Exhibit 10.1

EXECUTION VERSION

FIRST AMENDMENT TO RESTRUCTURING SUPPORT AND LOCK-UP AGREEMENT

This First Amendment (this “Amendment”), dated as of July 14, 2016, to that
certain Restructuring Support and Lock-Up Agreement, dated as of July 8, 2016
(the “Existing RSA” and, as amended by this Amendment and as may be further
amended, supplemented, or otherwise modified from time to time, the “First
Amended RSA”), by and among C&J Energy Services, Ltd. (“C&J Energy”) and certain
of its direct and indirect subsidiaries that are parties to the Existing RSA
(collectively, the “Company” or the “Company Parties”) and the undersigned
Lenders constituting the Required Supporting Creditors and the DIP Lenders
holding a majority in amount of the aggregate loans and commitments under the
DIP Facility (the “Required DIP Lenders”) (such undersigned Lenders,
collectively, with the Company Parties, the “Amendment Parties”). Capitalized
terms used but not otherwise defined herein have the meaning ascribed to such
terms in the Existing RSA.

RECITALS

WHEREAS, pursuant to the Existing RSA, the parties thereto agreed to support a
Restructuring that is to be implemented through a Plan;

WHEREAS, Section 8 of the Existing RSA provides that the Existing RSA may not be
modified, amended, or supplemented except with prior written consent of the
Company Parties and Required Supporting Creditors and, with respect to the DIP
Term Sheet, the Required DIP Lenders; and

WHEREAS, the Amendment Parties constitute the Company Parties, the Required
Supporting Creditors and the Required DIP Lenders and desire to amend the
Existing RSA as set forth in this Amendment.

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

AGREEMENT

Section 1. Amendments to the Existing RSA.

1.01. The paranthetical defining the terms “Supporting Creditors” and “Parties”
at the end of introductory paragraph ii to the Existing RSA is hereby amended
and restated in its entirety as follows:

“(such lenders or certain designated affiliates thereof that execute signature
pages hereto, the “Supporting Creditors” and, collectively, with (i) the Company
Parties and (ii) any transferee that becomes a Supporting Creditor pursuant to
Section 4.03(a), the “Parties”)”

1.02. The last sentence of Section 3 (“Definitive Documentation”) of the
Existing RSA is hereby amended and restated in its entirety as follows:

“As used herein, the term “Required Supporting Creditors” means, at any relevant
time, the Supporting Creditors holding more than 50.0% of the aggregate
outstanding principal amount of the Total Credit Exposure held by Supporting
Creditors.”

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1.03. Section 4.02(b)(ii) of the Existing RSA shall be amended to replace “July
17, 2016” with “July 20, 2016”.

1.04. Section 7 of the Existing RSA is hereby amended by adding the following
new Section 7.06:

“7.06. Withdrawal by Any Supporting Creditor. Any Supporting Creditor may
withdraw from this Agreement on or after the date that is one year after the
Agreement Effective Date by giving notice of such withdrawal to the Company
Parties and the other Supporting Creditors pursuant to Section 10.09 hereof.
Withdrawal pursuant to this Section 7.06 shall terminate the rights and
obligations solely of the withdrawing Supporting Creditor under this Agreement
and shall not otherwise affect any rights and obligations of, or terminate this
Agreement with respect to, any other Party under this Agreement.”

1.05. Section 8 of the Existing RSA is hereby amended and restated in its
entirety as follows:

“Section 8. Amendments. This Agreement, including the Restructuring Term Sheet,
may not be modified, amended, or supplemented without prior written consent of
the Company Parties and Required Supporting Creditors; provided, however, that
if the proposed modification, amendment or supplement has a material, adverse
and disproportionate (as compared to other Supporting Creditors holding claims
within the same Class as provided for in the Term Sheet) effect on any of the
Supporting Creditors or the Claims held by any of the Supporting Creditors, then
the consent of each such affected Supporting Creditor shall also be required to
effectuate such modification, amendment, or supplement.”

Section 2. Amendments to the Restructuring Term Sheet. The Amendment Parties
agree that on the First Amendment Effective Date (as defined below), the Term
Sheet exhibited to the Existing RSA (the “Existing Restructuring Term Sheet”)
shall be amended and restated in the form attached hereto as Exhibit A-1 (the
“First Amended Restructuring Term Sheet”) and any term or provision of the
Existing Restructuring Term Sheet which is different from the First Amended
Restructuring Term Sheet shall be replaced and superseded in all respects by the
terms and provisions of the First Amended Restructuring Term Sheet. A comparison
reflecting the differences between the First Amended Restructuring Term Sheet
and the Existing Restructuring Term Sheet is attached hereto as Exhibit A-2.

Section 3. Amendments to the DIP Facility Term Sheet. The Amendment Parties
hereto agree that on the First Amendment Effective Date, the DIP Facility Term
Sheet exhibited to the Existing RSA (the “Existing DIP Term Sheet”) shall be
amended and restated in the form attached hereto as Exhibit B-1 (the “First
Amended DIP Term Sheet”) and any term or provision of the Existing DIP Term
Sheet which is different from the First Amended DIP Term

 

2

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Sheet shall be replaced and superseded in all respects by the terms and
provisions of the First Amended DIP Term Sheet. A comparison reflecting the
differences between the First Amended DIP Term Sheet and the Existing DIP Term
Sheet is attached hereto as Exhibit B-2.

Section 4. Effect of Amendment; Ratification. Except as specifically amended or
waived hereby, the terms and provisions of the Existing RSA are in all other
respects ratified and confirmed and remain in full force and effect without
modification or limitation. Except as expressly provided herein, this Amendment
shall not be deemed or construed (i) to be a consent granted pursuant to, or a
waiver, modification or forbearance of, any term or condition of the Existing
RSA, any of the instruments or agreements referred to therein or a waiver of any
breach under the Existing RSA, whether or not known to any party thereto, or
(ii) to prejudice any right or remedy which any party to the Existing RSA may
now have or have in the future under or in connection with the Existing RSA, or
any of the instruments or agreements referred to therein, as applicable.

Section 5. Effectiveness of This Amendment. This Amendment shall become
effective on the date (such date, the “First Amendment Effective Date”) on which
counsel to the Company Parties has received signature pages from parties that
comprise the Company Parties and the Required Supporting Creditors. Following
the First Amendment Effective Date, all references to the “RSA”, “hereunder”,
“hereof” or words of like import in the Existing RSA shall mean and be a
reference to the First Amended RSA.

Section 6. Governing Law. THIS AMENDMENT IS TO BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF. EACH AMENDMENT PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 7. Execution of Amendment. This Amendment may be executed and delivered
in any number of counterparts and by way of electronic signature and delivery,
each such counterpart, when executed and delivered, shall be deemed an original,
and all of which together shall constitute the same agreement. Each individual
executing this Amendment on behalf of a Party has been duly authorized and
empowered to execute and deliver this Amendment on behalf of said Party.

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

[Remainder of page intentionally left blank.]

 

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

 

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

/s/ Danielle Hunter

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

/s/ Danielle Hunter

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

/s/ Danielle Hunter

  Name:   Danielle Hunter   Title:   Executive Vice President, General Counsel,
Chief Risk Officer

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C&J CORPORATE SERVICES (BERMUDA) LTD. By:  

/s/ Danielle Hunter

  Name:   Danielle Hunter   Title:   Director CJ LUX HOLDINGS S.À R.L. PENNY
GLOBAL HOLDINGS S.À R.L. PENNY GLOBAL LEASING S.À R.L. PENNY LUXEMBOURG
FINANCING S.À R.L. PENNY TECHNOLOGIES S.À R.L. By:  

/s/ Danielle Hunter

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

/s/ Danielle Hunter

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

/s/ Danielle Hunter

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

/s/ Angus Fraser

  Name:   Angus Fraser   Title:   General Manager

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Supporting Creditor Signature Page to the First Amendment

to Restructuring Support and Lock-Up Agreement

 

[            ], as Lender By:  

 

  Name:   Title:

Address:

Email address(es):

Telephone:

 

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

          

Credit Agreement Claims (if any)

   $     

C&J Energy Shares (if any)

   $         $         $         $         $                

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EXHIBIT A-1

First Amended Restructuring Term Sheet

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THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION
OF ACCEPTANCES OF A CHAPTER 11 PLAN WITHIN THE MEANING OF SECTION 1125 OF THE
BANKRUPTCY CODE. ANY SUCH OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE
SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE. NOTHING CONTAINED IN
THIS TERM SHEET SHALL BE AN ADMISSION OF FACT OR LIABILITY OR, UNTIL THE
OCCURRENCE OF THE AGREEMENT EFFECTIVE DATE ON THE TERMS DESCRIBED HEREIN AND IN
THE RESTRUCTURING SUPPORT AGREEMENT, DEEMED BINDING ON ANY OF THE PARTIES
HERETO.    

AMENDED AND RESTATED RESTRUCTURING TERM SHEET

INTRODUCTION

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

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

This Term Sheet is being agreed to in connection with entry by the Debtors,
certain non-Debtor subsidiaries of C&J Energy and the Required Supporting
Creditors into that certain First Amendment to Restructuring Support Agreement,
dated as of July 14, 2016 (the “RSA Amendment”), amending that certain
Restructuring Support Agreement, dated as of July 8, 2016, among the Debtors,
certain non-Debtor subsidiaries of C&J Energy and the Supporting Creditors (as
amended by the RSA Amendment and as may be further amended, supplemented or
modified pursuant to the terms thereof, the “RSA”). Pursuant to the RSA, the
parties thereto have agreed to support the transactions contemplated therein and
herein.

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

 

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

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OVERVIEW OF THE RESTRUCTURING

In general, the Restructuring contemplates that:

 

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

 

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

 

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

 

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

 

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

 

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

 

  (g) [TBD: Standby Facility.]

 

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

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

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GENERAL PROVISIONS REGARDING THE RESTRUCTURING

 

The DIP Facility   

The DIP Facility Backstop Lenders will backstop a senior secured superpriority
delayed draw term loan facility in an aggregate principal amount of up to $100
million. Each DIP Facility Backstop Lender shall fund no less than such DIP
Facility Backstop Lender’s pro rata share (based on Total Credit Exposure,
without regard to any Total Credit Exposure held by Lenders other than the DIP
Facility Backstop Lenders) of 60% of the aggregate commitments under the DIP
Facility. Rights (the “DIP Facility Participation Rights”) to fund up to 40% of
the aggregate commitments under the DIP Facility (the “DIP Facility
Participation Amount”) shall be offered to the Lenders that are Supporting
Creditors, other than the DIP Facility Backstop Lenders, in each case up to such
Lender’s pro rata share (based on Total Credit Exposure, without regard to any
Total Credit Exposure held by the DIP Facility Backstop Lenders) of the DIP
Facility Participation Amount. To the extent any portion of the DIP Facility
Participation Rights are not exercised, such corresponding portions of the DIP
Facility Participation Amount shall be allocated to, and added to the
commitments of, the DIP Facility Backstop Lenders on a pro rata basis (based on
Total Credit Exposure, without regard to any Total Credit Exposure held by
Lenders other than the DIP Facility Backstop Lenders).

 

The DIP Facility will be available in up to three drawings, with the first such
drawing to occur on the closing date of the DIP Facility in an aggregate
principal amount of no less than $25 million. The material terms of the DIP
Facility are set forth in the term sheet attached hereto as Exhibit B (the “DIP
Facility Term Sheet”).

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

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

 

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

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

TREATMENT OF CLAIMS AND INTERESTS OF THE DEBTORS UNDER THE PLAN

 

Class No.

  

Type of Claim

  

Treatment

  

Impairment /

Voting

Unclassified Non-Voting Claims N/A    DIP Facility Claims    On the Effective
Date, in full satisfaction of each Allowed DIP Facility Claim, each holder
thereof shall receive, in full satisfaction of its Claim, payment in full in
cash.    N/A N/A    Administrative Claims    On the Effective Date, except to
the extent that a holder of an Allowed Administrative Claim and the Debtor
against which such Allowed Administrative Claim is asserted agree to less
favorable treatment for such holder, each holder of an Allowed Administrative
Claim shall receive, in full satisfaction of its Claim, payment in full in cash.
   N/A N/A    Priority Tax Claims    Except to the extent that a holder of an
Allowed Priority Tax Claim and the Debtor against which such Allowed Priority
Tax Claim is asserted agree to less favorable treatment for such holder, each
holder of an Allowed Priority Tax Claim shall receive, in full satisfaction of
its Claim, treatment in a manner consistent with section 1129(a)(9)(C) of the
Bankruptcy Code.    N/A Classified Claims and Interests of the Debtors Class 1
   Other Secured Claims    On the Effective Date, in full satisfaction of each
Allowed Other Secured Claim, each holder thereof shall receive, at the option of
the applicable Debtor, with the consent (such consent not to be unreasonably
withheld) of the Required Supporting Creditors: (a) payment in full in cash; (b)
the collateral securing its Allowed Other Secured Claim; (c) Reinstatement of
its Other Secured Claim; or (d) such other treatment rendering its Allowed Other
Secured Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code.
   Unimpaired; deemed to accept. Class 2    Other Priority Claims    On the
Effective Date, in full satisfaction of each Allowed Other Priority Claim, each
holder thereof shall receive payment in full in cash.    Unimpaired; deemed to
accept.

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Class 3    Mineral Contractor Claims    On the Effective Date, in full
satisfaction of each Allowed Mineral Contractor Claim, to the extent not already
satisfied pursuant to a prior order of the Bankruptcy Court, each holder of an
Allowed Mineral Contractor Claim shall receive Cash in an amount equal to such
Claim on the later of: (a) the Effective Date; or (b) the date due in the
ordinary course of business in accordance with the terms and conditions of the
particular transaction giving rise to such Allowed Mineral Contractor Claim.   
Unimpaired; deemed to accept. Class 4    Lender Claims    On the Effective Date,
in full satisfaction of each Lender Claim, each holder thereof shall receive:
(a) its Pro Rata share of the New Common Equity Pool; and (b) if such holder is
an Accredited Investor, its Subscription Rights to purchase its Pro Rata share
of the Rights Offerings Shares in accordance with the Rights Offering
Procedures.    Impaired; entitled to vote. Class 5    General Unsecured Claims
   [TBD]    [TBD]. Class 6    Intercompany Claims    On the Effective Date, each
Intercompany Claim shall be, at the option of the Debtor, with the consent (such
consent not to be unreasonably withheld) of the Required Supporting Creditors,
either Reinstated or canceled and released without any distribution.   
Impaired; deemed to reject or Unimpaired; deemed to accept. Class 7    Interests
in Debtors other than C&J Energy    On the Effective Date, Interests in the
Debtors other than C&J Energy shall be, at the option of the Debtor, with the
consent (such consent not to be unreasonably withheld) of the Required
Supporting Creditors, either Reinstated or canceled and released without any
distribution.    Impaired; deemed to reject or Unimpaired; deemed to accept
Class 8    Interests in C&J Energy    All Interests in C&J Energy will be
canceled, released, and extinguished as of the Effective Date, and will be of no
further force or effect. On the Effective Date, each holder of C&J Common Stock
shall receive (a) if Class 8 has timely accepted the Plan, its Pro Rata share of
the New Warrants or (b) if Class 8 has not timely accepted the Plan, no
distribution.    Impaired; entitled to vote.

