Exhibit 10.1

Execution Version

 

THIS RESTRUCTURING SUPPORT 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 AGREEMENT
shall be an admission of fact or liability or, UNTIL the occurrence of the
Agreement effective date on THE TERMS DESCRIBED IN THIS RESTRUCTURING SUPPORT
AGREEMENT, deemed binding on any of the parties TO THIS RESTRUCTURING SUPPORT
AGREEMENT.

Restructuring Support Agreement

This Restructuring Support Agreement (this agreement, including all exhibits and
schedules attached hereto, as each may be amended, restated, supplemented, or
otherwise modified from time to time in accordance with the terms hereof, this
“Agreement”)1 is made and entered into as of October 26, 2018, by and among the
following parties (each of the parties described in Sub-Clauses (i), (ii), and
(iii), a “Party” and, collectively, the “Parties”):

 

i.

Gastar Exploration Inc. (“Gastar”); its undersigned subsidiary Northwest
Property Ventures LLC; and any other future subsidiary of Gastar (each a
“Company Party” and collectively, the “Company” or the “Company Parties”);

 

ii.

AF V Energy I Holdings, L.P., as a lender (the “Consenting Term Lender”) party
to the Third Amended and Restated Credit Agreement, dated March 3, 2017 (as
amended, restated, modified, or supplemented from time to time, the “Term Credit
Agreement”), by and among Gastar, as borrower, the guarantors specified in the
Term Credit Agreement or in related transaction documentation, the lenders from
time to time party thereto and Wilmington Trust, National Association, as
administrative agent and collateral agent (solely in such capacities, the “Term
Agent”);

 

iii.

the undersigned holders of notes (the “Second Lien Notes”) issued pursuant to
the Indenture dated March 3, 2017 (as amended, restated, modified or
supplemented from time to time, the “Second Lien Indenture”), by and among
Gastar, as issuer, the guarantors specified in the Second Lien Indenture or in
related transaction documentation, and Wilmington Trust, National Association,
as trustee and collateral agent (solely in such capacities, the “Second Lien
Trustee”) and any other holder of Second Lien Notes that may become party to
this Agreement pursuant to Section 6 below (collectively, the “Consenting Second
Lien Noteholders” and, together with the Consenting Term Lender, the “Consenting
Creditors”); and

 

iv.

the entities identified on Annex 1 to the Restructuring Term Sheet, in their
capacities as holders of Gastar’s outstanding common shares (such common shares,
together with any and all outstanding and unexercised or unvested warrants,
options or rights

 

1

Capitalized terms used but not otherwise defined in this document have the
meanings ascribed to such terms in the term sheet attached to this Agreement as
Exhibit A (the “Restructuring Term Sheet”), subject to Section 2 hereof.

 

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to acquire Gastar’s currently outstanding equity, the “Existing Common Equity”)
(in such capacities, the “Ares Equity Holders”; together with the Consenting
Creditors, the “Consenting Parties”).

RECITALS

WHEREAS, the Parties have engaged in good faith, arm’s-length negotiations
regarding the restructuring and recapitalization of the Company, including with
respect to the Company’s respective obligations under the Term Credit Agreement
and the Second Lien Indenture;

WHEREAS, the Parties desire to effectuate a restructuring of the Company as set
forth in the Restructuring Term Sheet.  Such restructuring shall be implemented
pursuant to a “prepackaged” chapter 11 plan of reorganization (as may be amended
or supplemented from time to time in accordance with the terms of this
Agreement, the “Plan”) reflecting the Economic Terms set forth in Restructuring
Term Sheet and the various transactions set forth in or contemplated by the
Restructuring Term Sheet, the DIP Term Sheet (defined below) and the Exit Term
Sheet (defined below) (collectively, the “Restructuring Transaction”);

WHEREAS, the Company will commence solicitation of the Plan prior to the
commencement of the Chapter 11 Cases.  In connection with such solicitation, the
Company shall prepare and deliver to all classes of claims entitled to vote on
the Plan a disclosure statement relating to the Plan (as may be amended or
supplemented from time to time in accordance with the terms of this Agreement,
the “Disclosure Statement”);

WHEREAS, the Company will commence voluntary cases under chapter 11 of the
Bankruptcy Code2 (the “Chapter 11 Cases”) in the United States Bankruptcy Court
for the Southern District of Texas (the “Bankruptcy Court”);

WHEREAS, upon commencement of such Chapter 11 Cases, the Company will file the
Plan and the Disclosure Statement, seek approval of the Disclosure Statement,
and seek confirmation of the Plan, in each case, in accordance with the
milestones and other terms set forth in the Restructuring Term Sheet;

WHEREAS, subject to the conditions set forth in this Agreement, certain
Consenting Parties and/or their affiliates have agreed to provide, on a
committed basis, the Company with superpriority debtor-in-possession financing
(the “DIP Facility”) on terms set forth in the term sheet attached to this
Agreement as Exhibit D (the “DIP Term Sheet”);

WHEREAS, among other things, the DIP Facility will fund the operations of the
Company through the consummation of the Restructuring Transaction on the terms
and subject to the conditions set forth in the DIP Term Sheet;

WHEREAS, subject to the conditions set forth in this Agreement, certain
Consenting Parties and/or their affiliates have agreed to provide on a committed
basis the Company with an exit financing term loan facility (the “Exit
Facility”) on the terms set forth in the term sheet attached to this Agreement
as Exhibit E (the “Exit Facility Term Sheet” and, together with the DIP Term
Sheet, the “Term Sheets”); and

 

2

“Bankruptcy Code” means title 11 of the United States Code, as amended.

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WHEREAS, the following sets forth the agreement among the Parties concerning
their respective rights and obligations in respect of the Restructuring
Transaction.

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

AGREEMENT

Section 1.Agreement Effective Date.  This Agreement shall become effective and
binding upon each of the Parties on the date:  (a) each of the Company Parties
has executed and delivered counterpart signature pages of this Agreement to
counsel to the Consenting Parties; (b) holders of 100% of the aggregate
principal amount of all claims outstanding under the Term Credit Agreement (any
such claims, the “Term Loan Claims”) have executed and delivered to the Company
counterpart signature pages of this Agreement; (c) holders of 100% of the
aggregate principal amount of all claims outstanding under the Second Lien
Indenture (any such claims, the “Second Lien Claims”) have executed and
delivered to the Company counterpart signature pages of this Agreement; and
(d) the Ares Equity Holders have executed and delivered to the Company
counterpart signature pages of this Agreement (such date, the “Agreement
Effective Date”).

Section 2.Exhibits and Schedules Incorporated by Reference.  Each of the
exhibits to this Agreement (including, but not limited to, the Restructuring
Term Sheet, the DIP Term Sheet, and the Exit Facility Term Sheet) and any
schedules or annexes to such exhibits (collectively, the “Exhibits and
Schedules”) is expressly incorporated into, and made a part of, this
Agreement.  As used in this Agreement, all references to this Agreement shall
include the Exhibits and Schedules.  In the event of any inconsistency between
this Agreement (without reference to the Exhibits and Schedules) and the
Exhibits and Schedules, this Agreement (without reference to the Exhibits and
Schedules) shall govern.

Section 3.Definitive Documentation.  

(a)The definitive documents and agreements governing the Restructuring
Transaction (collectively, the “Definitive Documents”) shall consist of this
Agreement and each of the following documents:

(i)the Plan (and all exhibits to the Plan);

(ii)the Disclosure Statement and the other solicitation materials in respect of
the Plan (such materials, collectively, the “Solicitation Materials”);

(iii)the order of the Bankruptcy Court (x) confirming the Plan, (y) approving
the Disclosure Statement and Solicitation Materials as containing, among other
things, “adequate information” as required by section 1125 of the Bankruptcy
Code and (z) approving the prepetition and/or postpetition solicitation of the
Plan (the “Confirmation Order”);

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(iv)all other documents that are contained in any supplements filed in
connection with the Plan (collectively, the “Plan Supplement”);

(v)(1) the interim order or orders authorizing the use of cash collateral and
the DIP Facility (each, an “Interim DIP Order”) and (2) the final order or
orders authorizing the use of cash collateral and the DIP Facility (each, a
“Final DIP Order” and together with each Interim DIP Order, collectively, the
“DIP Orders”);

(vi)the post-petition debtor-in-possession credit agreement (the “DIP Credit
Agreement”) for the DIP Facility to be entered into in accordance with the DIP
Orders by the Company Parties, Wilmington Trust, National Association, as
administrative agent, and the lenders party thereto, including any amendments,
modifications, supplements thereto, and together with any related notes,
certificates, agreements, security agreements, documents, and instruments
(including any amendments, restatements, supplements, or modifications of any of
the foregoing) related to or executed in connection therewith (together with the
DIP Credit Agreement, collectively, the “DIP Loan Documents”);

(vii)the agreements memorializing any exit financing facilities, including any
amendments, modifications, supplements thereto, and together with any related
notes, certificates, agreements, intercreditor agreements, security agreements,
documents, and instruments (including any amendments, restatements, supplements,
or modifications of any of the foregoing) related to or executed in connection
with any exit financing (collectively, the “Exit Financing Documents”);

(viii)any documents relating to the formation, organization or governance of any
Company Party or the rights of holders or interests, directly or indirectly, in
any Company Party (collectively, the “Governance Documents”); and

(ix)the Hedge Party Restructuring Support Agreement dated as of October 26, 2018
(including all exhibits and schedules attached thereto, as each may be amended,
restated, supplemented, or otherwise modified from time to time, the “Hedge
RSA”) by and between the Company Parties and the Hedge Parties (as defined in
the Hedge RSA), in their capacities as holders of claims arising under or
related to the Debtors’ prepetition hedging and/or swaps program (the “Hedge
Obligations”), including any market-to-market liability outstanding as of the
Petition Date or any net claims arising out of any termination thereof on or
prior to the Petition Date).

(b)Certain of the Definitive Documents remain subject to negotiation and
completion and shall, upon completion, contain terms, conditions,
representations, warranties, and covenants consistent with the terms of this
Agreement.  Except as provided in the immediately succeeding sentence, all such
Definitive Documents shall be in form and substance reasonably acceptable to the
Company Parties and the Consenting Parties.  Notwithstanding the foregoing,
(i) the Plan, the Plan Supplement (but excluding any Governance Documents in
such Plan Supplement), the Disclosure Statement, the DIP Orders, the DIP Loan
Documents, and the Exit Financing Documents shall each be in form and substance
satisfactory to the Consenting Parties and the Company Parties, each in their
sole discretion, and (ii) each of the Governance Documents shall be in form and
substance satisfactory solely to the Consenting Parties in their sole
discretion.

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Section 4.Milestones.  As provided in and subject to Section 5.02, the Company
shall implement the Restructuring Transaction in accordance with, and within the
time contemplated for the satisfaction of, the milestones set forth in the
Restructuring Term Sheet (the “Milestones”).  Each Milestone shall be subject to
extension or waiver only in the sole discretion of the Consenting Parties.

Section 5.Commitments Regarding the Restructuring Transaction.

5.01.Commitment of the Consenting Parties.

(a)From the Agreement Effective Date until the occurrence of a Termination Date
(as defined in Section 12.05) applicable to the Consenting Parties, each of the
Consenting Parties agrees (on a several but not joint basis) to:

(i)to the extent permitted to vote to accept or reject the Plan (and subject to
the actual receipt by such Consenting Party of the Disclosure Statement and the
Solicitation Materials, in each case, approved by the Bankruptcy Court as
containing “adequate information” as such term is defined in section 1125 of the
Bankruptcy Code), vote each of its claims against the Company (including each of
its Term Loan Claims, Second Lien Claims, and any other claims against the
Company (such claims the “Debtor Claims”)) and any interests in the Company
(such interests, the “Debtor Interests” and collectively with the Debtor Claims,
the “Debtor Claims/Interests”) to accept the Plan by delivering its duly
executed and completed ballot(s) accepting the Plan on a timely basis;

(ii)negotiate in good faith the Definitive Documents and use reasonable best
efforts to take any and all necessary and appropriate actions in furtherance of
the Restructuring Transaction, the Plan and this Agreement;

(iii)use reasonable best efforts to support and take all actions necessary or
appropriate to facilitate the solicitation, confirmation and consummation of the
Restructuring Transaction and the Plan;

(iv)consent to and use reasonable best efforts to support the release,
discharge, exculpation, and injunction provisions contained in the Definitive
Documents and, if applicable, not “opt out” of such provisions in the Plan;

(v)not (A) object to or join in any objection to, and use reasonable best
efforts to support approval of the Solicitation Materials, the Disclosure
Statement Order, the DIP Orders, and the Confirmation Order, or (B) file any
motion, pleading, or other document with the Bankruptcy Court or any other court
(including any modifications or amendments thereof) that is not materially
consistent with this Agreement or the Plan;

(vi)not change or withdraw (or cause to be changed or withdrawn) any vote(s) to
accept the Plan.  However, if a Termination Date occurs before consummation of
the Restructuring Transaction, to the greatest extent permitted by law, all
votes tendered by such Consenting Parties to accept the Plan shall be
immediately revoked and deemed void ab initio in accordance with Section 12;

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(vii)not (A) object to, delay, impede, or knowingly take any other action to
interfere with the acceptance, implementation, or consummation of the
Restructuring Transaction, (B) propose, file, support, or vote for any actual or
proposed transaction involving any or all of (1) another financial and/or
corporate restructuring of the Company, (2) the issuance, sale, or other
disposition of any equity or debt interests, or any material assets, of the
Company, or (3) a merger, acquisition, disposition, consolidation, business
combination, joint venture, liquidation, dissolution, winding up, assignment for
the benefit of creditors, recapitalization, refinancing, or similar transaction
involving the Company, other than the Restructuring Transaction (each, an
“Alternative Transaction”), or (C) support, encourage or direct any other person
or entity to take any action prohibited by either (A) or (B) of this Section
5.01(a)(vii).

(b)Notwithstanding the foregoing, nothing in this Agreement and neither a vote
to accept the Plan by any Consenting Party nor the acceptance of the Plan by any
Consenting Party shall: (i) be construed to prohibit any Consenting Party from
contesting whether any matter, fact, or thing is a breach of, or is inconsistent
with, this Agreement or the other Definitive Documents, complying with
applicable law, or exercising any rights (including any consent and approval
rights contemplated under this Agreement or the other Definitive Documents) or
remedies specifically reserved in this Agreement or the other Definitive
Documents; (ii) be construed to prohibit or limit any Consenting Party from
appearing as a party-in-interest in any matter to be adjudicated in the Chapter
11 Cases, so long as, during the period from the Agreement Effective Date until
the occurrence of a Termination Date (as defined in Section 12.05) applicable to
any Party (the “Effective Period”), such appearance and the positions advocated
are not inconsistent with this Agreement; or (iii) impair or waive the rights of
any Consenting Party to assert or raise any objection permitted under this
Agreement in connection with any hearing on confirmation of the Plan or in the
Bankruptcy Court.  For the avoidance of doubt, any delay or other effect on
consummation of the Restructuring Transaction contemplated by the Plan caused by
a Consenting Party’s opposition to: (x) any relief that is inconsistent (other
than to a de minimis extent, but, in no event, if adverse to the Company
Parties) with such Restructuring Transaction; (y) a motion by the Company to
enter into, amend, modify, assume or reject an executory contract, lease, or
other arrangement outside of the ordinary course of its business without
obtaining the prior written consent of the Consenting Parties; or (z) any relief
that is adverse to the interests of the Consenting Parties sought by the Company
(or any other party) in violation of this Agreement, shall, in each case, not
constitute a violation of this Agreement.

5.02.Commitment of the Company.  

(a)From the Agreement Effective Date until the occurrence of a Termination Date
applicable to the Company, the Company Parties agree, and agree to cause any of
their direct and indirect subsidiaries to:

(i)negotiate in good faith all Definitive Documents and take any and all
necessary and appropriate actions in furtherance of the Restructuring
Transaction, the Plan, and this Agreement, including, but not limited to, the
timely filing of the Plan, the Disclosure Statement, and any other pleadings or
documents necessary to obtain confirmation of the Plan and approval of the
Disclosure Statement with the Bankruptcy Court, the submission of verified
declarations and other customary evidence in support of confirmation of the Plan
and approval of

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the Disclosure Statement, and making available any expert witnesses and key
management of the Company for any and all proceedings involving the Plan and
Disclosure Statement;

(ii)seek orders of the Bankruptcy Court in respect of the Restructuring
Transaction, including approval of the Solicitation Materials, the Disclosure
Statement Order, the DIP Orders, and the Confirmation Order;

(iii)support and seek to consummate the Restructuring Transaction in accordance
with this Agreement within the time-frames contemplated under this Agreement and
in compliance with each Milestone.

(iv)negotiate, execute and deliver any other agreements necessary to effectuate
and consummate the Restructuring Transaction;

(v)use reasonable best efforts to obtain any and all regulatory and/or
third‑party approvals necessary or appropriate in connection with the
Restructuring Transaction.  For the avoidance of doubt, for purposes of the
foregoing sentence and Section 12.02(c), “reasonable best efforts” with respect
to an undertaking means the obligation to take all actions that a reasonable
person desirous of achieving the result in question would use in similar
circumstances to achieve such result as expeditiously as practicable, and shall
include, without limitation, the obligation to incur costs, expend resources,
engage advisors of recognized standing, and instruct such advisors to take all
reasonable actions necessary or advisable to attain the applicable result that
is the object of the undertaking in question;

(vi)pay the reasonable and documented fees and expenses of the Consenting
Parties as set forth in Section 13 of this Agreement;

(vii)timely file an objection with the Bankruptcy Court to any motion filed with
the Bankruptcy Court by a party seeking the entry of an order: (1) directing the
appointment of a trustee or examiner (with expanded powers beyond those set
forth in section 1106(a)(3) and (4) of the Bankruptcy Code); (2) converting any
of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code;
(3) dismissing any of the Chapter 11 Cases; or (4) modifying or terminating the
Company’s exclusive right to file and/or solicit acceptances of a plan of
reorganization, as applicable;

(viii)support and use commercially reasonable efforts to consummate the DIP
Facility pursuant to the DIP Orders and the DIP Loan Documents (including the
refinancing of the Term Loans with the DIP Loans);

(ix)timely file a formal objection, in form and substance acceptable to the
Consenting Parties, to any motion, application, or adversary proceeding:
(A) challenging the validity, enforceability, perfection, or priority of, or
seeking avoidance or subordination of, any portion of the Term Loan Claims or
Second Lien Claims; or (B) asserting any other cause of action against and/or
with respect or relating to such claims or the prepetition liens securing such
claims;

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(x)to the extent that any legal or structural impediment arises that would
prevent, hinder, or delay the consummation of the transactions contemplated in
this Agreement or the Plan, negotiate in good faith appropriate additional or
alternative provisions to address any such impediment that are consistent with
this Agreement or otherwise acceptable to the Consenting Parties;

(xi)if the Company knows of a breach by any Company Party in respect of any of
the obligations, representations, warranties, or covenants of the Company set
forth in this Agreement, furnish prompt written notice (and in any event within
two (2) calendar days of such knowledge) to the Consenting Parties and promptly
take all reasonably available remedial action necessary to cure such breach by
any such Company Party;

(xii)in consultation with the Consenting Parties, timely file a formal response
to any motion or other pleading filed with the Bankruptcy Court by any party
objecting to approval of the Solicitation Materials, the Disclosure Statement
Order, the DIP Orders, the Confirmation Order, or any other Definitive Documents
contemplated under this Agreement;

(xiii)operate their business in the ordinary course, taking into account the
Restructuring Transaction;

(xiv)not enter into an executory contract, lease, or other arrangement outside
of the ordinary course of its business without obtaining the prior written
consent of the Consenting Parties;

(xv)not assume or reject any executory contract or unexpired lease without
obtaining the prior written consent of the Consenting Parties.

(xvi)(A) not modify, amend, supplement, waive any portion of, or terminate the
Plan or any other Definitive Documents, in whole or in part, in a manner
inconsistent (other than to a de minimis extent, but, in no event, in a manner
adverse to the Company Parties) with this Agreement, subject to Section 14 of
this Agreement, and (B) take any and all reasonably necessary and appropriate
actions in furtherance and support of the effectuation of the transactions
contemplated by, and the performance of the terms set forth in, the Hedge RSA
(including, without limitation, by complying with the obligations of the Company
Parties under the Hedge RSA and seeking to cause the other parties to the Hedge
RSA to satisfy their respective obligations under such agreement); and

(xvii)not directly or indirectly:  (A) delay, impede, or take any other action
to interfere with the acceptance, implementation, or consummation of the
Restructuring Transaction, or otherwise take any action which would, or which
would reasonably be expected to, breach or be inconsistent with this Agreement;
or (B) support, encourage or direct any other person or entity to take any
action referred to in this Section 5.02(a)(xvii).

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(b)Notwithstanding the foregoing Section 5.02(a) or any other provision of this
Agreement, without limiting the rights and obligations of the Parties under
Section 12 (including, without limitation, the Company’s termination rights
under Section 12.02):

(i)Whether or not expressly so provided in this Agreement, the Company shall:

 

(A)

promptly keep the Consenting Parties fully informed of, and reasonably consult
with the Consenting Parties with respect to: (1) the status and satisfaction of
(or failure to satisfy) each Milestone; (2) any proposal, offer or expression of
interest the Company receives for an Alternative Transaction; (3) any
negotiations or discussions described in clauses (A), (B), or (C) of the final
proviso of Section 5.02(b)(ii); and (4) any proposed budget, business plan,
forecast, projection or valuation of, or relating to, the Company;

 

(B)

promptly (and, in any event, within one (1) business day) notify counsel to the
Consenting Parties of the Company’s receipt of any proposal, offer or expression
of interest regarding any Alternative Transaction or any proposal, offer, or
expression of interest from any Qualifying Prospective Bidder (as defined
below).  Any such notice shall include the material terms of such proposal,
offer or expression of interest, including the identity of the person or group
of persons involved, any written documentation evidencing such proposal, offer
or expression of interest and any other information received relating to such
proposal, offer or expression of interest; and

 

(C)

promptly (and, in any event, within one (1) business day) inform counsel to the
Consenting Parties of (x) any determination by the Company’s board of directors
(the “Board”) (I) pursuant to Section 12.02(b) that its continued support of the
Restructuring Transaction would be a breach of its fiduciary duties under
applicable law; or (II) pursuant to Section 5.02(c) that it is entitled to take
any material action inconsistent with this Agreement or that it is entitled to
refrain from taking any material action required by this Agreement with respect
to the Restructuring Transaction as a result of applicable law or applicable
fiduciary obligations under applicable law or (y) any material changes to any of
the matters contemplated in clauses (A) and (B) of this Section 5.02(b)(i) (the
foregoing matters contemplated in this Section 5.02(b)(i) collectively, the
“Information Sharing and Consultation Rights”);

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For purposes of Section 5.02(b)(i)(A), “promptly” shall mean at least three (3)
business days in advance of the Company failing to attain any Milestone, the
occurrence of any relevant development, acting or omitting to act with respect
to any applicable matter or making any applicable decision or determination.

