a component of the Restructuring and consistent with the Equity Rights
Offering Documents, the Company may conduct an equity rights offering in an
amount to be agreed among the Company and the Required Consenting Senior
Noteholders (the “Equity Rights Offering”), such amount to be subject to the
reasonable consent of the Required Consenting Senior Noteholders, pursuant to
which holders of Senior Notes Claims, Existing Preferred Interests, and Existing
Common Stock shall be permitted to purchase up to an amount of New Common Shares
reasonably acceptable to the Company and the Required Consenting Senior
Noteholders based on Plan Equity Value and the agreed amount of the Equity
Rights Offering to be issued pursuant to the Equity Rights Offering (in each
case subject to dilution by the MIP Equity, the New Common Shares issued
pursuant to the Backstop Commitment Premium, and the New Warrants (as defined
below) (the “Rights Offering Shares”), and in all respects consistent with the
Equity Rights Offering Documents.

 

The Equity Rights Offering Documents and the Plan shall provide holders of:

 

·     Senior Notes Claims the right to purchase their Pro Rata share of up to
97% of the Rights Offering Shares at a 30% discount (the “Rights Offering
Discount”) to Plan Equity Value, as outlined in the final Disclosure Statement.

 

·     Existing Preferred Interests and Existing Common Interests the right to
purchase up to 3%[1] of the Rights Offering Shares at the Rights Offering
Discount to Plan Equity Value.

 

The proceeds shall be used by the Debtors or the Reorganized Debtors, as
applicable, to (i) provide additional liquidity for working capital and general
corporate purposes, (ii) pay all Consenting Senior Noteholder Restructuring
Expenses (to the extent there are any outstanding) pursuant to the RSA and the
Backstop Commitment Agreement, and (iii) fund distributions under the Plan.

 

In accordance with the Equity Rights Offering Documents, the Backstop Parties
shall backstop the Equity Rights Offering in exchange for the Backstop
Commitment Premium.

 

The Backstop Commitment Agreement shall include a provision requiring prompt
payment of all Consenting Senior Noteholder Restructuring Expenses of the
Backstop Parties for so long as such agreement remains in effect.

New Warrants:

On the Effective Date, and in accordance with the terms herein, the Reorganized
Debtors shall issue to the holders of Existing Preferred Interests and Existing
Common Interests (i) new tranche A warrants, with a 4-year tenor, exercisable
into 10% of New Common Stock, struck at an equity value implying a 110% recovery
to the Senior Notes on the face value of their claims (including accrued
interest through the Effective Date), subject to dilution by the Management
Incentive Plan (the “Tranche A Warrants”), and (ii) new tranche B warrants, with
a 5-year tenor, exercisable into 5% of New Common Stock, struck at an equity
value implying a 125% recovery to the Senior Notes on the face value of their
claims (including accrued interest through the Effective Date), subject to
dilution by the Management Incentive Plan (the “Tranche B Warrants,” together
with the Tranche A Warrants, the “New Warrants”).

 

The New Warrants shall not include Black Scholes or similar protections in the
event of a sale, merger, or similar transaction prior to exercise.

 

 

1 Equity participation split between Existing Preferred Interests and Existing
Common Interests to be same as new ownership provided under Plan treatment.

 

5

 

 

DIP Financing DIP Credit Facility:

The Restructuring will be financed by a new money DIP financing facility in an
aggregate amount to be agreed prior to the Petition Date (the “DIP Credit
Facility”), provided by the Revolving Credit Agreement Lenders (in their
respective capacities as such, the “DIP Lenders”), which shall include access to
the consensual use of Cash Collateral, and shall be consistent with the material
terms set forth in the term sheet attached hereto as Annex 2 (the “DIP Term
Sheet”), and otherwise in form and substance reasonably acceptable to the
Required Consenting Senior Noteholders.

 

The interim and final orders approving the DIP Credit Facility (respectively,
the “Interim DIP Order” and the “Final DIP Order”), shall be reasonably
acceptable to the Required Consenting Senior Noteholders.

 

To the extent the Company pursues a new money DIP financing facility,
the Company shall solicit a proposal from the Ad Hoc Noteholder Group to provide
such DIP financing, which proposal the Company shall consider in good faith
alongside other commercially reasonable proposals that it receives, if any, from
third parties.

TREATMENT OF CLAIMS AND INTERESTS Type of Claim Treatment Impairment
/Voting Administrative Expense Claims and Priority Tax Claims: Except to the
extent that a holder of an Allowed Administrative Expense Claim or an Allowed
Priority Tax Claim agrees to a less favorable treatment, each holder of an
Allowed Administrative Expense Claim and an Allowed Priority Tax Claim will
receive, in full and final satisfaction of such Claim, Cash in an amount equal
to such Allowed Claim on the Effective Date or as soon as practicable thereafter
or such other treatment consistent with the provisions of section 1129(a)(9) of
the Bankruptcy Code. N/A DIP Claims: On the Effective Date, the DIP Loan Claims
shall be paid in full in Cash (or such other consideration as the DIP Lenders
agree in their sole discretion). Unimpaired; Presumed to Accept. Other Secured
Claims: Except to the extent that a holder of an Allowed Other Secured Claim
agrees to a less favorable treatment, in full and final satisfaction of such
Allowed Other Secured Claim, at the option of the Debtors or the
Reorganized  Debtors (subject to the reasonable consent of the Required
Consenting Senior Noteholders, which consent shall not be unreasonably
withheld), (i) each such holder will receive payment in full in Cash, payable on
the later of the Effective Date and the date that is ten (10) Business Days
after the date on which such Other Secured Claim becomes an Allowed Other
Secured Claim, in each case, or as soon as reasonably practicable thereafter,
(ii) such holder’s Allowed Other Secured Claim will be reinstated (only if the
Stand-Alone Restructuring is pursued), or (iii) such holder will receive such
other treatment so as to render such holder’s Allowed Other Secured Claim
Unimpaired pursuant to section 1124 of the Bankruptcy Code. Unimpaired; Presumed
to Accept.

 

6

 

 

Other Priority Claims: Except to the extent that a holder of an Allowed Other
Priority Claim agrees to a less favorable treatment, in full and final
satisfaction of such Allowed Other Priority Claim, each holder of an Allowed
Other Priority Claim will, at the option of the Debtors or the Reorganized
Debtors (subject to the reasonable consent of the Required Consenting Senior
Noteholders, which consent shall not be unreasonably withheld), (i) be paid in
full in Cash or (ii) otherwise receive treatment consistent with the provisions
of section 1129(a)(9) of the Bankruptcy Code, payable on the later of the
Effective Date and the date that is ten (10) Business Days after the date on
which such Other Priority Claim becomes an Allowed Other Priority Claim, in each
case, or as soon as reasonably practicable thereafter. Unimpaired; Presumed to
Accept. Revolving Credit Agreement Claims:

On the Effective Date, the Revolving Credit Agreement Claims shall either
be reinstated under an amended conforming revolving credit agreement, or be paid
in full in Cash from:

 

(a) if the Combination Transaction is pursued, (i) the proceeds of a new
reserve-based lending facility, and/or (ii) cash proceeds from the Combination
Transaction; or

 

(b) if the Stand-Alone Restructuring is pursued, the proceeds of (i) a new
reserve-based lending facility and (ii) the Equity Rights Offering.

Unimpaired; Presumed to Accept. Senior Notes Claims:

On the Effective Date of the Plan, the Senior Notes Claims will be released and
extinguished and each holder of an Allowed Senior Notes Claim will receive, in
full and final satisfaction of such Allowed Senior Notes Claim:

 

(a) if the Combination Transaction is pursued, its Pro Rata share of 97% of
(i) New Common Shares issued pursuant to the Plan on the Effective Date (the
“Equity Allocation”) pro forma for the Combination Transaction and/or (ii) cash
proceeds from the Combination Transaction (the “Alternative Allocation”); or

 

(b) if the Stand-Alone Restructuring is pursued, its Pro Rata share of (i) 97%
of the Equity Allocation, and (ii) subscription rights for 97% of the Equity
Rights Offering.

Impaired; Entitled to Vote.

 

7

 

 

Trade Claims:

(a) if the Combination Transaction is pursued, Trade Claims that are not
expressly assumed by the partner pursuant to the Combination Transaction shall
be treated as General Unsecured Claims; or

 

(b) if the Stand-Alone Restructuring is pursued, on the Effective Date of the
Plan each holder of an Allowed Trade Claim shall receive, in full and final
satisfaction of such Allowed Trade Claim, payment in full of such Allowed Trade
Claim on the Effective Date or otherwise in the ordinary course of the Debtors’
business, and the remaining Trade Claims shall be treated as General Unsecured
Claims.

Unimpaired; Presumed to Accept.

General Unsecured Claims:

 

On the Effective Date of the Plan, General Unsecured Claims will be cancelled,
released, and extinguished and will be of no further force and effect and each
holder of an Allowed General Unsecured Claim will receive, in full and final
satisfaction of such Allowed General Unsecured Claim:

 

(a) if the Combination Transaction is pursued, its Pro Rata share of 97% of
(i) the Equity Allocation pro forma for the Combination Transaction and/or
(ii) the Alternative Allocation; or

 

(b) if the Stand-Alone Restructuring is pursued, its Pro Rata share of 97% of
the Equity Allocation.

Impaired; Entitled to Vote.

Existing Preferred Interests:

 

On the Effective Date of the Plan, Existing Preferred Interests will be
cancelled, released, and extinguished and will be of no further force and effect
and each holder of an Allowed Existing Preferred Interest will receive, in full
and final satisfaction of such Allowed Existing Preferred Interest, its Pro Rata
Share of:

 

(a) if the Combination Transaction is pursued, (i) 1.5% of (x) the Equity
Allocation pro forma for the Combination Transaction and/or (y) the Alternative
Allocation, (ii) 50% of the Tranche A Warrants, and (iii) 50% of the Tranche B
Warrants; or

 

(b) if the Stand-Alone Restructuring is pursued, (i)  1.5% of the Equity
Allocation, (ii) subscription rights for 1.5% of the Equity Rights Offering,
(iii) 50% of the Tranche A Warrants, and (iv) 50% of the Tranche  B Warrants.

Impaired; Entitled to Vote.

 

8

 

 

Existing Common Interests:

 

On the Effective Date of the Plan, Existing Common Interests will be cancelled,
released, and extinguished and will be of no further force and effect and each
holder of an Allowed Existing Common Interest will receive, in full and final
satisfaction of such Allowed Existing Common Interest, its Pro Rata Share of:

 

(a) if the Combination Transaction is pursued, (i) 1.5% of (x) the Equity
Allocation pro forma for the Combination Transaction and/or (y) the Alternative
Allocation, (ii) 50% of the Tranche A Warrants, and (iii) 50% of the
Tranche B Warrants.; or

 

(b) if the Stand-Alone Restructuring is pursued, (i) 1.5% of the Equity
Allocation, (ii) subscription rights for 1.5% of the Equity Rights Offering,
(iii) 50% of the Tranche A Warrants, and (iv) 50% of the Tranche B Warrants.

Impaired; Entitled to Vote. Other Equity Interests: On the Effective Date, all
Other Equity Interests will be cancelled, released, and extinguished and will be
of no further force and effect.  No holder of Other Equity Interests will
receive a distribution under the Plan. Impaired; Presumed to Reject.
Intercompany Claims:

(a) if the Combination Transaction is pursued, [●]; or

 

(b) if the Stand-Alone Restructuring is pursued, all Intercompany Claims will be
adjusted, reinstated, or discharged in the Company’s discretion, subject to the
consent of the Required Consenting Senior Noteholders (such consent not to be
unreasonably withheld).

Unimpaired; Presumed to Accept. Intercompany Interests:

(a) if a Combination Transaction is pursued, [●]; or

 

(b) if the Stand-Alone Restructuring is pursued, all Intercompany Interests will
either be, subject to the reasonable consent of the Required Consenting Senior
Noteholders, (i) reinstated (except that they may be modified or recharacterized
as Intercompany Claims with the consent of the Required Consenting Senior
Noteholders (such consent not to be unreasonably withheld)), or (ii) cancelled
or otherwise eliminated and receive no distribution under the Plan.

Unimpaired; Presumed to Accept.

 

9

 

 

GENERAL PROVISIONS Executory Contracts and Unexpired Leases:

(a) if the Combination Transaction is pursued, any executory contracts and
unexpired leases (“Executory Contracts and Unexpired Leases”) to which any of
the Debtors are parties shall be deemed rejected as of [the date of entry of the
Confirmation Order], unless (i) such Executory Contract or Unexpired Lease is
assumed by the Debtors and assigned to the partners pursuant to the Combination
Transaction, (ii) was previously rejected by the Debtors, pursuant to a Final
Order of the Bankruptcy Court, (iii) previously expired or terminated pursuant
to its own terms or by agreement of the parties thereto, (iv) is the subject of
a motion to reject filed by the Debtors on or before [the date of entry of the
Confirmation Order], or (v) is specifically designated as a contract or lease to
be rejected on the Schedule of Rejected Contracts; provided, however, that the
Required Consenting Senior Noteholders consent to such rejection, assumption, or
assumption and assignment (such consent not to be unreasonably withheld); or

 

(b) if the Stand-Alone Restructuring is pursued, as of and subject to the
occurrence of the Effective Date and the payment of any applicable cure amount,
all Executory Contracts and Unexpired Leases shall be deemed assumed, unless
such contract or lease (i) was previously assumed or rejected by the Debtors,
pursuant to a Final Order of the Bankruptcy Court, (ii) previously expired or
terminated pursuant to its own terms or by agreement of the parties thereto,
(iii) is the subject of a motion to reject filed by the Debtors on or before the
date of entry of the Confirmation Order, (iv) contains a change of control or
similar provision that would be triggered by the Restructuring (unless such
provision has been irrevocably waived), or (v) is specifically designated as a
contract or lease to be rejected on the Schedule of Rejected Contracts;
provided, however, that the Required Consenting Senior Noteholders consent to
such rejection, assumption, or assumption and assignment (such consent not to be
unreasonably withheld).