GENERAL PROVISIONS REGARDING THE PLAN

 

Subordination    The classification and treatment of Claims under the Plan shall
conform to the respective contractual, legal, and equitable subordination rights
of such Claims, and any such rights shall be settled, compromised, and released
pursuant to the Plan. Restructuring Transactions    The Confirmation Order shall
be deemed to authorize, among other things, all actions as may be necessary or
appropriate to effect any transaction described in, approved by, contemplated
by, or necessary to effectuate the Plan, including the Rights Offering and the
issuance of all securities, notes, instruments, certificates, and other
documents required to be issued pursuant to the Restructuring (collectively, the
“Restructuring

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   Transactions”). On the Effective Date, the Debtors, as applicable, shall
issue all securities, notes, instruments, certificates, and other documents
required to be issued pursuant to the Restructuring. Cancellation of Notes,
Instruments, Certificates, and Other Documents    On the Effective Date, except
to the extent otherwise provided in this Term Sheet or the Plan, all notes,
instruments, certificates, and other documents evidencing Claims or Interests,
including credit agreements and indentures, shall be canceled and the
obligations of the Debtors and any non-Debtor Affiliates thereunder or in any
way related thereto shall be deemed satisfied in full and discharged. Executory
Contracts and Unexpired Leases    The Debtors shall seek to assume or reject
executory contracts and unexpired leases in consultation with the Supporting
Creditors and with the consent (such consent not to be unreasonably withheld) of
the Required Supporting Creditors. The Plan will provide that the executory
contracts and unexpired leases that are not assumed or rejected as of the Plan
Effective Date (either pursuant to the Plan or a separate motion) will be deemed
assumed pursuant to section 365 of the Bankruptcy Code. For the avoidance of
doubt, such consent shall be obtained with respect to all decisions to assume or
reject, including the deemed assumption of executory contracts and unexpired
leases pursuant to the Plan. Retention of Jurisdiction    The Plan will provide
for the retention of jurisdiction by the Bankruptcy Court for usual and
customary matters. Discharge of Claims and Termination of Interests    Pursuant
to section 1141(d) of the Bankruptcy Code, and except as otherwise specifically
provided in the Plan or in any contract, instrument, or other agreement or
document created pursuant to the Plan, the distributions, rights, and treatment
that are provided in the Plan shall be in complete satisfaction, discharge, and
release, effective as of the Effective Date, of Claims (including any
Intercompany Claims resolved or compromised after the Effective Date by the
Reorganized Debtors), Interests, and Causes of Action of any nature whatsoever,
including any interest accrued on Claims or Interests from and after the
Petition Date, whether known or unknown, against, liabilities of, liens on,
obligations of, rights against, and Interests in, the Debtors or any of their
assets or properties, regardless of whether any property shall have been
distributed or retained pursuant to the Plan on account of such Claims and
Interests, including demands, liabilities, and Causes of Action that arose
before the Effective Date, any liability (including withdrawal liability) to the
extent such Claims or Interests relate to services performed by employees of the
Debtors prior to the Effective Date and that arise from a termination of
employment, any contingent or non-contingent liability on account of
representations or warranties issued on or before the Effective Date, and all
debts of the kind specified in sections 502(g), 502(h), or 502(i) of the
Bankruptcy Code, in each case whether or not: (a) a Proof of Claim based upon
such debt or right is filed or deemed filed pursuant to section 501 of the
Bankruptcy Code; (b) a Claim or Interest based upon such debt, right, or
Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (c) the
holder of such a Claim or Interest has accepted the Plan. The Confirmation Order
shall be a judicial determination of the discharge of all Claims and Interests
subject to the occurrence of the Effective Date. Releases by the Debtors   
Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable
consideration, on and after the Effective Date, each Released Party is deemed
released and discharged by the Debtors, the Reorganized Debtors, and their
Estates from any and all Causes of Action, including any

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   derivative claims, asserted on behalf of the Debtors, that the Debtors, the
Reorganized Debtors, or their Estates would have been legally entitled to assert
in their own right (whether individually or collectively) or on behalf of the
holder of any Claim against, or Interest in, a Debtor or other Entity, based on
or relating to, or in any manner arising from, in whole or in part, the Debtors,
the Debtors’ in- or out-of-court restructuring efforts, intercompany
transactions, the Merger, the Backstop Commitment Agreement, the Chapter 11
Cases, the formulation, preparation, dissemination, negotiation, or filing of
the RSA, the Disclosure Statement, the DIP Facility, the Backstop Commitment
Agreement, the Plan, or any Restructuring Transaction, contract, instrument,
release, or other agreement or document created or entered into in connection
with the RSA, the Disclosure Statement, the DIP Facility, or the Plan, the
filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of
Consummation, the administration and implementation of the Plan, including the
issuance or distribution of securities pursuant to the Plan, or the distribution
of property under the Plan or any other related agreement, or upon any other act
or omission, transaction, agreement, event, or other occurrence taking place on
or before the Effective Date. Releases by Holders of Claims and Interests    As
of the Effective Date, each Releasing Party is deemed to have released and
discharged each Debtor, Reorganized Debtor, and Released Party from any and all
Causes of Action, whether known or unknown, including any derivative claims,
asserted on behalf of the Debtors, that such Entity would have been legally
entitled to assert (whether individually or collectively), based on or relating
to, or in any manner arising from, in whole or in part, the Debtors, the
Debtors’ in- or out-of-court restructuring efforts, intercompany transactions,
the Merger, the Backstop Commitment Agreement, the Chapter 11 Cases, the
formulation, preparation, dissemination, negotiation, or filing of the RSA, the
Disclosure Statement, the DIP Facility, the Plan, the Backstop Commitment
Agreement, or any Restructuring Transaction, contract, instrument, release, or
other agreement or document created or entered into in connection with the RSA,
the Disclosure Statement, the DIP Facility, or the Plan, the filing of the
Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the
administration and implementation of the Plan, including the issuance or
distribution of securities pursuant to the Plan, or the distribution of property
under the Plan or any other related agreement, or upon any other related act or
omission, transaction, agreement, event, or other occurrence taking place on or
before the Effective Date. Exculpation    Except as otherwise specifically
provided in the Plan, no Exculpated Party shall have or incur, and each
Exculpated Party is released and exculpated from any Cause of Action for any
claim related to any act or omission in connection with, relating to, or arising
out of, the Chapter 11 Cases, the formulation, preparation, dissemination,
negotiation, or filing of the RSA and related prepetition transactions, the
Disclosure Statement, the Plan, or any Restructuring Transaction, contract,
instrument, release or other agreement or document created or entered into in
connection with the Disclosure Statement or the Plan, the filing of the Chapter
11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the
administration and implementation of the Plan, including the issuance of
securities pursuant to the Plan, or the distribution of property under the Plan
or any other related agreement, except for claims related to any act or omission
that is determined in a final order to have constituted actual fraud or gross
negligence, but in all respects such Entities shall be entitled to reasonably

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   rely upon the advice of counsel with respect to their duties and
responsibilities pursuant to the Plan. The Exculpated Parties have, and upon
completion of the Plan shall be deemed to have, participated in good faith and
in compliance with the applicable laws with regard to the solicitation of votes
and distribution of consideration pursuant to the Plan and, therefore, are not,
and on account of such distributions shall not be, liable at any time for the
violation of any applicable law, rule, or regulation governing the solicitation
of acceptances or rejections of the Plan or such distributions made pursuant to
the Plan. Injunction    Except as otherwise expressly provided in the Plan or
for obligations issued or required to be paid pursuant to the Plan or the
Confirmation Order, all Entities who have held, hold, or may hold claims or
interests that have been released, discharged, or are subject to exculpation are
permanently enjoined, from and after the Effective Date, from taking any of the
following actions against, as applicable, the Debtors, the Reorganized Debtors,
the Exculpated Parties, or the Released Parties: (a) commencing or continuing in
any manner any action or other proceeding of any kind on account of or in
connection with or with respect to any such claims or interests; (b) enforcing,
attaching, collecting, or recovering by any manner or means any judgment, award,
decree, or order against such Entities on account of or in connection with or
with respect to any such claims or interests; (c) creating, perfecting, or
enforcing any encumbrance of any kind against such Entities or the property or
the estates of such Entities on account of or in connection with or with respect
to any such claims or interests; (d) asserting any right of setoff, subrogation,
or recoupment of any kind against any obligation due from such Entities or
against the property of such Entities on account of or in connection with or
with respect to any such claims or interests unless such holder has filed a
motion requesting the right to perform such setoff on or before the Effective
Date, and notwithstanding an indication of a claim or interest or otherwise that
such holder asserts, has, or intends to preserve any right of setoff pursuant to
applicable law or otherwise; and (e) commencing or continuing in any manner any
action or other proceeding of any kind on account of or in connection with or
with respect to any such claims or interests released or settled pursuant to the
Plan.

OTHER MATERIAL PROVISIONS REGARDING THE RESTRUCTURING

 

Management Incentive Plan    On the Effective Date, the Reorganized Debtors will
implement a management incentive plan (the “Management Incentive Plan”) that
shall provide for 10% of the New Common Stock, on a fully diluted basis, to be
issued to management of the Reorganized Debtors after the Effective Date at the
discretion of the New Board and on terms to be determined by the New Board
(including, without limitation, with respect to allocation, timing and structure
of such issuance and the Management Incentive Plan). The Plan will permit the
establishment of the Management Incentive Plan by the New Board following the
Effective Date.

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Employment Obligations    Each of the Debtors’ “first day” or “second day”
motions and proposed orders relating to wages, compensation, and benefits,
including executive compensation programs shall be in form and substance
acceptable to the Debtors and the Required Supporting Creditors. The Debtors and
the Required Supporting Creditors shall mutually agree as to (i) the
continuation, after the Effective Date, of the Key Employee Incentive Plan
effective as of May 6, 2016 (as amended, supplemented or otherwise modified, the
“KEIP”), (ii) the Debtors’ wages, compensation, and benefit programs that relate
to any “insider” as that term is defined in section 101(31) of the Bankruptcy
Code and (iii) the assumption, rejection or other disposition of any of the
Debtors’ existing employment agreements for insiders. Wages, compensation and
benefit programs, other than the KEIP that do not relate to insiders shall be
continued after the Effective Date and the Supporting Creditors shall support
assumption of non-insider employment agreements, in each case unless otherwise
agreed by the Debtors and the Required Supporting Creditors and subject to the
satisfaction and consent of the Required Supporting Creditors (such consent not
to be unreasonably withheld) following receipt and analysis by the Required
Supporting Creditors and their advisors of satisfactory information from the
Company regarding such programs, which information the Company shall provide as
promptly as practicable. Indemnification of Prepetition Directors, Officers,
Managers, et al.    Consistent with applicable law, all indemnification
provisions currently in place (whether in the by-laws, certificates of
incorporation or formation, limited liability company agreements, other
organizational documents, board resolutions, indemnification agreements,
employment contracts, or otherwise) for the current and former directors,
officers, managers, employees, attorneys, accountants, investment bankers, and
other professionals of the Debtors, as applicable, shall be reinstated and
remain intact, irrevocable, and shall survive the effectiveness of the
Restructuring on terms no less favorable to such current and former directors,
officers, managers, employees, attorneys, accountants, investment bankers, and
other professionals of the Debtors than the indemnification provisions in place
prior to the Restructuring. Director, Officer, Manager, and Employee Tail
Insurance Coverage   

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

 

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

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Claims of the Debtors   

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

 

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

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

 

(a)

  

 

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

      (i)    authorize the Debtors to take all actions necessary to enter into,
implement, and consummate the contracts, instruments, releases, leases,
indentures, and other agreements or documents created in connection with the
Plan;       (ii)    decree that the provisions of the Confirmation Order and the
Plan are nonseverable and mutually dependent;       (iii)    authorize the
Debtors, as applicable/necessary, to: (a) implement the Restructuring
Transactions, including the Rights Offering; (b) distribute the New Warrants and
the New Common Stock pursuant to the exemption from registration under the
Securities Act provided by section 1145 of the Bankruptcy Code or other
exemption from such registration or pursuant to one or more registration
statements; (c) make all distributions and issuances as required under the Plan,
including cash, the New Warrants, and the New Common Stock; and (d) enter into
any agreements, transactions, and sales of property as set forth in the Plan
Supplement, including the Exit Facility and the Management Incentive Plan;      
(iv)    authorize the implementation of the Plan in accordance with its terms;
and      

(v)

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

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   (b)    the Debtors shall have obtained all authorizations, consents,
regulatory approvals, rulings, or documents that are necessary to implement and
effectuate the Plan;    (c)    the final version of the Plan Supplement and all
of the schedules, documents, and exhibits contained therein shall have been
filed in a manner consistent in all material respects with the RSA, this Term
Sheet, and the Plan and shall be in form and substance acceptable to the Debtors
and the Required Supporting Creditors;    (d)    the RSA shall remain in full
force and effect;    (e)    all professional fees and expenses of retained
professionals required to be approved by the Bankruptcy Court shall have been
paid in full or amounts sufficient to pay such fees and expenses after the
Effective Date have been placed in a professional fee escrow account pending
approval by the Bankruptcy Court;    (f)    all professional fees and expenses
and of the advisors to the Supporting Creditors, the Credit Agreement Agent, the
DIP Facility Lenders and the DIP Facility Agent (including all advisors set
forth in Section 9 of the RSA) shall have been paid in full;    (g)    each Loan
Party (as defined in the Credit Agreement) that is not a Debtor shall have been
released from its obligations under the Credit Agreement and the other Credit
Agreement Documents pursuant to the terms thereof; and    (h)    the Debtors
shall have implemented the Restructuring Transactions, including the Rights
Offering, and all transactions contemplated by this Term Sheet, in a manner
consistent in all respects with the RSA, this Term Sheet, and the Plan, pursuant
to documentation acceptable to the Debtors and the Required Supporting
Creditors. Waiver of Conditions Precedent to the Effective Date    The Debtors,
with the prior written consent of the Required Supporting Creditors, may waive
any one or more of the Conditions Precedent to the Effective Date. Foreign
Proceedings    On or as soon as is reasonably practicable after the Effective
Date, the Bermudian Debtors shall commence the Bermudian Proceedings and the
Canadian Debtors shall commence the Canadian Proceedings to facilitate the
Restructuring and protect certain of the Debtors’ assets held outside of the
United States.

