Exhibit 10.1

EXECUTION VERSION

THIS RESTRUCTURING SUPPORT AND LOCK-UP AGREEMENT IS NOT AN OFFER 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 AND LOCK-UP
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 AND LOCK-UP AGREEMENT

This RESTRUCTURING SUPPORT AND LOCK-UP AGREEMENT (including all exhibits and
schedules attached hereto and incorporated herein, this “Agreement”) is made and
entered into as of July 8, 2016, by and among the following parties:

 

  i. C&J Energy Services, Ltd. (“C&J Energy”), a publicly-traded company
organized under the laws of Bermuda and its direct and indirect subsidiaries
that are parties to the Credit Agreement (as defined below) (collectively, the
“Company” or the “Company Parties” and such Company Parties (including, without
limitation, C&J Energy) that file Chapter 11 Cases (as defined below) as set
forth in Exhibit A hereto, collectively, the “Debtors”); and

 

  ii. those certain lenders of Term Loans and/or Revolving Loans1 (the
“Lenders”) under that certain Credit Agreement, dated as of March 24, 2015, by
and among C&J Energy, CJ Holding Co., CJ Lux Holdings S.a.r.l., the other
guarantors from time to time party thereto, Cortland Capital Market Services
LLC, as successor administrative agent (together with any successor
administrative agent, the “Agent”), and the lenders from time to time party
thereto (as amended and restated by that certain First Amendment to Credit
Agreement dated as of the same date, as the Waiver and Second Amendment to
Credit Agreement, dated as of September 29, 2015 and as the Third Amendment
(Refinancing Amendment) to Credit Agreement dated as of September 29, 2015, and
as further modified pursuant to that certain Temporary Limited Waiver Agreement,
dated as of May 10, 2016, that certain Forbearance Agreement, dated as of
May 31, 2016 and that certain Second Forbearance Agreement, dated as of June 30,
2016 (the “Second Forbearance Agreement”), the “Credit Agreement”), that execute
signature pages hereto (such lenders, other than any Affiliated Lender (as such
term is defined in the Credit Agreement), the “Supporting Creditors” and,
collectively, with (i) the Company Parties and (ii) any transferee that becomes
a Supporting Creditor pursuant to section 4.04(a), the “Parties”).

 

 

1  Capitalized terms used but not otherwise defined herein have the meaning
ascribed to such terms in the term sheet attached hereto as Exhibit A (as the
same may be amended, supplemented, or otherwise modified from time to time, the
“Restructuring Term Sheet”), subject to Section 2 hereof.

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RECITALS

WHEREAS, the Supporting Creditors, the Agent and the Company have engaged in
good faith, arm’s-length negotiations regarding a restructuring transaction (the
“Restructuring”) pursuant to the terms and upon the conditions set forth in this
Agreement;

WHEREAS, the Debtors intend to commence voluntary reorganization 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”), in the United States Bankruptcy
Court for the Southern District of Texas (the “Bankruptcy Court”) to effect the
Restructuring through a prenegotiated chapter 11 plan of reorganization that is
materially consistent with the Restructuring Term Sheet and otherwise in form
and substance acceptable to the Debtors and the Required Supporting Creditors
(the “Plan”);

WHEREAS, certain Supporting Creditors or affiliates of Supporting Creditors (in
their capacities as such, the “DIP Lenders”) have agreed to provide a
debtor-in-possession financing facility in an amount up to $100 million,
pursuant to the terms and conditions set forth in the term sheet attached as
Exhibit A-1 to the Restructuring Term Sheet and otherwise satisfactory to the
DIP Lenders and the Company (the “DIP Facility”);

WHEREAS, certain Supporting Creditors or affiliates of Supporting Creditors (in
such capacity, the “Backstop Parties”2), have agreed, subject to the terms and
conditions of this Agreement and the Restructuring Term Sheet, to backstop a
rights offering for an investment in the Company in an amount of up to $200
million as part of an approved Plan (the “Investment”);

WHEREAS, the Parties have agreed to certain terms with respect to the
organization and governance of the Company Parties following the effective date
of the Plan (the “Plan Effective Date”), as set forth in the Restructuring Term
Sheet;

WHEREAS, the Supporting Creditors intend, as of the time that this Agreement is
first being entered into, that they would credit bid the amount necessary to
defeat other bids, up to the full amount of their principal and accrued and
unpaid interest, in any sale transaction;

WHEREAS, the Company Parties have agreed to take certain actions in support of
the Restructuring on the terms and conditions set forth in this Agreement.

 

 

2  For the avoidance of doubt, as used herein, the terms “Supporting Creditors”
and “Parties” includes the DIP Lenders and the Backstop Parties in their
capacities as such.

 

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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. Agreement Effective Date. This Agreement shall become effective and
binding upon each of the Parties at 12:00 a.m., prevailing Eastern Time, on the
date (such date, the “Agreement Effective Date”) on which: (a)(i) the Company
Parties shall have executed and delivered counterpart signature pages of this
Agreement to counsel to the Supporting Creditors; (ii) the Lenders holding more
than 50% of the aggregate outstanding principal amount of the Total Credit
Exposure (as defined in the Credit Agreement) (determined without regard to any
claims held by a person or entity that is an “insider” as that term is defined
in section 101(31) of the Bankruptcy Code) shall have executed and delivered to
counsel to the Debtors counterpart signature pages of this Agreement, provided,
that Lenders holding more than 60% of the aggregate outstanding principal amount
of the Total Credit Exposure shall have executed signature pages of this
Agreement on or before the Petition Date; (b) the Company Parties have given
notice to counsel to the Supporting Creditors in accordance with Section 10.09
hereof that each of the foregoing conditions set forth in this Section 1, in
each case, has been satisfied, all signature pages held by such Company Parties
as contemplated above shall have been released for attachment to the relevant
agreements, and this Agreement is declared effective as to all Parties; and
(c) the Company Parties shall have paid all fees and expenses invoiced required
to be paid pursuant to the Second Forbearance Agreement and Section 9 hereof. If
the Agreement Effective Date shall not have occurred on or before July 8, 2016,
all signature pages referred to in Section 1 shall be returned to the Party
providing the same and this Agreement, and all documents to which such signature
pages apply, shall have no force or effect.3

Section 2. Exhibits Incorporated by Reference. Each of the exhibits attached
hereto is expressly incorporated herein and made a part of this Agreement, and
all references to this Agreement shall include such exhibits. In the event of
any inconsistency between this Agreement (without reference to the exhibits) and
the exhibits, this Agreement (without reference to the exhibits) shall govern.

Section 3. Definitive Documentation. The definitive documents and agreements
governing the Restructuring (collectively, the “Definitive Documentation”) shall
consist of: (a) the Plan (and all exhibits thereto); (b) the Confirmation Order
and pleadings in support of entry of the Confirmation Order; (c) the Disclosure
Statement and the other solicitation materials in respect of the Plan (such
materials, collectively, the “Solicitation Materials”); (d) the order of the
Bankruptcy Court approving the Disclosure Statement and the Solicitation
Materials; (e) the documentation in respect of the DIP Facility (including the
DIP Agreement and related motions and orders, the “DIP Documents”), which shall
in all instances be acceptable to the Required Supporting Creditors;
(f) customary “first day” and “second day” motions and proposed orders (the
“First Day and Second Day Pleadings”); and (g) all other documents that will
comprise the Plan Supplement. The Definitive Documentation remains subject to
negotiation and completion and shall, upon completion, contain terms,
conditions, representations, warranties, and covenants consistent with the terms
of this Agreement, and shall be subject to any consent rights set forth in this
Agreement and otherwise be in form and substance acceptable to the

 

3 

For the avoidance of doubt, the obligations and rights of the Supporting
Creditors described in this Agreement shall apply to any claims or interests
acquired by such Supporting Creditors.

 

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Debtors and reasonably acceptable to the Required Supporting Creditors.
Notwithstanding the foregoing, the Plan, the Confirmation Order, the Disclosure
Statement, the DIP Documents, and the documents comprising the Plan Supplement
shall be in form and substance acceptable to the Required Supporting Creditors.
As used herein, the term “Required Supporting Creditors” means, at any relevant
time, the Supporting Creditors holding greater than 50.0% of the outstanding
principal amount of Loans held by Supporting Creditors.

Section 4. Commitments Regarding the Restructuring.

4.01. Commitment of the Supporting Creditors.

(a) During the period beginning on the Agreement Effective Date and ending on a
Termination Date (as defined in Section 7.05) (such period, the “Effective
Period”), each Supporting Creditor shall (severally and not jointly), in each of
its capacities as a holder of Debtor Claims/Interests (as defined below):

(i) use good faith efforts to implement the Restructuring Term Sheet and the DIP
Term Sheet and, in each case, the transactions and other actions contemplated
hereby and thereby;

(ii) support and take all actions necessary or reasonably requested by the
Company Parties to facilitate consummation of the Restructuring, including, to
the extent a class is permitted to vote to accept or reject the Plan and upon
receipt of a disclosure statement that has been approved by the Bankruptcy
Court, vote each of its claims and interests (all claims held against the
Debtors, the “Claims,”4 and collectively with the interests in C&J Energy (the
“C&J Energy Common Shares”), the “Debtor Claim/Interests”) to (A) accept the
Plan by delivering its duly executed and completed ballot(s) accepting the Plan
on a timely basis and (B) not withdraw, amend, or revoke (or cause to be
withdrawn, amended, or revoked) its vote with respect to the Plan, provided,
however, that the votes of the Supporting Creditors shall be immediately revoked
and deemed null and void ab initio upon termination of this Agreement other than
pursuant to Section 7.04 of this Agreement;

(iii) (A) support the confirmation of the Plan and the transaction contemplated
therein and approval of the Disclosure Statement and the Solicitation Materials
and (B) not (1) object to, delay, interfere, impede, or take any other action to
delay, interfere or impede, directly or indirectly, with the Restructuring,
confirmation of the Plan, or approval of the Disclosure Statement or the
Solicitation Materials (including joining in or supporting any efforts to object
to or oppose any of the foregoing) or (2) propose, file, support, or vote for,
directly or indirectly, any restructuring, workout, plan of arrangement,
alternative transaction, including a sale pursuant to section 363 of the
Bankruptcy Code, or chapter 11 plan for the Debtors other than the Restructuring
and the Plan;

(iv) not commence any proceeding to oppose or alter any of the terms of the Plan
or any other document filed by the Debtors in connection with the confirmation
of the Plan (as long as such documents are consistent with the terms and
conditions of this Agreement),

 

 

4 

As reflected on the signature pages hereto.

 

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provided, that nothing in this Agreement shall prevent any Supporting Creditor
from withholding, amending, or revoking its timely consent or vote with respect
to the Plan if this Agreement is terminated with respect to such Supporting
Creditor other than pursuant to Section 7.04 of this Agreement;

(v) support (and not object to) any First Day and Second Day Pleadings
consistent with this Agreement filed by the Debtors in furtherance of the
Restructuring, including any motion seeking approval of the DIP Facility on the
terms set forth in the Restructuring Term Sheet and the DIP Term Sheet;

(vi) not, nor encourage any other person or entity to, take any action,
including initiating or joining in any legal proceeding that is inconsistent
with this Agreement, or delay, impede, appeal, or take any other negative
action, directly or indirectly, that could reasonably be expected to interfere
with the approval, acceptance, confirmation, consummation, or implementation of
the Restructuring or the Plan, as applicable;

(vii) not exercise any right or remedy for the enforcement, collection, or
recovery of any obligation arising under the Credit Agreement against any direct
or indirect subsidiary of C&J Energy that is not a Debtor filing a Chapter 11
Case pursuant to this Agreement and is also not a Loan Party (as defined in the
Credit Agreement);

(viii) not exercise any right or remedy for the enforcement, collection, or
recovery of any obligation arising under the Credit Agreement against any direct
or indirect subsidiary of C&J Energy that is a Loan Party (as defined in the
Credit Agreement) but is not a Debtor filing a Chapter 11 Case pursuant to this
Agreement (a “Non-Debtor Loan Party”) prior to, with respect to any such
Non-Debtor Loan Party, the earliest to occur of the following events:

 

  (A) failure by the Company Parties to comply with Section 4.02(b)(viii) of
this Agreement, following any Company Party’s receipt of notice from the
Required Supporting Creditors of such failure pursuant to Section 10.09 hereof
(with copies of any such notice being contemporaneously provided to the other
Company Parties and Davis Polk);

 

  (B) the acceleration of, or exercise of any remedies with respect to, any
indebtedness or any document, agreement or instrument governing indebtedness of
such Non-Debtor Loan Party in excess of $50,000 (or such other amount to be
negotiated by the Company Parties and the Required Supporting Creditors) other
than the indebtedness memorialized by the Credit Agreement, in each case if not
rescinded within 5 calendar days from the date of such acceleration or exercise
of remedies; or

 

  (C) the adjudication, prosecution or commencement of any proceeding in respect
of any bankruptcy, liquidation, receivership, trusteeship, winding up,
dissolution, reorganization, compromise, arrangement, adjustment, protection,
moratorium, relief, stay of proceedings to creditors, composition of its debts,
or any other similar relief in respect of such Non-Debtor Loan Party;

 

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(ix) use reasonable efforts to execute any document and give any notice, order,
instruction, or direction necessary or reasonably requested by the Debtors that
is consistent with the transactions contemplated by this Agreement and the Plan
to support, facilitate, implement, consummate, or otherwise give effect to the
Restructuring;

(x) use good faith efforts to negotiate, execute and implement the Definitive
Documentation on terms consistent with this Agreement;

(xi) not instruct (or join in any direction requesting that) the Agent or any
agent under related loan documents to take any action, or refrain from taking
any action, that would be inconsistent with this Agreement, the Plan, or the
Restructuring; and

(xii) not object to or opt out of any release included in the Solicitation
Materials or the Plan, so long as such release is consistent with the
Restructuring Term Sheet.

(b) Nothing contained herein shall limit (i) the rights of any Supporting
Creditor under applicable bankruptcy or insolvency law, or in any foreclosure or
similar proceeding, including appearing as a party in interest in any matter to
be adjudicated in the Chapter 11 Cases, so long as the exercise of any such
right is consistent with such Supporting Creditor’s obligations hereunder;
(ii) subject to the terms of Section 4.04 hereof, the ability of any Supporting
Creditor to purchase, sell or enter into any transactions in connection with its
Claims, subject to the terms hereof; (iii) subject to the terms of
Section 4.01(a) hereof, any right of a Supporting Creditor under (x) the Credit
Agreement or (y) any other applicable agreement, instrument or document that
gives rise to any Claim or Interest of such Supporting Creditor, nor shall
anything contained herein be deemed constitute a waiver or amendment of any
provision of any such agreement described in the foregoing clauses (x) and (y);
(iv) the ability of any Supporting Creditor to consult with other Lenders or the
Company; or (v) the ability of any Supporting Creditor to enforce any right,
remedy, condition, consent or approval requirement under this Agreement or any
of the Definitive Documentation.