(ii)Immediately upon the Petition Date and thereafter, the Company: shall not
(x) propose, file, seek, solicit, or support any Alternative Transaction,
(y) induce or initiate any proposal, offer or expression of interest from any
person or entity, or (z) enter into any agreement with, provide or otherwise
make available any due diligence information (including, without limitation,
through the provision of data site access) concerning the Company to, or engage
in or continue any discussions or negotiations with, any person or entity
concerning any Alternative Transaction, except as set forth in this
Agreement.  Notwithstanding the foregoing:

 

(A)

The Company shall be entitled to at any time to engage in any discussions or
negotiations with any creditor or shareholder of the Company regarding any
matter.  However, any such creditor or shareholder must have entered into a
non-disclosure agreement or otherwise be subject to a confidentiality obligation
to the Company no less restrictive than the obligation imposed by the
non-disclosure agreement in effect with the Consenting Parties.  Any such
discussions or negotiations shall be subject to the Information Sharing and
Consultation Rights.  In addition, notwithstanding the foregoing, in the event
that any such discussions or negotiations relate to an Alternative Transaction,
such discussions or negotiations shall in all respects be subject to the
introductory paragraph of this Section 5.02(b)(ii), sub-clause (B) of this
Section 5.02(b)(ii) and clauses (iii) and (iv) of this Section 5.02(b).  

 

(B)

Immediately upon the Petition Date and thereafter, the Company shall be entitled
to engage in any discussions or negotiations with, including providing data site
access and due diligence information concerning the Company to, any party from
which the Company receives a proposal, offer or expression of interest with
respect to an Alternative Transaction after the Petition Date, only if the
Company reasonably believes it is reasonably likely that (A) such party will
make an unconditional proposal (other than any required regulatory and/or court
approvals) that is of higher value from the perspective of the Company’s
stakeholders than the Restructuring Transaction (a “Potentially Superior
Proposal”) and (B) failure to further engage with such party in respect of such
proposal, offer, or expression of interest would be inconsistent with the
fiduciary duties of the directors then serving on the Board or applicable law
(the foregoing parties, the “Qualifying Prospective Bidders”).

(iii)If the Company receives a Potentially Superior Proposal that did not result
from a breach of Section 5.02(b) of this Agreement, then the Company may
terminate this Agreement pursuant to Section 12.02(b) of this Agreement and
enter into a definitive agreement

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with respect to such Potentially Superior Proposal.  However, prior to any such
termination: (A) the Company must provide the Consenting Parties with reasonable
advance written notice (and, in any event, such notice shall be provided to the
Consenting Parties not less than four (4) business days in advance) of the
Company’s intent to so terminate this Agreement; (B) the Company shall negotiate
in good faith with the Consenting Parties, to the extent the Consenting Parties
wish to negotiate, with respect to any revisions to the terms of the
Restructuring Transaction contemplated by this Agreement proposed by the
Consenting Parties; and (C) in determining whether it may still under the terms
of this Section 5.02 terminate this Agreement, the Board shall take into account
any changes to the terms of the Restructuring Transaction proposed by the
Consenting Parties and any other information provided by the Consenting Parties
in response to such notice during such five business day period.  Any amendment
to the financial terms or conditions or other material terms of any such
Potentially Superior Proposal will be deemed to be a new Potentially Superior
Proposal for purposes of this Section 5.02(b), including with respect to the
notice period referred to in this Section 5.02(b), except that the four (4)
business day period shall be three (3) business days for such purposes.

(iv)The Company shall not enter into any confidentiality or other agreement
with, or subject itself to any confidentiality or other obligation in favor of,
a party interested in an Alternative Transaction unless such party consents to
the Company identifying and providing to counsel to the Consenting Parties
(under a reasonably acceptable confidentiality agreement) the information
contemplated under this Section 5.02(b).

(c) Nothing in this Agreement shall require the Company, the Board or any other
person or entity, after consulting with external counsel, to take any action or
to refrain from taking any action with respect to the Restructuring Transaction
to the extent taking or failing to take such action would be inconsistent with
applicable law or its fiduciary obligations under applicable law. Provided the
Board is acting consistent with its fiduciary obligations, any such action or
inaction pursuant to this Section 5.02(c) shall not be deemed to constitute a
breach of this Agreement.

5.03.Corporate Structuring Transactions.  Notwithstanding anything to the
contrary in this Agreement, the Company shall reasonably cooperate with the
Consenting Parties to structure the Restructuring Transaction (x) in a
tax-efficient manner designed to preserve the Company’s favorable tax attributes
for the benefit of the Company, as reorganized, and the new equity holders of
the Company following the consummation of the Restructuring Transaction and (y)
to enable the Company or its successor to emerge on the effective date of the
Plan (the “Effective Date”) in the organizational form, and with the tax
structure and tax elections, requested or consented to by the Consenting
Parties.  Without limiting the foregoing, and subject to the prior consent of or
at the express direction of the Consenting Parties, such tax related structuring
may be effectuated through one or more of the following means (or such other
means requested or consented to by the Consenting Parties): (a) on or prior to
the Effective Date, the Company may effectuate internal corporate
reorganizations (i) to preserve and/or house in a holding entity the Company’s
favorable tax attributes, including, without limitation, the Company’s net
operating losses, (ii) to contribute certain of the Company’s assets, or the
assets of any other Company Party, to one or more subsidiaries, (iii) to convert
into, transfer its assets to or cause the equity interests in it to be
transferred to, in each case, a limited liability company or a limited
partnership, and/or (iv) as a result of which the Consenting Parties hold a
portion of their equity

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interests in the reorganized Company through a corporation (the “Corporation”)
and another portion of such equity interests through a limited liability company
or a limited partnership and (y) the New Warrants (as defined in the Term Sheet)
are issued by the Corporation; (b) on or prior to the Agreement Effective Date,
the Consenting Second Lien Noteholders may sell or assign their Second Lien
Claims (or the rights to receive the new common stock that such holders would
receive under the Plan on account of such Second Lien Claims) to third-party
investors, subject to the terms of this Agreement; and (c) on or after the
Agreement Effective Date, the Company may issue new preferred equity or common
equity to third-party investors.

Section 6.Transfer of Debtor Claims/Interests.

(a)During the Effective Period, no Consenting Party shall sell, assign,
transfer, permit the participation in, or otherwise dispose of (each, a
“Transfer”) any ownership (including any beneficial ownership3) in the Debtor
Claims/Interests to any party (other than to an Investment Affiliate4 of such
Consenting Party or to an entity that is controlled by or is under common
control with such Consenting Party), unless the intended transferee executes and
delivers to counsel to the Company and counsel to the Consenting Parties on the
terms set forth below an executed form of the transfer agreement in the form
attached to this Agreement as Exhibit B (a “Transfer Agreement”) (a transferee
that satisfies such requirements, a “Permitted Transferee,” and such Transfer, a
“Permitted Transfer”):

(b)Notwithstanding Section 6(a): (i) the foregoing provisions shall not preclude
a Consenting Party from settling or delivering securities or bank debt that
would otherwise be subject to the terms of this Agreement to settle any
confirmed transaction pending as of the date of such Party’s entry into this
Agreement (subject to compliance with applicable securities laws and it being
understood that such securities or bank debt so acquired and held (i.e., not as
a part of a short transaction) shall be subject to the terms of this Agreement;
and (ii) a Qualified Marketmaker5 that acquires any Debtor Claims/Interests
subject to this Agreement shall not be required to execute and deliver to
counsel a Transfer Agreement in respect of such Debtor Claims/Interests if
(A) such Qualified Marketmaker transfers such Debtor Claims/Interests (by
purchase, sale, assignment, participation, or otherwise) within five (5)
business days of its acquisition to a transferee that is an entity that is not
an Affiliate, affiliated fund, or affiliated entity with a common investment
advisor; (B) the transferee otherwise is a Permitted Transferee

 

3

As used in this Agreement, the term “beneficial ownership” means the direct or
indirect economic ownership of, and/or the power, whether by contract or
otherwise, to direct the exercise of the voting rights and the disposition of,
the Debtor Claims/Interests or the right to acquire such claims or interests.

4

As used in this Agreement, “Investment Affiliate” means and refers to any entity
that (x) is organized by a holder of Debtor Claims/Interests or an affiliate
thereof for the purpose of making equity or debt investments in one or more
companies and/or is managed by, controlled by, or under common control with, a
holder of Debtor Claims/Interests or an affiliate thereof, (y) is an “accredited
investor” within the meaning of Rule 501(a)(1), (3) or (7) of Regulation D
promulgated under the Securities Act and (z) is not a disqualified person under
Rule 506(d) of Regulation D promulgated under the Securities Act.

5

As used in this Agreement, the term “Qualified Marketmaker” means an entity that
holds itself out to the public or the applicable private markets as standing
ready in the ordinary course of business to purchase from customers and sell to
customers claims of the Company (or enter with customers into long and short
positions in claims against the Company), in its capacity as a dealer or market
maker in claims against the Company.

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(including, for the avoidance of doubt, the requirement that such transferee
execute a Transfer Agreement); and (C) the transfer otherwise is a Permitted
Transfer.

(c)This Agreement shall in no way be construed to preclude any Consenting Party
from acquiring additional Debtor Claims/Interests or effecting a Transfer of all
or a portion of its Debtor Claims/Interests to an Investment Affiliate of such
Consenting Party or an entity controlled by or under common control with such
Consenting Party.  However: (i) any such Consenting Party or entity that
acquires Debtor Claims/Interests, as applicable, after the Agreement Effective
Date shall promptly notify counsel to the Company of such acquisition including
the amount of such acquisition, who shall then promptly notify counsel to the
Consenting Parties; and (ii) such Debtor Claims/Interests shall automatically
and immediately upon acquisition by such Consenting Party or entity, as
applicable, be deemed subject to the terms of this Agreement (regardless of when
or whether notice of such acquisition is given to the Company or counsel to the
Consenting Parties) and subsequent Transfers shall be subject to this Section 6.

(d)Upon the completion of any Transfer of Debtor Claims in accordance with this
Section 6, the transferee shall be deemed a Consenting Party under this
Agreement with respect to such transferred rights, obligations and claims and
the transferor of such Debtor Claims shall be deemed to relinquish its rights
and claims (and be released from its obligations under this Agreement) with
respect to such transferred Debtor Claims.

(e)Any Transfer of any Debtor Claims/Interests made in violation of this Section
6 shall be void ab initio and of no force and effect and shall not create any
obligation or liability of any Consenting Party or the Company to the purported
transferee.

Section 7.Representations and Warranties of Consenting Parties.  Each Consenting
Party, severally, and not jointly, represents and warrants for itself and not
any other person or entity that the following statements are true, correct, and
complete, to the best of its actual knowledge, as of the date of this Agreement:

(a)it is the beneficial owner of the face amount of the Debtor Claims/Interests,
or is the nominee, investment manager, or advisor for beneficial holders of the
Debtor Claims/Interests, as reflected on such Consenting Party’s signature page
to this Agreement (such Debtor Claims/Interests, the “Owned Debtor
Claims/Interests”);

(b) such 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 materially and adversely affect such
Consenting Parties’ ability to perform any of its obligations under this
Agreement at the time such obligations are required to be performed;

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

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(d)it is either (i) a qualified institutional buyer as defined in Rule 144A of
the Securities Act, (ii) 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’), (iii) a Regulation S non-U.S. person, or (iv) the
foreign equivalent of (i) or (ii) above.

Section 8.Representations and Warranties of the Company.  Each Company Party,
severally, and not jointly, represents and warrants for itself and not any other
person or entity that the following statements are true, correct, and complete,
to the best of its actual knowledge, as of the date of this Agreement and as of
the Effective Date:

(a)none of the Company Parties or any of their subsidiaries is in violation or
default of: (i) any provision of its respective organizational documents;
(ii) the terms of any material indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its property
is subject; or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or such subsidiary or any of its
properties, as applicable, in any material respect;

(b)the Company is subject to and in full compliance with the reporting
requirements of Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended;

(c)the Gastar Exploration, Ltd. Employee Change of Control Severance Plan (the
“CIC Severance Plan”) has been duly terminated and the Company has no continuing
obligations under the CIC Severance Plan;

(d)all employment and other agreements providing any party with a right to
payment under the CIC Severance Plan have been duly terminated; and

(e)except as disclosed in the Company’s periodic reports filed with the
Securities and Exchange Commission or as set forth on Schedule 1 to this
Agreement, no Company Party has any material contingent liabilities, non-compete
agreements, MFN agreements, continuing indemnification obligations or other
material obligations (aside from the Hedge Obligations or those obligations
under the Second Lien Notes or the Term Credit Agreement) that would be
accelerated, or rights that would be lost, upon the occurrence of a change of
control or the commencement of the Chapter 11 Cases.

Section 9.Mutual Representations and Warranties.  Each (i) Consenting Party,
severally, and not jointly, and (ii) Company Party, on a joint and several
basis,  represents and warrants for itself and not any other person or entity
that the following statements are true, correct, and complete, to the best of
its actual knowledge, as of the date of this Agreement:

9.01.Enforceability.  It is validly existing and in good standing under the laws
of the state of its organization.  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.

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9.02.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 Transaction contemplated by, and perform the respective
obligations under, this Agreement.

9.03.Power and Authority.  Except as expressly provided in this Agreement and
subject to applicable law, it has all requisite corporate or other power and
authority to enter into, execute, and deliver this Agreement and to effectuate
the Restructuring Transaction contemplated by, and perform its respective
obligations under, this Agreement.  Each of the Definitive Documents will be
duly authorized and, assuming due authorization, execution and delivery of such
Definitive Document by the other parties to such Definitive Document, when
executed and delivered by each Party, will constitute a legal, valid, binding
instrument enforceable against the Parties in accordance with its terms
(subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors’ rights
generally from time to time in effect and to general principles of equity).

9.04.Governmental Consents.  Except as expressly set forth in this Agreement and
with respect to the Company’s execution and performance of this Agreement (and
subject to any necessary Bankruptcy Court approval, if applicable, and/or
regulatory approvals associated with the Restructuring Transaction), 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.

9.05.No Conflicts.  The execution, delivery, and performance of this Agreement
does not and shall not: (a) conflict with any provision of law, rules, or
regulations applicable to it or any of its subsidiaries in any material respect;
(b) conflict with, breach, or result in a default under its certificate of
incorporation, bylaws, or other organizational documents or those of any of its
subsidiaries; or (c) conflict with, breach, or result in 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 Transaction.

9.06.Fiduciary Duties.  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.

9.07.Other Representations.  It has sufficient knowledge and experience to
evaluate properly the terms and conditions of the Restructuring Term Sheet, the
Plan, and this Agreement.  It has been afforded the opportunity to consult with
its legal and financial advisors with respect to its decision to execute this
Agreement, and it has made its own analysis and decision to enter into this
Agreement and otherwise investigated this matter to its full satisfaction.

Section 10.Acknowledgement.  Notwithstanding any other provision in this
Agreement, 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

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in compliance with all applicable securities laws and provisions of the
Bankruptcy Code.  The Company will not solicit acceptances of any Plan from
Consenting Parties in any manner inconsistent with the Bankruptcy Code or
applicable bankruptcy law.

Section 11.Cooperation and Support.

(a)The Company shall provide the Consenting Parties with reasonable advance
notice of and an opportunity to review and comment on all Definitive Documents
and any related notices and instruments.  Such Definitive Documents shall be
subject to the consent and approval rights of the Company and the Consenting
Parties set forth in Section 3 of this Agreement.

(b)At least five (5) days before the date on which the Company commences the
Chapter 11 Cases in accordance with the terms of the Restructuring Term Sheet
and this Agreement, the Consenting Parties shall be furnished with and have a
reasonable opportunity to review and comment on the Company’s drafts of the
first-day pleadings (the “First Day Pleadings”).  The Company shall use
commercially reasonable efforts to incorporate any comments of the Consenting
Parties to the First Day Pleadings.

(c)Additionally, during the Effective Period, the Company will use commercially
reasonable efforts to provide draft copies of any additional process letters as
well as all material motions, pleadings, and documents other than the First Day
Pleadings that the Company intends to file with the Bankruptcy Court, in each
case, to counsel to the Consenting Parties at least two (2) days before the date
on which Company intends to distribute or file such materials.  To the extent
such documents do not constitute Definitive Documents (which shall be subject to
the consent and approval rights of the Company and the Consenting Parties as set
forth in Section 3 of this Agreement), the Company shall consult in good faith
with, and reasonably consider for incorporation any comments of, counsel to the
Consenting Parties regarding the form and substance of such documents.

(d)The Company shall: (i) promptly (and, in any event, within five (5) business
days) provide to the Consenting Parties’ advisors timely, accurate and complete
responses to all reasonable due diligence requests, including those relating to
the Consenting Parties’ evaluation of the Company’s assets, liabilities,
operations, businesses, finances, strategies, prospects, and affairs; and (ii)
promptly (and, in any event, within three (3) business days) notify counsel to
the Consenting Parties of any governmental or third party litigations,
investigations, regulatory actions or hearings against or involving any of the
Company Parties.

Section 12.Termination Events.

12.01.Consenting Party Termination Events.  So long as the Consenting Parties
have not failed to perform or comply in all material respects with the terms and
conditions of this Agreement (unless such failure is the result of any act,
omission or delay on the part of any Company Party in violation of its
obligations under this Agreement), this Agreement may be terminated by the
Consenting Parties pursuant to this Section 12.01 upon prior written notice
delivered in accordance with Section 16.09 of this Agreement, upon the
occurrence and continuation of any of the following events (each, a “Consenting
Party Termination Event”):

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(a)the failure to meet any of the Milestones unless: (i) such failure is the
result of any act, omission, or delay on the part of the Consenting Parties in
material violation of their obligations under this Agreement; or (ii) such
Milestone previously has been waived by the Consenting Parties in accordance
with Section 4;

(b)the occurrence of any act, event or omission that provides the Consenting
Parties with a termination right specified in the Restructuring Term Sheet;

(c)the occurrence of a breach (other than a de minimis breach, but, in no event,
a breach that is adverse to the Company Parties) of this Agreement by any Party
other than the Consenting Parties.  However, if such breach is capable of being
cured, the breaching Party shall have ten (10) calendar days following written
notice from the Consenting Parties of the occurrence thereof to cure such
breach;

(d)the issuance by any governmental authority, including any regulatory
authority, the Bankruptcy Court, or another court of competent jurisdiction, of
any injunction, judgment, decree, charge, ruling, or order that, in each case,
would have the effect of preventing consummation of all or a material portion of
the Restructuring Transaction.  However, the Company shall have thirty (30)
calendar days after issuance of such injunction, judgment, decree, charge,
ruling, or order to obtain relief that would allow consummation of the
Restructuring Transaction in a manner that does not prevent or diminish in a
material way compliance with the terms of this Agreement;

(e)the (i) conversion of one or more of the Chapter 11 Cases of the Company
Parties to a case under chapter 7 of the Bankruptcy Code, (ii) dismissal of one
or more of the Chapter 11 Cases of the Company Parties, unless such conversion
or dismissal, as applicable, is made with the prior written consent of the
Consenting Parties, or (iii) appointment of a trustee, receiver, or examiner
with expanded powers beyond those set forth in section 1106(a)(3) or (4) of the
Bankruptcy Code in one or more of the Chapter 11 Cases;

(f)without the prior consent of the Consenting Parties, any Company Party:
(i) amends, supplements, waives any portion of, terminates or modifies, or files
a pleading seeking authority to amend, supplement, waive any portion of,
terminate or modify, the Definitive Documents; (ii) suspends or revokes the
Restructuring Transaction; or (iii) publicly announces its intention to take any
such action specified in Sub-Clauses (i) and (ii) of this
subsection.  Notwithstanding the foregoing, all Definitive Documents shall
remain subject to the consent and approval standards set forth in Section 3 of
this Agreement, and, to the extent applicable, the additional obligations with
respect to the Definitive Documents set forth in Section 5.02(a);

(g)any of the Definitive Documents do not comply with Section 3 of this
Agreement or any other document or agreement necessary to consummate the
Restructuring Transaction is not reasonably satisfactory to the Consenting
Parties;

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(h)any Company Party makes any filing in support of or seeking authority to,
enters into an agreement with respect to or consummates, or announces its
support for (i) any Alternative Transaction or that it will file any plan of
reorganization other than the Plan, or (ii) the sale of any material assets
(other than as provided for in the Plan), in each case, without the prior
written consent of the Consenting Parties;

(i)the Bankruptcy Court enters any order authorizing the use of cash collateral
or post-petition financing that is not consistent (other than to a de minimis
extent, but, in no event, in a manner adverse to the Company Parties) with this
Agreement or otherwise consented to by the Consenting Parties;

(j)the Company’s failure to consummate the DIP Facility;

(k)the occurrence of any Event of Default under the DIP Loan Documents, or the
DIP Orders, as applicable, that has not been cured (if susceptible to cure) or
waived in accordance with the terms thereof;

(l)a breach by any Company Party of any representation or warranty of such
Company Party set forth in Section 9 of this Agreement that has had, or would
reasonably be expected to have, a material adverse effect on the consummation of
the Restructuring Transaction that (to the extent curable) remains uncured for a
period of ten (10) business days after the receipt by the Company of written
notice and description of such breach from any other Party;

(m)any Company Party files a motion, application, or adversary proceeding
(or any Company Party or other Party supports any such motion, application, or
adversary proceeding filed or commence by any third party) (i) challenging the
validity, enforceability, perfection, or priority of, or seeking avoidance or
subordination of, the Term Loan Claims or the Second Lien Claims, or
(ii) asserting any other cause of action against and/or with respect or relating
to such claims or the prepetition liens securing such claims;

(n) any Company Party determines or announces that: (i) pursuant to Section
12.02(b) that its continued support of the Restructuring Transaction would be a
breach of its fiduciary duties under applicable law; or (ii) pursuant to Section
5.02(c) that it is entitled to take any material action or that it is entitled
to refrain from taking any material action with respect to the Restructuring
Transaction as a result of applicable law or applicable fiduciary obligations
under applicable law;

(o)any Company Party terminates its obligations under and in accordance with
Section 12.02 of this Agreement;

(p)the Bankruptcy Court enters an order terminating any of the Company Parties’
exclusive right to file a plan or plans of reorganization or to solicit
acceptances of such plan or plans pursuant to section 1121 of the Bankruptcy
Code;

(q)the DIP Orders or any of the orders confirming the Plan or approving the
Disclosure Statement are reversed, stayed, dismissed, vacated, reconsidered,
modified (other than to a de minimis extent, but, in no event, in a manner
adverse to the Company Parties), or

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amended (other than to a de minimis extent, but, in no event, in a manner
adverse to the Company Parties) without the consent of the Consenting Parties or
a motion for reconsideration, reargument, or rehearing with respect to such
orders has been filed and the Company has failed to timely object to such
motion;

(r)the Bankruptcy Court enters an order denying confirmation of the
Plan.  However, the Consenting Parties may not exercise the termination right
set forth in this Section 12.01(r) until five (5) business days after the entry
of such order;

(s)the occurrence of a Maturity Date (as defined in the DIP Credit Agreement);
or

(t)the date on which the Consenting Parties deliver a notice to the Company
Parties (which notice may be in the form of an e-mail to counsel to the Company
Parties) stating that the Consenting Parties are terminating the Agreement based
on their due diligence investigation of the Company Parties and the Consenting
Parties’ conclusion that such investigation reveals information that,
individually or in the aggregate, (a) has had or would reasonably be expected to
have a material adverse effect on the financial condition, business, assets,
properties, liabilities, operating results and/or operations of the Company
Parties or (b) would, or would reasonably be expected to, prevent or materially
impair the consummation of the Restructuring Transaction (any such termination,
a “Diligence Termination”).  For purposes of sub-clause (a) in the preceding
sentence, the Parties acknowledge and agree that “material adverse effect” shall
mean an adverse effect, individually or in the aggregate with one or more other
adverse effects, that causes the Company Parties to expend or incur costs,
expenses or other obligations, or suffer or incur a loss or diminution in value,
equal to or greater than $1,000,000.  Notwithstanding the foregoing, so long as
the Company has promptly and timely provided due diligence materials in response
to reasonable requests for the same made by the Consenting Parties, the
Consenting Parties may exercise the Diligence Termination only until the date
that is fifteen (15) days following the Agreement Effective Date.