CORPORATE GOVERNANCE PROVISIONS/SECTION 1145 EXEMPTION

 

Governance  

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

 

Corporate governance for the Reorganized Debtors, including charters, bylaws,
operating agreements, or other organization documents, as

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

   applicable (the “New Organizational Documents”), shall be consistent with
this Term Sheet and section 1123(a)(6) of the Bankruptcy Code (as applicable)
and documentation therefor shall be included in the Plan Supplement and
otherwise acceptable to the Debtors and the Required Supporting Creditors.
Exemption from SEC Registration    The issuance of all securities under the Plan
will be exempt from SEC registration under applicable law.

[Exhibits follow.]

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EXHIBIT A

DEFINITIONS

 

Term

  

Definition

Accredited Investor    As defined in Rule 501 of Regulation D promulgated under
the Securities Act. Administrative Claim    A Claim for costs and expenses of
administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2),
507(b), or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and
necessary costs and expenses incurred on or after the Petition Date until and
including the Effective Date of preserving the Estates and operating the
Debtors’ businesses; (b) Allowed Professional Claims; and (c) all fees and
charges assessed against the Estates pursuant to section 1930 of chapter 123 of
title 28 of the United States Code. Affiliate    As defined in section 101(2) of
the Bankruptcy Code. Allowed    As to a Claim or an Interest, a Claim or an
Interest allowed under the Plan, under the Bankruptcy Code, or by a Final Order,
as applicable. For the avoidance of doubt, (a) there is no requirement to file a
Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed
Claim under the Plan, and (b) the Debtors may affirmatively determine to deem
Unimpaired Claims Allowed to the same extent such Claims would be allowed under
applicable nonbankruptcy law. Backstop Commitment Agreement    As defined in the
Term Sheet. Backstop Fee    As defined in the Term Sheet. Backstop Parties   
Certain of the Supporting Creditors (or certain designated affiliates thereof),
in their capacity as Backstop Parties under the Backstop Commitment Agreement,
including certain funds and/or accounts managed or advised by Ascribe Capital
LLC, Blue Mountain Capital Management, LLC, GSO Capital Partners LP, Silver
Point Capital L.P., Solus Alternative Asset Management LP and Symphony Asset
Management LLC; provided, however, that each Backstop Party shall be a
Supporting Creditor. Bankruptcy Code    As defined in the Term Sheet. Bankruptcy
Court    As defined in the Term Sheet. Bermuda Act    As defined in the
Introduction. Bermudian Court    As defined in the Introduction. Bermudian
Debtors    As defined in the Introduction. Bermudian Proceedings    As defined
in the Introduction. C&J Common Stock    C&J Energy’s authorized and issued
common stock outstanding as of the Effective Date. C&J Energy    As defined in
the Introduction. Canadian Court    As defined in the Introduction. Canadian
Debtors    As defined in the Introduction. Canadian Proceedings    As defined in
the Introduction. Cause of Action    Any claims, interests, damages, remedies,
causes of action, demands, rights, actions, suits, obligations, liabilities,
accounts, defenses, offsets, powers, privileges, licenses, liens, indemnities,
guaranties, and

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

Term

  

Definition

   franchises of any kind or character whatsoever, whether known or unknown,
foreseen or unforeseen, existing or hereinafter arising, contingent or
non-contingent, liquidated or unliquidated, secured or unsecured, assertable,
directly or derivatively, matured or unmatured, suspected or unsuspected, in
contract, tort, law, equity, or otherwise. Causes of Action also include: (a)
all rights of setoff, counterclaim, or recoupment and claims under contracts or
for breaches of duties imposed by law; (b) the right to object to or otherwise
contest Claims or Interests; (c) claims pursuant to sections 362, 510, 542, 543,
544 through 550, or 553 of the Bankruptcy Code; and (d) such claims and defenses
as fraud, mistake, duress, and usury, and any other defenses set forth in
section 558 of the Bankruptcy Code. CCAA    As defined in the Introduction.
Chapter 11 Cases    As defined in the Term Sheet. Claim    Any claim, as defined
in section 101(5) of the Bankruptcy Code, against any of the Debtors. Class    A
category of holders of Claims or Interests pursuant to section 1122(a) of the
Bankruptcy Code. Conditions Precedent    As defined in the Term Sheet.
Confidentiality Agreement    As defined in the RSA. Confirmation    Entry of the
Confirmation Order on the docket of the Chapter 11 Cases. Confirmation Date   
The date on which the Bankruptcy Court enters the Confirmation Order on the
docket of the Chapter 11 Cases within the meaning of Bankruptcy Rules 5003 and
9021 Confirmation Hearing    The hearing(s) before the Bankruptcy Court under
section 1128 of the Bankruptcy Code at which the Debtors seek entry of the
Confirmation Order. Confirmation Order    The order of the Bankruptcy Court
confirming the Plan under section 1129 of the Bankruptcy Code, which order shall
be in form and substance acceptable to the Debtors and the Required Supporting
Creditors. Company    C&J Energy and each of its direct and indirect
subsidiaries. Consummation    The occurrence of the Effective Date. Credit
Agreement    As defined in the RSA. Credit Agreement Agent    Cortland Capital
Market Services LLC, in its capacity as successor administrative agent pursuant
to the Credit Facility Documents, its successors, assigns, or any replacement
agent appointed pursuant to the terms of the Credit Agreement and, as
applicable, its predecessor administrative agent, Bank of America, N.A.. Credit
Agreement Documents    Collectively, the Credit Agreement, each other Loan
Document (as defined in the Credit Agreement), and all other agreements,
documents, and instruments delivered or entered into in connection therewith
(including any guarantee agreements, pledge and collateral agreements,
intercreditor agreements, and other security documents). Debtors    As defined
in the Term Sheet.

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Term

  

Definition

DIP Facility    As defined in the Term Sheet. DIP Facility Agent    That certain
administrative agent under the DIP Facility Loan Agreement. DIP Facility Claim
   Any Claim held by the DIP Facility Lenders or the DIP Facility Agent arising
under or related to the DIP Facility Loan Agreement or the DIP Facility Order,
including any and all fees, interest paid in kind, and accrued but unpaid
interest and fees arising under the DIP Facility Loan Agreement DIP Facility
Backstop Lenders    Certain of the Supporting Creditors, collectively, in their
capacity as backstop lenders party to the DIP Facility Loan Agreement, including
funds and/or accounts managed or advised by Ascribe Capital LLC, Blue Mountain
Capital Management, LLC, GSO Capital Partners LP and Solus Alternative Asset
Management LP. DIP Facility Lenders    Collectively, the DIP Facility Backstop
Lenders and the DIP Facility Participating Lenders. DIP Facility Loan Agreement
   That certain debtor-in-possession credit agreement as approved by the DIP
Facility Order, which shall contain terms consistent in all respects with the
DIP Facility Term Sheet and otherwise in form and substance acceptable to the
Debtors, the DIP Facility Backstop Lenders and the Required Supporting
Creditors. DIP Facility Order    Collectively, the interim and final orders
entered by the Bankruptcy Court authorizing the Debtors to enter into the DIP
Facility Loan Agreement and access the DIP Facility, which shall be in form and
substance acceptable to the Debtors, the DIP Facility Backstop Lenders, and the
Required Supporting Creditors. DIP Facility Participating Lenders    Certain of
the Supporting Creditors (or certain designated affiliates thereof that are
reasonably acceptable to the DIP Facility Backstop Lenders and the Debtors)
other than the DIP Facility Backstop Lenders that exercise their DIP Facility
Participation Rights, collectively, in their capacity as lenders under the DIP
Facility Loan Agreement; provided, however, that each DIP Facility Participating
Lender shall be a Supporting Creditor. DIP Facility Participation Amount    As
defined in the Term Sheet. DIP Facility Participation Rights    As defined in
the Term Sheet. DIP Facility Term Sheet    As defined in the Term Sheet.
Disclosure Statement    The disclosure statement for the Plan, including all
exhibits and schedules thereto, which shall be in form and substance acceptable
to the Debtors and acceptable to the Required Supporting Creditors. Effective
Date    The date that is the first Business Day after the Confirmation Date on
which all Conditions Precedent have been satisfied or waived in accordance with
the Plan. Entity    As defined in section 101(15) of the Bankruptcy Code. Estate
   The estate of any Debtor created under sections 301 and 541 of the Bankruptcy
Code upon the commencement of the applicable Debtor’s Chapter 11 Case.

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

Term

  

Definition

Excluded Parties    In the event that any holder of Interests in C&J Energy or
any Affiliate or subsidiary (other than C&J Energy and any direct or indirect
subsidiary thereof) or current or former officer, director, principal, member,
employee, agent or advisory board member thereof (a) seeks any relief materially
adverse to the Restructuring as agreed herein or the interests of the Debtors,
the Supporting Creditors, the Lenders, the Credit Agreement Agent, the DIP
Facility Lenders, the DIP Facility Agent or the Backstop Parties or objects to
or opposes any material relief sought by (including any request for relief by
any other party that is joined by any of the following) the Debtors, the
Supporting Creditors, the Credit Agreement Agent, the DIP Facility Lenders, the
DIP Facility Agent or the Backstop Parties, (b) is entitled to vote on the Plan
and does not vote to accept the Plan, (c) opts out of any third-party releases
sought in connection with the Plan or (d) objects to the Plan or causes an
objection to the Plan to be made, then such holder of Interests in C&J Energy
and each Affiliate and subsidiary (other than C&J Energy and any direct or
indirect subsidiary thereof) or current or former officer, director, principal,
member, employee, agent or advisory board member thereof shall be an Excluded
Party; provided, that no current or former director or officer of the Company
(in such capacity) shall be an Excluded Party. Exculpated Parties   
Collectively, and in each case (i) excluding any Excluded Parties and (ii) in
its capacity as such: (a) the Debtors; (b) any official committees appointed in
the Chapter 11 Cases and each of their respective members; and (c) with respect
to each of the foregoing, such Entity and its current and former Affiliates, and
such Entity’s and its current and former Affiliates’ current and former equity
holders, subsidiaries, officers, directors, managers, principals, members,
employees, agents, advisory board members, financial advisors, partners,
attorneys, accountants, investment bankers, consultants, representatives, and
other professionals, each in their capacity as such. Exit Facility    As defined
in the Term Sheet General Unsecured Claims    Any Claim other than an
Administrative Claim, a Professional Claim, a Secured Tax Claim, an Other
Secured Claim, a Priority Tax Claim, an Other Priority Claim, a Mineral
Contractor Claim, a Lender Claim, or a DIP Facility Claim. Governmental Unit   
As defined in section 101(27) of the Bankruptcy Code Impaired    With respect to
any Class of Claims or Interests, a Class of Claims or Interests that is
impaired within the meaning of section 1124 of the Bankruptcy Code. Intercompany
Claim    A Claim held by a Debtor or an Affiliate against a Debtor or an
Affiliate. Intercompany Interest    An Interest held by a Debtor or an Affiliate
of a Debtor. Interest    Any Equity Security (as defined in section 101(16) of
the Bankruptcy Code) in any Debtor and any other rights, options, warrants,
stock appreciation rights, phantom stock rights, restricted stock units,
redemption rights, repurchase rights, convertible, exercisable or exchangeable
securities or other agreements, arrangements or commitments of any character
relating to, or whose value is related to, any such interest or other ownership
interest in any Debtor. Lender    Each lender under the Credit Agreement.

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

Term

  

Definition

Lender Claim    Any Claim arising under, derived from, or based upon the Credit
Agreement. Management Incentive Plan    As defined in the Term Sheet. Merger   
Those certain transactions on or around March 24, 2015, by and among the
predecessors to the Debtors and the completion and production business of
Nabors, effectuating a merger of such entities. Mineral Contractor Claim    Any
Claim that is secured by, or in the reasonable judgment of counsel to the
Company may be secured by, a lien on property of a customer of the Debtors
arising under chapter 56 of the Texas Property Code, or any similar federal,
state, or local law, whether or not such Claim is or may be secured by a lien on
property of the Debtors. Nabors    Nabors Industries Ltd. New Board    As
defined in the Term Sheet. New Common Equity Pool    100% of the New Common
Stock issued and outstanding on the Effective Date to be distributed to the
holders of Allowed Lender Claims in accordance with the Plan, subject to
dilution on account of the Management Incentive Plan, the Rights Offering, the
Backstop Fee, and the New Warrants. New Common Stock    The common stock of
Reorganized C&J Energy. New Warrants    As defined in the Term Sheet. Other
Priority Claim    Any Claim other than an Administrative Claim or a Priority Tax
Claim entitled to priority in right of payment under section 507(a) of the
Bankruptcy Code. Other Secured Claim    Any Secured Claim, including any Secured
Tax Claim, other than a Lender Claim or a DIP Facility Claim. For the avoidance
of doubt, “Other Secured Claims” includes any Claim arising under, derived from,
or based upon any letter of credit issued in favor of one or more Debtors, the
reimbursement obligation for which is either secured by a Lien on collateral or
is subject to a valid right of setoff pursuant to section 553 of the Bankruptcy
Code. Petition Date    The date on which the Chapter 11 Cases were commenced.
Plan    As defined in the Term Sheet. Plan Restructuring Documents    As defined
in the RSA. Plan Supplement    Any compilation of documents and forms of
documents, agreements, schedules, and exhibits to the Plan, which shall be filed
by the Debtors no later than 7 days before the Confirmation Hearing or such
later date as may be approved by the Bankruptcy Court on notice to parties in
interest, and additional documents filed with the Bankruptcy Court prior to the
Effective Date as amendments to the Plan Supplement, each of which shall be
consistent in all respects with, and shall otherwise contain, the terms and
conditions set forth in the RSA and Term Sheet, where applicable, and shall be
in form and substance acceptable to the Debtors and the Required Supporting
Creditors. Plan Value    As defined in the Term Sheet. Priority Tax Claims   
Any Claim of a Governmental Unit of the kind specified in section 507(a)(8) of
the Bankruptcy Code.

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Term

  

Definition

Pro Rata    The proportion that an Allowed Claim or an Allowed Interest in a
particular Class bears to the aggregate amount of Allowed Claims or Allowed
Interests in that Class. Professional Claim    A Claim by a professional seeking
an award by the Bankruptcy Court of compensation for services rendered or
reimbursement of expenses incurred through and including the Confirmation Date
under sections 330, 331, 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the
Bankruptcy Code. Proof of Claim    A proof of Claim filed against any of the
Debtors in the Chapter 11 Cases by the applicable Bar Date. Reinstated    With
respect to Claims and Interests, that the Claim or Interest shall be rendered
unimpaired in accordance with section 1124 of the Bankruptcy Code. Released
Parties    Collectively, and in each case (i) other than any Excluded Parties
and (ii) in its capacity as such: (a) the Supporting Creditors; (b) the Backstop
Parties; (c) the Credit Agreement Agent; (d) the DIP Facility Lenders; (e) the
DIP Facility Agent; and (f) with respect to each of the Debtors, the Reorganized
Debtors, and each of the foregoing entities in clauses (a) through (e), such
Entity and its current and former Affiliates and subsidiaries, and such
Entities’ and their current and former Affiliates’ and subsidiaries’ current and
former directors, managers, officers, equity holders (regardless of whether such
interests are held directly or indirectly), predecessors, successors, and
assigns, subsidiaries, and each of their respective current and former equity
holders, officers, directors, managers, principals, members, employees, agents,
advisory board members, financial advisors, partners, attorneys, accountants,
investment bankers, consultants, representatives, and other professionals.
Releasing Parties    Collectively, (a) the Supporting Creditors; (b) the
Backstop Parties; (c) the DIP Facility Lenders; (d) the Credit Agreement Agent;
(e) the DIP Facility Agent; (f) all holders of Claims; (g) all holders of
Interests; and (h) with respect to each of the Debtors, the Reorganized Debtors,
and each of the foregoing entities in clauses (a) through (g), such Entity and
its current and former Affiliates and subsidiaries, and such Entities’ and their
current and former Affiliates’ and subsidiaries’ current and former directors,
managers, officers, equity holders (regardless of whether such interests are
held directly or indirectly), predecessors, successors, and assigns,
subsidiaries, and each of their respective current and former equity holders,
officers, directors, managers, principals, members, employees, agents, advisory
board members, financial advisors, partners, attorneys, accountants, investment
bankers, consultants, representatives, and other professionals, each in their
capacity as such collectively. Reorganized C&J Energy    C&J Energy, or any
successor or assign, by merger, consolidation, or otherwise, on or after the
Effective Date. Reorganized Debtors    A Debtor, or any successor or assign
thereto, by merger, consolidation, or otherwise, on and after the Effective
Date. Required Supporting Creditors    As defined in the RSA. Restructuring   
As defined in the Introduction. Restructuring Transactions    As defined in the
Term Sheet. Rights Offering Procedures    The procedures governing the Rights
Offering attached as an exhibit to the Backstop Commitment Agreement.

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

Term

  

Definition

Rights Offering Shares    The shares of New Common Stock distributed pursuant to
and in accordance with the Rights Offering. RSA    As defined in the Term Sheet.
SEC    The Securities and Exchange Commission. Secured    When referring to a
Claim: (a) secured by a Lien on collateral to the extent of the value of such
collateral, as determined in accordance with section 506(a) of the Bankruptcy
Code or (b) subject to a valid right of setoff pursuant to section 553 of the
Bankruptcy Code. Secured Tax Claim    Any Secured Claim that, absent its Secured
status, would be entitled to priority in right of payment under section
507(a)(8) of the Bankruptcy Code (determined irrespective of time limitations),
including any related Secured Claim for penalties. Securities Act    The
Securities Act of 1933, as amended, 15 U.S.C. §§ 77a–77aa, or any similar
federal, state, or local law. Standby Facility    [TBD.] Subscription Rights   
The rights to purchase Rights Offering Shares as set forth in the Rights
Offering Procedures. Supporting Creditors    As defined in the RSA. Term Sheet
   As defined in the Introduction. Total Credit Exposure    As defined in the
Credit Agreement. U.S. HoldCo    As defined in the Introduction. Unimpaired   
With respect to a Class of Claims or Interests, a Class of Claims or Interests
that is not Impaired.

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EXHIBIT A-2

Blackline of First Amended Restructuring Term Sheet against Existing
Restructuring Term Sheet

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

THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION
OF ACCEPTANCES OF A CHAPTER 11 PLAN WITHIN THE MEANING OF SECTION 1125 OF THE
BANKRUPTCY CODE. ANY SUCH OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE
SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE. NOTHING CONTAINED IN
THIS TERM SHEET SHALL BE AN ADMISSION OF FACT OR LIABILITY OR, UNTIL THE
OCCURRENCE OF THE AGREEMENT EFFECTIVE DATE ON THE TERMS DESCRIBED HEREIN AND IN
THE RESTRUCTURING SUPPORT AGREEMENT, DEEMED BINDING ON ANY OF THE PARTIES
HERETO.

AMENDED AND RESTATED RESTRUCTURING TERM SHEET

INTRODUCTION

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

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

This Term Sheet is being agreed to in connection with entry by the Debtors,
certain non-Debtor subsidiaries of C&J Energy and the Required Supporting
Creditors into that certain First Amendment to Restructuring Support Agreement,
dated as of July 14, 2016 (the “RSA Amendment”), amending that certain
Restructuring Support Agreement, dated as of July 8, 2016, among the Debtors,
certain non-Debtor subsidiaries of C&J Energy and the Supporting Creditors (as
amended by the RSA Amendment and as may be further amended, supplemented or
modified pursuant to the terms thereof, the “RSA”). Pursuant to the RSA, the
parties thereto have agreed to support the transactions contemplated therein and
herein.

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

 

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

 

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OVERVIEW OF THE RESTRUCTURING

In general, the Restructuring contemplates that:

 

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

 

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

 

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

 

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

 

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

 

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

 

  (o) [TBD: Standby Facility.]

 

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

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

 

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GENERAL PROVISIONS REGARDING THE RESTRUCTURING

 

The DIP Facility   

Certain of the Supporting Creditors (in such capacity, collectively, the “DIP
Lenders”) will provide a senior secured superpriority delayed draw term loan
facility in an aggregate principal amount of up to $100 million.

 

The DIP Facility Backstop Lenders will backstop a senior secured superpriority
delayed draw term loan facility in an aggregate principal amount of up to
$100 million. Each DIP Facility Backstop Lender shall fund no less than such DIP
Facility Backstop Lender’s pro rata share (based on Total Credit Exposure,
without regard to any Total Credit Exposure held by Lenders other than the DIP
Facility Backstop Lenders) of 60% of the aggregate commitments under the DIP
Facility. Rights (the “DIP Facility Participation Rights”) to fund up to 40% of
the aggregate commitments under the DIP Facility (the “DIP Facility
Participation Amount”) shall be offered to the Lenders that are Supporting
Creditors, other than the DIP Facility Backstop Lenders, in each case up to such
Lender’s pro rata share (based on Total Credit Exposure, without regard to any
Total Credit Exposure held by the DIP Facility Backstop Lenders) of the DIP
Facility Participation Amount. To the extent any portion of the DIP Facility
Participation Rights are not exercised, such corresponding portions of the DIP
Facility Participation Amount shall be allocated to, and added to the
commitments of, the DIP Facility Backstop Lenders on a pro rata basis (based on
Total Credit Exposure, without regard to any Total Credit Exposure held by
Lenders other than the DIP Facility Backstop Lenders).

 

The DIP Facility will be available in up to three drawings, with the first such
drawing to occur on the closing date of the DIP Facility in an aggregate
principal amount of no less than $25 million. The material terms of the DIP
Facility are set forth in the term sheet attached hereto as Exhibit B (the “DIP
Facility Term Sheet”).

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

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

 

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

 

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

TREATMENT OF CLAIMS AND INTERESTS OF THE DEBTORS UNDER THE PLAN

 

Class No.

  

Type of Claim

  

Treatment

  

Impairment /
Voting

Unclassified Non-Voting Claims N/A    DIP Facility Claims    On the Effective
Date, in full satisfaction of each Allowed DIP Facility Claim, each holder
thereof shall receive, in full satisfaction of its Claim, payment in full in
cash.    N/A N/A    Administrative Claims    On the Effective Date, except to
the extent that a holder of an Allowed Administrative Claim and the Debtor
against which such Allowed Administrative Claim is asserted agree to less
favorable treatment for such holder, each holder of an Allowed Administrative
Claim shall receive, in full satisfaction of its Claim, payment in full in cash.
   N/A N/A    Priority Tax Claims    Except to the extent that a holder of an
Allowed Priority Tax Claim and the Debtor against which such Allowed Priority
Tax Claim is asserted agree to less favorable treatment for such holder, each
holder of an Allowed Priority Tax Claim shall receive, in full satisfaction of
its Claim, treatment in a manner consistent with section 1129(a)(9)(C) of the
Bankruptcy Code.    N/A

 

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Classified Claims and Interests of the Debtors Class 1    Other Secured Claims
   On the Effective Date, in full satisfaction of each Allowed Other Secured
Claim, each holder thereof shall receive, at the option of the applicable
Debtor, with the consent (such consent not to be unreasonably withheld) of the
Required Supporting Creditors: (a) payment in full in cash; (b) the collateral
securing its Allowed Other Secured Claim; (c) Reinstatement of its Other Secured
Claim; or (d) such other treatment rendering its Allowed Other Secured Claim
Unimpaired in accordance with section 1124 of the Bankruptcy Code.   
Unimpaired; deemed to accept. Class 2    Other Priority Claims    On the
Effective Date, in full satisfaction of each Allowed Other Priority Claim, each
holder thereof shall receive payment in full in cash.    Unimpaired; deemed to
accept. Class 3    Mineral Contractor Claims    On the Effective Date, in full
satisfaction of each Allowed Mineral Contractor Claim, to the extent not already
satisfied pursuant to a prior order of the Bankruptcy Court, each holder of an
Allowed Mineral Contractor Claim shall receive Cash in an amount equal to such
Claim on the later of: (a) the Effective Date; or (b) the date due in the
ordinary course of business in accordance with the terms and conditions of the
particular transaction giving rise to such Allowed Mineral Contractor Claim.   
Unimpaired; deemed to accept. Class 4    Lender Claims    On the Effective Date,
in full satisfaction of each Lender Claim, each holder thereof shall
receive: (a) its Pro Rata share of the New Common Equity Pool; and (b) if such
holder is an Accredited Investor, its Subscription Rights to purchase its Pro
Rata share of the Rights Offerings Shares in accordance with the Rights Offering
Procedures.    Impaired; entitled to vote. Class 5    General Unsecured Claims
   [TBD]    [TBD]. Class 6    Intercompany Claims    On the Effective Date, each
Intercompany Claim shall be, at the option of the Debtor, with the consent (such
consent not to be unreasonably withheld) of the Required Supporting Creditors,
either Reinstated or canceled and released without any distribution.   
Impaired; deemed to reject or Unimpaired; deemed to accept. Class 7    Interests
in Debtors other than C&J Energy    On the Effective Date, Interests in the
Debtors other than C&J Energy shall be, at the option of the Debtor, with the
consent (such consent not to be unreasonably withheld) of the Required
Supporting Creditors, either Reinstated or canceled and released without any
distribution.    Impaired; deemed to reject or Unimpaired; deemed to accept
Class 8    Interests in C&J Energy    All Interests in C&J Energy will be
canceled, released, and extinguished as of the Effective Date, and will be of no
further force or effect. On the Effective Date, each holder of C&J Common Stock
shall receive (a) if Class 8 has timely accepted the Plan, its Pro Rata share of
the New Warrants or (b) if Class 8 has not timely accepted the Plan, no
distribution.    Impaired; entitled to vote.

 

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GENERAL PROVISIONS REGARDING THE PLAN

 

Subordination    The classification and treatment of Claims under the Plan shall
conform to the respective contractual, legal, and equitable subordination rights
of such Claims, and any such rights shall be settled, compromised, and released
pursuant to the Plan. Restructuring Transactions    The Confirmation Order shall
be deemed to authorize, among other things, all actions as may be necessary or
appropriate to effect any transaction described in, approved by, contemplated
by, or necessary to effectuate the Plan, including the Rights Offering and the
issuance of all securities, notes, instruments, certificates, and other
documents required to be issued pursuant to the Restructuring (collectively,
the “Restructuring Transactions”). On the Effective Date, the Debtors, as
applicable, shall issue all securities, notes, instruments, certificates, and
other documents required to be issued pursuant to the Restructuring.
Cancellation of Notes, Instruments, Certificates, and Other Documents    On the
Effective Date, except to the extent otherwise provided in this Term Sheet or
the Plan, all notes, instruments, certificates, and other documents evidencing
Claims or Interests, including credit agreements and indentures, shall be
canceled and the obligations of the Debtors and any non-Debtor Affiliates
thereunder or in any way related thereto shall be deemed satisfied in full and
discharged. Executory Contracts and Unexpired Leases    The Debtors shall seek
to assume or reject executory contracts and unexpired leases in consultation
with the Supporting Creditors and with the consent (such consent not to be
unreasonably withheld) of the Required Supporting Creditors. The Plan will
provide that the executory contracts and unexpired leases that are not assumed
or rejected as of the Plan Effective Date (either pursuant to the Plan or a
separate motion) will be deemed assumed pursuant to section 365 of the
Bankruptcy Code. For the avoidance of doubt, such consent shall be obtained with
respect to all decisions to assume or reject, including the deemed assumption of
executory contracts and unexpired leases pursuant to the Plan. Retention of
Jurisdiction    The Plan will provide for the retention of jurisdiction by the
Bankruptcy Court for usual and customary matters. Discharge of Claims and
Termination of Interests    Pursuant to section 1141(d) of the Bankruptcy Code,
and except as otherwise specifically provided in the Plan or in any contract,
instrument, or other agreement or document created pursuant to the Plan, the
distributions, rights, and treatment that are provided in the Plan shall be in
complete satisfaction, discharge, and release, effective as of the Effective
Date, of Claims (including any Intercompany Claims resolved or compromised after
the Effective Date by the Reorganized Debtors), Interests, and Causes of Action
of any nature whatsoever, including any interest accrued on Claims or Interests
from and after the Petition Date, whether known or unknown, against, liabilities
of, liens on, obligations of,

 

7

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   rights against, and Interests in, the Debtors or any of their assets or
properties, regardless of whether any property shall have been distributed or
retained pursuant to the Plan on account of such Claims and Interests, including
demands, liabilities, and Causes of Action that arose before the Effective Date,
any liability (including withdrawal liability) to the extent such Claims or
Interests relate to services performed by employees of the Debtors prior to the
Effective Date and that arise from a termination of employment, any contingent
or non-contingent liability on account of representations or warranties issued
on or before the Effective Date, and all debts of the kind specified in sections
502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or
not: (a) a Proof of Claim based upon such debt or right is filed or deemed filed
pursuant to section 501 of the Bankruptcy Code; (b) a Claim or Interest based
upon such debt, right, or Interest is Allowed pursuant to section 502 of the
Bankruptcy Code; or (c) the holder of such a Claim or Interest has accepted the
Plan. The Confirmation Order shall be a judicial determination of the discharge
of all Claims and Interests subject to the occurrence of the Effective Date.
Releases by the Debtors    Pursuant to section 1123(b) of the Bankruptcy Code,
for good and valuable consideration, on and after the Effective Date, each
Released Party is deemed released and discharged by the Debtors, the Reorganized
Debtors, and their Estates from any and all Causes of Action, including any
derivative claims, asserted on behalf of the Debtors, that the Debtors, the
Reorganized Debtors, or their Estates would have been legally entitled to assert
in their own right (whether individually or collectively) or on behalf of the
holder of any Claim against, or Interest in, a Debtor or other Entity, based on
or relating to, or in any manner arising from, in whole or in part, the Debtors,
the Debtors’ in- or out-of-court restructuring efforts, intercompany
transactions, the Merger, the Backstop Commitment Agreement, the Chapter 11
Cases, the formulation, preparation, dissemination, negotiation, or filing of
the RSA, the Disclosure Statement, the DIP Facility, the Backstop Commitment
Agreement, the Plan, or any Restructuring Transaction, contract, instrument,
release, or other agreement or document created or entered into in connection
with the RSA, the Disclosure Statement, the DIP Facility, or the Plan, the
filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of
Consummation, the administration and implementation of the Plan, including the
issuance or distribution of securities pursuant to the Plan, or the distribution
of property under the Plan or any other related agreement, or upon any other act
or omission, transaction, agreement, event, or other occurrence taking place on
or before the Effective Date. Releases by Holders of Claims and Interests    As
of the Effective Date, each Releasing Party is deemed to have released and
discharged each Debtor, Reorganized Debtor, and Released Party from any and all
Causes of Action, whether known or unknown, including any derivative claims,
asserted on behalf of the Debtors, that such Entity would have been legally
entitled to assert (whether individually or collectively), based on or relating
to, or in any manner arising from, in whole or in part, the Debtors, the
Debtors’ in- or out-of-court restructuring efforts, intercompany transactions,
the Merger, the Backstop Commitment Agreement, the Chapter 11 Cases, the
formulation, preparation, dissemination, negotiation, or filing of the RSA, the
Disclosure Statement, the DIP Facility, the Plan, the Backstop Commitment
Agreement, or any

 

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   Restructuring Transaction, contract, instrument, release, or other agreement
or document created or entered into in connection with the RSA, the Disclosure
Statement, the DIP Facility, or the Plan, the filing of the Chapter 11 Cases,
the pursuit of Confirmation, the pursuit of Consummation, the administration and
implementation of the Plan, including the issuance or distribution of securities
pursuant to the Plan, or the distribution of property under the Plan or any
other related agreement, or upon any other related act or omission, transaction,
agreement, event, or other occurrence taking place on or before the Effective
Date. Exculpation    Except as otherwise specifically provided in the Plan, no
Exculpated Party shall have or incur, and each Exculpated Party is released and
exculpated from any Cause of Action for any claim related to any act or omission
in connection with, relating to, or arising out of, the Chapter 11 Cases, the
formulation, preparation, dissemination, negotiation, or filing of the RSA and
related prepetition transactions, the Disclosure Statement, the Plan, or any
Restructuring Transaction, contract, instrument, release or other agreement or
document created or entered into in connection with the Disclosure Statement or
the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the
pursuit of Consummation, the administration and implementation of the Plan,
including the issuance of securities pursuant to the Plan, or the distribution
of property under the Plan or any other related agreement, except for claims
related to any act or omission that is determined in a final order to have
constituted actual fraud or gross negligence, but in all respects such Entities
shall be entitled to reasonably rely upon the advice of counsel with respect to
their duties and responsibilities pursuant to the Plan. The Exculpated Parties
have, and upon completion of the Plan shall be deemed to have, participated in
good faith and in compliance with the applicable laws with regard to the
solicitation of votes and distribution of consideration pursuant to the Plan
and, therefore, are not, and on account of such distributions shall not be,
liable at any time for the violation of any applicable law, rule, or regulation
governing the solicitation of acceptances or rejections of the Plan or such
distributions made pursuant to the Plan. Injunction    Except as otherwise
expressly provided in the Plan or for obligations issued or required to be paid
pursuant to the Plan or the Confirmation Order, all Entities who have held,
hold, or may hold claims or interests that have been released, discharged, or
are subject to exculpation are permanently enjoined, from and after the
Effective Date, from taking any of the following actions against, as applicable,
the Debtors, the Reorganized Debtors, the Exculpated Parties, or the Released
Parties: (a) commencing or continuing in any manner any action or other
proceeding of any kind on account of or in connection with or with respect to
any such claims or interests; (b) enforcing, attaching, collecting, or
recovering by any manner or means any judgment, award, decree, or order against
such Entities on account of or in connection with or with respect to any such
claims or interests; (c) creating, perfecting, or enforcing any encumbrance of
any kind against such Entities or the property or the estates of such Entities
on account of or in connection with or with respect to any such claims or
interests; (d) asserting any right of setoff, subrogation, or recoupment of any
kind against any obligation due from such Entities or against the property of
such Entities on account of or in connection with or

 

9

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   with respect to any such claims or interests unless such holder has filed a
motion requesting the right to perform such setoff on or before the Effective
Date, and notwithstanding an indication of a claim or interest or otherwise that
such holder asserts, has, or intends to preserve any right of setoff pursuant to
applicable law or otherwise; and (e) commencing or continuing in any manner any
action or other proceeding of any kind on account of or in connection with or
with respect to any such claims or interests released or settled pursuant to the
Plan.

OTHER MATERIAL PROVISIONS REGARDING THE RESTRUCTURING

 

Management Incentive Plan    On the Effective Date, the Reorganized Debtors will
implement a management incentive plan (the “Management Incentive Plan”) that
shall provide for 10% of the New Common Stock, on a fully diluted basis, to be
issued to management of the Reorganized Debtors after the Effective Date at the
discretion of the New Board and on terms to be determined by the New Board
(including, without limitation, with respect to allocation, timing and structure
of such issuance and the Management Incentive Plan). The Plan will permit the
establishment of the Management Incentive Plan by the New Board following the
Effective Date. Employment Obligations    Each of the Debtors’ “first day” or
“second day” motions and proposed orders relating to wages, compensation, and
benefits, including executive compensation programs shall be in form and
substance acceptable to the Debtors and the Required Supporting Creditors. The
Debtors and the Required Supporting Creditors shall mutually agree as to (i) the
continuation, after the Effective Date, of the Key Employee Incentive Plan
effective as of May 6, 2016 (as amended, supplemented or otherwise modified, the
“KEIP”), (ii) the Debtors’ wages, compensation, and benefit programs that relate
to any “insider” as that term is defined in section 101(31) of the Bankruptcy
Code and (iii) the assumption, rejection or other disposition of any of the
Debtors’ existing employment agreements for insiders. Wages, compensation and
benefit programs, other than the KEIP that do not relate to insiders shall be
continued after the Effective Date and the Supporting Creditors shall support
assumption of non-insider employment agreements, in each case unless otherwise
agreed by the Debtors and the Required Supporting Creditors and subject to the
satisfaction and consent of the Required Supporting Creditors (such consent not
to be unreasonably withheld) following receipt and analysis by the Required
Supporting Creditors and their advisors of satisfactory information from the
Company regarding such programs, which information the Company shall provide as
promptly as practicable.

 

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Indemnification of Prepetition Directors, Officers, Managers, et al.   
Consistent with applicable law, all indemnification provisions currently in
place (whether in the by-laws, certificates of incorporation or formation,
limited liability company agreements, other organizational documents, board
resolutions, indemnification agreements, employment contracts, or otherwise) for
the current and former directors, officers, managers, employees, attorneys,
accountants, investment bankers, and other professionals of the Debtors, as
applicable, shall be reinstated and remain intact, irrevocable, and shall
survive the effectiveness of the Restructuring on terms no less favorable to
such current and former directors, officers, managers, employees, attorneys,
accountants, investment bankers, and other professionals of the Debtors than the
indemnification provisions in place prior to the Restructuring. Director,
Officer, Manager, and Employee Tail Insurance Coverage   

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

 

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

Claims of the Debtors   

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

 

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

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

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

 

   (i)    the Bankruptcy Court shall have entered the Confirmation Order, which
shall be in form and substance acceptable to the Debtors and the Required
Supporting Creditors, and shall:       (vi)    authorize the Debtors to take all
actions necessary to enter into, implement, and consummate the contracts,
instruments, releases, leases, indentures, and other agreements or documents
created in connection with the Plan;

 

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      (vii)    decree that the provisions of the Confirmation Order and the Plan
are nonseverable and mutually dependent;       (viii)    authorize the Debtors,
as applicable/necessary, to: (a) implement the Restructuring Transactions,
including the Rights Offering; (b) distribute the New Warrants and the New
Common Stock pursuant to the exemption from registration under the Securities
Act provided by section 1145 of the Bankruptcy Code or other exemption from such
registration or pursuant to one or more registration statements; (c) make all
distributions and issuances as required under the Plan, including cash, the New
Warrants, and the New Common Stock; and (d) enter into any agreements,
transactions, and sales of property as set forth in the Plan Supplement,
including the Exit Facility and the Management Incentive Plan;       (ix)   
authorize the implementation of the Plan in accordance with its terms; and      
(x)    provide that, pursuant to section 1146 of the Bankruptcy Code, the
assignment or surrender of any lease or sublease, and the delivery of any deed
or other instrument or transfer order, in furtherance of, or in connection with
the Plan, including any deeds, bills of sale, or assignments executed in
connection with any disposition or transfer of assets contemplated under the
Plan, shall not be subject to any stamp, real estate transfer, mortgage
recording, or other similar tax; and    (j)    the Debtors shall have obtained
all authorizations, consents, regulatory approvals, rulings, or documents that
are necessary to implement and effectuate the Plan;    (k)    the final version
of the Plan Supplement and all of the schedules, documents, and exhibits
contained therein shall have been filed in a manner consistent in all material
respects with the RSA, this Term Sheet, and the Plan and shall be in form and
substance acceptable to the Debtors and the Required Supporting Creditors;   
(l)    the RSA shall remain in full force and effect;    (m)    all professional
fees and expenses of retained professionals required to be approved by the
Bankruptcy Court shall have been paid in full or amounts sufficient to pay such
fees and expenses after the Effective Date have been placed in a professional
fee escrow account pending approval by the Bankruptcy Court;    (n)    all
professional fees and expenses and of the advisors to the Supporting Creditors,
the Credit Agreement Agent, the DIP Facility Lenders and the DIP Facility Agent
(including all advisors set forth in Section 9 of the RSA) shall have been paid
in full;    (o)    each Loan Party (as defined in the Credit Agreement) that is
not a Debtor shall have been released from its obligations under the Credit
Agreement and the other Credit Agreement Documents pursuant to the terms
thereof; and    (p)    the Debtors shall have implemented the Restructuring
Transactions, including the Rights Offering, and all transactions contemplated
by this Term Sheet, in a manner consistent in all respects with the RSA, this
Term Sheet, and the Plan, pursuant to documentation acceptable to the Debtors
and the Required Supporting Creditors.

 

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

 

CORPORATE GOVERNANCE PROVISIONS/SECTION 1145 EXEMPTION

 

Governance   

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

 

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

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

[Exhibits follow.]

 

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EXHIBIT A

DEFINITIONS

 

Term

  

Definition

Accredited Investor    As defined in Rule 501 of Regulation D promulgated under
the Securities Act. Administrative Claim    A Claim for costs and expenses of
administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2),
507(b), or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and
necessary costs and expenses incurred on or after the Petition Date until and
including the Effective Date of preserving the Estates and operating the
Debtors’ businesses; (b) Allowed Professional Claims; and (c) all fees and
charges assessed against the Estates pursuant to section 1930 of chapter 123 of
title 28 of the United States Code. Affiliate    As defined in section 101(2) of
the Bankruptcy Code. Allowed    As to a Claim or an Interest, a Claim or an
Interest allowed under the Plan, under the Bankruptcy Code, or by a Final Order,
as applicable. For the avoidance of doubt, (a) there is no requirement to file a
Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed
Claim under the Plan, and (b) the Debtors may affirmatively determine to deem
Unimpaired Claims Allowed to the same extent such Claims would be allowed under
applicable nonbankruptcy law. Backstop Commitment Agreement    As defined in the
Term Sheet. Backstop Fee    As defined in the Term Sheet. Backstop Parties   
Certain of the Supporting Creditors, (or certain designated affiliates thereof),
in their capacity as Backstop Parties under the Backstop Commitment Agreement,
including certain funds and/or accounts managed or advised by Ascribe Capital
LLC, Blue Mountain Capital Management, LLC, GSO Capital Partners LP, Silver
Point Capital L.P., Solus Alternative Asset Management LP and Symphony Asset
Management LLC, in each case that are parties to the RSA.; provided, however,
that each Backstop Party shall be a Supporting Creditor. Bankruptcy Code    As
defined in the Term Sheet. Bankruptcy Court    As defined in the Term Sheet.
Bermuda Act    As defined in the Introduction. Bermudian Court    As defined in
the Introduction. Bermudian Debtors    As defined in the Introduction. Bermudian
Proceedings    As defined in the Introduction. C&J Common Stock    C&J Energy’s
authorized and issued common stock outstanding as of the Effective Date. C&J
Energy    As defined in the Introduction. Canadian Court    As defined in the
Introduction. Canadian Debtors    As defined in the Introduction.

 

14

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Term

  

Definition

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

 

15

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Term

  

Definition

Credit Agreement Documents    Collectively, the Credit Agreement, each other
Loan Document (as defined in the Credit Agreement), and all other agreements,
documents, and instruments delivered or entered into in connection therewith
(including any guarantee agreements, pledge and collateral agreements,
intercreditor agreements, and other security documents). Debtors    As defined
in the Term Sheet. DIP Facility    As defined in the Term Sheet. DIP Facility
Agent    That certain administrative agent under the DIP Facility Loan
Agreement. DIP Facility Claim    Any Claim held by the DIP Facility Lenders or
the DIP Facility Agent arising under or related to the DIP Facility Loan
Agreement or the DIP Facility Order, including any and all fees, interest paid
in kind, and accrued but unpaid interest and fees arising under the DIP Facility
Loan Agreement DIP Facility Backstop Lenders    Certain of the Supporting
Creditors, collectively, in their capacity as backstop lenders party to the DIP
Facility Loan Agreement, including funds and/or accounts managed or advised by
Ascribe Capital LLC, Blue Mountain Capital Management, LLC, GSO Capital Partners
LP and Solus Alternative Asset Management LP, in each case that are parties to
the RSA.. DIP Facility Lenders    Collectively, the DIP Facility Backstop
Lenders and the DIP Facility Participating Lenders. DIP Facility Loan Agreement
   That certain debtor-in-possession credit agreement as approved by the DIP
Facility Order, which shall contain terms consistent in all respects with the
DIP Facility Term Sheet and otherwise in form and substance acceptable to the
Debtors, the DIP Facility Backstop Lenders and the Required Supporting
Creditors. DIP Facility Order    Collectively, the interim and final orders
entered by the Bankruptcy Court authorizing the Debtors to enter into the DIP
Facility Loan Agreement and access the DIP Facility, which shall be in form and
substance acceptable to the Debtors, the DIP Facility Backstop Lenders, and the
Required Supporting Creditors. DIP Facility Participating Lenders    Certain of
the Supporting Creditors (or certain designated affiliates thereof that are
reasonably acceptable to the DIP Facility Backstop Lenders and the Debtors)
other than the DIP Facility Backstop Lenders that exercise their DIP Facility
Participation Rights, collectively, in their capacity as lenders under the DIP
Facility Loan Agreement; provided, however, that each DIP Facility Participating
Lender shall be a Supporting Creditor. DIP Facility Participation Amount    As
defined in the Term Sheet. DIP Facility Participation Rights    As defined in
the Term Sheet. DIP Facility Term Sheet    As defined in the Term Sheet.
Disclosure Statement    The disclosure statement for the Plan, including all
exhibits and schedules thereto, which shall be in form and substance acceptable
to the Debtors and acceptable to the Required Supporting Creditors.

 

16

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Term

  

Definition

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

 

17

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Term

  

Definition

Intercompany Interest    An Interest held by a Debtor or an Affiliate of a
Debtor. Interest    Any Equity Security (as defined in section 101(16) of the
Bankruptcy Code) in any Debtor and any other rights, options, warrants, stock
appreciation rights, phantom stock rights, restricted stock units, redemption
rights, repurchase rights, convertible, exercisable or exchangeable securities
or other agreements, arrangements or commitments of any character relating to,
or whose value is related to, any such interest or other ownership interest in
any Debtor. Lender    Each lender under the Credit Agreement. Lender Claim   
Any Claim arising under, derived from, or based upon the Credit Agreement.
Management Incentive Plan    As defined in the Term Sheet. Merger    Those
certain transactions on or around March 24, 2015, by and among the predecessors
to the Debtors and the completion and production business of Nabors,
effectuating a merger of such entities. Mineral Contractor Claim    Any Claim
that is secured by, or in the reasonable judgment of counsel to the Company may
be secured by, a lien on property of a customer of the Debtors arising under
chapter 56 of the Texas Property Code, or any similar federal, state, or local
law, whether or not such Claim is or may be secured by a lien on property of the
Debtors. Nabors    Nabors Industries Ltd. New Board    As defined in the Term
Sheet. New Common Equity Pool    100% of the New Common Stock issued and
outstanding on the Effective Date to be distributed to the holders of Allowed
Lender Claims in accordance with the Plan, subject to dilution on account of the
Management Incentive Plan, the Rights Offering, the Backstop Fee, and the New
Warrants. New Common Stock    The common stock of Reorganized C&J Energy. New
Warrants    As defined in the Term Sheet. Other Priority Claim    Any Claim
other than an Administrative Claim or a Priority Tax Claim entitled to priority
in right of payment under section 507(a) of the Bankruptcy Code. Other Secured
Claim    Any Secured Claim, including any Secured Tax Claim, other than a Lender
Claim or a DIP Facility Claim. For the avoidance of doubt, “Other Secured
Claims” includes any Claim arising under, derived from, or based upon any letter
of credit issued in favor of one or more Debtors, the reimbursement obligation
for which is either secured by a Lien on collateral or is subject to a valid
right of setoff pursuant to section 553 of the Bankruptcy Code. Petition Date   
The date on which the Chapter 11 Cases were commenced. Plan    As defined in the
Term Sheet.

 

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Term

  

Definition

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

 

19

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Term

  

Definition

   interests are held directly or indirectly), predecessors, successors, and
assigns, subsidiaries, and each of their respective current and former equity
holders, officers, directors, managers, principals, members, employees, agents,
advisory board members, financial advisors, partners, attorneys, accountants,
investment bankers, consultants, representatives, and other professionals, each
in their capacity as such collectively. Reorganized C&J Energy    C&J Energy, or
any successor or assign, by merger, consolidation, or otherwise, on or after the
Effective Date. Reorganized Debtors    A Debtor, or any successor or assign
thereto, by merger, consolidation, or otherwise, on and after the Effective
Date. Required Supporting Creditors    As defined in the RSA. Restructuring   
As defined in the Introduction. Restructuring Transactions    As defined in the
Term Sheet. Rights Offering Procedures    The procedures governing the Rights
Offering attached as an exhibit to the Backstop Commitment Agreement. Rights
Offering Shares    The shares of New Common Stock distributed pursuant to and in
accordance with the Rights Offering. RSA    As defined in the Term Sheet. SEC   
The Securities and Exchange Commission. Secured    When referring to a Claim:
(a) secured by a Lien on collateral to the extent of the value of such
collateral, as determined in accordance with section 506(a) of the Bankruptcy
Code or (b) subject to a valid right of setoff pursuant to section 553 of the
Bankruptcy Code. Secured Tax Claim    Any Secured Claim that, absent its Secured
status, would be entitled to priority in right of payment under section
507(a)(8) of the Bankruptcy Code (determined irrespective of time limitations),
including any related Secured Claim for penalties. Securities Act    The
Securities Act of 1933, as amended, 15 U.S.C. §§ 77a–77aa, or any similar
federal, state, or local law. Standby Facility    [TBD.] Subscription Rights   
The rights to purchase Rights Offering Shares as set forth in the Rights
Offering Procedures. Supporting Creditors    As defined in the RSA. Term Sheet
   As defined in the Introduction. Total Credit Exposure    As defined in the
Credit Agreement. U.S. HoldCo    As defined in the Introduction. Unimpaired   
With respect to a Class of Claims or Interests, a Class of Claims or Interests
that is not Impaired.

 

20

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EXHIBIT B-1

First Amended DIP Term Sheet

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

Amended and Restated Illustrative Summary of Terms And Conditions

This DIP term sheet (the “Term Sheet”), dated as of July 14, 2016, sets forth
certain of the principal terms and conditions of a debtor-in-possession loan
facility.

 

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

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

 

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

DIP Lenders:    One or more of Ascribe Capital LLC, funds managed or advised by
GSO Capital Partners LP, Blue Mountain Capital Management, LLC and Solus
Alternative Asset Management LP (including, in each case, affiliates of any of
the foregoing) (the “DIP Backstop Lenders”) and those Lenders under the
Prepetition Credit Agreement that are parties to the Restructuring Support
Agreement (as defined below), other than the DIP Backstop Lenders, that choose
to participate in the DIP Facility (as defined below) pursuant to the terms and
conditions set forth in this Term Sheet (such Lenders, the “DIP Participating
Lenders” and, together with the DIP Backstop Lenders, the “DIP Lenders”), but
excluding in any case Disqualified Lenders (as defined in the Prepetition Credit
Agreement). Certain Prepetition Debt Facilities:    Reference is made to that
certain Credit Agreement dated as of March 24, 2015 (as amended, restated,
amended and restated, extended, supplemented or otherwise modified, including
pursuant to waivers and forbearance agreements, and in effect from time to time,
the “Prepetition Credit Agreement”), the lenders from time to time party thereto
(the “Prepetition Secured Lenders”) and the revolving and term loan facilities
provided thereunder (the “Prepetition Credit Facilities”). Administrative Agent:
   Cortland Capital Market Services LLC or another institution to be agreed
shall act as administrative agent and collateral agent in respect of the DIP
Facility (as defined below) (the “Administrative Agent”). DIP Facility:    The
DIP Backstop Lenders will agree to backstop a senior secured superpriority
delayed draw term loan facility in an aggregate principal amount of up to $100.0
million (the “DIP Facility”, the loans made thereunder (which shall be
denominated in dollars) (the “DIP Loans”) and the commitments to make such DIP
Loans (the “DIP Commitments”)) on the terms and conditions set forth herein and
in the DIP Loan Documents (as defined below). Each DIP Backstop Lender shall
provide no less than such DIP Backstop Lender’s pro rata share (based on Total
Credit Exposure (as defined in the Prepetition Credit Agreement), without regard
to any Total Credit Exposure held by Lenders under the Prepetition Credit
Agreement other than the DIP Backstop Lenders) of 60% of the aggregate DIP
Commitments. Rights (the “DIP Participation Rights”) to up to 40% of the
aggregate DIP Commitments (the “DIP Participation Amount”) shall be offered to
the Lenders under the Prepetition Credit Agreement that are party to the
Restructuring Support Agreement, other than the DIP Backstop Lenders, in each
case up to such Lender’s pro rata share (based on Total Credit Exposure (as
defined in the Prepetition Credit Agreement), without

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regard to any Total Credit Exposure held by the DIP Backstop Lenders) of the DIP
Participation Amount. To the extent any portion of the DIP Participation Rights
are not exercised, such corresponding portions of the DIP Participation Amount
shall be allocated to, and added to the commitments of, the DIP Backstop Lenders
on a pro rata basis (based on Total Credit Exposure, without regard to any Total
Credit Exposure held by Lenders under the Prepetition Credit Agreement other
than the DIP Backstop Lenders).

 

The DIP Facility will be available in up to three drawings (the date of any such
drawing, a “Delayed Draw Funding Date”), with (x) the first drawing to be in an
amount equal to the lesser of (x) $25,000,000 and (y) the amount permitted to be
drawn under the Interim DIP Order, which shall be made on the Closing Date, (y)
the second drawing to be made within 2 business days after the entry of the
Final DIP Order in an amount that together with the first drawing shall be not
less than $50 million in the aggregate and (z) the remainder available to be
drawn in one drawing thereafter through and including the DIP Facility
Termination Date. Amounts borrowed under the DIP Facility that are prepaid may
not be re-borrowed.

 

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

 

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

DIP Facility Termination Date:   

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

 

“Scheduled Termination Date” means March 31, 2017.

 

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

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Use of Proceeds:   

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

 

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

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

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

 

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

 

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

 

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

 

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

OID and Fees:   

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

 

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

 

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

 

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

Optional Prepayments:    The Company may, upon at least 3 business days’ notice
for LIBO Rate loans and same day’s notice for Base Rate loans and at the end of
any applicable interest period (or at other times with the payment of applicable
breakage costs), prepay in full or in part, without premium or penalty (other
than such breakage costs and except as provided above), the DIP Loans; provided
that each such partial prepayment shall be in a minimum aggregate amount to be
mutually agreed.

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Mandatory Prepayments:    Mandatory prepayments of the DIP Loans shall be
required solely with (a) 100.0% of the net cash proceeds (subject to exceptions
to be agreed, including, without limitation, (i) dispositions of obsolete, worn
out or ‘scrap’ property in the ordinary course of business, (ii) dispositions of
light vehicles (i.e., cars and pick-up trucks but not heavy trucks or rigs) in
the ordinary course of business, (iii) the ability to reinvest the net cash
proceeds of up to $10 million in the aggregate from casualty events on the terms
set forth in the Prepetition Credit Agreement (without giving effect to any
limited waiver or forbearance agreement delivered with respect thereto), (iv)
the sale or other disposition of all or a portion of the business of Total E&S
Inc. (provided that 75% of the net cash proceeds of such sale or other
disposition shall be deposited into a segregated blocked agreement pledged to
the Administrative Agent to ensure sufficient liquidity at the exit from the
Cases) and (v) a de minimis basket of $10 million of net cash proceeds in the
aggregate for other applicable sales or dispositions) from sales or other
dispositions of any assets and (b) 100% of the net cash proceeds of any
indebtedness not permitted by the DIP Facility (subject to the 2% prepayment fee
as provided above in the case of another financing during the pendency of the
Cases). Security and Priority:   

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

 

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

 

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

 

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

 

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

 

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

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

 

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

Carve-Out:   

As used in this Term Sheet, the “Carve-Out” means the sum of (i) all fees
required to be paid to the Clerk of the Court and to the Office of the United
States Trustee under section 1930(a) of title 28 of the United States Code plus
interest at the statutory rate (without regard to the notice set forth in (iii)
below); (ii) all reasonable fees and expenses up to $50,000 incurred by a
trustee under section 726(b) of the Bankruptcy Code (without regard to the
notice set forth in (iii) below); (iii) to the extent allowed at any time,
whether by interim order, procedural order, or otherwise, all unpaid fees and
expenses (the “Allowed Professional Fees”) incurred by persons or firms retained
by the Debtors pursuant to section 327, 328, or 363 of the Bankruptcy Code (the
“Debtor Professionals”) and the Creditors’ Committee pursuant to section 328 or
1103 of the Bankruptcy Code (the “Committee Professionals” and, together with
the Debtor Professionals, the “Professional Persons”) at any time before or on
the first business day following delivery by the Administrative Agent of a
Carve-Out Trigger Notice (as defined below), whether allowed by the Court prior
to or after delivery of a Carve-Out Trigger Notice; and (iv) Allowed
Professional Fees of Professional Persons in an aggregate amount not to exceed
$4,000,000 incurred after the first business day following delivery by the
Administrative Agent of the Carve-Out Trigger Notice, to the extent allowed at
any time, whether by interim order, procedural order, or otherwise (the amounts
set forth in this clause (iv) being the “Post-Carve-Out Trigger Notice Cap”).
For purposes of the foregoing, “Carve-Out Trigger Notice” shall mean a written
notice delivered by email (or other electronic means) by the Administrative
Agent to the Debtors, their lead restructuring counsel, the U.S. trustee, and
counsel to the Creditors’ Committee, which notice may be delivered following the
occurrence and during the continuation of an Event of Default and acceleration
of the DIP Facility, stating that the Post-Carve-Out Trigger Notice Cap has been
invoked.