4.02. Commitment of the Company Parties.

(a) During the Effective Period, the Company Parties agree to:

(i) pursue the Restructuring on the terms set forth in this Agreement and the
Restructuring Term Sheet and not sign any agreement to pursue any auction, sale
process or other restructuring transaction for the Company or substantially all
of its assets;

(ii) use good faith efforts to implement the Restructuring Term Sheet and the
DIP Term Sheet and, in each case, the transactions and other actions
contemplated hereby and thereby;

(iii) (A) support and complete the Restructuring and all transactions set forth
in this Agreement; (B) negotiate in good faith all Definitive Documentation that
is subject to negotiation as of the Agreement Effective Date; (C) execute and
deliver any other required

 

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agreements to effectuate and consummate the Restructuring; (D) make commercially
reasonable efforts to obtain required regulatory and/or third-party approvals
for the Restructuring; (E) complete the Restructuring in a timely and
expeditious manner, and as otherwise required by this Agreement and the
Definitive Documentation; (F) operate their business, including, subject to the
Interim DIP Order and the Final DIP Order, any asset sales that are in process
but do not close prior to the commencement of the Chapter 11 Cases, in the
ordinary course, taking into account the Restructuring; (G) not undertake any
actions materially inconsistent with the Restructuring or the adoption and
implementation of the Plan and confirmation thereof; and (H) use commercially
reasonable efforts to obtain Bankruptcy Court approval of the releases set forth
in the Plan;

(iv) not object to, delay, impede or take any other action that is materially
inconsistent with, or is intended or is likely to interfere with, acceptance or
implementation of the Restructuring;

(v) not seek to amend or modify, or file a pleading seeking authority to amend
or modify, the Definitive Documentation or any other document related to the
Credit Facility, the DIP Facility or the Restructuring in a manner that is
materially inconsistent with this Agreement; and

(vi) not file any pleading materially inconsistent with the Restructuring or the
terms of this Agreement.

(b) During the Effective Period, the Company Parties or the Debtors, as
applicable, also agree to the following affirmative covenants:

(i) The Debtors shall provide counsel for the Supporting Creditors at least two
(2) calendar days (or such shorter prior review period as necessary in light of
exigent circumstances) prior to the date when the Debtors intend to file such
document draft copies of all material motions and proposed orders intended to be
filed with the Bankruptcy Court, including all First Day and Second Day
Pleadings, and shall consult in good faith with such counsel regarding the form
and substance of all such material proposed filings with the Bankruptcy Court.
Counsel to the Supporting Creditors shall provide all comments to such motions
by no later than one (1) calendar day (or within such time period as is
reasonably practicable in light of the time at which such motions were provided
to counsel for prior review) prior to the date when the Debtors intend to file
with the Bankruptcy Court such motions, and Debtors’ counsel shall consult in
good faith with such counsel regarding any comments so provided if Debtors’
counsel shall not be in agreement with such comments; provided that the consent
requirements set forth in Section 3 hereof shall apply with respect to all First
Day and Second Day Pleadings and any other motions, declarations, proposed
orders or other filings with the Bankruptcy Court that constitute Definitive
Documentation;

(ii) the Chapter 11 Cases shall be commenced on or before July 17, 2016
(the “Petition Date”), subject to extension with the consent of the Required
Supporting Creditors;

 

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(iii) the Debtors shall timely file a formal objection to any unresolved motion
filed with the Bankruptcy Court by a third party seeking the entry of an order
(A) directing the appointment of an examiner with expanded powers to operate the
Debtors’ businesses pursuant to section 1104 of the Bankruptcy Code or a
trustee, (B) converting the Chapter 11 Cases to cases under chapter 7 of the
Bankruptcy Code, (C) dismissing the Chapter 11 Cases, or (D) modifying or
terminating the Debtors’ exclusive right to file and/or solicit acceptances of a
plan of reorganization under section 1121 of the Bankruptcy Code;

(iv) the Debtors shall timely file a formal written response in opposition to
(or otherwise address in a manner reasonably acceptable to the Required
Supporting Creditors) any objection filed with the Bankruptcy Court by any
Person with respect to entry of the Interim DIP Order or the Final DIP Order or
with respect to any adequate protection proposed to be granted or granted to the
Supporting Creditors pursuant to any of the Cash Collateral Orders;

(v) the Debtors shall promptly notify the Supporting Creditors in writing of any
governmental or third-party complaints, litigations, investigations, or hearings
(or communications indicating that the same may be contemplated or threatened);
and

(vi) the Debtors shall promptly notify the Supporting Creditors of any uncured
breach by the Company in respect of any of the obligations, representations,
warranties or covenants set forth in this Agreement by furnishing written notice
to the Supporting Creditors pursuant to Section 10.09 hereof within three
(3) business days of actual knowledge of such breach;

(vii) the Company Parties shall use commercially reasonable efforts to
(A) timely obtain the release, compromise, settlement and/or discharge of any
obligations of, security interests in, and claims against, each Non-Debtor Loan
Party (including, without limitation, in respect of any indebtedness owing to
any Debtor, any other Non-Debtor Loan Party or other Company Party and any
indebtedness or other obligations under the Credit Agreement) prior to, or
contemporaneously with, the Plan Effective Date and (B) otherwise preserve the
assets (and the value thereof) of each Non-Debtor Loan Party for the benefit of
the Reorganized Debtors, in each case in a manner reasonably satisfactory to the
Required Supporting Creditors; and

(viii) upon the delivery of written notice to the Debtors under Section 10.09 of
the good faith determination by the Required Supporting Creditors that, with
respect to any Non-Debtor Loan Party, the Company Parties are reasonably likely
to be unable to, or have failed to, achieve, the (A) release, compromise,
settlement and/or discharge of obligations, security interests and claims or
(B) preserve the assets and value, in each case as contemplated by the preceding
Section 4.02(b)(vii), then, as soon as reasonably practicable and in any event
within 10 business days, the Company Parties shall (1) commence or cause to be
commenced a chapter 11 case before the Bankruptcy Court and/or any other
bankruptcy, liquidation, winding up, restructuring, reorganization or other
insolvency proceeding in respect of such Non-Debtor Loan Party as shall be
determined to be reasonably necessary or appropriate by the Required Supporting
Creditors and in a manner reasonably acceptable to the Required Supporting
Creditors and (2) conduct (or cause to be conducted) such chapter 11 case or
other insolvency proceeding described in the foregoing clause (1) in a manner
reasonably acceptable to the Required Supporting Creditors.

 

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(c) Notwithstanding anything to the contrary herein, nothing in this Agreement
shall require the board of directors, board of managers, directors, managers, or
officers or any other fiduciary of a Debtor to take any action, or to refrain
from taking any action, with respect to the Restructuring to the extent such
board of directors, board of managers, or such similar governing body
determines, based on advice of counsel, that taking such action, or refraining
from taking such action, as applicable, may be required to comply with
applicable law or its fiduciary obligations under applicable law.

4.03. Transfer of Interests and Securities.

(a) During the Effective Period, (i) no Supporting Creditor shall sell, pledge,
assign, transfer, permit the participation in, or otherwise dispose of (each,
a “Transfer”) any ownership in any of the Debtor Claims/Interests, unless the
transferee thereof either (i) is a Supporting Creditor, or (ii) prior to such
Transfer, agrees in writing for the benefit of the other Parties to be bound by
all of the terms of this Agreement with respect to such acquired Debtor
Claim/Interest by executing the joinder in the form attached hereto as Exhibit B
(the “Joinder Agreement”), and delivering an executed copy thereof, within five
(5) business days of closing of such Transfer, to the parties set forth in
Section 10.09 hereof, in which event the transferee shall be deemed to be a
Supporting Creditor under this Agreement with respect to such transferred Debtor
Claims/Interests. Each Supporting Creditor agrees and acknowledges that any
Transfer of Debtor Claims/Interests that does not comply with the terms and
procedures set forth in this Section 4.03 shall be deemed null and void ab
initio.

(b) Notwithstanding anything herein to the contrary, (i) any Supporting Creditor
may Transfer (by purchase, sale, assignment, participation, or otherwise) any
Debtor Claims/Interests to an entity that is acting in its capacity as a
Qualified Marketmaker5 without the requirement that the Qualified Marketmaker be
or become a Supporting Creditor; provided, that the Qualified Marketmaker
subsequently Transfers (by purchase, sale, assignment, participation, or
otherwise) the right, title, or interest in such Debtor Claims/Interests to a
transferee that is or becomes a Supporting Creditor by executing a Joinder
Agreement; and (ii) to the extent a Supporting Creditor, acting in its capacity
as a Qualified Marketmaker, acquires any Debtor Claims/Interests from a holder
of such claim or interest who is not a Supporting Creditor, it may transfer (by
purchase, sale, assignment, participation, or otherwise) such claim or interest
without the requirement that the transferee be or become a Supporting Creditor.
For the avoidance of doubt, if a Qualified Marketmaker acquires a Debtor
Claim/Interest from a Supporting Creditor as an “own account” investment, it
shall not be deemed to be a Qualified Marketmaker for purposes of this Section
4.03(b).

 

 

5  For the purposes of this Section 4.04, a “Qualified Marketmaker” means an
entity that (a) holds itself out to the market as standing ready in the ordinary
course of its business to purchase from customers and sell to customers claims
against and/or interests in (as applicable) the Debtors and their affiliates
(including debt securities or other debt) or enter with customers into long and
short positions in claims against the Debtors and their affiliates (including
debt securities or other debt), in its capacity as a dealer or market maker in
such claims against the Debtors and their affiliates 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).

 

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(c) This Agreement shall in no way be construed to preclude the Supporting
Creditors from acquiring additional Debtor Claims/Interests; provided, however,
that (i) any Supporting Creditor that acquires additional Debtor
Claims/Interests after the Agreement Effective Date shall promptly notify, at
such Supporting Creditor’s election (A) the Debtors and Davis Polk & Wardwell
LLP (“Davis Polk”) of such acquisition including the amount of such acquisition
or (B) Davis Polk of such acquisition including the amount of such acquisition
and cause Davis Polk to notify the Debtors of such acquisition, including the
amount thereof, but not the identity of the Supporting Creditor and (ii) such
acquired Debtor Claims/Interests shall automatically and immediately upon
acquisition by a Supporting Creditor be deemed subject to the terms of this
Agreement (regardless of when or whether notice of such acquisition is given to
the Debtors).

(d) To the extent the Debtors and another Party have entered into a separate
confidentiality agreement with respect to the issuance of a “cleansing letter”
or other public disclosure of information in connection with any proposed
Restructuring (each such executed agreement, a “Confidentiality Agreement”), the
terms of such Confidentiality Agreement shall continue to apply and remain in
full force and effect according to its terms.

4.04. Representations and Warranties of Supporting Creditors. Each Supporting
Creditor, severally, and not jointly, represents and warrants to all Parties
that:

(a) it is the beneficial owner of the face amount or unit amount, as applicable,
of the Debtor Claims/Interests, or is the nominee, investment manager, or
advisor for beneficial holders of the Debtor Claims/Interests, as reflected,
subject to Section 10.13 of this Agreement, in such Supporting Creditor’s
signature block to this Agreement (each such signature block, a “Supporting
Creditor Signature Block”), which amount each Party understands and acknowledges
is proprietary and confidential to such Supporting Creditor (such Debtor
Claims/Interests, the “Owned Debtor Claims/Interests”);

(b) it has the full power and authority to act on behalf of, vote and consent to
matters concerning the Owned Debtor Claims/Interests (or direct such action,
vote, or consent);

(c) the Owned Debtor Claims/Interests 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 adversely affect in any way such Supporting
Creditor’s ability to perform any of its obligations under this Agreement at the
time such obligations are required to be performed;

(d) (i) it is either (A) a qualified institutional buyer as defined in Rule 144A
of the Securities Act or (B) an institutional accredited investor (as defined in
Rule 501(a)(1), (2), (3), or (7) under the Securities Act of 1933, as amended
(the “Securities Act’) (C) a Regulation S non-U.S. person or (D) the foreign
equivalent of (A) or (B) above, and (ii) any securities of the Company acquired
by the applicable Supporting Creditor in connection with the Restructuring will
have been acquired for investment and not with a view to distribution or resale
in violation of the Securities Act;

 

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(e) as of the date hereof, it has no actual knowledge of any event that, due to
any fiduciary or similar duty to any other person or entity, would prevent it
from taking any action required of it under this Agreement; and

(f) the execution, delivery, and performance of this Agreement does not and
shall not: (a) violate any provision of law, rules, or regulations applicable to
it or any of its subsidiaries in any material respect; (b) violate its
certificate of incorporation, bylaws, or other organizational documents or those
of any of its subsidiaries; or (c) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
contractual obligation to which it is a party, which conflict, breach, or
default, would have a material adverse effect on the Restructuring.

Section 5. Mutual Representations, Warranties, and Covenants. Each of the
Parties, severally and not jointly represents, warrants, and covenants to each
other Party:

5.01. Enforceability. 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.

5.02. No Consent or Approval. Except as expressly provided in this Agreement,
the Plan, the Restructuring Term Sheet, or the Bankruptcy Code, no consent or
approval is required by any other person or entity in order for it to effectuate
the Restructuring contemplated by, and perform the respective obligations under,
this Agreement.

5.03. Power and Authority. Except as expressly provided in this Agreement, it
has all requisite corporate or other power and authority to enter into, execute,
and deliver this Agreement and to effectuate the Restructuring contemplated by,
and perform its respective obligations under, this Agreement.

5.04. Governmental Consents. Except as expressly set forth herein and with
respect to the Company Parties’ performance of this Agreement (and subject to
necessary Bankruptcy Court approval and/or regulatory approvals associated with
the Restructuring), the execution, delivery and performance by it of this
Agreement does not, and shall not, require any registration or filing with
consent or approval of, or notice to, or other action to, with or by, any
federal, state, or other governmental authority or regulatory body.

Section 6. 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 and provisions of the Bankruptcy Code. The
Debtors will not solicit acceptances of the Plan from Supporting Creditors in
any manner inconsistent with the Bankruptcy Code or applicable bankruptcy law.

 

11

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Section 7. Termination Events.

7.01. Supporting Creditor Termination Events.

(a) This Agreement may be terminated as between the Supporting Creditors and the
other Parties by the delivery to the Company Parties, and counsel to the other
Supporting Creditors, of a written notice in accordance with Section 10.09
hereof by the Required Supporting Creditors, upon the occurrence and
continuation of any of the following events:

(i) the breach by any Party other than the Supporting Creditors seeking such
termination of any of the representations, warranties, or covenants of such
breaching Party as set forth in this Agreement that would have a material
adverse effect on the Restructuring or the recovery of such Supporting Creditors
as contemplated by this Agreement, and which breach remains uncured for a period
of five (5) business days following such breaching Party’s receipt of notice
pursuant to Section 10.09 hereof (with copies of any such notice being
contemporaneously provided to the other Company Parties and Davis Polk);

(ii) the issuance by any governmental authority, including any regulatory
authority or court of competent jurisdiction, of any injunction, judgment,
decree, charge, ruling, or order enjoining, the consummation of a material
portion of the Restructuring, or materially adversely affecting the recovery of
the Supporting Creditors contemplated by this Agreement; provided, however, that
the Company Parties shall have 15 business days after issuance of such
injunction, judgment, decree, charge, ruling, or order to obtain relief that
would allow consummation of the Restructuring that (i) does not prevent or
diminish in a material way compliance with the terms of this Agreement or
(ii) is otherwise reasonably acceptable to the Required Supporting Creditors;

(iii) an examiner (with expanded powers beyond those set forth in section
1106(a)(3) and (4) of the Bankruptcy Code), or a trustee or receiver shall have
been appointed in one or more of the Chapter 11 Cases;

(iv) any Party other than the Supporting Creditors seeking to terminate this
Agreement pursuant to Section 7.01 files any motion or pleading with the
Bankruptcy Court that is materially inconsistent with this Agreement and such
motion or pleading has not been withdrawn or is not otherwise denied by the
Bankruptcy Court within 20 days of receipt of notice by such Party that such
motion or pleading is inconsistent with this Agreement;

(v) the entry of a ruling or order by the Bankruptcy Court that would prevent
consummation of the Restructuring; provided, however, that the Debtors shall
have sought a stay of such relief within 5 business days after the date of such
issuance and shall have 10 business days after issuance of such ruling or order
to obtain relief that (i) does not prevent or diminish in a material way
compliance with the terms of this Agreement or (ii) is otherwise reasonably
acceptable to the Required Supporting Creditors;

(vi) the conversion or dismissal of the Chapter 11 Cases, unless such conversion
or dismissal, as applicable, is made with the prior written consent of counsel
to the Required Supporting Creditors;

 

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(vii) any of the Definitive Documentation shall have been modified in a manner
materially adverse to the Supporting Creditors, without the prior written
consent of the Required Supporting Creditors;

(viii) the occurrence of any Event of Default (as defined in the DIP Agreement)
that is not timely waived pursuant to the terms thereof.