 

In either case, Claims arising from the rejection of the Debtors’ Executory
Contracts and Unexpired Leases shall be classified as General Unsecured Claims
and any settlement of such claims is subject to the reasonable consent of the
Required Consenting Senior Noteholders, which consent shall not be unreasonably
withheld. 

Board of Directors: If the Stand-Alone Restructuring is pursued, the board of
directors of the Reorganized Debtors (the “New Board”) will consist of (i) the
chief executive officer of the Reorganized Debtors and (ii) the other directors
selected by the Required Consenting Senior Noteholders, whose identities shall
be disclosed in the Plan Supplement.

 

10

 

 

Charter, By-Laws and Organizational
Documents: If the Stand-Alone Restructuring is pursued, the New Corporate
Governance Documents will become effective as of the Effective Date. In each
case, the New Corporate Governance Documents shall be in a form acceptable to
the Required Consenting Senior Noteholders. Management Incentive Plan:

(a) If the Combination Transaction is pursued, customary cash incentives will be
provided to the management with an aggregate value that is no less than the
value of the MIP Equity (as defined below) that would otherwise initially be
granted to management.

 

(b) If the Stand-Alone Restructuring is pursued, the Plan will provide for the
establishment of a post-emergence management incentive plan to be adopted by the
New Board (the “Management Incentive Plan”), which will include (i) restricted
stock units, options, New Common Shares, or other rights exercisable,
exchangeable, or convertible into New Common Shares representing up to 10% of
the New Common Shares on a fully diluted and fully distributed basis (the “MIP
Equity”) and (ii) other terms and conditions customary for similar type equity
plans, and otherwise in form and substance reasonably acceptable to the Required
Consenting Senior Noteholders.

 

KEIP/KERP: Following the Petition Date, to the extent the Company decides to
seek Bankruptcy Court approval of (a) a key employee incentive plan for insider
employees (the “KEIP”), and/or (b) a key employee retention plan for key
non-insider employees (the “KERP”), such plans shall be in form and substance
reasonably acceptable to the Required Consenting Senior Noteholders and the
Company shall consult with the Required Consenting Senior Noteholders with
respect to the terms of such KEIP and/or KERP prior to filing motions seeking
approval of the same. Vesting of Assets: If the Stand-Alone Restructuring is
pursued, on the Effective Date of the Plan, pursuant to section 1141(b)-(c) of
the Bankruptcy Code, all remaining operating assets of the Company will vest in
the Reorganized Debtors free and clear of all liens, Claims, and encumbrances,
except as otherwise provided by the Plan. Hedging Program: The Company shall
consult with the Required Consenting Senior Noteholders regarding any material
changes to the Company’s hedging program.

 

11

 

 

Survival of Indemnification Obligations and D&O Insurance:

(a) if the Combination Transaction is pursued, the Indemnification Obligations
will be subject to the partner’s discretion to assume such obligations as part
of the terms of the Combination Transaction.

 

In addition, after the Combination Transaction is effectuated, the partner will
not terminate or otherwise reduce the coverage under any directors’ and
officers’ insurance policies (including any “tail policy”) in effect or
purchased as of the Petition Date, and all members, managers, directors, and
officers of the Company who served in such capacity at any time prior to the
Effective Date or any other individuals covered by such insurance policies, will
be entitled to the full benefits of any such policy for the full term of such
policy regardless of whether such members, managers, directors, officers, or
other individuals remain in such positions after the Effective Date of the Plan.

 

(b) if the Stand-Alone Restructuring is pursued, any obligations of the Company
pursuant to corporate charters, bylaws, limited liability company agreements, or
other organizational documents to indemnify current and former officers,
directors, managers, members, agents, or employees with respect to all present
and future actions, suits, and proceedings against the Company or such
directors, officers, managers, members, agents, or employees, based upon any act
or omission for or on behalf of the Company (the “Indemnification Obligations”)
will not be discharged or impaired by confirmation of the Plan. All such
Indemnifications Obligations will be assumed by the Company under the Plan (and
shall be treated as executory contracts to be assumed under the Plan, to the
extent applicable) and will continue as obligations of the Reorganized Debtors.
Any Claim based on the Company’s obligations thereunder will be an Allowed
Claim.

 

In addition, after the Effective Date, the Reorganized Debtors will not
terminate or otherwise reduce the coverage under any directors’ and officers’
insurance policies (including any “tail policy”) in effect or purchased as of
the Petition Date, and all members, managers, directors, and officers of the
Company who served in such capacity at any time prior to the Effective Date or
any other individuals covered by such insurance policies, will be entitled to
the full benefits of any such policy for the full term of such policy regardless
of whether such members, managers, directors, officers, or other individuals
remain in such positions after the Effective Date.

 

Conditions to Confirmation:

Confirmation of the plan will be subject to the satisfaction of customary
conditions, including the following (as applicable):

 

i.     the Definitive Documents (as defined herein) will contain terms and
conditions consistent in all material respects with this Term Sheet and the RSA,
and otherwise satisfactory or reasonably satisfactory, as applicable, in form
and substance to the Required Consenting Senior Noteholders;

 

ii.   the RSA shall remain in full force and effect and shall not have been
terminated, and there shall be no default thereunder; and

 

iii.    the Bankruptcy Court will have entered the Disclosure Statement Order,
in form and substance acceptable to the Required Consenting Senior Noteholders,
and such Disclosure Statement Order will not have been reversed, stayed,
amended, modified, dismissed, vacated, or reconsidered.

 

The conditions to confirmation may be waived, in whole or in part, in writing
(which may be via e-mail) by the Debtors and the Required Consenting Senior
Noteholders.

 

 

12

 

 

Conditions to Effectiveness:

Effectiveness of the Plan will be subject to the satisfaction of customary
conditions, including the following (as applicable):

 

i.      the Definitive Documents (as defined in the RSA) will contain terms and
conditions consistent in all material respects with this Term Sheet and the RSA,
and otherwise satisfactory or reasonably satisfactory, as applicable, in form
and substance to the Required Consenting Senior Noteholders;

 

ii.     the RSA shall remain in full force and effect and shall not have been
terminated, and there shall be no default thereunder;

 

iii.     the Bankruptcy Court will have entered the Confirmation Order, in form
and substance acceptable to the Required Consenting Senior Noteholders, and such
Confirmation Order will not have been reversed, stayed, amended, modified,
dismissed, vacated, or reconsidered;

 

iv.    to the extent an Exit Facility is entered into, all conditions precedent
to the effectiveness of the Exit Facility shall have been satisfied or duly
waived, and the Exit Facility, including all documentation related thereto,
shall be in form and substance satisfactory to the Required Consenting Senior
Noteholders and the Company and in effect;

 

v.    the final version of the Plan, Plan Supplement, and all of the schedules,
documents, and exhibits contained therein, and all other schedules, documents,
supplements, and exhibits to the Plan shall be consistent with the RSA, and in
form and substance acceptable or reasonably acceptable, as applicable, to the
Required Consenting Senior Noteholders;

   

vi.   all waiting periods imposed by any Governmental Entity or Antitrust
Authority in connection with the transactions contemplated by the Backstop
Commitment Agreement shall have terminated or expired and all authorizations,
approvals, consents or clearances under the Antitrust Laws in connection with
the transactions contemplated by the Backstop Commitment Agreement shall have
been obtained, (if applicable);

 

vii.  the Debtors shall have obtained all material authorizations, consents,
regulatory approvals, rulings, or documents that are necessary to implement and
effectuate the Plan, including Bankruptcy Court approval, and each of the other
transactions contemplated by the Restructuring, and such material
authorizations, consents, regulatory approvals, rulings, or documents shall not
be subject to unfulfilled conditions and shall be in full force and effect, and
all applicable regulatory waiting periods will have expired; 

 

13

 

 

 

viii.    the Debtors shall have complied, in all material respects, with the
terms of the Plan that are to be performed by the Debtors on or prior to the
Effective Date and the conditions to the occurrence of the Effective Date (other
than any conditions relating to the occurrence of the closing) set forth in the
Plan shall have been satisfied or, with the prior consent of the Required
Consenting Senior Noteholders waived in accordance with the terms of the Plan;

 

ix.      the Restructuring to be implemented on the Effective Date shall be
consistent with the Plan and the RSA;

 

x.     all Consenting Senior Noteholder Restructuring Expenses have been or will
be paid in full in Cash;

   

xi.    the Debtors shall not be in default under the DIP Facility, and the
Interim DIP Order and the Final DIP Order shall not have been reversed, stayed,
dismissed, vacated, or reconsidered;

  

xii.   the Debtors shall not have filed, supported, or consented to any motion,
application, adversary proceeding, or cause of action (A) challenging the
validity, enforceability, perfection, or priority of, or seeking avoidance or
subordination of any of the Senior Notes Claims or the DIP Claims (as
applicable), (B) otherwise seeking to impose liability upon or enjoin the Senior
Noteholders or DIP Lenders, or (C) by any third party seeking standing to bring
such application, adversary proceeding, or cause of action;

 

xiii.      in the case of a Stand-Alone Restructuring:

  

a.   the Bankruptcy Court shall have entered the Backstop Order, in form and
substance acceptable to the Required Consenting Senior Noteholders, and such
order shall not have been reserved, stayed, amended, modified, dismissed,
vacated, or reconsidered;

  

b.   the Backstop Agreement shall remain in full force and effect and shall not
have been terminated, and the parties thereto shall be in compliance therewith;
and

   

c.   the Equity Rights Offering shall have been conducted, in all material
respects, in accordance with the Equity Rights Offering Documents and any other
relevant transaction documents; and

 

d.  the New Corporate Governance Documents shall be in full force and effect.

 

14

 

 

  The conditions to effectiveness may be waived, in whole or in part, in writing
(which may be via e-mail) by the Debtors and the Required Consenting Senior
Noteholders. Milestones:

The Consenting Senior Noteholders’ support for the Restructuring shall be
subject to the timely satisfaction of the following milestones
(the “Milestones”), which may be extended with the prior written consent of the
Required Consenting Senior Noteholders, which consent shall not be unreasonably
withheld:

 

1.      No later than June 15, 2020, the Company shall commence the Chapter 11
Cases;

 

2.     No later than 3 Business Days after the Petition Date, the Interim DIP
Order shall be entered by the Bankruptcy Court;

 

3.     No later than 5 days after the Petition Date, the Company’s investment
bankers shall have contacted the parties in the Combination Transaction Contact
List and initiated the reciprocal due diligence process;

 

4.     No later than 10 days after the Petition Date, the Company shall file the
Proposal Submission Guidelines Motion;

 

5.     No later than 21 days after the Petition Date, the Company shall file the
Plan, the Disclosure Statement, the Disclosure Statement Motion, and the
Backstop Motion;

 

6.     No later than 30 days after the Petition Date, the Proposal Submission
Guidelines Order, and the Final DIP Order shall be entered by the Bankruptcy
Court;

 

7.     No later than 45 days after the Petition Date, the deadline for
submission of preliminary indications of interest for the Combination
Transaction shall occur;

 

8.     No later than 45 days after filing the Disclosure Statement Motion, the
Disclosure Statement Order and the Backstop Order shall be entered by the
Bankruptcy Court;

 

9.     No later than 75 days after the Petition Date, the deadline for
submission of firm proposals, which shall include outside counsel vetted
comments to definitive transaction documents for a Combination Transaction,
shall occur;

 

10.  No later than 5 days after entry of the Disclosure Statement Order, the
Company shall commence the Equity Rights Offering and Plan solicitation in
accordance with the Disclosure Statement Order and the solicitation procedures; 

 

15

 

 

 

11.  Solely in the event that a Combination Transaction is pursued, no later
than 95 days after the Petition Date, the Company and a Combination Transaction
partner shall have executed and delivered a definitive transaction agreement;

 

12.  No later than 110 days after the Petition Date, the filing by the Debtors
of the Plan Supplement, including the documents relating to the Exit Facility
(if applicable);

 

13.  No later than 110 days after the Petition Date, the occurrence of the
Voting Deadline;

 

14.  Solely to the extent that the Company has entered into a definitive
agreement for a Combination Transaction and the Restructuring is being
effectuated through the Combination Transaction,

 

a.     No later than 115 days after the Petition Date, the Court endorsement of
the Combination Transaction contemplated by the definitive agreement shall be
entered by the Bankruptcy Court;

 

b.     No later than 120 days after the Petition Date, the Combination
Transaction shall be consummated, including final execution of all relevant
documents in connection therewith unless consummation of the Combination
Transaction is contingent on the Effective Date or third-party approvals that
are required under applicable securities laws;

 

15.  No later than 120 days after the Petition Date, the Confirmation Hearing
shall have commenced;

 

16.  No later than 123 days after the Petition Date, the Confirmation Order
shall be entered by the Bankruptcy Court; and

 

17.  No later than 130 days from the Petition Date, the Effective Date shall
have occurred.

Consenting Senior Noteholder Restructuring Expenses:

The Company will pay, immediately prior to the Petition Date, all Consenting
Senior Noteholder Restructuring Expenses, including fees and expenses estimated
to be incurred prior to the filing of the Chapter 11 Cases, for which invoices
or receipts are furnished by the advisors to the Consenting Senior Noteholders
at least one (1) Business Day prior thereto and provide (i) a $500,000.00
advance retainer to Paul, Weiss, Rifkind, Wharton & Garrison, LLP; (ii) a
$[$150,000.00] advance retainer to Young, Conaway, Stargatt & Taylor, LLP; and
(iii) a $[●] advance retainer Houlihan Lokey Capital, Inc.