The Interim DIP Order will provide that the Consenting Parties are authorized to
take any steps necessary (including, without limitation, sending any notice
contemplated under this Agreement) to effectuate the termination of this
Agreement notwithstanding section 362 of the Bankruptcy Code or any other
applicable law.  In the event of such termination, 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 Consenting Parties.  Following the commencement of the Chapter 11 Cases and
until such time as the Interim DIP Order (which includes the foregoing
provision) is entered, the occurrence of any Consenting Party Termination Event
in this Section 12.01 shall result in the automatic termination of this
Agreement five (5) days following such occurrence unless waived in writing by
the Consenting Parties.

 

12.02.Company’s Termination Events.  So long as no Company Party has failed to
perform or comply in all material respects with the terms and conditions of this
Agreement (unless such failure is the result of any act, omission, or delay on
the part of the Consenting Parties in violation of their obligations under this
Agreement), the Company may terminate this Agreement as to all Parties upon
prior written notice, delivered in accordance with Section 16.09 of this
Agreement, upon the occurrence of any of the following events:  

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(a)A material breach by any of the Consenting Parties of any provision set forth
in this Agreement that has had, or would reasonably be expected to have, a
material adverse impact on the consummation of the Restructuring Transaction
that (to the extent curable) remains uncured for a period of five (5) business
days after the receipt by the Consenting Parties of notice of such material
breach;

(b)after consultation with external counsel, the Board determines that
proceeding with the Restructuring Transaction would be inconsistent with
applicable law or its fiduciary duties under applicable law and that failure to
terminate this Agreement would be inconsistent with the exercise of its
fiduciary obligations or applicable law.  However, the Company acknowledges that
Section 5.02(b) of this Agreement applies to any deliberation regarding or
decision to exercise its termination right set forth in this Section 12.02(b);

(c)the issuance by any governmental authority, including any regulatory
authority, the Bankruptcy Court, or another court of competent jurisdiction, of
any ruling or order enjoining the consummation of all or a material portion of
the Restructuring Transaction, so long as the Company has made reasonable best
efforts to cure, vacate, reverse, or have overruled such ruling or order prior
to terminating this Agreement; or

(d) the Bankruptcy Court enters an order denying confirmation of the
Plan.  However, the Company may not exercise the termination right set forth in
this Section 12.02(d) until five (5) business days after the entry of such
order.

12.03.Mutual Termination.  This Agreement, and the obligations of all Parties
hereunder, may be terminated by mutual written agreement among each of the
Company and the Consenting Parties.

12.04.Termination upon Completion of the Restructuring Transaction.  This
Agreement shall terminate automatically without any further required action or
notice on the Effective Date.

12.05.Effect of Termination.  The earliest date on which termination of this
Agreement as to a Party is effective in accordance with Sections 12.01, 12.02,
12.03, and/or 12.04 shall be referred to as a “Termination Date.”  Upon the
occurrence of a Termination Date as to a Party, this Agreement shall be of no
further force or effect with respect to such Party.  Each Party subject to such
termination shall: (a) be released from its commitments, undertakings, and
agreements under or related to this Agreement; (b) have the rights and remedies
that it would have had, had it not entered into this Agreement; and (c) be
entitled to take all actions, whether with respect to the Restructuring
Transaction or otherwise, that it would have been entitled to take had it not
entered into this Agreement.   The termination of this Agreement with respect to
any Party shall not relieve or absolve any Party of any liability for any
breaches of this Agreement that preceded the termination of the Agreement.  Upon
the occurrence of a Termination Date with respect to the Consenting Parties, any
and all consents or ballots tendered by such Consenting Parties shall be deemed,
for all purposes, to be null and void ab initio to the fullest extent permitted
by law and shall not be used in any manner in connection with the Restructuring
Transaction or otherwise. Notwithstanding anything to the contrary in this
Agreement, the foregoing shall not be construed to prohibit a Company Party or
any of the Consenting Parties from contesting whether any such termination is in
accordance with its terms

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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 in this Agreement is intended to, or does, in any manner waive, limit,
impair, or restrict any right of any Consenting Party, or the ability of any
Consenting Party, to protect and preserve its rights (including rights under
this Agreement), remedies, and interests, including its claims against any
Company Party or Consenting Party.  Nothing in this Section 12.05 shall restrict
any Company Party’s right to terminate this Agreement in accordance with Section
12.02(b).

Section 13.Fees and Expenses.  Upon receipt of a request for payment, the
Company shall promptly pay and reimburse all reasonable and documented fees and
out-of-pocket fees and expenses of the Consenting Parties, including the fees
and expenses of all attorneys, accountants, advisors, consultants, and other
professionals of the Consenting Parties (regardless of whether such fees and
expenses are incurred before or after the Petition Date).

Section 14.Amendments; Consents and Waivers.  This Agreement (including the
Exhibits and Schedules), may not be modified, amended, or supplemented in any
manner except in writing signed by the Company and each of the Consenting
Parties.  Any proposed modification, amendment, or supplement that is not
approved by the requisite Parties as set forth above shall be ineffective and
void ab initio.  For the purposes of this Agreement and the Restructuring Term
Sheet, notwithstanding anything to the contrary in this Agreement or the
Restructuring Term Sheet any consent, waiver or exercise of discretion by the
Consenting Parties required under the Agreement or the Restructuring Term Sheet
will be effective only upon the consent, waiver or exercise of such discretion
by the (i) the Required Lenders, (ii) the Required Noteholders, and (iii) the
Ares Equity Holders.  

Section 15.Fiduciary Duties.  Nothing in this Agreement shall create any
fiduciary duty, or agent relationship, of any of the Consenting Parties to each
other, the Company or any of the Company’s creditors or other stakeholders.

Section 16.Miscellaneous.

16.01.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 in this Agreement 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
Transaction, as applicable.

16.02.Complete Agreement.  This Agreement (including the Exhibits and Schedules)
constitutes the entire agreement among the Parties with respect to the subject
matter of this Agreement and supersedes all prior negotiations, agreements, and
understandings, whether oral or written, among the Parties with respect
thereto. 

16.03.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 of this Agreement.

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16.04.GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM; WAIVER OF
TRIAL BY JURY.  THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.  Each Party to this Agreement agrees that it shall bring any
action or proceeding in respect of any claim arising out of or related to this
Agreement in either the United States District Court for the Southern District
of New York or any New York state court (the “Chosen Courts”).  Solely in
connection with claims arising under this Agreement, each Party:  (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 to this Agreement
or constitutional authority to finally adjudicate the matter.  Notwithstanding
the foregoing, if the Company Parties commence the Chapter 11 Cases, then the
Bankruptcy Court (or court of proper appellate jurisdiction) shall be the
exclusive Chosen Court.  

16.05.Trial by Jury Waiver.  EACH PARTY TO THIS AGREEMENT 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.

16.06.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.  Except as expressly
provided in this Agreement, each individual executing this Agreement on behalf
of a Party has been duly authorized and empowered to execute and deliver this
Agreement on behalf of said Party.  

16.07.Interpretation and Rules of Construction.  This Agreement is the product
of good faith negotiations among the Company and the Consenting
Parties.  Consequently, this Agreement shall be enforced and interpreted in a
neutral manner.  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 of this Agreement, shall not be effective in regard to
the interpretation of this Agreement.  The Company and the Consenting Parties
were each represented by counsel during the negotiations and drafting of this
Agreement and continue to be represented by counsel.  Accordingly, any rule of
law or any legal decision that would provide any Party with a defense to the
enforcement of the terms of this Agreement against such Party based upon lack of
legal counsel, shall have no application and is expressly waived.  In addition,
this Agreement shall be interpreted in accordance with section 102 of the
Bankruptcy Code.  For the purposes of this Agreement, the term “including” shall
mean “including, without limitation,” whether or not so specified.

16.08.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. 

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

 

(a)

if to a Company Party, to:

Gastar Exploration Inc.

1331 Lamar Street, Suite 650

Houston, TX 7710

Attention:  Michael A. Gerlich

mgerlich@gastar.com

with copies (which shall not constitute notice) to:

Kirkland & Ellis LLP
300 North LaSalle Street
Chicago, IL 60654
Attention:  Ross M. Kwasteniet, P.C.

ross.kwasteniet@kirkland.com

Douglas E. Bacon, P.C.

douglas.bacon@kirkland.com

John R. Luze

john.luze@kirkland.com

 

 

(b)

if to the Consenting Parties, to:

The address set forth on each such Consenting Party’s signature page (or as
directed by any transferee of such Consenting Party), as the case may be.

 

With a copy to counsel to the Consenting Parties (which shall not constitute
notice):

 

Milbank, Tweed, Hadley & McCloy LLP

2029 Century Park East, 33rd Floor

Los Angeles, CA 90067

Attention:  Paul S. Aronzon

paronzon@milbank.com

Thomas R. Kreller

tkreller@milbank.com

Adam Moses

amoses@milbank.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 (electronic or otherwise), or courier
shall be effective when received.  For purposes of this Agreement, any consents
or approvals of the Consenting Parties may be provided by counsel to the
Consenting Parties.

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

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

16.12.Relationship Among Parties.  Notwithstanding anything in this Agreement to
the contrary, the agreements, representations, warranties, and obligations of
the Consenting Parties under this Agreement are, in all respects, several and
not joint, and are made in favor of the Company only and not in favor of or for
the benefit of any other Consenting Party.  The agreements, representations and
obligations of the Company Parties under this Agreement are, in all respects,
joint and several.  No Party shall have any responsibility by virtue of this
Agreement for any trading by any other Entity.  Unless expressly stated in this
Agreement, this Agreement shall be solely for the benefit of the Parties and no
other person or entity shall be a third-party beneficiary of this
Agreement.  Any breach of this Agreement by a Consenting Party shall not result
in liability for any other Consenting Party.  No prior history, pattern, or
practice of sharing confidences among or between the Parties shall in any way
affect or negate this Agreement.  The Parties to this Agreement acknowledge that
this Agreement does not constitute an agreement, arrangement, or understanding
with respect to acting together for the purpose of acquiring, holding, voting,
or disposing of any equity securities of the Company and the Consenting Parties
do not constitute a “group” within the meaning of Rule 13d-5 under the
Securities Exchange Act of 1934, as amended.  No action taken by any Consenting
Party pursuant to this Agreement shall be deemed to constitute or to create a
presumption by any of the Parties that the Consenting Parties are in any way
acting in concert or as such a “group.”

16.13.Reservation of Rights.

(a)Except as expressly provided in this Agreement or the Restructuring Term
Sheet, including Section 5.01 and Section 5.02 of this Agreement, nothing in
this Agreement is intended to, or does, in any manner waive, limit, impair, or
restrict the ability of any Party to protect, preserve, and assert its rights,
remedies, defenses, claims and interests against or with respect to any of the
other Parties.

(b)Without limiting Section 12.05 and Sub-Clause (a) of this Section 16.13 in
any way, if the Plan is not consummated in the manner set forth, and on the
timeline set forth, in this Agreement, or if this Agreement is terminated for
any reason, nothing shall be construed in this

24

 

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Agreement as a waiver by any Party of any or all of such Party’s rights,
remedies, defenses, claims and interests.  Each of the Parties expressly
reserves and preserves any and all of its respective rights, remedies, defenses,
claims, and interests, subject to Section 16.10 of this Agreement.  This
Agreement, the Plan, and any related document shall in no event be construed as
or be deemed to be evidence of an admission or concession of any kind or nature
by any Party, including, but not limited to, with respect to: (i) the valuation
of any Company Party or any business of any Company Party; or (ii) the nature,
priority, extent, validity and/or perfection of the Consenting Parties’
respective liens on, claims against or interests in any Company Party’s property
or assets.

(c)Except as expressly set forth in this Agreement, nothing in this Agreement
shall be deemed to be, or construed as, a waiver or release of: (i) any secured
claim or any unsecured deficiency claim held by any Consenting Term Lender or
any Consenting Second Lien Noteholder; (ii) any claim in respect of the
Applicable Premium (as defined in the Term Credit Agreement) (a “First Lien
Make-Whole Claim”); (iii) any claim in respect of damages from the breach of the
“no-call” protections set forth in the Second Lien Indenture (including in
section 4.04 of the Second Lien Indenture), including but not limited to amounts
in respect of yield protection (a “Second Lien Yield Protection Claim”);
(iv) the right of any Consenting Term Lender or any Consenting Second Lien
Noteholder to assert any such secured claim, unsecured deficiency claim, First
Lien Make-Whole Claim or Second Lien Yield Protection Claim, including but not
limited to the right to credit bid all or a portion of any such claims in
accordance with section 363(k) of the Bankruptcy Code; or (v) the right of any
Consenting Term Lender or any Consenting Second Lien Noteholder to assert that
its claims are fully secured or that it is entitled to payment in full from the
collateral securing its claims.  Subject to the express terms of this Agreement,
any and all secured claims, unsecured deficiency claims, First Lien Make-Whole
Claims or Second Lien Yield Protection Claims of any Consenting Term Lender or
any Consenting Second Lien Noteholder and the rights to assert such secured
claims, unsecured deficiency claims, First Lien Make-Whole Claims and Second
Lien Yield Protection Claims are expressly reserved and preserved.

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

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

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16.16.Additional Parties.  Without in any way limiting the requirements of
Section 6 of this Agreement, additional holders of Debtor Claims/Interests may
elect to become Parties to this Agreement upon execution and delivery to the
other Parties of a Joinder Agreement in the form attached to this Agreement as
Exhibit C.  Each such additional Party shall (a) become a Consenting Party under
this Agreement in accordance with the terms of this Agreement, (b) be bound by
the terms and conditions of this Agreement, and (c) be deemed to make all
representations and warranties contained in this Agreement as of the date of the
execution and delivery of such Joinder Agreement.

16.17.Other Support Agreements.  Until a Termination Date with respect to the
Company, the Company shall not enter into any other restructuring support
agreement related to a partial or total restructuring of the Company’s balance
sheet or assets unless such support agreement is consistent in all respects with
the Restructuring Term Sheet and is acceptable to the Consenting Parties in
their sole discretion.

16.18.Confidentiality.  The terms of any existing confidentiality agreements
executed by and among any of the Parties as of the date of this Agreement shall
remain in full force and effect in accordance with their terms.  Except as
required by applicable law, rule, or regulation or as ordered by the Bankruptcy
Court or other court of competent jurisdiction, no Party or its advisors shall
disclose to any person or entity (including, for the avoidance of doubt, any
other Party) the holdings information of any Consenting Party without such
Consenting Party’s prior written consent.  However, the Company may publicly
disclose the aggregate holdings of all Consenting Parties.

16.19.Consent Rights Preserved.  Notwithstanding any provision in any order
approving any First Day Pleading or any other order that grants the Company
discretion to take any action that is subject to consent or approval rights of
the Consenting Parties hereunder, the entry of such order shall not be deemed a
waiver of such consent or approval rights hereunder.

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

 

[Remainder of page intentionally left blank.]

 

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

 

GASTAR EXPLORATION INC.

 

 

 

By:

 

/s/ Michael A. Gerlich

 

 

 

NORTHWEST PROPERTY VENTURES LLC

 

 

 

By:

 

/s/ Michael A. Gerlich

 

 

 

Debtor Signature Page to Restructuring Support Agreement

 

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

 

AF V ENERGY I AIV A1, L.P.

AF V ENERGY I AIV A2, L.P.

AF V ENERGY I AIV A3, L.P.

AF V ENERGY I AIV A4, L.P.

AF V ENERGY I AIV A5, L.P.

AF V ENERGY I AIV A6, L.P.

AF V ENERGY I AIV A7, L.P.

AF V ENERGY I AIV A8, L.P.

AF V ENERGY I AIV A9, L.P.

AF V ENERGY I AIV A10, L.P.

AF V ENERGY I AIV A11, L.P.

AF V ENERGY I AIV A12, L.P.

AF V ENERGY I AIV A13, L.P.

AF V ENERGY I AIV B1, L.P.

 

By:

 

AF V ENERGY I AIV GP, L.P.

 

 

as general partner

 

 

 

By:

 

/s/ Gary Levin

 

 

 

Name:

 

Gary Levin

Title:

 

Authorized Signer

 

Aggregate Amounts Beneficially Owned or Managed on Account of:

Term Loan Claims (if any)

$0.00

Second Lien Claims (if any)

$0.00

[Existing Common Equity] (if any)]

56,712,088 shares

 

 

 

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

 

AF V ENERGY I AIV A1, L.P.

AF V ENERGY I AIV A2, L.P.

AF V ENERGY I AIV A3, L.P.

AF V ENERGY I AIV A4, L.P.

AF V ENERGY I AIV A5, L.P.

AF V ENERGY I AIV A6, L.P.

AF V ENERGY I AIV A7, L.P.

AF V ENERGY I AIV A8, L.P.

AF V ENERGY I AIV A9, L.P.

AF V ENERGY I AIV A10, L.P.

AF V ENERGY I AIV A11, L.P.

AF V ENERGY I AIV A12, L.P.

AF V ENERGY I AIV A13, L.P.

AF V ENERGY I AIV B1, L.P.

 

By:

 

AF V ENERGY I AIV GP, L.P.

 

 

as general partner

 

 

 

By:

 

/s/ Gary Levin

 

 

 

Name:

 

Gary Levin

Title:

 

Authorized Signer

 

Aggregate Amounts Beneficially Owned or Managed on Account of:

Term Loan Claims (if any)

$0.00

Second Lien Claims (if any) in principal amount

$162,500,000.00

Existing Common Equity (if any)

0 shares

 

 

 

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

 

Execution Version

 

 

AF V ENERGY I HOLDINGS, L.P.,

as Consenting Term Lender

 

 

 

By:

 

/s/ Gary Levin

 

 

 

Name:

 

Gary Levin

Title:

 

Authorized Signer

 

Aggregate Amounts Beneficially Owned or Managed on Account of:

Term Loan Claims (if any) in principal amount at @

$ 283,851,332.61

Second Lien Claims (if any) 10/1/2018

$0.00

Existing Common Equity (if any)

0 shares

 

 

 

Consenting Party Signature Page to Restructuring Support Agreement

 

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SCHEDULE 1 to
the Restructuring Support Agreement

 

 

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

Execution Version

 

EXHIBIT A to
the Restructuring Support Agreement

 

Restructuring Term Sheet

Consenting Party Signature Page to Restructuring Support Agreement

 

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Gastar Exploration Inc.

RESTRUCTURING TERM SHEET

October 26, 2018

This term sheet (the “Restructuring Term Sheet”) summarizes the material terms
and conditions of certain transactions in connection with a potential
restructuring (the “Restructuring Transaction”) of the capital structure and
financial obligations of Gastar Exploration Inc., a Delaware corporation
(“Gastar”), and its subsidiary.  The regulatory, tax, accounting, and other
legal and financial matters and effects related to the Restructuring Transaction
have not been fully evaluated, and any such evaluation may affect the terms and
structure of any Restructuring Transaction.  This Restructuring Term Sheet is
attached to and made a part of the Restructuring Support Agreement (as amended,
modified or supplemented from time to time, the “RSA”), dated as of October 26,
2018, by and among the Company and the Consenting Parties (as each such term is
defined below).

THIS RESTRUCTURING TERM SHEET DOES NOT CONSTITUTE (NOR SHALL IT BE CONSTRUED AS)
AN OFFER OR PROPOSAL WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF
ACCEPTANCES OR REJECTIONS AS TO ANY chapter 11 PLAN. THE PARTIES TO THIS TERM
SHEET ACKNOWLEDGE AND AGREE THAT ANY SUCH  OFFER, PROPOSAL OR SOLICITATION, IF
ANY, WILL BE MADE ONLY IN COMPLIANCE WITH APPLICABLE PROVISIONS OF ALL
APPLICABLE LAW.  THIS RESTRUCTURING TERM SHEET DOES NOT ADDRESS ALL TERMS THAT
WOULD BE REQUIRED IN CONNECTION WITH ANY POTENTIAL RESTRUCTURING.  THE ENTRY
INTO OR THE CREATION OF ANY BINDING AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
IN THIS RESTRUCTURING TERM SHEET ARE SUBJECT IN ALL RESPECTS TO THE NEGOTIATION,
EXECUTION AND DELIVERY OF DEFINITIVE DOCUMENTATION IN FORM AND SUBSTANCE
CONSISTENT WITH THIS RESTRUCTURING TERM SHEET AND OTHERWISE ACCEPTABLE TO THE
COMPANY AND THE CONSENTING PARTIES AS WELL AS THE SATISFACTORY COMPLETION OF DUE
DILIGENCE BY THE CONSENTING PARTIES IN THEIR SOLE DISCRETION.  THIS
RESTRUCTURING TERM SHEET HAS BEEN PRODUCED FOR DISCUSSION AND SETTLEMENT
PURPOSES ONLY.  ACCORDINGLY, THIS TERM SHEET IS SUBJECT TO THE PROVISIONS OF
RULE 408 OF THE FEDERAL RULES OF EVIDENCE AND OTHER SIMILAR APPLICABLE STATE AND
FEDERAL RULES protecting the use or disclosure of confidential information and
information exchanged in the context of settlement discussions.  THIS
RESTRUCTURING TERM SHEET AND THE INFORMATION CONTAINED IN THIS RESTRUCTURING
TERM SHEET ARE STRICTLY CONFIDENTIAL AND SHALL NOT BE SHARED WITH ANY OTHER
PARTY ABSENT THE PRIOR WRITTEN CONSENT OF THE CONSENTING PARTIES OR THEIR
COUNSEL.  

3

 

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OVERVIEW

Parties to the Restructuring

Company:  Gastar; Northwest Property Ventures LLC; and any other future
subsidiaries of Gastar (collectively, the “Company”).

 

Term Lender:  AF V Energy I Holdings, L.P., as a lender (the “Consenting Term
Lender”) under the Third Amended and Restated Credit Agreement, dated March 3,
2017 (as amended, restated, modified or supplemented from time to time, the
“Term Credit Agreement”), by and among Gastar, as Borrower, the Guarantors
specified in the Term Credit Agreement or in related transaction documentation,
the Lenders from time to time party to the Term Credit Agreement and Wilmington
Trust, National Association, as administrative agent (the “Term Agent”).

 

Second Lien Noteholders:  The entities identified on Annex 1 attached to this
Restructuring Term Sheet, in their capacities as holders of the notes
(the “Second Lien Notes”) (in such capacities, the “Consenting Second Lien
Noteholders”) issued pursuant to the Indenture dated March 3, 2017 (as amended,
restated, modified or supplemented from time to time, the “Second Lien
Indenture”), by and among Gastar, as issuer, the Guarantors specified in the
Second Lien Indenture or in related transaction documentation, and Wilmington
Trust, National Association, as trustee and collateral agent (the “Second Lien
Trustee”).

 

Ares Equity Holders:  The entities identified on Annex 1 attached to this
Restructuring Term Sheet, in their capacities as holders of Gastar’s outstanding
common shares (such common shares, together with any and all outstanding and
unexercised or unvested warrants, options or rights to acquire Gastar’s
currently outstanding equity, the “Existing Common Equity”) (in such capacities,
the “Ares Equity Holders”; together with the Consenting Term Lender and the
Consenting Second Lien Noteholders, the “Consenting Parties”).

 

The Company and each of the Consenting Parties is referred to in this
Restructuring Term Sheet as a “Party”, and they are collectively referred to in
this Restructuring Term Sheet as the “Parties”.