(ix) the termination of forbearance with respect to any Non-Debtor Loan Party
pursuant to Section 4.01(viii) of this Agreement; provided that the conditions
leading to such termination remain unremedied for a period of five (5) business
days following such termination;

(x) the failure of any Company Party to comply with Section 4.02(b)(viii) of
this Agreement; provided that such failure remains uncured for a period of five
(5) business days;

(xi) the Bankruptcy Court grants relief terminating, annulling, or modifying the
automatic stay (as set forth in section 362 of the Bankruptcy Code) that would
have a material adverse effect on the Restructuring, without the written consent
of the Required Supporting Creditors;

(xii) the Chapter 11 Cases are not commenced before the Bankruptcy Court by the
date set forth in Section 4.03(b)(ii) of this Agreement (including as such date
may be extended therein);

(xiii) the Interim DIP Order has not been entered by the Bankruptcy Court within
7 days of the Petition Date;

(xiv) the Final DIP Order has not been entered by the Bankruptcy Court within 40
days of entry of the Interim DIP Order;

(xv) the Plan and Disclosure Statement have not been filed with the Bankruptcy
Court within 30 days of the Petition Date;

(xvi) the Disclosure Statement Order has not been entered by the Bankruptcy
Court within 90 days of the Petition Date;

(xvii) the Confirmation Order has not been entered by the Bankruptcy Court
within 130 days of the Petition Date; and

(xviii) the Plan Effective Date has not occurred within 21 days following the
date of entry of the Confirmation Order.

(b) The milestones set forth in sections (xi)–(xvi) may be extended with the
written consent of the Required Supporting Creditors.

7.02. Debtors’ Termination Events. The Debtors may terminate this Agreement as
to all Parties upon five (5) business days’ prior written notice, delivered in
accordance with Section 10.09 hereof, upon the occurrence of any of the
following events: (a) the breach by any

 

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of the Supporting Creditors of any material provision set forth in this
Agreement that remains uncured for a period of ten (10 ) business days after the
receipt by the Supporting Creditors of notice of such breach; (b) the board of
directors, board of managers, or such similar governing body of any Debtor
determines based on advice of counsel that proceeding with any of the
Restructuring would be inconsistent with the exercise of its fiduciary duties;
or (c) the issuance by any governmental authority, including any regulatory
authority or court of competent jurisdiction, of any final, non-appealable
ruling or order enjoining the consummation of a material portion of the
Restructuring; provided, that, for the avoidance of doubt, a ruling by the
Bankruptcy Court that the Plan is not confirmable as a result of terms included
therein and contemplated by one or more provisions of the Restructuring Term
Sheet shall not, by itself, constitute a termination event pursuant to this
Section 7.02(c).

7.03. Mutual Termination. This Agreement, and the obligations of all Parties
hereunder, may be terminated by mutual agreement among all of the following:
(a) the Required Supporting Creditors and (b) each of the Company Parties.

7.04. Termination Upon Completion of the Restructuring. This Agreement shall
terminate automatically without any further required action or notice on the
Plan Effective Date.

7.05. Effect of Termination.

(a) No Party may terminate this Agreement if such Party failed to perform or
comply in all material respects with the terms and conditions of this Agreement,
with such failure to perform or comply causing, or resulting in, the occurrence
of one or more termination events specified herein. The date on which
termination of this Agreement as to a Party is effective in accordance with
Sections 7.01, 7.02, 7.03, or 7.04, shall be referred to as a “Termination
Date.”

(b) Except as set forth below, upon the occurrence of a Termination Date as to a
Party, this Agreement shall be of no further force and effect 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 or otherwise, that it would have been entitled to take had it
not entered into this Agreement. Upon the occurrence of a Termination Date, 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 and this Agreement or
otherwise.

(c) Notwithstanding anything to the contrary in this Agreement, the foregoing
shall not be construed to prohibit the Debtors or any of the Supporting
Creditors from contesting whether any such termination is in accordance with the
terms of, 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 Debtor or the ability of any Debtor to
protect and preserve its rights (including rights under this Agreement),
remedies, and interests, including its claims against any Supporting Creditor,
and (b) any right of any Supporting Creditor, or the ability of any Supporting
Creditor to protect and preserve its rights (including rights under this
Agreement), remedies, and interests, including its claims against any Debtor or
Supporting Creditor.

 

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Section 8. Amendments. This Agreement, including the Restructuring Term Sheet
and the DIP Term Sheet, may not be modified, amended, or supplemented without
prior written consent of the Company Parties and Required Supporting Creditors
and, with respect to the DIP Term Sheet, DIP Lenders holding a majority in
amount of the aggregate loans and commitments under the DIP Facility.

Section 9. Fees and Expenses. So long as this Agreement has not been terminated,
the Company Parties hereby agree to pay in cash, in full, in accordance with
their respective engagement letters and the terms of the Credit Agreement and
the Second Forbearance Agreement (and in any case within 3 business days), all
invoiced fees and out-of-pocket expenses incurred by the Supporting Creditors,
including all invoiced fees and out-of-pocket expenses of (a) Davis Polk,
(b) FTI Consulting, Inc., (c) Moelis & Company LLC, (d) local counsel in
Houston, Texas, (e) one local counsel in each jurisdiction in which any Company
Party or any subsidiary thereof is located and (f) one additional counsel that
may be retained by the Agent to represent it in its own capacity, in each case
incurred prior to the earlier of the Plan Effective Date and the termination of
this Agreement; provided, following the Petition Date, payment of fees and
expenses pursuant to this Section 9 shall be subject to the terms of the Interim
DIP Order and the Final DIP Order, as applicable. The Company Parties hereby
acknowledge and agree that the fees and expenses incurred by the Supporting
Creditors prior to the termination of this Agreement are of the type that should
be entitled to treatment as administrative expense claims pursuant to sections
503(b) and 507(a)(2) of the Bankruptcy Code.

Section 10. Miscellaneous.

10.01. Further Assurances. Subject to the other terms of this Agreement, the
Parties agree 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, as applicable.

10.02. Complete Agreement. 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.

10.03. Headings. The headings of all sections of this Agreement are inserted
solely for the convenience of reference and are not a part of and are not
intended to govern, limit, or aid in the construction or interpretation of any
term or provision hereof.

10.04. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM. THIS
AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS 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

 

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the extent possible, in either the United States District Court for the Southern
District of New York or any New York State court located in New York County (the
“Chosen Courts”), and solely in connection with claims arising under this
Agreement: (a) irrevocably submits to the exclusive jurisdiction of the Chosen
Courts; (b) waives any objection to laying venue in any such action or
proceeding in the Chosen Courts; and (c) waives any objection that the Chosen
Courts are an inconvenient forum or do not have jurisdiction over any Party
hereto; provided, however, that if the Debtors commence the Chapter 11 Cases,
then the Bankruptcy Court (or court of proper appellate jurisdiction) shall be
the exclusive jurisdiction, rather than any Chosen Court.

10.05. 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.

10.06. 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. 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.

10.07. Interpretation and Rules of Construction. This Agreement is the product
of negotiations among the Parties, 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 Parties were each
represented by counsel during the negotiations and drafting of this Agreement
and continue to be represented by counsel. In addition, this Agreement shall be
interpreted in accordance with section 102 of the Bankruptcy Code.

10.08. Successors and Assigns. 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 the rights or obligations of any Party under this Agreement may
not be assigned, delegated, or transferred to any other person or entity.

10.09. Notices. All notices hereunder shall be deemed given if in writing and
delivered, if sent 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:

C&J Energy Services

3990 Rogerdale Road

Houston, Texas 77042

Attention: General Counsel

E-mail address: Danielle.Hunter@cjes.com

 

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with copies (which alone shall not constitute notice) to:

Kirkland & Ellis LLP

300 North LaSalle

Chicago, Illinois 60654

Attention: Marc Kieselstein, P.C., Chad J. Husnick, and Emily E. Geier

E-mail addresses: marc.kieselstein@kirkland.com, chusnick@kirkland.com, and
emily.geier@kirkland.com

and

Loeb & Loeb LLP

10100 Santa Monica Boulevard

Suite 2200

Los Angeles, California 90067

Attention: Bernard R. Given and Lance Jurich

E-mail addresses: bgiven@loeb.com and ljurich@loeb.com

(b) if to a Supporting Creditor to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention: Timothy Graulich, Damian Schaible, and David Schiff

E-mail addresses: timothy.graulich@davispolk.com, damian.schaible@davispolk.com,
and david.schiff@davispolk.com

or such other address as may have been furnished by a Party to each of the other
Parties by notice given in accordance with the requirements set forth above.

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

10.10. Access. Each Company Party agrees to (a) provide the Agent, the
Supporting Creditors and their representatives with reasonable access to inspect
such Loan Party’s financial records and properties as set forth in Section 6.10
of the Credit Agreement but without the limitations on the frequency of visits
contained therein, provided that such visits shall be during normal business
hours (which access shall include, for the avoidance of doubt, access, upon
reasonable notice during normal business hours, to relevant properties, books,
contracts, commitments, records, directors, officers, personnel, advisors and
representatives of the Company Parties) and (b) promptly provide such customary
financial and other information regarding the Company Parties and their
respective businesses and operations that the Supporting Creditors or their
advisors may reasonably request to the extent that (i) such information is
readily available to a Company Party, (ii) such information does not constitute
trade secrets and (iii) the provision of such information is not prohibited by
law or by the legally binding confidentiality obligations of any Company Party
to a third party (other than another Company Party); provided that the Company
Parties shall use commercially reasonable efforts to obtain the

 

17

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consent of any such third party to provide such information to the Agent, the
Supporting Creditors or their advisors on a confidential basis and use
commercially reasonable efforts to communicate, to the extent permitted, the
applicable information in a way that would not risk waiver of such privilege or
violate the applicable obligation; provided, further, that the Company Parties’
obligations under this Section 10.10 shall be conditioned upon the Agent or
applicable Supporting Creditor or representative agreeing to maintain the
confidentiality of such information in a manner consistent with the requirements
for treatment of confidential information set forth in Section 10.07 of the
Credit Agreement.

10.11. Independent Due Diligence and Decision Making. Each Supporting Creditor
hereby confirms that it is (a) a sophisticated party with respect to the matters
that are the subject of this Agreement, (b) has had the opportunity to be
represented and advised by legal counsel in connection with this Agreement and
acknowledges and agrees that it voluntarily and of its own choice and not under
coercion or duress enters into the Agreement, (c) has adequate information
concerning the matters that are the subject of this Agreement, and (d) has
independently and without reliance upon any other Party hereto, or any of their
affiliates, or any officer, employee, agent or representative thereof, and based
on such information as it has deemed appropriate, made its own analysis and
decision to enter into this Agreement, except that it has relied upon each other
Party’s express representations, warranties, and covenants in this Agreement.

10.12. Waiver. If the Restructuring is not consummated, or if this Agreement is
terminated for any reason, the Parties fully reserve any and all of their
rights.

10.13. Reporting of Debtor Claims/Interests. With respect to Claims related to
the Credit Agreement (“Credit Agreement Claims”), each Supporting Creditor
Signature Block shall disclose only the aggregate principal amount of such
Supporting Creditor’s beneficially owned or managed Total Credit Exposure (as
defined in the Credit Agreement). The Parties agree and acknowledge that the
reported amount of such Credit Agreement Claims does not necessarily reflect the
full amount of such Creditor’s Claims in respect of the Credit Agreement
(including, without limitation, principal, accrued and unpaid interest, fees and
expenses) and any disclosure made on any Supporting Creditor Signature Block
shall be without prejudice to any subsequent assertion by or on behalf of such
Supporting Creditor of the full amount of its Claims.

10.14. Automatic Stay. The Company acknowledges and agrees, and shall not
dispute, that the giving of a termination notice in accordance with Sections 7
and 10.09 hereof by any of the Supporting Creditors shall not be a violation of
the automatic stay under section 362 of the Bankruptcy Code (and the Company
hereby waives, to the greatest extent possible, the applicability of such
automatic stay to the giving of such notice), and the Supporting Creditors are
hereby authorized to take any steps necessary to effectuate the termination of
this Agreement notwithstanding section 362 of the Bankruptcy Code or any other
applicable law, and no cure period contained in this Agreement shall be extended
pursuant to sections 108 or 365 of the Bankruptcy Code or any other applicable
law without the prior written consent of the Required Supporting Creditors.

10.15. Settlement Discussions; No Admission. This Agreement and the Plan are
part of a proposed settlement of matters that could otherwise be the subject of
litigation among the

 

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Parties hereto. Nothing herein shall be deemed an admission of any kind.
Pursuant to Federal Rule of Evidence 408 and any applicable state rules of
evidence, this Agreement and all negotiations relating thereto shall not be
admissible into evidence in any proceeding other than a proceeding to enforce
the terms of this Agreement. This Agreement shall in no event be construed as or
be deemed to be evidence of an admission or concession on the part of any Party
of any claim or fault or liability or damages whatsoever.

10.16. Several, Not Joint, Claims. The agreements, representations, warranties,
and obligations of the Parties under this Agreement are, in all respects,
several and not joint.

10.17. Severability. 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.

10.18. Specific Performance/Remedies. It is understood and agreed by the Parties
that money damages would not be a sufficient remedy for any breach of this
Agreement by any Party and each non-breaching Party shall be entitled to seek
specific performance and injunctive or other equitable relief (including
attorney’s fees and costs) as a remedy for any such breach, in addition to any
other remedy to which such non-breaching Party may be entitled, at law or
equity, without the necessity of proving the inadequacy of money damages as a
remedy, including an order of the Chosen Court or the Bankruptcy Court requiring
any Party to comply promptly with any of its obligations hereunder. Each Party
agrees to waive any requirement for the securing or posting of a bond in
connection with such remedy.

10.19. 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.

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

[Remainder of page intentionally left blank.]