 

16

 

 

  Pursuant to and following the entry of the Backstop Order and/or DIP Orders,
the Company will pay from time to time within five (5) Business Days of receipt
of an invoice therefor, and (to the extent not previously paid) on the Effective
Date, to the extent invoice at least one (1) Business Day beforehand, all
Consenting Senior Noteholder Restructuring Expenses incurred and outstanding
(including any estimated fees and expenses estimated to be incurred through the
Effective Date). Consent Rights of Consenting Senior Noteholders and Required
Consenting Senior Noteholders: Notwithstanding anything to the contrary herein
or in the Plan, any and all consent rights of the Consenting Senior Noteholders
and Required Consenting Senior Noteholders set forth in the RSA with respect to
the Definitive Documents, including any amendments, restatements, supplements,
or other modifications to such documents, will be incorporated into the Plan by
reference and fully enforceable as if stated in full in the Plan. Releases and
Exculpation: The Plan and the Confirmation Order will contain the exculpation
provisions, the Debtor releases, and the “third-party” releases set forth in
Annex 1 to this Term Sheet. Tax Structure: To the extent practicable, the
Restructuring contemplated by this Term Sheet will be structured so as to obtain
the most beneficial tax structure for the Company and the Senior Noteholders, as
determined by the Company and with the consent of the Required Consenting Senior
Noteholders (such consent not to be unreasonably withheld). Retention of
Jurisdiction: The Plan, as applicable, will provide for a broad retention of
jurisdiction by the Bankruptcy Court for (i) resolution of Claims,
(ii) allowance of compensation and expenses for pre-Effective Date services,
(iii) resolution of motions, adversary proceedings, or other contested matters,
(iv) entry of such orders as necessary to implement or consummate the Plan and
any related documents or agreements, and (v) other customary purposes.
Restructuring Transactions: In the event the Stand-Alone Restructuring is
pursued, on the Effective Date or as soon as reasonably practicable thereafter,
the Debtors or the Reorganized Debtors, as applicable, subject to the consent of
the Required Consenting Senior Noteholders (such consent not to be unreasonably
withheld), may take all actions consistent with this Plan as may be necessary or
appropriate to effect any transaction described in, approved by, contemplated
by, or necessary to effectuate the Restructuring under and in connection with
the Plan. Exemption from SEC Registration: The issuance and distribution under
the Plan of the New Common Shares or the Rights Offering Shares pursuant to the
Equity Rights Offering, including any New Common Shares issued on account of the
Backstop Commitment Premium, will be issued in reliance on the exemption from
registration to the fullest extent permitted by law.

 

17

 

 

Securities Issuance Requirements:

If the Stand-Alone Restructuring is pursued, the issuance of the New Common
Shares, to the extent applicable, will be subject to the following requirements
(the “Securities Issuance Requirements”):

 

The Company will use commercially reasonable efforts to promptly make the New
Common Shares eligible for deposit with the DTC and posted on Bloomberg.

 

To the extent the Reorganized Parent is not an SEC registered reporting entity,
any New Common Shares issued under the Plan will entitle the beneficial owner of
such securities to certain information rights, including the following:
(1) quarterly unaudited financials (with MD&A); (2) annual audited financials
(with MD&A); (3) quarterly management calls with Q&A; (4) prompt reporting of
material acquisitions, dispositions, restructurings, mergers, issuances of debt
or similar transactions; (5) all other material publicly available reports; and
(6) sufficient financial information about the Reorganized Debtors shall be
provided to market makers to allow the New Common Shares to be “pink sheets”
eligible. For the avoidance of doubt, the foregoing shall not be required with
respect to such New Common Shares to the extent that the Company is an SEC
registered reporting entity.

 

Furthermore, to the extent the Reorganized Parent is an SEC reporting entity, on
the Effective Date, the Reorganized Debtors, at the discretion of the Required
Consenting Senior Noteholders, the Consenting Senior Noteholders, and any holder
of 10% or more of the New Common Shares will be party to a registration rights
agreement providing for customary demand registration rights with respect to New
Common Shares held by such Consenting Senior Noteholders and any other 10%
holders (the “Registration Rights Agreement”).

 

Fiduciary Out

Notwithstanding anything to the contrary herein, nothing in this Term Sheet, the
RSA, or any of the Definitive Documents shall require a Debtor or the board of
directors, board of managers, or similar governing body of a Debtor, after
consulting with counsel, to take any action or to refrain from taking any action
with respect to the Restructuring to the extent taking or failing to take such
action would be inconsistent with applicable law or its fiduciary obligations
under applicable law, and any such action or inaction pursuant to this provision
shall not be deemed to constitute a breach of the RSA, this Term Sheet, or any
of the Definitive Documents.

 

The Debtors may terminate the RSA, this Term Sheet, or any Definitive Document
if the board of directors, board of managers, or such similar governing body of
any Debtor determines, after consulting with counsel and, after prompt written
notice to counsel to the Consenting Senior Noteholders 

 

18

 

 

  that proceeding with any of the transactions comprising the Restructuring
would be inconsistent with the exercise of its fiduciary duties or applicable
law.

 

19

 

 

Other Defined Terms “Ad Hoc Noteholder Group” The ad hoc group of Senior
Noteholders represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP, as
counsel, and Houlihan Lokey Capital, Inc., as financial advisor. “Administrative
Expense Claim” A Claim for costs and expenses of administration of the Estates
under sections 503(b), 507(b), or 1114(e)(2) of the Bankruptcy Code,
including:  (a) the actual and necessary costs and expenses incurred on or after
the Petition Date of preserving the Estates and operating the businesses of the
Debtors; (b) Allowed Claim for professional services rendered or costs incurred
on or after the Petition Date through the Confirmation Date by professional
persons retained by an order of the Bankruptcy Court pursuant to sections 327,
328, 329, 330, 331, or 503(b) of the Bankruptcy Code in the Chapter 11 Cases
(“Professional Fee Claims”); and (c) the reasonable and documented fees and
expenses incurred by (i) the Consenting Senior Noteholders’ advisors pursuant to
the terms of their fee letters and (ii) Kirkland & Ellis LLP, Alvarez & Marsal
North America, LLC, Moelis & Company, Petrie Partners Securities, LLC, and local
counsel to the Company, in each case that are due and owing after receipt of
applicable invoices consistent with any applicable engagement letters, provided
that with respect to fees and expenses incurred prior to the Confirmation Date
(other than Consenting Senior Noteholder Restructuring Expenses), such fees and
expenses must have been approved by an order of the Bankruptcy Court. “Allowed”
With reference to any Claim or Interest, (i) any Claim or Interest arising on or
before the Effective Date (a) as to which no objection to allowance has been
interposed within the time period set forth in the Plan or (b) as to which any
objection has been determined by a Final Order of the Bankruptcy Court to the
extent such objection is determined in favor of the respective holder, (ii) any
Claim or Interest as to which the liability of the Debtors and the amount
thereof are determined by a Final Order of a court of competent jurisdiction
other than the Bankruptcy Court, or (iii) any Claim or Interest expressly
allowed under the Plan; provided, however, that notwithstanding the foregoing,
the Reorganized Debtors will retain all claims and defenses with respect to
Allowed Claims that are reinstated or otherwise Unimpaired pursuant to the Plan.
“Amended Organizational Documents” The forms of certificate of incorporation,
certificate of formation, bylaws, limited liability company agreements,
shareholder agreement (if any), or other similar organizational documents, as
applicable, of the Reorganized Parent, and in form and substance acceptable to
the Required Consenting Senior Noteholders. “Antitrust Authority” The United
States Federal Trade Commission, the Antitrust Division of the United States
Department of Justice, the attorneys general of the several states of the United
States and any other governmental entity having jurisdiction pursuant to the
antitrust laws.

 

 

20

 

 

Other Defined Terms “Antitrust Laws” The Sherman Act, the Clayton Act, the HSR
Act, the Federal Trade Commission Act, and any other law governing agreements in
restraint of trade, monopolization, pre-merger notification, the lessening of
competition through merger or acquisition or anti-competitive conduct, and any
foreign investment laws. “Backstop Commitment Agreement” The commitment
agreement attached to the RSA between the Backstop Parties and the Debtors to
backstop the Equity Rights Offering, and in form and substance reasonably
acceptable to the Backstop Parties and the Required Consenting Senior
Noteholders. “Backstop Commitment Premium” The amount to be paid as
consideration to the Backstop Parties on the Effective Date, pursuant to the
terms and conditions set forth in the Plan and the Backstop Commitment
Agreement, in the form of a nonrefundable aggregate premium equal to 9% of the
aggregate amount of the Equity Rights Offering, excluding any oversubscription
amounts, payable in (i) if the Stand-Alone Restructuring is pursued, New Common
Shares issued at the Rights Offering Discount to Plan Equity Value, (ii) if the
Combination Transaction is pursued, New Common Shares of the combined entity
issued at the Rights Offering Discount to Plan Equity Value pro forma for the
Combination Transaction and/or the Alternative Allocation, or (iii) if the
Backstop Commitment Agreement is terminated, Cash.  Subject to the limitations
contained herein, and in accordance with the Equity Rights Offering Documents,
the Backstop Commitment Premium shall be fully earned upon entry the Backstop
Commitment Order (other than by Backstop Parties who default on their
obligations under the Backstop Commitment Agreement) and payable on the
Effective Date of the Plan. “Backstop Motion” The motion filed with the
Bankruptcy Court seeking approval of the Rights Offering Procedures and the
Debtors’ entry into the Backstop Commitment Agreement, in form and substance
reasonably acceptable to the Backstop Parties and the Required Consenting Senior
Noteholders. “Backstop Parties” The holders of Senior Notes Claims that elect to
backstop the Equity Rights Offering pursuant to the Backstop Commitment
Agreement. “Backstop Order” The order of the Bankruptcy Court approving the
Rights Offering Procedures and entry into the Backstop Commitment Agreement, in
form and substance reasonably acceptable to the Backstop Parties and the
Required Consenting Senior Noteholders, which remains in full force and effect
and is not subject to a stay. “Business Day” Any day other than a Saturday, a
Sunday, or any other day on which banking institutions in New York, New York are
authorized or required by law or executive order to close.

 

21

 

 

Other Defined Terms “Cash” Legal tender of the United States of America. “Cash
Collateral” “Cash collateral,” as defined in section 363(a) of the Bankruptcy
Code. “Cause of Action” Any action, claim, cross-claim, third-party claim, cause
of action, controversy, dispute, demand, right, lien, indemnity, contribution,
guaranty, suit, obligation, liability, loss, debt, fee or expense, damage,
interest, judgment, cost, account, defense, remedy, offset, power, privilege,
proceeding, license, and franchise of any kind or character whatsoever, known,
unknown, foreseen or unforeseen, existing or hereafter arising, contingent or
non-contingent, matured or unmatured, suspected or unsuspected, liquidated or
unliquidated, disputed or undisputed, secured or unsecured, assertable directly
or derivatively (including any alter ego theories), whether arising before, on,
or after the Petition Date, in contract or in tort, in law or in equity or
pursuant to any other theory of law (including under any state or federal
securities laws).  For the avoidance of doubt, Cause of Action also includes
(i) any right of setoff, counterclaim, or recoupment and any claim for breach of
contract or for breach of duties imposed by law or in equity, (ii) the right to
object to Claims or Interests, (iii) any claim pursuant to section 362 or
chapter 5 of the Bankruptcy Code, (iv) any claim or defense including fraud,
mistake, duress, and usury and any other defenses set forth in section 558 of
the Bankruptcy Code, and (v) any state law fraudulent transfer claim. “Chapter
11 Cases” The jointly administered cases under chapter 11 of the Bankruptcy Code
commenced by the Debtors on the Petition Date in the Bankruptcy Court. “Claim” A
“claim,” as defined in section 101(5) of the Bankruptcy Code, as against any
Debtor. “Combination Transaction Contact List” A list of reasonably qualified
parties that could potentially be a viable Combination Transaction candidate;
such list to be created in consultation with, and subject to the consent of, the
Required Consenting Senior Noteholders (such consent not to be unreasonably
withheld). “Combination Transaction Documents” Any and all documents related to
the Combination Transaction including, but not limited to, any agreement and
plan of merger, or stock or asset purchase agreements, and any related pleadings
or documents, each in form and substance reasonably acceptable to the Required
Consenting Senior Noteholders. “Confirmation Date” The date on which the
Bankruptcy Court enters the Confirmation Order.

 

22

 

 

Other Defined Terms “Confirmation Order” The order of the Bankruptcy Court
confirming the Plan in the Chapter 11 Cases, and in form and substance
acceptable to the Required Consenting Senior Noteholders, which remains in full
force and effect and is not subject to a stay. “Consenting Senior Noteholders”
Those Senior Noteholders that are signatories to the RSA, and any subsequent
Senior Noteholder that becomes party thereto in accordance with the terms of the
RSA. “Consenting Senior Noteholder Restructuring Expenses” The reasonable and
documented fees and expenses incurred by the Ad Hoc Noteholder Group’s advisors
pursuant to the terms of their respective engagements related to the
Restructuring and not previously paid by, or on behalf of, the Company,
including, (i) the reasonable and documented fees and expenses of Paul, Weiss,
Rifkind, Wharton & Garrison, LLP, (ii) the reasonable and documented fees and
expenses of Young, Conaway, Stargatt & Taylor, LLP, and (iii) all monthly fees,
restructuring, transaction, and back-end fees payable to Houlihan Lokey
Capital, Inc. under and pursuant to its engagement letter, dated March 3, 2020,
executed by the Company.  All of the aforementioned fees shall be deemed
reasonable for all purposes hereunder. “Definitive Documents”

The Definitive Documents governing the Restructuring shall include, without
limitation, the following:

·     the Plan, the Confirmation Order, and any motion or other pleadings
related to the Plan or confirmation of the Plan and its exhibits;

·     the Plan Supplement;

·     the Disclosure Statement, the Disclosure Statement Order, and the other
Solicitation Materials, including the motion seeking approval of the
solicitation procedures;

·     the Interim DIP Order(s), the Final DIP Order, the motion seeking approval
of the same, and the credit agreement in connection therewith;

·     the substantive First Day Pleadings; and orders approving the same;

·     [the Management Incentive Plan];

·     any other material pleadings or material motions the Company plans to file
in connection with the Chapter 11 Cases, including (i) any and all motions filed
to assume, assume and assign, or reject an executory contract or unexpired lease
and the order or orders of the Bankruptcy Court approving such motions and
(ii) any and all motions seeking approval of a KEIP and/or KERP and the order or
orders of the Bankruptcy Court approving such motions;

 

23

 

 

Other Defined Terms

·     the Exit Facility and any related documentation;

·     the New Common Shares Documents;

·     the New Corporate Governance Documents;

·     the Equity Rights Offering Documents;

·     the RSA;

·     any and all material documents in connection with the Combination
Transaction and the M&A Process, including any and all motions and pleadings
seeking approval of or implementing the Combination Transaction, the Combination
Transaction Contact List, the Proposal Submission Guidelines, the Proposal
Submission Guidelines Motion, and the Proposal Submission Guidelines Order; and

·     such other agreements and documentation desired or necessary to consummate
and document the transactions contemplated by this Agreement and the Plan.