 

 

4

 

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Restructuring Transaction Overview

The Restructuring Transaction shall be implemented pursuant to a “prepackaged”
chapter 11 plan of reorganization (as may be amended or supplemented from time
to time, the “Plan”), which shall provide for a balance sheet restructuring
consistent with the Economic Terms (as defined below) and other terms set forth
in this Restructuring Term Sheet.  The Company shall commence cases (the
“Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) and
file the Plan.  The Plan will be subject to certain milestones
(the “Milestones”) set forth in this Restructuring Term Sheet.

The Company will commence solicitation of the Plan prior to the commencement of
the Chapter 11 Cases and, in any event, by no later than October 26, 2018.  In
connection with such solicitation, the Company shall prepare and deliver to all
classes of claims entitled to vote on the Plan a disclosure statement relating
to the Plan (as may be amended or supplemented from time to time, the
“Disclosure Statement”).

The Restructuring Transaction will be financed by:  (i) consensual use of cash
collateral; and (ii) an approximately $383.9 million superpriority
debtor-in-possession financing to be provided by one or more of the Consenting
Parties and/or affiliates thereof substantially on terms and subject to
conditions set forth in the term sheet attached to the RSA as Exhibit D
(the “DIP Term Sheet”).

In accordance with the terms and conditions described in Section 5.02(b) of the
RSA, the Economic Terms are subject to a Potentially Superior Proposal (as
defined in the RSA).

Each of the Milestones shall be subject to extension or waiver in the sole
discretion of the Consenting Parties.

 

 

5

 

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Economic Terms

The Plan shall provide for the following classification and principal economic
treatment (the “Economic Terms”) of claims against and interests in the Company,
provided that a DIP Toggle Event6 has not occurred:  

 

i.     DIP Claims:  On the effective date of the Chapter 11 Cases (the
“Effective Date”), all obligations under the DIP Facility (including, but not
limited to, any outstanding obligations relating to the Term Loan Refinancing)
(collectively, the “DIP Claims”) shall be treated as follows:

 

a. first, the DIP Claims shall be refinanced in accordance with the treatment
set forth below under the caption “Exit Facility; Refinancing of DIP Facility
and Term Facility;”

 

b. second, any amount of the DIP Claims that is not refinanced pursuant to
clause (a) immediately above (such amount the “Remaining DIP Claims”) shall be
exchanged for its pro rata share of 100% of the new common equity of the
reorganized Company (or a newly formed or other entity to be mutually agreed)
(which equity may take the form of equity interest in a limited liability
company or in a limited liability partnership or stock in a corporation, the
“New Common Equity”), subject to dilution on account of, as applicable, the New
Warrants (as defined below) and the Management Incentive Plan (as defined
below).  

 

For purposes of the treatment of the DIP Claims, “pro rata” shall mean the
proportion of (i) the Remaining DIP Claims to (ii) the sum of (a) the Equitized
Senior Obligations (as defined below), which amount, if a DIP Toggle Event has
occurred, shall include the Senior Additional Amount (as defined below) for the
purposes of this calculation, plus (b) the Second Lien Claims (as defined
below), which amount, if a DIP Toggle Event has occurred, shall include the
Second Lien Additional Amount (as defined below) for the purposes of this
calculation, plus, solely upon the occurrence of a DIP Toggle Event, (c) the
General Unsecured Claims (as defined below).

 

6 

A “DIP Toggle Event” shall have occurred upon (a) the occurrence of an Event of
Default (as defined in the DIP Term Sheet) and (b) the delivery to the Company
and filing on the docket of the Chapter 11 Cases, in each case by the Majority
DIP Lenders (as defined in the DIP Term Sheet) or DIP Agent at the direction of
the Majority DIP Lenders, of a notice stating that the DIP Toggle Event has
occurred.  The notice referred to in the preceding sentence is referred to
herein as a “DIP Toggle Notice.”

6

 

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ii.    Term Credit Agreement:  On the Effective Date, all obligations under or
in respect of the Term Credit Agreement (the “Term Loan Claims”) shall be
treated as follows:

 

a. first, the Term Loan Claims shall be refinanced as set forth below under the
caption “Exit Facility; Refinancing of DIP Facility and Term Facility;”

 

b. second, any amount of the Term Loan Claims that is not refinanced pursuant to
clause (a) immediately above (such amount, the “Remaining Term Loan Claims,”
together with the Remaining DIP Claims, the “Equitized Senior Obligations”)
shall be exchanged for its pro rata share of 100% of the New Common Equity,
subject to dilution on account of, as applicable, the New Warrants and the
Management Incentive Plan.

 

For purposes of the treatment of the Term Loan Claims, “pro rata” shall mean the
proportion of (i) the Remaining Term Loan Claims, which amount, if a DIP Toggle
Event has occurred, shall include the Senior Additional Amount for the purposes
of this calculation, to (ii) the sum of (a) the Equitized Senior Obligations,
which amount, if a DIP Toggle Event has occurred, shall include the Senior
Additional Amount for the purposes of this calculation, plus (b) the Second Lien
Claims, which amount, if a DIP Toggle Event has occurred, shall include the
Second Lien Additional Amount for the purposes of this calculation, plus, solely
upon the occurrence of a DIP Toggle Event, (c) the General Unsecured Claims.

 

iii.   Second Lien Indenture:  On the Effective Date, all obligations under or
in respect of the Second Lien Indenture (the “Second Lien Claims”) shall be
exchanged for a pro rata share of 100% of the New Common Equity, subject to
dilution on account of, as applicable, the New Warrants and the Management
Incentive Plan.

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For purposes of the treatment of the Second Lien Claims, “pro rata” shall mean
the proportion of (i) the Second Lien Claims, which amount, if a DIP Toggle
Event has occurred, shall include the Second Lien Additional Amount for the
purposes of this calculation, to (ii) the sum of (a) the Equitized Senior
Obligations (as defined below), which amount, if a DIP Toggle Event has
occurred, shall include the Senior Additional Amount for the purposes of this
calculation, plus (b) the Second Lien Claims, which amount, if a DIP Toggle
Event has occurred, shall include the Second Lien Additional Amount for the
purposes of this calculation, plus, solely upon the occurrence of a DIP Toggle
Event, (c) the General Unsecured Claims.

 

iv.   Administrative Claims:  On the Effective Date, any claims incurred for a
cost or expense of administration of the Chapter 11 Cases entitled to priority
under sections 503(b), 507(a)(2), or 507(b) of the Bankruptcy Code
(“Administrative Claims”) shall receive payment in full in cash.  For the
avoidance of doubt, all claims arising from the provision of goods or services
provided within the 20 days prior to the Petition Date (the “Reclamation
Claims”) shall be paid in the ordinary course of business during the pendency of
the Chapter 11 Cases as permitted by section 503(b)(9) of the Bankruptcy
Code.  Notwithstanding the foregoing, the payments on account of such
Reclamation Claims shall be subject to an aggregate cap of $2 million, after
which any further payments on account of Reclamation Claims will be subject to
the consent of the Consenting Parties in their sole discretion.  If such consent
is denied, any such Reclamation Claims will be treated as Administrative Claims
to be paid as set forth above.

 

v.    Hedging Bank Claims:  Each holder of any net claims arising out of any
termination of the Company’s prepetition hedging or swap arrangements with
Cargill, Inc. and NextEra Energy Marketing, LLC (the “Hedge Claims”) shall
receive cash in an amount equal to 100% of such holder’s Hedge Claims (the
“Hedge Claims Payment Amount”), payable in the following installments:  

 

(a) on the Effective Date, an amount equal to the product of (i) the number of
monthly settlement payments that would have occurred after the Hedge Termination
Date and on or prior to the Effective Date had the Hedge Claims not been
liquidated divided by 14 and (ii) the Hedge Claims Payment Amount; and

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(b) the remaining amount of the Hedge Claims Payment Amount in equal monthly
installments, with such remaining amount to be paid in full by December 31,
2019, pursuant to a new secured note that will be secured by a security interest
in the collateral securing the Hedge Claims as of the Petition Date (that is
senior up to the Effective Date and pari passu with the First Lien Exit Facility
(as defined below)) and otherwise on terms acceptable to the Company and the
Consenting Parties.

 

vi.   Statutory Lien Claims:  Each holder of any net claims secured by statutory
mechanics’ or construction liens (the foregoing collectively, the “Statutory
Lien Claims”) shall receive:  (a) on the Effective Date, cash in an amount equal
to 50% of the allowed amount of such holder’s net claims (the “Initial
Distribution”); and (b) on the date that is six months following the Effective
Date, cash in an amount equal to 50% of the allowed amount of such holder’s net
claims.  The prepetition liens securing any such Statutory Lien Claims shall be
automatically released and discharged on the Effective Date without the
requirement of any further notice, demand or order of the Bankruptcy Court or
any other court or any action by any party.  Immediately upon payment of the
Initial Distribution, each holder of Statutory Lien Claims shall take all
commercially reasonable actions to effectuate and document the release of such
prepetition liens securing such Statutory Lien Claims in accordance with
applicable non-bankruptcy law.

 

vii.  Other Secured Claims:  On the Effective Date, Other Secured Claims (as
defined below) shall receive, in full and final satisfaction of such claims,
either (a) payment in full in cash, (b) delivery of the collateral securing any
such claim and payment of any interest required under section 506(b) of the
Bankruptcy Code, (c) reinstatement of such claim under section 1124 of the
Bankruptcy Code, (d) other treatment rendering such claim unimpaired or (e) the
indubitable equivalent of such claim.7

 

7 

“Other Secured Claims” means any claim against the Company (other than the Term
Loan Claims, the Second Lien Claims, the Hedge Claims and the Statutory Lien
Claims) that is:  (a) secured by a lien on property in which the Company has an
interest, which lien is valid, perfected, and enforceable pursuant to applicable
law or by reason of a Bankruptcy Court order, or that is subject to setoff
pursuant to section 553 of the Bankruptcy Code, to the extent of the value of
the creditor’s interest in the Company’s interest in such property or to the
extent of the amount subject to setoff, as applicable, as determined pursuant to
section 506(a) of the Bankruptcy Code; or (b) allowed pursuant to the Plan, or
separate order of the Bankruptcy Court, as a secured claim.

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viii. Priority Tax Claims:  On the Effective Date, any claim of governmental
units of the type described in section 507(a)(8) of the Bankruptcy Code
(“Priority Tax Claims”) shall receive payment in full in cash or otherwise
receive treatment consistent with the provisions of section 1129(a)(9) of the
Bankruptcy Code.

 

ix.   Other Priority Claims:  On the Effective Date, any claims, other than
Administrative Claims or Priority Tax Claims, entitled to priority in right of
payment under section 507(a) of the Bankruptcy Code (the “Other Priority
Claims”) shall be paid in full in cash.

 

x.    General Unsecured Claims:  Each holder of a general unsecured claim (the
“General Unsecured Claims”) (if and to the extent any such General Unsecured
Claim has not been paid, including in connection with any “critical vendor” or
“first day” orders of the Bankruptcy Court) shall receive cash in an amount
equal to such General Unsecured 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, contract or other
arrangement giving rise to such General Unsecured Claim.

 

xi.   Existing Preferred Equity:  Holders of Gastar’s current outstanding
preferred equity shares (the “Existing Preferred Equity”) shall receive their
pro rata share of 100% of the New Preferred Warrants (as defined below), which
New Preferred Warrants shall be convertible into up to 2.5% of the number of
shares, units or equity interests (as the case may be based how the New Common
Equity is denominated) of the New Common Equity outstanding on the Effective
Date.  Notwithstanding the foregoing, holders of Existing Preferred Equity will
not receive any New Warrants if any holder or holders of Existing Common Equity
or Existing Preferred Equity seek official committee status or the appointment
of a trustee or examiner, or object to or otherwise oppose the consummation of
the Restructuring Transaction, the confirmation of the Plan by the Bankruptcy
Court or the approval of the DIP Facility by the Bankruptcy Court.

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xii.  Existing Common Equity:  Holders of Existing Common Equity shall receive
their pro rata share of 100% of the New Common Warrants (as defined below),
which New Common Warrants shall be convertible into up to 2.5% of the number of
shares, units or equity interests (as the case may be based how the New Common
Equity is denominated) of the New Common Equity outstanding on the Effective
Date.  Notwithstanding the foregoing, holders of Existing Common Equity will not
receive any New Warrants if any holder or holders of Existing Common Equity or
Existing Preferred Equity seek official committee status or the appointment of a
trustee or examiner, or object to or otherwise oppose the consummation of the
Restructuring Transaction, the confirmation of the Plan by the Bankruptcy Court
or the approval of the DIP Facility by the Bankruptcy Court.

 

xiii. Intercompany Claims and Interests:  Any intercompany claims or interests
shall be, at the option of the Company and with the consent of the Consenting
Parties (such consent not to be unreasonably withheld, conditioned or delayed),
either reinstated or canceled and released without any distribution.

 

Notwithstanding the foregoing, in the event that a DIP Toggle Event has
occurred, each holder of General Unsecured Claims, Existing Preferred Equity, or
Existing Common Equity shall receive under the Plan the treatment described
below, which shall constitute the Economic Terms as to such holders:

 

i.     General Unsecured Claims: Each holder of a General Unsecured Claim (if
and to the extent any such General Unsecured Claim has not been paid, including
in connection with any “critical vendor” or “first day” orders of the Bankruptcy
Court) shall receive its pro rata share of 100% of the New Common Equity,
subject to dilution on account of the Management Incentive Plan.

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For purposes of the treatment of the General Unsecured Claims in the event a DIP
Toggle Event has occurred, “pro rata” shall mean the proportion of (i) the
General Unsecured Claims to (ii) the sum of (a) the Equitized Senior
Obligations, which amount shall include the Senior Additional Amount for the
purposes of this calculation, plus (b) the Second Lien Claims, which amount
shall include the Second Lien Additional Amount for the purposes of this
calculation, plus (c) the General Unsecured Claims.

 

ii.    Existing Preferred Equity:  The Existing Preferred Equity shall be
canceled, released, and extinguished as of the Effective Date, and will be of no
further force or effect, and holders of Existing Preferred Equity will not
receive any distribution on account of such Existing Preferred Equity.

 

iii.   Existing Common Equity:  The Existing Common Equity shall be canceled,
released, and extinguished as of the Effective Date, and will be of no further
force or effect, and holders of Existing Common Equity will not receive any
distribution on account of such Existing Common Equity.

 

For the avoidance of doubt, treatment of all other claims or interests described
above other than General Unsecured Claims, Existing Preferred Equity, or
Existing Common Equity shall not receive different treatment in the event that a
DIP Toggle Event has occurred.

 

Each holder of an allowed claim or interest, as applicable, shall receive under
the Plan the treatment described above (or less favorable treatment that may be
agreed by the Company and the holder of such allowed claim or interest) in full
and final satisfaction, settlement, release, and discharge of and in exchange
for such holder’s allowed claim or interest.  Any action to be taken by the
Company on the Effective Date may be taken on the Effective Date or as soon as
is reasonably practicable thereafter.

 

Notwithstanding the foregoing, in any Chapter 11 Cases, in no event shall any
claim or interest that is not an allowed claim or interest pursuant to the
Bankruptcy Code be entitled to any consideration whatsoever on account of such
claim.  Additionally, if the holder of any claim or interest has agreed with the
Company to less favorable treatment on account of such claim than is set forth
above, the holder of such claim or interest will receive such less favorable
treatment.

 

 

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Plan Voting

Only the holders of Term Loan Claims, the Second Lien Claims, the Hedge Claims
and the Statutory Lien Claims shall be entitled to vote on the Plan.  For the
avoidance of doubt, holders of Existing Preferred Equity and/or Existing Common
Equity shall be deemed to reject the Plan.

Exit Facility; Refinancing of DIP Facility and Term Facility

On the Effective Date, the Consenting Parties shall provide to the reorganized
Company (or a newly formed or other entity to be mutually agreed) (the
“Borrower”) either through new money loans or a debt-for debt exchange (at the
election of the Consenting Parties):

(i)   a $100 million first lien secured delayed draw term loan facility
comprised of (a) term loans equal to the portion of the New Money Loans (as
defined in the DIP Term Sheet) outstanding under the DIP Facility and (b) term
loan commitments consisting of DIP Claims in an amount equal to any undrawn New
Money Loan commitments under the DIP Facility (the “First Lien Exit Facility”);
and

(ii)  a $200 million second lien secured term loan facility (the “Second Lien
Exit Facility”; and together with the First Lien Exit Facility, collectively,
the “Exit Facility”).

Pursuant to the Exit Facility, and subject to, the terms and conditions set
forth in the term sheet attached to the RSA as Exhibit E (the “Exit Facility
Term Sheet”) and the definitive documents memorializing such facility:

(a)  a portion of the First Lien Exit Facility in an amount equal to the undrawn
portion of the DIP Facility immediately prior to the consummation of the
Restructuring Transaction shall be available to the Borrower for working
capital, subject to and in accordance with the Exit Facility Term Sheet and the
terms of the definitive documentation governing the First Lien Exit Facility;

 

(b)  the balance of the First Lien Exit Facility shall be treated as satisfying
on a dollar-for-dollar basis first, the outstanding DIP Claims and second,
solely to the extent that all DIP Claims have been fully repaid, the Term Loan
Claims; and

 

(c)  the Second Lien Exit Facility shall be treated as satisfying on a
dollar-for-dollar basis first, any outstanding DIP Claims remaining after
application of the First Lien Exit Facility and second, solely to the extent
that all DIP Claims have been fully repaid, the Term Loan Claims.

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Any portion of the DIP Claims or the Term Loan Claims that is not refinanced
pursuant to the Exit Facility shall receive the treatment for Remaining DIP
Claims and Remaining Term Loan Claims, respectively, set forth above under the
caption “Economic Terms”.  The First Lien Exit Facility and the Second Lien Exit
Facility shall be secured by (subject to permitted liens to be mutually agreed),
respectively, first priority and second priority liens on the Credit Parties’
(as defined in the Exit Term Sheet) assets.

 

 

Notwithstanding the foregoing, the Consenting Parties shall have the right,
exercisable in their sole discretion, to (i) replace the First Lien Exit
Facility with a $100 million reserve based lending facility from a third party
financing source on or prior to the Effective Date; and (ii) to reduce the
principal amount of the Second Lien Exit Facility in such amount as they may
determine on or prior to the Effective Date.

 

 

Management Incentive Plan

On the Effective Date, the Company shall reserve shares, units or equity
interests (as the case may be based how the New Common Equity is denominated) of
New Common Equity to be available for grant from time to time to employees of
the reorganized business of the Company pursuant to a management incentive plan
(the “Management Incentive Plan”) in an aggregate amount equal to 10% of the New
Common Equity, on a fully diluted, fully distributed basis.  All terms,
conditions, allocations, securities types, exercise prices and grants of
individual awards under the Management Incentive Plan shall be subject to the
approval of the new Board of Directors (the “New Board”) of the parent entity
holding the reorganized business of the Company following the consummation of
the Restructuring Transaction.  Notwithstanding the foregoing, (i) no awards
under the Management Incentive Plan shall vest on confirmation of the Plan and
(ii) the amount of awards permitted to be granted under the Management Incentive
Plan each year will be subject to limitations to be determined by the New Board
so that the award of grants will be staggered over a period of time.  

Restructuring Support Agreement

The Company and the Consenting Parties shall execute the RSA.  The RSA shall
contain customary terms and conditions for an agreement of its type, including,
without limitation, terms evidencing the obligation of the parties to such
agreement to support the consummation of the Restructuring Transaction.

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Information Sharing and Consultation Rights

Notwithstanding anything to the contrary in this Restructuring Term Sheet,
whether or not expressly so provided in this Restructuring Term Sheet, each of
the following matters shall be subject to the Information Sharing and
Consultation Rights:  (i) the status and satisfaction of (or failure to satisfy)
each Milestone; (ii) any proposal, offer or expression of interest the Company
receives for an Alternative Transaction (as defined in the RSA); and (iii) any
proposed budget, business plan, forecast, projection or valuation of, or
relating to, the Company.

As used in this Restructuring Term Sheet, the “Information Sharing and
Consultation Rights” shall have the meaning set forth in the RSA.

Milestones

The Consenting Parties’ support for the Restructuring Transaction shall be
subject to the timely satisfaction of the following Milestones:8

•          The Company shall have commenced the solicitation of the Plan by no
later than October 26, 2018.

•          The Company shall have concluded the solicitation of the Plan by no
later than October 31, 2018.

•          The Company shall have commenced the Chapter 11 Cases in the
Bankruptcy Court by no later than October 31, 2018.

•          On the date of the commencement of the Chapter 11 Cases
(the “Petition Date”), the Company shall have filed (i) the Plan, (ii) the
Disclosure Statement, and (iii) a motion for approval of the Disclosure
Statement and solicitation procedures and to set a hearing to consider
confirmation of the Plan.

•          Within five (5) days following the Petition Date, the Bankruptcy
Court shall have entered the interim order approving the DIP Facility (the
“Interim Order”).

 

•          Within thirty (30) days following the Petition Date, the Bankruptcy
Court shall have entered the final order approving the DIP Facility.

 

•          Within sixty (60) days following the Petition Date, the Bankruptcy
Court shall have entered an order approving the Disclosure Statement and
confirming the Plan (the “Confirmation Order”).

 

8 

To the extent a Milestone falls within a Holiday Period then such milestone
shall be extended by three (3) business days after the end of the Holiday
Period. “Holiday Period” shall mean the period from November 19, 2018 through
and including November 23, 2018 and the period from December 24, 2018 through
and including January 4, 2018.

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•          Within twenty (20) days following the entry of the Confirmation
Order, the Plan shall have been consummated.

 

The Company shall use its best efforts to cause each of the Milestones to be
timely attained.  However, in the event that any Milestone is not timely
attained, the use by the Company of such best efforts shall in no event relieve
it of its obligation hereunder to have caused such Milestone to be timely
attained.  The failure to attain any Milestone shall give the Consenting Parties
the right to terminate the RSA in accordance with the terms of the RSA.

 

 

Credit Bidding

Upon the direction of the DIP Lenders (as defined in the DIP Term Sheet), the
Term Lender and the Second Lien Noteholders, as applicable, in their sole
discretion, the administrative agent under the DIP Facility (the “DIP Agent”),
the Term Agent and the Second Lien Trustee or their respective designees shall
have the right to credit bid all or a portion of the of DIP Claims, the Term
Loan Claims or the Second Lien Claims, respectively, in accordance with section
363(k) of the Bankruptcy Code.

Debtor-in-Possession Financing

Subject to the terms and conditions set forth in the DIP Term Sheet, certain of
the Consenting Parties and/or their affiliates will be lenders under a new
superpriority debtor-in-possession financing (the “DIP Facility”) in an
aggregate amount of approximately $383.9 million, which shall include up to $100
million in new money financing, to the extent necessary to fund the Company
through to the consummation of the Restructuring Transaction.  Subject to the
terms and conditions set forth in the DIP Term Sheet, the new money proceeds of
the DIP Facility shall be used by the Company, among other things, for general
working capital purposes and to fund the administration of the Chapter 11 Cases,
in each case, in accordance with a budget agreed to by the DIP Lenders (the “DIP
Budget”).  In addition, at the election of the Consenting Parties, approximately
$283.9 million of Term Loan Claims (consisting of the outstanding principal
amount and accrued but unpaid interest under the Term Credit Agreement as of the
Petition Date) shall either (i) be refinanced on a dollar-for-dollar basis in
cash with proceeds of the DIP Facility or (ii) be exchanged on a
dollar-for-dollar basis for an equal interest in the DIP Facility (the “Term
Loan Refinancing”).  The DIP Facility shall contain other customary terms and
conditions consistent with the DIP Term Sheet and otherwise be, in form and
substance, acceptable to the Company and the Consenting Parties.  