 

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Company Party Signature Page to the Restructuring Support and Lock-Up Agreement

 

C&J ENERGY PRODUCTION SERVICES-CANADA LTD. (formerly Nabors Production Services
Ltd.) C&J ENERGY SERVICES LTD. C&J ENERGY SERVICES, INC. C&J SPEC-RENT SERVICES,
INC. C&J WELL SERVICES, INC. (formerly Nabors Completion & Production Services
Co.) CJ HOLDING CO. By:  

/s/ Danielle Hunter

Name:   Danielle Hunter Title:   Executive Vice President and General Counsel
BLUE RIBBON TECHNOLOGY, INC. C&J VLC, LLC KVS TRANSPORTATION, INC. MOBILE DATA
TECHNOLOGIES LTD. TOTAL E&S, INC. By:  

/s/ Danielle Hunter

Name:   Danielle Hunter Title:   Executive Vice President and General Counsel
ESP COMPLETION TECHNOLOGIES LLC TELLUS OILFIELD INC. TIGER CASED HOLE SERVICES,
INC. By:  

/s/ Danielle Hunter

Name:   Danielle Hunter Title:   Executive Vice President and General Counsel
C&J CORPORATE SERVICES (BERMUDA) LTD. By:  

/s/ Danielle Hunter

Name:   Danielle Hunter Title:   Director

--------------------------------------------------------------------------------

CJ LUX HOLDINGS S.À R.L. PENNY GLOBAL HOLDINGS S.À R.L. PENNY GLOBAL LEASING S.À
R.L. PENNY LUXEMBOURG FINANCING S.À R.L. PENNY TECHNOLOGIES S.À R.L. By:  

/s/ Danielle Hunter

Name:   Danielle Hunter Title:   Type A Manager COPPER IRELAND FINANCING I LTD.
COPPER IRELAND FINANCING II LTD. By:  

/s/ Danielle Hunter

Name:   Danielle Hunter Title:   Director C&J INTERNATIONAL B.V. By:  

/s/ Danielle Hunter

Name:   Danielle Hunter Title:   Managing Director C&J INTERNATIONAL MIDDLE EAST
FZCO By:  

/s/ Authorized Signatory

  Authorized Signatory

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Supporting Creditor Signature Page to

the Restructuring Support and Lock-Up Agreement

 

[                    ], as Lender By:  

 

Name:   Title:  

Address:

Email address(es):

Telephone:

Aggregate Amounts or Units, as Applicable, Beneficially Owned or Managed on
Account of:

 

Credit Agreement Claims (if any)

   $                

C&J Energy Shares (if any)

   $                    $                    $                    $             
      $                

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EXHIBIT A to the Restructuring Support Agreement

Restructuring Term Sheet

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Execution Version

THIS TERM SHEET IS NOT AN OFFER 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 TERM SHEET SHALL BE AN ADMISSION OF FACT OR LIABILITY OR, UNTIL THE
OCCURRENCE OF THE AGREEMENT EFFECTIVE DATE ON THE TERMS DESCRIBED HEREIN AND IN
THE RESTRUCTURING SUPPORT AGREEMENT, DEEMED BINDING ON ANY OF THE PARTIES
HERETO.

RESTRUCTURING TERM SHEET

INTRODUCTION

This term sheet (this “Term Sheet”)1 describes the terms of a restructuring of:
(a) C&J Energy Services, Ltd., a Bermuda exempt company (“C&J Energy”); (b) C&J
Corporate Services (Bermuda) Ltd. (together with C&J Energy, collectively, the
“Bermudian Debtors”); (c) C&J Energy Production Services-Canada Ltd.; (d) Mobile
Data Technologies Ltd. (the entities listed in clauses (c) and (d) collectively,
the “Canadian Debtors”); (e) CJ Holding Co. (“U.S. HoldCo”); and (f) certain of
U.S. HoldCo’s directly and indirectly-owned subsidiaries, including Blue Ribbon
Technology, Inc., C&J Energy Services, Inc., C&J Spec-Rent Services, Inc., C&J
VLC, LLC, C&J Well Services, Inc., ESP Completion Technologies LLC, KVS
Transportation, Inc., Tellus Oilfield Inc., Tiger Cased Hole Services, Inc., and
Total E&S, Inc. (the entities listed in clauses (a) through (f) collectively,
the “Debtors,” and such restructuring, the “Restructuring”).

The Restructuring will be accomplished through: (a) the commencement of cases
(the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code
(the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern
District of Texas (the “Bankruptcy Court”) to implement on a pre-arranged or
prepackaged basis the chapter 11 plan of reorganization described herein and
otherwise in form and substance acceptable to the Debtors and the Required
Supporting Creditors (the “Plan”); (b) the commencement of ancillary proceedings
(the “Canadian Proceedings”) under the Companies’ Creditors Arrangement Act
(Canada) R.S.C. 1985, c. C-36 (as amended, the “CCAA”) in a court of proper
jurisdiction in Alberta, Canada (the “Canadian Court”); and (c) the commencement
of provisional liquidation proceedings (the “Bermudian Proceedings”) under the
Companies Act 1981 (the “Bermuda Act”) in a court of proper jurisdiction in
Bermuda (the “Bermudian Court”).

This Term Sheet is being agreed to in connection with entry by the Debtors,
certain non-Debtor subsidiaries of C&J Energy and the Supporting Creditors into
that certain Restructuring Support Agreement, dated as of July 8, 2016 (as may
be amended, supplemented or modified pursuant to the terms thereof, the “RSA”).
Pursuant to the RSA, the parties thereto have agreed to support the transactions
contemplated therein and herein.

This Term Sheet does not include a description of all of the terms, conditions,
and other provisions that are to be contained in the definitive documentation
governing the Restructuring, which remain subject to negotiation and completion
in accordance with the RSA and applicable bankruptcy law. The Restructuring will
not contain any material terms or conditions that are inconsistent in any
material respect with this Term Sheet or the RSA.

 

 

1  Capitalized terms used but not otherwise defined in this Term Sheet have the
meanings ascribed to such terms as set forth on Exhibit A.

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OVERVIEW OF THE RESTRUCTURING

In general, the Restructuring contemplates that:

 

  (a) The Debtors will implement the Restructuring in the Bankruptcy Court
pursuant to the Plan on the terms set forth in this Term Sheet.

 

  (b) Certain of the Supporting Creditors have agreed to provide a new-money
$100 million debtor-in-possession financing facility (the “DIP Facility”) and
consent to the use of their cash collateral to fund the Chapter 11 Cases and
(i) backstop a $200 million rights offering (the “Rights Offering”). In
addition, to the extent that the Debtors or Reorganized Debtors, as applicable,
the Backstop Parties and the Required Supporting Creditors agree that such a
facility would be in the best interests of the Reorganized Debtors, the Debtors
or the Reorganized Debtors, as applicable, may raise a senior secured revolving
asset-based lending credit facility to be arranged and provided by one or more
commercial lending institutions in a minimum amount of $100 million (the “Exit
Facility”).

 

  (c) All Claims arising under the DIP Facility will be paid in full, in cash on
the Effective Date from cash on hand and proceeds from the Rights Offering and
Exit Facility.

 

  (d) In full and final satisfaction of all Lender Claims, the Lenders will
receive their Pro Rata share of: (i) 100% of the New Common Stock, subject to
dilution on account of the Management Incentive Plan, the Rights Offering, the
Backstop Fee, and the New Warrants; and (ii) 100% of the Subscription Rights
under the Rights Offering.

 

  (e) [TBD: Treatment of General Unsecured Claims.]

 

  (f) Provided that Class 8 votes to accept the Plan, holders of C&J Common
Stock will receive their Pro Rata share of the New Warrants.

 

  (g) [TBD: Standby Facility.]

 

  (h) To facilitate the Restructuring, on or after the Petition Date, the
Bermudian Debtors and the Canadian Debtors will commence ancillary proceedings
before the Bermudian Court and the Canadian Court, respectively.

This Term Sheet incorporates the rules of construction as set forth in section
102 of the Bankruptcy Code.

GENERAL PROVISIONS REGARDING THE RESTRUCTURING

 

The DIP Facility    Certain of the Supporting Creditors (in such capacity,
collectively, the “DIP Lenders”) will provide a senior secured superpriority
delayed draw term loan facility in an aggregate principal amount of up to
$100 million. The DIP Facility will be available in up to three drawings, with
the first such drawing to occur on the closing date of the DIP Facility in an
aggregate principal amount of no less than $25 million. The material terms of
the DIP Facility are set forth in the term sheet attached hereto as Exhibit B
(the “DIP Facility Term Sheet”).

 

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The Rights Offering    Certain of the Supporting Creditors (in such capacity,
collectively, the “Backstop Parties”) will backstop a $200 million rights
offering to be consummated on the Effective Date and otherwise on the terms set
forth in the Backstop Commitment Agreement to be entered into by the Debtors and
the Backstop Parties, in form and substance satisfactory to the Debtors, the
Backstop Parties and the Required Supporting Lenders (including all schedules
and exhibits thereto, the “Backstop Commitment Agreement”). The Backstop
Commitment Agreement will provide for, among other things: (i) a commitment
premium of 5% of the $200 million committed amount (the “Backstop Fee”) payable
in New Common Stock to the Backstop Parties on the Effective Date; and (ii) a
discount of 20% to total settled plan enterprise value (“Plan Value”), provided
that Plan Value shall be no greater than $750 million. The Exit Facility   

To the extent that the Debtors or Reorganized Debtors, as applicable, the
Backstop Parties and the Required Supporting Creditors agree that such a
facility would be in the best interests of the Reorganized Debtors, the Debtors
or the Reorganized Debtors, as applicable, may raise the Exit Facility, a senior
secured revolving asset-based lending credit facility to be arranged and
provided by one or more commercial lending institutions in a minimum amount of
$100 million, on terms satisfactory to the Debtors or the Reorganized Debtors,
as applicable, and the Required Supporting Creditors.

 

The Debtors shall timely seek approval from the Bankruptcy Court to obtain
relief necessary to effectuate the Exit Facility.

The New Warrants    On the Effective Date, provided that Class 8 votes to accept
the Plan, the Debtors will issue 7-year warrants convertible into up to 6% of
the New Common Stock at a strike price of $1.55 billion. The documentation for
the New Warrants will be included in the Plan Supplement and otherwise in form
and substance acceptable to the Debtors and the Required Supporting Creditors.
Standby Facility    [TBD.]

 

TREATMENT OF CLAIMS AND INTERESTS OF THE DEBTORS UNDER THE PLAN

 

Class No.

  

Type of Claim

  

Treatment

  

Impairment /
Voting

Unclassified Non-Voting Claims N/A    DIP Facility Claims    On the Effective
Date, in full satisfaction of each Allowed DIP Facility Claim, each holder
thereof shall receive, in full satisfaction of its Claim, payment in full in
cash.    N/A N/A    Administrative Claims    On the Effective Date, except to
the extent that a holder of an Allowed Administrative Claim and the Debtor
against which such Allowed Administrative Claim is asserted agree to less
favorable treatment for such holder, each holder of an Allowed Administrative
Claim shall receive, in full satisfaction of its Claim, payment in full in cash.
   N/A

 

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N/A    Priority Tax Claims    Except to the extent that a holder of an Allowed
Priority Tax Claim and the Debtor against which such Allowed Priority Tax Claim
is asserted agree to less favorable treatment for such holder, each holder of an
Allowed Priority Tax Claim shall receive, in full satisfaction of its Claim,
treatment in a manner consistent with section 1129(a)(9)(C) of the Bankruptcy
Code.    N/A Classified Claims and Interests of the Debtors Class 1    Other
Secured Claims    On the Effective Date, in full satisfaction of each Allowed
Other Secured Claim, each holder thereof shall receive, at the option of the
applicable Debtor, with the consent (such consent not to be unreasonably
withheld) of the Required Supporting Creditors: (a) payment in full in cash; (b)
the collateral securing its Allowed Other Secured Claim; (c) Reinstatement of
its Other Secured Claim; or (d) such other treatment rendering its Allowed Other
Secured Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code.
   Unimpaired; deemed to accept. Class 2    Other Priority Claims    On the
Effective Date, in full satisfaction of each Allowed Other Priority Claim, each
holder thereof shall receive payment in full in cash.    Unimpaired; deemed to
accept. Class 3    Mineral Contractor Claims    On the Effective Date, in full
satisfaction of each Allowed Mineral Contractor Claim, to the extent not already
satisfied pursuant to a prior order of the Bankruptcy Court, each holder of an
Allowed Mineral Contractor Claim shall receive Cash in an amount equal to such
Claim on the later of: (a) the Effective Date; or (b) the date due in the
ordinary course of business in accordance with the terms and conditions of the
particular transaction giving rise to such Allowed Mineral Contractor Claim.   
Unimpaired; deemed to accept. Class 4    Lender Claims    On the Effective Date,
in full satisfaction of each Lender Claim, each holder thereof shall receive:
(a) its Pro Rata share of the New Common Equity Pool; and (b) if such holder is
an Accredited Investor, its Subscription Rights to purchase its Pro Rata share
of the Rights Offerings Shares in accordance with the Rights Offering
Procedures.    Impaired; entitled to vote. Class 5    General Unsecured Claims
   [TBD]    [TBD]. Class 6    Intercompany Claims    On the Effective Date, each
Intercompany Claim shall be, at the option of the Debtor, with the consent (such
consent not to be unreasonably withheld) of the Required Supporting Creditors,
either Reinstated or canceled and released without any distribution.   
Impaired; deemed to reject or Unimpaired; deemed to accept.

 

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Class 7    Interests in Debtors other than C&J Energy    On the Effective Date,
Interests in the Debtors other than C&J Energy shall be, at the option of the
Debtor, with the consent (such consent not to be unreasonably withheld) of the
Required Supporting Creditors, either Reinstated or canceled and released
without any distribution.    Impaired; deemed to reject or Unimpaired; deemed to
accept Class 8    Interests in C&J Energy    All Interests in C&J Energy will be
canceled, released, and extinguished as of the Effective Date, and will be of no
further force or effect. On the Effective Date, each holder of C&J Common Stock
shall receive (a) if Class 8 has timely accepted the Plan, its Pro Rata share of
the New Warrants or (b) if Class 8 has not timely accepted the Plan, no
distribution.    Impaired; entitled to vote.       GENERAL PROVISIONS REGARDING
THE PLAN    Subordination    The classification and treatment of Claims under
the Plan shall conform to the respective contractual, legal, and equitable
subordination rights of such Claims, and any such rights shall be settled,
compromised, and released pursuant to the Plan.

Restructuring

Transactions

   The Confirmation Order shall be deemed to authorize, among other things, all
actions as may be necessary or appropriate to effect any transaction described
in, approved by, contemplated by, or necessary to effectuate the Plan, including
the Rights Offering and the issuance of all securities, notes, instruments,
certificates, and other documents required to be issued pursuant to the
Restructuring (collectively, the “Restructuring Transactions”). On the Effective
Date, the Debtors, as applicable, shall issue all securities, notes,
instruments, certificates, and other documents required to be issued pursuant to
the Restructuring. Cancellation of Notes, Instruments, Certificates, and Other
Documents    On the Effective Date, except to the extent otherwise provided in
this Term Sheet or the Plan, all notes, instruments, certificates, and other
documents evidencing Claims or Interests, including credit agreements and
indentures, shall be canceled and the obligations of the Debtors and any
non-Debtor Affiliates thereunder or in any way related thereto shall be deemed
satisfied in full and discharged. Executory Contracts and Unexpired Leases   
The Debtors shall seek to assume or reject executory contracts and unexpired
leases in consultation with the Supporting Creditors and with the consent (such
consent not to be unreasonably withheld) of the Required Supporting Creditors.
The Plan will provide that the executory contracts and unexpired leases that are
not assumed or rejected as of the Plan Effective Date (either pursuant to the
Plan or a separate motion) will be deemed assumed pursuant to section 365 of the
Bankruptcy Code. For the avoidance of doubt, such consent shall be obtained with
respect to all decisions to assume or reject, including the deemed assumption of
executory contracts and unexpired leases pursuant to the Plan.