“Disclosure Statement” The disclosure statement in respect of the Plan,
including all exhibits and schedules thereto, as approved or ratified by the
Bankruptcy Court pursuant to section 1125 of the Bankruptcy Code, and in form
and substance reasonably acceptable to the Required Consenting Senior
Noteholders. “Disclosure Statement Order” The order of the Bankruptcy Court, in
form and substance reasonably satisfactory to the Required Consenting Senior
Noteholders, approving the Disclosure Statement in the Chapter 11 Cases, which
remains in full force and effect and is not subject to a stay.   “Disclosure
Statement Motion” The motion filed with the Bankruptcy Court seeking approval of
the solicitation procedures and the adequacy of the Disclosure Statement, in
form and substance reasonably acceptable to the Required Consenting Senior
Noteholders. “DTC” The Depository Trust Company. “Effective Date” The date upon
which all conditions to the effectiveness of the Plan have been satisfied or
waived in accordance with the terms thereof and the Plan becomes effective.
“Entity” An “entity,” as defined in section 101(15) of the Bankruptcy Code.
“Equity Rights Offering Documents” Collectively, the Backstop Commitment
Agreement, the Rights Offering Procedures, the Backstop Order, the Backstop
Motion, and any and all other agreements, documents, and instruments delivered
or entered into in connection with the Equity Rights Offering.

 

24

 

 

Other Defined Terms “Estate(s)” Individually or collectively, the estate or
estates of the Debtors created under section 541 of the Bankruptcy Code.
“Exculpated Parties” Collectively, and in each case in its capacity as
such:  (a) the Debtors; (b) the Reorganized Debtors; (c) the Consenting Senior
Noteholders; (d) the Ad Hoc Noteholder Group and each of its members; (e) the
Senior Notes Trustee; (f) the  any statutory committee appointed in the Chapter
11 Cases and each of such committee’s members; and (g) with respect to each of
the foregoing Persons in clauses (a) through (f), such Person’s affiliates; and
(h) with respect to each of the foregoing Persons in clauses (a) through (g),
such Person’s Related Parties, in each case in their capacity as such.  
“Existing Common Interests” Shares of the class of common stock of Parent that
existed immediately prior to the Effective Date, including any restricted stock
of Parent that vests prior to the Effective Date. “Exit Facility” The financing
to be provided to the Reorganized Debtors on the Effective Date in accordance
with the Plan and a commitment letter to be entered into by the Debtors and the
providers of the Exit Facility, which financing will include a revolving or
delayed-draw term loan credit facility with a minimum borrowing base and
commitment amount on terms to be mutually agreed between the Company and the
Required Consenting Senior Noteholders, and in a form and substance acceptable
to the Required Consenting Senior Noteholders. “Fee Claim” A Claim for
professional services rendered or costs incurred on or after the Petition Date
through the Confirmation Date by professional persons retained by an order of
the Bankruptcy Court pursuant to sections 327, 328, 329, 330, 331, or 503(b) of
the Bankruptcy Code in the Chapter 11 Cases. “Final Order” An order or judgment
of a court of competent jurisdiction that has been entered on the docket
maintained by the clerk of such court, which has not been reversed, vacated, or
stayed and as to which (i) the time to appeal, petition for certiorari, or move
for a new trial, reargument, or rehearing has expired and as to which no appeal,
petition for certiorari, or other proceedings for a new trial, reargument, or
rehearing shall then be pending, or (ii) if an appeal, writ of certiorari, new
trial, reargument, or rehearing thereof has been sought, such order or judgment
shall have been affirmed by the highest court to which such order was appealed,
or certiorari shall have been denied, or a new trial, reargument, or rehearing
shall have been denied or resulted in no modification of such order, and the
time to take any further appeal, petition for certiorari, or move for a new
trial, reargument, or rehearing shall have expired; provided, however, that no
order or judgment shall fail to be a “Final Order” solely because of the
possibility that a motion under Rules 59 or 60 of the Federal Rules of Civil
Procedure or any analogous Bankruptcy Rule (or any analogous rules applicable in
another court of competent jurisdiction) or sections 502(j) or 1144 of the
Bankruptcy Code has been or may be filed with respect to such order or judgment.

 

25

 

 

Other Defined Terms “First Day Pleadings” The first-day pleadings that the
Company files upon the commencement of the Chapter 11 Cases, including any
proposed orders to approve such first-day pleadings. “Governing Body” The board
of directors, board of managers, manager, general partner, investment committee,
special committee, or such similar governing body of an Entity (including the
board of directors of Extraction Oil & Gas, Inc.).   “Governmental Entity” Any
U.S. or non-U.S. international, regional, federal, state, municipal or local
governmental, judicial, administrative, legislative or regulatory authority,
entity, instrumentality, agency, department, commission, court or tribunal of
competent jurisdiction (including any branch, department or official thereof).
“Intercompany Claim” Any Claim against a Debtor held by another Debtor.
“Intercompany Interest” An Interest in a Debtor held by another Debtor.
“Interest” Any equity interest (as defined in section 101(16) of the Bankruptcy
Code) in the Company, including all ordinary shares, units, common stock,
preferred stock, membership interest, partnership interest or other instrument,
evidencing any fixed or contingent ownership interest in the Company, whether or
not transferable, including any option, warrant, or other right, contractual or
otherwise, to acquire any such interest in the Company, that existed immediately
before the Effective Date. “New Common Shares” Shares of common stock of the
Reorganized Parent. “New Common Shares Documents” Any and all documentation
required to implement, issue, and distribute the New Common Shares, including,
if reasonably requested by the Required Consenting Senior Noteholders, a
Registration Rights Agreement, which shall have customary terms for transactions
of the type set forth in this Term Sheet and shall be in form and substance
reasonably acceptable to the Required Consenting Senior Noteholders and the
Debtors.   “New Corporate Governance Documents” The Reorganized Parent’s forms
of certificate of incorporation, certificate of formation, bylaws, limited
liability company agreements, shareholder agreement (if any), or other similar
organizational documents, as applicable, which shall be in form and substance
acceptable to the Required Consenting Senior Noteholders.

 

26

 

 

Other Defined Terms “Other Equity Interests” All Interests in Parent other than
Existing Preferred Interests and Existing Common Interests. “Other Priority
Claim” Any Claim, other than an Administrative Claim or a Priority Tax Claim,
entitled to priority in right of payment under section 507(a) of the Bankruptcy
Code. “Other Secured Claim” Any secured Claim, other than a Priority Tax Claim
or a Revolving Credit Agreement Claim, including any Claim arising under,
derived from, or based upon any letter of credit issued in favor of one or more
Debtors, the reimbursement obligation for which is either secured by a lien on
collateral or is subject to a valid right of setoff pursuant to section 553 of
the Bankruptcy Code. “Person” Any individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company, limited
partnership, trust, estate, unincorporated organization, governmental unit (as
defined in section 101(27) of the Bankruptcy Code), or other Entity.

“Plan”

 

The chapter 11 plan of reorganization of the Company implementing the
Restructuring, including all appendices, exhibits, schedules, and supplements
thereto, as may be modified from time to time in accordance with its terms and
the RSA, and in form and substance reasonably acceptable to the Required
Consenting Senior Noteholders.

“Plan Supplement”

 

A supplement or supplements to the Plan containing certain documents and forms
of documents, schedules, and exhibits, in each case subject to the terms and
provisions of the RSA (including any consent rights in favor of the Consenting
Senior Noteholders) relevant to the implementation of the Plan and in form and
substance reasonably acceptable to the Required Consenting Senior Noteholders
and the Debtors, to be filed with the Bankruptcy Court, as amended, modified or
supplemented from time to time in accordance with the terms hereof and in
accordance with the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure,
and the RSA (including any consent rights in favor of the Consenting Senior
Noteholders), which shall include, but not be limited to (i) the New Corporate
Governance Documents, (ii) with respect to the members of the New Board,
information required to be disclosed in accordance with section 1129(a)(5) of
the Bankruptcy Code to the extent known and determined, (iii) the Exit
Facilities documents, (iv) a schedule of retained Causes of Action, and (v) the
Schedule of Rejected Contracts. “Plan Equity Value”

[The value of the New Common Shares as of the Effective Date, based on

the lower of (i) the Total Enterprise Value or (i) an assumed total

enterprise value of $[●].]

“Priority Tax Claim” Any Claim of a governmental unit of the kind specified in
section 507(a)(8) of the Bankruptcy Code.

 

27

 

 

Other Defined Terms “Proposal Submission Guidelines” The guidelines governing
the submission of proposals pursuant to the M&A Process and the marketing
process for the Combination Transaction, in form and substance reasonably
acceptable to the Required Consenting Senior Noteholders. “Proposal Submission
Guidelines Motion” The motion filed with the Bankruptcy Court seeking approval
of the Proposal Submission Guidelines, in form and substance reasonably
acceptable to the Required Consenting Senior Noteholders. “Proposal Submission
Guidelines Order” The order of the Bankruptcy Court approving the Proposal
Submission Guidelines and establishing deadlines for the submission of firm
proposals in accordance with such procedures, in form and substance reasonably
acceptable to the Required Consenting Senior Noteholders, which remains in full
force and effect and is not subject to a stay. “Pro Rata” The proportion that an
Allowed Claim or Interest in a particular class bears to the aggregate amount of
Allowed Claims or Interests in that class. “Registered Holder” A holder of
Existing Equity Interests whose ownership interest is registered directly on the
books and records of the Company’s transfer agent. “Related Parties”
Collectively, each of, and in each case in its capacity as such, current and
former directors, managers, officers, investment committee members, special or
other committee members, members of any Governing Body, equity holders
(regardless of whether such interests are held directly or indirectly),
affiliated investment funds or investment vehicles, managed accounts or funds,
predecessors, participants, successors, assigns, subsidiaries, Affiliates,
partners, limited partners, general partners, principals, members, management
companies, fund advisors or managers, employees, agents, trustees, advisory
board members, financial advisors, attorneys (including any other attorneys or
professionals retained by any current or former director or manager in his or
her capacity as director or manager of an Entity), accountants, investment
bankers, consultants, representatives, and other professionals and advisors and
any such person’s or Entity’s respective heirs, executors, estates, and
nominees. “Released Parties” Collectively, (a) the Consenting Senior
Noteholders, (b) the Ad Hoc Noteholder Group and each of its members, (c) the
Senior Notes Trustee, (d) the Backstop Parties, (e) the Revolving Credit
Agreement Agent and the Revolving Credit Agreement Lenders, (f) any Releasing
Party, (g) with respect to each of the foregoing Persons, in clauses (a) through
(f), each of their affiliates, and (h) with respect to each of the foregoing
Persons in clauses (a) through (g), such Person’s Related Parties, in each case
in their capacity as such. “Releasing Parties” Collectively, (a) the holders of
all Claims or Interests who vote to accept the Plan, (b) the holders of all
Claims or Interests whose vote to accept or reject the Plan is solicited but who
do not vote either to accept or to reject the Plan, (c) the holders of all
Claims or Interests who vote, or are deemed, to reject the Plan but do not opt
out of granting the releases set forth therein, (d) the holders of all Claims
and Interests who were given notice of the opportunity to opt out of granting
the releases set forth therein but did not opt out, (e) all other holders of
Claims and Interests to the maximum extent permitted by law, (f) the Consenting
Senior Noteholders, (g) the Ad Hoc Noteholder Group, (h) the Senior Notes
Trustee, (i) the Backstop Parties, (j) the Revolving Credit Agreement Agent and
the Revolving Credit Agreement Lenders, (k) with respect to each of the
foregoing Persons, in clauses (a) through (j), each of their affiliates, and
(l) with respect to each of the foregoing Persons in clauses (a) through (k),
such Person’s Related Parties, in each case in their capacity as such.