 

On the day on which a Carve-Out Trigger Notice is given by the Administrative
Agent to the Debtors with a copy to counsel to the Creditors’ Committee (the
“Termination Declaration Date”), the Carve-Out Trigger Notice shall (i) be
deemed a draw request and notice of borrowing by the US Borrower for DIP Loans
under the DIP Commitment (on a pro rata basis based on the then outstanding DIP
Commitments), in an amount equal to the then unpaid amounts of the Allowed
Professional Fees (any such amounts actually advanced shall constitute DIP
Loans) and (ii) also constitute a demand to the US Borrower to utilize all cash
on hand as of such date and any available cash thereafter held by any Debtor to
fund a reserve in an amount equal to the then unpaid amounts of the Allowed
Professional Fees. The Debtors shall deposit and hold such amounts in a
segregated account at the Administrative Agent in trust to pay such then unpaid
Allowed Professional Fees (the “Pre-Carve-Out Trigger Notice Reserve”) prior to
any and all other claims. On the Termination Declaration Date, the Carve-Out
Trigger Notice shall also be deemed a request by the

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   Debtors for DIP Loans under the DIP Commitment (on a pro rata basis based on
the then outstanding DIP Commitments), in an amount equal to the Post-Carve-Out
Trigger Notice Cap (any such amounts actually advanced shall constitute DIP
Loans). The Debtors shall deposit and hold such amounts in a segregated account
at the Administrative Agent in trust to pay such Allowed Professional Fees
benefiting from the Post-Carve-Out Trigger Notice Cap (the “Post Carve-Out
Trigger Notice Reserve” and, together with the Pre-Carve-Out Trigger Notice
Reserve, the “Carve-Out Reserves”) prior to any and all other claims. On the
first business day after the Administrative Agent gives such notice to such DIP
Lenders, notwithstanding anything in the Term Sheet to the contrary, including
with respect to the existence of a Default or Event of Default, the failure of
the Debtors to satisfy any or all of the conditions precedent for DIP Loans
under the DIP Facility, any termination of the DIP Commitments following an
Event of Default, or the occurrence of the Scheduled Termination Date, each DIP
Lender with an outstanding Commitment (on a pro rata basis based on the then
outstanding Commitments) shall make available to the Administrative Agent such
DIP Lender’s pro rata share with respect to such borrowing in accordance with
the DIP Facility. All funds in the Pre-Carve-Out Trigger Notice Reserve shall be
used first to pay the obligations set forth in clauses (i) through (iii) of the
definition of Carve-Out set forth above (the “Pre-Carve-Out Amounts”), but not,
for the avoidance of doubt, the Post-Carve-Out Trigger Notice Cap, until paid in
full, and then, to the extent the Pre Carve-Out Trigger Notice Reserve has not
been reduced to zero, to pay the Administrative Agent for the benefit of the DIP
Lenders, unless the DIP Facility has been indefeasibly paid in full in cash and
all Commitments have been terminated, in which case any such excess shall be
paid to the Prepetition Secured Lenders in accordance with their rights and
priorities as of the Petition Date. All funds in the Post-Carve-Out Trigger
Notice Reserve shall be used first to pay the obligations set forth in clause
(iv) of the definition of Carve-Out set forth above (the “Post-Carve-Out
Amounts”), and then, to the extent the Post Carve-Out Trigger Notice Reserve has
not been reduced to zero, to pay the Administrative Agent for the benefit of the
DIP Lenders, unless the DIP Facility has been indefeasibly paid in full in cash
and all Commitments have been terminated, in which case any such excess shall be
paid to the Prepetition Secured Lenders in accordance with their rights and
priorities as of the Petition Date. Notwithstanding anything to the contrary in
this Term Sheet, if either of the Carve-Out Reserves is not funded in full in
the amounts set forth herein, then, any excess funds in one of the Carve-Out
Reserves following the payment of the Pre-Carve-Out Amounts and Post-Carve-Out
Amounts, respectively, shall be used to fund the other Carve-Out Reserve, up to
the applicable amount set forth herein, prior to making any payments to the
Administrative Agent or the Prepetition Secured Lenders, as
applicable. Notwithstanding anything to the contrary in the Term Sheet,
following delivery of a Carve-Out Trigger Notice, the Administrative Agent and
the Prepetition Secured Lenders shall not sweep or foreclose on cash (including
cash received as a result of the sale or other disposition of any assets) of the
Debtors until the Carve-Out Reserves have been fully funded, but shall have a
security interest in any residual interest in the Carve-Out Reserves, with any
excess paid to the Administrative Agent for application in accordance with this
Term Sheet. Further, notwithstanding anything to the contrary in this Term
Sheet, (i) disbursements by the Debtors from the Carve-Out Reserves shall not
constitute DIP Loans or increase or reduce the DIP Facility, (ii) the failure of
the Carve-Out Reserves to satisfy in full the Allowed Professional Fees shall
not affect the priority of the Carve-Out, and (iii) in no way shall the initial
budget, budget, Carve-Out, Post-Carve-Out Trigger Notice Cap, Carve-Out
Reserves, or any of the foregoing be construed as

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

  

a cap or limitation on the amount of the Allowed Professional Fees due and
payable by the Debtors. For the avoidance of doubt and notwithstanding anything
to the contrary herein or in the Prepetition Credit Facilities, the Carve-Out
shall be senior to all liens and claims securing the DIP Facility, and any and
all other forms of adequate protection, liens, or claims securing the DIP
Facility.

 

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

 

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

 

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

Adequate Protection:   

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

 

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

 

(b) Subject to the requirements and limitations set forth in the Rolling Budget
(subject to permitted variances), Cash Collateral will only be used for the
purposes set forth in the Rolling Budget (subject to permitted variances),
without

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prior written authorization of the Required DIP Lenders (in their reasonable
discretion), provided that Cash Collateral will only be used in accordance with
the DIP orders entered by the Bankruptcy Court from time to time.

 

(c) From the date of the Interim DIP Order to the DIP Facility Termination Date,
and except to the extent of the Carve-Out, no claim may be asserted against the
Administrative Agent, the DIP Lenders, or the Prepetition Secured Lenders, each
in their capacity as such, to charge any expenses of administration of the Cases
or any future proceeding that may result therefrom, including liquidation in
bankruptcy or other proceedings under the Bankruptcy Code, against the
Collateral or the Existing Collateral or recover such expenses from the
Collateral or the Existing Collateral pursuant to section 506(c) of the
Bankruptcy Code or any similar principle of law, without the prior written
consent of the Required DIP Lenders and the Prepetition Secured Lenders, and no
such consent shall be implied from any other action, inaction, or acquiescence
by the DIP Lenders or Prepetition Secured Lenders.

 

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

 

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

 

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

 

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

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

The DIP Facility will contain only the following Financial Covenants:

 

(a) Tested weekly as of the last business day of each week (each such day, a
“Test Date”) for the applicable Test Period (as defined below) ending on such
Test Date against the most recent Rolling Budget that covers such Test Period,
the Company shall not allow (i) the aggregate receipts of the Company and its

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   subsidiaries to be less than the Variance Percentage (for the applicable Test
Period) of the aggregate receipts line item for the Company and its subsidiaries
and (ii) the aggregate operating disbursements (excluding professional fees and
expenses) made by the Company and its subsidiaries to be greater than the
Variance Percentage (for the applicable Test Period) of the aggregate operating
disbursements line item. The Financial Covenant set forth in this clause (a) is
referred to as the “Budget Variance Financial Covenant”. For purposes hereof,
“Test Period” means (i) in respect of the first Test Date covered in the most
recent Rolling Budget, the one-week period ending on such Test Date (the “First
Test Period”), (ii) in respect of the second Test Date covered in the most
recent Rolling Budget, the two-week period ending on such Test Date (the “Second
Test Period”), (iii) in respect of the third Test Date covered in the most
recent Rolling Budget, the three-week period ending on such Test Date (the
“Third Test Period”) and (iv) in respect of any subsequent Test Date covered in
the most recent Rolling Budget, the four-week period ending on such Test Date
(each, a “Subsequent Test Period”). As used herein, “Variance Percentage” means
the corresponding percentage below:

 

Test Period

   Variance Percentage        Receipts     Disbursements  

First Test Period

     75 %      125 % 

Second Test Period

     75 %      125 % 

Third Test Period

     80 %      120 % 

Subsequent Test Period

     80 %      120 % 

 

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

 

Fiscal Month

   Capital Expenditures  

August 2016

   $ 15,560,000   

September 2016

   $ 21,550,000   

October 2016

   $ 27,540,000   

November 2016

   $ 33,530,000   

December 2016

   $ 39,510,000   

January 2017

   $ 46,540,000   

February 2017

   $ 53,660,000   

March 2017

   $ 61,870,000   

 

Case Milestones:    The DIP Loan Documents shall require compliance with the
following milestones (the “Case Milestones”) in accordance with the applicable
timing referred to below (or such later dates as approved by the Required DIP
Lenders):    (a)    approval of the DIP Facility in form and substance
satisfactory to the DIP Lenders on an interim basis within 7 calendar days after
the Petition Date (or such later date as the Required DIP Lenders may agree in
their reasonable discretion);    (b)    approval of the DIP Facility in form and
substance satisfactory to the DIP Lenders on a final basis within 40 calendar
days after the entry of the Interim DIP Order (or such later date as the
Required DIP Lenders may agree in their reasonable discretion);

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   (c)    as promptly as possible but in no event later than 30 calendar days
after the Petition Date, the Debtors shall have filed a plan of reorganization
(an “Acceptable Plan of Reorganization”) and disclosure statement (an
“Acceptable Disclosure Statement”) that are, in each case, acceptable to the DIP
Lenders in their sole discretion;    (d)    approval of the Acceptable
Disclosure Statement within 90 calendar days after the Petition Date;    (f)   
confirmation of the Acceptable Plan of Reorganization within 130 calendar days
after the Petition Date (the “Confirmation Date”); and    (g)    effectiveness
of the Acceptable Plan of Reorganization by no later than 21 calendar days
following the Confirmation Date.   

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

 

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

Financial Reporting Requirements:   

Limited to the following:

 

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

 

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

 

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

 

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

 

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

 

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

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

Limited to the following:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

Events of Default:    The DIP Loan Documents will contain events of default
based on the Prepetition Credit Facilities, subject to modifications consistent
for facilities of this type to reflect the Cases and events or circumstances
impacting thereon. The termination of the Restructuring Support Agreement in
accordance with its terms shall constitute an event of default under the DIP
Loan Documents. Expenses and Indemnification:    The DIP Loan Documents will
contain provisions for payment of expenses and indemnification of the
Administrative Agent and the DIP Lenders based on the Prepetition Credit
Facilities.

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Assignments and Participations:    Assignments must be in a minimum amount to be
mutually agreed (or, if less, the remaining commitments and/or DIP Loans of any
assigning DIP Lender) and are subject to the consent of the Company (absent a
continuing Event of Default) and the Administrative Agent, except, in each case,
with respect to any assignment to a DIP Lender, an affiliate of such a DIP
Lender or a fund engaged in investing in commercial loans that is advised or
managed by such a DIP Lender. No participation shall include voting rights,
other than for matters requiring consent of all affected DIP Lenders. Required
DIP Lenders:    DIP Lenders holding, in the aggregate, more than 50.0% of the
outstanding commitments and/or exposure under the DIP Facility (the
“Required DIP Lenders”). Amendments:    Required DIP Lenders, except for
amendments customarily requiring approval by directly and adversely affected DIP
Lenders based on the Prepetition Credit Facilities, subject to modifications
consistent for facilities of this type. Miscellaneous:    The DIP Loan Documents
will include (i) yield protection provisions, (ii) waivers of consequential
damages and jury trial, and (iii) agency, set-off and sharing language, in each
case based on the Prepetition Credit Facilities. Governing Law and Submission to
Exclusive Jurisdiction:    State of New York (and, to the extent customary for
DIP financings, the Bankruptcy Code). Counsel to the Administrative Agent:   
Davis Polk & Wardwell LLP.

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EXHIBIT B-2

Blackline of First Amended DIP Term Sheet against Existing DIP Term Sheet

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

Amended and Restated Illustrative Summary of Terms And Conditions

This DIP term sheet (the “Term Sheet”), dated as of July 14, 2016, sets forth
certain of the principal terms and conditions of a debtor-in-possession loan
facility.

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

 

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

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

 

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

DIP Lenders:   

One or more of Ascribe Capital LLC, funds managed or advised by GSO Capital
Partners LP, Blue Mountain Capital Management, LLC and Solus Alternative Asset
Management LP (including, in each case, affiliates of any of the foregoing) (the
“DIP Backstop Lenders”) and those Lenders under the Prepetition Credit Agreement
that are parties to the Restructuring Support Agreement (as defined below),
other than the DIP Backstop Lenders, that choose to participate in the DIP
Facility (as defined below) pursuant to the terms and conditions set forth in
this Term Sheet (such Lenders, the “DIP Participating Lenders” and, together
with the DIP Backstop Lenders, the “DIP Lenders”), but excluding in any case
Disqualified Lenders (as defined in the Prepetition Credit Agreement).

Certain Prepetition Debt Facilities:    Reference is made to that certain Credit
Agreement dated as of March 24, 2015 (as amended, restated, amended and
restated, extended, supplemented or otherwise modified, including pursuant to
waivers and forbearance agreements, and in effect from time to time, the
“Prepetition Credit Agreement”), the lenders from time to time party thereto
(the “Prepetition Secured Lenders”) and the revolving and term loan facilities
provided thereunder ( the “Prepetition Credit Facilities” ). Administrative
Agent:    Cortland Capital Market Services LLC or another institution to be
agreed shall act as administrative agent and collateral agent in respect of the
DIP Facility (as defined below) (the “Administrative Agent”). DIP Facility:   
The DIP Facility Backstop Lenders will agree to backstop a senior secured
superpriority delayed draw term loan facility in an aggregate principal amount
of up to $100.0 million (the “DIP Facility”, the loans made thereunder (which
shall be denominated in dollars) (the “DIP Loans”) and the commitments to make
such DIP Loans (the “DIP Commitments”)) on the terms and conditions set forth
herein and in the DIP Loan Documents (as defined below). TheEach DIP Backstop
LendersLender shall provide no less than 60% ofsuch DIP Backstop Lender’s pro
rata share (based on Total Credit Exposure (as defined in the Prepetition Credit
Agreement), without regard to any Total Credit Exposure held by Lenders under
the Prepetition Credit Agreement other than the DIP Backstop Lenders) of 60% of
the aggregate DIP Commitments. Rights (the “DIP Participation Rights”) to up to
40% of the aggregate DIP Commitments (the “DIP Participation Amount”) shall be
offered for participation by the DIP Participatingto the Lenders under the
Prepetition Credit Agreement that are party to the Restructuring Support
Agreement, other than the DIP Backstop Lenders, in each case up to such DIP
Participating Lender’s pro rata share (based on Total Credit Exposure (as
defined in the Prepetition Credit Agreement), without regard to any Total Credit
Exposure held by the DIP Backstop Lenders) of the DIP Participation Amount. To
the extent any portion of the DIP Participation Amount is not filled by a DIP
Participating Lender, such amountRights are not exercised, such corresponding
portions of the DIP Participation Amount shall be allocated to, and added to the
commitments of, the DIP Backstop Lenders. on a pro rata basis (based on Total
Credit Exposure, without regard to any Total Credit Exposure held by Lenders
under the Prepetition Credit Agreement other than the DIP Backstop Lenders).

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

  

The DIP Facility will be available in up to three drawings (the date of any such
drawing, a “Delayed Draw Funding Date”), with (x) the first drawing to be in an
amount equal to the lesser of (x) $25,000,000 and (y) the amount permitted to be
drawn under the Interim DIP Order, which shall be made on the Closing Date, (y)
the second drawing to be made within 2 business days after the entry of the
Final DIP Order in an amount that together with the first drawing shall be not
less than $50 million in the aggregate and (z) the remainder available to be
drawn in one drawing thereafter through and including the DIP Facility
Termination Date. Amounts borrowed under the DIP Facility that are prepaid may
not be re-borrowed.

 

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

 

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

DIP Facility Termination Date:   

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

 

“Scheduled Termination Date” means March 31, 2017.

 

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

Use of Proceeds:    The proceeds of the DIP Facility and any Cash Collateral
shall be used only for the following, in each case subject to the terms,
conditions and amounts herein and the agreed Rolling Budget (subject to
permitted variances) from time to time (the “Approved Purposes”): (a) working
capital and general corporate purposes in accordance with the Rolling Budget
(subject to permitted variances); (b)

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

  

professional fees and expenses whether or not in accordance with the Rolling
Budget; and (c) Bankruptcy Court approved administrative expenses for estate
professionals and such other expenses to which the Required DIP Lenders may
consent in their sole direction.

 

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

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

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

 

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

 

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

 

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

 

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

OID and Fees:   

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

 

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

 

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

 

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

Optional Prepayments:    The Company may, upon at least 3 business days’ notice
for LIBO Rate loans and same day’s notice for Base Rate loans and at the end of
any applicable interest period (or at other times with the payment of applicable
breakage costs), prepay in full or in part, without premium or penalty (other
than such breakage costs and except as provided above), the DIP Loans; provided
that each such partial prepayment shall be in a minimum aggregate amount to be
mutually agreed. Mandatory Prepayments:    Mandatory prepayments of the DIP
Loans shall be required solely with (a) 100.0% of the net cash proceeds (subject
to exceptions to be agreed, including, without limitation, (i) dispositions of
obsolete, worn out or ‘scrap’ property in the ordinary course of business, (ii)
dispositions of light vehicles (i.e., cars and pick-up trucks but not heavy
trucks or rigs) in the ordinary course of business,

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

   (iii) the ability to reinvest the net cash proceeds of up to $10 million in
the aggregate from casualty events on the terms set forth in the Prepetition
Credit Agreement (without giving effect to any limited waiver or forbearance
agreement delivered with respect thereto), (iv) the sale or other disposition of
all or a portion of the business of Total E&S Inc. (provided that 75% of the net
cash proceeds of such sale or other disposition shall be deposited into a
segregated blocked agreement pledged to the Administrative Agent to ensure
sufficient liquidity at the exit from the Cases) and (v) a de minimis basket of
$10 million of net cash proceeds in the aggregate for other applicable sales or
dispositions) from sales or other dispositions of any assets and (b) 100% of the
net cash proceeds of any indebtedness not permitted by the DIP Facility (subject
to the 2% prepayment fee as provided above in the case of another financing
during the pendency of the Cases). Security and Priority:   

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

As used in this Term Sheet, the “Carve-Out” means the sum of (i) all fees
required to be paid to the Clerk of the Court and to the Office of the United
States Trustee under section 1930(a) of title 28 of the United States Code plus
interest at the statutory rate (without regard to the notice set forth in (iii)
below); (ii) all reasonable fees and expenses up to $50,000 incurred by a
trustee under section 726(b) of the Bankruptcy Code (without regard to the
notice set forth in (iii) below); (iii) to the extent allowed at any time,
whether by interim order, procedural order, or otherwise, all unpaid fees and
expenses (the “Allowed Professional Fees”) incurred by persons or firms retained
by the Debtors pursuant to section 327, 328, or 363 of the Bankruptcy Code (the
“Debtor Professionals”) and the Creditors’ Committee pursuant to section 328 or
1103 of the Bankruptcy Code (the “Committee Professionals” and, together with
the Debtor Professionals, the “Professional Persons”) at any time before or on
the first business day following delivery by the Administrative Agent of a
Carve-Out Trigger Notice (as defined below), whether allowed by the Court prior
to or after delivery of a Carve-Out Trigger Notice; and (iv) Allowed
Professional Fees of Professional Persons in an aggregate amount not to exceed
$4,000,000 incurred after the first business day following delivery by the
Administrative Agent of the Carve-Out Trigger Notice, to the extent allowed at
any time, whether by interim order, procedural order, or otherwise (the amounts
set forth in this clause (iv) being the “Post-Carve-Out Trigger Notice Cap”).
For purposes of the foregoing, “Carve-Out Trigger Notice” shall mean a written
notice delivered by email (or other electronic means) by the Administrative
Agent to the Debtors, their lead restructuring counsel, the U.S. trustee, and
counsel to the Creditors’ Committee, which notice may be delivered following the
occurrence and during the continuation of an Event of Default and acceleration
of the DIP Facility, stating that the Post-Carve-Out Trigger Notice Cap has been
invoked.

 

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

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

   account at the Administrative Agent in trust to pay such Allowed Professional
Fees benefiting from the Post-Carve-Out Trigger Notice Cap (the “Post Carve-Out
Trigger Notice Reserve” and, together with the Pre-Carve-Out Trigger Notice
Reserve, the “Carve-Out Reserves”) prior to any and all other claims. On the
first business day after the Administrative Agent gives such notice to such DIP
Lenders, notwithstanding anything in the Term Sheet to the contrary, including
with respect to the existence of a Default or Event of Default, the failure of
the Debtors to satisfy any or all of the conditions precedent for DIP Loans
under the DIP Facility, any termination of the DIP Commitments following an
Event of Default, or the occurrence of the Scheduled Termination Date, each DIP
Lender with an outstanding Commitment (on a pro rata basis based on the then
outstanding Commitments) shall make available to the Administrative Agent such
DIP Lender’s pro rata share with respect to such borrowing in accordance with
the DIP Facility. All funds in the Pre-Carve-Out Trigger Notice Reserve shall be
used first to pay the obligations set forth in clauses (i) through (iii) of the
definition of Carve-Out set forth above (the “Pre-Carve-Out Amounts”), but not,
for the avoidance of doubt, the Post-Carve-Out Trigger Notice Cap, until paid in
full, and then, to the extent the Pre Carve-Out Trigger Notice Reserve has not
been reduced to zero, to pay the Administrative Agent for the benefit of the DIP
Lenders, unless the DIP Facility has been indefeasibly paid in full in cash and
all Commitments have been terminated, in which case any such excess shall be
paid to the Prepetition Secured Lenders in accordance with their rights and
priorities as of the Petition Date. All funds in the Post-Carve-Out Trigger
Notice Reserve shall be used first to pay the obligations set forth in clause
(iv) of the definition of Carve-Out set forth above (the “Post-Carve-Out
Amounts”), and then, to the extent the Post Carve-Out Trigger Notice Reserve has
not been reduced to zero, to pay the Administrative Agent for the benefit of the
DIP Lenders, unless the DIP Facility has been indefeasibly paid in full in cash
and all Commitments have been terminated, in which case any such excess shall be
paid to the Prepetition Secured Lenders in accordance with their rights and
priorities as of the Petition Date. Notwithstanding anything to the contrary in
this Term Sheet, if either of the Carve-Out Reserves is not funded in full in
the amounts set forth herein, then, any excess funds in one of the Carve-Out
Reserves following the payment of the Pre-Carve-Out Amounts and Post-Carve-Out
Amounts, respectively, shall be used to fund the other Carve-Out Reserve, up to
the applicable amount set forth herein, prior to making any payments to the
Administrative Agent or the Prepetition Secured Lenders, as applicable.
Notwithstanding anything to the contrary in the Term Sheet, following delivery
of a Carve-Out Trigger Notice, the Administrative Agent and the Prepetition
Secured Lenders shall not sweep or foreclose on cash (including cash received as
a result of the sale or other disposition of any assets) of the Debtors until
the Carve-Out Reserves have been fully funded, but shall have a security
interest in any residual interest in the Carve-Out Reserves, with any excess
paid to the Administrative Agent for application in accordance with this Term
Sheet. Further, notwithstanding anything to the contrary in this Term Sheet, (i)
disbursements by the Debtors from the Carve-Out Reserves shall not constitute
DIP Loans or increase or reduce the DIP Facility, (ii) the failure of the
Carve-Out Reserves to satisfy in full the Allowed Professional Fees shall not
affect the priority of the Carve-Out, and (iii) in no way shall the initial
budget, budget, Carve-Out, Post-Carve-Out Trigger Notice Cap, Carve-Out
Reserves, or any of the foregoing be construed as a cap or limitation on the
amount of the Allowed Professional Fees due and payable by the Debtors. For the
avoidance of doubt and notwithstanding anything to the contrary herein or in the
Prepetition Credit Facilities, the Carve-Out shall be senior to all liens and
claims securing the DIP Facility, and any and all other forms of adequate
protection, liens, or claims securing the DIP Facility.

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

  

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

 

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

 

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

Adequate Protection:   

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

 

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

 

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

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

  

(c) From the date of the Interim DIP Order to the DIP Facility Termination Date,
and except to the extent of the Carve-Out, no claim may be asserted against the
Administrative Agent, the DIP Lenders, or the Prepetition Secured Lenders, each
in their capacity as such, to charge any expenses of administration of the Cases
or any future proceeding that may result therefrom, including liquidation in
bankruptcy or other proceedings under the Bankruptcy Code, against the
Collateral or the Existing Collateral or recover such expenses from the
Collateral or the Existing Collateral pursuant to section 506(c) of the
Bankruptcy Code or any similar principle of law, without the prior written
consent of the Required DIP Lenders and the Prepetition Secured Lenders, and no
such consent shall be implied from any other action, inaction, or acquiescence
by the DIP Lenders or Prepetition Secured Lenders.

 

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

 

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

 

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

 

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

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

The DIP Facility will contain only the following Financial Covenants:

 

(a) Tested weekly as of the last business day of each week (each such day, a
“Test Date”) for the applicable Test Period (as defined below) ending on such
Test Date against the most recent Rolling Budget that covers such Test Period,
the Company shall not allow (i) the aggregate receipts of the Company and its
subsidiaries to be less than the Variance Percentage (for the applicable Test
Period) of the aggregate receipts line item for the Company and its subsidiaries
and (ii) the aggregate operating disbursements (excluding professional fees and
expenses) made by the Company and its subsidiaries to be greater than the

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

  

Variance Percentage (for the applicable Test Period) of the aggregate operating
disbursements line item. The Financial Covenant set forth in this clause (a) is
referred to as the “Budget Variance Financial Covenant”. For purposes hereof,
“Test Period” means (i) in respect of the first Test Date covered in the most
recent Rolling Budget, the one-week period ending on such Test Date (the “First
Test Period”), (ii) in respect of the second Test Date covered in the most
recent Rolling Budget, the two-week period ending on such Test Date (the “Second
Test Period”), (iii) in respect of the third Test Date covered in the most
recent Rolling Budget, the three-week period ending on such Test Date (the
“Third Test Period”) and (iv) in respect of any subsequent Test Date covered in
the most recent Rolling Budget, the four-week period ending on such Test Date
(each, a “Subsequent Test Period”). As used herein, “Variance Percentage” means
the corresponding percentage below:

 

Test Period

   Variance Percentage        Receipts     Disbursements  

First Test Period

     75 %      125 % 

Second Test Period

     75 %      125 % 

Third Test Period

     80 %      120 % 

Subsequent Test Period

     80 %      120 % 

 

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

 

Fiscal Month

   Capital Expenditures  

August 2016

   $ 15,560,000   

September 2016

   $ 21,550,000   

October 2016

   $ 27,540,000   

November 2016

   $ 33,530,000   

December 2016

   $ 39,510,000   

January 2017

   $ 46,540,000   

February 2017

   $ 53,660,000   

March 2017

   $ 61,870,000   

 

Case Milestones:    The DIP Loan Documents shall require compliance with the
following milestones (the “Case Milestones”) in accordance with the applicable
timing referred to below (or such later dates as approved by the Required DIP
Lenders):       (a)    approval of the DIP Facility in form and substance
satisfactory to the DIP Lenders on an interim basis within 7 calendar days after
the Petition Date (or such later date as the Required DIP Lenders may agree in
their reasonable discretion);    (b)    approval of the DIP Facility in form and
substance satisfactory to the DIP Lenders on a final basis within 40 calendar
days after the entry of the Interim DIP Order (or such later date as the
Required DIP Lenders may agree in their reasonable discretion);    (c)    as
promptly as possible but in no event later than 30 calendar days after the

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      Petition Date, the Debtors shall have filed a plan of reorganization (an
“Acceptable Plan of Reorganization”) and disclosure statement (an “Acceptable
Disclosure Statement”) that are, in each case, acceptable to the DIP Lenders in
their sole discretion;    (d)    approval of the Acceptable Disclosure Statement
within 90 calendar days after the Petition Date;    (f)    confirmation of the
Acceptable Plan of Reorganization within 130 calendar days after the Petition
Date (the “Confirmation Date”); and    (g)    effectiveness of the Acceptable
Plan of Reorganization by no later than 21 calendar days following the
Confirmation Date.    To the extent the milestones set forth above are extended
pursuant to the restructuring support agreement among the Loan Parties the DIP,
certain Lenders under the Prepetition Credit Agreement and the other parties
thereto (the “Restructuring Support Agreement”), such milestones shall also be
extended by such amount for purposes of the DIP Facility.    Failure by the
Company to meet any of the foregoing milestones shall constitute an event of
default under the DIP Loan Documents and shall cause the consensual use of Cash
Collateral (described in the “Adequate Protection” section of this Term Sheet)
to be terminated. Financial Reporting Requirements:   

Limited to the following:

 

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

 

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

 

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

 

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

 

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

 

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

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

Limited to the following:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

Events of Default:    The DIP Loan Documents will contain events of default
based on the Prepetition Credit Facilities, subject to modifications consistent
for facilities of this type to reflect the Cases and events or circumstances
impacting thereon. The termination of the Restructuring Support Agreement in
accordance with its terms shall constitute an event of default under the DIP
Loan Documents. Expenses and Indemnification:    The DIP Loan Documents will
contain provisions for payment of expenses and indemnification of the
Administrative Agent and the DIP Lenders based on the Prepetition Credit
Facilities. Assignments and Participations:    Assignments must be in a minimum
amount to be mutually agreed (or, if less, the remaining commitments and/or DIP
Loans of any assigning DIP Lender) and are subject to the consent of the Company
(absent a continuing Event of Default) and the Administrative Agent, except, in
each case, with respect to any assignment to a DIP Lender, an affiliate of such
a DIP Lender or a fund engaged

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   in investing in commercial loans that is advised or managed by such a DIP
Lender. No participation shall include voting rights, other than for matters
requiring consent of all affected DIP Lenders. Required DIP Lenders:    DIP
Lenders holding, in the aggregate, more than 50.0% of the outstanding
commitments and/or exposure under the DIP Facility (the “Required DIP Lenders”).
Amendments:    Required DIP Lenders, except for amendments customarily requiring
approval by directly and adversely affected DIP Lenders based on the Prepetition
Credit Facilities, subject to modifications consistent for facilities of this
type. Miscellaneous:    The DIP Loan Documents will include (i) yield protection
provisions, (ii) waivers of consequential damages and jury trial, and (iii)
agency, set-off and sharing language, in each case based on the Prepetition
Credit Facilities. Governing Law and Submission to Exclusive Jurisdiction:   
State of New York (and, to the extent customary for DIP financings, the
Bankruptcy Code). Counsel to the Administrative Agent:    Davis Polk & Wardwell
LLP.