 

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Retention of Jurisdiction    The Plan will provide for the retention of
jurisdiction by the Bankruptcy Court for usual and customary matters. Discharge
of Claims and Termination of Interests    Pursuant to section 1141(d) of the
Bankruptcy Code, and except as otherwise specifically provided in the Plan or in
any contract, instrument, or other agreement or document created pursuant to the
Plan, the distributions, rights, and treatment that are provided in the Plan
shall be in complete satisfaction, discharge, and release, effective as of the
Effective Date, of Claims (including any Intercompany Claims resolved or
compromised after the Effective Date by the Reorganized Debtors), Interests, and
Causes of Action of any nature whatsoever, including any interest accrued on
Claims or Interests from and after the Petition Date, whether known or unknown,
against, liabilities of, liens on, obligations of, rights against, and Interests
in, the Debtors or any of their assets or properties, regardless of whether any
property shall have been distributed or retained pursuant to the Plan on account
of such Claims and Interests, including demands, liabilities, and Causes of
Action that arose before the Effective Date, any liability (including withdrawal
liability) to the extent such Claims or Interests relate to services performed
by employees of the Debtors prior to the Effective Date and that arise from a
termination of employment, any contingent or non-contingent liability on account
of representations or warranties issued on or before the Effective Date, and all
debts of the kind specified in sections 502(g), 502(h), or 502(i) of the
Bankruptcy Code, in each case whether or not: (a) a Proof of Claim based upon
such debt or right is filed or deemed filed pursuant to section 501 of the
Bankruptcy Code; (b) a Claim or Interest based upon such debt, right, or
Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (c) the
holder of such a Claim or Interest has accepted the Plan. The Confirmation Order
shall be a judicial determination of the discharge of all Claims and Interests
subject to the occurrence of the Effective Date. Releases by the Debtors   
Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable
consideration, on and after the Effective Date, each Released Party is deemed
released and discharged by the Debtors, the Reorganized Debtors, and their
Estates from any and all Causes of Action, including any derivative claims,
asserted on behalf of the Debtors, 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, the Debtors’ in-
or out-of-court restructuring efforts, intercompany transactions, the Merger,
the Backstop Commitment Agreement, the Chapter 11 Cases, the formulation,
preparation, dissemination, negotiation, or filing of the RSA, the Disclosure
Statement, the DIP Facility, the Backstop Commitment Agreement, the Plan, or any
Restructuring Transaction, contract, instrument, release, or other agreement or
document created or entered into in connection with the RSA, the Disclosure
Statement, the DIP Facility, or the Plan, 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 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.

 

6

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Releases by Holders of Claims and Interests    As of the Effective Date, each
Releasing Party is deemed to have released and discharged each Debtor,
Reorganized Debtor, and Released Party from any and all Causes of Action,
whether known or unknown, including any derivative claims, asserted on behalf of
the Debtors, 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, the Debtors’ in- or
out-of-court restructuring efforts, intercompany transactions, the Merger, the
Backstop Commitment Agreement, the Chapter 11 Cases, the formulation,
preparation, dissemination, negotiation, or filing of the RSA, the Disclosure
Statement, the DIP Facility, the Plan, the Backstop Commitment Agreement, or any
Restructuring Transaction, contract, instrument, release, or other agreement or
document created or entered into in connection with the RSA, the Disclosure
Statement, the DIP Facility, or the Plan, 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 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 related act or omission, transaction,
agreement, event, or other occurrence taking place on or before the Effective
Date. Exculpation    Except as otherwise specifically provided in the Plan, no
Exculpated Party shall have or incur, and each Exculpated Party is 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, the Disclosure Statement, the Plan, or any
Restructuring Transaction, contract, instrument, release or other agreement or
document created or entered into in connection with the Disclosure Statement or
the Plan, 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 or gross negligence, but in all respects such Entities
shall be entitled to reasonably rely upon the advice of counsel with respect to
their duties and responsibilities pursuant to the Plan. The Exculpated Parties
have, and upon completion of the Plan shall be deemed to have, participated in
good faith and in compliance with the applicable laws with regard to the
solicitation of votes and distribution of consideration pursuant to the Plan
and, therefore, are not, and on account of such distributions shall not be,
liable at any time for the violation of any applicable law, rule, or regulation
governing the solicitation of acceptances or rejections of the Plan or such
distributions made pursuant to the Plan. Injunction    Except as otherwise
expressly provided in the Plan or for obligations issued or required to be paid
pursuant to the Plan or the Confirmation Order, all Entities who have held,
hold, or may hold claims or interests that have been released, discharged, or
are subject to exculpation are permanently enjoined, from and after the
Effective Date, from taking any

 

7

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   of the following actions against, as applicable, the Debtors, the Reorganized
Debtors, the Exculpated Parties, or the Released Parties: (a) commencing or
continuing in any manner any action or other proceeding of any kind on account
of or in connection with or with respect to any such claims or interests; (b)
enforcing, attaching, collecting, or recovering by any manner or means any
judgment, award, decree, or order against such Entities on account of or in
connection with or with respect to any such claims or interests; (c) creating,
perfecting, or enforcing any encumbrance of any kind against such Entities or
the property or the estates of such Entities on account of or in connection with
or with respect to any such claims or interests; (d) asserting any right of
setoff, subrogation, or recoupment of any kind against any obligation due from
such Entities or against the property of such Entities on account of or in
connection with or with respect to any such claims or interests unless such
holder has filed a motion requesting the right to perform such setoff on or
before the Effective Date, and notwithstanding an indication of a claim or
interest or otherwise that such holder asserts, has, or intends to preserve any
right of setoff pursuant to applicable law or otherwise; and (e) commencing or
continuing in any manner any action or other proceeding of any kind on account
of or in connection with or with respect to any such claims or interests
released or settled pursuant to the Plan. OTHER MATERIAL PROVISIONS REGARDING
THE RESTRUCTURING Management Incentive Plan    On the Effective Date, the
Reorganized Debtors will implement a management incentive plan (the “Management
Incentive Plan”) that shall provide for 10% of the New Common Stock, on a fully
diluted basis, to be issued to management of the Reorganized Debtors after the
Effective Date at the discretion of the New Board and on terms to be determined
by the New Board (including, without limitation, with respect to allocation,
timing and structure of such issuance and the Management Incentive Plan). The
Plan will permit the establishment of the Management Incentive Plan by the New
Board following the Effective Date. Employment Obligations    Each of the
Debtors’ “first day” or “second day” motions and proposed orders relating to
wages, compensation, and benefits, including executive compensation programs
shall be in form and substance acceptable to the Debtors and the Required
Supporting Creditors. The Debtors and the Required Supporting Creditors shall
mutually agree as to (i) the continuation, after the Effective Date, of the Key
Employee Incentive Plan effective as of May 6, 2016 (as amended, supplemented or
otherwise modified, the “KEIP”), (ii) the Debtors’ wages, compensation, and
benefit programs that relate to any “insider” as that term is defined in section
101(31) of the Bankruptcy Code and (iii) the assumption, rejection or other
disposition of any of the Debtors’ existing employment agreements for insiders.
Wages, compensation and benefit programs, other than the KEIP that do not relate
to insiders shall be continued after the Effective Date and the Supporting
Creditors shall support assumption of non-insider employment agreements, in each
case unless otherwise agreed by the Debtors and the Required Supporting
Creditors and subject to the satisfaction and consent of the Required

 

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   Supporting Creditors (such consent not to be unreasonably withheld) following
receipt and analysis by the Required Supporting Creditors and their advisors of
satisfactory information from the Company regarding such programs, which
information the Company shall provide as promptly as practicable.
Indemnification of Prepetition Directors, Officers, Managers, et al.   
Consistent with applicable law, all indemnification provisions currently in
place (whether in the by-laws, certificates of incorporation or formation,
limited liability company agreements, other organizational documents, board
resolutions, indemnification agreements, employment contracts, or otherwise) for
the current and former directors, officers, managers, employees, attorneys,
accountants, investment bankers, and other professionals of the Debtors, as
applicable, shall be reinstated and remain intact, irrevocable, and shall
survive the effectiveness of the Restructuring on terms no less favorable to
such current and former directors, officers, managers, employees, attorneys,
accountants, investment bankers, and other professionals of the Debtors than the
indemnification provisions in place prior to the Restructuring. Director,
Officer, Manager, and Employee Tail Insurance Coverage   

On or before the Effective Date, the Debtors shall purchase and maintain
directors, officers, managers, and employee liability tail coverage for the
six-year period following the Effective Date on terms no less favorable than the
Debtors’ existing director, officer, manager, and employee coverage and with an
aggregate limit of liability upon the Effective Date of no less than the
aggregate limit of liability under the existing director, officer, manager, and
employee coverage upon placement.

 

Reasonable directors and officers insurance policies shall remain in place in
the ordinary course during the Chapter 11 Cases and from and after the Plan
Effective Date.

Claims of the Debtors   

The Reorganized Debtors, as applicable, shall retain all rights to commence and
pursue any Causes of Action, other than any Causes of Action released by the
Debtors pursuant to the release and exculpation provisions outlined in this Term
Sheet.

 

Prior to consummation of the Plan, the Debtors shall not settle, compromise or
discharge any Cause of Action that is not agreed to be released pursuant to this
Term Sheet without the consent of the Required Supporting Lenders.

Additional Plan Provisions and Documentation    The Plan shall contain other
customary provisions for chapter 11 plans of this type. The Plan and all
supporting and implementing documentation (including all briefs and other
pleadings filed in support thereof, all documents filed as part of the Plan
Supplement, and the Confirmation Order) shall be in form and substance
acceptable to the Debtors and the Required Supporting Creditors. Conditions
Precedent to Restructuring   

The following shall be conditions to the Effective Date (the “Conditions
Precedent”):

 

(a)       the Bankruptcy Court shall have entered the Confirmation Order, which
shall be in form and  substance acceptable to the Debtors and the Required
Supporting Creditors, and shall:

 

(i)       authorize the Debtors to take all actions necessary to enter into,
implement, and  consummate the contracts, instruments, releases, leases,
indentures, and other  agreements or documents created in connection with the
Plan;

 

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(ii)      decree that the provisions of the Confirmation Order and the Plan are
nonseverable and  mutually dependent;

 

(iii)     authorize the Debtors, as applicable/necessary, to: (a) implement the
Restructuring  Transactions, including the Rights Offering; (b) distribute the
New Warrants and the  New Common Stock pursuant to the exemption from
registration under the Securities  Act provided by section 1145 of the
Bankruptcy Code or other exemption from such  registration or pursuant to one or
more registration statements; (c) make all distributions  and issuances as
required under the Plan, including cash, the New Warrants, and the  New Common
Stock; and (d) enter into any agreements, transactions, and sales of
 property as set forth in the Plan Supplement, including the Exit Facility and
the  Management Incentive Plan;

 

(iv)     authorize the implementation of the Plan in accordance with its terms;
and

 

(v)      provide that, pursuant to section 1146 of the Bankruptcy Code, the
assignment or  surrender of any lease or sublease, and the delivery of any deed
or other instrument or  transfer order, in furtherance of, or in connection with
the Plan, including any deeds,  bills of sale, or assignments executed in
connection with any disposition or transfer of  assets contemplated under the
Plan, shall not be subject to any stamp, real estate transfer,
 mortgage recording, or other similar tax; and

 

(b)      the Debtors shall have obtained all authorizations, consents,
regulatory approvals, rulings, or  documents that are necessary to implement and
effectuate the Plan;

 

(c)       the final version of the Plan Supplement and all of the schedules,
documents, and exhibits  contained therein shall have been filed in a manner
consistent in all material respects with the  RSA, this Term Sheet, and the Plan
and shall be in form and substance acceptable to the  Debtors and the Required
Supporting Creditors;

 

(d)      the RSA shall remain in full force and effect;

 

(e)       all professional fees and expenses of retained professionals required
to be approved by the  Bankruptcy Court shall have been paid in full or amounts
sufficient to pay such fees and  expenses after the Effective Date have been
placed in a professional fee escrow account  pending approval by the Bankruptcy
Court;

 

(f)       all professional fees and expenses and of the advisors to the
Supporting Creditors, the Credit  Agreement Agent, the DIP Facility Lenders and
the DIP Facility Agent (including all advisors  set forth in Section 9 of the
RSA) shall have been paid in full;

 

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(g)      each Loan Party (as defined in the Credit Agreement) that is not a
Debtor shall have been  released from its obligations under the Credit Agreement
and the other Credit Agreement  Documents pursuant to the terms thereof; and

 

(h)      the Debtors shall have implemented the Restructuring Transactions,
including the Rights  Offering, and all transactions contemplated by this Term
Sheet, in a manner consistent in all  respects with the RSA, this Term Sheet,
and the Plan, pursuant to documentation acceptable to  the Debtors and the
Required Supporting Creditors.

Waiver of Conditions Precedent to the Effective Date    The Debtors, with the
prior written consent of the Required Supporting Creditors, may waive any one or
more of the Conditions Precedent to the Effective Date. Foreign Proceedings   
On or as soon as is reasonably practicable after the Effective Date, the
Bermudian Debtors shall commence the Bermudian Proceedings and the Canadian
Debtors shall commence the Canadian Proceedings to facilitate the Restructuring
and protect certain of the Debtors’ assets held outside of the United States.
CORPORATE GOVERNANCE PROVISIONS/SECTION 1145 EXEMPTION Governance   

The board or directors of Reorganized Debtors (the “New Board”) shall be
appointed by the Supporting Creditors, in consultation with the Reorganized
Debtors’ management, and the identities of directors on the New Board shall be
set forth in the Plan Supplement, to the extent known at the time of filing;
provided, however that the reorganized Debtors’ chief executive officer shall be
a member of the New Board and the remainder of the New Board shall be appointed
in compliance with section 1129(a)(5) of the Bankruptcy Code.

 

Corporate governance for the Reorganized Debtors, including charters, bylaws,
operating agreements, or other organization documents, as applicable (the “New
Organizational Documents”), shall be consistent with this Term Sheet and section
1123(a)(6) of the Bankruptcy Code (as applicable) and documentation therefor
shall be included in the Plan Supplement and otherwise acceptable to the Debtors
and the Required Supporting Creditors.

Exemption from SEC Registration    The issuance of all securities under the Plan
will be exempt from SEC registration under applicable law.

[Exhibits follow.]

 

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EXHIBIT A

DEFINITIONS

 

Term

  

Definition

Accredited Investor    As defined in Rule 501 of Regulation D promulgated under
the Securities Act. Administrative Claim    A Claim for costs and expenses of
administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2),
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 until and
including the Effective Date of preserving the Estates and operating the
Debtors’ businesses; (b) Allowed Professional Claims; and (c) all fees and
charges assessed against the Estates pursuant to section 1930 of chapter 123 of
title 28 of the United States Code. Affiliate    As defined in section 101(2) of
the Bankruptcy Code. Allowed    As to a Claim or an Interest, a Claim or an
Interest allowed under the Plan, under the Bankruptcy Code, or by a Final Order,
as applicable. For the avoidance of doubt, (a) there is no requirement to file a
Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed
Claim under the Plan, and (b) the Debtors may affirmatively determine to deem
Unimpaired Claims Allowed to the same extent such Claims would be allowed under
applicable nonbankruptcy law. Backstop Commitment Agreement    As defined in the
Term Sheet. Backstop Fee    As defined in the Term Sheet. Backstop Parties   
Certain of the Supporting Creditors, in their capacity as Backstop Parties under
the Backstop Commitment Agreement, including funds and/or accounts managed or
advised by Ascribe Capital LLC, Blue Mountain Capital Management, LLC, GSO
Capital Partners LP, Silver Point Capital L.P., Solus Alternative Asset
Management LP and Symphony Asset Management LLC, in each case that are parties
to the RSA. Bankruptcy Code    As defined in the Term Sheet. Bankruptcy Court   
As defined in the Term Sheet. Bermuda Act    As defined in the Introduction.
Bermudian Court    As defined in the Introduction. Bermudian Debtors    As
defined in the Introduction. Bermudian Proceedings    As defined in the
Introduction. C&J Common Stock    C&J Energy’s authorized and issued common
stock outstanding as of the Effective Date. C&J Energy    As defined in the
Introduction. Canadian Court    As defined in the Introduction.