 

28

 

 

Other Defined Terms “Reorganized Debtors” Each of the Debtors as reorganized on
the Effective Date in accordance with the Plan. “Reorganized Parent” Parent as
reorganized on the Effective Date in accordance with the Plan. “Required
Consenting Senior Noteholders” As of the date of determination, at least two
(2) members of the Ad Hoc Noteholder Group that have signed the RSA holding a
majority of the outstanding Senior Notes held by the Ad Hoc Group of Noteholders
that have signed the RSA as of such date. “Rights Offering Procedures” The
rights offering procedures in form and substance reasonably acceptable to the
Required Consenting Senior Noteholders setting forth the procedures to
participate in the Equity Rights Offering. “Schedule of Rejected Contracts” The
schedule of Executory Contracts and Unexpired Leases to be rejected by the
Debtors pursuant to the Plan, in form and substance acceptable to the Required
Consenting Senior Noteholders.   “Senior Notes Trustee” The Wells Fargo Bank,
National Association, as trustee under the Senior Notes indentures and its
successors, assigns, or any replacement trustee appointed pursuant to the terms
of the Senior Notes indentures. “Secured Claim” A Claim (i) secured by a lien on
collateral to the extent of the value of such collateral as (a) set forth in the
Plan, (b) agreed to by the holder of such Claim and the Debtors, or
(c) determined by a Final Order in accordance with section 506(a) of the
Bankruptcy Code, or (ii) secured by the amount of any right of setoff of the
holder thereof in accordance with section 553 of the Bankruptcy Code.
“Securities Act” Securities Act of 1933, as amended, 15 U.S.C. §§ 77a–77aa, and
any rules and regulations promulgated thereby. “Solicitation Materials”
Collectively, the Disclosure Statement and the related solicitation materials.
“Successful Proposal” [One or more proposals to purchase or consummate a
combination or merger involving all or substantially all of the Company’s
restructured equity or assets that the Company determines, in an exercise of its
business judgment: (a) provides sufficient consideration to satisfy the
following Claims in full in accordance with the priorities set forth in the
Plan: (i) Allowed Administrative Claims; (ii) Allowed Other Secured Claims
(except to the extent the applicable purchase agreement provides for a different
method of rendering such Claims Unimpaired); (iii)  Allowed Professional Fee
Claims; (iv) Allowed Priority Tax Claims (unless paid in another manner
permitted by section 1129(a)(9)(c) of the Bankruptcy Code); (v) Allowed Other
Priority Claims; [and] (vi) Allowed Revolving Credit Agreement Claims (or such
lesser amount as is acceptable to the Revolving Credit Agreement Lenders in
their sole and absolute discretion); [and (vii) Allowed Trade Claims;
(b) [provides sufficient consideration to satisfy the DIP Claims in accordance
with the terms of the [DIP Term Sheet]]; (c)  provides consideration in respect
of the Senior Notes Claims acceptable to the Required Consenting Senior
Noteholders; (d) provides consideration that the Company and the Required
Consenting Senior Noteholders determine is sufficient to pay or reserve for
payments pursuant to and in accordance with the Plan, including, as applicable,
consideration sufficient to wind down the estates following the closing of the
Combination Transaction; and (e) includes such other terms and conditions as the
Company may require, subject to the reasonable consent of the Required
Consenting Senior Noteholders.] “Total Enterprise Value” The total enterprise
value of the Reorganized Debtors. “Unimpaired” With respect to a
Claim, Interest, or a class of Claims or Interests, not “impaired” within the
meaning of sections 1123(a)(4) and 1124 of the Bankruptcy Code.

 

29

 

 

  

ANNEX 1

 

Exculpation and Release Language

 

 

30

 

 

A.Releases by the Debtor.

 

Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable
consideration, the adequacy of which is hereby confirmed, on and after the
Effective Date, each Released Party is deemed to be, hereby conclusively,
absolutely, unconditionally, irrevocably, and forever released and discharged by
the Debtors, the Reorganized Debtors, and their Estates, in each case on behalf
of themselves and their respective successors, assigns, and representatives, and
any and all other Entities who may purport to assert any Cause of Action,
directly or derivatively, by, through, for, or because of the foregoing
Entities, from any and all Causes of Action, including any derivative claims,
asserted on behalf of the Debtors, whether known or unknown, foreseen or
unforeseen, matured or unmatured, existing or hereafter arising, in law, equity,
contract, tort or otherwise, that the Debtors, the Reorganized Debtors, or their
Estates would have been legally entitled to assert in their own right (whether
individually or collectively) or on behalf of the holder of any Claim against,
or Interest in, a Debtor or other Entity, based on or relating to, or in any
manner arising from, in whole or in part, the Debtors (including the Debtors’
capital structure, management, ownership, or operation thereof, including any
draws under the Revolving Credit Facility), the assertion or enforcement of
rights and remedies against the Debtors, the Debtors’ in- or out-of-court
restructuring efforts, any avoidance actions, intercompany transactions between
or among a Debtor or an affiliate of a Debtor and another Debtor or affiliate of
a Debtor, the Chapter 11 Cases, the formulation, preparation, dissemination,
negotiation, or filing of the RSA, the Disclosure Statement, the Backstop
Commitment Agreement, the Plan (including, for the avoidance of doubt, the Plan
Supplement), the Definitive Documents, or any aspect of the Restructuring,
including any contract, instrument, release, or other agreement or document
created or entered into in connection with the RSA, the Disclosure Statement,
the Backstop Commitment Agreement, the Plan, or the Definitive Documents, the
filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of
consummation of the Plan, the administration and implementation of the Plan,
including the issuance or distribution of securities pursuant to the Plan, or
the distribution of property under the Plan or any other related agreement, or
upon any other act or omission, transaction, agreement, event, or other
occurrence taking place on or before the Effective Date related or relating to
any of the foregoing. Notwithstanding anything contained herein to the contrary,
the foregoing release does not release any obligations of any party under the
Plan or any document, instrument, or agreement executed to implement the Plan.

 

Notwithstanding anything contained herein to the contrary, the foregoing release
does not release (i) any obligations of any party under the Plan or any
document, instrument, or agreement executed to implement the Plan, (ii) any
claims related to any act or omission that is determined in a Final Order to
have constituted willful misconduct, gross negligence, or actual fraud,
(iii) the rights of any current employee of the Debtors under any employment
agreement or plan, (iv) the rights of the Debtors with respect to any
confidentiality provisions or covenants restricting competition in favor of the
Debtors under any employment agreement with a current or former employee of the
Debtors, or (v) the rights of holders of Allowed Claims or Interests to receive
distributions under the Plan.

 

B.Releases by the holders of Claims and Interests.

 

Except as otherwise expressly set forth in the Plan or the Confirmation Order,
on and after the Effective Date, in exchange for good and valuable
consideration, the adequacy of which is hereby confirmed, each Released Party
is, and is deemed to be, hereby conclusively, absolutely, unconditionally,
irrevocably and forever, released and discharged by each Releasing Party from
any and all Causes of Action, whether known or unknown, foreseen or unforeseen,
matured or unmatured, existing or hereafter arising, in law, equity, contract,
tort, or otherwise, including any derivative claims asserted on behalf of the
Debtors, the Reorganized Debtors, or their Estates, that such Entity would have
been legally entitled to assert (whether individually or collectively), based on
or relating to, or in any manner arising from, in whole or in part, the Debtors
(including the Debtors’ capital structure, management, ownership, or operation
thereof, including any draws under the Revolving Credit Facility), the Debtors’
in- or out-of-court restructuring efforts, intercompany transactions between or
among a Debtor or an affiliate of a Debtor and another Debtor or affiliate of a
Debtor, the Chapter 11 Cases, the formulation, preparation, dissemination,
negotiation, or filing of the RSA, the Disclosure Statement, the Backstop
Commitment Agreement, the Plan (including, for the avoidance of doubt, the Plan
Supplement), the Definitive Documents, or any aspect of the Restructuring,
including any contract, instrument, release, or other agreement or document
created or entered into in connection with the RSA, the Disclosure Statement,
the Backstop Commitment Agreement, the Plan, or the Definitive Documents, the
filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of
consummation of the Plan, the administration and implementation of the Plan,
including the issuance or distribution of securities pursuant to the Plan, or
the distribution of property under the Plan or any other related agreement, or
upon any other act or omission, transaction, agreement, event, or other
occurrence taking place on or before the Effective Date related or relating to
any of the foregoing.

 

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Notwithstanding anything contained herein to the contrary, the foregoing release
does not release (i) any obligations of any party under the Plan or any
document, instrument, or agreement executed to implement the Plan, (ii) any
claims related to any act or omission that is determined in a Final Order to
have constituted willful misconduct, gross negligence, or actual fraud,
(iii) the rights of any current employee of the Debtors under any employment
agreement or plan, (iv) the rights of the Debtors with respect to any
confidentiality provisions or covenants restricting competition in favor of the
Debtors under any employment agreement with a current or former employee of the
Debtors, or (v) the rights of holders of Allowed Claims or Interests to receive
distributions under the Plan.

 

C.Exculpation.

 

Except as otherwise specifically provided in the Plan, no Exculpated Party shall
have or incur liability for, and each Exculpated Party is hereby released and
exculpated from any Cause of Action for any claim related to any act or omission
in connection with, relating to, or arising out of, the Chapter 11 Cases, the
formulation, preparation, dissemination, negotiation, or filing of the RSA and
related prepetition transactions (including any draws under the Revolving Credit
Facility), the Disclosure Statement, the Backstop Commitment Agreement, the
Plan, the Plan supplement, or any transaction related to the Restructuring, any
contract, instrument, release or other agreement or document created or entered
into before or during the Chapter 11 Cases, any preference, fraudulent transfer,
or other avoidance claim arising pursuant to chapter 5 of the Bankruptcy Code or
other applicable law, the filing of the Chapter 11 Cases, the pursuit of
Confirmation, the pursuit of Consummation, the administration and implementation
of the Plan, including the issuance of securities pursuant to the Plan, or the
distribution of property under the Plan or any other related agreement, except
for claims related to any act or omission that is determined in a Final Order to
have constituted actual fraud, gross negligence or willful misconduct, but in
all respects such Exculpated Parties shall be entitled to reasonably rely upon
the advice of counsel with respect to their duties and responsibilities pursuant
to the Plan.

 

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ANNEX 2

 

DIP Facility Term Sheet

 

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EXTRACTION OIL & GAS, INC.

 

NON-BINDING DEBTOR-IN-POSSESSION (“DIP”) DIP FINANCING TERM SHEET

 

This DIP Term Sheet (including any exhibits attached hereto, the “DIP Term
Sheet”) sets forth the principal terms of a superpriority, priming secured
debtor-in-possession credit facility (the “DIP Credit Facility”; the credit
agreement evidencing the DIP Credit Facility, the “DIP Credit Agreement” and,
together with the other definitive documents governing the DIP Credit Facility
and the DIP Orders,[1] the “DIP Documents,” each of which shall be in form and
substance reasonably acceptable to the DIP Lenders (or with respect to the DIP
Orders, the Majority Lenders (it being understood that the form of Interim DIP
Order agreed to by the Majority Lenders and included in the Chapter 11 Cases
filed on the Petition Date shall be reasonably acceptable, provided that, any
changes made to such filed order must be reasonably acceptable to the Majority
Lenders)), the DIP Agent, and the Debtors and substantially consistent with this
DIP Term Sheet and the Documentation Principles). The DIP Credit Facility shall
be subject to the approval of the Bankruptcy Court and consummated in the cases
(the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code,
11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) commenced by Extraction Oil &
Gas, Inc. (“Extraction”) and those certain additional subsidiaries of Extraction
listed as Guarantors hereunder (such subsidiaries and Extraction each a “Debtor”
and, collectively, the “Debtors”) in the United States Bankruptcy Court for the
District of Delaware (the “Bankruptcy Court”) pursuant to (i) an interim order
(the “Interim DIP Order”) and  a final order consistent with the Interim DIP
Order (with such changes as the DIP Agent and the Majority Lenders reasonably
approve) (the “Final DIP Order” and, together with the Interim DIP Order, the
“DIP Orders”) of the Bankruptcy Court authorizing the Debtors to obtain the DIP
Credit Facility and enter into the DIP Documents (as applicable); and (ii) the
DIP Documents to be executed by the Debtors (as applicable). The date of the
filing of such Chapter 11 Cases being the “Petition Date.”

 

Borrower Extraction, a Delaware corporation, as a debtor in possession in the
Chapter 11 Cases (the “Borrower”). Guarantors The DIP Obligations will be
guaranteed by each of 8 North, LLC, 7N, LLC, Axis Exploration, LLC, Extraction
Finance Corp., Mountaintop Minerals, LLC, [Northwest Corridor Holdings, LLC,]
Table Mountain Resources, LLC, XOG Services, LLC, and XTR Midstream, LLC, each
as a debtor in possession in the Chapter 11 Cases  (all companies which provide
guarantees, collectively, the “Guarantors”).  For the avoidance of doubt,
Elevation Midstream, LLC, a Delaware limited liability company, shall not be a
Guarantor or a Debtor. DIP Agent Wells Fargo Bank, National Association (in its
capacity as administrative agent under the DIP Credit Facility, the “DIP
Agent”). DIP Letter of Credit Issuers The entities specified as “Issuing
Lenders” in the DIP Credit Agreement, as mutually agreed by the DIP Agent and
the Borrower. DIP Lenders Lenders under that certain Amended and Restated Credit
Agreement dated as of August 16, 2017 (as amended, restated, amended and
restated, modified, supplemented, or replaced from time to time prior to the
Petition Date, the “Prepetition Credit Agreement”) that agree to provide DIP
financing (in their capacity as lenders under the DIP Credit Facility,
collectively, the “DIP Lenders”) in the form of DIP Loans (all New DIP Loans and
Prepetition Roll-Up Loans, the “DIP Loans”) and DIP Letters of Credit.  The
facilities under the Prepetition Credit Agreement being the “Prepetition Credit
Facilities.”  The obligations under the Prepetition Credit Agreement being the
“Prepetition Secured Obligations”.

 

 

1 Equity participation split between Existing Preferred Interests and Existing
Common Interests to be same as new ownership provided under Plan treatment.

 

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Cash Collateral

“Cash Collateral” consists of: (i) cash collateral (as such term is defined in
section 363(a) of the Bankruptcy Code, including, without limitation, any
accounts receivable and general intangible and any other cash or right that
would be included in such definition of “cash collateral” within the meaning of
section 363(a) of the Bankruptcy Code) constituting Prepetition Collateral
(including, without limitation, all cash or cash equivalents and other amounts
of the Borrower and each other Debtor, including the cash in any deposit or
securities accounts, wherever located); (ii) any cash or cash equivalents
received as proceeds of Prepetition Collateral or DIP Collateral; and (iii) all
other cash or cash equivalents of the Debtors.