 

 

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New Preferred Warrants

On the Effective Date, subject to the conditions set forth above in the Economic
Terms relating to the treatment of the Existing Preferred Equity, the Company
will issue 3-year warrants exercisable for cash (and in no event exercisable on
a cashless basis) into up to 2.5% of the number of shares, units or equity
interests (as the case may be based how the New Common Equity is denominated) of
the New Common Equity outstanding on the Effective Date with a strike price
equal to, as of any applicable date of determination, (i) (A) the amount of the
Second Lien Claims outstanding as of immediately prior to the effectiveness of
the Restructuring Transaction plus (B) the amount of interest that would have
accrued (assuming such interest is compounded on each March 1, June 1, September
1 and December 1) on the sum of such Second Lien Claims and $23,369,951.46 (the
“Second Lien Additional Amount”) through such date if the Second Lien Notes
(plus the Second Lien Additional Amount) had been outstanding after the
Effective Date and through such date plus (C) the amount of the Equitized Senior
Obligations plus (D) the amount of interest that would have accrued on the sum
of such Equitized Senior Obligations and $50,541,158.61 (the “Senior Additional
Amount”) through such date if the Equitized Senior Obligations (plus the Senior
Additional Amount) had remained outstanding in accordance with their terms after
the Effective Date and through such date (assuming such interest is compounded
on each March 31, June 30, September 30 and December 31), plus
(E) $73,911,110.07, divided by (ii) the number of shares, units or equity
interests (as the case may be based how the New Common Equity is denominated) of
New Common Equity issued under the Plan on the Effective Date (the “New
Preferred Warrants”).

The foregoing is subject in its entirety to the terms and conditions set forth
below in “Parameters Relating to the Issuance of the New Warrants.”

 

 

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New Common Warrants

 

 

On the Effective Date, subject to the conditions set forth above in the Economic
Terms relating to the treatment of the Existing Common Equity, the Company will
issue 3-year warrants exercisable for cash (and in no event exercisable on a
cashless basis) into up to 2.5% of the number of shares, units or equity
interests (as the case may be based how the New Common Equity is denominated) of
the New Common Equity outstanding on the Effective Date with a strike price
equal to, as of any applicable date of determination, (i) (A) the amount of the
Second Lien Claims outstanding as of immediately prior to the effectiveness of
the Restructuring Transaction plus (B) the amount of interest that would have
accrued (assuming such interest is compounded on each March 1, June 1,
September 1 and December 1) on the sum of such Second Lien Claims and the Second
Lien Additional Amount through such date if the Second Lien Notes (plus the
Second Lien Additional Amount) had remained outstanding after the Effective Date
and through such date plus (C) the amount of the Equitized Senior Obligations
plus (D) the amount of interest that would have accrued on the sum of such
Equitized Senior Obligations and the Senior Additional Amount through such date
if the Equitized Senior Obligations (plus the Second Lien Additional Amount) had
remained outstanding in accordance with their terms after the Effective Date and
through such date (assuming such interest is compounded on each March 31, June
30, September 30 and December 31) plus (E) the aggregate liquidation preference
of the Existing Preferred Equity as of immediately prior to the effectiveness of
the Restructuring Transaction plus (F) the amount of dividends that would have
accrued on such Existing Preferred Equity through such date if the Existing
Preferred Equity had remained outstanding after the Effective Date and through
such date, plus (G) $73,911,110.07, divided by (ii) the number of shares, units
or equity interests (as the case may be based how the New Common Equity is
denominated) of New Common Equity issued under the Plan on the Effective Date
(the “New Common Warrants”, and together with the New Preferred Warrants, the
“New Warrants”).

The foregoing is subject in its entirety to the terms and conditions set forth
below in “Parameters Relating to the Issuance of the New Warrants.”

 

 

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Parameters Relating to the Issuance of the New Warrants

The issuance of the New Warrants shall be conditioned upon each of the
following: (i) the holders of the New Warrants holding passive positions (i.e.,
no minority governance, registration, or similar rights) following such
issuance, and any exercise, of the New Warrants; (ii) such issuance of the New
Warrants being exempt from the registration requirements under the Securities
Act of 1933 (the “Securities Act”) and any other applicable federal, state or
other securities laws; (iii) in no event shall any fractional New Warrants be
required to be issued; (iv) such issuance of New Warrants not resulting in any
of the entities holding the reorganized business of the Company following the
consummation of the Restructuring Transaction being required to be a publicly
held company or otherwise being required to make or file public periodic reports
pursuant to any applicable federal, state or other securities laws or otherwise
(a “Reporting Triggering Event”); and (v) in no event shall any New Warrants be
required to be issued to any competitors of the Company.  

Notwithstanding the foregoing, in the event that the issuance of the New
Warrants in accordance with the terms set forth in “New Preferred Warrants” and
“New Common Warrants” above would result in the issuance of fractional New
Warrants, the occurrence of a Reporting Triggering Event or the issuance of New
Warrants to a competitor of the Company, then, although such issuances would not
be required to be effected pursuant to this Term Sheet as a result of the
failure of, as applicable, the condition set forth in clause (iii), clause (iv)
and/or clause (v) of the immediately preceding paragraph, the Consenting Parties
shall nevertheless, in their sole discretion, be entitled to elect (a “Cash-Out
Election”):

(a) in the case of the failure of the condition set forth in such clause (iii)
and/or the condition set forth in such clause (iv), to direct that any holder or
holders of Existing Preferred Equity and any holders or holders of Existing
Common Equity designated by the Consenting Parties (the designation of such
holders to be made in the sole discretion of the Consenting Parties, taking into
account the purpose of preventing the issuance of fractional New Warrants and/or
the occurrence of a Reporting Triggering Event, as the case may be) shall
receive instead of New Warrants a distribution of cash in an amount equal to the
Value (as defined below) of the New Warrants such holders would have otherwise
received but for the failure of the applicable conditions(s) (the “Category I
Unavailable Warrants”); and/or

 

 

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(b) in the case of the failure of the condition set forth in such clause (v),
direct that such holders of Existing Preferred Equity and holders of Existing
Common Equity that are competitors of the Company shall be entitled to a
distribution of cash in an amount equal to the Value of the New Warrants such
holders would have otherwise received but for the failure of the applicable
condition (the “Category II Unavailable Warrants,” and together with the
Category I Unavailable Warrants, the “Unavailable Warrants”).

In the event that the Consenting Parties make any Cash-Out Election(s), then the
amount of New Warrants granted pursuant to “New Preferred Warrants” and “New
Common Warrants,” as applicable, shall be reduced by the amount of Unavailable
Warrants.

For purposes of the foregoing, “Value” means the value of the applicable New
Preferred Warrants or New Common Warrants, as the case may be, as reasonably
determined by the Company and the Consenting Parties using the Black Scholes
model or such other valuation methodology as is customary for valuations of this
type.

 

The New Warrants will not be registered under the Securities Act or any other
applicable federal, state or other securities laws.  

The New Warrants will be transferable subject to restrictions pursuant to
applicable federal, state and other securities laws.  Such New Warrants shall
only be transferable to:

(a)      “qualified institutional buyers” within the meaning of Rule 144A
promulgated under the Securities Act; and

(b)      “accredited investors” within the meaning of Rule 501(a)(1), (2), (3)
or (7) of Regulation D promulgated under the Securities Act who are not
disqualified persons under Rule 506(d) of Regulation D promulgated under the
Securities Act.  

The New Warrants will also be subject to restrictions:

(i)       designed to prevent the occurrence of circumstances that are
reasonably expected by the Consenting Parties to require registration or
qualification of the New Warrants pursuant to federal, state or other securities
laws, or require the Consenting Parties to make or file public periodic reports
pursuant to any applicable federal, state or other securities laws or otherwise;
and

(ii)      on transfers that would subject the Consenting Parties to regulation
under the Investment Company Act of 1940, the Investment Advisers Act of 1940 or
the U.S. Employee Retirement Income Security Act of 1974, each as amended;

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(iii)     as specified in the definitive warrant agreement (the “Warrant
Agreement”) pursuant to which the New Warrants will be issued; and

(iv)     on transfers to competitors.

 

All holders of New Common Equity issued or issuable upon the exercise of the New
Warrants shall be required to become parties to a stockholders or similar
agreement with respect to the post-emergence equity in the entities holding the
reorganized business of the Company (the “Stockholders Agreement”).  The Warrant
Agreement and the Stockholders Agreement shall each be in form and substance
acceptable to the Consenting Parties.

 

In the event that a Sale (as defined below) is consummated prior to the 3-year
anniversary of the Effective Date, any Warrants then remaining outstanding and
unexercised shall expire worthless and will automatically be cancelled for no
further consideration.   For the avoidance of doubt, no holder of Warrants shall
be entitled to the fair market value of the New Warrants (using the Black
Scholes model or otherwise) in connection with a Sale, but shall have the right
to exercise the New Warrants at any time prior to such Sale.  The Company shall
provide the holders of the New Warrants with five (5) business days’ prior
written notice of a Sale.  The term “Sale” applies to any transaction with
respect to the Company (or any successor to the Company) and/or its subsidiaries
taken as a whole and means (i) any consolidation, (ii) any merger, (iii) any
disposition, transfer, conveyance or sale of all or a majority of the assets or
equity interests, (iv) any transaction in which the holders of equity interests
are entitled to receive (either directly or upon subsequent liquidation) cash,
securities or other property with respect to, or in exchange for, such equity
interests and/or (v) any transaction similar to the foregoing.

 

Notwithstanding anything to the contrary in this Term Sheet, neither the Company
nor any of the entities holding the reorganized business of the Company
following the consummation of the Restructuring Transaction shall be required to
take any action that would result in the Company or such entity, as the case may
be, being required to make or file public periodic reports pursuant to any
applicable federal, state or other securities laws or otherwise.

21

 

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Release

 

Except as expressly set forth in this Restructuring Term Sheet or the definitive
documentation for the Restructuring Transaction (the “Definitive
Documentation”), the Definitive Documentation shall include full customary
debtor and “third party” releases from liability in favor of the Company, each
of the DIP Lenders, the DIP Agent, the Consenting Parties, the Term Agent, the
Second Lien Trustee, and each of their respective directors, officers, funds,
affiliates, members, employees, partners, managers, investment advisors, agents,
representatives, principals, consultants, attorneys, professional advisors,
heirs, executors, successors and assigns (each in their capacity as such).  The
releases will cover any claims and causes of action related to or in connection
with the Company, the Company’s out-of-court restructuring efforts, the RSA, the
Plan, the Restructuring Transaction or the obligations under the DIP Facility,
the Term Credit Agreement, the Second Lien Indenture, the Existing Preferred
Equity or the Existing Common Equity.  The releases described in this section
shall contain a carve-out for actual fraud or fraud grounded in deliberate
recklessness.  For the avoidance of doubt, any claims in respect of avoidance
actions against the Consenting Parties shall be released.  Nothing in the
foregoing shall result in any current or former members of the board of
directors of the Company (the “Existing Board”) or any current or former
officers of the Company waiving any indemnification claims against the Company
or any of its insurance carriers or any rights as beneficiaries of any insurance
policies.

Board of Directors

The New Board shall consist of five (5) members.  All of the directors for the
initial term following the consummation of the Restructuring Transaction shall
be selected by the Consenting Parties.  In subsequent terms, the directors shall
be selected in accordance with the organizational documents of the parent entity
holding the reorganized business of the Company.

Senior Officers

Upon the consummation of the Restructuring Transaction, the Company’s existing
senior officers shall continue to serve in their current capacities at the
pleasure of the New Board.

Employment Agreements

TBD.

Executory Contracts

The Company shall not enter into an executory contract, lease, or other
arrangement outside of the ordinary course of its business without obtaining the
prior written consent of the Consenting Parties.

The Company shall not assume or reject any executory contract or unexpired lease
without obtaining the prior written consent of the Consenting Parties.

22

 

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Amended Articles & Bylaws

Any existing organizational and corporate governance documents of the entities
holding the reorganized business of the Company after giving effect to the
Restructuring Transaction shall be subject to amendments and modifications
customary in connection with transactions similar to the Restructuring
Transaction.

Public / Private Status of Company

The entities holding the reorganized business of the Company shall be privately
held and shall not be subject to any United States Securities and Exchange
Commission reporting obligations.

Registration Rights

The reorganized Company shall remain a privately held company and will not be
required to register any of its post-emergence equity (including, without
limitation, the New Common Equity or the New Warrants) for resale under the
Securities Act or any other applicable federal, state or other securities laws
or to offer to exchange any of such post-emergence equity for securities
registered under the Securities Act or any other applicable federal, state or
other securities laws.

Fees & Expenses / Expense Reimbursement

The Company shall promptly upon receipt of a request for payment thereof, pay
all reasonable and documented out-of-pocket fees and expenses of the Consenting
Parties as they are incurred, including but not limited to, the fees and
expenses of their legal, financial and other advisors.

Tax, Securities, and Corporate Matters / Related Structure Considerations

The transactions discussed in this Restructuring Term Sheet are subject to
ongoing tax diligence, securities compliance, and other corporate review.  

The Company shall reasonably cooperate with the Consenting Parties to structure
the Restructuring Transaction to enable the Company or its successor to emerge
on the Effective Date in the organizational form, and with the tax structure and
tax elections, requested or consented to by the Consenting Parties.  Without
limiting the foregoing, if requested by the Consenting Parties, the Company
shall effectuate an internal corporate reorganization (i) to convert into,
transfer all or a portion of its assets to or cause all or a portion of the
equity interests in it to be transferred to, in each case, a limited liability
company or a limited partnership, or (ii) as a result of which (x) the
Consenting Parties hold a portion of their equity interests in the reorganized
Company through a corporation (the “Corporation”) and another portion of such
equity interests through a limited liability company or a limited partnership
and (y) the New Warrants are issued by the Corporation.

23

 

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Definitive Documentation

The Definitive Documentation and other material agreements relating to the
Restructuring Transaction, any Plan or accompanying Disclosure Statement, any of
the documents or materials identified in the “Milestones” section of this
Restructuring Term Sheet, and any forms of orders submitted to the Bankruptcy
Court shall:  (i) be consistent with this Restructuring Term Sheet, (ii) be
subject to the consent and approval standards set forth in the Restructuring
Term Sheet, and (iii) contain such other terms and conditions as are customary
for transactions of this type.

Required Lenders / Required Noteholders

For the purposes of this Restructuring Term Sheet, any consent, waiver or
exercise of discretion of the Consenting Parties will be effective only upon the
consent of the Required Lenders, the Required Noteholders and the Ares Equity
Holders.

“Required Lenders” means, as of any date of determination, Term Lenders holding
a majority of the outstanding principal amount of the Term Loan Claims held by
the Term Lenders in the aggregate.

“Required Noteholders” means, as of any date of determination, Second Lien
Noteholders holding a majority of the outstanding principal amount of the Second
Lien Claims held by the Second Lien Noteholders in the aggregate.

 

 

24

 

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Annex 1

Consenting Second Lien Noteholders
and Ares Equity Holders

Consenting Second Lien Noteholders

AF V ENERGY I AIV A1, L.P.

AF V ENERGY I AIV A2, L.P.

AF V ENERGY I AIV A3, L.P.

AF V ENERGY I AIV A4, L.P.

AF V ENERGY I AIV A5, L.P.

AF V ENERGY I AIV A6, L.P.

AF V ENERGY I AIV A7, L.P.

AF V ENERGY I AIV A8, L.P.

AF V ENERGY I AIV A9, L.P.

AF V ENERGY I AIV A10, L.P.

AF V ENERGY I AIV A11, L.P.

AF V ENERGY I AIV A12, L.P.

AF V ENERGY I AIV A13, L.P.

AF V ENERGY I AIV B1, L.P.

 

 

Ares Equity Holders

AF V ENERGY I AIV A1, L.P.

AF V ENERGY I AIV A2, L.P.

AF V ENERGY I AIV A3, L.P.

AF V ENERGY I AIV A4, L.P.

AF V ENERGY I AIV A5, L.P.

AF V ENERGY I AIV A6, L.P.

AF V ENERGY I AIV A7, L.P.

AF V ENERGY I AIV A8, L.P.

AF V ENERGY I AIV A9, L.P.

AF V ENERGY I AIV A10, L.P.

AF V ENERGY I AIV A11, L.P.

AF V ENERGY I AIV A12, L.P.

AF V ENERGY I AIV A13, L.P.

AF V ENERGY I AIV B1, L.P.

 

 

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EXHIBIT B to
the Restructuring Support Agreement

 

Form of Transfer Agreement and Joinder

 

 

 

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Transfer Agreement and Joinder

 

The undersigned (“Transferee”) hereby acknowledges that it has read and
understands the Restructuring Support Agreement, dated as of __________
(the “Agreement”),9 by and among Gastar, its direct and indirect subsidiaries
bound thereto and Northwest Property Ventures LLC, and certain other parties,
including the transferor to the Transferee of any [Debtor Claims/Interests]
(each such transferor, a “Transferor”), and agrees to be bound by the terms and
conditions of the Agreement to the extent the Transferor was thereby bound, and
shall be deemed a “Consenting Party” and a “Party” under the terms of the
Agreement.

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

Date Executed:  

 

______________________________________

Name:

Title:

 

Address:

 

E-mail address(es):

Telephone:

Facsimile:

 

Aggregate Amounts Beneficially Owned or Managed on Account of:

Term Loan Claims (if any)

$[__]

Second Lien Claims (if any)

$[__]

[Preferred Stock Claims] (if any)

[__] shares

[Existing Common Equity] (if any)]

[__] shares

 

 

 

9

Capitalized terms not used but not otherwise defined in this Transfer Agreement
and Joinder shall have the meanings ascribed to such terms in the Agreement.

 

 

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EXHIBIT C to
the Restructuring Support Agreement

 

Form of Joinder Agreement

 

 

 

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Joinder Agreement

 

The undersigned (“Joining Party”) hereby acknowledges that it has read and
understands the Restructuring Support Agreement, dated as of __________
(the “Agreement”),10 by and among Gastar, its direct and indirect subsidiaries
bound thereto and Northwest Property Ventures LLC, the Consenting Parties, and
certain other parties, and agrees to be bound by the terms and conditions of the
Agreement, and shall be deemed a “Consenting Party” and a “Party” under the
terms of the Agreement.

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

Date Executed:  

 

Name:

Title:

 

Address:

 

E-mail address(es):

Telephone:

Facsimile:

 

Aggregate Amounts Beneficially Owned or Managed on Account of:

ABL Revolver Claims (if any)

$[__]

ABL Term Loan Claims (if any)

$[__]

Term Loan Claims (if any)

$[__]

Unsecured Note Claims (if any)

$[__]

Existing Common Stock (if any)

[__] shares

 

 

 

 

 

10

Capitalized terms not used but not otherwise defined in this Joinder Agreement
shall have the meanings ascribed to such terms in the Agreement.

 

 

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EXECUTION VERSION

EXHIBIT D to
the Restructuring Support Agreement

 

DIP Term Sheet

 

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DIP Term Sheet

Gastar exploration inc.11

This term sheet (this “DIP Term Sheet”) is a summary of indicative terms and
conditions for a proposed DIP term loan financing (the “DIP Facility”) that is
materially consistent with the terms and conditions as set forth in this DIP
Term Sheet and otherwise acceptable in form and substance to the Debtors and the
DIP Lenders (each as defined below).

This DIP Term Sheet is non-binding and is being presented for discussion and
settlement purposes only.  Consequently, this DIP Term Sheet is entitled to
protection from any use or disclosure to any person or entity pursuant to
Federal Rule of Evidence 408 and any other rules or laws of similar
import.  This DIP Term Sheet does not purport to summarize all of the terms,
conditions, covenants and other provisions that may be contained in the fully
negotiated and executed definitive documentation in connection with the DIP
Facility.  Among other things, the transactions described in this DIP Term Sheet
are subject in all respects to: (i) internal authorization and approval by the
appropriate credit committee of the DIP Lenders; (ii) the execution and delivery
of definitive documentation satisfactory in form and substance to the Debtors
and the DIP Lenders; (iii) satisfaction or waiver of the conditions precedent
set forth in this DIP Term Sheet; (iv) approval by the Bankruptcy Court (as
defined below); and (iv) the satisfactory completion of diligence by the DIP
Lenders in their sole discretion.  This DIP Term Sheet does not constitute a
commitment to lend or to provide or arrange any other financing; such an
obligation would arise only under a fully negotiated commitment letter if
executed by all parties thereto in accordance with its terms.  

This DIP Term Sheet and the information contained in this DIP Term Sheet shall
remain strictly confidential and may not be shared with any person or entity
(other than the Debtors, the DIP Lenders and their respective professionals),
unless otherwise consented to by the Debtors or the DIP Lenders, as applicable.

Parties

Debtors:  Gastar Exploration Inc. (“Gastar”),  Northwest Property Ventures LLC,
and any other current or future subsidiaries of Gastar, as debtors-in-possession
(collectively, the “Debtors”) in the cases to be filed under Chapter 11 of the
Bankruptcy Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court
for the Southern District of Texas (the “Bankruptcy Court”).  The date of
commencement of the Chapter 11 Cases is referred to in this DIP Term Sheet as
the “Petition Date”.

Borrower:  Gastar.

Guarantors:  Each of the Debtors (other than Gastar) and each other subsidiary
of Gastar that guaranteed the Term Facility (as defined below) or the Second
Lien Notes (as defined below) (collectively, the “Guarantors”).  All obligations
of the Borrower under the DIP Facility will be unconditionally guaranteed on a
joint and several basis by the Guarantors, and each Guarantor that is a Debtor
shall be deemed to have guaranteed the DIP Obligations (as defined below)
pursuant to the Interim Order (as defined below).  

 

11 

This DIP Term Sheet, the terms and provisions set forth in this DIP Term Sheet,
and the transactions contemplated by this DIP Term Sheet are in all respects
subject to, and may be further revised, modified or changed following, the
completion of due diligence by the DIP Lenders (as defined below) and their
professionals.

2

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DIP Lenders: Funds managed or controlled by Ares Management, L.P. (together with
their successors and permitted assigns, collectively, the “DIP Lenders”).

DIP Agent: Wilmington Trust, National Association (the “DIP Agent”), shall act
as administrative agent for the DIP Lenders under the DIP Facility.

Existing Debt Arrangements

Term Loan Facility:  The Third Amended and Restated Credit Agreement, dated
March 3, 2017 (the “Term Credit Agreement”), by and between Gastar, as Borrower,
the Guarantors party thereto, the Lenders (the “Term Lenders”) from time to time
party thereto and Wilmington Trust, National Association, as administrative
agent (the “Term Agent”) (as amended, supplemented or otherwise modified prior
to the date hereof, and including all exhibits and guarantee, security and other
ancillary documentation in respect thereof, the “Term Facility”; all payment
Obligations (as defined in the Term Credit Agreement), under or related to the
Term Facility, collectively, the “Term Obligations”).

Second Lien Notes: Those certain notes issued pursuant to the Indenture dated
March 3, 2017 (the “Second Lien Indenture”), by and between Gastar, as Issuer,
the Guarantors party thereto, and Wilmington Trust, National Association, as
trustee and collateral agent (the “Second Lien Trustee”) (as amended,
supplemented or otherwise modified prior to the date hereof, and including all
exhibits and guarantee, security and other ancillary documentation in respect
thereof, the “Second Lien Notes”; all payment Obligations (as defined in the
Second Lien Indenture), under or related to the Second Lien Notes, collectively,
the “Second Lien Obligations”).