 

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Term

  

Definition

Canadian Debtors    As defined in the Introduction. Canadian Proceedings    As
defined in the Introduction. Cause of Action    Any claims, interests, damages,
remedies, causes of action, demands, rights, actions, suits, obligations,
liabilities, accounts, defenses, offsets, powers, privileges, licenses, liens,
indemnities, guaranties, and franchises of any kind or character whatsoever,
whether known or unknown, foreseen or unforeseen, existing or hereinafter
arising, contingent or non-contingent, liquidated or unliquidated, secured or
unsecured, assertable, directly or derivatively, matured or unmatured, suspected
or unsuspected, in contract, tort, law, equity, or otherwise. Causes of Action
also include: (a) all rights of setoff, counterclaim, or recoupment and claims
under contracts or for breaches of duties imposed by law; (b) the right to
object to or otherwise contest Claims or Interests; (c) claims pursuant to
sections 362, 510, 542, 543, 544 through 550, or 553 of the Bankruptcy Code; and
(d) such claims and defenses as fraud, mistake, duress, and usury, and any other
defenses set forth in section 558 of the Bankruptcy Code. CCAA    As defined in
the Introduction. Chapter 11 Cases    As defined in the Term Sheet. Claim    Any
claim, as defined in section 101(5) of the Bankruptcy Code, against any of the
Debtors. Class    A category of holders of Claims or Interests pursuant to
section 1122(a) of the Bankruptcy Code. Conditions Precedent    As defined in
the Term Sheet. Confidentiality Agreement    As defined in the RSA. Confirmation
   Entry of the Confirmation Order on the docket of the Chapter 11 Cases.
Confirmation Date    The date on which the Bankruptcy Court enters the
Confirmation Order on the docket of the Chapter 11 Cases within the meaning of
Bankruptcy Rules 5003 and 9021 Confirmation Hearing    The hearing(s) before the
Bankruptcy Court under section 1128 of the Bankruptcy Code at which the Debtors
seek entry of the Confirmation Order. Confirmation Order    The order of the
Bankruptcy Court confirming the Plan under section 1129 of the Bankruptcy Code,
which order shall be in form and substance acceptable to the Debtors and the
Required Supporting Creditors. Supporting Creditors    As defined in the RSA.
Company    C&J Energy and each of its direct and indirect subsidiaries.
Consummation    The occurrence of the Effective Date.

 

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Term

  

Definition

Credit Agreement    As defined in the RSA. Credit Agreement Agent    Cortland
Capital Market Services LLC, in its capacity as successor administrative agent
pursuant to the Credit Facility Documents, its successors, assigns, or any
replacement agent appointed pursuant to the terms of the Credit Agreement and,
as applicable, its predecessor administrative agent, Bank of America, N.A..
Credit Agreement Documents    Collectively, the Credit Agreement, each other
Loan Document (as defined in the 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, and other security documents). Debtors    As defined
in the Term Sheet. DIP Facility    As defined in the Term Sheet. DIP Facility
Agent    That certain administrative agent under the DIP Facility Loan Agreement
DIP Facility Claim    Any Claim held by the DIP Facility Lenders or the DIP
Facility Agent arising under or related to the DIP Facility Loan Agreement or
the DIP Facility Order, including any and all fees, interest paid in kind, and
accrued but unpaid interest and fees arising under the DIP Facility Loan
Agreement DIP Facility Lenders    Certain of the Supporting Creditors, in their
capacity as lenders party to the DIP Facility Loan Agreement, including funds
and/or accounts managed or advised by Ascribe Capital LLC, Blue Mountain Capital
Management, LLC, GSO Capital Partners LP and Solus Alternative Asset Management
LP, in each case that are parties to the RSA. DIP Facility Loan Agreement   
That certain debtor-in-possession credit agreement as approved by the DIP
Facility Order, which shall contain terms consistent in all respects with the
DIP Facility Term Sheet and otherwise in form and substance acceptable to the
Debtors, the DIP Facility Lenders and the Required Supporting Creditors. DIP
Facility Order    Collectively, the interim and final orders entered by the
Bankruptcy Court authorizing the Debtors to enter into the DIP Facility Loan
Agreement and access the DIP Facility, which shall be in form and substance
acceptable to the Debtors, the DIP Facility Lenders and the Required Supporting
Creditors. DIP Facility Term Sheet    As defined in the Term Sheet. Disclosure
Statement    The disclosure statement for the Plan, including all exhibits and
schedules thereto, which shall be in form and substance acceptable to the
Debtors and acceptable to the Required Supporting Creditors. Effective Date   
The date that is the first Business Day after the Confirmation Date on which all
Conditions Precedent have been satisfied or waived in accordance with the Plan.

 

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Term

  

Definition

Entity    As defined in section 101(15) of the Bankruptcy Code. Estate    The
estate of any Debtor created under sections 301 and 541 of the Bankruptcy Code
upon the commencement of the applicable Debtor’s Chapter 11 Case. Excluded
Parties    In the event that any holder of Interests in C&J Energy or any
Affiliate or subsidiary (other than C&J Energy and any direct or indirect
subsidiary thereof) or current or former officer, director, principal, member,
employee, agent or advisory board member thereof (a) seeks any relief materially
adverse to the Restructuring as agreed herein or the interests of the Debtors,
the Supporting Creditors, the Lenders, the Credit Agreement Agent, the DIP
Facility Lenders, the DIP Facility Agent or the Backstop Parties or objects to
or opposes any material relief sought by (including any request for relief by
any other party that is joined by any of the following) the Debtors, the
Supporting Creditors, the Credit Agreement Agent, the DIP Facility Lenders, the
DIP Facility Agent or the Backstop Parties, (b) is entitled to vote on the Plan
and does not vote to accept the Plan, (c) opts out of any third-party releases
sought in connection with the Plan or (d) objects to the Plan or causes an
objection to the Plan to be made, then such holder of Interests in C&J Energy
and each Affiliate and subsidiary (other than C&J Energy and any direct or
indirect subsidiary thereof) or current or former officer, director, principal,
member, employee, agent or advisory board member thereof shall be an Excluded
Party; provided, that no current or former director or officer of the Company
(in such capacity) shall be an Excluded Party. Exculpated Parties   
Collectively, and in each case (i) excluding any Excluded Parties and (ii) in
its capacity as such: (a) the Debtors; (b) any official committees appointed in
the Chapter 11 Cases and each of their respective members; and (c) with respect
to each of the foregoing, such Entity and its current and former Affiliates, and
such Entity’s and its current and former Affiliates’ current and former equity
holders, subsidiaries, officers, directors, managers, principals, members,
employees, agents, advisory board members, financial advisors, partners,
attorneys, accountants, investment bankers, consultants, representatives, and
other professionals, each in their capacity as such. Exit Facility    As defined
in the Term Sheet General Unsecured Claims    Any Claim other than an
Administrative Claim, a Professional Claim, a Secured Tax Claim, an Other
Secured Claim, a Priority Tax Claim, an Other Priority Claim, a Mineral
Contractor Claim, a Lender Claim, or a DIP Facility Claim. Governmental Unit   
As defined in section 101(27) of the Bankruptcy Code Impaired    With respect to
any Class of Claims or Interests, a Class of Claims or Interests that is
impaired within the meaning of section 1124 of the Bankruptcy Code. Intercompany
Claim    A Claim held by a Debtor or an Affiliate against a Debtor or an
Affiliate.

 

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Term

  

Definition

Intercompany Interest    An Interest held by a Debtor or an Affiliate of a
Debtor. Interest    Any Equity Security (as defined in section 101(16) of the
Bankruptcy Code) in any Debtor and any other rights, options, warrants, stock
appreciation rights, phantom stock rights, restricted stock units, redemption
rights, repurchase rights, convertible, exercisable or exchangeable securities
or other agreements, arrangements or commitments of any character relating to,
or whose value is related to, any such interest or other ownership interest in
any Debtor. Lender    Each lender under the Credit Agreement. Lender Claim   
Any Claim arising under, derived from, or based upon the Credit Agreement.
Management Incentive Plan    As defined in the Term Sheet. Merger    Those
certain transactions on or around March 24, 2015, by and among the predecessors
to the Debtors and the completion and production business of Nabors,
effectuating a merger of such entities. Mineral Contractor Claim    Any Claim
that is secured by, or in the reasonable judgment of counsel to the Company may
be secured by, a lien on property of a customer of the Debtors arising under
chapter 56 of the Texas Property Code, or any similar federal, state, or local
law, whether or not such Claim is or may be secured by a lien on property of the
Debtors. Nabors    Nabors Industries Ltd. New Board    As defined in the Term
Sheet. New Common Equity Pool    100% of the New Common Stock issued and
outstanding on the Effective Date to be distributed to the holders of Allowed
Lender Claims in accordance with the Plan, subject to dilution on account of the
Management Incentive Plan, the Rights Offering, the Backstop Fee, and the New
Warrants. New Common Stock    The common stock of Reorganized C&J Energy. New
Warrants    As defined in the Term Sheet. 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, including any Secured Tax Claim, other than a Lender
Claim or a DIP Facility Claim. For the avoidance of doubt, “Other Secured
Claims” includes 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.

 

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Term

  

Definition

Petition Date    The date on which the Chapter 11 Cases were commenced. Plan   
As defined in the Term Sheet. Plan Restructuring Documents    As defined in the
RSA. Plan Supplement    Any compilation of documents and forms of documents,
agreements, schedules, and exhibits to the Plan, which shall be filed by the
Debtors no later than 7 days before the Confirmation Hearing or such later date
as may be approved by the Bankruptcy Court on notice to parties in interest, and
additional documents filed with the Bankruptcy Court prior to the Effective Date
as amendments to the Plan Supplement, each of which shall be consistent in all
respects with, and shall otherwise contain, the terms and conditions set forth
in the RSA and Term Sheet, where applicable, and shall be in form and substance
acceptable to the Debtors and the Required Supporting Creditors. Plan Value   
As defined in the Term Sheet. Priority Tax Claims    Any Claim of a Governmental
Unit of the kind specified in section 507(a)(8) of the Bankruptcy Code. Pro Rata
   The proportion that an Allowed Claim or an Allowed Interest in a particular
Class bears to the aggregate amount of Allowed Claims or Allowed Interests in
that Class. Professional Claim    A Claim by a professional seeking an award by
the Bankruptcy Court of compensation for services rendered or reimbursement of
expenses incurred through and including the Confirmation Date under sections
330, 331, 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code.
Proof of Claim    A proof of Claim filed against any of the Debtors in the
Chapter 11 Cases by the applicable Bar Date. Reinstated    With respect to
Claims and Interests, that the Claim or Interest shall be rendered unimpaired in
accordance with section 1124 of the Bankruptcy Code. Released Parties   
Collectively, and in each case (i) other than any Excluded Parties and (ii) in
its capacity as such: (a) the Supporting Creditors; (b) the Backstop Parties;
(c) the Credit Agreement Agent; (d) the DIP Facility Lenders; (e) the DIP
Facility Agent; and (f) with respect to each of the Debtors, the Reorganized
Debtors, and each of the foregoing entities in clauses (a) through (e), such
Entity and its current and former Affiliates and subsidiaries, and such
Entities’ and their current and former Affiliates’ and subsidiaries’ current and
former directors, managers, officers, equity holders (regardless of whether such
interests are held directly or indirectly), predecessors, successors, and
assigns, subsidiaries, and each of their respective current and former equity
holders, officers, directors, managers, principals, members, employees, agents,
advisory board members, financial advisors, partners, attorneys, accountants,
investment bankers, consultants, representatives, and other professionals.

 

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Term

  

Definition

Releasing Parties    Collectively, (a) the Supporting Creditors; (b) the
Backstop Parties; (c) the DIP Facility Lenders; (d) the Credit Agreement Agent;
(e) the DIP Facility Agent; (f) all holders of Claims; (g) all holders of
Interests; and (h) with respect to each of the Debtors, the Reorganized Debtors,
and each of the foregoing entities in clauses (a) through (g), such Entity and
its current and former Affiliates and subsidiaries, and such Entities’ and their
current and former Affiliates’ and subsidiaries’ current and former directors,
managers, officers, equity holders (regardless of whether such interests are
held directly or indirectly), predecessors, successors, and assigns,
subsidiaries, and each of their respective current and former equity holders,
officers, directors, managers, principals, members, employees, agents, advisory
board members, financial advisors, partners, attorneys, accountants, investment
bankers, consultants, representatives, and other professionals, each in their
capacity as such collectively. Reorganized C&J Energy    C&J Energy, or any
successor or assign, by merger, consolidation, or otherwise, on or after the
Effective Date. Reorganized Debtors    A Debtor, or any successor or assign
thereto, by merger, consolidation, or otherwise, on and after the Effective
Date. Required Supporting Creditors    As defined in the RSA. Restructuring   
As defined in the Introduction. Restructuring Transactions    As defined in the
Term Sheet. Rights Offering Procedures    The procedures governing the Rights
Offering attached as an exhibit to the Backstop Commitment Agreement. Rights
Offering Shares    The shares of New Common Stock distributed pursuant to and in
accordance with the Rights Offering. RSA    As defined in the Term Sheet. SEC   
The Securities and Exchange Commission. Secured    When referring to a Claim:
(a) secured by a Lien on collateral to the extent of the value of such
collateral, as determined in accordance with section 506(a) of the Bankruptcy
Code or (b) subject to a valid right of setoff pursuant to section 553 of the
Bankruptcy Code. Secured Tax Claim    Any Secured Claim that, absent its Secured
status, would be entitled to priority in right of payment under section
507(a)(8) of the Bankruptcy Code (determined irrespective of time limitations),
including any related Secured Claim for penalties. Securities Act    The
Securities Act of 1933, as amended, 15 U.S.C. §§ 77a–77aa, or any similar
federal, state, or local law. Standby Facility    [TBD.] Subscription Rights   
The rights to purchase Rights Offering Shares as set forth in the Rights
Offering Procedures.

 

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Term

  

Definition

Term Sheet    As defined in the Introduction. U.S. HoldCo    As defined in the
Introduction. Unimpaired    With respect to a Class of Claims or Interests, a
Class of Claims or Interests that is not Impaired.

 

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EXHIBIT A-1 to Restructuring Term Sheet

DIP Term Sheet

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$100.0 Million Senior Secured Debtor-In-Possession Term Loan Facility

Illustrative Summary of Terms And Conditions

This DIP term sheet (the “Term Sheet”), dated as of July 8, 2016, sets forth
certain of the principal terms and conditions of a debtor-in-possession loan
facility.

THIS TERM SHEET IS PROVIDED FOR DISCUSSION PURPOSES ONLY AND DOES NOT CONSTITUTE
AN OFFER, AGREEMENT OR COMMITMENT TO ENTER INTO THE DEFINITIVE DIP LOAN
DOCUMENTS, ANOTHER BUSINESS TRANSACTION OR A RELATIONSHIP. NOTHING IN THIS TERM
SHEET IS INTENDED TO REPRESENT A COMMITMENT ON THE PART OF THE DEBTORS OR ANY OF
THEIR AFFILIATES OR ANY OF THE LENDERS, TO ENTER INTO THE DIP FACILITY OR ANY
OTHER DEFINITIVE AGREEMENT WITH ANY PERSON.

 

Borrower:   C&J Energy Services Ltd. (the “Company”) and CJ Holding Co. (the “US
Borrower” and, together with the Company, the “Borrowers”). Guarantors:  

Guarantors to include all direct and indirect subsidiaries of the Company that
are debtors in the Chapter 11 cases of the Company and such debtor subsidiaries
(the “Cases”), with exceptions based on the Prepetition Credit Facilities
(collectively, the “Guarantors”). The Company and the Guarantors are referred to
herein as “Loan Parties” and each, a “Loan Party” or “Debtors” and each, a
“Debtor”.

 

The date of commencement of the Cases is referred to herein as the
“Petition Date”.