Subject to the terms of the DIP Orders and the other definitive documentation,
the agent under the Prepetition Credit Agreement (the “Prepetition Agent”) and
the lenders under the Prepetition Credit Agreement (the “Prepetition Lenders”
and, together with the Prepetition Agent, the “Prepetition Secured Parties”)
shall consent to the Debtors’ use of Cash Collateral during the Chapter 11 Cases
to fund (a) working capital, (b) general corporate purposes, (c) restructuring
expenses, (d) fees and expenses incurred by professionals, (e) Adequate
Protection payments, (f) the Carve-Out, and (g) any other fees required under
the DIP Credit Agreement and the other definitive documentation during the
pendency of the Chapter 11 Cases, in each case, subject to the Approved DIP
Budget, including the Permitted Variance and related exclusions set forth in the
“Approved DIP Budget and Permitted Variance” section below; provided that,
notwithstanding the foregoing, Cash Collateral may only be used to investigate
the claims and liens of the Prepetition Secured Parties, each in such capacity,
in an aggregate amount not to exceed $25,000.

Other than as expressly set forth above, Cash Collateral shall not be used for
any purpose prohibited in the “Use of Proceeds” section below for the New DIP
Loans.

For the avoidance of doubt, any Cash Collateral order shall contain usual and
customary release provisions with respect to the Prepetition Secured Parties.

DIP Secured Parties The DIP Agent, the DIP Lenders, the DIP Letter of Credit
Issuers, the holders of Hedging Obligations and any other holders of DIP
Obligations.

 

35

 

 

DIP Credit Facility Structure and Size

Senior secured superpriority credit facilities, comprised of:

 

New Money DIP Loans

 

A non-amortizing new money multi-draw term loan credit facility in an aggregate
principal amount equal to $50 million, comprised of the following new money
loans (collectively, the “New DIP Loans”):

 

(a)           $15 million in principal amount of the New DIP Loans, available
upon entry of the Interim DIP Order (the “Interim DIP Loans”); and

 

(b)           the balance of the principal aggregate amount of the New DIP
Loans, available upon entry of the Final DIP Order (the “Final DIP Loans”).

 

The aggregate amount of any New DIP Loans available to the Borrower to draw as
of any draw date shall be equal to the amount of the undrawn New DIP Loans
available as of such date minus any DIP Letters of Credit issued as of such
date.

 

Rolled-Up Obligations

 

Subject to entry of the Final DIP Order, a portion of the Loans (as defined in
the Prepetition Credit Agreement) made by Prepetition Lenders that are DIP
Lenders shall be rolled into the DIP Credit Facility pro rata in an aggregate
principal amount equal to $75 million (the “Prepetition Roll-Up Loans”) and
deemed to constitute DIP Loans under the DIP Credit Facility, regardless of
whether any New DIP Loans are requested. Any unpaid interest and fees due in
respect of the Prepetition Roll-Up Loans, subject to entry of the Final DIP
Order, shall be rolled into the DIP Credit Facility and deemed to constitute
obligations due under the DIP Credit Facility (the “Additional Obligations” and
together with the Prepetition Roll-Up Loans, the “Rolled-Up Obligations”).

 

The New DIP Loans, the Rolled-Up Obligations, the Hedging Obligations, and any
other obligations under, or secured by, the DIP Credit Facility are collectively
referred to herein as the “DIP Obligations.”

 

The DIP Credit Facility will be subject to the definitive documents that will
reflect the terms and conditions set forth in this DIP Term Sheet and such other
terms and conditions as may be agreed by the DIP Lenders and the Debtors.

 

Borrowings of New DIP Loans shall be in accordance with the Approved DIP Budget,
subject to the Permitted Variance.

DIP Letters of Credit The Borrower may request DIP Letters of Credit from the
DIP Letter of Credit Issuers in an aggregate amount not to exceed $3,500,000,
which for the avoidance of doubt, shall be included in the $50 million permitted
for New DIP Loans.  Terms regarding DIP Letters of Credit shall be similar to
those customarily found in loan documents for similar debtor-in-possession
financings. Fees on the New DIP Loans and Agency Fee

Commitment Fee: For the account of each DIP Lender, a commitment fee in an
amount equal to such DIP Lender’s pro rata share of the Commitment Fee Amount
earned and payable in full upon the effective date of the DIP Credit Facility.
“Commitment Fee Amount” means $750,000.

 

Unused Fee: 0.50% per annum of the average daily undrawn amount of (i) prior to
entry of the Final DIP Order, the Interim DIP Loans, and (ii) following entry of
the Final DIP Order, the New DIP Loans, in each case, payable monthly in
arrears.

 

For the avoidance of doubt, no such commitment or unused fees shall be payable
in respect of any Rolled-Up Obligations.

 

Arrangement and agency fee as provided in a separate fee letter.

 

DIP Letter of Credit Fees: a fronting fee equal to the greater of (i) 12.5 bps
and (ii) $500, and other customary letter of credit fees.

 

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Scheduled Maturity Date The date that is six months after the Petition Date with
an extension option of up to three months subject to the consent of the Majority
Lenders (the “Scheduled Maturity Date”). Maturity Date The earliest of (i) the
Scheduled Maturity Date, (ii) the consummation of a sale of all or substantially
all of the assets of the Debtors pursuant to Section 363 of the Bankruptcy Code
or otherwise; (iii) the effective date of a plan of reorganization or
liquidation in the Chapter 11 Cases; (iv) the entry of an order by the
Bankruptcy Court dismissing any of the Chapter 11 Cases or converting such
Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code, and (v) the
date of termination of the DIP Lenders’ commitments and the acceleration of any
outstanding extensions of credit, in each case, under the DIP Credit Facility in
accordance with and subject to the terms of the DIP Documents and the DIP
Orders. Margin and Interest

DIP Letters of Credit: 575 bps with respect to DIP Letters of Credit.

 

New DIP Loans: LIBOR (with a LIBOR floor of 100 bps) + 575 bps with respect to
all New DIP Loans.

 

Prepetition Roll-Up Loans: The Prepetition Roll-Up Loans will have an interest
rate identical to the interest rate applicable to New DIP Loans.

 

Default Rate Premium: the interest rate otherwise in effect plus 200 bps in
respect of DIP Loans and DIP Letters of Credit following the occurrence and
during the continuance of an event of default under the DIP Credit Facility.

 

Interest shall accrue daily and be payable monthly in cash in arrears. Interest
shall be calculated on the basis of the actual number of days elapsed in a 365
or 366-day year.

DIP Collateral Subject to the Carve-Out, upon entry of the Interim DIP Order,
the DIP Obligations will be secured by the following (collectively, the “DIP
Collateral”): (i) pursuant to section 364(d)(1) of the Bankruptcy Code
superpriority priming liens on the property secured by valid, unavoidable and
perfected security interest securing the Prepetition Credit Facilities, and
valid liens perfected (but not granted) after the Petition Date that secure the
Prepetition Credit Facilities (to the extent that such perfection in respect of
a prepetition claim is expressly permitted under the Bankruptcy Code)  (the
“Prepetition Collateral”), (ii) pursuant to section 364(c)(3) of the Bankruptcy
Code junior liens on any property that is secured by valid, unavoidable and
perfected security interests or valid liens perfected (but not granted) after
the Petition Date (to the extent that such perfection in respect of a
prepetition claim is expressly permitted under the Bankruptcy Code), other than
any property for which a lien is granted pursuant to clause (i), and
(iii) pursuant to section 364(c)(2) of the Bankruptcy Code first-priority liens
on unencumbered assets of the Debtors that were not, as of the Petition Date,
subject to valid, unavoidable and perfected security interests and liens or
valid liens perfected (but not granted) after the Petition Date (to the extent
that such perfection in respect of a prepetition claim is expressly permitted
under the Bankruptcy Code), including, subject to entry of the Final DIP Order,
any proceeds, or property recovered in connection with, any of the Debtors’
causes of action under Bankruptcy Code sections 502(d), 544, 545, 547, 548, 549,
550 or 553 or any other avoidance actions under the Bankruptcy Code or
applicable non-bankruptcy law (such claims or causes of action, the “Avoidance
Actions”) (but excluding, for the avoidance of doubt, the Avoidance Actions, and
including, for the avoidance of doubt, any proceeds of the Avoidance Actions and
any property recovered in connection therewith).  All liens authorized and
granted pursuant to the Interim DIP Order or the Final DIP Order entered by the
Bankruptcy Court approving the DIP Credit Facility shall be deemed effective and
perfected as of the Petition Date, and no further filing, notice or act will be
required to effect such perfection; provided, that there shall be customary
exclusions consistent with the Prepetition Credit Facilities subject to
modifications to reflect that the DIP Credit Facility is a debtor-in-possession
facility. The DIP Lenders, or the DIP Agent on behalf of the DIP Lenders, shall
be permitted, but not required, to make any filings, deliver any notices, make
recordations, perform any searches or take any other acts as may be desirable
under law in order to reflect the security, perfection or priority of the DIP
Lenders’ claims described herein.  

 

37

 

 

Carve-Out

See Exhibit 1. 

Hedging

Any hedging transactions permitted under the DIP Orders and Hedging Orders
entered by the Bankruptcy Court, that are entered into (i) prior to the Petition
Date and authorized by the DIP Order to continue post-Petition Date, or
(ii) after the Petition Date by the Debtors with a counterparty that is the DIP
Agent, a DIP Lender or any affiliate of the foregoing will, in each case, be
secured by the DIP Collateral (such hedging obligations, the “Hedging
Obligations”).

 

“Hedging Order” means the order granting a motion authorizing the Debtors to
continue prepetition hedging arrangements and enter into post-petition hedging
arrangements, among other relief, which such order shall be in form and
substance reasonably satisfactory to the DIP Agent.

Use of Proceeds of New DIP Loans

The proceeds of the New DIP Loans shall be used (a) to pay costs, fees, interest
and expenses associated with the DIP Credit Facility and the Chapter 11 Cases,
including fees and expenses of professionals and the Carve-Out, (b) to pay any
Adequate Protection payments, and (c) to fund the working capital needs, capital
improvements and expenditures of the Debtors during the pendency of the Chapter
11 Cases, in each case, subject to the Approved DIP Budget, including Permitted
Variance.

Proceeds of the New DIP Loans shall not be used (i) to permit the Borrower,
Guarantor or any other party-in-interest or any of their representatives to
challenge or otherwise contest or institute any proceeding to determine (x) the
validity, perfection or priority of security interests in favor of any of the
DIP Agent, the DIP Lenders or the Prepetition Secured Parties, or (y) the
enforceability of the obligations of the Borrower or any Guarantor under the DIP
Credit Facility or the Prepetition Credit Agreement or any other Loan Document
(as defined in the Prepetition Credit Agreement), or (ii) to investigate,
commence, or prosecute any claim, motion, proceeding or cause of action against
any of the DIP Agent, the DIP Lenders, the Prepetition Agent or the Prepetition
Lenders, each in such capacity, and their respective agents, attorneys, advisors
or representatives, including, without limitation, any lender liability claims
or subordination claims.

 

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Adequate Protection

The DIP Orders shall provide for the following adequate protection to the
Prepetition Secured Parties for and to the extent of any diminution in value of
the Prepetition Collateral including, without limitation, any such diminution
during the Chapter 11 Cases arising from the (a) sale, lease or use by the
Debtors of the Prepetition Collateral and Cash Collateral, (b) the priming of
the Prepetition Lenders’ valid, unavoidable and perfected security interests and
liens in the Prepetition Collateral (other than by the amount of the Rolled-Up
Obligations), and (c) imposition of the automatic stay pursuant to section 362
of the Bankruptcy Code in respect of all claims under the Prepetition Credit
Facilities, subject in each case, to the Carve-Out and any valid, perfected, and
non-avoidable senior liens (as long as same are permitted liens under the
Prepetition Credit Agreement) in the Prepetition Collateral in existence
immediately prior to the Petition Date and any such valid and non-avoidable
liens in existence immediately prior to the Petition Date that are perfected
subsequent to the Petition Date pursuant to section 546(b) of the Bankruptcy
Code:

 

(a)       a superpriority administrative expense claim as contemplated by
Section 507(b) of the Bankruptcy Code immediately junior to the claims under
Section 364(c)(1) of the Bankruptcy Code held by the DIP Agent and the DIP
Lenders;

 

(b)       liens on the DIP Collateral (such adequate protection liens shall be
junior to the liens securing the DIP Credit Facility);

 

(c)       any interest payable under the Prepetition Credit Agreement (excluding
interest on the Rolled-Up Obligations), which payments shall be made monthly in
arrears on the last day of each calendar month. The first such payment shall
include all accrued interest to and including such payment date, including
unpaid prepetition interest. For the avoidance of doubt, all interest payable
under the Prepetition Credit Agreement shall include default interest from and
after the Petition Date;

 

(d)       payment in cash of (i) all reasonable and documented accrued and
unpaid fees and disbursements as provided for under the Prepetition Credit
Agreement owing to advisors, professionals and other consultants (including
legal counsel) of the Prepetition Secured Parties incurred prior to the Petition
Date, and (ii) all reasonable and documented fees and out-of-pocket
disbursements of such advisors, professionals and other consultants (including
legal counsel) as may have been retained by the Prepetition Agent or the
Prepetition Lenders incurred on or after the Petition Date; and

 

(e)       100% of the cash consideration due to a Loan Party in respect of any
termination of any Hedging Arrangement (as defined in the Prepetition Credit
Agreement) shall be applied to prepay the prepetition Loans (as defined in the
Prepetition Credit Agreement).

 

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Superpriority Claims

Pursuant to section 364(c)(1) of the Bankruptcy Code, all of the DIP Obligations
shall constitute allowed senior administrative expense claims against each of
the Debtors (without the need to file any proof of claim or request for payment
of administrative expense) with priority over any and all other administrative
expenses, adequate protection claims, diminution claims (including all adequate
protection obligations) and all other claims against the Debtors, now existing
or hereafter arising, of any kind or nature whatsoever, including, without
limitation, all administrative expenses of the kind specified in sections
503(b) and 507(b) of the Bankruptcy Code, and over any and all other
administrative expenses or other claims arising under sections 105, 326, 327,
328, 330, 331, 503(b), 506(c) (with any claims arising only under section
506(c) subject to the entry of the Final DIP Order), 507(a), 507(b), 546, 726,
1113, or 1114 of the Bankruptcy Code (the “Superpriority Claims”), whether or
not such expenses or claims may become secured by a judgment lien or other
non-consensual lien, levy or attachment, which allowed claims shall for purposes
of section 1129(a)(9)(A) of the Bankruptcy Code be considered administrative
expenses allowed under section 503(b) of the Bankruptcy Code, and which shall be
payable from and have recourse to all pre- and postpetition property of the
Debtors and their estates and all proceeds thereof (excluding all Avoidance
Actions, but including any proceeds of the Avoidance Actions); provided, however
that the Superpriority Claims shall be subordinate only to the Carve-Out.

 

The DIP Obligations will be indefeasibly paid in full, in cash, on the effective
date of a Plan of Reorganization, unless a Lender elects a different treatment
with respect to such Lender’s DIP Obligations.

Selected Key Milestones

The DIP Orders and the DIP Credit Agreement shall provide that the Debtors will
implement their Chapter 11 Cases in accordance with the milestones as reflected
in Annex 1 attached hereto (the “DIP Milestones”).

 

The Debtors may extend a DIP Milestone only with the express written consent of
the DIP Agent acting at the direction of the Majority Lenders.

 

As used in this DIP Term Sheet, “Majority Lenders” means, at any time, DIP
Lenders having exposure and unused commitments representing at least a majority
of the sum of all exposure outstanding and unused commitments at such time
(subject to customary defaulting lender limitations).

 

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Conditions Precedent

Usual and customary conditions precedent found for similar debtor in possession
financings, to include:

 

·     entry of the Interim DIP Order and such order shall not have been stayed,
modified or appealed;

·     execution of DIP Documents;

·     perfection of collateral;

·     reps and warranties to be true and correct in all material respects;

·     no material adverse effect since Petition Date;

·     payment of fees, costs and expenses incurred by the DIP Agent and DIP
Lenders in accordance with this Term Sheet;

·     KYC requirements;

·     customary bankruptcy related conditions precedent; and

·     delivery of customary closing deliverables.

 

Affirmative Covenants The DIP Credit Agreement will contain affirmative
covenants that are consistent with those found in the Prepetition Credit
Agreement, subject to modifications to reflect that the DIP Credit Facility is a
debtor-in-possession facility (including, without limitation, reductions and
eliminations of certain “baskets”, carveouts, exceptions and qualifications),
and additional covenants customarily found in loan documents for similar
debtor-in-possession financings, including, without limitation, the following:
cash management, compliance with Approved DIP Budget and Permitted Variances
consistent with this DIP Term Sheet, compliance with the Milestones, and
customary bankruptcy reporting provisions. Negative Covenants

The DIP Credit Agreement will contain negative covenants that are consistent
with those found in the Prepetition Credit Agreement, subject to modifications
to reflect that the DIP Credit Facility is a debtor-in-possession facility
(including, without limitation, reductions and eliminations of certain
“baskets”, carveouts, exceptions and qualifications), and additional covenants
customarily found in loan documents for similar debtor-in-possession financings,
including, without limitation, the following: minimum liquidity (to be defined
as unrestricted cash and cash equivalents, together with availability under the
DIP Credit Facility) of not less than $10 million at any time, limitations on
incurring or permitting additional super-priority claims or the grant of
adequate protection, limitation on maintaining deposit, securities or
commodities accounts, limitations on changing any DIP Order, limitations related
to non-credit party subsidiaries, and limitations on ability to assume, assume
and assign or reject any executory contracts or unexpired leases under the
Bankruptcy Code without first consulting the DIP Agent.

 

For the avoidance of doubt, the only financial covenants will be compliance with
Approved DIP Budget and Permitted Variance and minimum liquidity (as described
in the above paragraph).

 

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Approved DIP Budget and Permitted Variance

On or before the Petition Date, the Debtors shall have furnished to the DIP
Agent a thirteen week rolling operating budget and cash flow forecast, in form
and substance reasonably acceptable to the DIP Agent as directed by the Majority
Lenders (the “Approved DIP Budget”), together with such related information
and/or materials as the DIP Agent and the Majority Lenders may deem reasonably
necessary or desirable in connection therewith.

 

No later than 12:00 p.m. Mountain time on Thursday starting with the fourth
Thursday of the first full four calendar weeks following the Petition Date, and
every four weeks thereafter (), the Debtors shall propose a rolling DIP budget
(the “Proposed DIP Budget”) to the DIP Agent. The DIP Agent, at the direction of
the Majority Lenders, may approve such Proposed DIP Budget, which will then
become the “Approved DIP Budget” then in effect in the DIP Agent’s and the
Majority Lenders’ reasonable discretion; provided, that (i) if the DIP Agent
does not provide notice of approval or disapproval of the Proposed DIP Budget
within five (5) business days, the DIP Agent and the Majority Lenders will be
deemed to have approved such Proposed DIP Budget and (ii) if the Proposed DIP
Budget is not approved by the DIP Agent at the direction of the Majority
Lenders, the Approved DIP Budget that was last approved by the DIP Agent at the
direction of the Majority Lenders shall continue to be in effect.
Notwithstanding the foregoing, the Debtors may not modify allocations between
tested and non-tested line items within the Approved DIP Budget without the
prior written authorization of the DIP Agent at the direction of the Majority
Lenders.

 

No later than 12:00 p.m. Mountain time on Thursday starting with the Thursday
after the first full two calendar weeks following the Petition Date, and every
four weeks thereafter, the Debtors shall deliver to the DIP Agent a 13 week cash
flow forecast. For the avoidance of doubt, the 13 week cash flow forecast will
not be deemed a Proposed DIP Budget and will not require approval from the DIP
Agent.

 

No later than 12:00 p.m. Mountain time on Thursday of each week starting with
the first full calendar week following the Petition Date, and on a weekly basis
thereafter (each a “Report Date”), the Debtors shall deliver to the DIP Agent a
weekly variance report (the “Variance Report”). The Variance Report shall
measure performance, for all disbursements made in the prior four weeks
(excluding the first three Report Dates which will measure weekly performance)
ending on the previous Friday (the “Test Date”) on a rolling basis against the
amount budgeted therefor in the Approved DIP Budget(s), and shall include
calculations that demonstrate that the Debtors are in compliance with the
Permitted Variance (as defined below). The Debtors shall not be required to test
receipts in the Variance Report.

 

On each Report Date, beginning on the fourth Thursday following the Petition
Date, the Debtors shall demonstrate in each such Variance Report that the actual
disbursements made in the prior four weeks (such period, the “Test Period”),
excluding (i) any fees and expenses of professionals, (ii) any fluctuations in
royalty payments, payments to working interest holders, or similar payments or
ad valorem or other taxes due on account of production of oil and gas interests
that are attributable to changes in commodity prices, (iii) Adequate Protection
payments, and (iv) disbursements in respect of hedge unwinds or terminations,
and interest, fees and expenses related to the Prepetition Credit Agreement and
the DIP Credit Agreement (items (i) through (iv), collectively “Excluded
Items”), do not exceed the sum of the aggregate amount budgeted therefor in the
Approved DIP Budget(s) for the applicable Test Period by more than ten percent
(10%) of the budgeted amount for such Test Period (the “Permitted Variance”) on
a cumulative basis for all disbursements made during such Test Period.
Certification of compliance shall be provided on such Test Date, concurrently
with delivery of each Variance Report.

 

42

 

 

Representations and Warranties The DIP Credit Agreement will contain
representations and warranties that are consistent with those found in the
Prepetition Credit Agreement, subject to modifications to reflect that the DIP
Credit Facility is a debtor-in-possession facility (including, without
limitation, reductions and eliminations of certain carveouts, exceptions and
qualifications), and additional representations and warranties that are
customary for debtor in possession financings of this type and acceptable to the
DIP Lenders and the Debtors. Events of Default

The DIP Credit Agreement will contain events of default consistent with those
found in the Prepetition Credit Agreement, subject to modifications to reflect
that the DIP Credit Facility is a debtor-in-possession facility, and additional
events of default customarily found in loan documents for similar
debtor-in-possession financings including, without limitation, the following:
(i) the failure of the Debtors to satisfy any of the Milestones, (ii) entry of
an order by the Bankruptcy Court dismissing any of the Chapter 11 Cases or
converting such Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy
Code; (iii) entry of an order staying, reversing, vacating or otherwise
modifying the Interim Order or Final Order in a manner adverse to the DIP
Lenders or in a manner inconsistent with the DIP Credit Agreement; (iv) entry of
an order appointing a trustee, receiver or examiner with expanded powers;
(v) entry of an order denying or terminating use of Cash Collateral; (vi) entry
of an order terminating or reducing the exclusivity period; (vii) entry of an
order lifting the automatic stay with respect to assets above $2,500,000;
(viii) entry of an order permitting any claims to be pari passu or senior to the
claims under the DIP Facility (other than claims pursuant to agreed-upon
post-petition hedging arrangements); and (ix) the commencement of any suit or
proceeding by the Debtors or supported by the Debtors, against the DIP Agent or
the DIP Lenders relating to the DIP Facility.

 

An event of default under the DIP Credit Agreement without regard to or
limitation by any notice, waiver, forbearance, or decision by Majority Lenders
shall constitute an event of default (or other term of similar effect or
meaning) under any swap agreement in existence on or prior to the Petition Date
with any DIP Lender or affiliate thereof (or that was a DIP Lender or affiliate
thereof on the date the DIP Credit Agreement was entered into).

 

43

 

 

 

Prepayments

Prior to the Maturity Date, the Borrower may, upon agreed notice periods
(subject to payment of applicable breakage costs), prepay and cash
collateralize, in full or in part, the DIP Loans and DIP Letters of Credit.

 

Prior to the Maturity Date, mandatory prepayments shall be required under
certain standard and customary circumstances to be agreed, including that the
Debtors shall prepay the DIP Loans and cash collateralize the DIP Letters of
Credit (i) in an amount equal to 100% of the net cash proceeds of the sale or
other disposition of any property or assets of the Debtors or any of their
respective subsidiaries or receipt of insurance or condemnation proceeds (except
for ordinary course, exchanges and de minimis sales and additional exceptions to
be agreed on in the DIP Documents), and (ii) in connection with the issuance of
certain equity and post-petition debt.

Voting Except as otherwise provided for herein, voting in respect of amendments,
waivers, and modifications of the terms of the DIP Credit Agreement shall be
consistent with voting found in the Prepetition Credit Agreement, subject to
modifications to reflect that the DIP Credit Facility is a debtor-in-possession
facility. Expenses and Indemnification Expense reimbursement (including, without
limitation, reimbursement of fees and expenses incurred by each of the DIP Agent
and the DIP Lenders) and indemnification provisions consistent with those found
in the Prepetition Credit Agreement, subject to modifications to reflect that
the DIP Credit Facility is a debtor-in-possession facility. Yield Protection The
DIP Documents will contain yield protection provisions consistent with the
Documentation Principles; provided that there shall be no prepayment premium or
penalty. Assignments The DIP Documents will contain assignment provisions
consistent with the Documentation Principles.   Documentation Principles The
documentation for the DIP Credit Facility shall be negotiated in good faith and
shall be substantially consistent with the Prepetition Credit Agreement and the
documents executed in connection therewith, giving due effect to any changes
reflecting the debtor-in-possession nature of the DIP Credit Facility and this
Term Sheet (collectively, the “Documentation Principles”). Governing Law;
Submission to Jurisdiction; Waiver of Jury Trial

State of New York. Exclusive jurisdiction is vested in the Bankruptcy Court,
including with respect to the exercise of Events of Default and remedies by the
DIP Lenders and preservation of the DIP Collateral’s value. Each party expressly
waives the right to trial by jury in any proceeding relating to or arising in
any way from this DIP Term Sheet, any other DIP Document or the transactions
contemplated hereby or thereby, to the extent permitted by applicable law.

 

In the event the Bankruptcy Court lacks jurisdiction, or abstains from
exercising jurisdiction, the United States District Court for the Southern
District of New York and any Appellate Court thereof shall retain exclusive
jurisdiction in any action or proceeding arising out of or relating to this DIP
Term Sheet.

  

44

 

  

Annex 1

 

DIP Milestones

 

“Milestones” means the following milestones relating to the Chapter 11 Cases:

 

(a)            The Petition Date shall occur no later than June 15, 2020;

 

(b)            No later than 3 business days after the Petition Date (or such
later date as the DIP Agent and the Majority Lenders may agree in writing to the
Borrower), the Bankruptcy Court shall have entered the Interim DIP Order, in a
form and substance reasonably satisfactory to the DIP Agent and the Majority
Lenders;

 

(c)            No later than 21 days after the Petition Date (or such later date
as the DIP Agent and the Majority Lenders may agree in writing to the Borrower),
the Debtors shall have filed with the Bankruptcy Court a chapter 11 plan of
reorganization (the “Plan of Reorganization”) and related disclosure statement
(the “Disclosure Statement”) and the motion seeking approval of the solicitation
procedures and the adequacy of the Disclosure Statement (the “Disclosure
Statement Motion”), in each case, in a form and substance reasonably
satisfactory to the DIP Agent and the Majority Lenders;

 

(d)            No later than 30 days after the Petition Date (or such later date
as the DIP Agent and the Majority Lenders may agree in writing to the Borrower),
the Bankruptcy Court shall have entered the Final DIP Order;

 

(e)            No later than 45 days after the Disclosure Statement Motion has
been filed (or such later date as the DIP Agent and the Majority Lenders may
agree in writing to the Borrower), the Bankruptcy Court shall have entered an
order (the “Disclosure Statement Order”) approving the Disclosure Statement in
the Chapter 11 Cases, which remains in full force and effect is not subject to a
stay, in a form and substance reasonably satisfactory to the DIP Agent and the
Majority Lenders;

 

(f)            No later than 5 days after entry of the Disclosure Statement
Order (or such later date as the DIP Agent and the Majority Lenders may agree in
writing to the Borrower), the Debtors shall have commenced solicitation in
accordance with the Disclosure Statement Order and the related solicitation
procedures;

 

(g)            No later than 123 days after the Petition Date (or such later
date as the DIP Agent and the Majority Lenders may agree in writing to the
Borrower), either (i) the Debtors shall obtain entry of an order of the
Bankruptcy Court, with terms and substance acceptable to the DIP Agent acting at
the direction of the Majority Lenders, approving a sale to, or a combination or
merger with, a third party involving all or substantially all of the Debtors’
[restructured equity] or assets (a “Combined Transaction”) or (ii) the
Bankruptcy Court shall have entered an order (the “Confirmation Order”), in each
case, in a form and substance reasonably satisfactory to the DIP Agent and the
Majority Lenders; and

 

(h)            No later than 130 days after the Petition Date (or such later
date as the DIP Agent and the Majority Lenders may agree in writing to the
Borrower), either (i) the Debtors shall have consummated the Combined
Transaction or (ii) the Plan of Reorganization shall have become effective and
Debtors shall have substantially consummated the transactions contemplated by
the Plan of Reorganization and Confirmation Order.

 

45

 

  

Exhibit 1

 

Carve-Out

 

(a)            Carve Out.  As used in this Interim Order, the “Carve Out” means
the sum of (i) all fees required to be paid to the Clerk of the Court and to the
Office of the United States Trustee under section 1930(a) of title 28 of the
United States Code plus interest at the statutory rate (without regard to the
notice set forth in (iii) below); (ii) all reasonable fees and expenses up to
$[50,000] incurred by a trustee under section 726(b) of the Bankruptcy Code
(without regard to the notice set forth in (iii) below); (iii) to the extent
allowed at any time, whether by interim order, procedural order, or otherwise,
all unpaid fees and expenses (the “Allowed Professional Fees”) incurred by
persons or firms retained by the Debtors pursuant to section 327, 328, or 363 of
the Bankruptcy Code (the “Debtor Professionals”) and the Committee  pursuant to
section 328 or 1103 of the Bankruptcy Code (the “Committee Professionals” and,
together with the Debtor Professionals, the “Professional Persons”) at any time
before or on the first business day following delivery by the DIP Agent of a
Carve Out Trigger Notice (as defined below), whether allowed by the Court prior
to or after delivery of a Carve Out Trigger Notice; and (iv) Allowed
Professional Fees of Professional Persons in an aggregate amount not to exceed
$1,000,000 incurred after the first business day following delivery by the DIP
Agent of the Carve Out Trigger Notice, to the extent allowed at any time,
whether by interim order, procedural order, or otherwise (the amounts set forth
in this clause (iv) being the “Post-Carve Out Trigger Notice Cap”).  For
purposes of the foregoing, “Carve Out Trigger Notice” shall mean a written
notice delivered by email (or other electronic means) by the DIP Agent to the
Debtors, their lead restructuring counsel, the U.S. Trustee, counsel to the Ad
Hoc Noteholder Group, and counsel to the Committee, which notice may be
delivered following the occurrence and during the continuation of an Event of
Default (as defined in the DIP Credit Agreement) and acceleration of the DIP
Obligations under the DIP Facility, stating that the Post-Carve Out Trigger
Notice Cap has been invoked.

 

46

 

 

(b)            Carve Out Reserves.  On the day on which a Carve Out Trigger
Notice is given by the DIP Agent to the Debtors with a copy to counsel to the
Committee (the “Termination Declaration Date”), the Carve Out Trigger Notice
shall (i) be deemed a draw request and notice of borrowing by the Debtors for
New DIP Loans under the New Money Commitment (each, as defined in the DIP Credit
Agreement) (on a pro rata basis based on the then outstanding New Money
Commitments), in an amount equal to the then unpaid amounts of the Allowed
Professional Fees (any such amounts actually advanced shall constitute New Money
Loans) and (ii) also constitute a demand to the Debtors to utilize all cash on
hand as of such date and any available cash thereafter held by any Debtor to
fund a reserve in an amount equal to the then unpaid amounts of the Allowed
Professional Fees.  The Debtors shall deposit and hold such amounts in a
segregated account at the DIP Agent in trust to pay such then unpaid Allowed
Professional Fees (the “Pre-Carve Out Trigger Notice Reserve”) prior to any and
all other claims.  On the Termination Declaration Date, the Carve Out Trigger
Notice shall also (i) be deemed a request by the Debtors for New Money Loans
under the New Money Commitment (on a pro rata basis based on the then
outstanding New Money Commitments), in an amount equal to the Post-Carve Out
Trigger Notice Cap (any such amounts actually advanced shall constitute New
Money Loans) and (ii) constitute a demand to the Debtors to utilize all cash on
hand as of such date and any available cash thereafter held by any Debtor, after
funding the Pre-Carve Out Trigger Notice Reserve, to fund a reserve in an amount
equal to the Post-Carve Out Trigger Notice Cap.  The Debtors shall deposit and
hold such amounts in a segregated account at the DIP Agent in trust to pay such
Allowed Professional Fees benefiting from the Post-Carve Out Trigger Notice Cap
(the “Post-Carve Out Trigger Notice Reserve” and, together with the Pre-Carve
Out Trigger Notice Reserve, the “Carve Out Reserves”) prior to any and all other
claims.  On the first business day after the DIP Agent gives such notice to such
Lenders (as defined in the DIP Credit Agreement), notwithstanding anything in
the DIP Credit Agreement to the contrary, including with respect to the
existence of a Default (as defined in the DIP Credit Agreement) or Event of
Default, the failure of the Debtors to satisfy any or all of the conditions
precedent for New Money Loans under the DIP Facility Documents, any termination
of the New Money Commitments following an Event of Default, or the occurrence of
the Maturity Date, each Lender with an outstanding New Money Commitments (on a
pro rata basis based on the then outstanding New Money Commitments) shall make
available to the DIP Agent such Lender’s pro rata share with respect to such
borrowing in accordance with the DIP Facility Documents.  All funds in the
Pre-Carve Out Trigger Notice Reserve shall be used first to pay the obligations
set forth in clauses (i) through (iii) of the definition of Carve Out set forth
above (the “Pre-Carve Out Amounts”), but not, for the avoidance of doubt, the
Post-Carve Out Trigger Notice Cap, until paid in full, and then, to the extent
the Pre-Carve Out Trigger Notice Reserve has not been reduced to zero, to pay
the DIP Agent for the benefit of the DIP Lenders, unless the DIP Obligations
have been indefeasibly paid in full, in cash, and all New Money Commitments have
been terminated, in which case any such excess shall be paid to the Prepetition
Secured Parties in accordance with their rights and priorities as of the
Petition Date.  All funds in the Post-Carve Out Trigger Notice Reserve shall be
used first to pay the obligations set forth in clause (iv) of the definition of
Carve Out set forth above (the “Post-Carve Out Amounts”), and then, to the
extent the Post-Carve Out Trigger Notice Reserve has not been reduced to zero,
to pay the DIP Agent for the benefit of the DIP Lenders, unless the DIP
Obligations have been indefeasibly paid in full, in cash, and all New Money Loan
Commitments have been terminated, in which case any such excess shall be paid to
the Prepetition Secured Parties in accordance with their rights and priorities
as of the Petition Date.  Notwithstanding anything to the contrary in the DIP
Facility Documents, or this Interim Order, if either of the Carve Out Reserves
is not funded in full in the amounts set forth in this paragraph [5(b)], then,
any excess funds in one of the Carve Out Reserves following the payment of the
Pre-Carve Out Amounts and Post-Carve Out Amounts, respectively, shall be used to
fund the other Carve Out Reserve, up to the applicable amount set forth in this
paragraph [5(b)], prior to making any payments to the DIP Agent or the
Prepetition Secured Parties, as applicable.  Notwithstanding anything to the
contrary in the DIP Facility Documents or this Interim Order, following delivery
of a Carve Out Trigger Notice, the DIP Agent and the Prepetition Agent shall not
sweep or foreclose on cash (including cash received as a result of the sale or
other disposition of any assets) of the Debtors until the Carve Out Reserves
have been fully funded, but shall have a security interest in any residual
interest in the Carve Out Reserves, with any excess paid to the DIP Agent for
application in accordance with the DIP Facility Documents.  Further,
notwithstanding anything to the contrary in this Interim Order,
(i) disbursements by the Debtors from the Carve Out Reserves shall not
constitute New Money Loans or increase or reduce the DIP Obligations, (ii) the
failure of the Carve Out Reserves to satisfy in full the Allowed Professional
Fees shall not affect the priority of the Carve Out, and (iii) in no way shall
the Approved Budget, Budget, Carve Out, Post-Carve Out Trigger Notice Cap, Carve
Out Reserves, or any of the foregoing be construed as a cap or limitation on the
amount of the Allowed Professional Fees due and payable by the Debtors.  For the
avoidance of doubt and notwithstanding anything to the contrary in this Interim
Order, the DIP Facility, or in the Prepetition Facility, the Carve Out shall be
senior to all liens and claims securing the DIP Facility, the Adequate
Protection Liens, and the 507(b) Claim, and any and all other forms of adequate
protection, liens, or claims securing the DIP Obligations or the Prepetition
Secured Obligations.

 

47

 

  

(c)            No fees shall be paid pursuant to this Interim Order from the
Carve-Out Reserves to any professional retained in these cases pursuant to
section 327, section 328, or section 1103 of the Bankruptcy Code (a “Retained
Professional”) absent (i) compliance with any order entered by the Court
regarding interim compensation procedures governing payment of such Retained
Professional and, if applicable, (ii) a Court order approving payment of the
such fees upon the filing, on notice, of a fee application of such Retained
Professional. For the avoidance of doubt, the foregoing shall not apply to those
professionals that are subject to any order entered by the Court concerning
ordinary course professionals (an “OCP Order”), with respect to which no fees
shall be paid to such ordinary course professionals except in compliance with
the procedures set forth in such OCP Order.

 

(d)            Payment of Allowed Professional Fees Prior to the Termination
Declaration Date.  Any payment or reimbursement made prior to the occurrence of
the Termination Declaration Date in respect of any Allowed Professional Fees
shall not reduce the Carve Out.

 

(e)            No Direct Obligation To Pay Allowed Professional Fees.  None of
the DIP Agent, DIP Lenders, or the Prepetition Secured Parties shall be
responsible for the payment or reimbursement of any fees or disbursements of any
Professional Person incurred in connection with the Chapter 11 Cases or any
successor cases under any chapter of the Bankruptcy Code.  Nothing in this
Interim Order or otherwise shall be construed to obligate the DIP Agent, the DIP
Lenders, or the Prepetition Secured Parties, in any way, to pay compensation to,
or to reimburse expenses of, any Professional Person or to guarantee that the
Debtors have sufficient funds to pay such compensation or reimbursement.

 

 

 

(a)            Payment of Carve Out On or After the Termination Declaration
Date.  Any payment or reimbursement made on or after the occurrence of the
Termination Declaration Date in respect of any Allowed Professional Fees shall
permanently reduce the Carve Out on a dollar-for-dollar basis.  Any funding of
the Carve Out shall be added to, and made a part of, the DIP Obligations secured
by the DIP Collateral and shall be otherwise entitled to the protections granted
under this Interim Order, the DIP Facility Documents, the Bankruptcy Code, and
applicable law.

 

 

 

EXHIBIT C

 

Provision for Transfer Agreement

 

The undersigned (“Transferee”) hereby acknowledges that it has read and
understands the Restructuring Support Agreement, dated as of __________ (the
“Agreement”),1 by and among Extraction Oil & Gas, Inc. and its affiliates and
subsidiaries bound thereto and the Consenting Senior Noteholder, including the
transferor to the Transferee of any Company Claims (each such transferor, a
“Transferor”), and agrees to be bound by the terms and conditions thereof to the
extent the Transferor was thereby bound, and shall be deemed a “Consenting
Senior Noteholder,” and a “Party” under the terms of the Agreement.

 

The Transferee specifically agrees to be bound by the terms and conditions of
the Agreement and makes all representations and warranties contained therein as
of the date of the Transfer, including the agreement to be bound by the vote of
the Transferor if such vote was cast before the effectiveness of the Transfer
discussed herein.

 

Date Executed:

 

    Name:   Title:   Address:   E-mail address(es):  

 

Aggregate Amounts Beneficially Owned or Managed on Account of: 2024 Senior Notes
  2026 Senior Notes   Revolving Loans   Existing Preferred Interests   Existing
Common Interests  

 

 

1       Capitalized terms used but not otherwise defined herein shall having the
meaning ascribed to such terms in the Agreement.

 

 

 

EXHIBIT D

 

Form of Joinder

 

The undersigned (“Joinder Party”) hereby acknowledges that it has read and
understands the Plan Support Agreement, dated as of __________ (the
“Agreement”),1 by and among Extraction Oil & Gas, Inc. and its affiliates bound
thereto and the Consenting Senior Noteholder and agrees to be bound by the terms
and conditions thereof to the extent the other Parties are thereby bound, and
shall be deemed a “Consenting Senior Noteholder,” and a “Party” under the terms
of the Agreement.

 

The Joinder Party specifically agrees to be bound by the terms and conditions of
the Agreement and makes all representations and warranties contained therein as
of the date of this Joinder and any further date specified in the Agreement.

 

Date Executed:

 

    Name:   Title:   Address:   E-mail address(es):  

 

Aggregate Amounts Beneficially Owned or Managed on Account of: 2024 Senior Notes
  2026 Senior Notes   Revolving Loans   Existing Preferred Interests   Existing
Common Interests  

 

 

1        Capitalized terms used but not otherwise defined herein shall having
the meaning ascribed to such terms in the Agreement.