DIP Facility

As described in greater detail below, the proceeds of the DIP Facility will be
used by the Debtors: (i) subject to the Budget (as defined below) for working
capital purposes and funding the administration of the Chapter 11 Cases; and
(ii) to effectuate the Term Facility Refinancing (as defined below).

 

The DIP Facility shall be comprised of term loans in an aggregate amount of
approximately $383.9 million (the “DIP Loans”) and shall consist of the
following:  (a) $100 million of new money loans (the “New Money Loans”); and
(b) approximately $283.9 million of refinanced Term Obligations consisting of
outstanding principal and accrued and unpaid interest under the Term Facility as
of the Petition Date (the “Roll-up Loans”) pursuant to the Term Facility
Refinancing.

 

The DIP Facility and all instruments and documents executed at any time in
connection therewith, together with the DIP Orders (as defined below), shall be
referred to collectively as the “DIP Loan Documents.” Amounts repaid or prepaid
in respect of DIP Loans may not be reborrowed.

3

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Upon entry of and subject to a Bankruptcy Court order granting interim approval
of the DIP Facility (such order to be in form and substance satisfactory to the
Debtors in their reasonable discretion and the DIP Lenders in their sole
discretion, the “Interim Order”) and subject to satisfaction (or waiver) of the
additional Conditions Precedent (defined below) and the draw limitations set
forth in the last sentence of this paragraph and so long as consistent with the
Budget, up to $15 million of the New Money Loans (the “Interim DIP Tranche”) may
be drawn by the Borrower upon three business days’ notice in one or more draws
in an amount that is not less than $2,500,000 for the initial draw and not less
than $500,000 for each subsequent draw (or, if less, in the amount of the entire
unused balance of the Interim DIP Tranche).  Notwithstanding the foregoing or
anything to the contrary in this DIP Term Sheet, (i) draws under the Interim DIP
Tranche shall be limited to no more than one draw per week and (ii) no draw
under the Interim DIP Tranche shall in any event exceed the amount actually
needed by the Borrower at the applicable time of determination (taking into
account the Borrower’s cash on hand at such time) to fund the Chapter 11 Cases
and/or the Borrower’s working capital needs (after giving effect to a $5 million
cash minimum liquidity floor, which the Debtors shall be permitted to maintain
at all times during the pendency of the Chapter 11 Cases), in each case, over
the immediately succeeding 14-day period (any such applicable period, a “Forward
Period”) in the amounts expressly provided for in the Budget for such Forward
Period, net of (and without duplicating) any amounts previously drawn under the
DIP Facility in respect of amounts provided for in the Budget for such Forward
Period.

 

 

4

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Upon entry of and subject to a Bankruptcy Court order granting final approval of
the DIP Facility (such order to be in form and substance satisfactory to the
Debtors in their reasonable discretion and the DIP Lenders in their sole
discretion, the “Final Order” and together with the Interim Order, collectively,
the “DIP Orders”) and subject to the terms and conditions of the DIP Loan
Documents and the draw limitations set forth in the last sentence of this
paragraph and so long as consistent with the Budget, up to an amount equal to
$100 million of New Money Loans, minus the amount of New Money Loans previously
drawn by the Debtors prior to such date (the resulting amount, the “Final DIP
Tranche”) may be drawn by the Borrower upon three business days’ notice in one
or more draws in an amount not less than $500,000 for each draw (or, if less, in
the amount of the entire unused balance of the Final DIP
Tranche).  Notwithstanding the foregoing or anything to the contrary in this DIP
Term Sheet, (a) draws under the Final DIP Tranche shall be limited to no more
than one draw per week and (b) no draw under the Final DIP Tranche shall in any
event exceed the amount actually needed by the Borrower at the applicable time
of determination (taking into account the Borrower’s cash on hand at such time)
to fund the Chapter 11 Cases and/or the Borrower’s working capital needs, in
each case, over the immediately succeeding Forward Period in the amounts
expressly provided for in the Budget for such Forward Period, net of (and
without duplicating) any amounts previously drawn under the DIP Facility in
respect of amounts provided for in the Budget for such Forward Period.

 

Upon entry of and subject to the Final Order and subject to the terms and
conditions of the DIP Loan Documents and the Debtors having demonstrated to the
reasonable satisfaction of the DIP Lenders acting in good faith, the bona fide
need of the Debtors for such additional liquidity to preserve lease operating
rights in response to actions taken or proposed to be taken by third parties
(the “Operating Rights Preservation Activities”) and subject to the draw
limitations set forth in the last sentence of this paragraph, up to an amount
equal to $100 million of New Money Loans, minus any amounts of New Money Loans
previously drawn by the Debtors prior to such date (the “Reserve DIP Tranche”)
may be drawn by the Borrower upon three business days’ notice in one or more
draws in an amount not less than $500,000 for each draw (or, if less, in the
entire amount of the unused balance of the Reserve DIP
Tranche).  Notwithstanding the foregoing or anything to the contrary in this DIP
Term Sheet, (i) draws under the Reserve DIP Tranche shall be limited to no more
than one draw per week and (ii) no draw under the Reserve DIP Tranche shall in
any event exceed the amount actually needed by the Borrower at the applicable
time of determination (taking into account the Borrower’s cash on hand at such
time) to fund Operating Rights Preservation Activities over the immediately
succeeding Forward Period in the amounts expressly approved by the DIP Lenders
for such Forward Period, net of (and without duplicating) any amounts previously
drawn under the DIP Facility in respect of amounts so approved by the DIP
Lenders for such Forward Period.

5

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The date of entry of the Interim Order and satisfaction of the other Conditions
Precedent is referred to hereunder as the “Closing Date.”

 

 

DIP Liens and Superpriority Status

Subject to a “carve-out” as set forth on Exhibit A to this DIP Term Sheet (the
“Carve-Out”) and liens securing obligations owed to the Debtors’ hedge
counterparties (the “Hedge Carve-Out”), the DIP Facility and all obligations of
the Debtors to the DIP Lenders and the DIP Agent under the DIP Loan Documents
(collectively, the “DIP Obligations”) shall at all times be secured:
(a) pursuant to Bankruptcy Code section 364(d) of the Bankruptcy Code, by first
priority priming liens on all encumbered assets of the Debtors (whether existing
as of the Petition Date or after-acquired, tangible or intangible, and
comprising real or personal property), which liens shall prime all other liens
and claims, including the liens securing the Term Obligations and the Second
Lien Obligations but excluding the items addressed in clause (c) below; (b)
pursuant to Bankruptcy Code section 364(c)(2), first priority liens on all
unencumbered assets of the Debtors (whether existing as of the Petition Date or
after-acquired, tangible or intangible, and comprising real or personal
property) including, upon entry of the Final Order, any causes of action under
Bankruptcy Code sections 502(d), 544, 545, 547, 548, 549, 550 or 553 or any
other avoidance actions under the Bankruptcy Code or applicable non-bankruptcy
law and the proceeds thereof (“Avoidance Actions”) and (c) pursuant to the
Bankruptcy Code 364(c)(3), junior-priority liens on all assets of the Debtors to
the extent that such assets are subject to valid, perfected and unavoidable
Permitted Liens (as such term shall be defined under the DIP Loan Documents) in
favor of third parties that were in existence immediately prior to the Petition
Date, 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 and claims in respect of the Term
Obligations and the Second Lien Obligations, which existing liens and claims
will be primed by the liens described in clause (a) above) (such liens and
security interests, collectively, the “DIP Liens”).  

Subject to the Carve-Out, the DIP Obligations shall be allowed superpriority
claims, pursuant to Bankruptcy Code section 364(c)(1), with priority over all
other claims (including claims otherwise having priority under section 507 of
the Bankruptcy Code or otherwise).

6

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Use of Proceeds; Carve-Out

Subject to the terms and conditions in this DIP Term Sheet, the proceeds of the
DIP Facility shall be used only (x) to effect the Term Facility Refinancing and
(y) otherwise in accordance with the terms of the Budget (other than with
respect to the Reserve DIP Tranche, which may not be reflected in the Budget)
and the DIP Loan Documents.  Permitted uses for such funds shall include:

(i)        to pay (x) all fees due to DIP Lenders and the DIP Agent under the
DIP Loan Documents and (y) all reasonable pre- and post-petition professional
fees and expenses (including legal, financial advisor, appraisal and
valuation-related fees and expenses) incurred by the DIP Lenders and the DIP
Agent, including, without limitation, those incurred in connection with the
preparation, negotiation, documentation and court approval of the documentation
and transactions contemplated by this DIP Term Sheet;

(ii)       to provide working capital to the Debtors and to fund the Debtors’
general corporate purposes (but not, for the avoidance of doubt, any
equityholder or other affiliate of the Debtors except as expressly set forth in
this DIP Term Sheet or the DIP Loan Documents);

(iii)      fund the fees, costs and expenses of administration of the Chapter 11
Cases (including the Carve-Out); and

(iv)      to pay amounts in respect of the adequate protection provided to the
Term Facility Secured Parties (as defined below) and the Second Lien Secured
Parties (as defined below).

Notwithstanding the foregoing, during the period between entry of the Interim
Order and entry of the Final Order, the proceeds of the DIP Facility shall not
be used in connection with the payment of any fees or expenses incurred by any
professional retained (or to be retained) in these Chapter 11 Cases.

The liens securing the DIP Obligations, the DIP Obligations status as
“super-priority” claims, the “super-priority” claims and liens constituting the
Term Facility Adequate Protection Claims (as defined below), and the liens
securing the Term Obligations shall be subject to the Carve-Out and the Hedge
Carve-Out.

Use of Cash Collateral

The Debtors shall be entitled to use cash collateral of the DIP Agent, the Term
Agent and the Second Lien Trustee (the “Cash Collateral”) in accordance with the
Budget and DIP Loan Documents.  

7

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Limitations on Use of DIP Proceeds and Cash Collateral

The DIP Loan Documents shall provide customary and regular restrictions on the
Debtors’ use of Cash Collateral, the proceeds of the DIP Facility, and the
collateral therefor.  Those restrictions shall, without limitation, include:

(i)        financing any investigation (including discovery proceedings),
initiation or prosecution of any adversary action, suit, arbitration,
proceeding, application, motion or other litigation of any type adverse to the
DIP Agent or the DIP Lenders, the Term Facility Secured Parties, the Second Lien
Secured Parties, or any of their respective Related Persons,12 or their
respective rights and remedies under or in respect of the DIP Facility, the Term
Facility, the Second Lien Notes, or any interim or final order with respect to
the DIP Facility and the adequate protection granted to the Term Facility
Secured Parties and the Second Lien Secured Parties;

(ii)       financing any action with respect to (a) the Term Facility or the
Term Facility Secured Parties, (b) the Second Lien Notes or the Second Lien
Secured Parties, (c) any claims, demands, liabilities, responsibilities,
disputes, remedies, causes of action, indebtedness or obligations, or (d) the
Debtors’ Stipulations (as defined below);

(iii)      any purpose that is (a) prohibited under the Bankruptcy Code, the
Interim Order, the Final Order or the DIP Loan Documents or (b) not expressly
provided for in the Budget; and

(iv)      making any payment in settlement of any claim, action or proceeding,
before any court, arbitrator or other governmental body, which payment is not
provided for in the Budget, without the prior written consent of the DIP Lenders
holding at least 50.1% of the total DIP Loans and DIP Commitments (the “Majority
DIP Lenders”).

Notwithstanding the foregoing, advisors to the official unsecured creditors’
committee, if one is appointed with regard to the Chapter 11 Cases, may
investigate the liens granted pursuant to, or any claims under or causes of
action with respect to, the Term Facility or the Second Lien Notes at an
aggregate expense for such investigation not to exceed $25,000.  Further, no
portion of such amount may be used to prosecute or support any claims.

 

 

 

12 

“Related Persons” means any person’s or entity’s respective directors, officers,
funds, affiliates, members, employees, partners, managers, investment advisors,
agents, representatives, principals, attorneys, consultants, professional
advisors, heirs, executors, successors and assigns (each in their capacity as
such).

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Term Facility Refinancing

Subject to entry of the Final Order, approximately $283.9 million in outstanding
Term Obligations consisting of principal and accrued and unpaid interest under
the Term Facility as of the Petition Date will be repaid from the proceeds of
the DIP Loans (the “Term Facility Refinancing”).

Adequate Protection

 

Adequate Protection for Term Facility: The Term Agent and the Term Lenders
(collectively, the “Term Facility Secured Parties”) shall be entitled to
adequate protection of their interests in the Collateral (as defined in the Term
Credit Agreement, the “Term Facility Collateral”).  Such adequate protection
shall be in an amount equal to the aggregate diminution in the value of their
interests in the Term Facility Collateral (the “Term Facility Adequate
Protection Claims”) in the form of:

(i)        a senior perfected replacement lien on all Term Facility Collateral,
including any such assets of the Debtors’ estates existing as of the Petition
Date or thereafter acquired, and all proceeds thereof, to secure the Term
Facility Adequate Protection Claims, senior to all other liens on such Term
Facility Collateral (other than the DIP Liens), subject to the Carve-Out and the
Hedge Carve-Out;

(ii)       additional perfected liens on all assets of the Debtors that do not
constitute Term Facility Collateral but constitute collateral for the DIP
Facility (including, for the avoidance of doubt, any Avoidance Actions and the
proceeds thereof upon the entry of the Final Order), senior to all other liens
on such collateral (other than the DIP Liens), subject to the Carve-Out and the
Hedge Carve-Out (together with the adequate protection liens granted to the Term
Facility Secured Parties in clause (i) immediately above, the “Term Facility
Adequate Protection Liens”);

(iii)      superpriority claims as provided in section 507(b) in the amount of
any Term Facility Adequate Protection Claims, with priority over all other
superpriority and administrative expense claims except the Carve-Out, the Hedge
Carve-Out and the DIP Obligations;

(iv)      within three (3) business days following the initial funding of the
DIP Loans, payment in cash of all accrued and unpaid reasonable pre-petition
fees and expenses of the Term Facility Secured Parties (including, but not
limited to, fees and expenses of their advisors); and

(v)       after entry of the Interim Order, monthly payment in cash of the
reasonable and documented costs, fees and expenses of the Term Facility Secured
Parties (including, but not limited, to fees and expenses of their advisors) in
accordance with the Term Credit Agreement.

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All interest on the Term Facility, including accrued and unpaid interest as of
the Petition Date and interest accruing thereafter, shall not be paid currently,
but shall continue to accrue at the non-default rate.  To the extent permitted
under the Bankruptcy Code and by the Bankruptcy Court, all such interest shall
be deemed part of the Term Facility Secured Parties’ secured claim for all
purposes, including for purposes of any credit bid under section 363(k) of the
Bankruptcy Code.

Adequate Protection for Second Lien Notes: The Second Lien Trustee and the
holders of the Second Lien Notes (the “Second Lien Secured Parties”) shall be
entitled to adequate protection of their interests in the Collateral (as defined
in the Second Lien Indenture, the “Second Lien Collateral”).  Such adequate
protection shall be in an amount equal to the aggregate diminution in the value
of their interests in the Second Lien Collateral (the “Second Lien Adequate
Protection Claims”) in the form of:

(i)        a senior perfected replacement lien on all the Second Lien
Collateral, including any such assets of the Debtors’ estates existing as of the
Petition Date or thereafter acquired, and all proceeds thereof, to secure the
Second Lien Adequate Protection Claims, senior to all other liens on such Second
Lien Collateral (other than the liens thereon securing the DIP Facility, the
Term Obligations, or the Term Facility Adequate Protection Claims), subject to
the Carve-Out and the Hedge Carve-Out;

(ii)       additional perfected liens on all assets of the Debtors that do not
constitute Second Lien Collateral (including, for the avoidance of doubt, any
Avoidance Actions and the proceeds thereof upon the entry of the Final Order),
senior to all other liens on such collateral (other than the DIP Liens, the
liens securing the Term Obligations, the Term Facility Adequate Protection
Liens, and the Term Facility Adequate Protection Claims), subject to the
Carve-Out and the Hedge Carve-Out;

(iii)      superpriority claims as provided in section 507(b) in the amount of
any Second Lien Adequate Protection Claims, with priority over all other
superpriority and administrative expense claims except the Carve-Out, the Hedge
Carve-Out, the DIP Obligations, the Term Obligations, the Term Facility Adequate
Protection Claims, and the Term Facility Adequate Protection Liens;

(iv)      within three (3) business days following the initial funding of the
DIP Loans, payment in cash of all accrued and unpaid reasonable pre-petition
fees and expenses of the Second Lien Secured Parties (including, but not limited
to, fees and expenses of their advisors); and

 

 

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(v)       after entry of the Interim Order, monthly payment in cash of the
reasonable and documented costs, fees and expenses of the Second Lien Secured
Parties (including, but not limited, fees and expenses of their advisors) in
accordance with the Second Lien Indenture.  

All interest on the Second Lien Notes, including accrued and unpaid interest as
of the Petition Date and interest accruing thereafter, shall not be paid
currently, but shall continue to accrue at the non-default rate.  To the extent
permitted under the Bankruptcy Code and by the Bankruptcy Court, all such
interest shall be deemed part of the Second Lien Secured Parties’ secured claim
for all purposes, including for purposes of any credit bid under section 363(k)
of the Bankruptcy Code.

Scheduled Maturity Date

The earliest of (i) thirty (30) days following the Petition Date if the Final
Order shall not have been entered by such date, (ii) the effective date of an
Acceptable Plan,13 (iii) February 15, 2019 and (iv) the date that all DIP Loans
shall become due and payable in full in accordance with the terms of the DIP
Facility, including due to acceleration (whether voluntary or involuntary).  For
the avoidance of doubt, upon the maturity of the DIP Obligations, certain of the
DIP Obligations shall, under the circumstances provided for in the restructuring
term sheet (the “Restructuring Term Sheet”) attached to the Restructuring
Support Agreement dated as of October 26, 2018 (the “RSA”), be rolled-over into
an exit facility as more thoroughly described in the Restructuring Term Sheet.  

Interest Rate

The DIP Loans will bear interest at a rate of adjusted LIBOR (subject to a 2.0%
floor) plus 7.5% per annum and such interest rate shall increase to adjusted
LIBOR (subject to a 2.0% floor) plus 10.0% for DIP Loans outstanding in excess
of 90 days. Interest on the New Money Loans shall be paid in cash monthly and
upon any repayment or prepayment.  Interest on the Roll-up Loans shall be paid
in kind and any reference to “principal amount” of the Roll-up Loans shall
include any interest so capitalized and added to the principal amount
thereof.  Notwithstanding the foregoing, upon the occurrence of any Event of
Default under the DIP Facility, and upon written notice from the Majority DIP
Lenders, such interest rate margin in respect of the DIP Loans shall
automatically increase as of the date of the occurrence of the Event of Default
by an additional 3.0% per annum (the “Default Rate”).  A customary alternate
base rate option will be available (or required) as an alternative to adjusted
LIBOR.

Interest shall be due and payable on (a) the last day of each interest period
for DIP Loans bearing interest at LIBOR and (b) the last business day of each
month for DIP Loans bearing interest at an alternate base rate.

 

13 

“Acceptable Plan” means a plan of reorganization that contains the terms and
conditions set forth in the RSA Term Sheet and which is otherwise acceptable to
the DIP Lenders in their sole discretion.

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Upfront/Arrangement Fee

An upfront and arrangement fee in an aggregate amount equal to 1.75% of the
aggregate principal amount of the New Money Loans shall be due and payable to
the DIP Lenders in cash on the initial funding date of the New Money Loans.

Commitment Yield Enhancement

A commitment yield enhancement in an amount equal to 1.75% of the aggregate
principal amount of the New Money Loans shall be due and payable to the DIP
Lenders in cash on the initial funding date of the New Money Loans.

Budget; Permitted Variances

Prior to the commencement of the Chapter 11 Cases, the DIP Lenders shall receive
an initial 13-week budget commencing with the week during which the Petition
Date shall occur.  The budget shall contain line items of sufficient detail to
reflect the Debtors’ consolidated projected receipts and disbursements for such
13-week period, as set forth on a week-by-week basis.  The 13-week budget shall
be in form and substance satisfactory to the Majority DIP Lenders in their sole
discretion (the “Initial Budget”). The Budget (as defined below) shall also
contain line items of sufficient detail to reflect the Debtors’ consolidated
projected professional fees (the “Professional Fees Estimate”) and royalty
obligations (the “Royalty Estimate”).  The Debtors shall provide a new budget to
the DIP Lenders on the Thursday of each week, beginning with the Thursday of the
second full week after the Petition Date.  Once delivered and approved by the
Majority DIP Lenders in their sole discretion, each subsequent budget shall
become the new budget (together with the Initial Budget, each such subsequent
budget, the “Budget”).  To the extent such subsequent budget is not approved by
the Majority DIP Lenders, the existing budget shall remain as the Budget.

Commencing on the Thursday of the second full week after the Petition Date, the
Debtors shall deliver to the DIP Lenders on the Thursday of each calendar week
(a) a variance report comparing actual cash disbursements for the preceding
Testing Period (as defined below) to the projected cash disbursements for such
Testing Period as set forth in the Budget and (b) a variance report comparing
actual cash receipts for the preceding Testing Period to the projected cash
receipts for such Testing Period as set forth in the Budget, in each case such
variance reports to be certified by the chief financial officer of the Debtors
(the variance test described in the foregoing clauses (a) and (b), the “Budget
Test”).  The Budget Test shall not include a test on the Professional Fees
Estimate.

“Testing Period” means (a) with respect to the initial Budget Test, the Petition
Date through and including the last day of the first full week after the
Petition Date and (b) with respect to each subsequent Budget Test, the first day
after the end of the immediately preceding week through and including the last
day of the same calendar week.

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“Permitted Variance” means for any Testing Period, a variance of not more than
(a) 20% less than the amount in the Budget for the operating receipts for such
Testing Period measured on a line-by-line basis after giving effect to any
Operating Receipt Carryforward (as defined below) and (b) 10% more than the
amount in the Budget for the operating disbursements measured on a line-by-line
basis after giving effect to any Operating Disbursement Carryforward (as defined
below).  Additional variances, if any, from the Budget shall be subject to the
written consent of the Majority DIP Lenders in their sole discretion.  

An “Operating Receipt Carryforward” is the amount by which the amount of actual
cash receipts received in a Testing Period exceeds the amount of any projected
cash receipts set forth in the Budget for such Testing Period, which amounts
shall carry forward into the next seceding Testing Period.

An “Operating Disbursement Carryforward” is the amount of any projected cash
disbursements set forth in the Budget for a Testing Period not expended in such
Testing Period, which amounts shall carry forward into the next seceding Testing
Period.  

Substantially concurrently with the delivery of the applicable variance report,
the Debtors shall deliver to the DIP Lenders a “flash” cash report detailing all
cash and cash equivalents of each of the Debtors (broken out by entity) as of
the close of business of the last business day of the prior week.

Conditions Precedent to Funding

The obligation of each DIP Lender to fund the DIP Loans on the Closing Date or
thereafter is subject to the Debtors’ satisfaction, or waiver by the Majority
DIP Lenders, of all conditions set forth below (the “Conditions Precedent”):

1.        The Interim Order shall have been entered by the Bankruptcy Court in
the Chapter 11 Cases and shall have been in form and substance consistent with
this DIP Term Sheet and otherwise satisfactory to the Debtors in their
reasonable discretion and the Majority DIP Lenders in their sole
discretion.  The Interim Order shall be in full force and effect and shall not
have been vacated, stayed, revised, modified or amended in any manner without
the prior written consent of the Majority DIP Lenders in their sole discretion.

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2.        All orders entered by the Bankruptcy Court, including orders
pertaining to cash management and adequate protection and all other motions and
documents filed or to be filed with, and submitted to, the Bankruptcy Court in
connection therewith, shall be in form and substance reasonably satisfactory to
the Majority DIP Lenders.  With respect to any provisions that affect the rights
or duties of the DIP Agent, the orders shall be in form and substance reasonably
satisfactory to the DIP Agent.

3.        With respect to any borrowings to occur later than thirty (30) days
following the Petition Date, the Final Order shall have been entered by the
Bankruptcy Court no later than thirty (30) days following the Petition Date and
the DIP Agent shall have received a true and complete copy of such order.  Such
order shall be consistent with the DIP Term Sheet and otherwise in form and
substance satisfactory to the Debtors in their reasonable discretion and the
Majority DIP Lenders (and with respect to any provisions that affect the rights
or duties of the DIP Agent, the DIP Agent) in their sole discretion.  The Final
Order shall be in full force and effect, and shall not have been reversed,
modified, amended, stayed or vacated absent prior written consent of the
Majority DIP Lenders (and with respect to any provisions that affect the rights
or duties of the DIP Agent, the DIP Agent) in their sole discretion.

4.        Except as disclosed to the DIP Lenders in writing, since the Petition
Date, no event, circumstance or change shall have occurred that has caused, or
would reasonably be expected to cause, or evidences, either in any case or in
the aggregate, a material adverse effect (to be defined as mutually agreed in
the DIP Loan Documents, a “Material Adverse Effect”).

5.        Other than the Chapter 11 Cases (and, except as otherwise provided
herein, any objections, claims, actions, suits, investigations, litigation, or
proceedings that may be commenced or pursued therein), there shall exist no
claim, action, suit, investigation, litigation or proceeding, pending in any
court or before any arbitrator or governmental instrumentality (a) which relates
to the DIP Facility or the transactions contemplated thereby or (b) except for
claims, actions, suits, investigations, litigation or proceedings (i) disclosed
in a schedule to the DIP Loan Documents or (ii) otherwise stayed by 11 U.S.C. §
362.

6.        The DIP Lenders shall have received executed originals of each
guaranty and pledge agreement required under the DIP Loan Documents. Subject to
the entry of the Interim Order or Final Order, as applicable, each such
agreement shall be in full force and effect.

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7.         No trustee, examiner or receiver shall have been appointed or
designated with respect to the Debtors or their business, properties or
assets.  

8.        The DIP Lenders shall have received the Budget, which shall be in form
and substance acceptable to the DIP Lenders in their sole discretion, and such
other information (financial or otherwise) as the DIP Lenders may reasonably
request.  The Debtors shall be in compliance with the Budget.

9.         No default or event of default under the DIP Loan Documents shall
have occurred and be continuing.

10.       The Debtors shall have delivered a funding notice in the form required
by the DIP Loan Documents.

11.      The Debtors shall be in compliance with the Interim Order or, if
applicable, the Final Order in all respects and each other Bankruptcy Court
order in all material respects.

12.       All reasonable and documented fees and expenses of the DIP Agent and
the DIP Lenders (including, but not limited to, the fees and expenses of their
advisors) shall have been satisfied.

13.      The representations and warranties contained in the DIP Loan Documents
shall be true and correct in all material respects (unless otherwise qualified
by materiality in which case such representations and warranties shall be true
and correct in all respects) on and as of such date, as though made on and as of
such date, except to the extent that any such representation or warranty
expressly relates to an earlier date (in which case such representation or
warranty shall be true and correct in all material respects (unless otherwise
qualified by materiality in which case such representations and warranties shall
be true and correct in all respects) on and as of such earlier date).

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Covenants

(1)       The DIP Facility shall contain the financial, negative and affirmative
covenants set forth below (subject to exceptions and qualifiers) that are
ordinary and customary in debtor-in-possession financings of this type
acceptable to the Debtors in their reasonable discretion and the Majority DIP
Lenders in their sole discretion:

(i)       delivery of the Budget and variance reports as set forth in the
“Budget; Permitted Variances” section and compliance with the Budget Test
subject to the Permitted Variance, in accordance with the terms of this DIP Term
Sheet and the DIP Loan Documents;

(ii)      delivery of information (financial or otherwise) reasonably requested
by the DIP Lenders and commercially reasonable access to management subject to
customary prior notice;

(iii)     delivery to the DIP Lenders and their counsel with reasonable prior
notice and an opportunity to comment, copies of all pleadings, motions,
applications, judicial information, financial information and other documents
filed by or on behalf of the Debtors with the Bankruptcy Court in the Chapter 11
Cases, or distributed by or on behalf of the Debtors to any official committee
appointed in the Chapter 11 Cases;

(iv)       support and seek to consummate the Restructuring Transaction (as
defined in the RSA) in accordance with the RSA within the time-frames
contemplated under the RSA and in compliance with each Milestone (as defined in
the RSA);

(v)       restrictions on the granting of liens, the issuing of guarantees and
the incurrence of other obligations (including the refinancing of any
obligations);

(vi)      without the Majority DIP Lenders’ consent (in their sole discretion),
a prohibition on the Debtors, proposing, filing, consenting to, cooperating
with, soliciting votes with respect to, acquiescing to, or supporting any
chapter 11 plan or debtor in possession financing unless: (i) such plan or
financing would, on the date of its effectiveness, pay in full in cash all DIP
Obligations, all Term Obligations and all Second Lien Obligations; or (ii) such
plan is an Acceptable Plan;

 

 

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(vii)     make or permit to be made any change, amendment or modification, or
any application or motion for any change, amendment or modification, to any DIP
Order, without the written consent of the Majority DIP Lenders in their sole
discretion (which consent may be granted through email);

(viii)    except as otherwise permitted pursuant to the DIP Orders, (A) assume
or reject any executory contract or unexpired lease without the consent of the
Majority DIP Lenders or (B) consent to termination or reduction of any
exclusivity period or fail to object to any motion seeking to terminate or
reduce any exclusivity period other than a motion filed by or with the written
consent of the Majority DIP Lenders (which consent may be granted through
email);

(ix)      assert any right of subrogation or contribution against any other
obligor under the DIP Facility until all borrowings under the DIP Facility are
paid in full and the commitments are terminated; and

(x)       the existing covenants in the Term Credit Agreement, which shall be
modified as appropriate for the purposes of the DIP Facility in a manner
satisfactory to the Debtors in their reasonable discretion and the DIP Lenders
in their sole discretion.

The Debtors shall not amend, modify, or assign, without the prior written
consent of the Majority DIP Lenders any of their respective material agreements
(each as in effect on the date hereof).

Representations and Warranties

The DIP Loan Documents shall only contain representations and warranties
customary for transactions and debtors of this type, which shall be limited to
priority, collateral, the DIP Orders, the DIP Loan Documents, the Budget,
prepetition indebtedness, use of proceeds and the representations and warranties
set forth in the Term Credit Agreement, as appropriate and as modified to
reflect the debtor-in-possession nature of the financing, as such
representations and warranties may be modified or waived form time to time at
the discretion of the Majority DIP Lenders in their sole discretion.

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Prepayments

Voluntary Prepayment:  At any time prior to maturity, the Debtors may
voluntarily prepay the DIP Loans in full or in part.  Any such prepayment shall
be made with all accrued interest, fees, the Make-Whole Amount (as defined and
calculated in the Term Credit Agreement), if any, and other amounts outstanding
in respect to such prepaid DIP Loans.

Mandatory Prepayment: Customary for transactions of this type, including without
limitation: 100% of the net cash proceeds of (i) any non-ordinary course asset
sales above $25,000 individually or in the aggregate, (ii)
insurance/condemnation events above $25,000 individually or in the aggregate
(the prepayments set forth in the foregoing clause (i) or (ii), collectively,
the “Excluded Make-Whole Prepayments”) and (iii) any incurrence of indebtedness
not otherwise permitted under the DIP Loan Documents.  The Debtors shall make
such mandatory prepayments within three (3) business days following the Debtors’
receipt of any such net cash proceeds.

Make-Whole Amount: Whether voluntary or mandatory, and with respect to each
repayment or prepayment of the DIP Loans, any acceleration of the DIP Loans or
any other satisfaction or discharge of the DIP Loans prior to February 15, 2019,
the Borrower shall pay to the DIP Agent, for the ratable benefit of the DIP
Lenders, with respect to the amount of the DIP Loans repaid, prepaid,
accelerated, satisfied or discharged, in each case, concurrently with such
repayment, prepayment, acceleration, satisfaction or discharge, an amount equal
to the Make Whole Amount.  Notwithstanding the foregoing, no Make-Whole Amount
shall be payable (a) with respect to any Excluded Make-Whole Prepayments, which
shall not include, for the avoidance of doubt, and prepayment in connection with
a sale pursuant to section 363 of the Bankruptcy Code, or (b) if the DIP Loans
are repaid and otherwise satisfied pursuant to the Acceptable Plan.

Events of Default

The following will constitute events of default (“Events of Default” and each an
“Event of Default”) under the DIP Loan Documents (in each case, subject to cure
periods and materiality qualifiers customary for transactions and debtors of
this type as agreed to by the Debtors, DIP Lenders and the DIP Agent):  

(i)        “Events of Default” as defined in and consistent with the Term
Facility shall be included in the DIP Loan Documentation, mutatis mutandis for
the DIP Loan Obligations (and only to the extent applicable to the DIP Loan
Obligations), other than any such “Events of Default” in respect of insolvency
or the filing of the Chapter 11 Cases contemplated hereunder;

 

 

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(ii)       appointment of a chief restructuring officer  or any equivalent
officer that is not reasonably satisfactory to the Majority DIP Lenders;

(iii)      appointment of a trustee or examiner in the Chapter 11 Cases or
appointment of a receiver;

(iv)      the Bankruptcy Court shall have entered an order with respect to any
of the Chapter 11 Cases converting such Chapter 11 Cases to a case or cases
under Chapter 7 of the Bankruptcy Code;

(v)       an order shall be entered by the Bankruptcy Court without the written
consent of the Majority DIP Lenders (which may be withheld in their sole
discretion) permitting (A) the incurrence of any debt (including any guaranty or
refinancing) or lien by any Debtor (excepting any Permitted Debt and/or
Permitted Liens as such terms shall be defined under the DIP Loan Documents) or
(B) any administrative expense or any claim to have administrative priority as
to the Debtors equal or superior to the priority of the Chapter 11 Cases (other
than the Carve-Out and the Hedge Carve-Out);

(vi)      without the Majority DIP Lenders’ consent, the Debtors shall have
proposed, filed, solicited, consented to, cooperated with, acquiesced to, or
supported any chapter 11 plan or debtor in possession financing unless: (i) such
plan or financing would, on the date of its effectiveness, pay in full in cash
all DIP Obligations, all Term Obligations and all Second Lien Obligations; or
(ii) such plan is an Acceptable Plan;

(vii)     the Debtors shall have breached any of the Debtors’ Stipulations;

(viii)    the Debtors shall file a motion seeking, or the Bankruptcy Court shall
enter, an order granting any third party relief from the stay applicable to any
third party to the extent the claim of such third party is in excess of
$500,000;

(ix)      the Debtors shall file a motion seeking, or the Bankruptcy Court shall
enter, an order approving payment of any prepetition claim other than (A) as
provided for in the “first-day orders” or “second-day orders,” (B) as
contemplated by the Budget (subject to the Permitted Variance) or (C) otherwise
consented to by the Majority DIP Lenders (which consent may be withheld in their
sole discretion);

 

 

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(x)       an order shall be entered by the Bankruptcy Court dismissing any of
the Chapter 11 Cases which does not contain a provision for payment in full of
the DIP Obligations, the Term Obligations and the Second Lien Obligations;

(xi)     the termination of the Debtors’ exclusive period to file or solicit
acceptance of a plan;

(xii)     any Debtor shall fail to execute and deliver to the DIP Agent any
agreement, financing statement, trademark filing, copyright filing, mortgages,
notices of lien or similar instruments or other documents that the DIP Agent or
the DIP Lenders may reasonably request from time to time to more fully evidence,
confirm, validate, perfect, preserve and enforce the liens created in favor of
the DIP Agent, and such failure shall continue unremedied for a period of ten
days;

(xiii)    (A) any Debtor shall attempt to invalidate, reduce or otherwise impair
the DIP Liens or security interests of the DIP Agent or the DIP Lenders, claims
or rights against such person or to subject any collateral to assessment
pursuant to section 506(c) of the Bankruptcy Code, (B) the DIP Liens or security
interest created by the collateral documents or the DIP Orders shall for any
reason cease to be valid or (C) any action is commenced by the Debtors which
contests the validity, perfection or enforceability of any of the DIP Liens or
security interests of the DIP Agent;

(xiv)    the Acceptable Plan (including any exit financing) or confirmation
order approving the same is not in form or substance satisfactory to the
Majority DIP Lenders in their sole discretion;

(xv)     the Acceptable Plan is withdrawn, terminated, amended, supplemented or
otherwise modified, in each case, without the prior written consent of the
Majority DIP Lenders in their sole discretion;

(xvi)    any Debtor shall seek to, or shall support any other person’s motion
to, disallow the DIP Lenders’ claim in respect of the DIP Obligations or contest
any provision of any DIP Loan Document or any material provision of any DIP Loan
Document shall cease to be effective;

 

 

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(xvii)   the initiation by the Debtors, any statutory committee appointed in the
Chapter 11 Cases, any trustee, any examiner or any other party in interest of
any contested matter or adversary proceeding in respect of any of the DIP
Facility, the DIP     Obligations, the DIP Agent, the DIP Lenders, the Term
Facility, the Term Obligations, the Term Facility Secured Parties, the Second
Lien Notes, the Second Lien Obligations, the Second Lien Secured Parties,
including, but not limited to, any actions pursuant to chapter 5 of the
Bankruptcy Code, in each case, except as may otherwise be permitted under the
Interim Order or Final Order;

(xviii)  the violation of any term, provision or condition in the Interim Order
or the Final Order; the Interim Order or the Final Order is amended,
supplemented, reversed, vacated or otherwise modified without the prior written
consent of the Majority DIP Lenders (and with respect to amendments,
modifications or supplements that affect the rights or duties of the DIP Agent,
the DIP Agent);

(xix)    an application for any of the orders described in clause (v) or (xviii)
shall be made by a person other than the Debtors and such application is not
contested by the Debtors in good faith or the relief requested is not withdrawn,
dismissed or denied within 30 day after filing or any person obtains a final
order under section 506(c) of the Bankruptcy Code against the DIP Agent or
obtain a final order adverse to the DIP Agent or the DIP Lenders or any of their
respective rights and remedies under the DIP Loan Documents or in the
collateral; and

(xx)     the occurrence of a default under or termination of the RSA.

Upon the occurrence and during the continuation of an Event of Default, the
Majority DIP Lenders or the DIP Agent at the direction of the Majority DIP
Lenders may immediately (a) deliver a notice of an Event of Default to Debtors
and (b) terminate any commitments of each DIP Lender.

 

 

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In addition, upon the occurrence and during the continuation of an Event of
Default, upon three (3) business days prior written notice to the Debtors from
the Majority DIP Lenders or the DIP Agent at the direction of the Majority DIP
Lenders, (a) the DIP Obligations shall  accelerate and (b) the automatic stay of
Section 362 of the Bankruptcy Code shall be terminated without order of the
Bankruptcy Court, without the need for filing any motion for relief from the
automatic stay or any other pleading, for the purpose of permitting the DIP
Lenders to exercise any or all of their rights and remedies set forth in the DIP
Orders or the DIP Loan Documents, including without limitation: (i) directing
the DIP Agent to foreclose on the Collateral and (ii) moving the Bankruptcy
Court (on shortened notice) to appoint a chief restructuring officer for the
Debtors, which the Debtors shall agree not to oppose such motion.  In addition,
upon an Event of Default, the DIP Lenders (or the DIP Agent at the direction of
the Majority DIP Lenders) may file a motion to seek to terminate or modify the
Debtors’ plan exclusivity periods under Bankruptcy Code section 1121(d) and have
such motion heard on shortened notice.

Upon the occurrence of an Event of Default, the DIP Lenders also shall have the
right to deliver to the Debtors a DIP Toggle Notice (as defined in the
Restructuring Term Sheet).  Upon the delivery of a DIP Toggle Notice, the
Debtors shall continue to pursue the Acceptable Plan in accordance with the RSA
and the milestones set forth therein.  The delivery of the DIP Toggle Notice
shall not be, and shall not be deemed, a waiver of any Event of Default
(including, but not limited to, any Event of Default on which the DIP Toggle
Notice is based) or any rights or remedies of the DIP Agent or the DIP Lenders
in respect of any Event of Default (including the right to terminate the DIP
Facility and accelerate the DIP Loans).  All such rights and remedies shall be
reserved and preserved and the DIP Agent or the DIP Lenders, as applicable, may
exercise such rights and remedies (including the right to terminate the DIP
Facility and accelerate the DIP Loans) following the delivery of a DIP Toggle
Notice.

DIP Orders

The DIP Orders shall be consistent with this Term Sheet and shall otherwise be
in form and substance satisfactory to the Debtors in their reasonable discretion
and the Majority DIP Lenders in their sole discretion. Among other things, the
DIP Orders shall provide and/or contain:

(i)        stipulations from the Debtors as to the validity, perfection, amount
and priority of the Term Obligations, the Second Lien Obligations and the
respective liens and security interests securing such obligations;

 

 

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(ii)       indemnifications for the DIP Agent, the DIP Lenders and each of their
respective Related Persons as set forth below;

(iii)      subject to the entry of the Final Order, full waivers of (A) the
ability to surcharge the collateral securing the Term Facility and the Second
Lien Notes under section 506(c) of the Bankruptcy Code or otherwise, (B) the
ability to apply the “equities of the case exception” under section 552(b) of
the Bankruptcy Code; and (C) the application of the doctrine of marshalling;

(iv)      payment of all reasonable and documented out-of-pocket expenses (pre-
or post-petition) of the DIP Agent, the DIP Lenders, the Term Facility Secured
Parties and the Notes Secured Parties, including the reasonable and documented
fees and expenses of their advisors (as set forth in this DIP Term Sheet),
including all Term Facility Adequate Protection Claims and all Second Lien
Adequate Protection Claims;

(v)       that the net proceeds from any non-ordinary course sale of collateral
securing the DIP Obligations, the Term Obligations or the Second Lien
Obligations shall above the threshold set forth above be used by the Debtors to
repay such obligations;

(vi)      other than Permitted Debt or Permitted Liens (as such terms are to be
defined in the DIP Loan Documents), that the Majority DIP Lenders’ consent in
their sole discretion is required for any debt (including any guaranty or
refinancing) to be incurred or lien to be granted by any Debtor;

(vii)     that, without the Majority DIP Lenders’ consent (which may be withheld
in their sole discretion),  the Debtors shall not propose, file, consent to,
cooperate with, solicit votes with respect to, acquiesce to, or support any
chapter 11 plan or debtor in possession financing unless (A) such plan or
financing would, on the date of its effectiveness, pay in full in cash all DIP
Obligations, all Term Obligations and all Second Lien Obligations or (B) such
plan is an Acceptable Plan;  

 

 

23

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(viii)    that the Debtors shall not directly or indirectly take any action that
is inconsistent with, or that would unreasonably delay or impede approval of,
any of this DIP Term Sheet, the DIP Facility or the DIP Loan Documents, which
actions include, without limitation, directly or indirectly soliciting,
encouraging, initiating, joining, and/or supporting any offer or proposal from,
entering into any agreement with, and/or engaging in any discussions or
negotiations with, any person concerning any actual or proposed transaction
involving any or all of (A) a financial and/or corporate restructuring of any
Debtor not supported by the DIP Lenders, (B) another debtor-in-possession
financing facility (other than a financing that pays the DIP Obligations, the
Term Obligations and the Second Lien Obligations in full in cash), (C) the
issuance, sale, or other disposition of any equity or debt interests, or any
material assets, of any Debtor, or (D) a merger, consolidation, business
combination, liquidation, recapitalization, refinancing, sale of substantially
all assets, or similar transaction involving any Debtor;

(ix)      that the DIP Orders are binding on the Debtors, their estates, all
parties in interest, any statutory committee appointed in the Chapter 11 Cases,
any successor in interest in the Chapter 11 Cases or to the Debtors, including,
but not limited to, any trustee appointed in the Chapter 11 Cases or any
subsequent cases under chapter 7 of the Bankruptcy Code, and any examiner; and

(x)       that upon the direction of the DIP Lenders, the Term Lenders and the
holders of the Second Lien Notes, as applicable, each in their sole discretion,
the DIP Agent, the Term Agent and the Second Lien Trustee or any of their
respective designees shall have the right to credit bid all or a portion of the
DIP Obligations, the Term Obligations or the Second Lien Obligations,
respectively, in accordance with section 363(k) of the Bankruptcy Code.

 

 

24

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The stipulations, acknowledgements, and agreements of the Debtors set forth in
this section are referred to collectively as the “Debtors’ Stipulations”.  For
the avoidance of doubt, nothing in this DIP Term Sheet or the DIP Orders shall
be deemed a waiver of any of the Debtors’, the Term Facility Secured Parties’ or
the Second Lien Secured Parties’ respective rights, remedies, claims or
defenses, including, but not limited to, any rights, remedies, claims or
defenses under the Term Loan Documents, the Second Lien Documents, or under
applicable law (including, but not limited to, any claims under Bankruptcy Code
section 506(b)).  The DIP Orders shall provide that all such rights, remedies,
claims and defenses of the Term Facility Secured Parties and the Second Lien
Secured Parties, as applicable, are expressly reserved and preserved and may be
asserted by the Term Facility Secured Parties and the Second Lien Secured
Parties, as applicable, at any time during the Chapter 11 Cases.

The Debtors’ Stipulations concerning the extent, validity, priority, perfection,
enforceability and non-avoidance of the Term Obligations, the Second Lien
Obligations and the liens and security interests securing such obligations,
respectively, shall: (i) be binding on the Debtors, their estates, all parties
in interest, any statutory committee appointed in the Chapter 11 Cases, any
successor in interest in the Chapter 11 Cases or to the Debtors, including, but
not limited to, any trustee appointed in the Chapter 11 Cases or any subsequent
cases under chapter 7 of the Bankruptcy Code, and any examiner; and (ii) subject
to a “Challenge Period” to be determined.

Amendments, Waivers and Modifications

The consent of the Majority DIP Lenders shall be required to amend, waive or
modify the DIP Facility or any of the DIP Loan Documents.  Notwithstanding the
foregoing, certain matters shall be subject to an “affected lender” consent.  

Assignments and Participations

The DIP Loan Documents shall include customary rights of assignment and
participation rights, including the Debtors’ right to consent to assignments
unless an event of default has occurred and is continuing.  

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Indemnity

The Debtors shall, jointly and severally, indemnify and hold harmless the DIP
Agent (and any sub-agent thereof), each of the DIP Lenders, and each of their
respective Related Persons (each, an “Indemnified Person”) from and against all
any and all claims arising in respect of the DIP Facility.  Such indemnified
claims shall include, without limitation, crossclaims, counterclaims, rights of
set-off and recoupment), losses, liabilities, actions, causes of action, suits,
debts, accounts, interests, liens, promises, warranties, damages and
consequential damages, demands, agreements, bonds, bills, specialties,
covenants, controversies, variances, trespasses, judgments, executions, costs,
expenses or claims of whatsoever nature and kind.  The Indemnified Persons shall
be indemnified from such claims, whether known or unknown, whether now existing
or hereafter arising, whether arising at law or in equity, or whether foreseen
or unforeseen,14 in connection with any investigation, litigation or proceeding,
or the preparation of any defense with respect thereto, arising out of or
relating to the DIP Facility except to the extent arising from any dispute
solely among Indemnified Persons which does not arise out of any act or omission
of the Debtors (other than any proceeding against any Indemnified Person solely
in its capacity or in fulfilling its role as DIP Agent or similar
role).  Notwithstanding the foregoing, no Indemnified Person will be indemnified
for any cost, expense or liability to the extent determined in the final,
non-appealable judgment of a court of competent jurisdiction to have resulted
from the fraud, gross negligence or willful misconduct of such Indemnified
Person or a material breach by such Indemnified Person of any of its obligations
in respect of the DIP Facility.

Governing Law

New York, except to the extent preempted by federal bankruptcy laws.

The DIP Loan Documents will provide that the Debtors will submit to the
non-exclusive jurisdiction and venue of the Bankruptcy Court, or in the event
that the Bankruptcy Court does not have or does not exercise jurisdiction, then
in any state or federal court of competent jurisdiction in the State of New
York; and shall waive any right to trial by jury.

 

 

14 

This includes, without limitation, as to the DIP Agent and the DIP Lenders, in
each case, the reasonable and documented out-of-pocket fees and disbursements of
one primary counsel and one local counsel in each relevant jurisdiction and, if
necessary, a single special counsel for each relevant specialty and, in the case
of a conflict of interest, one additional counsel in each jurisdiction to such
affected parties similarly situated and, in the case of other Indemnified
Persons, the reasonable and documented out-of-pocket fees and disbursements of
one primary counsel and one local counsel in each relevant jurisdiction and, in
the case of a conflict of interest, one additional counsel in each jurisdiction
to such affected parties similarly situated.

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EXHIBIT A to
the DIP Term Sheet

Carve-Out Language

 

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1.Carve Out.

(a)Carve Out.  As used in this [Final/Interim] Order, the “Carve Out” means the
sum of (i) all fees required to be paid to the Clerk of the Court and to the
Office of the United States Trustee under section 1930(a) of title 28 of the
United States Code plus interest at the statutory rate (without regard to the
notice set forth in (iii) below); (ii) all reasonable fees and expenses up to
$50,000 incurred by a trustee under section 726(b) of the Bankruptcy Code
(without regard to the notice set forth in (iii) below); (iii) to the extent
allowed at any time, whether by interim order, procedural order, or otherwise,
all unpaid fees and expenses (the “Allowed Professional Fees”) incurred by
persons or firms retained by the Debtors pursuant to section 327, 328, or 363 of
the Bankruptcy Code (the “Debtor Professionals”) and the Creditors’
Committee (if any) pursuant to section 328 or 1103 of the Bankruptcy Code (the
“Committee Professionals” and, together with the Debtor Professionals, the
“Professional Persons”) at any time before or on the first business day
following delivery by the DIP Agent or the Majority DIP Lenders 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 $350,000 incurred
after the first business day following delivery by the DIP Agent or the Majority
DIP Lenders of the Carve Out Trigger Notice, to the extent allowed at any time,
whether by interim order, procedural order, or otherwise (the amounts set forth
in this clause (iv) being the “Post-Carve Out Trigger Notice Cap”).  For
purposes of the foregoing, “Carve Out Trigger Notice” shall mean a written
notice delivered by email (or other electronic means) by the DIP Agent or the
Majority DIP Lenders (or by counsel to either of the foregoing) to the Debtors,
their lead restructuring counsel, the U.S. Trustee, and counsel to the
Creditors’ Committee (if any), which notice may be delivered following the
occurrence and during the continuation of an Event of Default and acceleration
of the DIP Obligations under the DIP Facility, stating that the Post-Carve Out
Trigger Notice Cap has been invoked. 

(b)Carve Out Reserves.  On the day on which a Carve Out Trigger Notice is given
by the DIP Agent to the Debtors with a copy to counsel to the Creditors’
Committee (if any) (the “Termination Declaration Date”), the Carve Out Trigger
Notice shall (i) be deemed a draw request and notice of borrowing by the Debtors
for New Money Loans under the Final DIP Tranche (each, as defined in the DIP
Loan Documents) (on a pro rata basis based on the then outstanding DIP Loans),
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 Debtors to utilize all cash on hand as of such date
and any available cash thereafter held by any Debtor to fund a reserve in an
amount equal to the then unpaid amounts of the Allowed Professional Fees.  The
Debtors shall deposit and hold such amounts in a segregated account at or in the
name of the DIP Agent in trust to pay such then unpaid Allowed Professional Fees
(the “Pre-Carve Out Trigger Notice Reserve”) prior to any and all other claims. 
On the Termination Declaration Date, the Carve Out Trigger Notice shall also (i)
be deemed a request by the Debtors for New Money Loans under the Final DIP
Tranche (on a pro rata basis based on the then outstanding DIP Loans), in an
amount equal to the Post‑Carve Out Trigger Notice Cap (any such amounts actually
advanced shall constitute DIP Loans) and (ii) constitute a demand to the Debtors
to utilize all cash on hand as of such date and any available cash thereafter
held by any Debtor, after funding the Pre-Carve Out Trigger Notice Reserve, to
fund a reserve in an amount equal to the Post‑Carve Out Trigger Notice Cap.  The
Debtors shall deposit and hold such amounts in a segregated account at or in the
name of the DIP Agent in trust to pay such Allowed Professional Fees benefiting
from the Post-Carve Out Trigger Notice Cap (the “Post‑Carve Out Trigger Notice
Reserve” and, together with the Pre-Carve Out

 

 

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Trigger Notice Reserve, the “Carve Out Reserves”) prior to any and all other
claims.  On the first business day after the DIP Agent gives such notice to such
DIP Lenders (as defined in the DIP Loan Documents), notwithstanding anything in
the DIP Loan Documents to the contrary, including with respect to the existence
of a Default (as defined in the DIP Loan Documents) or Event of Default, the
failure of the Debtors to satisfy any or all of the conditions precedent for
borrowing of New Money Loans under the Final DIP Tranche under the DIP Facility,
any termination of the DIP Facility following an Event of Default, or the
occurrence of the Maturity Date, each DIP Lender (on a pro rata basis based on
the then outstanding DIP Loans) shall make available to the DIP Agent such DIP
Lender’s pro rata share with respect to such borrowing in accordance with the
DIP Loan Documents.  All funds in the Pre-Carve Out Trigger Notice Reserve shall
be used first to pay the obligations set forth in clauses (i) through (iii) of
the definition of Carve Out set forth above (the “Pre-Carve Out Amounts”), but
not, for the avoidance of doubt, the Post-Carve Out Trigger Notice Cap, until
paid in full, and then, to the extent the Pre‑Carve Out Trigger Notice Reserve
has not been reduced to zero, to pay the DIP Agent for the benefit of the DIP
Lenders, unless the DIP Obligations have been indefeasibly paid in full, in
cash, and all DIP Loans have been terminated, in which case any such excess
shall be paid to the holders of Term Obligations and Second Lien Obligations in
accordance with their rights and priorities as of the Petition Date.  All funds
in the Post-Carve Out Trigger Notice Reserve shall be used first to pay the
obligations set forth in clause (iv) of the definition of Carve Out set forth
above (the “Post-Carve Out Amounts”), and then, to the extent the Post‑Carve Out
Trigger Notice Reserve has not been reduced to zero, to pay the DIP Agent for
the benefit of the DIP Lenders, unless the DIP Obligations have been
indefeasibly paid in full, in cash, and all DIP Loans have been terminated, in
which case any such excess shall be paid to the holders of Term Obligations and
Second Lien Obligations in accordance with their rights and priorities as of the
Petition Date.  Notwithstanding anything to the contrary in the DIP Loan
Documents, or this [Final/Interim] Order, if either of the Carve Out Reserves is
not funded in full in the amounts set forth in this paragraph [●], then, any
excess funds in either of the Carve Out Reserves following the payment of the
Pre-Carve Out Amounts and Post-Carve Out Amounts, respectively, shall be used to
fund the other Carve Out Reserve, up to the applicable amount set forth in this
paragraph [●], prior to making any payments to the DIP Agent or the holders of
Term Obligations and Second Lien Obligations, as applicable.  Notwithstanding
anything to the contrary in the DIP Loan Documents or this [Final/Interim]
Order, following delivery of a Carve Out Trigger Notice, the DIP Agent, the Term
Agent, and the Second Lien Trustee shall not sweep or foreclose on cash
(including cash received as a result of the sale or other disposition of any
assets) of the Debtors until the Carve Out Reserves have been fully funded, but
shall have a security interest in any residual interest in the Carve Out
Reserves, with any excess paid to the DIP Agent for application in accordance
with the DIP Loan Documents.  Further, notwithstanding anything to the contrary
in this [Final/Interim] Order, (i) disbursements by the Debtors from the Carve
Out Reserves shall not constitute DIP Loans (as defined in the DIP Loan
Documents) or increase or reduce the DIP Obligations, (ii) the failure of the
Carve Out Reserves to satisfy in full the Allowed Professional Fees shall not
affect the priority of the Carve Out, and (iii) in no way shall the Budget,
Carve Out, Post-Carve Out Trigger Notice Cap, Carve Out Reserves, or any of the
foregoing be construed as a cap or limitation on the amount of the Allowed
Professional Fees due and payable by the Debtors.  For the avoidance of doubt
and notwithstanding anything to the contrary in this [Final/Interim] Order, the
DIP Facility, or in the Term Facility or Second Lien Notes, the Carve Out shall
be senior to all liens and claims securing the DIP Facility, the Term Facility
Adequate Protection Claims, and the Second Lien Adequate Protection Claims, and
any and all other forms of adequate protection, liens, or claims securing the
DIP Obligations, the Term Obligations, or the Second Lien Obligations.

 

 

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

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

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

 

 

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EXHIBIT E to
the Restructuring Support Agreement

 

Exit Facility Term Sheet

 

 

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EXIT FACILITY Term Sheet

Gastar exploration inc.15

This exit facility term sheet (this “Exit Facility Term Sheet”) is a summary of
indicative terms and conditions for a proposed exit facility term loan financing
that is materially consistent with the terms and conditions as set forth in this
Exit Facility Term Sheet and otherwise acceptable in form and substance to the
Credit Parties and the Exit Lenders (each as defined below).

This Exit Facility Term Sheet is non-binding and is being presented for
discussion and settlement purposes only.  Consequently, this Exit Facility Term
Sheet is entitled to protection from any use or disclosure to any person or
entity pursuant to Federal Rule of Evidence 408 and any other rules or laws of
similar import.  This Exit Facility Term Sheet does not purport to summarize all
of the terms, conditions, covenants and other provisions that may be contained
in the fully negotiated and executed definitive documentation in connection with
the Exit Facility (the “Exit Facility Documentation”).  The transactions
described in this Exit Facility Term Sheet are subject in all respects to, among
other things, internal authorization and approval by the appropriate credit
committees of the Exit Lenders, the execution and delivery of Exit Facility
Documentation satisfactory in form and substance to the Credit Parties and the
Exit Lenders, satisfaction or waiver of the conditions precedent set forth in
such Exit Facility Documentation, approval by the Bankruptcy Court (as defined
below), and the satisfactory completion of diligence by the Exit Lenders in
their sole discretion.  This Exit Facility Term Sheet does not constitute a
commitment to lend or to provide or arrange any other financing; such an
obligation would arise only under a fully negotiated commitment letter if
executed by all parties thereto in accordance with its terms.  

This Exit Facility Term Sheet and the information contained in this Exit
Facility Term Sheet shall remain strictly confidential and may not be shared
with any person or entity (other than the Credit Parties, the Exit Lenders and
their respective professionals), unless otherwise consented to by the Credit
Parties or the Exit Lenders, as applicable.

 

Borrower  

An entity to be mutually agreed (the “Borrower”).  

Holdings

To the extent a structure is mutually agreed whereby the equity of the Borrower
is wholly-owned by a holding company, such holding company (“Holdings”).

Guarantors  

Holdings, if any, Northwest Property Ventures LLC, Gastar Exploration Inc. (to
the extent it is not the Borrower and as mutually agreed), and each other
subsidiary of Holdings (other than the Borrower) (collectively, the “Guarantors”
and together with the Borrower, the “Credit Parties”).

Exit Lenders

Funds managed or controlled by Ares Management, L.P. (collectively, the “Exit
Lenders”).

 

15 

This Exit Facility Term Sheet, the terms and provisions set forth in this Exit
Facility Term Sheet, and the transactions contemplated by this Exit Facility
Term Sheet are in all respects subject to, and may be further revised, modified
or changed following, the completion of due diligence by the Exit Lenders and
their professionals.

 

 

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Exit Facility

(a) A $100 million secured delayed draw term loan facility (the “First Lien Exit
Facility”) comprised of (i) term loans consisting of DIP Claims (as defined in
the RSA) that constitute New Money Loans (as defined in the DIP Term Sheet (as
defined in the RSA)) funded under the DIP Facility (as defined in the RSA) and
deemed funded under the First Lien Exit Facility on the Closing Date and (ii)
term loan commitments consisting of DIP Claims in an amount equal to any undrawn
commitment under the DIP Facility and (b) a secured term loan facility (the
“Second Lien Exit Facility” and together with the First Lien Exit Facility,
collectively, the “Exit Facility”) comprised of up to $200 million (as such
amount may be reduced by the Exit Lenders in their sole discretion on or prior
to the effective date of the Plan (the “Effective Date”)) in aggregate principal
amount of term loans deemed funded on the Closing Date consisting of DIP Claims
and Term Loan Claims (as defined in the RSA) (the loans under the First Lien
Exit Facility and the Second Lien Exit Facility, collectively, the “Exit
Loans”).  The Exit Loans may not be reborrowed once repaid.

The “Plan” means the Plan (as defined in the RSA), which is a Chapter 11 Plan of
Reorganization and a related disclosure statement of the Credit Parties to be
filed with the United States Bankruptcy Court for the District of Delaware (the
“Bankruptcy Court”).  The reorganization contemplated by the Plan is referred to
herein as the “Reorganization.”

Administrative and Collateral Agent

Wilmington Trust, National Association (the “Administrative Agent”).

Use of Proceeds

The proceeds of the Exit Facility will be used to refinance on the Closing Date
a portion of the outstanding obligations under the DIP Facility as of the
Effective Date and refinance indebtedness under and replace the commitments
under the Credit Parties’ Term Facility.  The First Lien Exit Facility shall
provide for commitments for future term loans to fund general working capital
and for other general corporate purposes after emergence from Chapter 11 on
terms to be mutually agreed and in an amount equal to the undrawn commitments
under the DIP Facility as of the Effective Date.

Closing Date

The date on which the Exit Loans are issued under the Exit Facility and the
Reorganization is consummated in all material respects pursuant to the Plan (the
“Closing Date”).

Maturity

The date that is mutually agreed but in any event no less than 5 years or
greater than 7 years after the Closing Date (the “Maturity Date”).

 

 

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Collateral

The First Lien Exit Facility will be secured by a perfected first-priority
(subject to the pari passu liens securing obligations owed to the Credit
Parties’ hedge counterparties and other permitted liens to be mutually agreed)
security interest in and lien on substantially all of the Credit Parties’
tangible and intangible assets (collectively, the “Collateral”), with
materiality thresholds and exceptions consistent with those in the Pledge and
Security Agreement (as defined in the Term Credit Agreement (as defined in the
RSA)), including, without limitation, (i) 100% of the stock, membership or
partnership interests of the Borrower (so long as Holdings wholly-owns the
equity of the Borrower), each Guarantor (other than Holdings) and each
subsidiary of the foregoing, (ii) all of the Credit Parties’ deposit, securities
and commodities accounts, in each case, subject to certain exceptions consistent
with those in the Pledge and Security Agreement and subject to control
agreements, and (iii) oil and gas properties of the Credit Parties comprising
not less than each of (a) 90% of the PV10 of the proved reserves attributable to
such properties of the Credit Parties and (b) 90% of the net acres of such
properties of the Credit Parties with no associated proved reserves; in each
case, subject to mutually agreed exceptions for “excluded property” consistent
with those in the existing Security Documents (as defined in the Term Credit
Agreement). The Second Lien Exit Facility will be secured by a perfected
second-priority security interest in and lien on the Collateral.  All such
security interests in personal property and all liens on oil and gas properties
and other real property will be created in accordance with the Exit Facility
Documentation.  

Conditions to Closing

Usual and customary for facilities of this type, including, without limitation,
the following:

A.   The negotiation, execution and delivery of the Exit Facility Documentation
substantially consistent with the terms set forth in this Exit Facility Term
Sheet and otherwise satisfactory to the Exit Lenders in their sole discretion.

B.   The satisfaction of the Exit Lenders in their sole discretion with:

 

•     the Plan; and

•     the terms, entry and effectiveness of a confirmation order with respect to
the Plan.

C.   The Reorganization shall have been consummated in accordance with the Plan
in all material respects (all conditions set forth therein having been satisfied
or waived (with any such waiver having been approved by the Exit Lenders in
their sole discretion)), substantial consummation (as defined in Section 1101 of
the Bankruptcy Code) of the Plan in accordance with its terms in all material
respects shall have occurred substantially contemporaneously with the closing of
the Exit Facility and such closing shall have occurred not later than February
15, 2019.

 

 

 

 

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D.   The Exit Lenders shall be satisfied in their sole discretion that, on the
Closing Date, immediately after giving effect to the consummation of the Plan,
the issuance of the Exit Loans to occur on the Closing Date and any other
transactions to occur on the Closing Date, the Credit Parties and their
subsidiaries shall have outstanding no indebtedness for borrowed money other
than indebtedness outstanding under the Exit Facility and any additional
indebtedness (including but not limited to capital leases and obligations owed
to the Credit Parties’ hedge counterparties) on terms and conditions (including
as to structure and amount) satisfactory to the Exit Lenders in their sole
discretion.

E.   Delivery of evidence that all required insurance has been maintained and
that the Administrative Agent (as defined below) has been named as loss payee
and additional insured.  To the extent the Borrower is not able to deliver
endorsements pursuant to this clause (E) by the Closing Date after having used
commercially reasonable efforts to do so, such endorsements shall be delivered
within 30 days after the Closing Date (or such longer time as the majority of
the Exit Lenders may agree).

F.   Accuracy of representations and warranties contained in the Exit Facility
Documentation in all material respects (or, in the case of representations and
warranties that are qualified by materiality, in all respects) on the Closing
Date (except to the extent such representations and warranties expressly relate
to an earlier date, in which case they shall be true and correct in all material
respects as of such earlier date (or, in the case of representations and
warranties that are qualified by materiality, in all respects)) and absence of
default and Event of Default under the Exit Facility Documentation.

G.   Compliance with customary documentation conditions, including the delivery
of customary legal opinions and closing certificates (including a customary
solvency certificate), good standing certificates and  certified organizational
documents, in each case, in form and substance reasonably satisfactory to the
Exit Lenders and the Administrative Agent.

H.   The Administrative Agent shall have a perfected first-priority (subject to
permitted liens to be mutually agreed) lien on substantially all of the assets
of the Credit Parties, subject to any agreed post-closing perfection
requirements.

I.    Receipt by the Administrative Agent of reasonably satisfactory results of
customary lien searches.

J.    Receipt and satisfactory review by the Administrative Agent of (i) the
Borrower’s audited financial statements for the most recent fiscal year ending
at least 90 days prior to the Closing Date, (ii) the Borrower’s unaudited
financial statements for the most recent fiscal quarter ending at least 60 days
prior to the Closing Date and (iii) pro forma financial statements of the
Borrower (after giving effect to the transactions contemplated in the Plan and
this Exit Facility Term Sheet).

 

 

 

 

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K.   Receipt and satisfactory review of the reserve reports (i) dated as of the
most recent date required by the Term Credit Agreement and prepared by Wright &
Company, Inc. or other engineering firm acceptable to the Exit Lenders and (ii)
dated as of the most recent date required by the Term Credit Agreement and
prepared internally by the Borrower, together with certification by the Borrower
as to accuracy, title and, except as otherwise disclosed, absence of gas
imbalances or take-or-pay or other prepayments.

L.   Satisfactory title information as required by the Exit Lenders on at least
90% of the PV10 of the oil and gas properties of the Credit Parties.

M.  Receipt of mortgages and security agreements providing perfected
first-priority (subject to permitted liens to be mutually agreed) or
second-priority, as applicable, security interests in and liens on all assets of
the Credit Parties, including, as applicable, not less than each of (i) 90% of
the PV10 of the proved reserves attributable to the oil and gas properties of
the Credit Parties and (ii) 90% of the net acres of oil and gas properties of
the Credit Parties with no associated proved reserves.

N.   All requisite governmental and third party approvals shall have been
obtained, and there shall be no material litigation, governmental,
administrative or judicial action against the Credit Parties, except as
otherwise disclosed pursuant to the Credit Parties’ public disclosures or to the
Exit Lenders in writing prior to the Closing Date.

O.   Delivery of all documentation and other information required by bank
regulatory authorities under applicable “know-your-customer”, anti-money
laundering rules and regulations, and the Patriot Act, to the extent requested
at least 5 business days prior to the Closing Date.

P.   To the extent invoiced at least one business day prior to the Closing Date,
payment by the Borrower on or before the Closing Date of (i) the reasonable and
documented out-of-pocket fees and expenses of the Administrative Agent
(including the fees and expenses of one outside counsel to the Administrative
Agent), and (ii) the fees and expenses of Milbank, Tweed, Hadley & McCloy LLP,
in connection with the transaction hereunder due on such date.

Q.   No default or event of default under the DIP Facility.

R.   No material adverse change from the date of the RSA until closing
(excluding the pendency of the Chapter 11 Cases).

Interest Rate  

At the election of the Borrower, either (a) Adjusted LIBOR Rate plus 6.00% per
annum (subject to a 2.00% LIBOR floor) if paid in cash or (b) Adjusted LIBOR
Rate plus 8.00% per annum (subject to a 2.00% LIBOR floor) if paid in kind, in
each case, payable quarterly.

During the continuance of an event of default, past due amounts under the Exit
Facility will bear interest at an additional 3.00% per annum above the interest
rate otherwise applicable.

Upfront/Arrangement Fee

None.

 

 

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Scheduled Amortization  

None.  The unpaid principal amount of the Exit Loans shall be repaid in full on
the Maturity Date.  

Call Protection  

None.

Mandatory Prepayments

The Exit Loans shall be prepaid with:

(i)   100% of the net cash proceeds of non-ordinary course asset sales or
casualty or condemnation events (subject to reinvestment rights and baskets and
exclusions to be agreed); and

(ii)  100% of the proceeds of debt incurrences (other than debt permitted under
the Exit Facility Documentation).

Financial Covenants

None.

Exit Facility Documentation

The Exit Facility Documentation shall contain representations and warranties,
affirmative covenants, negative covenants and events of default usual and
customary for transactions of this type and with materiality, thresholds and
exceptions, in each case, consistent with the existing Loan Documents as
mutually agreed.  Terms not expressly set forth in this Exit Facility Term Sheet
will (i) be negotiated in good faith within a reasonable time period to be
determined based on the expected Closing Date and (ii) contain such other terms
as the Credit Parties and the Exit Lenders shall agree (given due regard to the
operations, size, industry (and risks and trends associated therewith),
geographic locations and businesses of the Credit Parties). The definitive
documentation for the Term Credit Agreement will be used as a starting point for
the Exit Facility Documentation.

Expenses and Indemnification

Usual and customary for facilities of this type and consistent with the existing
Loan Documents.

Governing Law

State of New York.

 

 

 

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SCHEDULE 1 to
the Restructuring Support Agreement