DIP Lenders:   One or more of Ascribe Capital LLC, funds managed or advised by
GSO Capital Partners LP, Blue Mountain Capital Management, LLC and Solus
Alternative Asset Management LP (including, in each case, affiliates of any of
the foregoing) (the “Steering Committee Lenders”) and other financial
institutions reasonably acceptable to the Steering Committee Lenders (together
with the Steering Committee Lenders, the “DIP Lenders”) and the Company, but
excluding in any case Disqualified Lenders (as defined in the Prepetition Credit
Agreement). Certain Prepetition Debt Facilities:   Reference is made to that
certain Credit Agreement dated as of March 24, 2015 (as amended, restated,
amended and restated, extended, supplemented or otherwise modified, including
pursuant to waivers and forbearance agreements, and in effect from time to time,
the “Prepetition Credit Agreement”), the lenders from time to time party thereto
(the “Prepetition Secured Lenders”) and the revolving and term loan facilities
provided thereunder (the “Prepetition Credit Facilities”). Administrative Agent:
  Cortland Capital Market Services LLC or another institution to be agreed shall
act as administrative agent and collateral agent in respect of the DIP Facility
(as defined below) (the “Administrative Agent”). DIP Facility:  

The DIP Lenders will agree to provide a senior secured superpriority delayed
draw term loan facility in an aggregate principal amount of up to $100.0 million
(the “DIP Facility”, the loans made thereunder (which shall be denominated in
dollars) (the “DIP Loans”) and the commitments to make such DIP Loans (the “DIP
Commitments”)) on the terms and conditions set forth herein and in the DIP Loan
Documents (as defined below).

 

The DIP Facility will be available in up to three drawings (the date of any such
drawing, a “Delayed Draw Funding Date”), with (x) the first drawing to be in an
amount equal to the lesser of (x) $25,000,000 and (y) the amount permitted to be
drawn under the Interim DIP Order, which shall be made on the Closing Date, (y)
the second drawing to be made within 2 business days after the entry of the

 

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Final DIP Order in an amount that together with the first drawing shall be not
less than $50 million in the aggregate and (z) the remainder available to be
drawn in one drawing thereafter through and including the DIP Facility
Termination Date. Amounts borrowed under the DIP Facility that are prepaid may
not be re-borrowed.

 

The effectiveness of the DIP Facility is conditioned, among other things, on
(a) Bankruptcy Court approval of the Adequate Protection (defined below), as
protection in respect of (i) the incurrence of the DIP Facility, (ii) the
imposition of the automatic stay and (iii) the Debtors’ use of collateral that
secures the Prepetition Credit Facilities (collectively, the
“Existing Collateral”), including cash collateral (“Cash Collateral”) and (b)
entry of the Interim DIP Order within 7 calendar days after the Petition Date
(or such later date as the Required DIP Lenders may agree in their reasonable
discretion).

 

“Interim DIP Order” means an order of the Bankruptcy Court authorizing, on an
interim basis, the DIP Facility and the use of Cash Collateral, and containing
provisions granting the adequate protection liens described under “Adequate
Protection” below and related adequate protection claims, with only such
modifications as are satisfactory to the Required DIP Lenders and the Company in
their respective sole discretion.

DIP Facility Termination Date:  

The “DIP Facility Termination Date” with respect to the DIP Facility shall be
the earliest of (a) the Scheduled Termination Date (as defined below); (b) seven
(7) calendar days after the Petition Date (or such later date as the Required
DIP Lenders may agree in their reasonable discretion) if the Interim DIP Order
has not been entered prior to such date; (c) 40 calendar days after the entry of
the Interim DIP Order (or such later date as the Required DIP Lenders may agree
in their reasonable discretion) unless the Final DIP Order has been entered by
such date; (d) the substantial consummation (as defined in Section 1101 of the
Bankruptcy Code and which for purposes hereof shall be no later than the
“effective date” thereof) of a plan of reorganization filed in the Cases that is
confirmed pursuant to an order entered by the Bankruptcy Court; and (e) the
acceleration of the DIP Loans and the termination of the commitments with
respect to such DIP Facility in accordance with the DIP Loan Documents.

 

“Scheduled Termination Date” means March 31, 2017.

 

“Final DIP Order” means a final order of the Bankruptcy Court authorizing the
DIP Facility in substantially the form of the Interim DIP Order, with only such
modifications as are satisfactory to the Required DIP Lenders in their sole
discretion.

Use of Proceeds:  

The proceeds of the DIP Facility and any Cash Collateral shall be used only for
the following, in each case subject to the terms, conditions and amounts herein
and the agreed Rolling Budget (subject to permitted variances) from time to time
(the “Approved Purposes”): (a) working capital and general corporate purposes in
accordance with the Rolling Budget (subject to permitted variances); (b)
professional fees and expenses whether or not in accordance with the Rolling
Budget; and (c) Bankruptcy Court approved administrative expenses for estate
professionals and such other expenses to which the Required DIP Lenders may
consent in their sole direction.

 

As between the DIP Facility and Cash Collateral, Cash Collateral shall be used
first for the Approved Purposes unless otherwise agreed by the Required DIP
Lenders in their reasonable discretion.

 

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DIP Loan Documents:   The DIP Facility will be documented by customary
documentation, which may include a credit agreement, a security agreement and a
guaranty agreement, the terms of which will be consistent with this Term Sheet
and will be based on the Prepetition Credit Facilities, subject to modifications
customary for facilities of this type (such documentation, collectively,
together with such ancillary documents contemplated thereunder, the “DIP Loan
Documents”). Interest Rate:  

DIP Loans will bear interest, at the option of the Company, at one of the
following rates:

 

(i) the Applicable Margin (as defined below) plus the Base Rate (to be defined
in a customary manner), payable monthly in arrears; or

 

(ii) the Applicable Margin plus the LIBO Rate (to be defined in a customary
manner), provided that in no event shall the LIBO Rate be less than 1.00% (the
“LIBOR Floor”).

 

“Applicable Margin” means 8.00%, in the case of Base Rate loans and 9.00%, in
the case of LIBO Rate loans.

 

During the continuance of an event of default under the DIP Facility, overdue
amounts will bear interest at an additional 2% per annum (the “Default Rate”).

OID and Fees:  

Original issue discount - For the account of the DIP Lenders, an original issue
discount equal to 2.00% of the DIP Commitments, which discount shall be earned
and due and payable on the Closing Date.

 

Ticking Fee - From and after the Closing Date, a non-refundable unused
commitment fee at the rate of 5.00% per annum will accrue on the undrawn portion
of the DIP Facility, payable monthly in arrears and on the availability
termination date.

 

Prepayment Fee - For the account of the DIP Lenders, a prepayment fee of 2.00%
if the DIP Loans are prepaid with the proceeds of another financing during the
pendency of the Cases.

 

Agency Fees - As separately agreed to between the Company and the Administrative
Agent.

Optional Prepayments:   The Company may, upon at least 3 business days’ notice
for LIBO Rate loans and same day’s notice for Base Rate loans and at the end of
any applicable interest period (or at other times with the payment of applicable
breakage costs), prepay in full or in part, without premium or penalty (other
than such breakage costs and except as provided above), the DIP Loans; provided
that each such partial prepayment shall be in a minimum aggregate amount to be
mutually agreed. Mandatory Prepayments:   Mandatory prepayments of the DIP Loans
shall be required solely with (a) 100.0% of the net cash proceeds (subject to
exceptions to be agreed, including, without limitation, (i) dispositions of
obsolete, worn out or ‘scrap’ property in the ordinary course of business, (ii)
dispositions of light vehicles (i.e., cars and pick-up trucks but not heavy
trucks or rigs) in the ordinary course of business, (iii) the ability to
reinvest the net cash proceeds of up to $10 million in the aggregate from
casualty events on the terms set forth in the Prepetition Credit Agreement
(without giving effect to any limited waiver or forbearance agreement delivered
with respect thereto), (iv) the sale or other disposition of all or a portion of
the business of Total E&S Inc. (provided that 75% of the net cash proceeds of
such sale or other disposition shall be deposited into a segregated blocked
agreement pledged to the Administrative Agent to ensure sufficient liquidity at
the exit from the Cases) and (v) a de minimis basket of $10 million of

 

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net cash proceeds in the aggregate for other applicable sales or dispositions)
from sales or other dispositions of any assets and (b) 100% of the net cash
proceeds of any indebtedness not permitted by the DIP Facility (subject to the
2% prepayment fee as provided above in the case of another financing during the
pendency of the Cases).

 

Security and Priority:  

The obligations of the Borrowers under the DIP Facility and the obligations of
each Guarantor in respect of its guarantee of all of the foregoing shall,
subject to the Carve-Out (as defined below), at all times:

 

(a) be entitled to superpriority administrative expense claim status in the Case
of such Loan Party (the “DIP Superpriority Claims”);

 

(b) be secured by a perfected first priority security interest and lien on the
Collateral of each Loan Party to the extent such Collateral is not subject to
valid, perfected and non-avoidable liens as of the Petition Date (subject to
customary exclusions and excluding claims and causes of action under sections
502(d), 544, 545, 547, 548 and 550 of the Bankruptcy Code (collectively
“Avoidance Actions”) (it being understood that notwithstanding such exclusion of
Avoidance Actions, upon entry of the Final DIP Order, to the extent approved by
the Bankruptcy Court, such lien shall attach to any proceeds of Avoidance
Actions);

 

(c) except as otherwise provided in the immediately following clause (d) be
secured by a junior perfected security interest and lien on the Collateral of
each Loan Party to the extent that such Collateral is subject to valid,
perfected and unavoidable liens in favor of third parties that were in existence
immediately prior to the Petition Date and permitted under the Prepetition
Credit Agreement, or to valid and unavoidable permitted liens in favor of third
parties that were in existence immediately prior to the Petition Date that were
perfected subsequent to the Petition Date as permitted by Section 546(b) of the
Bankruptcy Code (other than the existing liens that secure obligations of the
applicable Loan Party under or governed by the Prepetition Credit Agreement,
which existing liens will be primed by the liens described in clause (d) below),
subject as to priority to such liens in favor of such third parties; and

 

(d) pursuant to Section 364(d)(1) of the Bankruptcy Code, be secured by a
perfected priming security interest and lien on the Collateral of each Loan
Party (such lien and security interest, the “Priming Liens”) to the extent that
Collateral is subject to existing liens that secure the obligations of the
applicable Loan Party under the Prepetition Credit Agreement (the “Primed
Liens”).

 

The Priming Liens (x) shall be senior in all respects to the interests in such
property of the Prepetition Secured Lenders under the Prepetition Credit
Facilities (the “Primed Parties”) and (y) shall also be senior to any liens
granted to provide Adequate Protection in respect of any of the Primed Liens.

 

All of the liens described above shall be effective and perfected upon entry of
the Interim DIP Order.

 

“Collateral” means all owned or hereafter acquired assets and property of the
Loan Parties (including, without limitation, inventory, accounts receivable,
property, plant, equipment, rights under leases and other contracts, patents,
copyrights, trademarks, tradenames and other intellectual property and capital
stock of subsidiaries), and the proceeds thereof, subject to exclusions based on
the Prepetition Credit Facilities with modifications to be agreed that are
customary for facilities of this type, and excluding Avoidance Actions and,
prior to entry of the Final DIP Order, proceeds of Avoidance Actions.

 

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Carve-Out:  

As used in this Term Sheet, 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 Creditors’ 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 Administrative 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
$4,000,000 incurred after the first business day following delivery by the
Administrative 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 Administrative
Agent to the Debtors, their lead restructuring counsel, the U.S. trustee, and
counsel to the Creditors’ Committee, which notice may be delivered following the
occurrence and during the continuation of an Event of Default and acceleration
of the DIP Facility, stating that the Post-Carve-Out Trigger Notice Cap has been
invoked.

 

On the day on which a Carve-Out Trigger Notice is given by the Administrative
Agent to the Debtors with a copy to counsel to the Creditors’ Committee (the
“Termination Declaration Date”), the Carve-Out Trigger Notice shall (i) be
deemed a draw request and notice of borrowing by the US Borrower for DIP Loans
under the DIP Commitment (on a pro rata basis based on the then outstanding DIP
Commitments), in an amount equal to the then unpaid amounts of the Allowed
Professional Fees (any such amounts actually advanced shall constitute DIP
Loans) and (ii) also constitute a demand to the US Borrower 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 Administrative 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 be deemed a request by the Debtors for DIP Loans under
the DIP Commitment (on a pro rata basis based on the then outstanding DIP
Commitments), in an amount equal to the Post-Carve-Out Trigger Notice Cap (any
such amounts actually advanced shall constitute DIP Loans). The Debtors shall
deposit and hold such amounts in a segregated account at the Administrative
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 Administrative Agent gives such notice to such DIP Lenders, notwithstanding
anything in the Term Sheet to the contrary, including with respect to the
existence of a Default or Event of Default, the

 

5

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failure of the Debtors to satisfy any or all of the conditions precedent for DIP
Loans under the DIP Facility, any termination of the DIP Commitments following
an Event of Default, or the occurrence of the Scheduled Termination Date, each
DIP Lender with an outstanding Commitment (on a pro rata basis based on the then
outstanding Commitments) shall make available to the Administrative Agent such
DIP Lender’s pro rata share with respect to such borrowing in accordance with
the DIP Facility. 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 Administrative Agent for the benefit of the DIP
Lenders, unless the DIP Facility has been indefeasibly paid in full in cash and
all Commitments have been terminated, in which case any such excess shall be
paid to the Prepetition Secured Lenders 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 Administrative Agent for the benefit of the
DIP Lenders, unless the DIP Facility has been indefeasibly paid in full in cash
and all Commitments have been terminated, in which case any such excess shall be
paid to the Prepetition Secured Lenders in accordance with their rights and
priorities as of the Petition Date. Notwithstanding anything to the contrary in
this Term Sheet, if either of the Carve-Out Reserves is not funded in full in
the amounts set forth herein, 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 herein, prior to making any payments to the
Administrative Agent or the Prepetition Secured Lenders, as applicable.
Notwithstanding anything to the contrary in the Term Sheet, following delivery
of a Carve-Out Trigger Notice, the Administrative Agent and the Prepetition
Secured Lenders 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 Administrative Agent for application in accordance with this Term
Sheet. Further, notwithstanding anything to the contrary in this Term Sheet, (i)
disbursements by the Debtors from the Carve-Out Reserves shall not constitute
DIP Loans or increase or reduce the DIP Facility, (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 initial
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 herein or in the
Prepetition Credit Facilities, the Carve-Out shall be senior to all liens and
claims securing the DIP Facility, and any and all other forms of adequate
protection, liens, or claims securing the DIP Facility.

 

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.

 

Any payment or reimbursement made on or after the occurrence of the Termination
Declaration Date in respect of any Allowed Professional Fees shall

 

6

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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 Facility secured by
the Collateral and shall be otherwise entitled to the protections granted under
the order approving the DIP Facility, the Bankruptcy Code, and applicable law.

 

Notwithstanding the foregoing, the Carve-Out shall not include, apply to or be
available for any fees or expenses incurred by any party in connection with (a)
the investigation, initiation or prosecution of any claims, causes of action,
adversary proceedings or other litigation (i) against any of the DIP Lenders,
the Administrative Agent, or the Prepetition Secured Lenders, or (ii)
challenging the amount, validity, perfection, priority or enforceability of or
asserting any defense, counterclaim or offset to, the obligations and the liens
and security interests granted under the DIP Loan Documents or the indebtedness
described in “Certain Prepetition Debt Facilities” above (whether in such
capacity or otherwise), including, in each case, without limitation, for lender
liability or pursuant to section 105, 510, 544, 547, 548, 549, 550, or 552 of
the Bankruptcy Code, applicable non-bankruptcy law or otherwise; (b) attempts to
modify any of the rights granted to the DIP Lenders or the Administrative Agent;
(c) attempts to prevent, hinder or otherwise delay any of the DIP Lenders’ or
the Administrative Agent’s assertion, enforcement or realization upon any
Collateral in accordance with the DIP Loan Documents and the Final DIP Order
other than to seek a determination that an event of default has not occurred or
is not continuing; or (d) paying any amount on account of any claims arising
before the commencement of the Cases unless such payments are approved by an
order of the Bankruptcy Court; provided, however, that the Carve Out and such
collateral proceeds and loans under the DIP Loan Documents may be used for
allowed fees and expenses, in an amount not to exceed $50,000 in the aggregate
(the “Investigation Fund”), incurred solely by the Creditors’ Committee in
investigating any potential Challenges (as defined in the Interim DIP Order)
during the Challenge Period (as defined in the Interim DIP Order); provided
further, however, that the Investigation Fund shall not be used for fees and
expenses incurred to initiate, assert, join, commence, support, or prosecute any
Challenges.

 

Adequate Protection:  

As protection in respect of (x) the incurrence of the DIP Facility, (y) the
imposition of the automatic stay, and (z) the Debtors’ use of the Existing
Collateral including Cash Collateral, the Debtors and the DIP Lenders agree,
subject to Bankruptcy Court approval, to all of the following forms of adequate
protection (the “Adequate Protection”):

 

(a) The Existing Collateral comprising Cash Collateral may be used to the extent
set forth in this Term Sheet and the DIP Loan Documents.

 

(b) Subject to the requirements and limitations set forth in the Rolling Budget
(subject to permitted variances), Cash Collateral will only be used for the
purposes set forth in the Rolling Budget (subject to permitted variances),
without prior written authorization of the Required DIP Lenders (in their
reasonable discretion), provided that Cash Collateral will only be used in
accordance with the DIP orders entered by the Bankruptcy Court from time to
time.

 

(c) From the date of the Interim DIP Order to the DIP Facility Termination Date,
and except to the extent of the Carve-Out, no claim may be asserted against the
Administrative Agent, the DIP Lenders, or the Prepetition Secured Lenders, each
in their capacity as such, to charge any expenses of administration of the Cases
or any future proceeding that may result therefrom, including liquidation in
bankruptcy or other proceedings under the Bankruptcy Code, against the
Collateral or the Existing Collateral or recover such expenses from

 

7

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the Collateral or the Existing Collateral pursuant to section 506(c) of the
Bankruptcy Code or any similar principle of law, without the prior written
consent of the Required DIP Lenders and the Prepetition Secured Lenders, and no
such consent shall be implied from any other action, inaction, or acquiescence
by the DIP Lenders or Prepetition Secured Lenders.

 

(d) The Primed Parties whose liens will be primed as described above, and whose
Cash Collateral will be authorized for use by the Loan Parties, will receive as
adequate protection, pursuant to sections 361, 363(e) and 364(d)(1) of the
Bankruptcy Code:

 

(i) current cash payment of professional fees and expenses otherwise
reimbursable under the Prepetition Credit Facilities,

 

(ii) to the extent of any diminution in value of their prepetition security
interests, replacement or, if applicable, new liens on the Collateral that are
junior to the liens securing the DIP Facility, and

 

(iii) to the extent of any diminution in value of their prepetition security
interests, superpriority claims as provided for in section 507(b) of the
Bankruptcy Code that are junior to the DIP Superpriority Claims.

Conditions Precedent to Effectiveness:   The effectiveness of the DIP Loan
Documents (the “Closing”; the date on which the Closing occurs, the “Closing
Date”) and the availability of the DIP Facility shall be subject to the
satisfaction (or waiver) of customary conditions for DIP financings of this
type. Conditions Precedent to each Borrowing:   Each borrowing under the DIP
Facility will be subject to the satisfaction (or waiver) on each Delayed Draw
Funding Date of conditions based on those set forth in the Prepetition Credit
Facilities, subject to customary modifications for facilities of this type.
Representations and Warranties:   The DIP Loan Documents will contain
representations and warranties based on the Prepetition Credit Facilities,
subject to customary modifications for facilities of this type to reflect the
Cases and events or circumstances impacting thereon. Affirmative and
Negative Covenants:   The DIP Loan Documents will contain affirmative and
negative covenants based on the Prepetition Credit Facilities, subject to
modifications customary for facilities of this type to reflect the Cases and
events or circumstances impacting thereon; provided that the Loan Parties will
be permitted to make investments in, or otherwise make payments to, non-Loan
Party subsidiaries of the Company in an aggregate amount not to exceed $5.0
million. Financial Covenants:  

The DIP Facility will contain only the following Financial Covenants:

 

(a) Tested weekly as of the last business day of each week (each such day, a
“Test Date”) for the applicable Test Period (as defined below) ending on such
Test Date against the most recent Rolling Budget that covers such Test Period,
the Company shall not allow (i) the aggregate receipts of the Company and its
subsidiaries to be less than the Variance Percentage (for the applicable Test
Period) of the aggregate receipts line item for the Company and its subsidiaries
and (ii) the aggregate operating disbursements (excluding professional fees and
expenses) made by the Company and its subsidiaries to be greater than the
Variance Percentage (for the applicable Test Period) of the aggregate operating
disbursements line item. The Financial Covenant set forth in this clause (a) is
referred to as the “Budget Variance Financial Covenant”. For purposes hereof,
“Test Period” means (i) in respect of the first Test Date covered in the most
recent Rolling Budget, the one-week period ending on such Test Date (the “First
Test Period”), (ii) in respect of the second Test Date covered in the most
recent Rolling Budget, the two-week period ending on such Test Date (the

 

8

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  “Second Test Period”), (iii) in respect of the third Test Date covered in the
most recent Rolling Budget, the three-week period ending on such Test Date (the
“Third Test Period”) and (iv) in respect of any subsequent Test Date covered in
the most recent Rolling Budget, the four-week period ending on such Test Date
(each, a “Subsequent Test Period”). As used herein, “Variance Percentage” means
the corresponding percentage below:

 

Test Period

   Variance Percentage      Receipts     Disbursements  

First Test Period

     75 %      125 % 

Second Test Period

     75 %      125 % 

Third Test Period

     80 %      120 % 

Subsequent Test Period

     80 %      120 % 

 

  (b) Tested monthly, the Company shall not make any capital expenditures,
except for capital expenditures not exceeding an amount equal to the applicable
amount set forth below for the period beginning on the Closing Date and ending
on the last day of such month.

 

Fiscal Month

   Capital Expenditures  

August 2016

   $ 15,560,000   

September 2016

   $ 21,550,000   

October 2016

   $ 27,540,000   

November 2016

   $ 33,530,000   

December 2016

   $ 39,510,000   

January 2017

   $ 46,540,000   

February 2017

   $ 53,660,000   

March 2017

   $ 61,870,000   

 

Case Milestones:  

The DIP Loan Documents shall require compliance with the following milestones
(the “Case Milestones”) in accordance with the applicable timing referred to
below (or such later dates as approved by the Required DIP Lenders):

 

(a)    approval of the DIP Facility in form and substance satisfactory to the
DIP Lenders on an interim basis within 7 calendar days after the Petition Date
(or such later date as the Required DIP Lenders may agree in their reasonable
discretion);

 

(b)    approval of the DIP Facility in form and substance satisfactory to the
DIP Lenders on a final basis within 40 calendar days after the entry of the
Interim DIP Order (or such later date as the Required DIP Lenders may agree in
their reasonable discretion);

 

(c)    as promptly as possible but in no event later than 30 calendar days after
the Petition Date, the Debtors shall have filed a plan of reorganization (an
“Acceptable Plan of Reorganization”) and disclosure statement (an “Acceptable
Disclosure Statement”) that are, in each case, acceptable to the DIP Lenders in
their sole discretion;

 

(d)    approval of the Acceptable Disclosure Statement within 90 calendar days
after the Petition Date;

 

9

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(f)     confirmation of the Acceptable Plan of Reorganization within 130
calendar days after the Petition Date (the “Confirmation Date”); and

 

(g)    effectiveness of the Acceptable Plan of Reorganization by no later than
21 calendar days following the Confirmation Date.

 

To the extent the milestones set forth above are extended pursuant to the
restructuring support agreement among the Loan Parties and the Steering
Committee Lenders (the “Restructuring Support Agreement”), such milestones shall
also be extended by such amount for purposes of the DIP Facility.

 

Failure by the Company to meet any of the foregoing milestones shall constitute
an event of default under the DIP Loan Documents and shall cause the consensual
use of Cash Collateral (described in the “Adequate Protection” section of this
Term Sheet) to be terminated.

Financial Reporting Requirements:  

Limited to the following:

 

(a) monthly unaudited consolidated financial statements of the Company and its
subsidiaries (together with a consolidating balance sheet and income statement
of the Loan Parties and their subsidiaries that are not Loan Parties) within 30
days after the end of each fiscal month, certified by the Company’s chief
financial officer, chief accounting officer or treasurer;

 

(b) quarterly unaudited consolidated financial statements of the Company and its
subsidiaries (together with a consolidating balance sheet and income statement
of the Loan Parties and their subsidiaries that are not Loan Parties) within 45
days of quarter-end for the first 3 fiscal quarters of the fiscal year,
certified by the Company’s chief financial officer, chief accounting officer or
treasurer;

 

(c) annual audited consolidated financial statements of the Company and its
subsidiaries (together with a consolidating balance sheet and income statement
of the Loan Parties and their subsidiaries that are not Loan Parties, which
consolidating balance sheet and income statement shall not be required to be
audited) within 90 days of year-end, accompanied by an audit report (which may
be subject to qualifications and exceptions in respect of the financial
condition of the Company and its subsidiaries) with respect to such consolidated
statements by KPMG LLP, any other “Big 4” accounting firm or other independent
certified public accountants reasonably acceptable to the Required DIP Lenders;

 

(d) copies of all reports on Form 10-K, 10-Q or 8-K filed by the Company or its
subsidiaries with the Securities and Exchange Commission;

 

(e) weekly flash reporting of cash and cash equivalents, including both book and
bank balances, substantially the same as the flash reporting required under that
certain Forbearance Agreement dated May 31, 2016 among the Borrowers, the other
loan parties under the Prepetition Credit Agreement party thereto, certain of
the Prepetition Secured Lenders and the other parties thereto; and

 

(f) periodic reporting of professional fees and expenses to be determined.

 

Any of the foregoing requirements under clauses (a), (b), (c) and (d) will be
permitted to be satisfied by means of filing the applicable statements with the
SEC or other authority or posting the applicable statements to a
publicly-available website, in each case as and to the extent permitted under
the Prepetition Credit Facility.

 

10

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Budget Reporting:  

Limited to the following:

 

1. The Company shall deliver on the Closing Date, in each case in form and
substance reasonably satisfactory to the Lenders:

 

(i) monthly projections for the nine months after the Closing Date (such budget,
as amended, modified or supplemented in a manner reasonably satisfactory to the
Required Lenders, the “DIP Budget”); and

 

(ii) a thirteen (13) week budget for the Approved Purposes, including use of
Cash Collateral (starting with the week of the Petition Date), which sets forth,
among other things, on a cumulative roll-forward basis, the projected cash
disbursements and projected cash receipts for each applicable week (such budget,
the “Initial Rolling Budget”).

 

2. The Company shall deliver to the Administrative Agent on the third business
day of each 4-week period following the Closing Date:

 

(i) a new thirteen (13) week budget for the Approved Purposes, including use of
Cash Collateral, in form substantially similar to the Initial Rolling Budget and
in substance reasonably satisfactory to the Required Lenders (such budget,
together with the Initial Rolling Budget, the “Rolling Budget”) (subject to a
deemed consent construct if the Required Lenders do not dispute any such budget
within 5 business days after delivery of such budget).

 

3. The Company shall deliver to the Administrative Agent, in form reasonably
satisfactory to the Required Lenders, on the third business day of each week for
the applicable Test Period ending on the last business day of the prior week:

 

(i) a report (the “Budget Compliance Report”) that sets forth, for such Test
Period, a comparison of the actual cash disbursements and actual cash receipts
to the projected cash disbursements (other than in respect of professional fees
and expenses) and projected cash receipts set forth in the most recent Rolling
Budget for such period, together with a certification from the Company that it
is in compliance with the Budget Variance Financial Covenant.

 

Notwithstanding the forgoing, the DIP Loan Documents will provide that the
Company will be permitted to pay all professional fees and expenses
notwithstanding the information disclosed in any financial report delivered
thereunder.

Events of Default:   The DIP Loan Documents will contain events of default based
on the Prepetition Credit Facilities, subject to modifications consistent for
facilities of this type to reflect the Cases and events or circumstances
impacting thereon. The termination of the Restructuring Support Agreement in
accordance with its terms shall constitute an event of default under the DIP
Loan Documents. Expenses and Indemnification:   The DIP Loan Documents will
contain provisions for payment of expenses and indemnification of the
Administrative Agent and the DIP Lenders based on the Prepetition Credit
Facilities. Assignments and Participations:   Assignments must be in a minimum
amount to be mutually agreed (or, if less, the remaining commitments and/or DIP
Loans of any assigning DIP Lender) and are subject to the consent of the Company
(absent a continuing Event of Default) and the Administrative Agent, except, in
each case, with respect to any assignment to a DIP Lender, an affiliate of such
a DIP Lender or a fund engaged in investing in commercial loans that is advised
or managed by such a DIP Lender. No participation shall include voting rights,
other than for matters requiring consent of all affected DIP Lenders. Required
DIP Lenders:   DIP Lenders holding, in the aggregate, more than 50.0% of the
outstanding commitments and/or exposure under the DIP Facility (the
“Required DIP Lenders”).

 

11

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Amendments:   Required DIP Lenders, except for amendments customarily requiring
approval by directly and adversely affected DIP Lenders based on the Prepetition
Credit Facilities, subject to modifications consistent for facilities of this
type. Miscellaneous:   The DIP Loan Documents will include (i) yield protection
provisions, (ii) waivers of consequential damages and jury trial, and (iii)
agency, set-off and sharing language, in each case based on the Prepetition
Credit Facilities. Governing Law and Submission to Exclusive Jurisdiction:  
State of New York (and, to the extent customary for DIP financings, the
Bankruptcy Code). Counsel to the Administrative Agent:   Davis Polk & Wardwell
LLP.

 

12

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EXHIBIT B

Form of Joinder Agreement

--------------------------------------------------------------------------------

Joinder Agreement

[            ], 2016

The undersigned (“Transferee”) hereby acknowledges that it has read and
understands the Restructuring Support Agreement, dated as of [            ],
2016, a copy of which is attached hereto as Annex I (as it may be amended,
supplemented, or otherwise modified from time to time, the “Restructuring
Support Agreement”),1 by and among the Company Parties and the Supporting
Creditors.

1. Agreement to be Bound. The Transferee hereby agrees to be bound by all of the
terms of the Restructuring Support Agreement. The Transferee shall hereafter be
deemed to be a “Supporting Creditor” and a “Party” for all purposes under the
Restructuring Support Agreement.

2. Representations and Warranties. With respect to the aggregate principal
amount of Holdings Credit Agreement Claims set forth below its name on the
signature page hereof, the Transferee hereby makes the representations and
warranties of the Supporting Creditors set forth in Section 4.06 of the
Restructuring Support Agreement to each other Party.

3. Governing Law. This joinder agreement (the “Joinder Agreement”) to the
Restructuring Support Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware, without regard to any conflicts
of law provisions which would require the application of the law of any other
jurisdiction.

* * * * *

[Remainder of Page Intentionally Left Blank]

 

 

1  Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Restructuring Support Agreement.

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Transferee has caused this Joinder Agreement to be
executed as of the date first written above.

 

Name of Transferor:  

 

   Name of Transferee:  

 

  

 

By:  

 

Name:  

 

Title:  

 

Principal Amount of Term Loan Transferred: $        

Principal Amount of Revolving Loan Transferred: $        

 

Notice Address:

 

 

 

Fax:  

 

Attention:  

 

With a copy to:

 

 

 

Fax:  

 

Attention: