Exhibit 10.1

EXECUTION VERSION

THIS PLAN SUPPORT AGREEMENT IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A
SOLICITATION OF VOTES WITH RESPECT TO A CHAPTER 11 PLAN OF REORGANIZATION. ANY
SUCH OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS
AND/OR, AS APPLICABLE, PROVISIONS OF THE BANKRUPTCY CODE

 

 

PLAN SUPPORT AGREEMENT

by and among

KEY ENERGY SERVICES, INC.

KEY ENERGY SERVICES, LLC

KEY ENERGY MEXICO, LLC

MISR KEY ENERGY INVESTMENTS, LLC

MISR KEY ENERGY SERVICES, LLC

and

EACH SUPPORTING CREDITOR PARTY HERETO

dated as of August 24, 2016

 

 

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PLAN SUPPORT AGREEMENT

 

PREAMBLE      1    RECITALS      1    1.     

INCORPORATION OF FUNDAMENTAL TERM SHEETS AND DEFINITIONS; INTERPRETATION

     3    2.     

EFFECTIVENESS; ENTIRE AGREEMENT

     13    3.     

MATERIAL COVENANTS OF ALL PARTIES

     13    4.     

ADDITIONAL COVENANTS OF THE SUPPORTING CREDITORS

     15    5.     

ADDITIONAL COVENANTS OF THE DEBTORS

     16    6.     

NO WAIVER OF PARTICIPATION AND PRESERVATION OF RIGHTS

     19    7.     

MUTUAL REPRESENTATIONS AND WARRANTIES OF ALL PARTIES

     19    8.     

ADDITIONAL REPRESENTATIONS AND WARRANTIES BY THE SUPPORTING CREDITORS

     20    9.     

ADDITIONAL REPRESENTATIONS AND WARRANTIES BY THE DEBTORS

     21    10.     

TRANSFER RESTRICTIONS

     22    11.     

TERMINATION OF OBLIGATIONS

     24    12.     

FORBEARANCE

     32    13.     

SPECIFIC PERFORMANCE

     34    14.     

COUNTERPARTS

     34    15.     

NO SOLICITATION AND ACKNOWLEDGEMENTS

     34   

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16.     

TIME IS OF THE ESSENCE

     34    17.     

GOVERNING LAW; CONSENT TO JURISDICTION

     35    18.     

INDEPENDENT ANALYSIS

     35    19.     

THIRD-PARTY BENEFICIARIES

     35    20.     

NOTICES

     36    21.     

SEVERABILITY

     38    22.     

MUTUAL DRAFTING

     38    23.     

HEADINGS

     38    24.     

WAIVERS AND AMENDMENTS

     38    25.     

SEVERAL, NOT JOINT, CLAIMS

     40    26.     

AUTOMATIC STAY

     40    27.     

SETTLEMENT DISCUSSIONS

     40    28.     

CONSIDERATION

     40    29.     

CONFIDENTIALITY AND PUBLICITY

     41    30.     

SURVIVAL

     42   

 

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PREAMBLE

This Plan Support Agreement (including all annexes, exhibits and schedules
attached hereto, including the Fundamental Term Sheets (defined below), in each
case, as may be amended, modified or supplemented from time to time only in
accordance with Section 24 hereof and, as applicable, the terms of the other
Fundamental Implementation Agreements (defined below), this “PSA” or this
“Agreement”), dated as of August 24, 2016, is entered into by and among (i) Key
Energy Services, Inc., a Maryland corporation (“Key” or the “Company”), and each
of the undersigned direct subsidiaries of the Company (the “Debtor
Subsidiaries,” and together with the Company, the “Debtors”) and (ii) severally
and not jointly each Holder (or investment advisor or manager thereof), on
behalf of itself and each of its Affiliated Covered Holders that is a Holder,
(A) of Senior Notes listed on Schedule 1 and party hereto (each, a “Supporting
Noteholder”), or (B) of Term Loans listed on Schedule 1 and party hereto (each,
a “Supporting Term Lender”; collectively with each Supporting Noteholder, the
“Supporting Creditors”).

Each Debtor and each Supporting Creditor is referred to herein individually as a
“Party”, and collectively as the “Parties”.

RECITALS

WHEREAS, Key and its majority-owned subsidiaries are in the business of
providing onshore rig-based well services to the oil and natural gas exploration
and production industry;

WHEREAS, the Debtors are obligors under the following debt agreements: (a) the
ABL Facility, which remains undrawn except for $38,526,688 of outstanding but
undrawn letters of credit; (b) the Term Loan Credit Agreement in the aggregate
outstanding principal amount of $299,523,134.89 as of the date hereof (before
giving effect to the Forbearance Payment), plus accrued and unpaid interest
thereon; and (c) the Senior Notes in the aggregate outstanding principal amount
of $675,000,000 as of the date hereof, plus accrued and unpaid interest thereon;

WHEREAS, as of the date hereof, the Supporting Noteholders, in the aggregate,
holding approximately $601,651,000 (89.1%) of the aggregate outstanding
principal amount of the Senior Notes;

WHEREAS, as of the date hereof, the Supporting Term Lenders, in the aggregate,
holding approximately $263,390,185.29 (87.9%) of the aggregate outstanding
principal amount of the Term Loan Claims before giving effect to the Forbearance
Payment;

WHEREAS, the Parties have negotiated in good faith and at arms’ length a
transaction that will effectuate a financial restructuring (the “Restructuring”)
of the Debtors’ capital structure and financial obligations, on the terms and
conditions set forth in the Fundamental Implementation Agreements;

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WHEREAS, to effectuate the Restructuring, the Debtors propose to commence
voluntary cases (collectively, the “Chapter 11 Cases”) under Chapter 11 of the
United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”),
before the United States Bankruptcy Court for the District of Delaware (the
“Bankruptcy Court”), on a consensual basis pursuant to a joint prepackaged
Chapter 11 plan of reorganization (including all annexes, exhibits, schedules
and supplements thereto, in each case, as may be amended, modified or
supplemented from time to time only in accordance with Section 24 of this
Agreement and, as applicable, the terms of the other Fundamental Implementation
Agreements, the “Plan”), the terms and conditions of which are reflected in the
Fundamental Implementation Agreements, and, if not expressly specified therein,
in a manner reasonably satisfactory to the Debtors and the Required Consenting
Creditors;

WHEREAS, in furtherance of implementing the Restructuring, the Debtors have
agreed, among other things and subject to the terms and conditions of the
Fundamental Implementation Agreements and consistent with the Restructuring
Timeline, to:

 

  (i) promptly negotiate and prepare the Solicitation Materials;

 

  (ii) following completion of the Solicitation Materials, commence and complete
the Rights Offering and Solicitation, in accordance with applicable
non-bankruptcy law, and as permitted under Sections 1125(g) and 1126(b) of the
Bankruptcy Code; and

 

  (iii) obtain entry of the Confirmation Order and consummate the Plan
consistent with and by the applicable deadlines set forth in the Restructuring
Timeline;

WHEREAS, subject to the terms and conditions set forth in the Fundamental
Implementation Agreements (and any other definitive agreement contemplated
thereby), each Supporting Creditor has agreed, among other things, subject to
commencement of the Solicitation and receipt of the Disclosure Statement, to
vote in favor of and not oppose, the Restructuring and the Plan; and

WHEREAS, the Parties desire to express to each other their mutual support and
commitment in respect of the Restructuring, including with respect to the
consummation of the Plan on the terms and conditions contained in the
Fundamental Implementation Agreements.

 

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AGREEMENT

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

 

  1. Incorporation of Fundamental Term Sheets and Definitions; Interpretation.

The general terms and conditions of the Restructuring are set forth herein. All
references herein to “this Agreement”, “this PSA” or “herein” shall include each
Fundamental Term Sheet. In the event the terms and conditions set forth in any
of the Fundamental Term Sheets and this Agreement are inconsistent, the terms
and conditions set forth in the applicable Fundamental Term Sheets shall govern,
until such time as the corresponding Fundamental Implementation Agreements have
been executed, at which time the terms and conditions set forth therein, to the
extent intended to supersede the relevant Fundamental Term Sheet, shall govern.
Each of the schedules and exhibits attached hereto is expressly incorporated
herein and made a part of this Agreement.

In this PSA, unless the context otherwise requires:

 

  (a) words importing the singular also include the plural, and references to
one gender include all genders;

 

  (b) the headings in this PSA are inserted for convenience only and do not
affect the construction of this PSA and shall not be taken into consideration in
its interpretation;

 

  (c) the words “hereof,” “herein” and “hereunder” and words of similar import
when used in this PSA shall refer to this PSA as a whole and not to any
particular provision of this PSA;

 

  (d) the words “include,” “includes,” and “including” shall be deemed to be
followed by the phrase “without limitation;” the word “or” is not exclusive;

 

  (e) all financial statement accounting terms not defined in this PSA shall
have the meanings determined by United States generally accepted accounting
principles as in effect on the date of this PSA; and

 

  (f) references to any governmental entity or any governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality, or
judicial or administrative body, in any jurisdiction shall include any successor
to such entity.

The following terms shall have the following meanings:

“ABL Agent” has the meaning set forth in Section 19 hereto.

“ABL Facility” means that certain Loan and Security Agreement, dated as of June
1, 2015, by and among Key, as borrower, each of the guarantors named therein,
and the lenders party thereto, as amended, restated, supplemented or otherwise
modified from time to time prior to the date hereof.

“ABL Forbearance Agreement” means that certain Limited Consent and Second
Amendment to Loan Agreement Consent and Amendment No. 3 to Limited Consent to
Loan

 

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Agreement and Forbearance Agreement, which shall be in the form attached as
Exhibit C hereto, by an among the Borrowers and the Administrative Agent (as
such terms are defined therein) as may be amended, modified or supplemented
pursuant to the terms thereof.

“ABL Lenders” has the meaning set forth in Section 19 hereto.

“Affiliate” means (i) a Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
such Person; or (ii) managed funds, accounts, investment managers,
representatives, agents and employees, in each case to the extent controlled by
a Person.

“Affiliated Covered Holder” means, subject to Section 2(b) hereof, any Person of
whom a Supporting Creditor is an investment advisor or manager or over whom a
Supporting Creditor has power and/or authority to bind with respect to
securities and/or Covered Interests owned by such Person.

“Agreement” has the meaning set forth in the Preamble.

“Alleged Defaults” has the meaning set forth in the Forbearance Agreement.

“Alternative Transaction” means (i) any alternative refinancing,
recapitalization, share exchange, rights offering, equity investment or other
transaction other than the Restructuring or any purchase, sale, or other
disposition of all or a material portion of a Debtor’s business or assets,
except for the sale of assets in the ordinary course of business or in
connection with a Specified Asset Sale, (ii) any issuance, sale, or other
disposition of any equity interest (including, without limitation, securities or
instruments directly or indirectly convertible or exchangeable into equity but
excluding any intercompany transactions necessary or desirable in connection
with the Restructuring) in a Debtor (by such Debtor), (iii) any merger,
acquisition, consolidation, or similar business combination transaction
involving a Debtor (excluding any intercompany transactions necessary or
contemplated in connection with the Restructuring) or (iv) any other
reorganization, restructuring or other transaction the purpose or effect of
which would be reasonably expected to, or which would, prevent or render
impractical, or otherwise frustrate or impede in any material respect, the
Restructuring, or is otherwise inconsistent with the Definitive Restructuring
Documents and the Fundamental Implementation Agreements (including this PSA).

“Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as amended,
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the
Federal Trade Commission Act, as amended and all other laws (statutory or
common), statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any U.S. or non-U.S. federal, state, municipal, local,
judicial, administrative, legislative or regulatory agency, department,
commission, court, or tribunal of competent jurisdiction (including any branch,
department or official thereof), that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade or lessening of competition through merger or acquisition.

 

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“Backstop Agreement” means the duly executed and delivered backstop commitment
agreement(s), in the form attached to the Disclosure Statement, incorporating
the terms and conditions set forth in the Backstop Agreement Term Sheet, which
agreement shall be in form and substance reasonably satisfactory to the parties
thereto, as such agreement may be amended, modified or supplemented from time to
time only in accordance with the terms thereof.

“Backstop Agreement Term Sheet” means the term sheet attached as Exhibit 3 to
the Plan Term Sheet, as may be amended, modified or supplemented only in
accordance with Section 24 hereof.

“Backstop Order” has the meaning set forth in the Backstop Agreement Term Sheet.

“Backstop Participant” has the meaning set forth in the Backstop Agreement Term
Sheet and, after the execution of the Backstop Agreement, the Backstop
Agreement.

“Backstop Pro Rata Share” has the meaning set forth in the Backstop Agreement
Term Sheet.

“Bankruptcy Code” has the meaning set forth in the Recitals.

“Bankruptcy Court” has the meaning set forth in the Recitals.

“Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure, promulgated
under 28 U.S.C. § 2075, the Local Rules of Bankruptcy Practice and Procedure of
the United States Bankruptcy Court for the District of Delaware, the Local Rules
of Civil Practice and Procedure of the United States District Court for the
District of Delaware, and general orders and chambers procedures of the
Bankruptcy Court, each as applicable to the Chapter 11 Cases and as amended from
time to time.

“Board” has the meaning set forth in Section 11(b)(i) hereof.

“Business Day” means any day, other than a Saturday, Sunday or “legal holiday”
(as defined in Bankruptcy Rule 9006(a)).

“Cash Collateral” has the meaning set forth in Section 363(a) of the Bankruptcy
Code.

“Cash Collateral Order Term Sheet” means the term sheet attached as Exhibit 2 to
the Plan Term Sheet, as may be amended, modified or supplemented only in
accordance with Section 24 hereof.

“Cash Collateral Orders” means the Interim Cash Collateral Order and the Final
Cash Collateral Order.

“Chapter 11 Cases” has the meaning set forth in the Recitals.

 

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“Claim” means any claim (as defined in section 101(5) of the Bankruptcy Code)
against any Debtor.

“Cleary” means Cleary Gottlieb Steen & Hamilton LLP.

“Company” has the meaning set forth in the Preamble.

“Confirmation Order” means the order confirming the Plan, as entered by the
Bankruptcy Court, which shall be in form and substance reasonably satisfactory
to the Debtors and the Required Consenting Creditors.

“Consensual Equity Exchange” has the meaning ascribed to it in the Plan Term
Sheet.

“Corporate Governance Term Sheet” means the term sheet attached as Exhibit 4 to
the Plan Term Sheet, as may be amended, modified or supplemented only in
accordance with Section 24 hereof and, as applicable, the terms of the other
Fundamental Implementation Agreements.

“Covered Interests” means, individually or in the aggregate, the Term Loan
Claims and the Senior Notes Claims.

“Davis Polk” means Davis Polk & Wardwell LLP.

“Debtor Subsidiaries” has the meaning set forth in the Preamble.

“Debtors” has the meaning set forth in the Preamble.

“Definitive Restructuring Documents” has the meaning set forth in Section 3(b)
hereof.

“Disclosure Statement” means a disclosure statement containing “adequate
information” (as that term is defined in section 1125(a)(1) of the Bankruptcy
Code) with respect to the Plan and the transactions contemplated thereby and the
other Fundamental Implementation Agreements, including all annexes, exhibits and
schedules attached thereto, and which otherwise is in form and substance
reasonably satisfactory to the Debtors and the Required Consenting Creditors (as
may be amended, modified or supplemented from time to time only in accordance
with Section 24 hereof or the terms of the Fundamental Implementation
Agreements).

“Effective Time” has the meaning set forth in Section 12(b) hereof.

“Entity” has the meaning set forth in Section 101(15) of the Bankruptcy Code.

“FCPA” means the U.S. Foreign Corrupt Practices Act.

“FCPA Resolution” means the valid and binding cease and desist order entered by
the SEC with respect to the Company on August 11, 2016 and effective as of
August 11, 2016.

 

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“Final” means an order or judgment of the Bankruptcy Court, or other court of
competent jurisdiction with respect to the subject matter, which has not been
reversed, stayed, modified or amended, and as to which (i) the time to appeal,
petition for certiorari, or move for reargument or rehearing (other than a
request for rehearing under Federal Rule of Civil Procedure 60(b), which shall
not be considered for purposes of this definition) has expired and no appeal or
petition for certiorari has been timely taken, or (ii) any timely appeal that
has been taken or any petition for certiorari that has been or may be timely
filed has been resolved by the highest court to which the order or judgment was
appealed or from which certiorari was sought or has otherwise been dismissed
with prejudice.

“Final Cash Collateral Order” means a final order entered by the Bankruptcy
Court approving the use of Cash Collateral incorporating the terms and
conditions set forth in the Cash Collateral Order Term Sheet and otherwise in
form and substance satisfactory to the Required Consenting Term Lenders and with
material economic terms reasonably satisfactory to the Debtors and the Required
Consenting Noteholders.

“Forbearance Agreement” means that certain Forbearance Agreement, dated as of
May 11, 2016, among the Company, each of the guarantors party thereto, each of
the lenders party thereto, and Cortland Capital Market Services LLC, as
administrative agent, as amended by Amendment No. 1, dated June 6, 2016 and by
Amendment No. 2, dated June 17, 2016.

“Forbearance Payment” means $10 million in cash, which payment shall be applied
to prepay outstanding principal amount of the loans outstanding under the Term
Loan Credit Agreement (excluding any prepayment premium) plus accrued and unpaid
interest thereon (at the non-default rate) in accordance with Section 5.3.1 of
the Term Loan Credit Agreement.

“Fundamental Implementation Agreements” means this Agreement and, once executed
and delivered by the parties thereto, the Backstop Agreement, and, once
distributed in the Solicitation, the Plan.

“Fundamental Term Sheets” means the Plan Term Sheet together with any term
sheets, schedules or exhibits attached thereto.

“Holder” means any Entity that is the legal and/or beneficial owner of a
security and/or Covered Interests.

“HL” means Houlihan Lokey, Inc.

“Interim Cash Collateral Order” means an interim order entered by the Bankruptcy
Court approving the use of Cash Collateral, which incorporates the terms and
conditions set forth in the Cash Collateral Order Term Sheet and is otherwise in
form and substance satisfactory to the Required Consenting Term Lenders and with
material economic terms reasonably satisfactory to the Debtors and the Required
Consenting Noteholders.

“Interest” means any equity security (as defined in Section 101(16) of the
Bankruptcy Code) in any Debtor.

 

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“Investor Rights Agreement” means the registration rights agreement and an
investor rights agreement (to the extent one is required to be executed to
implement the Restructuring) to be implemented on the Plan Effective Date
incorporating the terms and conditions set forth in the Corporate Governance
Term Sheet, which agreement shall be in form and substance reasonably
satisfactory to the Debtors and to each Backstop Participant, as such agreement
may be amended, modified or supplemented from time to time only in accordance
with the terms thereof.

“Key” has the meaning set forth in the Preamble.

“Key Common Stock” means “equity securities” as such term is defined in Section
101(16) of the Bankruptcy Code, including any issued or unissued shares of
common stock, preferred stock, or other instruments, including restricted stock
units, evidencing an ownership interest in Key, whether or not transferable, and
any options, warrants or rights, contractual or otherwise, to acquire any such
interests in Key.

“Loan Document” has the meaning set forth in the Term Loan Credit Agreement.

“New ABL Agreement” means the ABL credit agreement by and between the lenders
and agents party thereto and reorganized Key which shall become effective on the
Plan Effective Date, consistent with the conditions contained in the New Term
Loan Credit Agreement Term Sheet and otherwise in form and substance reasonably
satisfactory to the Debtors and the Required Consenting Creditors, as such
agreement may be amended, modified or supplemented from time to time only in
accordance with the terms thereof.

“New Key Constituent Documents” means (a) the certificate of conversion and
certificate of incorporation of reorganized Key to be filed with the Secretary
of State of Delaware, together with all other documents necessary to be executed
and/or filed in order to reincorporate reorganized Key as a Delaware corporation
and (b) the bylaws of reorganized Key, in each case, the material terms of which
are set forth on the Corporate Governance Term Sheet, and otherwise in form and
substance reasonably satisfactory to the Debtors and the Required Consenting
Noteholders, and as may be amended, modified or supplemented from time to time
in accordance with Section 24 hereof and, as applicable, the terms of the other
Fundamental Implementation Agreements.

“New MIP” means a management incentive plan to be implemented on or following
the Plan Effective Date, which agreement shall be in form and substance
reasonably satisfactory to the Debtors and the Required Consenting Noteholders,
as such agreement may be amended, modified or supplemented from time to time
only in accordance with the terms thereof.

“New Term Loan Credit Agreement” means the term loan credit agreement to be
consummated on the Plan Effective Date, incorporating the terms and conditions
set forth in the New Term Loan Credit Agreement Term Sheet and otherwise in form
and substance satisfactory to the Debtors and the Required Consenting Term
Lenders and reasonably satisfactory to the Required Consenting Noteholders, as
such agreement may be amended, modified or supplemented from time to time only
in accordance with the terms thereof.

 

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“New Term Loan Credit Agreement Term Sheet” means the New Term Loan Credit
Agreement term sheet attached as Exhibit 1 to the Plan Term Sheet, as may be
amended, modified or supplemented only in accordance with Section 24 hereof and,
as applicable, the terms of the other Fundamental Implementation Agreements.

“Outside Date” means the earlier of 110 days after the Petition Date and March
21, 2017.

“Party” or “Parties” has the meaning set forth in the Preamble.

“Permitted Transfer” has the meaning set forth in Section 10(a) hereof.

“Permitted Transferee” has the meaning set forth in Section 10(a) hereof.

“Person” has the meaning set forth in Section 101(41) of the Bankruptcy Code.

“Petition Date” means the date on which the Debtors file voluntary petitions
commencing the Chapter 11 Cases, which shall be no later than the deadline set
forth in the Restructuring Timeline.

“Plan” has the meaning set forth in the Recitals.

“Plan Effective Date” means the effective date of the Plan.

“Plan Supplement” means the supplement to be filed prior to the Confirmation
Hearing which shall, among other things, (i) identify the initial board of
directors of Reorganized Key consistent with the Corporate Governance Term
Sheet; (ii) identify any executory contracts and/or unexpired leases to be
rejected by the Debtors; and (iii) contain substantially final forms of certain
material Definitive Restructuring Documents and shall be otherwise in form and
substance reasonably acceptable to the Required Consenting Creditors.

“Plan Term Sheet” means the term sheet attached hereto as Exhibit A outlining
the terms and conditions of the Plan (as such term sheet, including all exhibits
and annexes thereto, may be amended, modified or supplemented only in accordance
with Section 24 hereof and, as applicable, the terms of the other Fundamental
Implementation Agreements).

“Platinum” means, collectively, Platinum Equity Advisors, LLC and its Affiliated
Covered Holders (including Soter Capital, LLC).

“Pro Forma 13-Week Budget” means the 13 week projection provided to counsel for
the Supporting Creditors on or about August 22, 2016, as may be updated from
time to time.

“PSA” has the meaning set forth in the Preamble.

“PSA Assumption Motion” means a motion, in form and substance reasonably
acceptable to the Debtors and the Required Consenting Creditors, seeking entry
of the PSA Assumption Order.

 

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“PSA Assumption Order” means an order, which may be the Confirmation Order,
authorizing the assumption of this PSA, in form and substance reasonably
acceptable to the Debtors and the Required Consenting Creditors.

“PSA Effective Date” has the meaning set forth in Section 2(a) hereof.

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

“Required Consenting Creditors” means (a) with respect to the PSA, the Plan, the
New Term Loan Credit Agreement, and the dates in the Restructuring Timeline,
both (i) the Required Consenting Noteholders and (ii) the Required Consenting
Term Lenders; and (b) with respect to the Backstop Agreement, the New ABL
Agreement, the Definitive Restructuring Documents (other than the New Term Loan
Credit Agreement) and all other documents or transactions in respect of the
Restructuring not listed in clause (a), (i) the Required Consenting Noteholders
and (ii) the Required Consenting Term Lenders, solely to the extent that a
proposed action, modification, amendment, supplement or waiver adversely affects
the Supporting Term Lenders; provided that the foregoing definition shall not
negate or limit any explicit amendment, consent or termination right granted to
the Required Consenting Term Lenders in this Agreement.

“Required Consenting Noteholders” means, as of any date of determination, those
Supporting Noteholders holding at least 66 2/3% of the aggregate outstanding
principal amount of the Senior Notes, unless the Supporting Noteholders
collectively hold less than 66 2/3% of the aggregate outstanding principal
amount of the Senior Notes, in which case those Supporting Noteholders holding
at least 66 2/3% of the aggregate outstanding principal amount of the Senior
Notes held by Supporting Noteholders; provided that for purposes of this
definition, the term “Supporting Noteholders” excludes any Holder of Senior
Notes that, on the relevant date of determination, is in breach of any of its
material obligations hereunder.

“Required Consenting Term Lenders” means, as of any date of determination, those
Supporting Term Lenders holding at least 66 2/3% of the aggregate outstanding
principal amount of the Term Loans held by Supporting Term Lenders, provided
further that for purposes of this definition, the term “Supporting Term Lenders”
excludes any Holder of Term Loans that, on the relevant date of determination,
is in breach of any of its material obligations hereunder.

“Required Lenders” has the meaning set forth in the Term Loan Credit Agreement.

“Restructuring” has the meaning set forth in the Recitals.

 

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“Restructuring Timeline” means the timeline set forth on Schedule 1 to the Plan
Term Sheet, as may be amended with the consent of the Required Consenting
Creditors and the Debtors; it being understood that if a deadline ends on a
weekend or holiday on which the Bankruptcy Court is not open and holding
hearings, the deadlines within the Restructuring Timeline and any such extension
shall be automatically extended to the next Business Day on which the Bankruptcy
Court is open and holding hearings.

“Rights Offering” has the meaning ascribed to it in the Plan Term Sheet and once
distributed in the Solicitation, the Plan.

“Rights Offering Documents” means, collectively, the Backstop Agreement and any
other documents required thereby or necessary to effectuate the Rights Offering,
including subscription agreements, and the transactions contemplated by the
Backstop Agreement Term Sheet, such documents incorporating the terms and
conditions of the Rights Offering set forth in the Plan Term Sheet and otherwise
in form and substance reasonably satisfactory to the parties to the Backstop
Agreement.

“S&C” means Sullivan & Cromwell LLP.

“SEC” means the United States Securities and Exchange Commission.

“Senior Notes” means the $675,000,000 principal amount outstanding of 6.75%
Senior Notes due 2021 issued by Key pursuant to the Senior Notes Indenture.

“Senior Notes Claim” has the meaning ascribed to it in the Plan Term Sheet, and
once distributed in the Solicitation, the Plan.

“Senior Notes Forbearance” has the meaning set forth in Section 12(a) hereof.

“Senior Notes Indenture” means that certain Indenture, dated as of March 4,
2011, by and among Key, the guarantors named therein and The Bank of New York
Mellon Trust Company, N.A., as trustee (incorporating in their entirety the
terms of the First Supplemental Indenture, the Amended First Supplemental
Indenture, and the Second Supplemental Indenture).

“Solicitation” means the solicitation of votes on the Plan.

“Solicitation Materials” means the Disclosure Statement, the Plan, the Rights
Offering Documents, the letters of transmittal and the ballots and other
documents required to solicit votes from the Supporting Creditors, each in form
and substance reasonably satisfactory to the Debtors and the Required Consenting
Creditors.

“Specified Asset Sales” means those sales of certain assets and/or subsidiaries
disclosed to counsel to the Supporting Creditors prior to the date hereof
related to international operations and/or certain domestic business lines of
the Company, with respect to which the Debtors may execute definitive
transaction documents with respect thereto only after receipt by the Company of
written consent from the Required Consenting Noteholders, which consent shall
not be unreasonably withheld, conditioned or delayed.

 

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“Specified Defaults” has the meaning set forth in Section 12(a) hereof.

“Superior Alternative Transaction” has the meaning set forth in Section 5(p)
hereof.

“Supporting Creditors” has the meaning set forth in the Preamble.

“Supporting Creditor Advisors” means, (a) with respect to the Supporting
Noteholders: S&C, one local counsel to the Supporting Noteholders to be selected
in the sole and absolute discretion of the Supporting Noteholders, Cleary, HL,
Spears & Associates, TRC Environmental Corporation, Marsh LLC, Jones Lang
LaSalle, Inc., Palm Tree Advisors (whose fees and expenses payable by the
Debtors shall in no event exceed $40,000), and such other counsel as may be
required to implement the Restructuring and approved by the Debtors and the
Required Consenting Noteholders, and (b) with respect to the Supporting Term
Lenders: Davis Polk, Cleary, Evercore Partners and Richards Layton & Finger.

“Supporting Noteholder” has the meaning set forth in the Preamble.

“Supporting Term Lender” has the meaning set forth in the Preamble.

“Term Loan Agent” means Cortland Capital Market Services LLC as administrative
agent for the lenders under the Term Loan Credit Agreement, or any successor
agent appointed in accordance with the terms of the Term Loan Credit Agreement.

“Term Loan Credit Agreement” means that certain Term Loan and Security
Agreement, dated as of June 1, 2015, by and among Key, as borrower, each of the
guarantors name therein, and the lenders party thereto, as amended, restated,
supplemented or otherwise modified from time to time prior to the date hereof.

“Term Loan” means the principal amount of term loans outstanding under the Term
Loan Credit Agreement as of the date hereof.

“Term Loan Claim” has the meaning ascribed to it in the Plan Term Sheet, and
once distributed in the Solicitation, the Plan.

“Term Loan Forbearance” has the meaning set forth in Section 12(b) hereof.

“Term Loan Payment” has the meaning ascribed to it in the Plan Term Sheet, and
once distributed in the Solicitation, the Plan.

“Transfer” has the meaning set forth in Section 10(a) hereof.

“Transfer Agreement” means the form attached hereto as Exhibit B, as may be
amended, modified or supplemented only in accordance with Section 24 hereof and,
as applicable, the terms of the other Fundamental Implementation Agreements.

 

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“Transferring Backstop Participant” has the meaning set forth in Section 10(d)
hereof.

 

  2. Effectiveness; Entire Agreement.

(a) This Agreement shall become effective and binding upon each of the Parties
upon (i) the execution and delivery of counterpart signature pages to this
Agreement by the Company, Supporting Noteholders holding at least 66 2/3% of the
Senior Notes and Supporting Term Lenders holding at least 66 2/3% of the Term
Loan; and (ii) the ABL Forbearance Agreement has been entered into by all
requisite parties thereto (such date, the “PSA Effective Date”).

(b) Notwithstanding anything in this Agreement and for the avoidance of doubt,
if any Party signs onto this PSA solely as to a specific business unit or desk,
no Affiliate of such Supporting Creditor or other business unit or desk within
any such Party, shall be subject to this Agreement unless they separately become
a party hereto.

(c) With the exception of non-disclosure and confidentiality agreements among
the Parties, this PSA, including all exhibits and schedules attached hereto
(inclusive of exhibits thereto), constitutes the entire agreement of the Parties
as of the date of this Agreement with respect to the subject matter hereof and
supersedes all prior negotiations and documents reflecting such prior
negotiations between and among the Parties (and their respective advisors), with
respect to the Restructuring.

 

  3. Material Covenants of All Parties.

For so long as this Agreement has not been validly terminated, and subject to
the terms and conditions of the Fundamental Implementation Agreements and
consistent with the Restructuring Timeline, each Party severally and not jointly
agrees (in the case of any Supporting Creditor, so long as it or its Affiliated
Covered Holder remains the legal owner or beneficial owner of any Covered
Interests (provided that any Transfer of Covered Interests is made in accordance
with Section 10 herein)) to:

(a) support and cooperate with each other Party in good faith and coordinate its
activity in connection with, and otherwise use its commercially reasonable
efforts to consummate, the Restructuring as soon as reasonably practicable, but
in all cases, consistent with the Restructuring Timeline and as otherwise
prescribed by the Fundamental Implementation Agreements;

(b) use its commercially reasonable efforts and work in good faith to (A)
negotiate definitive documents implementing, achieving and relating to the
Restructuring, as

 

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soon as reasonably practicable, but in all cases, consistent with the
Restructuring Timeline, including (i) the Solicitation Materials, the New Term
Loan Credit Agreement, the proposed Confirmation Order, the proposed Cash
Collateral Orders, the proposed PSA Assumption Order, the New MIP, the New Key
Constituent Documents and the Investor Rights Agreement, (ii) such other related
documents and ancillary agreements required to implement the Restructuring and
obtain entry of the Confirmation Order, which shall contain terms and conditions
consistent, in all material respects, with the Fundamental Implementation
Agreements and, if not expressly specified therein, in form and substance
reasonably satisfactory to the Debtors and the Required Consenting Creditors
(collectively (i) and (ii), such documents, in each case, in form and substance
reasonably satisfactory to the Debtors and the Required Consenting Creditors,
and as may be amended, modified or supplemented only in accordance with the
terms of the Fundamental Implementation Agreements, the “Definitive
Restructuring Documents”) and (iii) the Backstop Agreement and the New ABL
Agreement, and (B) and once Definitive Restructuring Documents are finally
negotiated and agreed in all respects consistent with the term sheets, duly
execute and deliver (to the extent it is a party thereto) the Definitive
Restructuring Documents, Backstop Agreement and the New ABL Agreement and
otherwise support and seek to effect the actions and transactions contemplated
thereby, in each case as soon as reasonably practicable;

(c) support and use its commercially reasonable efforts to (i) consummate the
Restructuring and all transactions contemplated by the Fundamental
Implementation Agreements (including this Agreement) or Definitive Restructuring
Documents, to which it is a party, as soon as reasonably practicable and in any
event, consistent with the Restructuring Timeline, (ii) take any and all
reasonably necessary actions in furtherance of the Restructuring and the
transactions contemplated by the Fundamental Implementation Agreements
(including this Agreement) or the Definitive Restructuring Documents, and (iii)
if applicable, obtain (solely as it relates to such Party) any and all required
regulatory and/or third party approvals necessary to consummate the
Restructuring, including any approvals required under Antitrust Laws;

(d) not take any action that is inconsistent in any material respect with, or is
intended to frustrate, delay or impede in any material respect the timely
approval and entry of the Backstop Order or the Confirmation Order and
consummation of the transactions contemplated by the Fundamental Implementation
Agreements (including this Agreement) or Definitive Restructuring Documents;

(e) (i) work in good faith to prepare agreed-upon forms of the Cash Collateral
Orders, (ii) obtain entry and support and not object to such entry of the Cash
Collateral Orders, and (iii) not propose, seek approval for, or support any use
of Cash Collateral or debtor-in-possession financing that is not consistent with
the Cash Collateral Order Term Sheet and, once entered, each of the Cash
Collateral Orders; and

(f) not challenge the validity, enforceability or priority of the Term Loan or
the Senior Notes or any Term Loan Claim or Senior Notes Claim in any way,
including by commencing an avoidance action or other legal proceeding.

 

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  4. Additional Covenants of the Supporting Creditors.

For so long as this Agreement has not been validly terminated, and subject to
the terms and conditions of the Fundamental Implementation Agreements and
consistent with the Restructuring Timeline, each Supporting Creditor (solely on
behalf of itself and its Affiliated Covered Holders, and not on behalf of any
other Supporting Creditor) agrees, so long as it or its Affiliated Covered
Holder remains the legal owner or beneficial owner of any Covered Interests
(provided that any Transfer of Covered Interests is made in accordance with
Section 10 herein), to:

(a) not, directly or indirectly, (i) object to, delay, impede, or take any other
action to interfere with the acceptance, implementation, confirmation or
consummation of the Restructuring and the Plan, (ii) seek, solicit, support,
encourage, or vote any Claims for, or consent to, any restructuring or
reorganization for any Debtor that is inconsistent with the Definitive
Restructuring Documents and the Fundamental Implementation Agreements (including
this PSA) in any respect, (iii) commence or support any action filed by any
party in interest to appoint a trustee, conservator, receiver, or examiner for
the Debtors, or to dismiss the Chapter 11 Cases, or to convert the Chapter 11
Cases to cases under chapter 7 of the Bankruptcy Code, (iv) commence or support
any action or proceeding to shorten or terminate the period during which only
the Debtors may propose and/or seek confirmation of any plan of reorganization,
or (v) otherwise support any plan, sale process or other transaction that is
inconsistent with the Fundamental Implementation Agreements (including this PSA)
or the Definitive Restructuring Documents;

(b) (i) not object to or oppose the approval by the Bankruptcy Court of any
Definitive Restructuring Documents or any Fundamental Implementation Agreement,
(ii) neither join in nor support any objection by any Entity to approval by the
Bankruptcy Court of any Fundamental Implementation Agreement or any Definitive
Restructuring Document, and (iii) not otherwise commence, join or support any
proceeding to oppose or alter any of the terms of the Fundamental Implementation
Agreements, the Definitive Restructuring Documents or any other document filed
by Debtors (that is consistent with the Fundamental Implementation Agreements or
Definitive Restructuring Documents and otherwise in form and substance
reasonably satisfactory to the Debtors and the Required Consenting Creditors),
or any of the transactions contemplated thereby, in connection with the
confirmation and consummation of the Plan;

(c) solely with respect to each Supporting Creditor that is a Supporting
Noteholder, support the implementation and consummation of the Consensual Equity
Exchange subject to and in accordance with the terms hereof and the Solicitation
Materials;

(d) (i) vote, and cause each of its Affiliated Covered Holders to vote, each of
its Covered Interests, as applicable, and, to accept the Plan by delivering its
duly executed and completed ballot(s) accepting the Plan on a timely basis
following the commencement of the Solicitation and its actual receipt of the
Disclosure Statement and other related Solicitation Materials, and (ii) not
elect on its ballot(s) to preserve Claims, if any, that each Supporting Creditor
may own or control that may be affected by any releases expressly contemplated
by the Plan, to the extent such election is available; and

(e) not change, amend, revoke or withdraw (or cause to be changed, amended,
revoked or withdrawn) such vote.

 

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Notwithstanding anything to the contrary in this Agreement (including Section
3), nothing herein shall constitute an agreement of any Supporting Creditor to
limit the transfer of, to vote, or to take any other action (or refrain from
taking any action) solely in respect of Key Common Stock beneficially owned as
of the date hereof, provided that no Supporting Creditor, in its capacity as a
holder of Key Common Stock, shall directly or indirectly object to or support
any objection to confirmation or consummation of the Plan.

 

  5. Additional Covenants of the Debtors.

For so long as this Agreement has not been validly terminated, and subject to
the terms and conditions of the Fundamental Implementation Agreements, each
Debtor shall (solely on behalf of itself and not on behalf of any other Debtor):

(a) commence the Chapter 11 Cases on or before the deadline set forth in the
Restructuring Timeline;

(b) (i) negotiate, consistent with the Restructuring Timeline, the Definitive
Restructuring Documents and the remaining Fundamental Implementation Agreements,
and (ii) seek to obtain (A) approval by the Bankruptcy Court of the Solicitation
Materials, including the Disclosure Statement and the Rights Offering Documents,
and the other Definitive Restructuring Documents and (B) entry of the PSA
Assumption Order, the Backstop Order and the Confirmation Order by the
Bankruptcy Court in accordance with the Bankruptcy Code and the Bankruptcy
Rules;

(c) file with the Bankruptcy Court on the Petition Date (i) the PSA Assumption
Motion and (ii) other motions seeking ‘first day’ relief with respect to such
matters as the Debtors, with the consent of the Required Consenting Creditors
(which consent shall not be unreasonably withheld, conditioned or delayed),
determine appropriate in connection with the Chapter 11 Cases and the pursuit of
the Plan, and in each case, obtain prompt entry of the interim and/or Final
orders approving the motions, and, in the event that any such order is appealed,
defend such appeal, including opposing any stay requested in connection
therewith;

(d) provide to counsel to the Supporting Creditors reasonable advance notice of,
and opportunity to review and comment on, any other motions, pleadings, notices
or documents to be filed during the Chapter 11 Cases or in connection with the
pursuit or implementation of the Plan and consult with counsel in good faith
with respect to the same; provided that each Debtor may file any such
documentation (other than the Plan, the Backstop Agreement, the other
Solicitation Materials, the New Term Loan Credit Agreement, the New ABL
Agreement, the proposed Confirmation Order, the proposed Cash Collateral Orders,
the proposed PSA Assumption Order, the New MIP, the New Key Constituent
Documents and the Investor Rights Agreement) upon the failure of the Required
Consenting Creditors to object to the substantially final form of any such
documentation within five (5) Business Days of receipt by counsel to the
Supporting Creditors;

 

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(e) (i) promptly notify counsel to the Supporting Creditors of any inquiries,
proposals or offers to purchase any substantial assets or properties of the
Debtors, to modify in a material manner any long-term commercial relationship
with the Debtors, to make any material investment in the Debtors or to provide
the Debtors with debt or equity financing and (ii) thereafter, keep counsel to
the Supporting Creditors promptly and reasonably informed of the progress of any
related discussions or negotiations;

(f) not take any action that is in any material respect contrary to or
inconsistent with the Fundamental Implementation Agreements or any Definitive
Restructuring Document, or that would be reasonably expected to materially delay
consummation of the Restructuring or the transactions contemplated by the
Fundamental Implementation Agreements (including this Agreement) or Definitive
Restructuring Documents;

(g) not, directly or indirectly (including through its representatives and
advisors), seek, solicit, encourage or, other than as expressly permitted in the
final paragraph of this Section 5, negotiate or engage in, any discussions or
other communications relating to, or enter into any agreements or arrangements
relating to, any alternative plan or transaction other than the Plan that could
reasonably be expected to prevent, delay, or impede the Restructuring as
contemplated by the Plan, and otherwise object to any motion to approve or
confirm, as applicable, any other plan of reorganization, sale transaction, or
any motions related thereto;

(h) prepare and provide to the Supporting Creditors (i) once every two weeks or
more frequently as updated during the Chapter 11 Cases, a rolling 13-week cash
flow forecast in form and substance reasonably satisfactory to the Required
Consenting Creditors, (ii) on or prior to the Petition Date, a detailed
projection of restructuring-related expenses for the duration of the Chapter 11
Cases and, after the Petition Date, revised projections of such expenses as the
Required Consenting Creditors may reasonably request, (iii) any information
provided to the Holders of Term Loans pursuant to the Term Loan Credit Agreement
and/or the Cash Collateral Orders, and (iv) within a reasonable time frame, such
other information as either the Required Consenting Noteholders or the Required
Consenting Term Lenders may reasonably request from time to time;

(i) pay all reasonable and documented fees and expenses of the Supporting
Creditor Advisors;

(j) comply with the FCPA Resolution, including timely paying all amounts
required to be paid thereunder and completing all other acts required to be
completed by the Company thereunder;

(k) if the Debtors know of the Company’s failure to comply with the FCPA
Resolution, furnish prompt written notice (and in any event within two (2)
Business Days of such actual knowledge) to the Supporting Creditors;

(l) if the Debtors know of a breach by any Debtor of any of the obligations,
representations, warranties, or covenants of the Debtors set forth in this
Agreement or in any Fundamental Implementation Agreement, furnish prompt written
notice (and in any event within

 

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five (5) Business Days of such actual knowledge) to the Supporting Creditors and
use commercially reasonable efforts to take all remedial action necessary as
soon as practicable to cure such breach by any such Debtor;

(m) operate their businesses in the ordinary course in a manner consistent with
past practice in all material respects (other than any changes in operations (i)
resulting from or relating to the Plan or the proposed or actual filing of the
Chapter 11 Cases, (ii) imposed by the Bankruptcy Court or (iii) related to the
Specified Asset Sales; provided that such changes in operations are, in the
absence of such written consent, consistent with the transactions contemplated
by the Fundamental Implementation Agreements (including this Agreement) or
Definitive Restructuring Documents);

(n) to the extent any legal or structural impediments arise that would prevent,
hinder, or delay the consummation of the transactions contemplated by the
Fundamental Implementation Agreements (including this Agreement) or Definitive
Restructuring Documents, negotiate in good faith appropriate additional or
alternative provisions to address any such impediments; provided that such
alternative does not alter, in any material respect, the substance and economics
of the Restructuring or the transactions contemplated by the Fundamental
Implementation Agreements (including this Agreement) or Definitive Restructuring
Documents;

(o) not redeem, purchase, or acquire or offer to acquire any equity interests of
Key or any of its subsidiaries, including capital stock, limited liability
company interests, or partnership interests or make any Distribution (as defined
in the Term Loan Credit Agreement); or

(p) not acquire or divest (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise), or file any motion or application seeking
authority to acquire or divest, (i) any corporation, partnership, limited
liability company, joint venture, or other business organization or division or
(ii) the Debtors’ assets, other than (w) related to the Specified Asset Sales,
(x) in the ordinary course of business in an aggregate amount of less than $10
million, provided that such assets are no longer needed for the Debtors’
operations; (y) as contemplated by the Fundamental Implementation Agreements
(including this Agreement) or Definitive Restructuring Documents, or (z) with
the advance written consent of the Required Consenting Creditors.

For the avoidance of doubt, and notwithstanding any provisions to the contrary
herein, to the extent required to comply with applicable law or the Debtors’
fiduciary obligations, the Debtors may (i) receive, but not actively pursue or
cause their representatives to actively pursue, unsolicited proposals, offers,
indications of interest or inquiries for one or more Alternative Transactions
from other parties and, (ii) to the extent such Alternative Transaction would be
expected to provide a higher or better recovery to Holders of Claims and
Interests in the Debtors as compared to the recovery such Holders would receive
pursuant to the transactions contemplated herein, including consummation of the
Restructuring (such Alternative Transaction, a “Superior Alternative
Transaction”), negotiate, provide due diligence in connection with, discuss,
and/or analyze such unsolicited Superior Alternative Transaction without
breaching or terminating this Agreement; provided that the Company shall
promptly (i)

 

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notify counsel to the Supporting Creditors upon (x) receipt of any offer or
proposal (written or oral) for a Superior Alternative Transaction which the
Debtors are considering and (y) electing to enter into a Superior Alternative
Transaction; and (ii) provide counsel to the Supporting Creditors with all
documentation or information provided to, and offers or proposals received from,
third parties in connection with a Superior Alternative Transaction.

 

  6. No Waiver of Participation and Preservation of Rights.

For the avoidance of doubt, nothing in this Agreement shall limit any rights of
any Party, subject to applicable law, and the agreements contained in any
Fundamental Implementation Agreement or Definitive Restructuring Document, to
(a) initiate, prosecute, appear, or participate as a party in interest in any
contested matter or adversary proceeding to be adjudicated in the Chapter 11
Cases so long as such appearance, initiation, prosecution or participation and
the positions advocated in connection therewith are not inconsistent with the
Fundamental Implementation Agreements, (b) object to any motion to approve or
confirm, as applicable, any other plan of reorganization, sale transaction, or
any motions related thereto filed in the Chapter 11 Cases, to the extent that
the terms of any such motions, documents, or other agreements are inconsistent
with the Fundamental Implementation Agreements, (c) appear as a party in
interest in the Chapter 11 Cases for the purpose of contesting whether any
matter or fact is or results in a breach of, or is inconsistent in any material
respect with, any Fundamental Implementation Agreement, and (d) as applicable,
file a proof of claim, if required.

Except as provided herein or in any Fundamental Implementation Agreement or
Definitive Restructuring Document, nothing herein or therein is intended to,
does or shall be deemed in any manner to waive, limit, impair or restrict the
ability of any Party to protect and preserve its rights, remedies and interests,
including Claims against any of the Debtors, or liens or security interests it
may have in any assets of any of the Debtors. Without limiting the foregoing in
any way, if this Agreement is terminated in accordance with its terms for any
reason, each Party fully reserves any and all of its respective rights, remedies
and interests.

 

  7. Mutual Representations and Warranties of All Parties.

Each Party represents and warrants to each of the other Parties that, as of the
date hereof:

(a) it has all requisite power and authority to enter into this PSA and to carry
out the transactions contemplated hereby, and perform its obligations hereunder;

(b) the execution and delivery of this PSA and the performance of its
obligations hereunder have been duly authorized by all necessary action on its
part; and

(c) this PSA constitutes the legally valid and binding obligation of such Party,
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to or limiting creditors’ rights generally or by equitable
principles relating to enforceability.

 

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  8. Additional Representations and Warranties by the Supporting Creditors.

Each Supporting Creditor (solely on its own behalf and not on behalf of any
other Supporting Creditor) represents and warrants, as of the date hereof that:

(a) Holdings by the Supporting Creditors. As of the date hereof, with respect to
each Covered Interest listed on Schedule 1 hereto opposite its name, such
Supporting Creditor (A) either (i) is the sole beneficial owner of the full
amount of such Covered Interests as set forth herein or (ii) has sole investment
or voting discretion with respect to the full amount of such Covered Interests
as set forth herein and has the power and authority to bind the beneficial
owners of such Covered Interests to the terms of this PSA and (B) has full power
and authority to act on behalf of, vote, and consent to matters concerning such
Covered Interests and to dispose of, exchange, assign, and transfer such Covered
Interests, including the power and authority to execute and deliver this PSA and
to perform its obligations hereunder, in each case, subject to any ordinary
course financing arrangements a Supporting Creditor may have with respect to
such Covered Interests;

(b) No Transfers. As of the date hereof, with respect to the Covered Interests,
as applicable, held by each Supporting Creditor as set forth on Schedule 1
hereto, such Supporting Creditor has made no Transfer;

(c) Sufficiency of Information Received. Such Supporting Creditor has reviewed,
or has had the opportunity to review, with the assistance of professional and
legal advisors of its choosing, all information it deems necessary and
appropriate for such Supporting Creditor to evaluate the financial risks
inherent in the Restructuring and accept the terms of the Plan as set forth in
the Plan Term Sheet and the exhibits and schedules thereto;

(d) Knowledge and Experience. Such Supporting Creditor has such knowledge and
experience in financial and business matters of this type that it is capable of
evaluating the merits and risks of entering into this Agreement and of making an
informed investment decision, and has conducted an independent review and
analysis of the business and affairs of the Debtors that it considers sufficient
and reasonable for purposes of entering into this Agreement;

(e) No Conflicts (Contracts). The execution, delivery and performance by such
Supporting Creditor of this Agreement and the transactions contemplated by the
Fundamental Implementation Agreements (including this Agreement) or Definitive
Restructuring Documents does not and shall not conflict with, result in a breach
of or constitute

 

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(with due notice or lapse of time or both) a default under any contractual
obligation to which such Supporting Creditor is a party, except as would not
otherwise have a material adverse effect on or materially delay consummation of
the Restructuring;

(f) Governmental Approvals. The execution, delivery and performance by such
Supporting Creditor of this Agreement does not and shall not require any
registration or filing with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or governmental authority or
regulatory body, except as may be required for approval of the transactions
contemplated by this Agreement, the Fundamental Implementation Agreements and
the Definitive Restructuring Documents pursuant to applicable Antitrust Laws,
and except as would not otherwise have a material adverse effect on the
Restructuring; and

(g) No Conflicts (Laws and Organizational Documents). The execution, delivery,
and performance of this Agreement does not (i) violate any provision of law,
rule, or regulations applicable to such Supporting Creditor or (ii) violate such
Supporting Creditor’s certificate of incorporation, limited liability company
agreement, by-laws, or other organizational documents.

 

  9. Additional Representations and Warranties by the Debtors.

Each Debtor (solely on its own behalf and not on behalf of any other Debtor)
represents and warrants to its knowledge, as of the date hereof that:

(a) No Conflicts (Contracts). The execution, delivery and performance by such
Debtor of this Agreement and the transactions contemplated by the Fundamental
Implementation Agreements (including this Agreement) or Definitive Restructuring
Documents, including the contemplated New Key Constituent Documents, does not
and shall not conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any contractual obligation to
which such Debtor is a party, except (i) as a direct result of the filing of the
Chapter 11 Cases, (ii) to the extent the applicable Debtor has obtained a waiver
or forbearance of any such default which such waiver remains in effect, and/or
(iii) to the extent any such breach or default would not be expected to have a
material adverse effect on the Debtors’ business or materially delay
consummation of the Restructuring;

(b) Governmental Approvals. Subject to the accuracy of Section 8(f), the
execution, delivery and performance by such Debtor of this Agreement does not
and shall not require any registration or filing with, consent or approval of,
or notice to, or other action to, with or by, any federal, state or governmental
authority or regulatory body, except as may be necessary or required (i) for
approval by the Bankruptcy Court of such Debtor’s authority to implement this
Agreement and the Restructuring, (ii) for filings pursuant to the Securities
Exchange Act of 1934, as amended, (iii) for filings pursuant to applicable state
securities or “blue sky” laws , and (iv) for approval of the transactions
contemplated by this Agreement, the Fundamental Implementation Agreements and
the Definitive Restructuring Documents pursuant to applicable Antitrust Laws,
and except as would not otherwise have a material adverse effect on the
consummation of the Restructuring;

 

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(c) No Conflicts (Laws and Organizational Documents). The execution, delivery,
and performance of this Agreement does not (i) violate any provision of law,
rule, or regulations applicable to such Debtor or (ii) violate such Debtor’s
certificate of incorporation, limited liability company agreement, by-laws, or
other organizational documents;

(d) Certain Estimated Liabilities. To the best of its knowledge after reasonable
inquiry, outstanding (i) Other Secured Claims (as defined in the Plan Term
Sheet) are not expected to exceed approximately $1 million as of the Plan
Effective Date and (ii) General Unsecured Claims (as defined in the Plan Term
Sheet) are not expected to exceed approximately $17 million as of the Plan
Effective Date after giving effect to payments of General Unsecured Claims in
the ordinary course during the Chapter 11 Cases consistent with the Pro Forma
13-Week Budget; and

(e) No Defaults. No Default or Event of Default (as such terms are defined in
each of the Term Loan Credit Agreement or the Senior Notes Indenture, as
applicable) has occurred and is continuing under the Senior Notes Indenture or
the Term Loan Credit Agreement other than the Specified Defaults.

 

  10. Transfer Restrictions.

(a) Subject to clause (d) of this Section 10, so long as this Agreement has not
been terminated in accordance with its terms, no Supporting Creditor shall, or
shall permit its Affiliated Covered Holder to, (A) sell, use, pledge, assign,
transfer, permit the participation in, or otherwise dispose of any ownership
(including any beneficial ownership1) in the Covered Interests, as the case may
be, set forth on Schedule 1 hereto, in whole or in part (other than pledges,
transfers or security interests that such Supporting Creditor may have created
(i) in favor of a prime broker under and in accordance with its prime brokerage
agreement with such prime broker or (ii) in favor of a financing counterparty in
accordance with any ordinary course financing arrangements) or (B) grant any
proxies or deposit any of such Supporting Creditor’s Interests in the Covered
Interests, as the case may be, set forth on Schedule 1 hereto into a voting
trust, or enter into a voting agreement with respect to any such Interest
(collectively, the actions described in clauses (A) and (B), a “Transfer”),
unless it satisfies the following requirement (a transferee that satisfies such
requirement, a “Permitted Transferee,” and such Transfer, a “Permitted
Transfer”): the intended transferee executes and delivers to counsel to the
Debtors and to counsel to the Supporting Noteholders and counsel to the
Supporting Term Lenders, in each case on a confidential basis, on the terms set
forth in clauses (b) through (d) below an executed form of the transfer
agreement in a form attached hereto as Exhibit B (a “Transfer Agreement”) before
such Transfer is effective (it being understood that any Transfer shall not be

 

1 

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

 

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effective, including without limitation for purposes of calculating Required
Consenting Creditors, until notification of such Transfer and a copy of the
executed Transfer Agreement is received by counsel to the Company and counsel to
the Supporting Noteholders and Supporting Term Lenders, in each case, on the
terms set forth herein).

(b) Subject to clause (d) of this Section 10, (A) any Supporting Creditor may
Transfer, and execution of the Transfer Agreement shall not be required for
Transfer of, Covered Interests to (i) any other Supporting Creditor or (ii) any
Affiliated Covered Holder of such Supporting Creditors, which transferee shall
be automatically bound by this Agreement upon the Transfer of such Covered
Interests, (B) a Qualified Marketmaker that acquires any of the Covered
Interests solely with the purpose and intent of acting as a Qualified
Marketmaker for such Covered Interests, shall not be required to execute and
deliver to counsel a Transfer Agreement or otherwise agree to be bound by the
terms and conditions set forth in this Agreement if such Qualified Marketmaker
transfers such Claims (by purchase, sale, assignment, participation, or
otherwise) to a Supporting Creditor or Permitted Transferee (including, for the
avoidance of doubt, the requirement that such transferee execute a Transfer
Agreement) and the Transfer otherwise is a Permitted Transfer, and (C) to the
extent any Party who has signed this Agreement is acting in its capacity as a
Qualified Marketmaker, it may Transfer any ownership interests in the Covered
Interests that it acquires from a Holder that has not signed this Agreement to a
transferee that has not signed this Agreement at the time of such Transfer
without the requirement that such transferee be or become a signatory to this
Agreement.

(c) This Agreement shall in no way be construed to preclude a Supporting
Creditor or any of its Affiliated Covered Holders from acquiring additional
Covered Interests or any other Claim against or equity Interest in the Company;
provided that (i) if any Supporting Creditor or its Affiliated Covered Holder
acquires additional Covered Interests after the PSA Effective Date, such
Supporting Creditor shall make commercially reasonable efforts to notify counsel
to Company and counsel to the Supporting Noteholders and counsel to the
Supporting Term Lenders, in each case on a confidential basis, within a
reasonable period of time following such acquisition, which notice shall be
deemed to be provided by the filing of any statement with the Bankruptcy Court
required by Rule 2019 of the Federal Rules of Bankruptcy Procedure including
revised holdings information for such Supporting Creditor of such acquisition,
including the amount of such acquisition and (ii) such Supporting Creditor
hereby acknowledges and agrees that such Covered Interest shall automatically
and immediately upon acquisition by a Supporting Creditor or its Affiliated
Covered Holder be subject to the terms of this Agreement (regardless of when or
whether notice of such acquisition is given in accordance herewith).

(d) Notwithstanding any other provision of this Agreement to the contrary, a
Transfer of any or all of the Senior Notes Claims beneficially owned by a
Backstop Participant (a “Transferring Backstop Participant”) prior to the
execution and delivery of the Backstop Agreement shall not relieve such
Transferring Backstop Participant of its obligations under this Agreement to
negotiate, and once final, execute and deliver the Backstop Agreement without
any modification to its Backstop Pro Rata Share as of the date hereof, other
than a Transfer to a Permitted Transferee who agrees in writing to be bound by
the obligations of such Transferring Backstop Participant under the PSA and who
the Company and each Backstop Participant has

 

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agreed in writing, after due inquiry and investigation, is reasonably capable
of fulfilling such obligations and the Transferring Backstop Participant’s
obligations set forth in the Backstop Agreement Term Sheet.

(e) Any Transfer made in violation of this provision shall be void ab
initio. Any Supporting Creditor that effectuates a Permitted Transfer to a
Permitted Transferee shall have no liability under this Agreement arising from
or related to the failure of the Permitted Transferee to comply with the terms
of this Agreement.

 

  11. Termination of Obligations.

(a) This Agreement shall terminate and all of the obligations of the Parties
shall be of no further force or effect upon the occurrence of any of the
following events: (i) the Plan Effective Date, (ii) the Plan Confirmation Order
is reversed or vacated, (iii) any court of competent jurisdiction has entered an
order declaring this Agreement to be unenforceable, (iv) the Debtors and the
Required Consenting Creditors mutually agree to such termination in writing, or
(v) this Agreement is terminated pursuant to paragraph (b), (c), or (e) of this
Section 11.

(b) The Company may, in its discretion, terminate this Agreement by written
notice to the other Parties, upon the occurrence of any of the following events:

(i) within three (3) Business Days after the giving of written notice by the
Company to the Supporting Creditors of a determination by the board of directors
of Key (the “Board”), in good faith, based on the advice of its outside counsel,
that proceeding with the Restructuring and pursuit of confirmation and
consummation of the Plan would be inconsistent with the Board’s fiduciary
obligations under applicable law;

(ii) a breach by one or more Supporting Noteholders holding Senior Notes in an
aggregate amount such that non-breaching Supporting Noteholders hold less than
66 2/3% of the aggregate outstanding principal amount of the Senior Notes, of
its or their material obligations, representations or warranties hereunder,
which breach is not cured within ten (10) days after the giving of written
notice by the Company of such breach to such Supporting Noteholder or Supporting
Noteholders and counsel to the Supporting Noteholders;

(iii) a breach by one or more Supporting Term Lenders holding Term Loans in an
aggregate amount such that non-breaching Supporting Term Lenders hold less than
66 2/3% of the aggregate outstanding principal amount of the Term Loans, of its
or their material obligations, representations or warranties hereunder, which
breach is not cured within ten (10) days after the giving of written notice by
the Company of such breach to such Supporting Term Lender or Supporting Term
Lenders and counsel to the Supporting Term Lenders;

(iv) the Backstop Agreement has been terminated; or

(v) (x) the Supporting Noteholders no longer collectively hold at least 66 2/3%
of the aggregate outstanding principal amount of the Senior Notes and (y) the
Supporting Term Lenders no longer collectively hold at least 66 2/3% of the
aggregate outstanding principal amount of the Term Loans;

 

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provided that, upon a termination of this Agreement by the Company pursuant to
Section 11(b), (x) all obligations of the Supporting Creditors hereunder shall
immediately terminate without further action or notice by such Supporting
Creditors, and (y) the Company (and its directors, officers, employees,
advisors, subsidiaries, and representatives) shall not have or incur any
liability under this Agreement or otherwise on account of such termination.

(c) This Agreement may be terminated by the Required Consenting Noteholders upon
the occurrence of any of the following events (it being understood that the
following termination events are intended solely for the benefit of the
Supporting Noteholders):

(i) any Debtor files or publicly announces that it will file or joins in or
supports any plan of reorganization (or disclosure statement related thereto) in
the Chapter 11 Cases other than as described herein without the prior written
consent of the Required Consenting Noteholders;

(ii) after filing of the Plan with the Bankruptcy Court, (A) any material
amendment or modification to the Plan, any other Fundamental Implementation
Agreement, or any Definitive Restructuring Document is made by the Debtors or
(B) any pleading that seeks Bankruptcy Court approval to amend or modify the
Plan, any other Fundamental Implementation Agreement, or any Definitive
Restructuring Documents is filed by the Debtors, and such amendment or
modification would adversely affect (indirectly or directly) the treatment of
the Senior Notes Claims, or the transactions contemplated by the Fundamental
Implementation Agreements (including this Agreement) or Definitive Restructuring
Documents, including reorganized Key’s contemplated corporate governance
arrangements and post-reorganization SEC reporting obligations, which amendment,
modification or filing is not in form and substance reasonably satisfactory to
the Required Consenting Noteholders;

(iii) the filing of any motion or pleading with the Bankruptcy Court by a Party
to this Agreement that is inconsistent in any material respect with this PSA,
any other Fundamental Implementation Agreement, or any Definitive Restructuring
Document, or the transactions contemplated by the Fundamental Implementation
Agreements (including this Agreement) or Definitive Restructuring Documents,
including reorganized Key’s contemplated corporate governance arrangements and
post-reorganization SEC reporting obligations (in each case, with such
amendments and modifications as have been effected in accordance with the terms
hereof and thereof) and such motion or pleading has not been withdrawn prior to
the earlier of (i) two (2) Business Days after the Company has received written
notice from the Required Consenting Noteholders requesting such withdrawal and
(ii) the entry of an order of the Bankruptcy Court approving such motion;

(iv) the Bankruptcy Court grants relief that is inconsistent in any material
respect with this Agreement, any other Fundamental Implementation Agreement, or
any

 

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Definitive Restructuring Document in a manner that impacts (indirectly or
directly) the treatment of the Senior Notes Claims, or the transactions
contemplated by the Fundamental Implementation Agreements (including this
Agreement) or Definitive Restructuring Documents, including reorganized Key’s
contemplated corporate governance arrangements and post-reorganization SEC
reporting obligations (in each case with such amendments and modifications as
have been properly effected or are permitted in accordance with the terms hereof
and thereof);

(v) a breach by any Debtor of (a) its obligations hereunder in any material
respect or (b) any of its representations or warranties that would, in the case
of clause (b), be reasonably likely to have a material adverse impact on the
Debtors or the ability to consummate the Plan or the transactions contemplated
by the Fundamental Implementation Agreements (including this Agreement) or
Definitive Restructuring Documents, including reorganized Key’s contemplated
corporate governance arrangements and post-reorganization SEC reporting
obligations, which breach, in the case of each of clause (a) and clause (b), is
not cured within ten (10) days after the giving of written notice by counsel for
the Supporting Noteholders to the Debtors and the Supporting Term Lenders;

(vi) a breach by one or more Supporting Term Lenders holding Term Loans in an
aggregate amount such that non-breaching Supporting Term Lenders hold less than
67% of the Term Loans, of (a) its obligations hereunder in any material respect
or (b) any of its representations or warranties, in each case that would be
reasonably likely to have a material adverse impact on the Debtors or the
ability to consummate the Plan or the transactions contemplated by the
Fundamental Implementation Agreements (including this Agreement) or Definitive
Restructuring Documents, including reorganized Key’s contemplated corporate
governance arrangements and post-reorganization SEC reporting obligations, which
breach is not cured within ten (10) days after the giving of written notice by
counsel for the Supporting Noteholders to the Debtors and such Supporting Term
Lender;

(vii) the deadlines within the Restructuring Timeline have not been satisfied,
unless extended in accordance with the terms of this Agreement;

(viii) the Backstop Agreement is validly terminated;

(ix) the Bankruptcy Court refuses to approve the PSA Assumption Motion;

(x) the Bankruptcy Court does not enter, (i) within five (5) Business Days after
the Petition Date, the Interim Cash Collateral Order, and (ii) within forty (40)
days after the Petition Date, the Final Cash Collateral Order;

(xi) if any Debtor’s consensual use of the Cash Collateral is terminated and
remains terminated for five (5) Business Days;

(xii) (i) a trustee, receiver, or examiner with expanded powers beyond those set
forth in Sections 1106(a)(3) and (4) of the Bankruptcy Code is appointed in one
or more of the Chapter 11 Cases, (ii) the filing by any Debtor of a motion or
other request for relief

 

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seeking to dismiss any of the Chapter 11 Cases or convert any of the Chapter 11
Cases to a case under Chapter 7 of the Bankruptcy Code, or (iii) entry of an
order by the Bankruptcy Court dismissing any of the Chapter 11 Cases or
converting any of the Chapter 11 Cases to a case under Chapter 7 of the
Bankruptcy Code;

(xiii) any Debtor requests that the United States Trustee appoint an official
committee of unsecured creditors or an official committee of equity security
holders or supports any such request;

(xiv) any Debtor or any Supporting Creditor challenges the principal amount,
priority, and/or validity of the Senior Notes Claims;

(xv) the Bankruptcy Court enters an order in the Chapter 11 Cases terminating
any of the Debtors’ exclusive right to file a plan or plans of reorganization
pursuant to Section 1121 of the Bankruptcy Code;

(xvi) the issuance by any governmental authority, including the Bankruptcy
Court, any regulatory authority or any other court of competent jurisdiction, of
any ruling or order enjoining the substantial consummation of the Restructuring
and the Plan on the terms and conditions set forth in this PSA and the
Fundamental Implementation Agreements; provided, however, that the Debtors shall
have ten (10) days after notice to the Debtors of such ruling or order to obtain
relief that would allow consummation of the Restructuring and the Plan in a
manner that (i) does not prevent or diminish in a material way compliance with
the terms of the PSA and the Fundamental Implementation Agreements and (ii) is
acceptable to the Required Consenting Noteholders in their reasonable
discretion;

(xvii) any Debtor sells or files any motion or application seeking authority to
sell a material portion of its assets, without the prior written consent of the
Required Consenting Creditors;

(xviii) the Company fails to comply with the FCPA Resolution, including by
failing to timely pay any amounts required to be paid thereunder or by failing
to timely complete any act required to be completed by the Company thereunder;

(xix) the Required Consenting Term Lenders terminate this Agreement (solely as
to each Supporting Term Lender) pursuant to Section 11(d) hereof;

(xx) the Company (i) files a motion or pleading with the Bankruptcy Court
seeking authority to terminate this Agreement on account of the Board’s
fiduciary obligations; or (ii) provides notice to counsel to the Supporting
Creditors of its intent to enter into or otherwise publicly announces its intent
to pursue an Alternative Transaction;

(xxi) there occurs any uncured Event of Default (as defined in the Senior Notes
Indenture) other than a Specified Default;

(xxii) an order denying confirmation of the Plan is entered on the docket in the
Chapter 11 Cases; or

(xxiii) the ABL Forbearance Agreement is terminated or expires in accordance
with its terms.

 

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(d) This Agreement may be terminated by the Required Consenting Term Lenders,
solely as to each Supporting Term Lender supporting such termination, upon the
occurrence of any of the following events (it being understood that the
following termination events are intended solely for the benefit of the
Supporting Term Lenders):

(i) any Debtor files or publicly announces that it will file or joins in or
supports any plan of reorganization (or disclosure statement related thereto) in
the Chapter 11 Cases other than as described herein without the prior written
consent of the Required Consenting Term Lenders;

(ii) after filing of the Plan with the Bankruptcy Court, (A) any material
amendment or modification to the Plan, any other Fundamental Implementation
Agreement, or any Definitive Restructuring Document is made by the Debtors or
(B) any pleading that seeks Bankruptcy Court approval to amend or modify the
Plan, any other Fundamental Implementation Agreement, or any Definitive
Restructuring Documents is filed by the Debtors, and such amendment or
modification would adversely affect (indirectly or directly) the treatment of
the Term Loan Claims, or the transactions contemplated by the Fundamental
Implementation Agreements (including this Agreement) or Definitive Restructuring
Documents, including reorganized Key’s contemplated corporate governance
arrangements and post-reorganization SEC reporting obligations, which amendment,
modification or filing is not in form and substance reasonably satisfactory to
the Required Consenting Term Lenders;

(iii) the filing of any motion or pleading with the Bankruptcy Court by a Party
to this Agreement that is inconsistent in any material respect with this PSA,
any other Fundamental Implementation Agreement, or any Definitive Restructuring
Document, or the transactions contemplated by the Fundamental Implementation
Agreements (including this Agreement) or Definitive Restructuring Documents (in
each case, with such amendments and modifications as have been effected in
accordance with the terms hereof and thereof) and such motion or pleading has
not been withdrawn prior to the earlier of (i) two (2) Business Days after the
Company has received written notice from the Required Consenting Term Lenders
requesting such withdrawal and (ii) the entry of an order of the Bankruptcy
Court approving such motion;

(iv) the Bankruptcy Court grants relief that is inconsistent in any material
respect with this Agreement, any other Fundamental Implementation Agreement, or
any Definitive Restructuring Document in a manner that impacts (indirectly or
directly) the treatment of the Term Loan Claims, or the transactions
contemplated by the Fundamental Implementation Agreements (including this
Agreement) or Definitive Restructuring Documents (in each case with such
amendments and modifications as have been properly effected or are permitted in
accordance with the terms hereof and thereof);

 

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(v) a breach by any Debtor of (a) its obligations hereunder in any material
respect or (b) any of its representations or warranties that would, in the case
of clause (b), be reasonably likely to have a material adverse impact on the
Debtors or their ability to consummate the Plan or the transactions contemplated
by the Fundamental Implementation Agreements (including this Agreement) or
Definitive Restructuring Documents, which breach, in the case of each of clause
(a) and clause (b), is not cured within ten (10) days after the giving of
written notice by counsel for the Supporting Term Lenders to the Debtors and the
Supporting Noteholders;

(vi) a breach by one or more Supporting Noteholders holding Senior Notes in an
aggregate amount such that non-breaching Supporting Noteholders hold less than
67% of the Senior Notes of (a) its obligations hereunder in any material respect
or (b) any of its representations or warranties, in each case that would be
reasonably likely to have a material adverse impact on the Debtors or their
ability to consummate the Plan or the transactions contemplated by the
Fundamental Implementation Agreements (including this Agreement) or Definitive
Restructuring Documents, which breach is not cured within ten (10) days after
the giving of written notice by counsel for the Supporting Term Lenders to the
Debtors and such Supporting Noteholder;

(vii) the deadlines within the Restructuring Timeline have not been satisfied,
unless extended in accordance with the terms of this Agreement;

(viii) the Company and the Backstop Participants do not execute the Backstop
Agreement prior to the earlier of (x) the 40th day following the date hereof or
(y) the day that the Rights Offering commences as to the Supporting Noteholders,
or once executed, the Backstop Agreement is amended in a manner that would
require the consent of the Required Consenting Term Lenders as provided in the
definition of Required Consenting Creditors without such consent;

(ix) (a) The Backstop Agreement is inconsistent with the Backstop Agreement Term
Sheet in a manner that adversely affects the Supporting Term Lenders; (b) the
Backstop Agreement is validly terminated; or (c) the Backstop Agreement is
amended, modified or supplemented in a manner that adversely affects the
Supporting Term Lenders in any material respect, including any amendment,
modification or supplement that delays or impedes consummation of the
transactions contemplated by the Fundamental Implementation Agreements
(including this Agreement) or Definitive Restructuring Documents in a manner
that is inconsistent with the Restructuring Timeline;

(x) the Bankruptcy Court refuses to approve the PSA Assumption Motion;

(xi) the Bankruptcy Court does not enter, (i) within five (5) Business Days
after the Petition Date, the Interim Cash Collateral Order, and (ii) within
forty (40) days after the Petition Date, the Final Cash Collateral Order;

(xii) any Debtor’s consensual use of the Cash Collateral is terminated and
remains terminated for five (5) Business Days;

 

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(xiii) (i) a trustee, receiver, or examiner with expanded powers beyond those
set forth in Sections 1106(a)(3) and (4) of the Bankruptcy Code is appointed in
one or more of the Chapter 11 Cases, (ii) the filing by any Debtor of a motion
or other request for relief seeking to dismiss any of the Chapter 11 Cases or
convert any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy
Code, or (iii) entry of an order by the Bankruptcy Court dismissing any of the
Chapter 11 Cases or converting any of the Chapter 11 Cases to a case under
Chapter 7 of the Bankruptcy Code;

(xiv) any Debtor requests that the United States Trustee appoint an official
committee of unsecured creditors or an official committee of equity security
holders or supports any such request;

(xv) any Debtor or any Supporting Creditor challenges the principal amount,
priority, and/or validity of the Term Loan Claims and/or the liens in respect
thereof;

(xvi) the Bankruptcy Court enters an order in the Chapter 11 Cases terminating
any of the Debtors’ exclusive right to file a plan or plans of reorganization
pursuant to Section 1121 of the Bankruptcy Code;

(xvii) the issuance by any governmental authority, including the Bankruptcy
Court, any regulatory authority or any other court of competent jurisdiction, of
any ruling or order enjoining the substantial consummation of the Restructuring
and the Plan on the terms and conditions set forth in this PSA and the
Fundamental Implementation Agreements; provided, however, that the Debtors shall
have ten (10) days after notice to the Debtors of such ruling or order to obtain
relief that would allow consummation of the Restructuring and the Plan in a
manner that (i) does not prevent or diminish in a material way compliance with
the terms of the PSA and the Fundamental Implementation Agreements and (ii) is
acceptable to the Required Consenting Term Lenders in their reasonable
discretion;

(xviii) any Debtor sells or files any motion or application seeking authority to
sell a material portion of its assets, without the prior written consent of the
Required Consenting Creditors;

(xix) the Company fails to comply with the FCPA Resolution, including by failing
to timely pay any amounts required to be paid thereunder or by failing to timely
complete any act required to be completed by the Company thereunder;

(xx) the Company (i) files a motion or pleading with the Bankruptcy Court
seeking authority to terminate this Agreement on account of the Board’s
fiduciary obligations; or (ii) provides notice to counsel to the Supporting
Creditors of its intent to enter into or otherwise publicly announces its intent
to pursue an Alternative Transaction;

(xxi) there occurs any uncured Event of Default (as defined in the Term Loan
Credit Agreement) other than a Specified Default;

 

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(xxii) an order denying confirmation of the Plan is entered on the docket in the
Chapter 11 Cases; or

(xxiii) the ABL Forbearance Agreement is terminated or expires in accordance
with its terms.

(e) The Debtors or the Required Consenting Creditors (by written notice executed
by counsel at the direction of the Required Consenting Creditors) may terminate
this Agreement by written notice to the Parties in the event that the Bankruptcy
Court or other governmental authority shall have issued any order, injunction or
other decree or take any other action, which restrains, enjoins or otherwise
prohibits the implementation of the Restructuring, the Fundamental
Implementation Agreements, and/or the Definitive Restructuring Documents
substantially on the terms and conditions set forth in this Agreement.

(f) A Supporting Creditor may (solely as to such terminating Supporting
Creditor), terminate its obligations hereunder if (i) the Chapter 11 Cases have
not been commenced on or before November 22, 2016, or (ii) such Supporting
Creditor is both a Supporting Noteholder and a Supporting Term Lender and this
Agreement is terminated by the Required Consenting Term Lenders as to themselves
pursuant to Section 11(d) hereto.

(g) Any Party may (solely as to such terminating Party) terminate its
obligations hereunder if the Plan Effective Date has not occurred on or before
the Outside Date.

(h) Any Supporting Noteholder, solely as to such terminating Supporting
Noteholder, and any Supporting Term Lender, solely as to such terminating
Supporting Term Lender, may terminate its obligations hereunder if any change,
modification, amendment, supplement or waiver requiring prior written consent of
such Supporting Noteholder or Supporting Term Lender, as applicable, under
Section 24 hereof is made without the prior written consent of such Supporting
Noteholder or Supporting Term Lender, as applicable.

(i) This Agreement shall terminate solely as to any Supporting Creditor on the
date on which such Supporting Creditor has transferred all (but not less than
all) of its Covered Interests, as applicable, in accordance with Section 10 of
this Agreement.

(j) No Party may seek to terminate or terminate this Agreement based upon any
default, failure of a condition, or right of termination in this Agreement
arising (directly or indirectly) out of its own actions or omissions.

(k) If this Agreement is terminated as to any Party pursuant to this Section 11,
this Agreement shall forthwith become void and of no further force or effect,
each such Party shall be released from its commitments, undertakings and
agreements under or related to this Agreement, and there shall be no liability
or obligation on the part of any such Party, provided that (i) each such Party
shall have all rights and remedies available to it under applicable law (for all
matters unrelated to this Agreement); (ii) any and all consents and ballots
tendered by the a terminating Supporting Creditors prior to such termination
shall be deemed, for all purposes, automatically to be null and void ab initio,
shall not be considered or otherwise used in any

 

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manner by the Parties in connection with the Plan and this Agreement or
otherwise and such consents or ballots may be changed or resubmitted regardless
of whether the applicable voting deadline has passed (without the need to seek a
court order or consent from the Debtors allowing such change or resubmission);
(iii) in no event shall any such termination relieve any Party from liability
for its breach or non-performance of its obligations hereunder prior to the date
of such termination (including any reimbursement obligations incurred prior to
the date of such termination); and (iv) in no event shall any such termination
relieve any Party from its obligations under this Agreement which expressly
survive any such termination pursuant to Section 30 hereof.

 

  12. Forbearance.

(a) From the date hereof until the earlier of (x) the valid termination of this
Agreement and (y) termination of the Term Loan Forbearance pursuant to clause
(c) of this Section 12, each Supporting Noteholder severally and not jointly
agrees (so long as it or its Affiliated Covered Holder remains the legal owner
or beneficial owner of any Covered Interests (provided that any Transfer of
Covered Interests is made in accordance with Section 10 herein)) to: (i) not
instruct any indenture trustee for the Senior Notes to exercise any rights or
remedies it may have under the Senior Notes Indenture or under applicable United
States or foreign law or otherwise with respect to any of the alleged, existing
or anticipated Defaults or Events of Default (as such terms are defined in each
of the Term Loan Credit Agreement or the Senior Notes Indenture, as applicable)
listed on Schedule 12 hereto (the “Specified Defaults”) and (ii) waive or
forbear from the exercise of any rights or remedies it may have under the Senior
Notes Indenture or under applicable United States or foreign law or otherwise
with respect to the Specified Defaults or any acceleration that may occur
automatically without action of any party as a result of the operation of the
Senior Notes Indenture, solely due to the Specified Defaults (the obligations
set forth in this clause (a), the “Senior Notes Forbearance”).

(b) From the time at which the Term Loan Agent receives the Forbearance Payment
(the “Effective Time”), for so long as the events set forth in clause (c) of
this Section 12 have not occurred, the Supporting Term Lenders agree to (i) not
instruct the Term Loan Agent to exercise any rights or remedies it may have
under the Term Loan Credit Agreement or any of the Loan Documents or under
applicable United States or foreign law or otherwise with respect to the
Specified Defaults and (ii) waive or forbear from the exercise of any rights or
remedies it may have under the Term Loan Credit Agreement or any of the Loan
Documents or under applicable United States or foreign law or otherwise with
respect to the Specified Defaults or any acceleration that may occur
automatically without action of any party as a result of the operation of the
Term Loan Credit Agreement, solely due to the Specified Defaults (the
obligations set forth in this clause (b), the “Term Loan Forbearance”).

(c) The Supporting Term Lenders’ obligations under the Term Loan Forbearance
shall terminate one (1) Business Day following the occurrence of any of the
following events or circumstances:

(i) this Agreement is validly terminated in accordance with Section 11 hereof;

 

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(ii) the occurrence and continuation of a Default or Event of Default (as such
terms are defined in the Term Loan Credit Agreement) other than the Specified
Defaults, unless waived pursuant to the terms of the Term Loan Credit Agreement;
or

(iii) the making by the Company or any of its subsidiaries that are Obligors
under the Term Loan Credit Agreement of any voluntary prepayment of principal or
interest on, redemption, repurchase, defeasance or other acquisition or
retirement for value of, any Indebtedness (as such term is defined in the Senior
Notes Indenture) outstanding pursuant to the Senior Notes Indenture.

(d) As of the Effective Time, notwithstanding any provision to the contrary in
the Term Loan Credit Agreement, (i) the Supporting Term Lenders, who constitute
Required Lenders under the Term Loan Credit Agreement, hereby irrevocably waive
and direct the Term Loan Agent to waive, (1) payment of any prepayment premia
(including the Applicable Premium (as such term is defined in the Term Loan
Credit Agreement)) in respect of the Forbearance Payment, the Term Loan Payment,
and any other principal repayment required to be paid prior to the Petition Date
and (2) the requirement that the Company provide three (3) Business Days’ notice
prior to any prepayment of any LIBOR Loans (as such term is defined in the Term
Loan Credit Agreement) in connection with the Forbearance Payment and the Term
Loan Payment and (ii) the Company hereby irrevocably agrees to waive its right
to apply the Forbearance Payment and the Term Loan Payment to the principal
repayment installments set forth in Section 5.2.1 of the Term Loan Credit
Agreement prior to the Maturity Date (as such term is defined in the Term Loan
Credit Agreement). For the avoidance of doubt, the provisions of this Section
12(d) shall survive termination of this Agreement.

(e) The execution, delivery and effectiveness of this Agreement, including this
Section 12, shall not operate as a waiver of any right, power or remedy of any
Supporting Creditor under the Senior Notes Indenture or any of the Loan
Documents, as applicable, nor constitute a waiver of any provision of the Senior
Notes Indenture or any of the Loan Documents, as applicable, other than as
expressly set forth in this Section 12. On and after the Effective Time, this
Agreement shall for all purposes constitute a Loan Document.

(f) Execution of this Agreement by the Required Lenders constitutes a direction
by the Required Lenders that the Term Loan Agent, in accordance with this
Agreement, act or refrain from acting. Each Supporting Term Lender agrees that
the Term Loan Agent shall not be required to act against the Company or any of
its subsidiaries that are Obligors under the Term Loan Credit Agreement if such
action is contrary to the terms of this Agreement. In no event shall any
discretionary obligations or duties be construed against the Term Loan Agent
hereunder.

 

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  13. Specific Performance.

The Parties agree that money damages would be an insufficient remedy for any
breach of this Agreement by any Party and each non-breaching Party shall be
entitled to specific performance and injunctive or other equitable relief,
including attorneys’ fees and costs, as a remedy of any such breach, including
an order of the Bankruptcy Court or other court of competent jurisdiction
requiring any Party to comply promptly with any of its obligations hereunder,
and each Party agrees to waive any requirement for the securing or posting of a
bond in connection with such remedy, as the sole remedy to which such
non-breaching Party will be entitled, at law or in equity. The Parties agree
that such relief will be their only remedy against the applicable other Party
with respect to any such breach, and that in no event will any Party be liable
for monetary damages (including consequential, special, indirect or punitive
damages or damages for lost profits) other than attorneys’ fees and costs.

 

  14. Counterparts.

This Agreement and any amendments, waivers, consents, or supplements hereto or
in connection herewith may be executed in multiple counterparts and delivered by
electronic mail (in “.pdf” or “.tif” format), facsimile or otherwise, each of
which shall be deemed to be an original for the purposes of this Agreement and
all of which taken together shall constitute one and the same Agreement.

 

  15. No Solicitation and Acknowledgements.

Notwithstanding anything to the contrary in this Agreement, each Party
acknowledges that (a) no securities of the Company are being offered or sold
hereby and this Agreement neither constitutes an offer to sell nor a
solicitation of an offer to buy any securities of the Company and (b) this
Agreement is not, and shall not be deemed to be, a solicitation of a vote for
the acceptance of the Plan pursuant to Section 1125 of the Bankruptcy Code. The
acceptance of votes from holders of Claims and Interests, as applicable, will
not be solicited until such holders have received the Disclosure Statement and
related Solicitation Materials that meet the requirements of the Bankruptcy
Code, including Bankruptcy Code Sections 1125 and 1126.

 

  16. Time is of the Essence.

The Parties acknowledge and agree that time is of the essence, and that they
must each use commercially reasonable efforts to effectuate and consummate the
Restructuring as soon as reasonably practicable.

 

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  17. Governing Law; Consent to Jurisdiction.

(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW
PROVISION WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER
JURISDICTION.

(b) By its execution and delivery of this Agreement, each Party hereby
irrevocably and unconditionally agrees for itself that any legal action, suit or
proceeding against it with respect to any matter under or arising out of or in
connection with this Agreement or for recognition or enforcement of any judgment
rendered in any such action, suit or proceeding, may be brought solely in either
a state or federal court of competent jurisdiction in the County of New York in
the State of New York. By execution and delivery of this Agreement, each of the
parties hereto hereby irrevocably accepts and submits itself to the nonexclusive
jurisdiction of each such court, generally and unconditionally, with respect to
any such action, suit or proceeding. Notwithstanding the foregoing, upon the
commencement of the Chapter 11 Cases, each Party hereto hereby agrees that, if
the petitions have been filed and the Chapter 11 Cases are pending, the
Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of
or in connection with this Agreement. The Parties to this Agreement expressly
consent to entry of final orders by the Bankruptcy Court arising out of or
relating to this Agreement, including but not limited to orders interpreting and
enforcing this Agreement.

 

  18. Independent Analysis.

Each Party hereby confirms that it has made its own decision to execute this
Agreement based upon its own independent assessment of documents and information
available to it, as it has deemed appropriate. Each Party has had the ability
to, and has, consulted with counsel in connection with its consideration of this
Agreement. Each Party agrees that it has not entered into this Agreement based
upon any representations or warranties that are not included herein.

 

  19. Third-Party Beneficiaries.

In consideration for the consent of the administrative agent (the “ABL Agent”)
and the lenders (the “ABL Lenders”) under the ABL Facility to the Forbearance
Payment pursuant to the ABL Forbearance Agreement, the (a) Term Loan Agent and
the Supporting Term Lenders hereby consent to the use of cash collateral on the
terms set forth in the Cash Collateral Order Term Sheet, and (b) Parties hereby
acknowledge and agree that the consent of the ABL Agent and the Required Lenders
(as defined in the ABL Facility) to use of cash collateral is contingent on the
provisions set forth on the Cash Collateral Order Term Sheet as in effect on the
date hereof to be reflected in the cash collateral orders entered by the
Bankruptcy Court in a manner reasonably satisfactory to the ABL Agent, and
agree, for so long as this Agreement is in effect, to use commercially
reasonable efforts to cause the provisions on the Cash Collateral Order Term
Sheet as in effect on the date hereof to be reflected in the cash collateral
orders entered by

 

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the Bankruptcy Court in a manner reasonably satisfactory to the ABL Agent and
not to consent to the entry of any cash collateral orders that fail to include
the provisions set forth on the Cash Collateral Order Term Sheet as in effect on
the date hereof in a manner reasonably satisfactory to the ABL Agent (this
paragraph being the “Cash Collateral Provision”).

The ABL Agent and the ABL Lenders are express third-party beneficiaries of the
Cash Collateral Provision and this Section 19, and the Cash Collateral Provision
and the terms and provisions of this Section 19 expressly inure to the benefit
of the ABL Agent and the ABL Lenders, who shall be entitled to rely on and
enforce the provisions of this Section 19.

The Term Loan Agent and the Parties agree that money damages would be an
insufficient remedy for any breach of the Cash Collateral Provision or this
Section 19 and the ABL Agent and the ABL Lenders, as applicable, shall be
entitled to specific performance and injunctive or other equitable relief,
including attorneys’ fees and costs, as a remedy of any such breach, including
an order of the Bankruptcy Court or other court of competent jurisdiction
requiring the applicable party to comply promptly with any of its obligations
hereunder, and each of the Term Loan Agent and each of the Parties, and by
acceptance of the benefits of this Section, the ABL Agent and the ABL Lenders,
as applicable, agrees to waive any requirement for the securing or posting of a
bond in connection with such remedy, as the sole remedy to which such
non-breaching party will be entitled, at law or in equity. Each of the Term Loan
Agent and each of the Parties, and by accepting the benefits of this Section 19,
each of the ABL Agent and the ABL Lenders executing the ABL Forbearance
Agreement agree that such relief will be their only remedy against the
applicable other party with respect to any such breach, and that in no event
will the ABL Agent and the ABL Lenders or the Term Loan Agent or each of the
Parties, be liable for monetary damages (including consequential, special,
indirect or punitive damages or damages for lost profits) other than attorneys’
fees and costs.

Unless expressly stated herein, including in this Section 19, this Agreement
shall be solely for the benefit of the Parties hereto and no other Entity shall
be a third-party beneficiary hereof.

 

  20. Notices.

Any notice, request, instruction or other document to be given hereunder by any
Party to the others shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, by email or overnight courier.

(a) If to the Supporting Noteholders, or counsel to the Supporting Noteholders,
to counsel at:

Michael H. Torkin

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10006

torkinm@sullcrom.com

 

-36-

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

With a copy to:

Sean A. O’Neal

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, NY 10006

soneal@cgsh.com

(b) If to the Supporting Term Lenders, or counsel to the Supporting Term
Lenders, to counsel at:

Eli J. Vonnegut

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

eli.vonnegut@davispolk.com

With a copy to:

Sean A. O’Neal

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, NY 10006

soneal@cgsh.com

(c) If to Debtors, to:

Katherine Hargis

Vice President, Chief Legal Officer and Secretary

Key Energy Services, Inc.

1301 McKinney Street, Suite 1800

Houston, Texas 77010

khargis@keyenergy.com

With a courtesy copy (that does not constitute notice) to:

Joshua A. Feltman

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

jafeltman@WLRK.com

 

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

and to:

Jeffrey E. Bjork

Sidley Austin LLP

555 West Fifth Street, Suite 4000

Los Angeles, California 90013

jbjork@sidley.com

 

  21. Severability.

Whenever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. In the event that any part of this
Agreement is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision survives to the extent it is not
so declared, and all of the other provisions of this Agreement remain in full
force and effect only if, after excluding the portion deemed to be
unenforceable, the remaining terms provide for the consummation of the
transactions contemplated hereby in substantially the same manner as originally
set forth at the later of the date this Agreement was executed or last amended.

 

  22. Mutual Drafting.

This Agreement is the result of the Parties’ joint efforts, and each of them and
their respective counsel have reviewed this Agreement and each provision hereof
has been subject to the mutual consultation, negotiation, and agreement of the
Parties, and the language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and therefore
there shall be no construction against any Party based on any presumption of
that Party’s involvement in the drafting thereof.

 

  23. Headings.

The headings used in this Agreement are for convenience of reference only and do
not constitute a part of this Agreement and shall not be deemed to limit,
characterize, or in any way affect any provision of this Agreement, and all
provisions of this Agreement shall be enforced and construed as if no headings
had been used in this Agreement.

 

  24. Waivers and Amendments.

Notwithstanding anything to the contrary contained herein, this Agreement,
including any exhibits and schedules hereto (including any provision in the Plan
Term Sheet and any exhibits and schedules thereto) and the other Fundamental
Implementation Agreements

 

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

(other than the Backstop Agreement and once the Confirmation Order has been
entered, the Plan) may not be changed, modified, amended, or supplemented, nor
shall any provision or requirement hereof be waived, without the prior written
agreement (which may include electronic mail by counsel to the applicable
parties) of the Debtors and the Required Consenting Creditors; provided that,
notwithstanding the foregoing:

(A) any changes, modifications, amendments, supplements or waivers to (i) (a)
the following sections or exhibits of the Plan Term Sheet: (1) Sections 8 and 9
(sub-sections entitled “Reorganized Key Corporate Governance Documents”,
“Corporate Advisory Services Agreement” and “Investor Rights Agreement” only)
and Exhibits 4 and 5, (2) the economic terms of Sections 2 (sub-section entitled
“Senior Notes” only) and 7 (sub-section entitled “Senior Notes Rights Offering”
only) and (3) the Company’s agreement pursuant to Section 3 to enter into exit
financing facilities substantially on the terms set forth in this Agreement, (b)
the sections of the Backstop Agreement Term Sheet entitled “Backstop - Backstop
Pro Rata Allocation”, “Backstop - Backstop Commitment Payments”, “Call Option
Commitment”, “Backstop Agreement Representations, Warranties, Covenants and
Conditions” (sub-sections entitled “Covenants” (clauses (d), (g) and (h) only),
“Conditions to Backstop Participant Obligations” (clause (i) only), and “Sale,
Transfer and Assignment”), “Backstop Agreement Termination” (sub-section
entitled “Backstop Participant Termination Rights” only) and “Put Premium”, and
the definition of “Required Backstop Participants” in the Backstop Agreement
Term Sheet, (c) the Corporate Governance Term Sheet or (d) the Form of Corporate
Advisory Service Agreement attached as Exhibit 5 to the Plan Term Sheet (in each
of clauses (a), (b), (c) and (d) other than immaterial changes, modifications,
amendments, supplements or waivers ), or (ii) the definition of the term
“Required Consenting Noteholders” included herein, may not be made without the
prior written consent of the Company and each Supporting Noteholder;

(B) any changes, modifications, amendments, supplements or waivers to (i) (a)
the economic terms of Section 2 (sub-section entitled “Term Loan” only) of the
Plan Term Sheet, (b) Section 8 of the Plan Term Sheet and (c) the Company’s
agreement pursuant to Section 3 of the Plan Term Sheet to enter into exit
financing facilities substantially on the terms set forth in this Agreement (in
each of clauses (a), (b) and (c), other than immaterial changes, modifications,
amendments, supplements or waivers necessary to achieve consummation of the
Plan), or (ii) the definition of the term “Required Consenting Term Lenders”
included herein, may not be made without the prior written consent of the
Company and each Supporting Term Lender;

(C) any changes, modifications, amendments, supplements or waivers to
Sections 11(f), 11(g), 11(h), 11(i) and 24 hereof and the definitions of the
terms “Outside Date,” and “Required Consenting Creditors,” included herein, may
not be made without the prior written consent of the Company and each Supporting
Creditor; and

(D) this clause (D) and Section 19 hereof may not be amended, supplemented,
waived or otherwise modified without the prior written consent of the ABL Agent
and the ABL Lenders;

provided further that any changes, modifications, amendments, supplements or
waivers and any proposed change, modification, amendment or supplement to, or
waiver of, any

 

-39-

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

provision of this Agreement and the other Fundamental Implementation Agreements
(other than the Backstop Agreement and once the Confirmation Order has been
entered, the Plan) that would or would reasonably be expected to materially and
adversely affect (i) any Supporting Noteholder in a manner that is
disproportionate to any other Supporting Noteholder or the Supporting
Noteholders as a whole or (ii) any Supporting Term Lender in a manner that is
disproportionate to any other Supporting Term Lender or the Supporting Term
Lenders as a whole, may not be made without the prior written consent of the
Company and each Supporting Creditor that would be so affected.

 

  25. Several, Not Joint, Claims.

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

 

  26. Automatic Stay.

The Parties hereby acknowledge and agree and shall not dispute that after the
commencement of the Chapter 11 Cases, any Party is authorized to terminate, and
to take any action necessary to effectuate the termination of, this Agreement
pursuant to terms hereof, notwithstanding Section 362 of the Bankruptcy Code or
any other applicable law; provided, that nothing herein shall prejudice any
Party’s rights to argue that the giving of notice of termination was not
otherwise proper under the terms of this Agreement. No cure period contained in
this Agreement shall be extended pursuant to Sections 108 or 365 of the
Bankruptcy Code or any other applicable law without the prior written consent of
each of the Supporting Creditors, and the Debtors hereby waive, to the greatest
extent possible, the applicability of the automatic stay to such steps necessary
to effectuate the termination of this Agreement.

 

  27. Settlement Discussions.

This Agreement and the Plan Term Sheet are part of a proposed settlement of
matters that could otherwise be the subject of litigation among the
Parties. Nothing herein shall be deemed an admission of any kind. Pursuant to
Federal Rule of Evidence 408 and any applicable state rules of evidence, this
Agreement and all negotiations relating thereto shall not be admissible into
evidence in any proceeding other than a proceeding related to the terms of this
Agreement.

 

  28. Consideration.

The Parties hereby acknowledge that no consideration, other than that
specifically described herein and in the other Fundamental Implementation
Agreements, shall be due or paid to any Party for its agreement to vote to
accept the Plan in accordance with the terms and conditions of this Agreement,
other than the Debtors’ representations, warranties and agreement to use its
commercially reasonable efforts to seek to confirm and consummate the Plan.

 

-40-

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

  29. Confidentiality and Publicity.

(a) Other than as may be required by applicable law and regulation or by any
governmental or regulatory authority, no Party shall issue any press release,
make any filing with the SEC (other than required under applicable securities
law and regulation as reasonably determined in good faith by outside counsel to
the Debtors) or make any other public announcement regarding this Agreement
without the consent of the Debtors and the Required Consenting Creditors, which
consent shall not be unreasonably delayed, conditioned, or withheld, and each
Party shall coordinate with the other Parties regarding any public statements
made, including any communications with the press, public filings or filings
with the SEC, with respect to this Agreement; for the avoidance of doubt, each
Party shall have the right, without any obligation to any other Party, to
decline to comment to the press with respect to this Agreement.

(b) Under no circumstances may any Party make any public disclosure of any kind
that would disclose (i) the particular holdings of Covered Interests of any
Supporting Creditor or (ii) the identity of any Supporting Creditor, in each
case without the prior written consent of such Supporting Creditor; provided
that (w) the Debtors may disclose such identities and the aggregate holdings of
the Supporting Noteholders and the Supporting Term Lenders, respectively, but
not individual holdings of any individual Supporting Creditor (which shall be
treated as “advisors’ eyes only”) in any filing with the SEC in respect of this
Agreement and in any materials filed in the Chapter 11 Cases in support of the
PSA Assumption Motion; (x) the Debtors may disclose such identities or amounts
without consent to the extent that, upon the advice of counsel, it is required
to do so by any governmental or regulatory authority or court of competent
jurisdiction (including the Bankruptcy Court), or by applicable law, in which
case the Debtors, prior to making such disclosure, shall allow the Supporting
Creditors to whom such disclosure relates reasonable time at its own cost to
seek a protective order with respect to such disclosures, (y) the Debtors may
disclose the existence and material terms of this Agreement, including the
execution of this Agreement by the Supporting Creditors, and (z) the Debtors may
disclose the aggregate percentage or aggregate principal amount of Covered
Interests held by the Supporting Noteholders and Supporting Term Lenders,
respectively. The Debtors shall not use the name of any Supporting Creditor in
any press release without such Party’s prior written consent.

(c) The Debtors will submit to counsel to the Supporting Noteholders all press
releases, public filings, public announcements or other communications with any
news media relating to this Agreement or the Restructuring; provided that the
Company shall be under no obligation to consult with, or obtain the prior
approval of, any other Party as it relates to communications with vendors,
customers and other third parties regarding the general nature of the
Restructuring.

 

-41-

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

  30. Survival.

Notwithstanding (i) a Permitted Transfer of Covered Interests in accordance with
Section 10 or (ii) the termination of this Agreement in accordance with its
terms, the agreements and obligations of the Parties in this Section 30 and
Sections 1, 2(c), 6, 7, 8, 9, 11(k), 12,13, 14, 15, 17, 18, 19, 20, 21, 22, 23,
24, 25, 27 and 29(b) shall survive such Permitted Transfer and/or termination
and shall continue in full force and effect for the benefit of the Parties in
accordance with the terms hereof.

[Signature Pages Follow]

 

-42-

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

IN WITNESS WHEREOF, this PSA has been duly executed as of the date first above
written.

 

KEY ENERGY SERVICES, INC. By:  

/s/ Robert W. Drummond

Name:   Robert W. Drummond Title:   President & Chief Executive Officer KEY
ENERGY SERVICES, LLC SOLE MEMBER: KEY ENERGY SERVICES, INC.: By:  

/s/ Robert W. Drummond

Name:   Robert W. Drummond Title:   President & Chief Executive Officer SOLE
MANAGER:

/s/ Katherine I. Hargis

Name:   Katherine I. Hargis Title:   Manager KEY ENERGY MEXICO, LLC SOLE MEMBER:
KEY ENERGY SERVICES, INC. By:  

/s/ Robert W. Drummond

Name:   Robert W. Drummond Title:   President & Chief Executive Officer SOLE
MANAGER:

/s/ Katherine I. Hargis

Name:   Katherine I. Hargis Title:   Manager

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

MISR KEY ENERGY INVESTMENTS, LLC SOLE MEMBER: KEY ENERGY SERVICES, INC. By:  

/s/ Robert W. Drummond

Name:   Robert W. Drummond Title:   President & Chief Executive Officer MISR KEY
ENERGY SERVICES, LLC SOLE MEMBER: KEY ENERGY SERVICES, INC. By:  

/s/ Robert W. Drummond

Name:   Robert W. Drummond Title:   President & Chief Executive Officer

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

Soter Capital, LLC By:  

/s/ Mary Ann Sigler

  Name: Mary Ann Sigler   Title: President & Treasurer

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

Goldman, Sachs, & Co., solely with respect to the Multi-Strategy Investing desk
of the Americas Special Situations Group By:  

/s/ Daniel S. Oneglia

Name:   Daniel S. Oneglia Title:   Authorized Signatory Special Situations
Investing Group, Inc. By:  

/s/ Daniel S. Oneglia

Name:   Daniel S. Oneglia Title:   Authorized Signatory

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

Quantum Partners LP By: QP GP LLC, its General Partner By:  

/s/ Thomas L. O’Grady

  Name:   Thomas L. O’Grady   Title:   Attorney-in-Fact QPB Holdings Ltd. By:  

/s/ Thomas L. O’Grady

  Name:   Thomas L. O’Grady   Title:   Attorney-in-Fact

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

Silver Point Capital Fund, L.P. By:  

/s/ Brett Rodda

  Name:   Brett Rodda   Title:   Authorized Signatory Silver Point Capital
Offshore Master Fund, L.P. By:  

/s/ Brett Rodda

  Name:   Brett Rodda   Title:   Authorized Signatory

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

Contrarian Capital Senior Secured, L.P.

CCM Pension-B, L.L.C.

Contrarian Capital Fund I, L.P.

Contrarian Capital Trade Claims, L.P.

CCM Pension-A, L.L.C.

Contrarian Advantage-B, LP

Contrarian Opportunity Fund, L.P.

Contrarian Centre Street Partnership, L.P.

Contrarian Dome Du Gouter Master Fund, LP

By:   Contrarian Capital Management, L.L.C., on behalf of the foregoing
affiliated entities and managed accounts By:  

/s/ Jon R. Bauer

Name:   Jon R. Bauer Title:   Managing Member

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

Scoggin Capital Management II LLC Scoggin International Fund Ltd By:   Scoggin
Management LP, its   Investment Manager By:  

/s/ Craig Effron

  Name:   Craig Effron   Title:   Managing Partner Scoggin Worldwide Fund Ltd.
By:   Old Bellow Partners LP, its   Investment Manager By:  

/s/ Craig Effron

  Name:   Craig Effron   Title:   Managing Partner

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

Whitebox Asymmetric Partners, LP

Whitebox Relative Value Partners, LP

Whitebox Credit Partners, LP

Whitebox Special Opportunities Fund LP, Series O

Whitebox Multi-Strategy Partners, LP

Pandora Select Partners, LP

By:   Whitebox Advisors LLC, its Investment Manager By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   General Counsel & Chief Operating Officer,
Whitebox Advisors LLC

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

TAO FUND LLC, as a Supporting Term Lender By:  

/s/ David Stiepleman

Name:   David Stiepleman Title:   Vice President TPG SPECIALTY LENDING, INC, as
a Supporting Term Lender By:  

/s/ Josh Easterly

Name:   Josh Easterly Title:   Co-Chief Executive Officer

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

BLUEMOUNTAIN CREDIT ALTERNATIVES MASTER FUND L.P., as a Supporting Term Lender

By: BlueMountain Capital Management, LLC,

its investment manager

By:  

/s/ David O’Mara

Name:   David O’Mara Title:   Deputy General Counsel BLUEMOUNTAIN LOGAN
OPPORTUNITIES MASTER FUND L.P., as a Supporting Term Lender

By: BlueMountain Capital Management, LLC,

its investment manager

By:  

/s/ David O’Mara

Name:   David O’Mara Title:   Deputy General Counsel BLUEMOUNTAIN SUMMIT TRADING
L.P., as a Supporting Term Lender

By: BlueMountain Capital Management, LLC,

its investment manager

By:  

/s/ David O’Mara

Name:   David O’Mara Title:   Deputy General Counsel BLUEMOUNTAIN FOINAVEN
MASTER FUND L.P., as a Supporting Term Lender

By: BlueMountain Capital Management, LLC,

its investment manager

By:  

/s/ David O’Mara

Name:   David O’Mara Title:   Deputy General Counsel

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

BLUEMOUNTAIN KICKING HORSE FUND L.P., as a Supporting Term Lender

By: BlueMountain Capital Management, LLC,

its investment manager

By:  

/s/ David O’Mara

Name:   David O’Mara Title:   Deputy General Counsel BLT 13 LLC, as a Supporting
Term Lender By:  

/s/ Robert Healey

Name:   Robert Healey Title:   Authorized Signatory

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

TENNENBAUM ENERGY OPPORTUNITIES CO., LLC

TENNENBAUM ENHANCED YIELD OPERATING I, LLC

TENNENBAUM SENIOR LOAN FUND

V, LLC

TENNENBAUM SENIOR LOAN

FUNDING III, LLC

TENNENBAUM SENIOR LOAN SPV,

LLC, as Supporting Term Lenders

By: Tennenbaum Capital Partners, LLC Its: Investment Manager By:  

/s/ David Adler

Name:   David Adler Title:   Partner

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

SCHEDULE 1

HOLDINGS OF SUPPORTING CREDITORS

[Confidential – Advisors Eyes Only – to be redacted]

 

Supporting Creditor

   Principal Amount of Term
Loan      Principal Amount of Senior
Notes                    

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

SCHEDULE 12

SPECIFIED DEFAULTS

With respect to the Senior Notes Forbearance:

 

  1. The Alleged Defaults, as applicable to the Senior Notes Indenture.

 

  2. Defaults or Events of Default (as such term is defined in the Senior Notes
Indenture and the Term Loan Credit Agreement) arising solely from (i) the
negotiation, execution, implementation or consummation of any Fundamental
Implementation Agreement (including the PSA) or Definitive Restructuring
Document, or any of the actions or transactions contemplated thereby, including
the filing of the Chapter 11 Cases or (ii) any cross-default arising as a result
of any Default or Event of Default under the ABL Facility caused by the
negotiation, execution, implementation or consummation of any Fundamental
Implementation Agreement (including the PSA) or Definitive Restructuring
Document, or any of the actions or transactions contemplated thereby, including
the filing of the Chapter 11 Cases.

 

  3. Failure to pay interest in accordance with the terms of the Senior Notes
Indenture and any cross-default arising as a result of a Default or Event of
Default under either the Term Loan Credit Agreement or the ABL Facility caused
by the failure to pay interest in accordance with the terms of the Senior Notes
Indenture.

With respect to the Term Loan Forbearance:

 

  1. The Alleged Defaults.

 

  2. Defaults or Events of Default (as such term is defined in the Term Loan
Credit Agreement) arising solely from (i) (a) the negotiation, execution,
implementation or consummation of any Fundamental Implementation Agreement
(including the PSA) or Definitive Restructuring Document, or any of the actions
or transactions contemplated thereby, including the filing of the Chapter 11
Cases or (b) the failure to pay interest in accordance with the terms of the
Senior Notes Indenture; (ii) any cross-default arising as a result of any
Default or Event of Default under the ABL Facility caused by (a) the
negotiation, execution, implementation or consummation of any Fundamental
Implementation Agreement (including the PSA) or Definitive Restructuring
Document, or any of the actions or transactions contemplated thereby, including
the filing of the Chapter 11 Cases or (b) the failure to pay interest in
accordance with the terms of the Senior Notes Indenture.

 

  3. Failure to pay amortization payments under the Term Loan Credit Agreement
after the Petition Date and any cross-default arising as a result of any Default
or Event of Default under the ABL Facility caused by the failure to pay such
amortization payments.

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

  4. Failure to pay default interest in accordance with the terms of the Term
Loan Credit Agreement, other than to the extent required by the Cash Collateral
Orders and any cross-default arising as a result of any Default or Event of
Default under the ABL Facility caused by the failure to pay such default
interest; it being understood and agreed that non-default interest and all other
amounts due (other than prepayment premia with respect to the Forbearance
Payment and the Term Loan Payment, post-petition amortization payments and
default interest) under the Term Loan Credit Agreement will continue to be paid
in accordance with the Cash Collateral Orders when due at all times prior to the
Effective Date.

 

  5. From and after the date of any payment pursuant to the FCPA Resolution, (x)
failure to satisfy the existing financial covenants contained in Section 10.3.2
of the Term Loan Credit Agreement, and (y) any cross-default arising from (a) a
failure to satisfy the existing financial covenants contained in Section 10.3.3
of the ABL Facility and (b) any Default or Event of Default under Section
12.1(j) of the ABL Facility.

 

  6. From and after September 30, 2016, (x) failure to satisfy the existing
financial covenant contained in Section 10.3.1 of the Term Loan Agreement, and
(y) any cross-default arising from a failure to satisfy the existing financial
covenants contained in Section 10.3.1 of the ABL Facility.

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

Exhibit A

Plan Term Sheet

[See separate attachment]

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

FINAL VERSION

 

  THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OF KEY ENERGY
SERVICES, INC. OR A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN WITHIN THE
MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE. NOTHING CONTAINED IN THIS TERM
SHEET IS AN ADMISSION OF FACT OR LIABILITY OR SHALL BE DEEMED BINDING ON ANY OF
THE DEBTORS OR THE SUPPORTING CREDITORS.   

KEY ENERGY SERVICES, INC., ET AL.

CHAPTER 11 PLAN TERM SHEET

This term sheet (the “Plan Term Sheet”) describes the material terms of a
proposed “prepackaged” chapter 11 plan of reorganization for Key Energy
Services, Inc., a Maryland corporation (“Key” or the “Company” and, as
reorganized, “Reorganized Key”) and certain of its subsidiaries, under Chapter
11 of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq. (the
“Bankruptcy Code”).

Capitalized terms used in the Plan Term Sheet shall, except as otherwise defined
herein or where the context otherwise requires, have the meanings provided in
the Plan Support Agreement (the “PSA”) by and among (i) the Debtors (defined
below) and (ii) severally and not jointly each Holder (or investment advisor or
manager thereof), on behalf of itself and each of its Affiliated Covered Holders
that is a Holder of (A) Senior Notes listed on Schedule 1 to the PSA and party
thereto (each, a “Supporting Noteholder”), and/or (B) Term Loans listed on
Schedule 1 to the PSA and party thereto (each, a “Supporting Term Lender”; and
together with the Supporting Noteholders, the “Supporting Creditors”). Each
Debtor and each Supporting Creditor is referred to herein individually as a
“Party”, and collectively as the “Parties”.

This Plan Term Sheet does not include a description of all the relevant terms
and conditions of the restructuring contemplated herein.

Nothing herein constitutes a commitment to exchange any debt, lend funds to any
of the Debtors, vote in a certain way or otherwise negotiate or engage in the
transactions contemplated herein.

This Plan Term Sheet is proffered in the nature of a settlement proposal in
furtherance of settlement discussions and is intended to be entitled to the
protections of Rule 408 of the Federal Rules of Evidence and all other
applicable statutes or doctrines protecting the use or disclosure of
confidential information and information exchanged in the context of settlement
discussions.

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SUMMARY OF PRINCIPAL TERMS AND CONDITIONS

 

SECTION 1: Transaction Overview    Debtors:1    Key Energy Services, Inc. (MD);
Key Energy Services, LLC (TX); Key Energy Mexico, LLC (DE); Misr Key Energy
Investments, LLC (DE); Misr Key Energy Services, LLC (DE); (collectively, the
“Debtors”). Non-Debtors:    KES Mexico Holding Company, LLC (DE); KES Global
Holdings LLC (DE); Key International, LLC (MD); Key Energy Services Luxembourg I
S.à.r.l. (Luxembourg); Key Energy Services Luxembourg II S.à.r.l. (Luxembourg);
Key Energy Services do Brasil-Services Petroliferos Ltda. (Brazil); Key Energy
Services de Mexico S. De R.L. De C.V. (Mexico); Recursos Omega, S. De R. L. De
C.V. (Mexico); Canadian Key Energy Services ULC (Alberta); Advanced Measurements
Inc. (Alberta); Key Energy Services Cyprus Ltd. (Cyprus); Geostream Services
Group LLC (Russia); Geostream Drilling LLC (Russia); GK Drilling Tools Leasing
Company Ltd (Cyprus); Enconco CJSC (Russia); Leader LLC (Russia); Key Cayman
Ltd. 2 (Cayman Islands); Key Cayman Ltd. 1 (Cayman Islands); Wilayat Key Energy
L.L.C. (Oman); Egypt Key Energy Services, LLC (Egypt) (collectively, the
“Non-Debtors”). Implementation of Restructuring:    The Parties intend that the
Restructuring be implemented through the Chapter 11 Cases and a Plan, the terms
and conditions of which are reflected in the Fundamental Implementation
Agreements (including this

 

1  List of Debtors and Non-Debtors to be adjusted (i) to the extent necessary as
a result of any Specified Asset Sales closed prior to the Petition Date and
(ii) to cover (a) all parties to any executory contract or unexpired lease
proposed to be rejected, and (b) all parties to any material contract with an
ipso facto clause that could be terminated if not afforded protection of
automatic stay.

 

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Plan Term Sheet), and, if not expressly specified therein, in a manner
reasonably satisfactory to the Required Consenting Creditors and the Debtors.

 

The Plan shall contain a provision reflecting the Consensual Equity Exchange
(defined below), which shall be included in the section of the Plan entitled
“Implementation of the Plan.”

Current Capital Structure:   

ABL Facility: No amounts are drawn; there are issued and outstanding letters of
credit with an undrawn balance of $38,526,688, which letters of credit are set
forth in further detail in Schedule 2 hereto.

 

Term Loan: $289,523,135 in principal plus accrued and unpaid interest, fees and
any and all other amounts outstanding under the Term Loan, which amounts are set
forth in further detail in Schedule 3 hereto.

 

Other Secured Debt: In addition to the above, the Debtors have secured debt
obligations, including equipment liens (collectively, and excluding the ABL
Facility and the Term Loan, the “Other Secured Claims”), that the Debtors shall
represent and warrant to their knowledge after conducting commercially
reasonable due diligence, do not exceed $1 million in the aggregate.

 

Senior Notes: $675,000,000 in principal plus accrued and unpaid interest, fees
and any and all other amounts outstanding under the Senior Notes. The Senior
Notes are unsecured obligations jointly and severally guaranteed by the
Guarantors thereto.

 

Other General Unsecured Obligations: In addition to the above, the Debtors have
third-party trade and other general unsecured obligations (collectively, the
“General Unsecured Claims”), that the Debtors shall represent and warrant to
their knowledge after conducting commercially reasonable due diligence, do not
exceed $27.5 million in the aggregate (which amount does not

 

3

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include potential General Unsecured Claims arising from the Debtors’
post-petition rejection of executory contracts and unsecured leases, if any, or
any accrued and unpaid professional fees).

 

Intercompany Claims: In addition to the above, the Debtors have trade claims and
loans to and from other Debtors and certain of the Debtors direct and indirect
wholly owned subsidiaries (collectively, the “Intercompany Claims”).

 

Common Equity: 160,851,304 shares of Key common stock were outstanding as of
August 2, 2016.

 

Intercompany Interests: All other equity Interests in the Company’s Debtor
subsidiaries (the “Intercompany Interests”).

SECTION 2: Treatment of Claims and Interests    For the avoidance of doubt, (i)
the Debtors and the Required Consenting Creditors shall agree upon and stipulate
to the amount of the Term Loan Claims and the amount of the Senior Notes Claims
and (ii) the Debtors are expected to pay allowed Administrative Expense Claims
and General Unsecured Claims (to the extent authorized by the Bankruptcy Court)
in the ordinary course during the Chapter 11 Cases. Administrative Expense
Claims (including 503(b)(9) Claims):    On the later of (i) the date such
amounts become due and owing in the ordinary course of business and (ii) the
Plan Effective Date, each Holder of an allowed Administrative Expense Claim
(including 503(b)(9) claims) shall receive, in full satisfaction of its Claim
against a Debtor, payment in full in cash or treatment on such other less
favorable terms as agreed between the Debtors, the Required Consenting
Noteholders, and the Holder thereof.    Unclassified – Non-Voting Priority Tax
Claims:    Each Holder of an allowed Priority Tax Claim shall receive, in full
satisfaction of its Claim, deferred cash payments over a period

 

4

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   not longer than five (5) years after the Petition Date of a total value, as
of the Plan Effective Date, equal to the allowed amount of such Claim, together
with interest from and after the Plan Effective Date at the applicable rate
under section 511 of the Bankruptcy Code, or treatment on such other less
favorable terms as agreed between the Debtors, the Required Consenting
Noteholders and the Holder thereof.    Unclassified – Non-Voting Priority
Non-Tax Claims:    On the Plan Effective Date, each Holder of a Priority Non-Tax
Claim shall receive, in full satisfaction of its Claim, payment in full in cash
or treatment on such other less favorable terms as agreed between the Debtors,
the Required Consenting Noteholders and the Holder thereof.    Unimpaired –
Deemed to Accept Other Secured Claims:    On the Plan Effective Date, each
Holder of an allowed Other Secured Claim shall receive, in full satisfaction of
its Claim, one of the following treatments as agreed upon by the Debtors and the
Required Consenting Creditors: (i) payment in full in cash; (ii) delivery of
collateral securing any such claim and payment of any interest required to be
paid under section 506(b) of the Bankruptcy Code; or (iii) treatment on such
other less favorable terms as agreed between the Debtors, the Required
Consenting Noteholders, and the Holder thereof.    Unimpaired – Deemed to Accept
ABL Facility:    On the Plan Effective Date (i) each lender under the ABL
Facility shall receive, in full satisfaction of its allowed Claim (each an “ABL
Claim”), payment in full in cash of any amounts due and owing under the ABL
Facility, or treatment on such other less favorable terms as agreed between the
Debtors, the Required Consenting Creditors and the Holder of such ABL Claim, and
(ii) any letters of credit outstanding under the ABL Facility shall be cash
collateralized,

 

5

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   backstopped and/or replaced with new letters of credit under the new ABL
facility (the “New ABL”) issued under the New ABL Agreement.    Unimpaired –
Deemed to Accept Term Loan:    On the Plan Effective Date, each Holder of Term
Loans shall receive, in full satisfaction of its allowed Claim (each, a “Term
Loan Claim”), (i) its pro rata share of a principal payment in cash, plus all
accrued and unpaid interest (at the non-default rate) through the Plan Effective
Date (the “Term Loan Payment”), but excluding any prepayment premium such that
the outstanding principal amount of Term Loans on the Plan Effective Date shall
be $250 million after giving effect to such payment2 and (ii) its pro rata share
of $250 million in principal amount of new term loans (the “New Term Loan”)
issued under the New Term Loan Credit Agreement.    Impaired – Entitled to Vote
Senior Notes:    On the Plan Effective Date, the Senior Notes shall be cancelled
and each Holder of Senior Notes shall receive, in full satisfaction of its
allowed Claim (inclusive of accrued and unpaid interest) in respect of such
Senior Notes, as applicable, (each, a “Senior Notes Claim”) such Holder’s pro
rata share of 5,000,000 shares of common stock of Reorganized Key (the
“Reorganized Key Common Stock”) (rounded up or down to the nearest whole share)
(the “Senior Notes Exchange”). Reorganized Key Common Stock issued pursuant to
the Senior Notes

 

2  Assumes a $10 million pre-Plan par principal prepayment by the Company in
connection with the execution of the PSA. In addition, an amount will be paid on
the Plan Effective Date as the Term Loan Payment such that the outstanding
principal amount of the Term Loan on the Plan Effective Date is $250 million.
None of the foregoing payments shall entitle the Term Loan Lenders to payment of
any make-whole premium under the Term Loan Agreement.

 

6

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Exchange shall account for 100% of the issued and outstanding Reorganized Key
Common Stock immediately prior to the issuance of any other shares of
Reorganized Key Common Stock in connection with the Plan, as set forth herein
and in any other Fundamental Implementation Agreement.

 

A schedule setting forth the number of shares, the price per share (if
applicable) and the relative pro forma percentage of Reorganized Key Common
Stock to be issued pursuant to the Plan, including the Rights Offering, Backstop
Agreement and Incremental Liquidity Facility (as defined in the Backstop
Agreement Term Sheet), is set forth on Schedule 4 hereto. In the event of any
discrepancy between such amount of shares, price per share (if applicable), or
pro forma percentage with respect thereto as listed in this Plan Term Sheet and
on Schedule 4 hereto, Schedule 4 hereto shall control.3

 

In addition to the Senior Notes Exchange:

 

(a) Qualifying Noteholders (defined below) shall receive a preplan distribution
of non-transferable subscription rights (the “Noteholder Rights”) to purchase
(x) an aggregate of 4,447,811 shares of Rights Offering Stock (in aggregate
equal to 95% of the shares of Rights Offering Stock to be issued in the Rights
Offering) and (y) 95% of the shares issued pursuant to the Incremental Liquidity
Facility (as defined and described in the Backstop Agreement Term Sheet), such
Noteholder Rights to be allocated pro rata based on each Qualifying Noteholder’s
Senior Notes Primary Pro Rata Allocation (defined below); and

 

3  Certain share amounts and prices depend upon the amount funded on account of
the Incremental Liquidity Facility, if any. Detail regarding potential share
issuances depending on the amount funded on account of the Incremental Liquidity
Facility are set forth on Schedule 4 hereto.

 

7

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   (b) Holders of Senior Notes Claims that are not Qualifying Noteholders (each
a “Non-Qualifying Noteholder”) shall each receive, in lieu of the Noteholder
Rights offered to Qualifying Noteholders in the Rights Offering, a cash
distribution on the Plan Effective Date equal the product of (i) the resulting
quotient of (x) the aggregate principal amount of Senior Notes Claims
beneficially owned by such Non-Qualifying Noteholder divided by (y) the
aggregate principal amount of Senior Notes Claims beneficially owned by all
Non-Qualifying Noteholders, multiplied by (ii) $25,000 (such amount, with
respect to each Non-Qualifying Noteholder, the “Noteholder Cash-Out Amount”);
provided that in no event shall the Noteholder Cash-Out Amount received by any
Non-Qualifying Noteholder exceed an amount equal to the product of (x) the
aggregate principal amount of Senior Notes Claims beneficially owned by such
Non-Qualifying Noteholder multiplied by (y) 5%.    Impaired – Entitled to Vote
General Unsecured Claims:    Each Holder of an allowed General Unsecured Claim
shall receive, in full satisfaction of such Claim, (i) payment in full in the
ordinary course of the Company’s business or (ii) such other less favorable
treatment (a) as may be agreed upon by the Debtors, the Required Consenting
Noteholders and the Holder thereof or (b) as may be required to allow such
General Unsecured Claims to “ride through” the Chapter 11 Cases).    Unimpaired
– Deemed to Accept Intercompany Claims:    All Intercompany Claims between and
among the Debtors and other Debtors or Non-Debtors shall be treated in a manner
reasonably satisfactory to the Debtors and the Required Consenting Creditors.   
TBD—Deemed to Accept or Deemed to Reject

 

8

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Intercompany Interests:    On the Plan Effective Date, all Intercompany
Interests shall remain in place for purposes of convenience.    Unimpaired –
Deemed to Accept Existing Key Common Stock:    On the Plan Effective Date, all
Existing Key Common Stock (defined below) will be cancelled and released and
Holders of Existing Key Common Stock will receive the Equity Exchange Shares and
Warrants (as defined below) in connection with the Plan in exchange for such
Existing Key Common Stock and providing the releases set forth herein (Holders
that do not provide such releases or do not refrain from taking certain actions
during the Chapter 11 Cases shall not receive the Equity Exchange Share and
Warrants), all as described in Consensual Equity Exchange below.    Impaired –
Deemed to Reject Other Key Equity Interests   

On the Plan Effective Date, all Other Key Equity Interests shall be discharged,
cancelled, released and extinguished and shall be of no further force or effect,
whether surrendered for cancellation or otherwise, and Holders of such Other Key
Equity Interests shall not be entitled to participate in the Consensual Equity
Exchange on account of such Interests.

 

“Other Key Equity Interests” means any equity security (as defined in section
101(16) of the Bankruptcy Code) of Key other than Existing Key Common Stock,
including (i) all issued, unissued, authorized, or outstanding shares or common
stock, preferred stock, or other instruments, including restricted stock units,
evidencing any fixed or contingent ownership interest in any Debtor together
with any warrants, options, or contractual rights to purchase or acquire such
equity securities at any time and all rights arising with respect thereto, as
well as any partnership, limited liability company, or similar interest of any
Debtor, as applicable, (ii) any claim, interest or other equity-related rights
associated with any equity-related agreements (including without

 

9

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   limitation any existing registration rights), and (iii) any Claim that is
subordinated pursuant to section 510(b) of the Bankruptcy Code or any other
applicable law; provided however, that Existing Key Common Stock and
Intercompany Interests shall in no event be included within the definition, or
class, of Other Key Equity Interests.    Impaired – Deemed to Reject SECTION 3:
New Financing Facilities    New ABL Agreement:    On the Plan Effective Date,
Reorganized Key, as Borrower, and certain of the domestic reorganized Debtors,
as Guarantors, shall enter into the New ABL Agreement. New Term Loan Credit
Agreement:    On the Plan Effective Date, Reorganized Key, as Borrower, and
certain of the domestic reorganized Debtors, as Guarantors, shall enter into the
New Term Loan Credit Agreement. SECTION 4: Use of Cash Collateral    The Company
shall seek, and the Supporting Creditors shall support, approval of an Interim
Cash Collateral Order and a Final Cash Collateral Order on the terms set forth
on Exhibit 2 hereto. SECTION 5: Consensual Equity Exchange   

Consensual Exchange of Existing

Key Common Stock:

   In connection with the settlement among the Parties embodied in the PSA and
the Parties’ consensual pursuit of the Plan as a “prepackaged” chapter 11 plan
of reorganization, the Senior Notes class, by voting to accept the Plan, shall
be deemed to have consented to the delivery by the reorganized Debtors of the
following consideration ((a) and (b) below)) out of their recovery to Holders of
Existing Key Common Stock, in exchange for such Holders’ Existing Key Common
Stock and

 

10

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for providing the releases set forth herein (such consensual exchange, the
“Consensual Equity Exchange”):

 

(a) subject to the provision below regarding fractional shares and Warrants,
each Holder of Existing Key Common Stock shall receive its Percentage Allocation
(defined below) of warrants to be issued on the Plan Effective Date, or as soon
thereafter as reasonably practicable, which shall be exercisable on the terms
set forth in the Terms of Warrants attached as Exhibit 6 hereto (the
“Warrants”); and

 

(b) subject to the following paragraph, each Holder of Existing Key Common Stock
shall receive its Percentage Allocation of an aggregate of 543,927 shares of
Reorganized Key Common Stock to be issued on the Plan Effective Date, or as soon
thereafter as reasonably practicable (the “Equity Exchange Shares” and together
with the Warrants, the “Equity Exchange Shares and Warrants”).

 

Any Holder of Existing Key Common Stock who would be entitled to no more than
0.5 Equity Exchange Shares and Warrants will receive no distribution. Such
fractional shares and Warrants will be aggregated and reallocated on a pro rata
basis to Holders of Existing Key Common Stock otherwise entitled to at least 0.5
Equity Exchange Shares and Warrants, after which all such Equity Exchange Shares
and Warrants shall be rounded up or down to the nearest whole share with the
result that no fractional Equity Exchange Shares and Warrants will be issued.

 

Each Holder of Existing Key Common Stock will also have the opportunity to elect
to receive cash, to the extent funded by other such Holders (the “Cash-Out
Election”), in lieu of both the Equity Exchange Shares and Warrants to be
received under the

 

11

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Consensual Equity Exchange (such participant, a “Cash-Out Elector”).4 In order
to fund the Cash-Out Election, each Rights Offering Equity Holder will have the
opportunity to subscribe as part of the Equity Interest Rights Offering (the
“Cash-Out Subscription”), for all or a portion of the Equity Exchange Shares and
Warrants subject to the Cash-Out Election (each subscribing Rights Offering
Equity Holder, a “Cash-Out Investor”).

 

If fully funded pursuant to the Cash-Out Subscription, each Cash-Out Elector
will receive from the Cash-Out Investors an amount of cash equal to (x) the
number of Equity Exchange Shares it would otherwise have been entitled to
receive, multiplied by (y) $18.76 per share of Equity Exchange Shares (such per
share price, the “Per Share Cash-Out Price” and such cash amount, with respect
to each Holder of Existing Key Common Stock that exercise the Cash-Out Election,
the “Cash-Out Amount”); provided, that if the aggregate Cash-Out Amount required
to purchase all Equity Exchange Shares and Warrants subject to Cash-Out
Elections exceeds the aggregate amount of the Cash-Out Subscriptions, the Per
Share Cash-Out Price shall be paid to Cash-Out Electors on a pro rata basis, and
the Cash-Out Electors shall retain any remaining Equity Exchange Shares and
Warrants for which they do not receive cash from the Cash-Out Election. For the
avoidance of doubt, any Warrants issued in respect of Equity Exchange Shares
submitted for sale in connection with the Cash-Out Election will be transferred
to the extent such Cash-Out Election is honored, however no separate
consideration will be paid for any such Warrants. Any Cash-Out Amounts shall be
funded on the Plan Effective Date, or as soon as reasonably practicable
thereafter.

 

4  The Plan may also provide for a mandatory cash-out of Holders of Key Common
Stock that would otherwise receive de minimis Equity Exchange Shares and
Warrants, any terms of which shall be reasonably satisfactory to the Debtors and
the Required Consenting Creditors.

 

12

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In exchange for its payment of the Cash-Out Amount subscribed for in its
Cash-Out Subscription, each participating Cash-Out Investor shall receive its
proportionate number of the Equity Exchange Shares and Warrants that would
otherwise have been distributed to the Cash-Out Electors.

 

In addition, as described further below in the sections entitled Prepetition
Rights Offering and Equity Interest Rights Offering, Qualifying Equity Holders
(as defined below) will receive “Equity Holder Rights” (together with the
Noteholder Rights, the “Rights”) permitting such Holders:

 

(x) to participate in the Rights Offering;

 

(y) to the extent that such Qualifying Equity Holder subscribes for at least
$25,000 worth of Rights Offering Common Stock and funds such commitment in full
on or prior to the Rights Offering Expiration Date (each such Qualifying Equity
Holder, a “Rights Offering Equity Holder”), to subscribe for a minimum of
$10,000 worth of Incremental Liquidity Facility Shares on a pro rata basis
across each tranche of the funding, up to the total of 5% of each tranche
available to all Rights Offering Equity Holders; and

 

(z) to subscribe for Equity Exchange Shares and Warrants pursuant to the
Cash-Out Subscription.

 

Each Rights Offering Equity Holder shall, as a condition to participating in the
Rights Offering and the Incremental Liquidity Facility (and receiving the
Consensual Equity Exchange) (each, a “Participating Equity Holder”), agree in
writing pursuant to the Rights Offering Documents to grant the Releases and not
to, among other things, (i) oppose the Plan, including any portion of the Plan
pertaining to the treatment of the Term Loan Claims, treatment of the Senior
Notes Claims or the Consensual Equity Exchange;

 

13

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(ii) seek, solicit, support, encourage or consent to, any restructuring or
reorganization for any Debtor that is inconsistent with the Definitive
Restructuring Documents and the Fundamental Implementation Agreements (including
the PSA) in any respect; (iii) commence or support any action filed by any party
in interest to appoint a trustee, conservator, receiver, or examiner for the
Debtors, or to dismiss the Chapter 11 Cases, or to convert the Chapter 11 Cases
to cases under chapter 7 of the Bankruptcy Code; (iv) commence or support any
action or proceeding to shorten or terminate the period during which only the
Debtors may propose and/or seek confirmation of any plan of reorganization; or
(v) otherwise support any plan, sale process or other transaction that is
inconsistent with the Fundamental Implementation Agreements (including the PSA)
or the Definitive Restructuring Documents.

 

In addition, any Holder of Existing Key Common Stock that does not grant the
Releases or takes any of the actions listed in clauses (i) – (v) of the previous
paragraph on or prior to the Plan Effective Date shall be disqualified from
receiving the Consensual Equity Exchange.

 

“Equity Holder Record Date” means August 18, 2016.

 

“Existing Key Common Stock” means the aggregate number of vested and unvested
(i) issued and outstanding shares of Key common stock and (ii) restricted stock
units for Key common stock.

 

“Percentage Allocation” means (i) with respect to each Holder of Existing Key
Common Stock for purposes of determining the allocation of Equity Exchange
Shares and Warrants, the percentage equal to the quotient of (x) the number of
shares of Existing Key Common Stock beneficially owned by such Holder divided by
(y) the

 

14

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   aggregate number of shares of Existing Key Common Stock, and (ii) with
respect to Qualifying Equity Holders for purposes of determining Equity Holder
Rights, the percentage equal to the quotient of (x) the number of Record Date
Shares owned by such Qualifying Equity Holder divided by (y) the aggregate
number of Record Date Shares owned by all Qualifying Equity Holders.   

“Record Date Shares” means Existing Key Common Stock as of the Equity Holder
Record Date.

 

For the avoidance of doubt, the Plan and the Disclosure Statement will clarify
that each of the Existing Key Common Stock class and the Other Key Equity
Interests class is deemed to reject the Plan, and is therefore not entitled to
vote, because such class is receiving no recovery pursuant to the Plan; the Plan
shall be deemed to be a “cramdown” plan under Section 1129(b) of the Bankruptcy
Code with respect to each of the Existing Key Common Stock class and the Other
Key Equity Interests class. In no event shall the aggregate amount of
consideration provided to Holders of Existing Key Common Stock exceed the
consideration provided for such Holders pursuant to the Equity Holder Rights and
Consensual Equity Exchange described herein.

SECTION 6: [Intentionally Omitted]    SECTION 7: Prepetition Rights Offering5   
The Company shall launch the Senior Notes Rights Offering (defined below) as to
Qualifying Noteholders and the Equity

 

5  Participants in the Rights Offering will also be entitled to subscribe for
Incremental Liquidity Facility Shares, as described herein, and in the case of
the Rights Offering Equity Holders, will also be entitled to subscribe for
shares and Warrants under the Cash-Out Subscription, as described above.

 

15

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Interest Rights Offering (defined below) as to Qualifying Equity Holders
(defined below) (the Senior Notes Rights Offering and the Equity Interest Rights
Offering, together, the “Rights Offering”) to sell an aggregate of 4,681,906
shares of Reorganized Key Common Stock to be issued and sold by Reorganized Key
on the Plan Effective Date, or as soon thereafter as reasonably practicable (the
“Rights Offering Stock”) at a price per share (the “Rights Offering Per Share
Price”) equal to $18.16, for aggregate gross proceeds of $85,000,000 (the
“Rights Offering Amount”). The applicable Rights Offering Documents shall
include the option for (i) Rights Offering Noteholders (as defined below) to
subscribe under the Incremental Liquidity Facility as described below, and (ii)
Rights Offering Equity Holders to subscribe under the Incremental Liquidity
Facility and the Cash-Out Subscription. Participation in the Incremental
Liquidity Facility will be conditioned upon a subscriber irrevocably subscribing
for a pro rata portion of each tranche of the facility, to the extent of such
subscriber’s elected level of subscription.

 

The Senior Notes Rights Offering shall commence concurrently with the
commencement of the solicitation of votes on the Plan (the “Notes Rights
Offering Commencement Date”) and expire at 5:00 p.m. (Eastern Time) on the date
that is twenty (20) Business Days after the Notes Rights Offering Commencement
Date (the “Rights Offering Expiration Date”).

 

The Equity Interest Rights Offering is expected, but not required, to commence
prior to the Notes Rights Offering Commencement Date through an initial inquiry
to Holders of Existing Key Common Stock for verified information demonstrating
that interested Holders may be Qualifying Equity Holders as of the Equity Holder
Record Date. In order to participate in the Equity Interest Rights Offering,
Holders of

 

16

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Existing Key Common Stock must provide sufficient verification of their status
as Qualifying Equity Holders, as well as their number of Record Date Shares. The
Equity Interest Rights Offering is expected to expire as of the Rights Offering
Expiration Date.

 

Each Qualifying Noteholder and each Qualifying Equity Holder shall be qualified
to participate in the Rights Offering as described below.

 

The Rights shall be non-transferrable (other than as required or permitted
pursuant to the Backstop Agreement).

 

As set forth in the Backstop Agreement Term Sheet, 100% of the Rights Offering
Amount plus 100% of the Incremental Liquidity Facility will be backstopped by
the Backstop Participants.

 

The Rights Offering and any participation in the Incremental Liquidity Facility
(other than with respect to the Backstop Participants who will fund pursuant to
the terms of the Backstop Agreement) must be funded in full on or before the
Rights Offering Expiration Date. Subscriptions under the Rights Offering,
Incremental Liquidity Facility and the Cash-Out Subscription are irrevocable.

 

Any Rights Offering or other Backstop Agreement commitments funded by the
Backstop Participants shall be funded in accordance with the Backstop Agreement.
Any amounts funded by Qualifying Noteholders and Rights Offering Equity Holders
pursuant to the Rights Offering, Incremental Liquidity Facility or Cash-Out
Subscription that are not consummated pursuant to the terms of the Plan shall be
returned promptly, with interest (if any), upon such failure to consummate the
Rights Offering, Incremental Liquidity Facility or Cash-Out Subscription, as
applicable.

Senior Notes Rights Offering:    On the Notes Rights Offering Commencement Date,
as part of the Rights Offering, the Qualifying Noteholders shall be

 

17

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offered Noteholder Rights (such offer, the “Senior Notes Rights Offering”) to
purchase an aggregate of up to 4,447,811 shares of Rights Offering Stock (the
“Aggregate Noteholder Primary Shares”); provided that each Qualifying Noteholder
must, among other things, agree to purchase at least $1,000 worth of Rights
Offering Stock (such Qualifying Noteholder, a “Rights Offering Noteholder”) in
order to properly subscribe pursuant to the Rights Offering and to be eligible
to participate on a pro rata basis in the Incremental Liquidity Facility, as
described in the Backstop Agreement Term Sheet.

 

Each Qualifying Noteholder shall be entitled to exercise Noteholder Rights to
subscribe for up to the number of Aggregate Noteholder Primary Shares (rounded
up or down to the nearest whole share in the discretion of the Company so that
the number of shares issued equals 4,447,811) equal to the product of (a) the
resulting quotient of (x) the aggregate principal amount of Senior Notes Claims
beneficially owned by such Qualifying Noteholder as of the Senior Notes Record
Date divided by (y) the aggregate principal amount of all Senior Notes Claims as
of the Senior Notes Record Date (such number, with respect to each Qualifying
Noteholder, the “Senior Notes Primary Pro Rata Allocation”), multiplied by (b)
4,447,811 (such number of shares, with respect to each Qualifying Noteholder,
the “Noteholder Primary Shares”). Participation in the Incremental Liquidity
Facility shall be conducted on substantially the same terms as the foregoing;
provided that in order to participate in the Incremental Liquidity Facility, a
subscriber must (i) exercise its Noteholder Rights with respect to the Rights
Offering in full and (ii) irrevocably subscribe for a pro rata portion of each
tranche of the Incremental Liquidity Facility, to the extent of such
subscriber’s elected level of subscription.

 

18

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

  

“Qualifying Noteholder” means a Holder of Senior Notes Claims as of the Senior
Notes Record Date that (a) is an accredited investor (as defined by Rule 501 of
the Securities Act of 1933, as amended (the “Securities Act”)) (an “AI”) and (b)
whose Senior Notes Primary Pro Rata Allocation entitles such Holder to
sufficient Noteholder Rights necessary to subscribe for a minimum of $1,000
worth of Rights Offering Stock.

 

“Senior Notes Record Date” means, for purposes of determining eligibility of a
Holder of Senior Notes Claims to receive Noteholder Rights to participate in the
Senior Notes Rights Offering and Incremental Liquidity Facility, the date that
is five (5) business days prior to the Notes Rights Offering Commencement Date.

Equity Interest Rights Offering:   

As part of the Rights Offering, Qualifying Equity Holders shall be offered
Equity Holder Rights to purchase up to 100% of an aggregate of up to 234,095
shares of Rights Offering Stock (in aggregate equal to 5% of the shares of
Rights Offering Stock to be issued in the Rights Offering) (each, an “Equity
Holder Primary Share” and, collectively, the “Aggregate Equity Holder Primary
Shares”) (such offer, the “Equity Interest Rights Offering”), as well as the
option to subscribe for up to 5% of the Incremental Liquidity Facility, if
necessary, and the Cash-Out Subscription, as described above.

 

Each Qualifying Equity Holder shall be eligible to exercise Equity Holder Rights
to acquire all or a portion of the Aggregate Equity Holder Primary Shares;
provided that each Qualifying Equity Holder must agree, among other things, to
purchase at least $25,000 worth of Rights Offering Stock in order to
participate. In the event the Rights Offering Equity Holders in the aggregate
exercise Equity Holder Rights for more than 100% of the Aggregate Equity Holder
Primary Shares, the number of shares of Rights Offering Stock to be allocated to
each

 

19

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

  

subscribing Qualifying Equity Holder shall be adjusted proportionate to their
respective Percentage Allocations, so that the total number of shares of Rights
Offering Stock allocated to subscribing Qualifying Equity Holders equals the
number of Aggregate Equity Holder Primary Shares.

 

Participation in the Incremental Liquidity Facility shall be conducted on
substantially the same terms as the foregoing; provided, that in order to
properly subscribe for Incremental Liquidity Facility Shares, a Rights Offering
Equity Holder must subscribe for at least $25,000 of Equity Holder Primary
Shares and (ii) irrevocably subscribe for a pro rata portion of each potential
tranche of the Incremental Liquidity Facility, to the extent of such
subscriber’s elected level of subscription; provided, further, that each such
Holder must subscribe for at least $10,000 of Incremental Liquidity Facility
Shares in order to properly subscribe and any subscription for a larger relative
percentage of Incremental Liquidity Facility Shares than Rights Offering Common
Stock subscribed for in the Equity Holder Rights Offering will not be honored.6

 

“Qualifying Equity Holder” means a beneficial owner of Record Date Shares that
has certified to the Company that it is an AI (which certification shall be
verified by the Company).

Use of Rights Offering Proceeds and Incremental Liquidity Facility:    The
proceeds from the Rights Offering (and any amounts funded under the Incremental

 

6  By way of example, assuming an Incremental Liquidity Facility of $10 million,
a Rights Offering Equity Holder subscribing for $100,000 worth of Equity Holder
Primary Shares will be limited to subscribing for $11,764.71 worth of
Incremental Liquidity Shares (the resulting quotient of (a) (i) $100,000 divided
by (ii) $4.25 million total amount of Equity Interest Rights Offering,
multiplied by (b) (i) $500,000 total amount of Incremental Liquidity Facility
available to Rights Offering Equity Holders). For the avoidance of doubt, in the
event of oversubscription, the number of shares of Equity Holder Primary Shares
and Incremental Liquidity Facility Shares to be allocated to each subscribing
Rights Offering Equity Holder shall be adjusted proportionate to their
respective Percentage Allocations.

 

20

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

   Liquidity Facility) shall be used for the Term Loan Payment, and the
remainder shall be used for general corporate purposes, including to pay
administrative expenses and Claims under the Plan, including all professional
fees. SECTION 8: Release and Related Provisions    Exculpations:    To the
fullest extent permitted by applicable law, the Plan shall provide that (a) each
Debtor, (b) each Supporting Creditor, (c) each Backstop Participant, and (d)
each of their respective current and former officers and directors,
professionals, advisors, accountants, attorneys, investment bankers,
consultants, members, managers, equity holders, general or limited partners,
controlling persons, Affiliates, parents, subsidiaries, predecessors,
successors, heirs, executors and assigns, employees, agents and other
representatives (each, an “Exculpated Party”) shall not have or incur any
liability, Claims, damages, remedies, causes of action, demands, rights,
actions, suits, obligations, liabilities, accounts, defenses, offsets, whether
known or unknown, foreseen or unforeseen, existing or hereinafter arising,
contingent or non-contingent, matured or unmatured, suspected or unsuspected, in
tort, law, equity, or otherwise (each, a “Cause of Action”) related to any act
or omission in connection with, relating to, or arising out of, the Chapter 11
Cases, the formulation, preparation, dissemination, negotiation, filing, or
termination of the Fundamental Implementation Agreements or Definitive
Restructuring Document, or any of the transactions contemplated thereby, any
contract, instrument, release or other agreement or document (including
providing any legal opinion requested by any entity regarding any transaction,
contract, instrument, document, or other agreement contemplated by the Plan or
the reliance by any Exculpated Party on the Plan or the Confirmation Order in
lieu of such legal

 

21

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   opinion) created or entered into in connection with the Disclosure Statement
or the Plan, the filing of the Chapter 11 Cases, the pursuit of confirmation and
consummation of the Plan, the administration and implementation of the Plan,
including the issuance of any securities pursuant to or in connection with the
Plan (including the securities issued pursuant to the Rights Offering and the
Backstop Agreement), 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, willful
misconduct, 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, 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. Releases:    To the fullest extent permitted by applicable
law, the Plan shall include a full mutual release from liability in favor of
each Debtor, each Supporting Creditor, each Backstop Participant, each
Participating Equity Holder, and all of their respective current and former
officers and directors, professionals, advisors, accountants, attorneys,
investment bankers, consultants, members, managers, equity holders, general or
limited partners, controlling persons, Affiliates, parents, subsidiaries,
predecessors, successors, heirs, executors and assigns, employees, agents and
other representatives (the “Released Parties”), from any claims and Causes of
Action related to or in connection with the

 

22

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

   Company and its subsidiaries, arising on or prior to the Plan Effective Date,
including, for the avoidance of doubt, any actions taken in connection with the
Alleged Defaults, including the negotiation and consummation of the Forbearance
Agreement and amendments thereto and any reappraisal of assets pursuant to
section 10.1.2(m) of the Term Loan Credit Agreement (collectively, the
“Releases”); provided, however, that no Party shall be released from any claim
or Cause of Action (other than with respect to any actions taken in connection
with the Alleged Defaults, including the negotiation and consummation of the
Forbearance Agreement and amendments thereto and any reappraisal of assets
pursuant to section 10.1.2(m) of the Term Loan Credit Agreement) that was a
result of such Party’s gross negligence, willful misconduct, or bad faith, as
determined by a Final order of a court of competent jurisdiction.
Notwithstanding anything contained herein to the contrary, the Releases shall
not release any (a) post-Plan Effective Date obligations of any party under (x)
the Plan or (y) any document, instrument or agreement (including those set forth
in the Plan Supplement) implementing the Plan or (b) continuing contractual
obligation owed by any Released Party to or for the benefit of any Debtor or
Reorganized Debtor. Director and Officer Indemnification:   

Any obligations of the Debtors pursuant to their organizational documents to
indemnify current and former officers, directors, agents, and/or employees shall
not be discharged or impaired by confirmation of the Plan.

 

Director and officer insurance will continue in place for the directors and
officers of all of the Debtors during these Chapter 11 Cases on existing or
comparable terms.

 

After the Plan Effective Date, the reorganized Debtors shall acquire a standard
tail policy covering any director and officer at any time prior to the Plan
Effective Date

 

23

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   in at least the scope and amount as currently maintained by the Debtors for
six years after the Plan Effective Date. Such directors and officers shall be
exculpated and indemnified by the Debtors and reorganized Debtors to the extent
of such insurance. Discharge:    A full and complete discharge shall be provided
in the Plan. Injunction:    Ordinary and customary injunction provisions shall
be included in the Plan. SECTION 9: Other Implementation Provisions    Corporate
Structure; Vesting of Assets; Business Plan:   

After consummation of the Restructuring, subject to any divestitures in
connection with Specified Asset Sales, all of the assets of the Debtors as of
the Plan Effective Date shall be owned by the reorganized Debtors and their
wholly owned subsidiaries; provided that, at any time prior to the Plan
Effective Date, the Required Consenting Creditors may elect, with the prior
written consent of the Debtors (which consent shall not be unreasonably
withheld, conditioned or delayed) and to the extent permitted by applicable law,
to amend the Plan to provide for the liquidation of certain Debtor holding
companies whose sole assets are subsidiaries organized and located outside of
the United States.

 

The Required Consenting Noteholders may, at their option, review and analyze the
proposed tax and corporate structure of the reorganized Debtors for tax and
corporate efficiencies as part of the Restructuring and the Plan will contain
such provisions reasonably acceptable to the Required Consenting Noteholders and
the Debtors to ensure such tax and corporate efficiencies. The Debtors shall
work with the Required Consenting Noteholders to structure the Restructuring and
the transactions contemplated herein to the extent practicable in a
tax-efficient and cost-effective manner, as determined by the Required
Consenting Noteholders in their reasonable discretion,

 

24

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

  

and in consultation with the Supporting Term Lenders. Tax-efficient structuring
shall include structuring to avoid recognition of gains and to recognize losses
(to the extent possible). The proposed tax structure for the reorganized Debtors
shall be finalized prior to the Petition Date.

 

The Debtors’ management shall work with the Supporting Noteholders (and their
advisors) that remain subject to a nondisclosure agreement to determine and
finalize the Company’s long term business plan, which shall be finalized prior
to the Petition Date and shall be determined in consultation with the Supporting
Term Lenders (and their advisors) to the extent also subject to a nondisclosure
agreement. After the Petition Date, to the extent requested by the Required
Consenting Noteholders or the Required Consenting Term Lenders, the Debtors’
management team and operational advisors will host weekly calls with a
Supporting Noteholder that is both designated by the Required Consenting
Noteholders and that is subject to a nondisclosure agreement to provide updates
with regard to the business and any developments.

 

From the date of execution of the PSA through consummation of the Plan, the
Company shall inform Cleary Gottlieb Steen & Hamilton LLP, Sullivan & Cromwell
LLP, and Houlihan Lokey, Inc., as advisors of the Supporting Noteholders, and
Davis Polk & Wardwell LLP and Evercore Group LLC, as advisors to the Supporting
Term Lenders, prior to entry into any new material contracts, other than
agreements with customers in the ordinary course of business, and shall consult
with, and obtain the consent of, the Required Consenting Noteholders (provided
that to the extent any such contract is subject to a customary nondisclosure
agreement with the Company, the “Required Consenting Noteholders” threshold with
respect to approval of such contract shall be

 

25

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

   calculated without including in the numerator or the denominator Senior Notes
held by any Supporting Noteholder that is not party to and declines to enter
into such nondisclosure agreement); provided, however, that (i) the Company
shall consult with, but need not obtain any further approval of, the Required
Consenting Noteholders with respect to any contracts previously disclosed and
agreed to in writing by the Required Consenting Noteholders, and (ii) the
consent of Required Consenting Noteholders as to any material contracts related
to Specified Asset Sales shall not be unreasonably withheld, conditioned or
delayed. In any event, the Company will inform the Supporting Creditors and the
Supporting Creditor Advisors that remain under a nondisclosure agreement and
their respective advisors concurrently with or promptly after entry into any new
material contracts. Reincorporation:    Reorganized Key shall be reincorporated
in Delaware. Reorganized Key Corporate Governance Documents:   

On the Plan Effective Date the existing Key corporate charter and bylaws shall
be automatically terminated and cancelled.

 

The Plan shall provide for the execution and filing, on the Plan Effective Date,
of the New Key Constituent Documents consistent with the Corporate Governance
Term Sheet.

 

The Plan Supplement shall identify the initial board of directors of Reorganized
Key consistent with the Corporate Governance Term Sheet.

Investor Rights Agreement:    The Plan shall provide for the execution, on the
Plan Effective Date, of the Investor Rights Agreement consistent with the
Corporate Governance Term Sheet. Corporate Advisory Services Agreement:    On
the Plan Effective Date, Reorganized Key shall enter into a corporate advisory
services agreement with Platinum Equity Advisors, LLC, or an Affiliate, in the
form attached as Exhibit 5 hereto (the “Corporate Advisory Services Agreement”).

 

26

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Management Incentive Plan:    The Plan shall provide for the New MIP to be
implemented on or following the Plan Effective Date. Employment Matters:    All
existing employment, retention and change of control agreements shall be assumed
by the Debtors and “ride through” the Chapter 11 Cases (the “Assumed Employee
Agreements”), and any future cash payments or distributions contemplated
thereunder shall (to the extent not paid in the ordinary course during the
Chapter 11 Cases) remain outstanding and payable in full in cash by Reorganized
Key after the Plan Effective Date; provided, that any provisions in such Assumed
Employee Agreements that provide rights to purchase or receive Existing Key
Common Stock (including, without limitation, vested and unvested (i) restricted
stock and (ii) restricted stock units) shall be given effect for purposes of the
Equity Interest Rights Offering and Consensual Equity Exchange under the Plan
(and will be null and void and have no effect with respect to Reorganized Key
Common Stock after the Plan Effective Date). For the avoidance of doubt, if any
Assumed Employee Agreement contains a provision or provisions allowing the
Company to convert a cash payment or distribution into equity, such provision(s)
shall be null and void as to such conversion feature, and any future cash
payments or distributions will be paid in cash by Reorganized Key after the Plan
Effective Date in accordance with the foregoing sentence. Cash obligations of
the Reorganized Debtors on and after the Plan Effective Date pursuant to the
prior two sentences shall not exceed a maximum of $8.75 million of which
approximately (x) $4.6 million relates to retention payments approved by the
Board as set forth on a schedule delivered to counsel to the Supporting
Noteholders; (y) $3.4 million relates to current contractual severance

 

27

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obligations as set forth on a schedule delivered to counsel to the Supporting
Noteholders; and (z) up to $750,000 relates to retention or separation-related
payments that may become due on or after the Plan Effective Date as a result of
future events as disclosed to counsel for the Consenting Noteholders; provided
however that the $8.75 million cap on cash obligations shall exclude (a) any
obligations in the nature of wages, expense reimbursements, or other
non-incentive based amounts or benefits; and (b) any other obligations that may
become due as a result of a termination under the terms of contractual
obligations in place as of the date of the PSA, whether or not following a
change of control, up to a maximum amount of $11.75 million. Subject to the
terms set forth in this paragraph, all equity components of any existing
incentive plans will be cancelled, any cash components of such plans will be
honored by Reorganized Key, and Reorganized Key shall have no obligation to
provide equity-based compensation to employees except as may be provided
pursuant to the New MIP. Any individual severance obligation as to former
employees terminated prior to the Plan Effective Date will be resolved in a
manner satisfactory to the Required Consenting Noteholders and the Debtors,
other than individual severance obligations for less than one year’s salary and
for less than $500,000 in the aggregate for all severance obligations, which may
be resolved by the Debtors in consultation with the Required Consenting
Noteholders.

 

Decisions with respect to amounts to be paid to employees on account of the 2016
annual cash incentive plan generally available to the Debtors’ employees (the
“2016 PIP”) will be made following the Plan Effective Date at the discretion of
the Board of Reorganized Key. The maximum amount payable under the 2016 PIP
shall not exceed $10.3 million.

Executory Contracts and Unexpired Leases:    All executory contracts and
unexpired leases, except as set forth in the Plan Supplement to be agreed by the
Debtors and Required Consenting Noteholders, shall be deemed assumed. The
Debtors and the Required Consenting Noteholders shall consult with each other to
determine which, if any,

 

28

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

   executory contracts or unexpired leases should be included for rejection. The
Debtors shall not reject any material contract without the prior written consent
of the Required Consenting Noteholders. Certain Closing and Other Conditions to
Confirmation and Effectiveness:   

The Plan shall be subject to usual and customary conditions to confirmation and
effectiveness (as applicable), as well as such other conditions that are
reasonably satisfactory to and agreed upon by the Debtors and the Required
Consenting Creditors, including, but not limited to, the following:

 

(a) The Bankruptcy Court shall have entered a Final order, which may be the
Confirmation Order, in form and substance reasonably satisfactory to the
Required Consenting Creditors and the Debtors approving the Disclosure Statement
as containing “adequate information” within the meaning of section 1125 of the
Bankruptcy Code;

 

(b) The Plan and all documents contained in the Plan Supplement, including any
exhibits, schedules, amendments, modifications or supplements thereto, all other
Definitive Restructuring Documents and the Backstop Agreement, shall have been
negotiated, executed, delivered and filed with the Bankruptcy Court or other
applicable government authority in substantially final form consistent with the
terms and conditions described in this Plan Term Sheet, the Definitive
Restructuring Documents or the PSA, as applicable;

 

(c) The Bankruptcy Court shall have entered the Confirmation Order confirming
the Plan on terms consistent with this Plan Term Sheet, the Definitive
Restructuring Documents, and the PSA, as applicable, and otherwise reasonably
satisfactory to the Required Consenting Creditors and the Debtors, on or before
the applicable date set forth on the Restructuring Timeline, unless otherwise
agreed by the Debtors and the Required Consenting Creditors in a manner
consistent with the PSA, and the Confirmation Order shall be a Final order;

 

29

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

  

(d) The PSA Assumption Order shall have been entered, shall not have been
terminated, reversed or vacated, and shall be in full force and effect;

 

(e) All governmental and material third party notifications, filings, consents,
waivers and approvals required for the consummation of the transactions
contemplated by the Fundamental Implementation Agreements, including the
Backstop Agreement, shall have been made or received, including approval under
applicable Antitrust Laws;

 

(f) From and after the Petition Date, the Debtors shall not have commenced an
insolvency (or similar) proceeding in any foreign jurisdiction without the
consent of the Required Consenting Creditors;

 

(g) The reasonable and documented professional fees and expenses of the
Supporting Creditor Advisors incurred prior to the Petition Date and thereafter
shall have been paid in full by the Debtors on or prior to the Plan Effective
Date;

 

(h) The Backstop Agreement shall not have been validly terminated;

 

(i) The Company shall have complied with the FCPA Resolution, including having
timely paid all amounts required to be paid thereunder and completed all other
acts required to be completed by the Company thereunder, and the FCPA Resolution
shall be in full force and effect;

 

(j) The New Term Loan Credit Agreement and New ABL Agreement shall have gone
effective;

 

(k) The Company shall (x) have timely complied with all reporting obligations
under applicable securities laws (giving effect to any extensions granted
pursuant to the filing of a Form 12b-25 with the SEC, (y) not have become a
delinquent filer (giving effect to any extensions granted pursuant to the filing

 

30

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of a Form 12b-25 with the SEC), and (z) in cooperation with counsel to the
Required Consenting Noteholders, have used commercially reasonable efforts to
obtain a listing on the New York Stock Exchange (“NYSE”) or NASDAQ Global Select
Market (“NASDAQ”) as promptly as possible following the Plan Effective Date; and

 

(l) The Backstop Agreement Closing Conditions (as defined in the Backstop
Agreement Term Sheet) shall have been satisfied or waived pursuant to the terms
of the Backstop Agreement on or before the Plan Effective Date and the proceeds
from the Rights Offering and the Incremental Liquidity Facility, if any, and all
amounts funded pursuant to the Backstop Agreement shall have been released to
the Company from the escrow account pursuant to the terms of the Rights Offering
Documents and the Backstop Agreement.

Rights Offering Backstop:    As set forth in the Backstop Agreement Term Sheet,
the Debtors and the Supporting Noteholders shall, consistent with Section 3 of
the PSA, negotiate, execute and deliver the Backstop Agreement (each such
Supporting Noteholder, a “Backstop Participant”). Reservation of Rights:   

Nothing herein shall be deemed an admission of any kind.

 

If the Restructuring is not consummated for any reason, the Debtors and the
Supporting Creditors fully reserve any and all of their respective rights.

No Registration Under the Securities Act:    The offer, issuance and
distribution of the Reorganized Key Common Stock pursuant to the Plan and the
Consensual Equity Exchange transactions contemplated by the PSA, this Plan Term
Sheet and the Backstop Agreement, will be exempt from registration under the
Securities Act pursuant to any available exception or exemption, including but
not limited to section 1145 of the Bankruptcy Code.

 

31

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Governing Law and Forum; Venue for Filing:   

The governing law for all applicable documentation shall be New York law.

 

The Debtors shall file for chapter 11 in the District of Delaware.

Retention of Jurisdiction:    The Plan will provide for the retention of
jurisdiction by the Bankruptcy Court for usual and customary matters.
Restructuring Timeline:    It is anticipated that the Restructuring described
herein will take place in accordance with the timeline set forth in the
Restructuring Timeline.

 

32

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Schedule 1

Restructuring Timeline

No later than 11:59 p.m. (Eastern Time) on:

 

1.   October 3, 2016:    Execute Backstop Agreement. 2.   October 4, 2016:   
Commence Solicitation of Plan and Rights Offering. 3.   November 4, 2016:   
Solicitation of Plan and Rights Offering expires. 4.   November 8, 2016:   
Petition Date and filing of Solicitation Materials. 5.   Petition Date + 3 days:
   Hearing to approve ‘first day’ motions. 6.   Petition Date + 5 Business Days:
   Interim Cash Collateral Order entered. 7.   Petition Date + 40 days:    Final
Cash Collateral Order entered. 8.   Scheduled for no later than sixty (60) days
after the Petition Date but must be concluded no later than sixty-five (65) days
after the Petition Date:    Confirmation Hearing to approve Plan, Disclosure
Statement, Solicitation procedures. 9.   Must be entered no later than five
(5) Business Days after conclusion of the Confirmation Hearing:    PSA
Assumption Order, Backstop Order and Confirmation Order entered. 10.   As
promptly as possible after entry of the Confirmation Order but not later than
ninety (90) days after the Petition Date:    Plan Effective Date.

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

Schedule 2

ABL Facility Detail

Schedule 2: ABL Facility Detail

 

 

Beneficiary

   Letters of
Credit Amount  

Ace Insurance

   $ 28,488,900   

Highland Insurance

     150,000   

Liberty Mutual Insurance

     9,643,788   

Bond Safeguard Insurance Company

     244,000      

 

 

 

Total

   $ 38,526,688      

 

 

 

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

Schedule 3

Term Loan Facility Detail

Schedule 3: Term Loan Facility Detail

 

 

Assumptions

  

Beginning Term Loan Balance Date

     7/1/2016   

Interest Payment

     7/6/2016   

PSA Date

     8/24/2016   

Filing Date

     10/2/2016   

Effective Date

     1/2/2017   

Term Loan Interest Rate

     10.250 % 

Term Loan Balance

  

Beginning Term Loan Balance (07/01/16)

   $ 299,523,135   

PSA Paydown (08/25/16) (1)

     (9,859,637 )    

 

 

 

Term Loan Balance (08/25/16)

     289,663,498   

Amortization Payment (09/30/16)

     (787,500 )    

 

 

 

Term Loan Balance at Filing (10/02/16)

     288,875,998   

Effective Date Paydown (01/02/17)

     (38,875,998 )    

 

 

 

Term Loan Balance at Effective Date (01/02/17)

   $ 250,000,000      

 

 

 

 

(1) Accrued interest of $140,363 on the $10 million of principal will be paid at
the time of the PSA signing.

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

Initial Rights Offering

 

($ in millions)

 

Pro Forma Equity Value

 

Company TEV

  $ 450   

Less: Pro Forma Debt at Emergence

    (250 ) 

Plus: Excess Cash After Rights Offering

    35     

 

 

 

Equity Value Post Rights Offering

  $ 235   

Less: Rights Offering New Money

    (85 )   

 

 

 

Pre-Rights Offering Equity Value

  $ 150   

Rights Offering Calculation

 

(A) Rights Offering Size

  $ 85   

Pre-Rights Offering Equity Value

  $ 150   

Rights Offering Discount

    25.0 % 

(B) Discounted Pre-Money Equity Value

  $ 113   

% Equity to Rights Offering Parties (A ÷ (A + B))

    43.0 % 

Percentage Put Premium (% of Pro Forma Equity)

    6.0 % 

Total Equity to Rights Offering and Percentage Put Premium Parties

    49.0 % 

Plan Value Price Per Share

 

Pre-Rights Offering Equity Value

  $ 150   

Shares Outstanding Before Rights Offering (incl. percentage put premium)

    6.2   

$ Per Share

  $ 24.21   

Rights Offering Price Per Share

 

Rights Offering Money Invested

  $ 85   

Rights Offering Shares Issued (not incl. percentage put premium)

    4.7   

$ Per Share

  $ 18.16   

Memo: Discount to Plan Value Per Share

    25.0 % 

 

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

Incremental Liquidity Shares - No Tranches of Incremental Liquidity Shares
Funded

 

($ in millions)

 

Pro Forma Equity Value - Pre-Incremental Liquidity Shares

 

Company TEV

  $ 450   

Less: Pro Forma Debt at Emergence

    (250 ) 

Plus: Excess Cash After Incremental Liquidity Shares Investment

    35     

 

 

 

Transaction Equity Value

  $ 235   

Less: Incremental Liquidity Shares New Money

    —       

 

 

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares Calculation - Tranche 1

 

Pre-Incremental Liquidity Shares Equity Value

    235   

Incremental Liquidity Shares 1 Discount

    —      

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

    235   

Incremental Liquidity Shares 1 New Money

    —     

Incremental Liquidity Shares 2 New Money - Undiscounted

    —     

Incremental Liquidity Shares 3 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

  $ 235   

Equity to Incremental Liquidity Shares 1

    —    

Incremental Liquidity Shares Calculation - Tranche 2

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    —      

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 2 New Money

    —     

Incremental Liquidity Shares 1 New Money - Undiscounted

    —     

Incremental Liquidity Shares 3 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

    235   

Equity to Incremental Liquidity Shares 2

    —    

Incremental Liquidity Shares Calculation - Tranche 3

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    —      

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 3 New Money

    —     

Incremental Liquidity Shares 1 New Money - Undiscounted

    —     

Incremental Liquidity Shares 2 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

  $ 235   

Equity to Incremental Liquidity Shares 3

    —    

Total Equity to Incremental Liquidity Shares

    —    

Dollar Put Premium

    6.0 % 

Total Incremental Liquidity Facility Commitment

  $ 25.0   

Dollar Put Premium ($)

    1.5   

Dollar Put Premium (%)

    0.6 % 

Total Equity to Incremental Liquidity Shares and Dollar Put Premium Parties

    0.6 % 

Price Per Share Pre-Incremental Liquidity Shares

 

Equity Value Post-Rights Offering

  $ 235   

Total Shares Post-Rights Offering

    10.9   

Increase in Percentage Put Premium and Dollar Put Premium

    0.1   

$ Per Share

  $ 21.46   

Incremental Liquidity Shares Tranche 1 - Price Per Share

 

Incremental Liquidity Shares Tranche 1 Money Invested

    —     

Incremental Liquidity Shares Tranche 1 Issued

    —     

$ Per Share

    N/A   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    N/A  

Incremental Liquidity Shares Tranche 2 - Price Per Share

 

Incremental Liquidity Shares Tranche 2 Money Invested

    —     

Incremental Liquidity Shares Tranche 2 Issued

    —     

$ Per Share

    N/A   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    N/A  

Incremental Liquidity Shares Tranche 3 - Price Per Share

 

Incremental Liquidity Shares Tranche 3 Money Invested

    —     

Incremental Liquidity Shares Tranche 3 Issued

    —     

$ Per Share

    N/A   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    N/A  

 

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

Schedule 4

Schedule of Reorganized Key Common Stock

Schedule 4: Reorganized Key Common Stock - No Tranches of Incremental Liquidity
Shares Funded

 

 

    After Rights Offering     After Incremental
Liquidity Shares     After Exercise of
4-Year Warrants     After Exercise of
5-Year Warrants       Shares(1)     % Total     Shares(1)     % Total    
Shares(1)     % Total     Shares(1)     % Total  

Notes Ownership

               

Senior Notes Exchange

    5,000,000        46.0 %      5,000,000        45.6 %      5,000,000       
43.3 %      5,000,000        41.1 % 

Rights Offering

    4,447,811        40.9 %      4,447,811        40.6 %      4,447,811       
38.5 %      4,447,811        36.6 % 

Percentage Put Premium

    652,713        6.0 %      657,175        6.0 %      657,175        5.7 %   
  657,175        5.4 % 

Dollar Put Premium

    —          —          69,912        0.6 %      69,912        0.6 %     
69,912        0.6 % 

Incremental Liquidity Shares - Tranche 1

    —          —          —          —          —          —          —         
—     

Incremental Liquidity Shares - Tranche 2

    —          —          —          —          —          —          —         
—     

Incremental Liquidity Shares - Tranche 3

    —          —          —          —          —          —          —         
—       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    10,100,523        92.8 %      10,174,898        92.9 %      10,174,898     
  88.0 %      10,174,898        83.7 % 

Shareholder Ownership

               

Reorganized Key Common Stock Distribution

    543,927        5.0 %      543,927        5.0 %      543,927        4.7 %   
  543,927        4.5 % 

Rights Offering

    234,095        2.2 %      234,095        2.1 %      234,095        2.0 %   
  234,095        1.9 % 

Incremental Liquidity Shares - Tranche 1

    —          —          —          —          —          —          —         
—     

Incremental Liquidity Shares - Tranche 2

    —          —          —          —          —          —          —         
—     

Incremental Liquidity Shares - Tranche 3

    —          —          —          —          —          —          —         
—     

4-Year Warrants

    —          —          —          —          604,612        5.2 %     
604,612        5.0 % 

5-Year Warrants

    —          —          —          —          —          —          604,612   
    5.0 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    778,023        7.2 %      778,023        7.1 %      1,382,634        12.0 % 
    1,987,246        16.3 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    10,878,546        100.0 %      10,952,921        100.0 %      11,557,532   
    100.0 %      12,162,144        100.0 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Shares of Reorganized Key Common Stock.

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

Incremental Liquidity Shares - Tranche 1 of Incremental Liquidity Shares Funded

 

($ in millions)

 

Pro Forma Equity Value - Pre-Incremental Liquidity Shares

 

Company TEV

  $ 450   

Less: Pro Forma Debt at Emergence

    (250 ) 

Plus: Excess Cash After Incremental Liquidity Shares Investment

    45     

 

 

 

Transaction Equity Value

  $ 245   

Less: Incremental Liquidity Shares New Money

    (10 )   

 

 

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares Calculation - Tranche 1

 

Pre-Incremental Liquidity Shares Equity Value

    235   

Incremental Liquidity Shares 1 Discount

    37.5 %   

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

    147   

Incremental Liquidity Shares 1 New Money

    10   

Incremental Liquidity Shares 2 New Money - Undiscounted

    —     

Incremental Liquidity Shares 3 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

  $ 157   

Equity to Incremental Liquidity Shares 1

    6.4 % 

Incremental Liquidity Shares Calculation - Tranche 2

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    —      

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 2 New Money

    —     

Incremental Liquidity Shares 1 New Money - Undiscounted

    16   

Incremental Liquidity Shares 3 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

    251   

Equity to Incremental Liquidity Shares 2

    —    

Incremental Liquidity Shares Calculation - Tranche 3

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    —      

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 3 New Money

    —     

Incremental Liquidity Shares 1 New Money - Undiscounted

    16   

Incremental Liquidity Shares 2 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

  $ 251   

Equity to Incremental Liquidity Shares 3

    —    

Total Equity to Incremental Liquidity Shares

    6.4 % 

Dollar Put Premium

    6.0 % 

Total Incremental Liquidity Facility Commitment

  $ 25.0   

Dollar Put Premium ($)

    1.5   

Dollar Put Premium (%)

    0.6 % 

Total Equity to Incremental Liquidity Shares and Dollar Put Premium Parties

    7.0 % 

Price Per Share Pre-Incremental Liquidity Shares

 

Equity Value Post-Rights Offering

  $ 235   

Total Shares Post-Rights Offering

    10.9   

Increase in Percentage Put Premium and Dollar Put Premium

    0.1   

$ Per Share

  $ 21.36   

Incremental Liquidity Shares Tranche 1 - Price Per Share

 

Incremental Liquidity Shares Tranche 1 Money Invested

  $ 10   

Incremental Liquidity Shares Tranche 1 Issued

    0.7   

$ Per Share

  $ 13.35   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    37.5 % 

Incremental Liquidity Shares Tranche 2 - Price Per Share

 

Incremental Liquidity Shares Tranche 2 Money Invested

    —     

Incremental Liquidity Shares Tranche 2 Issued

    —     

$ Per Share

    N/A   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    N/A  

Incremental Liquidity Shares Tranche 3 - Price Per Share

 

Incremental Liquidity Shares Tranche 3 Money Invested

    —     

Incremental Liquidity Shares Tranche 3 Issued

    —     

$ Per Share

    N/A   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    N/A  

 

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

Schedule 4: Reorganized Key Common Stock - Tranche 1 of Incremental Liquidity
Shares Funded

 

 

    After Rights Offering     After Incremental
Liquidity Shares     After Exercise of
4-Year Warrants     After Exercise of
5-Year Warrants       Shares(1)     % Total     Shares(1)     % Total    
Shares(1)     % Total     Shares(1)     % Total  

Notes Ownership

               

Senior Notes Exchange

    5,000,000        46.0 %      5,000,000        42.5 %      5,000,000       
40.5 %      5,000,000        38.6 % 

Rights Offering

    4,447,811        40.9 %      4,447,811        37.8 %      4,447,811       
36.0 %      4,447,811        34.3 % 

Percentage Put Premium

    652,713        6.0 %      705,122        6.0 %      705,122        5.7 %   
  705,122        5.4 % 

Dollar Put Premium

    —          —          71,951        0.6 %      71,951        0.6 %     
71,951        0.6 % 

Incremental Liquidity Shares - Tranche 1

    —          —          711,677        6.1 %      711,677        5.8 %     
711,677        5.5 % 

Incremental Liquidity Shares - Tranche 2

    —          —          —          —          —          —          —         
—     

Incremental Liquidity Shares - Tranche 3

    —          —          —          —          —          —          —         
—       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    10,100,523        92.8 %      10,936,562        93.1 %      10,936,562     
  88.5 %      10,936,562        84.3 % 

Shareholder Ownership

               

Reorganized Key Common Stock Distribution

    543,927        5.0 %      543,927        4.6 %      543,927        4.4 %   
  543,927        4.2 % 

Rights Offering

    234,095        2.2 %      234,095        2.0 %      234,095        1.9 %   
  234,095        1.8 % 

Incremental Liquidity Shares - Tranche 1

    —          —          37,457        0.3 %      37,457        0.3 %     
37,457        0.3 % 

Incremental Liquidity Shares - Tranche 2

    —          —          —          —          —          —          —         
—     

Incremental Liquidity Shares - Tranche 3

    —          —          —          —          —          —          —         
—     

4-Year Warrants

    —          —          —          —          607,275        4.9 %     
607,275        4.7 % 

5-Year Warrants

    —          —          —          —          —          —          607,275   
    4.7 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    778,023        7.2 %      815,479        6.9 %      1,422,755        11.5 % 
    2,030,030        15.7 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    10,878,546        100.0 %      11,752,041        100.0 %      12,359,316   
    100.0 %      12,966,592        100.0 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Shares of Reorganized Key Common Stock.

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

Incremental Liquidity Shares - Tranche 1 and 2 of Incremental Liquidity Shares
Funded

 

($ in millions)

 

Pro Forma Equity Value - Pre-Incremental Liquidity Shares

 

Company TEV

  $ 450   

Less: Pro Forma Debt at Emergence

    (250 ) 

Plus: Excess Cash After Incremental Liquidity Shares Investment

    55     

 

 

 

Transaction Equity Value

  $ 255   

Less: Incremental Liquidity Shares New Money

    (20 )   

 

 

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares Calculation - Tranche 1

 

Pre-Incremental Liquidity Shares Equity Value

    235   

Incremental Liquidity Shares 1 Discount

    37.5 %   

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

    147   

Incremental Liquidity Shares 1 New Money

    10   

Incremental Liquidity Shares 2 New Money - Undiscounted

    13   

Incremental Liquidity Shares 3 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

  $ 169   

Equity to Incremental Liquidity Shares 1

    5.9 % 

Incremental Liquidity Shares Calculation - Tranche 2

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    50.0 %   

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 118   

Incremental Liquidity Shares 2 New Money

    10   

Incremental Liquidity Shares 1 New Money - Undiscounted

    8   

Incremental Liquidity Shares 3 New Money - Undiscounted

    —       

 

 

 

Pro Forma Equity Value

    136   

Equity to Incremental Liquidity Shares 2

    7.4 % 

Incremental Liquidity Shares Calculation - Tranche 3

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    —      

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 3 New Money

    —     

Incremental Liquidity Shares 1 New Money - Undiscounted

    16   

Incremental Liquidity Shares 2 New Money - Undiscounted

    20     

 

 

 

Pro Forma Equity Value

  $ 271   

Equity to Incremental Liquidity Shares 3

    —    

Total Equity to Incremental Liquidity Shares

    13.3 % 

Dollar Put Premium

    6.0 % 

Total Incremental Liquidity Facility Commitment

  $ 25.0   

Dollar Put Premium ($)

    1.5   

Dollar Put Premium (%)

    0.6 % 

Total Equity to Incremental Liquidity Shares and Dollar Put Premium Parties

    13.9 % 

Price Per Share Pre-Incremental Liquidity Shares

 

Equity Value Post-Rights Offering

  $ 235   

Total Shares Post-Rights Offering

    10.9   

Increase in Percentage Put Premium and Dollar Put Premium

    0.2   

$ Per Share

  $ 21.24   

Incremental Liquidity Shares Tranche 1 - Price Per Share

 

Incremental Liquidity Shares Tranche 1 Money Invested

  $ 10   

Incremental Liquidity Shares Tranche 1 Issued

    0.8   

$ Per Share

  $ 13.27   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    37.5 % 

Incremental Liquidity Shares Tranche 2 - Price Per Share

 

Incremental Liquidity Shares Tranche 2 Money Invested

  $ 10   

Incremental Liquidity Shares Tranche 2 Issued

    0.9   

$ Per Share

  $ 10.62   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    50.0 % 

Incremental Liquidity Shares Tranche 3 - Price Per Share

 

Incremental Liquidity Shares Tranche 3 Money Invested

    —     

Incremental Liquidity Shares Tranche 3 Issued

    —     

$ Per Share

    N/A   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    N/A  

 

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

Schedule 4: Reorganized Key Common Stock - Tranche 1 and 2 of Incremental
Liquidity Shares Funded

 

 

    After Rights Offering     After Incremental
Liquidity Shares     After Exercise of
4-Year Warrants     After Exercise of
5-Year Warrants       Shares(1)     % Total     Shares(1)     % Total    
Shares(1)     % Total     Shares(1)     % Total  

Notes Ownership

               

Senior Notes Exchange

    5,000,000        46.0 %      5,000,000        39.2 %      5,000,000       
37.4 %      5,000,000        35.8 % 

Rights Offering

    4,447,811        40.9 %      4,447,811        34.9 %      4,447,811       
33.3 %      4,447,811        31.8 % 

Percentage Put Premium

    652,713        6.0 %      765,716        6.0 %      765,716        5.7 %   
  765,716        5.5 % 

Dollar Put Premium

    —          —          75,070        0.6 %      75,070        0.6 %     
75,070        0.5 % 

Incremental Liquidity Shares - Tranche 1

    —          —          715,798        5.6 %      715,798        5.4 %     
715,798        5.1 % 

Incremental Liquidity Shares - Tranche 2

    —          —          894,748        7.0 %      894,748        6.7 %     
894,748        6.4 % 

Incremental Liquidity Shares - Tranche 3

    —          —          —          —          —          —          —         
—       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    10,100,523        92.8 %      11,899,143        93.2 %      11,899,143     
  89.0 %      11,899,143        85.1 % 

Shareholder Ownership

               

Reorganized Key Common Stock Distribution

    543,927        5.0 %      543,927        4.3 %      543,927        4.1 %   
  543,927        3.9 % 

Rights Offering

    234,095        2.2 %      234,095        1.8 %      234,095        1.8 %   
  234,095        1.7 % 

Incremental Liquidity Shares - Tranche 1

    —          —          37,674        0.3 %      37,674        0.3 %     
37,674        0.3 % 

Incremental Liquidity Shares - Tranche 2

    —          —          47,092        0.4 %      47,092        0.4 %     
47,092        0.3 % 

Incremental Liquidity Shares - Tranche 3

    —          —          —          —          —          —          —         
—     

4-Year Warrants

    —          —          —          —          610,642        4.6 %     
610,642        4.4 % 

5-Year Warrants

    —          —          —          —          —          —          610,642   
    4.4 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    778,023        7.2 %      862,788        6.8 %      1,473,430        11.0 % 
    2,084,071        14.9 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    10,878,546        100.0 %      12,761,931        100.0 %      13,372,573   
    100.0 %      13,983,214        100.0 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Shares of Reorganized Key Common Stock.

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

Incremental Liquidity Shares - Tranche 1, 2 and 3 of Incremental Liquidity
Shares Funded

 

($ in millions)

 

Pro Forma Equity Value - Pre-Incremental Liquidity Shares

 

Company TEV

  $ 450   

Less: Pro Forma Debt at Emergence

    (250 ) 

Plus: Excess Cash After Incremental Liquidity Shares Investment

    60     

 

 

 

Transaction Equity Value

  $ 260   

Less: Incremental Liquidity Shares New Money

    (25 )   

 

 

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares Calculation - Tranche 1

 

Pre-Incremental Liquidity Shares Equity Value

    235   

Incremental Liquidity Shares 1 Discount

    37.5 %   

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

    147   

Incremental Liquidity Shares 1 New Money

    10   

Incremental Liquidity Shares 2 New Money - Undiscounted

    13   

Incremental Liquidity Shares 3 New Money - Undiscounted

    10     

 

 

 

Pro Forma Equity Value

  $ 179   

Equity to Incremental Liquidity Shares 1

    5.6 % 

Incremental Liquidity Shares Calculation - Tranche 2

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    50.0 %   

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 118   

Incremental Liquidity Shares 2 New Money

    10   

Incremental Liquidity Shares 1 New Money - Undiscounted

    8   

Incremental Liquidity Shares 3 New Money - Undiscounted

    8     

 

 

 

Pro Forma Equity Value

    143   

Equity to Incremental Liquidity Shares 2

    7.0 % 

Incremental Liquidity Shares Calculation - Tranche 3

 

Pre-Incremental Liquidity Shares Equity Value

  $ 235   

Incremental Liquidity Shares 1 Discount

    67.5 %   

 

 

 

Discounted Pre-Incremental Liquidity Shares Equity Value

  $ 76   

Incremental Liquidity Shares 3 New Money

    5   

Incremental Liquidity Shares 1 New Money - Undiscounted

    5   

Incremental Liquidity Shares 2 New Money - Undiscounted

    7     

 

 

 

Pro Forma Equity Value

  $ 93   

Equity to Incremental Liquidity Shares 3

    5.4 % 

Total Equity to Incremental Liquidity Shares

    17.9 % 

Dollar Put Premium

    6.0 % 

Total Incremental Liquidity Facility Commitment

  $ 25.0   

Dollar Put Premium ($)

    1.5   

Dollar Put Premium (%)

    0.6 % 

Total Equity to Incremental Liquidity Shares and Dollar Put Premium Parties

    18.5 % 

Price Per Share Pre-Incremental Liquidity Shares

 

Equity Value Post-Rights Offering

  $ 235   

Total Shares Post-Rights Offering

    10.9   

Increase in Percentage Put Premium and Dollar Put Premium

    0.2   

$ Per Share

  $ 21.14   

Incremental Liquidity Shares Tranche 1 - Price Per Share

 

Incremental Liquidity Shares Tranche 1 Money Invested

  $ 10   

Incremental Liquidity Shares Tranche 1 Issued

    0.8   

$ Per Share

  $ 13.21   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    37.5 % 

Incremental Liquidity Shares Tranche 2 - Price Per Share

 

Incremental Liquidity Shares Tranche 2 Money Invested

  $ 10   

Incremental Liquidity Shares Tranche 2 Issued

    0.9   

$ Per Share

  $ 10.57   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    50.0 % 

Incremental Liquidity Shares Tranche 3 - Price Per Share

 

Incremental Liquidity Shares Tranche 3 Money Invested

  $ 5   

Incremental Liquidity Shares Tranche 3 Issued

    0.7   

$ Per Share

  $ 6.87   

Memo: Discount to Price Per Share Pre-Liquidity Shares

    67.5 % 

 

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

Schedule 4: Reorganized Key Common Stock - Tranche 1, 2 and 3 of Incremental
Liquidity Shares Funded

 

 

    After Rights Offering     After Incremental
Liquidity Shares     After Exercise of
4-Year Warrants     After Exercise of
5-Year Warrants       Shares(1)     % Total     Shares(1)     % Total    
Shares(1)     % Total     Shares(1)     % Total  

Notes Ownership

               

Senior Notes Exchange

    5,000,000        46.0 %      5,000,000        36.9 %      5,000,000       
35.3 %      5,000,000        33.8 % 

Rights Offering

    4,447,811        40.9 %      4,447,811        32.8 %      4,447,811       
31.4 %      4,447,811        30.1 % 

Percentage Put Premium

    652,713        6.0 %      812,858        6.0 %      812,858        5.7 %   
  812,858        5.5 % 

Dollar Put Premium

    —          —          78,159        0.6 %      78,159        0.6 %     
78,159        0.5 % 

Incremental Liquidity Shares - Tranche 1

    —          —          719,047        5.3 %      719,047        5.1 %     
719,047        4.9 % 

Incremental Liquidity Shares - Tranche 2

    —          —          898,809        6.6 %      898,809        6.3 %     
898,809        6.1 % 

Incremental Liquidity Shares - Tranche 3

    —          —          691,392        5.1 %      691,392        4.9 %     
691,392        4.7 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    10,100,523        92.8 %      12,648,077        93.4 %      12,648,077     
  89.3 %      12,648,077        85.6 % 

Shareholder Ownership

               

Reorganized Key Common Stock Distribution

    543,927        5.0 %      543,927        4.0 %      543,927        3.8 %   
  543,927        3.7 % 

Rights Offering

    234,095        2.2 %      234,095        1.7 %      234,095        1.7 %   
  234,095        1.6 % 

Incremental Liquidity Shares - Tranche 1

    —          —          37,845        0.3 %      37,845        0.3 %     
37,845        0.3 % 

Incremental Liquidity Shares - Tranche 2

    —          —          47,306        0.3 %      47,306        0.3 %     
47,306        0.3 % 

Incremental Liquidity Shares - Tranche 3

    —          —          36,389        0.3 %      36,389        0.3 %     
36,389        0.2 % 

4-Year Warrants

    —          —          —          —          613,261        4.3 %     
613,261        4.2 % 

5-Year Warrants

    —          —          —          —          —          —          613,261   
    4.2 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total

    778,023        7.2 %      899,562        6.6 %      1,512,823        10.7 % 
    2,126,083        14.4 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    10,878,546        100.0 %      13,547,639        100.0 %      14,160,899   
    100.0 %      14,774,160        100.0 %   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Shares of Reorganized Key Common Stock.

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

KEY ENERGY SERVICES, INC.

PLAN TERM SHEET LIST OF EXHIBITS

 

1. Exhibit 1: New Term Loan Credit Agreement Term Sheet

 

2. Exhibit 2: Cash Collateral Order Term Sheet

 

3. Exhibit 3: Backstop Agreement Term Sheet

 

4. Exhibit 4: Corporate Governance Term Sheet

 

5. Exhibit 5: Form of Corporate Advisory Services Agreement

 

6. Exhibit 6: Terms of Warrants

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

PLAN TERM SHEET – EXHIBIT 1

SUMMARY OF TERMS AND CONDITIONS

KEY ENERGY TERM LOAN AGREEMENT

This Summary of Terms outlines all material terms of the exit term loan and
security agreement of Key Energy Services, Inc. (the “Exit Term Loan
Agreement”). Capitalized terms used and not defined herein have meanings
assigned to them in the existing Term Loan and Security Agreement, dated as of
June 1, 2015, among Key Energy Services, Inc., as Borrower, Cortland Capital
Market Services LLC, as Agent and lenders party thereto (the “Existing Term Loan
Agreement”).

 

Borrower:   Key Energy Services, Inc. as a reorganized company (the “Borrower”).
Guarantors:   Consistent with the Existing Term Loan Agreement, the Term Loans
shall be guaranteed by: (a) Key Energy Mexico, LLC as a reorganized company and
a Delaware limited liability company, (b) Key Energy Services, LLC as a
reorganized company and a Texas limited liability company and (c) each other
Person that guarantees payment or performance of the Obligations. Collateral:  

The definition of “Excluded Property” shall be amended by replacing
“$45,000,000” with “$5,000,000.” The assets in the SPV shall not count toward
the Excluded Property threshold.

 

Section 7.3 will be revised to reflect the following (the Collateral specified
below, the “Post-Closing Collateral” and the time periods relating thereto, the
“Post-Closing Collateral Period”):

 

    •  

The Obligors shall execute, deliver and record a Mortgage (and an opinion)
sufficient to create a perfected Lien in favor of the Agent on each owned real
property with a net book value greater than $250,000 located in TX, ND, NM, CA,
LA or OK within three months (with extensions to be granted by Agent not to be
unreasonably withheld, delayed or conditioned) following the Closing Date. Title
insurance shall be required only with respect to real properties with a net book
value in excess of $500,000 and only to the extent doing so does not require
obtaining new survey, zoning, appraisals, phase 1s, et cetera.

 

    •   The Obligors shall use commercially reasonable efforts to transfer all
leased real property and all owned real property (and in any event transfer
owned real property accounting for 90% of the aggregate net book value of all
applicable real property) not secured by a mortgage to a special purpose vehicle
(the “SPV”) (which shall not be required to be “bankruptcy remote” but which
shall be prohibited from incurring any indebtedness or other obligations or
granting any liens, other than customary

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

      exceptions related to maintenance of its corporate existence, intercompany
obligations subject to a subordination agreement, involuntary liens and claims,
etc.) within three months (with extensions to be granted by Agent not to be
unreasonably withheld, delayed or conditioned) following the Closing Date.
Commercially reasonable efforts shall not require the payment of consent or
similar fees to counterparties to leases or other contracts.    

•

  The Obligors shall use commercially reasonable efforts to create a perfected
Lien in favor of the Agent on each Vehicle that is not currently subject to a
perfected security interest in favor of the Agent within nine months (with
extensions to be granted by Agent not to be unreasonably withheld, delayed or
conditioned) following the Closing Date.    

•

  No leasehold mortgages will be required and no Related Real Estate Documents
shall be required with respect to any owned real property, other than properties
mortgaged as of the date hereof, and other than, as to properties with a net
book value in excess of $500,000 and subject to the first bullet point above,
title insurance. Documentation Principles:   The documentation for the Exit Term
Loan Agreement (the “New Exit Term Loan Documentation”) will be drafted by
Sullivan & Cromwell LLP and negotiated in good faith by the Borrower and the
Lenders, as promptly as reasonably practicable after the acceptance of this
Summary of Terms, will be based on the Existing Term Loan Agreement and related
documentation and except as otherwise set forth in this Summary of Terms shall
be consistent in all material respects with the Existing Term Loan Agreement,
will give effect to technical changes to cure any ambiguity or mistake, “fresh
start” accounting, the resolution of the FCPA Matter, the cancellation of the
Senior Notes on the effective date of the Prepackaged Plan, the amendment of the
ABL Credit Agreement on the effective date of the Prepackaged Plan and the
consummation of the transactions contemplated by the Prepackaged Plan and shall
be in a form such that, if and when executed and delivered, it is consistent
with this Summary of Terms and would not impair availability of the Term Loans
on the Closing Date if the conditions set forth in this Summary of Terms are
satisfied (collectively, the “Documentation Principles”). Agent:   Cortland
Capital Market Services LLC (in its capacity as agent for the Lenders, the
“Agent”).

 

-2-

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Lenders:   The financial institutions party to the Existing Term Loan Agreement
(the “Lenders”). Type and Amount of Term Loans:   $250,000,000 of term loans
(the “Term Loans”). Maturity:   Five (5) years from the Closing Date (as defined
herein). Amortization:   The amortization schedule in Section 5.2.1 will be
revised so that (i) the first amortization payment shall be due on the last day
of the first full Fiscal Quarter ending after the Closing Date and (ii) each
quarterly amortization payment, including the first amortization payment, shall
be in an amount of $625,000. Interest Rate:  

Applicable Margin: (a) 10.25% per annum in the case of LIBOR Loans and (b) 9.25%
per annum in the case of Base Rate Loans. The LIBOR “floor” shall equal 1.00%.

 

The Exit Term Loan Agreement shall permit the Borrower, at its option, to pay up
to 100 bps of interest in cash, “PIK” interest in the form of additional Term
Loans or any combination of the foregoing.

Applicable Premium:  

The schedule set forth in Section 5.5 with respect to the Applicable Premium
shall be revised so that if a repayment, prepayment or assignment requiring the
payment of the Applicable Premium is triggered then (i) if made prior to the
first anniversary of the Closing Date, the Make-Whole Amount shall be due, (ii)
if made on or after the first anniversary but prior to the second anniversary of
the Closing Date, a cash amount equal to the product of the principal amount of
the loan prepaid times 6.00% shall be due, (iii) if made on or after the second
anniversary but prior to the third anniversary of the Closing Date, a cash
amount equal to the product of the principal amount of the loan prepaid times
3.00% shall be due and (iv) if made on or after the third anniversary of the
Closing Date, then $0 shall be due.

 

 

-3-

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The definition of “Make-Whole Amount” shall be amended and restated as follows:

 

Make-Whole Amount: with respect to any Loan repaid or prepaid under Sections
5.3.1 or 5.3.2, accelerated pursuant to Section 12.2 or assigned under Section
14.4(a), on any prepayment, repayment, acceleration or assignment date, the
greater of:

     

(a)    1.0% of the principal amount of the Loan repaid, prepaid, accelerated or
assigned; and

     

(b)    the excess of:

 

(i) the present value at such repayment, prepayment or assignment date of (i)
the principal amount of such Loans, plus (ii) the Applicable Premium on such
Loan on the first anniversary of the Closing Date set forth in Section 5.5(b),
plus (iii) each required interest payment on such Loan from the date of such
repayment, prepayment or assignment (assuming that the rate for LIBOR Loans
prevailing at the time of the notice of repayment, prepayment or assignment
applies throughout such period) through the first anniversary of the Closing
Date (excluding accrued but unpaid interest to the date of such repayment,
prepayment or assignment), such present value to be computed using a discount
rate equal to the Treasury Rate plus 50 basis points discounted to the
repayment, prepayment or assignment date on a semi-annual basis (assuming a 360
day year consisting of twelve 30 day months), over

 

(ii) the principal amount of such Loans.

Incremental Facility:   The definition of “Incremental Amount” shall be amended
by replacing “$400,000,000” with “$0.” Voluntary Prepayments:   Consistent with
the Documentation Principles. Offer to Repurchase Loans:  

The following changes shall be made to:

 

Asset Disposition Offers: To add a 365 day customary reinvestment right
(including to use for capital expenditures) for up to $20,000,000 of Net Cash
Proceeds from Asset Dispositions per fiscal year and $40,000,000 in the
aggregate before an Asset Disposition Offer is required.

 

Excess Cash Flow: The first Excess Cash Flow payment will commence for the
Fiscal Year ending December 31, 2017.

 

Change of Control: The definition of “Change of Control” shall be amended to
carve out Platinum and its affiliates (and any group of which Platinum and its
affiliates are members so long as Platinum and its affiliates own a majority of
the Voting Stock held by the group).

Representations and Warranties:   Consistent with the Documentation Principles.

 

-4-

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

Affirmative Covenants:   Subject to the Documentation Principles, the
affirmative covenants will remain consistent with the Existing Term Loan
Agreement, except as set forth below:

Reporting:

  Subject to the Documentation Principles, clauses (a) and (b) of Section 10.1.2
will be revised so that:       •   Annual Financial Statements:           i.  
Required to be delivered by the earlier of (x) ninety (90) days after the end of
each Fiscal Year and (y) the date by which the Borrower is required to file its
annual report on Form 10-K with the SEC; and           ii.  

The “going concern” qualification to conform to the ABL facility.

 

      •   Quarterly Financial Statements:           i.   Required to be
delivered within sixty (60) days after the end of each Fiscal Quarter (other
than fourth Fiscal Quarter).      

•

  Information Regarding Obligors: Notice to be provided within three (3)
Business Days after the occurrence of each of the items listed in clause (k) of
Section 10.1.2.       •   PP&E Value Reports: Section 10.1.2(m)(i) shall be
amended and restated as follows: “Concurrently with any delivery of financial
statements under Section 10.1.2(a) or financial statements for any quarter
ending June 30 under Section 10.1.2(b), a PP&E Value Report evaluating the Term
Priority Collateral and setting forth the PP&E Value (before any adjustments
contemplated by the proviso set forth in the definition thereof) with respect
thereto as of a date to be no earlier than 45 days prior to the last day of the
period covered by such financial statements, together with a certification from
the Borrower that such PP&E Value Report is true and accurate and has been
prepared in accordance with the procedures used in the immediately preceding
PP&E Value Report; provided that (A) the PP&E Value Report to be delivered in
connection with annual financials shall reflect appropriate field examinations
with respect to the Term Priority Collateral and (B) otherwise, the PP&E Value
Report may consist of a desktop appraisal, in each case, prepared by an Accepted
Appraiser. After receipt of the PP&E Value Report, the Agent will have ten (10)

 

-5-

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

       

Business Days to review it. The Agent will deliver notice to the Borrower on or
prior to the tenth (10th) Business Day after receipt of the PP&E Value Report
specifying in reasonable detail all disputed items with respect to such report
and the basis therefor. If the Agent fails to deliver such notice in such ten
(10) Business Day period, the Agent will have waived their right to contest the
PP&E Value Report. If the Agent notifies the Borrower of any objections to the
PP&E Value Report in such ten (10) Business Day period, the parties will, within
ten (10) days following the date of such notice, attempt to resolve their
differences and any written resolution by them as to any disputed amount will be
final and binding for all purposes under this Agreement. If at the conclusion of
such ten (10) day period (the “Resolution End Date”) the parties have not
reached an agreement on any objections with respect to the PP&E Value Report,
then the Agent may request an additional PP&E Value Report prepared at the
expense of the Borrower from another Accepted Appraiser selected and engaged by
the Agent based on new field examinations with respect to the Term Priority
Collateral (an “Interim PP&E Value Report”). If the Interim PP&E Value Report is
delivered to the Agent on or prior to the 50th Business Day following the
Resolution End Date, the results thereof shall apply for all purposes of this
Agreement. If such Interim PP&E Value Report is not delivered within such
period, then the initial PP&E Value Report shall apply.

 

Section 10.1.2(m)(ii) shall be amended and restated as follows: “In addition to
the foregoing, at any time upon the request of the Required Lenders (not to be
exercised more than once in any Fiscal Year), the Agent may request an Interim
PP&E Value Report. After receipt of an Interim PP&E Value Report, the Borrower
will have ten (10) Business Days to review it. The Borrower will deliver notice
to the Agent on or prior to the tenth (10th) Business Day after receipt of the
Interim PP&E Value Report specifying in reasonable detail all disputed items
with respect to such report and the basis therefor. If the Borrower fails to
deliver such notice in such ten (10) Business Day period, the Borrower will have
waived

 

-6-

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

       

their right to contest the Interim PP&E Value Report. If the Borrower notifies
the Agent of any objections to the Interim PP&E Value Report in such ten (10)
Business Day period, the parties will, within ten (10) days following the date
of such notice, attempt to resolve their differences and any written resolution
by them as to any disputed amount will be final and binding for all purposes
under this Agreement. If by the Resolution End Date the parties have not reached
an agreement on any objections with respect to the Interim PP&E Value Report,
then the Borrower may request an updated Interim PP&E Value Report prepared at
the expense of the Borrower from another Accepted Appraiser selected and engaged
by the Borrower (the “Updated Interim PP&E Value Report”). If the Updated
Interim PP&E Value Report is delivered to the Agent on or prior to the 50th
Business Day following the Resolution End Date, the results thereof shall apply
for all purposes of this Agreement. If such Updated Interim PP&E Value Report is
not delivered within such period, then the initial Interim PP&E Value Report
shall apply.

 

“Accepted Appraiser” shall mean each of Great American Group, Tiger Valuation
Services, Hilco Appraisal Services and Gordon Brothers Corporation.

      •   Lender Calls: A new Section 10.1.21 shall be added as follows: “Unless
the Borrower holds a quarterly public earnings call with a “Q&A” component, the
Borrower shall participate in one conference call per quarter with the Agent and
the Lenders, collectively, in each case at such times as may be agreed to by the
Borrower and the Agent or the Required Lenders.”

Payment of Tax Obligations:

  The definition of “Properly Contested” shall be revised to remove “nor result
in forfeiture or sale of any assets of the Obligor”.

Insurance:

  Section 10.1.8 will be modified to require 10 days’ notice to the Agent for
cancellation due to non-payment.

Licenses Affecting Collateral:

  Section 10.1.19 shall be removed.

 

-7-

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

Negative Covenants:   Subject to the Documentation Principles, negative
covenants will remain consistent with the Existing Term Loan Agreement, except
as set forth below:

Debt:

  Section 10.2.1 shall be revised as follows:          •       Senior Notes:
Clause (f) with respect to the Senior Notes shall be deleted; and     •   FCCR
Investment: Clause (n)(ii) to be clarified so that assets with liens in favor of
the Agent are not excluded.     •   Permitted Junior Priority Secured Debt:
Clause (i) and related definitions to be revised (1) so that interest thereunder
must be PIK coupon only and (2) to provide for full payment subordination to the
Term Loans.     •   ABL Basket: Clause (h) shall be equal to (1) $100,000,000
under the amended ABL Credit Agreement, plus (2) up to $50,000,000 of
incremental ABL loans so long as the all-in-yield for such incremental ABL loans
(taking into account interest margins, upfront fees and OID, with upfront fees
and OID being equated to interest margins based on an assumed four-year life to
maturity and any underwriting, commitment, arrangement or other fees payable in
connection therewith, but exclusive of Base Rate and LIBOR (assuming a LIBOR
floor of no greater than 100 bps)) is no greater than 600 bps, all subject to a
borrowing base (x) based solely on “Eligible Accounts” (substantially as defined
in the ABL Credit Agreement as of the date hereof or as otherwise agreed with
the Term Lenders) and cash collateral and (y) with a maximum advance rate
against Eligible Accounts of 85%.

Distributions; Upstream Payments:

      The following definition of “Redemption” shall be added:       Redemption:
with respect to any Debt, the repurchase, redemption, prepayment, repayment, or
defeasance or any other acquisition or retirement for value (or the segregation
of funds with respect to any of the foregoing) of such Debt.

Sale of Properties:

  Section 10.2.9 shall be revised so that:     •   clause (d) permits “any sale,
transfer, lease or other disposition” (rather than just “transfer”) by
Subsidiaries/Guarantors to the Borrower/Guarantors and by non-Guarantors to
other non-Guarantors (rather than just by Subsidiaries/Guarantors to the
Borrower or Guarantor); and     •   any transactions contemplated by the
Prepackaged Plan on the Closing Date are permitted.

 

-8-

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

Transactions with Affiliates:

 

Section 10.2.10 shall be revised so that:

 

         •       accrual of management fees of $3,000,000 per year and payable
as follows: (i) beginning in 2017, paid on an annual basis out of retained ECF
and (ii) beginning in 2018, can also be paid without limit if the leverage ratio
is below 2.0x; and     •   up to $1,000,000 per year of out-of-pocket expenses
of Platinum and its affiliates may be reimbursed. Financial Maintenance
Covenants:        

Asset Coverage Ratio:

  Section 10.3.1 and the related definitions shall be revised so that:     •  
the numerator of the Asset Coverage Ratio shall only include Term Priority
Collateral in which the Agent has a perfected security interest; provided that,
for purposes of the Asset Coverage Ratio, the Post-Closing Collateral shall be
deemed perfected during the Post-Closing Collateral Period and all real property
transferred to the SPV shall be deemed perfected;     •   the Asset Coverage
Ratio test shall be changed from 1.50x to 1.35x;     •   the definition of the
PP&E Value shall be revised so that it includes all cash and Cash Equivalents
deposited in the TL Proceeds and Priority Collateral Account (rather than in
excess of $100,000,000) and the Borrower will be able to make deposits from time
to time in such account, including up to an amount to be agreed on the Closing
Date; provided that (i) no such amounts constitute ABL Priority Collateral (as
defined in the Intercreditor Agreement) and (ii) Funds in the TL Proceeds and
Priority Collateral Account may be only transferred to other deposit accounts of
the Loan Parties if and to the extent such funds are to be disbursed to third
parties in accordance with the Exit Term Loan Agreement and, in such case, such
transfer shall occur substantially concurrently with or reasonably in advance of
such disbursement;     •   drafting shall be revised to make clear that Asset
Coverage Ratio is tested as of the last day of each Fiscal Quarter, but only
upon delivery of Compliance Certificate; and     •   the proviso at the end of
the Section shall only apply to clause (b) of Section 10.3.1 (i.e., cure by
prepayment of Term Loans).

 

-9-

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

Liquidity:

  Section 10.3.2 and the related definitions shall be revised so that:     •  
the minimum Liquidity test shall be $37,500,000 (rather than $100,000,000);    
•   minimum Liquidity shall only be tested on the last day of each Fiscal
Quarter and reported to Agent within ten (10) Business Days following the end of
such Fiscal Quarter;     •   cash and Cash Equivalents must comprise at least
$20,000,000 of Liquidity; and     •   definition of “Liquidity” shall continue
to include “Availability”.

Equity Cure:

  To be revised (i) to apply to both the Asset Coverage Ratio and Liquidity
financial maintenance covenants, (ii) to remove the requirement of no more than
one cure in any two Fiscal Quarters period and (iii) so that the amount of all
cash equity (which may be common or preferred equity or subordinated debt
reasonably satisfactory to the Lenders) contributed to the Borrower following
the last day of the applicable Fiscal Quarter and through the date that is no
more than ten (10) Business Days after the date upon which the applicable
financial certificate is delivered by the Borrower will, at the request of the
Borrower, be, as applicable, (a) an addition to Liquidity and (b) a
dollar-for-dollar reduction to the denominator (but will not be included in the
PP&E Value in the numerator) of the Asset Coverage Ratio. Events of Default:  

Definition of “Event of Default” shall be revised so that for Material Debt, it
is a cross-payment default and cross-default (but cross-acceleration to ABL
financial covenant).

 

To be modified (i) to provide that a default due to failure to deliver a
compliance certificate may not be cured, (ii) reduce the cure period in clause
(a) for failure to pay any interest, fee or other Obligation from 30 days to
five (5) Business Days and (iii) so that clause (e) includes any Security
Document ceasing to create a perfected and prior security interest in a material
portion of the Collateral in favor of the Agent.

Financial Definitions and Ratios:   Except as set forth herein, the definition
of EBITDA, Consolidated Net Income and any other financial definitions or any
financial ratios shall be consistent with the Existing Credit Agreement subject
to any changes mutually agreed to by the Borrower and the Lenders. Closing Date
and Conditions to Borrowing:   The effectiveness of the Exit Term Loan Agreement
on the Closing Date will be subject solely to the conditions expressly set forth
in Exhibit A to this Summary of Terms.

 

-10-

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Assignments and Participations:  

After the Closing Date, the Lenders will be permitted to assign Term Loans
(other than to Disqualified Institutions (to the extent the list of Disqualified
Institutions has been made available to all Lenders) or natural persons) with
the consent of the Borrower and the Agent (in each case not to be unreasonably
withheld, delayed or conditioned); provided that no consent of the Borrower
shall be required after the occurrence and during the continuance of an event of
default or in the case of assignments to other Lenders or Affiliated Lenders (to
the extent such Lenders or Affiliated Lenders have not subsequently been
designated as Disqualified Institutions). The deemed consent period for the
Borrower shall be ten (10) Business Days; provided that there shall be no deemed
consent with respect to any assignments to Disqualified Institutions.

 

The New Exit Term Loan Documentation shall provide that Term Loans may be
purchased by and assigned to Platinum or any of its Affiliates (for purposes of
this paragraph, other than the Borrower or any of its subsidiaries and other
than natural persons) on a non-pro rata basis through (a) open market purchases
(which includes privately negotiated transactions) and/or (b) Dutch auctions
open to all Lenders on a pro rata basis in accordance with customary procedures,
in each case, so long as no default or event of default has occurred; provided
that (i) Platinum and its Affiliates (each, an “Affiliated Lender”) (x) will not
receive information provided solely to Lenders and will not be permitted to
attend/participate in Lender-only conference calls or meetings (in each case in
their capacity as a lender), (y) will not have access to any electronic site
established for the Lenders or confidential communications from counsel to or
financial advisors of the Agent or Lenders and (z) will not be permitted to
receive advice of counsel to the Agent or the Lenders and will not, solely
acting in its capacity as an Affiliated Lender, have the right to challenge the
Lenders’ attorney-client privilege, (ii) for purposes of any amendment, waiver
or modification of the New Exit Term Loan Documentation that does not require
the consent of each Lender or each affected Lender and adversely affects such
Affiliated Lender in any material respect differently as compared to other
Lenders, Affiliated Lenders will be deemed to have voted in the same proportion
as non-affiliated Lenders voting on such matter, (iii) the Affiliated Lenders
shall agree that the Agent shall vote on behalf of the Affiliated Lenders in
connection with a plan of reorganization under any insolvency proceeding unless
the plan of reorganization affects the Affiliated Lender in its capacity as a
Lender in a disproportionally adverse manner than its effect on the other
Lenders, (iv) such loans owned or held by an Affiliated Lender shall not, in the

 

-11-

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aggregate, exceed 25% of the loans then outstanding under the Exit Term Loan
Agreement and (v) the applicable assignor shall make a representation to the
seller that it does not possess material non-public information with respect to
the Borrower and its subsidiaries that has not been disclosed to the Lenders
generally (other than Lenders that have elected not to receive such
information). For the avoidance of doubt, the limitations of the preceding
clauses (i) through (v) in the immediately preceding sentence shall not apply to
Debt Fund Affiliates and the Borrower and its respective subsidiaries; provided
that in any “Required Lender” vote, Debt Fund Affiliates cannot, in the
aggregate, account for more than 49.9% of the amounts included in determining
whether such consent or waiver has been obtained. Notwithstanding the foregoing,
the New Exit Term Loan Documentation shall permit (but not require) Platinum or
its Affiliates to contribute any loans under the Exit Term Loan Agreement
acquired to the Borrower or any of its subsidiaries for purposes of cancelling
such debt, which may include contribution (with the consent of the Borrower) to
the Borrower (whether through any of its direct or indirect parent entities or
otherwise) in exchange for debt or equity securities of such parent entity or
the Borrower that are otherwise permitted to be issued by such entity at such
time, with any such contributed Term Loans being automatically and permanently
cancelled.

 

Debt Fund Affiliate: an Affiliated Lender that is a bona fide debt fund or an
investment vehicle that is primarily engaged in making, purchasing, holding or
otherwise investing in commercial loans, bonds and similar extensions of credit
in the ordinary course of business and with respect to which none of the
Borrower or the Affiliated Lenders or any Affiliate of the Borrower or the
Affiliated Lenders makes investment decisions or has the power, directly or
indirectly, to direct or cause the direction of such Affiliated Lender’s
investment decisions.

 

Disqualified Institutions: Disqualified Institutions: (a) (i) persons identified
by name in writing to the Agent by the Borrower on the Closing Date and,
thereafter, (ii) any strategic competitor of the Borrower or any of its
subsidiaries, in each case of this clause (a)(ii), identified by name in writing
to the Agent by the Borrower from time to time (provided that (A) any person
who, together with its affiliates, owns more than 20% of the equity securities
of any person identified in subclause (ii) will not receive any private-side
information and (B) any person who, together with its affiliates, owns more than
50% of the equity securities of any person identified in subclause (ii) will not
have any voting rights, subject to customary exceptions) and (b) any Affiliate
of a person identified pursuant to clause (a) that is either (x) identified in
writing by the Borrower to the Agent or (y) readily identifiable by the

 

-12-

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Lenders or the Agent by name (excluding in the case of clauses (a) and (b),
affiliates that are bona fide debt funds or investment vehicles that purchase
commercial loans in the ordinary course of business and with respect to which
none of the persons identified in clauses (a) or (b)(other than such debt fund
affiliates or investment vehicles) makes investment decisions or has the power,
directly or indirectly, to direct or cause the direction of such debt fund
affiliate’s or investment vehicle’s investment decisions); it being understood
and agreed that the limitations set forth above shall not apply to, and the term
“Disqualified Institutions” shall not include, the Term Lenders as of the
Closing Date (or any of their affiliates).

 

In addition, the New Exit Term Loan Documentation shall provide that so long as
no event of default is continuing the Term Loans may be purchased by and
assigned to the Borrower or any of its subsidiaries on a non-pro rata basis
through (a) open-market purchases (which includes privately negotiated
transactions) and/or (b) Dutch auctions open to all Lenders on a pro rata basis
in accordance with customary procedures; provided that (1) no event of default
shall have occurred and be continuing, (2) any such Term Loans acquired by the
Borrower or any of its subsidiaries shall be retired and cancelled promptly upon
acquisition thereof (or contribution thereto, including as contemplated by the
preceding paragraph) and (3) the Borrower shall make a representation to the
seller that it does not possess material non-public information with respect to
the Borrower and its subsidiaries that has not been disclosed to the Lenders
generally (other than Lenders that have elected not to receive such
information).

Amendments:   To include customary amend and extend provisions, requiring only
the consent of the extending lenders. Governing Law and Jurisdiction:  
Consistent with the Documentation Principles. To be governed by New York law.

 

-13-

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EXHIBIT A

CONDITIONS PRECEDENT TO CLOSING

The initial extension of credit under the Exit Term Loan Agreement will be
subject to the satisfaction (or waiver) of the following conditions:

 

  (a) The New Exit Term Loan Documentation shall have been duly executed and
delivered to Agent by each of the signatories thereto, and each Obligor shall be
in compliance with all terms thereof.

 

  (b) Agent shall have received acknowledgments of all filings or recordations
necessary to perfect its Liens in the Collateral or arrangements reasonably
satisfactory to the Agent for such filings and recordations shall have been made
(and all filing and recording fees and taxes in connection therewith shall have
been duly paid or arrangements reasonably satisfactory to the Agent for the
payment of such fees and taxes shall have been made), as well as UCC and Lien
searches and other evidence reasonably satisfactory to Agent that such Liens are
the only Liens upon such Collateral, except Permitted Liens, in each case
subject to the post-closing collateral requirements.

 

  (c) Agent shall have received a true, correct and complete copy of the amended
ABL Credit Agreement and the aggregate amount of the commitments in respect of
ABL Loans shall not be less than $50,000,000.

 

  (d) Agent shall have received certificates, in form and substance reasonably
satisfactory to it, from a knowledgeable Senior Officer of the Borrower
certifying that, after giving effect to the initial Loans and transactions
hereunder, (i) the Borrower and the Obligors, taken as a whole, are Solvent;
(ii) no Default exists; (iii) the representations and warranties set forth in
the Exit Term Loan Agreement are true and correct in all material respects,
except to the extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
shall have been true and correct in all material respects on and as of such
earlier date); and (iv) the Borrower has complied with all agreements and
conditions to be satisfied by it under the New Exit Term Loan Documentation.

 

  (e) Agent shall have received a certificate of a duly authorized officer of
each Obligor, certifying (i) that attached copies of such Obligor’s Organic
Documents are true and complete, and in full force and effect, without amendment
except as shown; (ii) that an attached copy of resolutions authorizing execution
and delivery of the Loan Documents is true and complete, and that such
resolutions are in full force and effect, were duly adopted, have not been
amended, modified or revoked, and constitute all resolutions adopted with
respect to this credit facility; (iii) that an attached copy of the Confirmation
Order authorizing execution and delivery of the Definitive Restructuring
Documents, including the Exit Term Loan Agreement, is in full force and effect,
and not subject to a stay; and (iv) to the title, name and signature of each
Person authorized to sign the Exit Term Loan Agreement. Agent may conclusively
rely on this certificate until it is otherwise notified by the applicable
Obligor in writing.

 

  (f) Agent shall have received a customary written opinion of counsel to the
Borrower, in form and substance reasonably satisfactory to Agent.

 

  (g) Agent shall have received good standing certificates (to the extent
available in such Obligor’s jurisdiction of organization) for each Obligor,
issued by the Secretary of State or other appropriate official of such Obligor’s
jurisdiction of organization.

 

  (h) Agent shall have received copies of policies or certificates of insurance
for the insurance policies carried by the Borrower.

 

  (i) A Material Adverse Effect (as defined in the Backstop Agreement Term
Sheet) shall not have occurred after the date the Plan Support Agreement is
executed.

 

A-1

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  (j) The Borrower shall have paid all reasonable and documented fees and
expenses to be paid to Agent and Lenders on the Closing Date (provided that
invoices for expenses shall have been delivered to the Borrower at least two
(2) Business Days prior to the Closing Date).

 

  (k) (i) All conditions precedent to the confirmation and effectiveness of the
Prepackaged Plan set forth in the Plan Term Sheet and, once distributed in the
Solicitation, the Prepackaged Plan, shall have been satisfied or waived in
accordance with the terms thereof, (ii) the Bankruptcy Court shall have entered
the Confirmation Order, and such Confirmation Order shall be Final, (iii) the
effective date under the Prepackaged Plan shall have occurred (and all
conditions precedent thereto as set forth therein shall have been satisfied or
waived in accordance with the terms thereof), (iv) substantial consummation
under the Prepackaged Plan shall have occurred, and (v) no motion, action or
proceeding by any creditor or other party-in-interest to the Chapter 11 Cases
which could materially adversely affect the Prepackaged Plan, the consummation
of the Prepackaged Plan, the business or operations of the Borrower or the
transactions contemplated by this Agreement or the Prepackaged Plan shall be
pending.

 

  (l) Agent shall have received a certificate of a duly authorized Senior
Officer of the Borrower, demonstrating that, after giving effect to all payments
under the Prepackaged Plan (including on account of accrued and unpaid
professional fees and expenses, but not including any fees paid or to be paid in
connection with the Corporate Advisory Services Agreement (as defined in the
Plan Support Agreement)), on the effective date of the Prepackaged Plan, the
Debtors (as defined in the Plan Support Agreement) shall, on a pro forma basis
after giving effect to the funding of the Rights Offering and the Incremental
Liquidity Facility , if any (as such terms are defined in the Plan Term Sheet)
satisfy the Minimum Liquidity Threshold.

Minimum Liquidity Threshold means:

(x) $100 million, consisting of (A) at least $80 million, comprising
(i) unrestricted domestic cash (or cash equivalents), at least $70 million of
which must be deposited in the TL Proceeds and Priority Collateral Account (as
defined in the Existing Term Loan Agreement) plus (ii) Expected Asset Sale
Proceeds (as defined in the Backstop Agreement Term Sheet), if any, and
(B) Availability (as defined in the Existing Term Loan Agreement) under the
amended ABL Credit Agreement; or

(y) $110 million, consisting of (A) at least $75 million, comprising
(i) unrestricted domestic cash (or cash equivalents), at least $65 million of
which must be deposited in the TL Proceeds and Priority Collateral Account (as
defined in the Existing Term Loan Agreement) plus (ii) Expected Asset Sale
Proceeds, if any, and (B) Availability (as defined in the Existing Term Loan
Agreement) under the amended ABL Credit Agreement;

provided that no cash or cash equivalents shall be counted for purposes of
satisfying the Minimum Liquidity Threshold to the extent they (a) are held in a
foreign bank account or (b) serve to backstop letters of credit under the
amended ABL Credit Agreement.

 

  (m) Agent shall have received evidence that the Existing Term Loan Agreement
has been, or concurrently with the initial Term Loans on the Closing Date is
being, terminated and all Liens securing obligations under the Existing Term
Loan Agreement have been, or concurrently with the initial Term Loans on the
Closing Date are being, released.1

 

  (n) Agent shall have received, at least three Business Days prior to the
Closing Date, all documentation and other information required by Governmental
Authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including the PATRIOT Act, that has been reasonably
requested in writing at least 10 Business Days prior to the Closing Date by the
Lenders.

 

1  Provided in any case the Company and the Required Consenting Term Lenders may
mutually agree in their respective discretion to amend and restate the existing
term loans in conformity with this term sheet.

 

A-2

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Related New Definitions:

Bankruptcy Court: United States Bankruptcy Court for the District of Delaware.

Chapter 11 Cases: has the meaning assigned to such term in the Plan Support
Agreement.

Confirmation Order: has the meaning assigned to such term in the Plan Support
Agreement.

Definitive Restructuring Documents: has the meaning assigned to such term in the
Plan Support Agreement.

Final: has the meaning assigned to such term in the Plan Support Agreement.

Plan Support Agreement: the Plan Support Agreement (including the term sheets
and any other attachments thereto), entered into on August 24, 2016 among the
Borrower and the supporting holders party thereto, as may be amended, modified
or supplemented from time to time in accordance with the terms thereof.

Plan Term Sheet: has the meaning assigned to such term in the Plan Support
Agreement.

Prepackaged Plan: the “Plan”, as such term is defined in the Plan Support
Agreement.

Solicitation: has the meaning assigned to such term in the Plan Support
Agreement.

 

A-3

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PLAN TERM SHEET – EXHIBIT 2

KEY ENERGY RESTRUCTURING

CASH COLLATERAL TERM SHEET1

The terms and conditions are subject to definitive documentation in the form of
an interim order (the “Interim Order”) and final order (the “Final Order,” and
together with the Interim Order, the “Cash Collateral Orders”) in form and
substance acceptable to the Term Loan Agent, the Required Consenting Term
Lenders, the administrative agent for the ABL Facility (the “ABL Agent”) and,
the required percentage of lenders under the ABL Facility (the “Requisite ABL
Lenders”) approving the Debtors’ use of cash collections on the Debtors’
accounts receivable, including cash deposited in account #XXX07 at Bank of
America, N.A. and the cash deposited in account #XXX-XXX74 at Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the “TL Proceeds and Priority Collateral
Account”).

 

Term of Cash Collateral Use   Consensual use of cash collections on the Debtors’
accounts receivable and cash deposited in the TL Proceeds and Priority
Collateral Account through the earliest of (i) the Plan Effective Date, (ii) the
date a sale of substantially all assets is consummated, and (iii) (a) with
respect to the consent of the Term Loan Agent and Consenting Term Lenders, the
Outside Date, and (b) with respect to the consent of the ABL Agent and Requisite
ABL Lenders, the earlier of seventy-five (75) days after the Petition Date and
January 15, 2017 (if the Confirmation Order has been entered in the Chapter 11
Cases on or prior to the earlier of the 75th day after the Petition Date or
January 15, 2017, however, the applicable deadline shall be extended by fifteen
(15) days); provided that on such termination date, if all outstanding letters
of credit are not concurrently terminated or deemed reissued under an exit
facility acceptable to the ABL Secured Parties (as hereafter defined), then
Debtors shall deliver cash security for such letters of credit to the ABL Agent
in an amount equal to 105% of the aggregate outstanding LC Obligations (as
defined in the loan and security agreement for the ABL Facility (the “ABL Loan
Agreement”). The Debtors shall satisfy their foregoing cash collateralization
obligations (x) first, from the Segregated Cash, (y) second, from any other Cash
Collateral on which the ABL Secured Parties have a first lien, and (z) third,
from any other available cash other than Cash Collateral on which the Term
Lenders have a first priority lien; provided, further that to the extent this
cash collateralization obligation cannot be satisfied from the three enumerated
sources, the Debtors shall be deemed to have breached, and shall remain
obligated to comply with, such cash collateralization obligation. Adequate
Protection  

Debtors to provide adequate protection to the Holders of Term Loans (“Term
Lenders” and together with the Term Loan Agent, the “Term Loan Secured Parties”)
and Holders of Claims under the ABL Facility (“ABL Lenders” and together with
the ABL Agent, the “ABL Secured Parties”) in the form of:

 

Payments

 

  •   Payment of all accrued but unpaid pre-petition fees, interest at the
non-default contract rate (or in the case of payment obligations in respect of
honored Letters of Credit, the rate of interest set forth below) and other
amounts payable under the Term Loan Facility and the ABL Facility, as
applicable, including, with respect to the ABL Facility, any accrued but unpaid
unused line fee (prior to the effective date of the Limited Consent and Second
Amendment to Loan Agreement Consent and Amendment No. 3 to Limited Consent to
Loan Agreement and Forbearance Agreement (the “ABL Forbearance Agreement”)) and
per diem fee (from and after the effective date of the ABL Forbearance
Agreement) pursuant to section 3.2.1 of the ABL Loan Agreement. Current payment
of interest to the Term Lenders at the non-default contract rate (from the date
of filing through the Plan Effective Date). Rights reserved to assert claims for
default rate interest if the PSA is terminated.

 

1  Capitalized terms used but not otherwise defined in this term sheet have the
meanings set forth in the Plan Support Agreement dated August 24, 2016.

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

  •   Current payment of letter of credit fees, fronting fees, interest at the
non-default contract rate (or in the case of payment obligations in respect of
honored Letters of Credit, the interest rate set forth below), and all other
amounts payable under the ABL Facility (through the Plan Effective Date); it
being understood and agreed that no commitments shall be continuing under the
ABL Facility from and after the Petition Date, and the ABL Lenders’ only
obligations under the ABL Loan Agreement after such date shall be solely with
respect to draws under letters of credit in existence immediately prior to the
Petition Date.   •   The Debtors shall reimburse the Issuing Banks under (and as
defined in) the ABL Loan Agreement on the “Reimbursement Date” (as defined
therein) together with any interest at the base rate plus 5.50% per annum in
accordance with the terms thereof for any payment under a Letter of Credit
honored by the Issuing Banks (and the Cash Collateral Orders shall include a
covenant providing for such reimbursement, with the right to such reimbursement
being entitled to superpriority claim status as part of the ABL Secured Parties’
Adequate Protection Claim (as defined below)). The Debtors shall satisfy their
reimbursement obligations in respect of any honored Letter of Credit (i) first,
from the Segregated Cash, (ii) second, from any other Cash Collateral on which
the ABL Secured Parties have a first lien, and (iii) third, from any other
available cash other than Cash Collateral on which the Term Lenders have a first
priority lien. In the event the Debtors fail to satisfy their Letter of Credit
reimbursement obligations (whether because of the insufficiency of the foregoing
three enumerated sources or for any other reason), the Debtors shall be in
default of the Cash Collateral Order, and the Debtors’ right to use any Cash
Collateral on which the ABL Secured Parties have a first priority lien shall be
automatically terminated without further notice, application, hearing or order
of the court; provided, however, that if such Letter of Credit

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

    reimbursement obligations are repaid in full in cash by 11:00 am Central
time on the next business day with respect to draws as to which Debtors receive
notice of such draws after 3:00 pm Central time on the day on which the
applicable Letter of Credit was honored, then the Debtors’ right to use Cash
Collateral on which the ABL Secured Parties have a first priority lien shall be
reinstated as of the time of such repayment. In that event, (i) the ABL Secured
Parties shall be entitled, without further notice, application, hearing or order
of the court (and without any grace period), to exercise any and all rights and
remedies with respect to such Cash Collateral, including, without limitation,
the exercise of cash dominion rights under any deposit account control agreement
and the sweeping of all Cash Collateral on which the ABL Secured Parties have a
first priority lien for application to the Obligations (as defined in the ABL
Loan Agreement), and (ii) the Debtors shall immediately turn over to the ABL
Agent for application to such Obligations all Cash Collateral in which the ABL
Secured Parties have a first priority lien.   •   Current payment of all
outstanding prepetition and all postpetition reasonable and documented fees and
expenses incurred by (a) the Term Loan Agent, including the reasonable and
documented fees and expenses incurred by Davis Polk & Wardwell LLP, as counsel
to the Term Loan Agent, Evercore Partners LLC, as financial advisors to the Term
Loan Agent, and Richards, Layton & Finger, P.A., as local counsel to the Term
Loan Agent; (b) the ad hoc group of Term Lenders, including the reasonable and
documented fees and expenses of Cleary Gottlieb Steen & Hamilton LLP, as counsel
to the ad hoc group of Term Lenders; (c) the ABL Agent, including the reasonable
and documented fees and expenses incurred by Latham & Watkins LLP, as counsel to
the ABL Agent, and one local counsel to be selected by the ABL Agent; and (d)
Wells Fargo Bank, National Association, in its capacity as a Co-Collateral
Agent, Lender, and Issuing Bank under the ABL Loan Agreement (in such
capacities, “Wells Fargo”), including the reasonable and documented fees and
expenses incurred by Greenberg Traurig, LLP, as counsel to Wells Fargo.  
Replacement Liens   •   To the extent of any diminution in the value of their
security interests in the prepetition collateral (the “Prepetition Collateral”)
during the Chapter 11 Cases, liens on unencumbered assets and replacement liens
on all other assets (consistent with the Intercreditor Agreement) (together, the
“Adequate Protection Liens”). All Adequate Protection Liens to be automatically
perfected via cash collateral order.   •   No liens to be senior to or pari
passu with the Adequate Protection Liens (other than the Carve-Out (as defined
below) and any valid and perfected senior pre-petition liens), with relative
priorities in accordance with the Intercreditor Agreement as between Term Loan
Secured Parties and ABL Secured Parties with respect to the Prepetition
Collateral.

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  Superpriority Claims   •   To the extent of any diminution in the value of
their Prepetition Collateral, superpriority claims as provided for in
section 507(b) of the Bankruptcy Code (the “Adequate Protection Claims”). The
Adequate Protection Claim granted to the ABL Secured Parties and the Adequate
Protection Claim granted to the Term Loan Secured Parties shall be pari passu
with each other. No claims to be senior to or pari passu with Adequate
Protection Claims (other than the Carve-Out).   Other Protections:   •   The
Cash Collateral Orders shall provide that an amount equal to (a)(i) the
$18,605,000 pledged to the ABL Agent (such amount, together with any additional
amounts deposited following the date of the Plan Support Agreement in the
segregated cash or cash collateral accounts pledged to the ABL Agent, the
“Segregated Cash”) plus (ii) the sum of the Accounts Formula Amount (as defined
in the ABL Loan Agreement (but with Dilution Percent (as defined therein)
determined as of the close of business of each week for the four-week period
then ended)), minus (b) the Availability Reserve (as defined in the ABL Loan
Agreement, but including an additional Availability Reserve equal to the
Carve-Out) shall not at any time be less than 105% of the aggregate amount of
outstanding LC Obligations (the “Minimum Borrowing Base Covenant”).   •   The
Cash Collateral Orders (or another appropriate first day order) shall obligate
the Debtors to pay when due in the ordinary course all liabilities that are
supported by any Letter of Credit. Automatic Stay   Immediate and automatic
lifting of the automatic stay to permit enforcement of Cash Collateral Orders in
the event of a cash collateral termination event, subject to 5-business-day
grace period (except as provided in the Adequate Protection section of this Term
Sheet) for exercise of remedies against collateral, during which Debtors may
only contest whether a Cash Collateral Order termination event has occurred and
may only make necessary ordinary course operating expenditures (but without
waiver of the right to seek approval from the court of a new cash collateral
order). Budget/Reporting   Debtors to provide to Term Loan Agent, ABL Agent and
their advisors:   •   Reasonable budget covenant, including disbursements as set
forth in a 13-week cash disbursements and receipts budget, subject in each case
to permitted variances to be agreed upon.   •   Every week, reporting with an
updated 13-week budget and reconciliation against actual disbursements and
receipts.   •   Reporting consistent with the terms of the Term Loan Credit
Agreement and ABL Loan Agreement, including a Borrowing Base

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    Report by Wednesday of each week in the case of gross receivables and every
other Wednesday in the case of the full Borrowing Base, calculated as of the
close of business of the previous week in a manner reasonably satisfactory to
the ABL Agent, and all back-up and supporting calculations as provided in the
ABL Loan Agreement.   •   The initial budget and all amendments thereto shall be
in form and substance reasonably acceptable to the ABL Agent and Term Loan
Agent. Releases/Waivers   Cash Collateral Orders to contain:   •   Customary
stipulations by Debtors regarding validity, perfection, priority and absence of
defenses or counterclaims to liens securing the Term Loan Claims and ABL Claims.
  •   Customary stipulations by Debtors regarding validity, priority and absence
of defenses or counterclaims to Term Loan Claims and ABL Claims.   •   Customary
releases by Debtors of Term Loan Secured Parties and ABL Secured Parties.   •  
506(c) waiver, waiver of “equities of the case” exception under 552(b) and
marshaling waiver (subject in each case to the Carve-Out). Carve-Out   Cash
Collateral Orders to contain an agreed upon professional fee and UST fee
carve-out (the “Carve-Out”), which shall be subject to the budget, and shall be
limited to $3.5 million after the delivery of a Carve-Out trigger notice by ABL
Agent or the Term Loan Agent upon a cash collateral termination event. 11.74%2
of the Carve-Out shall be funded from collateral on which the ABL Agent has a
priority lien and 88.26% of the Carve-Out shall be funded from collateral on
which the Term Loan Agent has a priority lien. Termination Events   Cash
Collateral Orders to contain customary termination events for use of cash
collateral (including termination of the PSA) to be agreed among the Debtors,
the Requisite ABL Lenders and the Required Consenting Term Lenders, including
any actions in furtherance of any alternate plan not expressly permitted under
the PSA. Any termination of consensual use of cash collateral by the ABL Secured
Parties will terminate the consent of the Term Loan Secured Parties to use of
cash collateral, and vice versa. Purchase Card Program   The Cash Collateral
Orders (or first day cash management orders) will provide that the approximately
$3.0 million in cash pledged to Bank of America, N.A. or its affiliate to secure
the Debtors’ purchase card program would remain in place to provide assurance
that Bank of America, N.A. or its affiliate will be paid in full. Such orders
shall

 

2 

Based on $289,523,135 of outstanding term loans (per the Plan Support Agreement)
and $38,526,688 in outstanding letters of credit.

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

  further provide that Bank of America, N.A. or its affiliate shall be permitted
to offset any balance due under the purchase card program against such pledged
cash without relief from the automatic stay or further order of the bankruptcy
court, and will contain other customary protections.

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PLAN TERM SHEET – EXHIBIT 3

Backstop Agreement Term Sheet

Capitalized terms used herein and not otherwise defined have the meaning
ascribed to such terms in the Plan Term Sheet. Definitions shall apply to the
plural as well as the singular number.

 

Transaction Overview   Description:   Backstop Commitment Agreement (the
“Backstop Agreement”). Parties (each a “Party”):  

(a)   The Company, on behalf of itself and the Debtor Subsidiaries (together
with the Company, the “Debtors”); and

 

(b)   The certain Supporting Noteholders set forth on Schedule 1 hereto
(including, as applicable, any Transferees in accordance with the terms hereof,
each a “Backstop Participant”)

Rights Offering   Rights Offering Commitment:   On the terms and subject to the
conditions of the Backstop Agreement, and on the basis of the representations
set forth therein, each Backstop Participant shall commit, severally and not
jointly, to validly exercise its Rights to purchase 100% of its Noteholder
Primary Shares (as such amounts are set forth in Schedule 1 hereto, which shall
be updated as of the date the Backstop Agreement to reflect any permitted
transfers is executed and which shall be attached as a schedule thereto) in the
Rights Offering (the “Rights Offering Commitment”). Backstop   Backstop
Commitment:   On the terms and subject to the conditions of the Backstop
Agreement, and on the basis of the representations set forth therein, each
Backstop Participant, severally and not jointly, shall grant to the Company an
option (collectively, the “Put Option”) to require such Backstop Participant, in
the event such

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Backstop Participant’s Call Option (defined below) has not been validly
exercised, to purchase from the Company on the Plan Effective Date, its Initial
Backstop Pro Rata Share (defined below) of the sum of the Aggregate Noteholder
Primary Shares and the Aggregate Equity Holder Primary Shares that are not
subscribed and paid for in full pursuant to the Rights Offering, if any (such
unsubscribed shares, the “Unsubscribed Shares”), at a per share price equal to
the Rights Offering Per Share Price (the “Backstop Commitment”).

 

For the avoidance of doubt, to the extent a Backstop Participant duly exercises
its Call Option during the Call Option Exercise Period and actually acquires the
Unsubscribed Shares subject to such Call Option, the corresponding Put Option
with respect to such Unsubscribed Shares shall terminate automatically upon the
completion of such Backstop Participant’s purchase of the Unsubscribed Shares
subject to such Call Option, and any exercise of the Put Option with respect to
such Unsubscribed Shares shall be cancelled automatically, without any further
action by either the Company or any Backstop Participant.

 

In the event a Call Option with respect to Unsubscribed Shares has not been
validly exercised during the Call Option Exercise Period, the corresponding Put
Option with respect to such Unsubscribed Shares shall be exercisable during the
time between the end of the Call Option Exercise Period and five (5) Business
Days thereafter (the “Put Option Exercise Period”). The Company shall be deemed
to have exercised the Put Option in full at the end of the Put Option Exercise
Period unless the Company shall have given written notice on or prior to such
date that it has elected not to exercise the Put Option. Any such election by
the Company not to exercise the Put Option shall not be

 

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effective and shall be void ab initio unless consented to in writing by the
Required Consenting Term Lenders.

 

In addition to the foregoing, each Backstop Participant’s obligations with
respect to its Put Option shall terminate automatically, without any further
action by either the Company or any Backstop Participant, if (a) the Company has
given written notice, with the prior written consent of the Required Consenting
Term Lenders, to the Backstop Participants that it has elected not to exercise
the Put Option, or (b) upon termination of the Backstop Agreement by all Parties
thereto subject to the limitations and consent rights applicable to Mutual
Terminations (solely with respect to the Company) and Company Terminations (each
as defined below).

Backstop Participant Holdings:   Schedule 1 hereto, which shall be updated as of
the date the Backstop Agreement to reflect any permitted transfers and which
shall be attached as a schedule thereto, sets forth with respect to each
Backstop Participant (i) its Initial Backstop Pro Rata Share (as defined below),
(ii) the amount of its Noteholder Primary Shares and (iii) the aggregate
principal amount of the Senior Notes Claims beneficially owned by such Backstop
Participant as of the date of the PSA. Backstop Pro Rata Allocation:   Each
Backstop Participant will be allocated a portion of each of the Put Option and
the Call Option equal to its Initial Backstop Pro Rata Share (defined below) of
the Unsubscribed Shares plus any portion of the Call Option and Put Option
acquired by such Backstop Participant due to the exercise of a Post-Default
Subscription Right, a Post-Default Noteholder Call Option Assumption Right, or a
Post-Termination Subscription Right (with respect to each Backstop Participant,
the “Backstop Pro Rata Allocation”).

 

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“Initial Backstop Pro Rata Share” means, with respect to each Backstop
Participant and as set forth on Schedule 1 hereto (which shall be updated as of
the date the Backstop Agreement to reflect any permitted transfers is executed
and which shall be attached as a schedule thereto), a percentage equal to
(a) the aggregate principal amount of the Senior Notes Claims beneficially owned
by such Backstop Participant divided by (b) the aggregate principal amount of
the Senior Notes Claims beneficially owned by all Backstop Participants, in each
case, as of the date of the PSA.

 

“Backstop Pro Rata Share” means, with respect to each Backstop Participant, a
percentage equal to its Backstop Pro Rata Allocation divided by (b) the
aggregate Backstop Pro Rata Allocation of all Backstop Participants.

Backstop Participant Default Backstop:   If any Backstop Participant defaults on
its Backstop Commitment obligations under the Backstop Agreement (such default,
a “Backstop Participant Default,” and such Backstop Participant a “Defaulting
Backstop Participant”), each non-defaulting Backstop Participant (a
“Non-Defaulting Backstop Participant”) shall have the right (the “Post-Default
Subscription Right”), but not the obligation, to within five (5) Business Days
of the Backstop Participant Default, assume and exercise up to 100% the
Defaulting Backstop Participant’s rights and obligations under the Backstop
Agreement, including the Backstop Commitment, Call Option Commitment, Call
Option rights, and Put Option obligations, to be allocated to each
Non-Defaulting Backstop Participant based on its Backstop Pro Rata Share
(adjusted, as applicable, for the removal of any terminating or defaulting
Backstop Participant and any Backstop Participant not wishing to exercise its
Post-Default Subscription Right) on the terms and subject to the conditions set
forth in the Backstop Agreement.

 

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In the event the Non-Defaulting Backstop Participants in the aggregate elect to
assume and exercise more than 100% of the Defaulting Backstop Participant’s
rights and obligations under the Backstop Agreement, the allocation of such
rights and obligations to each Non-Defaulting Backstop Participant shall be
adjusted proportionate to their respective Backstop Pro Rata Shares, so that the
aggregate allocation to the Non-Defaulting Backstop Participants equals 100% of
the Defaulting Backstop Participant’s rights and obligations under the Backstop
Agreement.

 

For the avoidance of doubt, the assumption by any Non-Defaulting Backstop
Participant of any Defaulting Backstop Participant’s obligations under the
Backstop Agreement shall not relieve such Defaulting Backstop Participant of its
liability for breach of the Backstop Agreement.

Backstop Commitment Payments:   The Backstop Agreement shall include customary
procedures for the establishment of an escrow account to which each Backstop
Participant shall deliver and pay the aggregate purchase price for the amount of
Noteholder Primary Shares, Unsubscribed Shares, if any, Incremental Liquidity
Facility Shares, if any, and Unsubscribed Incremental Liquidity Facility Shares,
if any to be purchased by such Backstop Participant pursuant to its obligations
under the Backstop Agreement, which funds shall be released from the escrow
account to the Company only upon the occurrence of the closing of the Backstop
Commitments (the “Closing”), which shall take place on the date on which all of
the Backstop Agreement Closing Conditions (defined below) have been satisfied or
waived pursuant to the terms of the Backstop Agreement. The date on which the
Closing actually occurs shall be referred to herein as the “Closing Date.”

 

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In connection with obtaining ‘first day’ relief, the Company shall obtain an
order of the Bankruptcy Court, in form and substance reasonably satisfactory to
the Parties, confirming all amounts on deposit do not constitute property of the
Debtors’ estates pending release to the Company in accordance with the Backstop
Agreement, and such amounts shall be irrevocably released to any Person funding
such amounts into the escrow account as and when required pursuant to the terms
hereof and of the Rights Offering Documents.

 

All such payments to the escrow account shall be paid in immediately available
funds on a date to be agreed by the Required Backstop Participants (defined
below), which date shall be no later than three (3) Business Days after the date
on which the Plan Confirmation Order is entered by the Bankruptcy Court.

 

All funds held in the escrow account shall be released to the Backstop
Participants, and each Backstop Participant shall receive from the escrow
account the cash amount actually funded to the escrow account by such Backstop
Participant, plus any interest accrued thereon, promptly following the earlier
to occur of (i) in the event of a termination of the Backstop Agreement by such
Backstop Participant in accordance with its terms, within one (1) Business Day
thereof; and (ii) the Outside Date, if the Closing has not occurred on or before
such date.

Call Option:   On the terms and subject to the conditions of the Backstop
Agreement, the Company shall grant to each Backstop Participant an option
(collectively, the “Call Option”) to require the Company to sell to such
Backstop Participant on the Plan Effective Date, its

 

-6-

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Initial Backstop Pro Rata Share of the Unsubscribed Shares, at a per share price
equal to the Rights Offering Per Share Price.

 

The Backstop Agreement shall include customary procedures for the exercise of
the Call Option.

 

The Call Option shall be exercisable during the time between (i) the date of the
Backstop Agreement and (ii) ten (10) Business Days prior to the anticipated
Confirmation Hearing to approve the Plan (the “Call Option Exercise Period”).
Each Backstop Participant shall be deemed to have exercised its Call Option in
full at the end of the Call Option Exercise Period, unless such Backstop
Participant shall have given written notice to the Company on or prior to such
date that it has elected not to exercise its Call Option.

 

A Backstop Participant’s Call Option shall terminate automatically, without any
further action by either the Company or such Backstop Participant, if (a) the
Call Option Exercise Period expires without such Call Option having been
exercised, (b) in the event of a Backstop Participant Default or Backstop
Participant Termination with respect to such Backstop Participant, no other
Backstop Participant has assumed the Call Option, or (c) upon termination of the
Backstop Agreement with respect to such Party in accordance with its terms.

Call Option Commitment   The Backstop Participants agree amongst each other to
exercise their respective Call Options in the time period required by the
Backstop Commitment (the “Call Option Commitment”). Call Option Commitment
Default:   The Call Option Commitment shall provide that if any Backstop
Participant defaults on its Call Option Commitment (such default, a “Call Option
Commitment Default,” and such Backstop Participant a “Defaulting Call Option
Backstop Participant”), each non-defaulting

 

-7-

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Backstop Participant (each a “Non-Defaulting Call Option Backstop Participant”)
shall have the right (the “Post-Default Noteholder Call Option Assumption
Right”), but not the obligation, to, within five (5) Business Days of the Call
Option Commitment Default, assume and exercise up to 100% of the Defaulting Call
Option Backstop Participant’s rights and obligations under the Backstop
Agreement, including the Backstop Commitment, Call Option Commitment, Call
Option rights, and Put Option obligations, to be allocated to each
Non-Defaulting Call Option Backstop Participant based on its Backstop Pro Rata
Share (adjusted, as applicable, for the removal of the Defaulting Call Option
Backstop Participant and any Backstop Participant not wishing to exercise its
Post-Default Noteholder Call Option Assumption Right).

 

In the event the Non-Defaulting Call Option Backstop Participants in the
aggregate elect to assume and exercise more than 100% of the Call Option
Backstop Participant’s rights and obligations under the Backstop Agreement, the
allocation of such rights and obligations to each Call Option Backstop
Participant shall be adjusted proportionate to their respective Backstop Pro
Rata Shares, so that the aggregate allocation to the Non-Defaulting Call Option
Backstop Participants equals 100% of the Defaulting Call Option Backstop
Participant’s rights and obligations under the Backstop Agreement.

 

For the avoidance of doubt, the assumption by any Non-Defaulting Call Option
Backstop Participant of any Defaulting Call Option Backstop Participant’s
obligations under the Backstop Agreement shall not relieve such Defaulting Call
Option Backstop Participant of its liability for breach of the Backstop
Agreement.

 

-8-

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Backstop Agreement Representations, Warranties, Covenants and Conditions  
Company Representations and Warranties:  

Except as set forth in the disclosure schedules to be attached to the Backstop
Agreement, the Company, on behalf of itself and the other Debtors, shall
represent and warrant, subject to customary qualifications, to the following
usual and customary representations and warranties:

 

organization and qualification; corporate power and authority; execution and
delivery; enforceability; authorized and issued capital stock; no conflicts;
consents and approvals; arm’s length; compliant and timely (giving effect to any
extensions granted pursuant to the filing of a Form 12b-25 with the SEC) filing
all reports or other documents (including financial statements) required to be
filed or furnished to the SEC; no violation and compliance with laws; legal
proceedings; labor relations; intellectual property; real and personal property;
no undisclosed relationships; no undisclosed liabilities; absence of certain
changes; licenses and permits; environmental; taxes; liens; internal controls
over financial reporting; disclosure controls and procedures; FCPA compliance;
investment company act; employees and benefit plans; material contracts; no
unlawful payments; compliance with anti-money laundering laws; takeover
statutes; compliance with sanctions laws; no broker’s fees; filing of Disclosure
Statement with the Bankruptcy Court that shall conform in all material respects
with the Bankruptcy Code; insurance; and alternative transactions.

 

-9-

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Backstop Participant Representations and Warranties:   Each Backstop
Participant, severally and not jointly, shall represent and warrant, subject to
customary qualifications, to the following usual and customary representations
and warranties:   organization and qualification; corporate power and authority;
authorization; execution and delivery; enforceability; consents and approvals;
no registration; legal proceedings; no conflicts; sophistication and
investigation; no broker’s fee; votable claims; accredited investor and
sufficiency of funds. Covenants:  

(a)   The Debtors shall use commercially reasonable efforts to (i) obtain entry,
consistent with the Restructuring Timeline, of the Confirmation Order and an
order (which may be included in the Confirmation Order, the “Backstop Order”),
in form and substance reasonably satisfactory to the Required Backstop
Participants and the Debtors, approving the Rights Offering, the Rights Offering
Documents (including the Backstop Agreement) and the payment of the Put Premium
and Termination Fee, and cause such orders to become Final and (ii) to take or
cause to be taken all actions necessary or advisable in order to consummate the
transactions provided in the Backstop Agreement;

 

(b)   The Company shall be subject to customary business conduct covenants to
apply during the period (the “Pre-Closing Period”) from the (i) date of the PSA
to (ii) the earlier of (x) the Closing Date and (y) the date on which the
Backstop Agreement is terminated in accordance with its terms, including that
the Company shall, and shall cause each of the Debtor Subsidiaries to:

 

(A)   operate their businesses in the ordinary course in a manner consistent
with past practice in all material respects (other than any changes in
operations (i)

 

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resulting from or relating to the Plan or the proposed or actual filing of the
Chapter 11 Cases, (ii) imposed by the Bankruptcy Court or (iii) related to the
Specified Asset Sales as to which the Debtors have obtained prior written
consent from the Required Consenting Creditors, which consent shall not be
unreasonably withheld, conditioned or delayed; provided that such changes in
operations are, in the absence of such written consent, consistent with the
transactions contemplated by the Fundamental Implementation Agreements
(including the PSA) or Definitive Restructuring Documents);

 

(B)   not acquire or divest (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise), or file any motion or application seeking
authority to acquire or divest, (i) any corporation, partnership, limited
liability company, joint venture, or other business organization or division or
(ii) the Debtors’ assets, other than (w) related to the Specified Asset Sales as
to which the Debtors have obtained prior written consent from the Required
Consenting Creditors, which consent shall not be unreasonably withheld,
conditioned or delayed, (x) in the ordinary course of business in an aggregate
amount of less than $10 million, provided that such assets are no longer needed
for the Debtors’ operations, (y) as contemplated by the

 

-11-

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Fundamental Implementation Agreements (including the PSA) or Definitive
Restructuring Documents, or (z) with the advance written consent of the Required
Backstop Participants in their sole and absolute discretion.

 

(C)   use its commercially reasonable efforts to (i) preserve intact its
business, (ii) keep available the services of its officers and employees, and
(iii) preserve its material relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with the Company or
the Debtor Subsidiaries in connection with its business;

 

(D)   exercise, consistent with the terms and conditions of the Backstop
Agreement, complete control and supervision of the business of the Company and
the Debtor Subsidiaries; and

 

(E)   not (i) declare, set aside or pay any dividends or purchase, redeem, or
otherwise acquire, except in connection with the Plan, any shares of its capital
stock, (ii) issue, deliver, grant, sell, pledge or otherwise encumber any of its
capital stock or any convertible securities into its capital stock or any of its
assets, (iii) agree to acquire or acquire any assets unless consistent with the
Pro Forma 13-Week Budget and in the ordinary course consistent with past
practice, (iv) incur or guarantee any funded

 

-12-

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indebtedness (including any hedging obligations), (v) make any capital
expenditure during the Pre-Closing Period unless consistent with the Pro Forma
13-Week Budget and in the ordinary course consistent with past practice,
(vi) make, change or rescind any material election relating to taxes, except
elections consistent with past practice, (vii) adopt or amend any collective
bargaining agreement, (viii) enter into, amend the economic terms, scope or
duration of, or terminate any material employment agreement, or (ix) approve,
authorize, vest or make any payments under any incentive, severance, retention,
change of control, bonus or similar payment (including under the 2016 PIP) to
employees, including managers, outside the ordinary course of business. For the
avoidance of doubt, the board of directors of Reorganized Key shall make
decisions as to approving, authorizing, vesting or making any payments under the
2016 PIP.

 

(c)   The Company shall, during the Pre-Closing Period, afford the Parties and
their advisors, upon reasonable notice, reasonable access, during normal
business hours and without unreasonable disruption or interference with the
Company’s business or operations, to the Company’s employees, properties, books,
contracts and records;

 

-13-

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(d)   The Company shall timely file a Form D with the SEC with respect to the
Rights Offering Stock to the extent required under Regulation D of the
Securities Act and the rules and regulations of the SEC thereunder, and shall
provide, upon request, a copy thereof to each Backstop Participant;

 

(e)   The Company shall, and shall cause the Debtor Subsidiaries to, on or
before the Closing Date, take such action as is necessary or advisable to,
assuming the representations and warranties of the Backstop Participants in the
Backstop Agreement are true and correct, (i) make the Rights Offering and
transactions contemplated by the Fundamental Implementation Agreements comply
with U.S. securities laws and (ii) obtain an exemption for, or to qualify the
Reorganized Key Common Stock issued pursuant to the Rights Offering and the
Fundamental Implementation Agreements for, sale to the Backstop Participants
under applicable securities and “blue sky” laws of the states of the United
States (or to obtain an exemption from such qualification) and any applicable
foreign jurisdictions, and shall provide evidence of any such action so taken to
the Backstop Participants on or prior to the Closing Date;

 

(f)   Each Party agrees to use commercially reasonable efforts to take or cause
to be taken all steps necessary to ensure compliance with Antitrust Laws, with
respect to the transactions contemplated by the Fundamental Implementation
Agreements, including the Backstop Agreement, and, if applicable, shall file, or
cause to be filed, any filings required under Antitrust Laws that are necessary
to consummate and make effective the transactions contemplated by the
Fundamental Implementation

 

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Agreements, including the Backstop Agreement, as soon as reasonably practicable
and shall promptly furnish documents or information reasonably requested by any
antitrust, anti-monopoly, anti-competition or other similar governmental
authority in any jurisdiction;

 

(g)   Each Party agrees to treat the Call Option and the Put Option as options
for U.S. federal income tax purposes; and

 

(h)   The Company shall (x) timely comply with all reporting obligations under
applicable securities laws (giving effect to any extensions granted pursuant to
the filing of a Form 12b-25 with the SEC), (y) not become a delinquent filer
(giving effect to any extensions granted pursuant to the filing of a Form 12b-25
with the SEC) and (z) in cooperation with counsel to the Required Consenting
Noteholders, use commercially reasonable efforts to obtain a listing on the NYSE
or NASDAQ as promptly as possible following the Plan Effective Date.

Conditions to Backstop Participant Obligations:  

The obligations of each Backstop Participant under the Backstop Agreement
(including obligations to fund amounts due in respect of the Call Option or the
Put Option) and the release of any amounts to the Company from the escrow
account at the Closing shall be subject to the satisfaction or waiver on or, as
otherwise specified below, prior to the Closing Date of usual and customary
conditions, as well as such other conditions that are satisfactory to and agreed
upon by the Parties, including the following (the “Backstop Participant Closing
Conditions”):

 

(a)   The PSA shall not have been terminated;

 

(b)   The Rights Offering shall have been conducted in all material respects in
accordance with the Rights Offering Documents and the Fundamental Implementation
Agreements;

 

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(c)   All shares of Reorganized Key Common Stock issued under the Plan,
including pursuant to the Rights Offering shall be, upon payment of the
applicable purchase price as provided in the Rights Offering Documents and the
Fundamental Implementation Agreements, validly issued and outstanding, and free
and clear of all withholding taxes, liens, pre-emptive rights, rights of first
refusal, subscription and similar rights other than as set forth in the New Key
Constituent Documents and the Investor Rights Agreement;

 

(d)   After giving effect to all payments under the Plan (including on account
of accrued and unpaid professional fees and expenses, but not including any fees
paid or to be paid in connection with the Corporate Advisory Services
Agreement), on the Plan Effective Date, the Debtors shall, on a pro forma basis
after giving effect to the funding of the Rights Offering and the Incremental
Liquidity Facility, if any, satisfy the Minimum Liquidity Threshold.

 

“Minimum Liquidity Threshold” means:

 

(x) $100 million, consisting of (A) at least $80 million, comprising
(i) unrestricted domestic cash (or cash equivalents), at least $70 million of
which must be deposited in the TL Proceeds and Priority Collateral Account (as
defined in the Term Loan Credit Agreement) plus (ii) Expected Asset Sale
Proceeds1, if any, and (B) Availability

 

1  “Expected Asset Sale Proceeds” means any cash proceeds payable in connection
with a Specified Asset Sale pursuant to one or more fully-executed purchase
agreements which (i) contain no material financial or diligence conditions to
closing, and (ii) are contracted to close within 30 calendar days after the Plan
Effective Date; provided, however, that, unless the Required Backstop
Participants have consented to the waiver of such condition, such cash proceeds
must be held in escrow at a nationally chartered U.S. bank pursuant to an escrow
agreement requiring payment of such proceeds to the Debtors or Reorganized
Debtors upon the closing of the Specified Asset Sale within 30 calendar days
after the Plan Effective Date, subject only to a failure to obtain the approval
of any governmental entity on the basis of any applicable Antitrust Laws.

 

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(as defined in the Term Loan Credit Agreement) under the New ABL Agreement; or

 

(y) $110 million, consisting of (A) at least $75 million, comprising
(i) unrestricted domestic cash (or cash equivalents), at least $65 million of
which must be deposited in the TL Proceeds and Priority Collateral Account plus
(ii) Expected Asset Sale Proceeds, if any, and (B) Availability under the New
ABL Agreement;

 

provided that no cash or cash equivalents shall be counted for purposes of
satisfying the Minimum Liquidity Threshold to the extent they (a) are held in a
foreign bank account or (b) serve to backstop letters of credit under the New
ABL Agreement.

 

(e)   The Company shall have completed all acts required to be completed by the
Company under the FCPA Resolution, including payment of all amounts due
thereunder, and the FCPA Resolution shall be in full force and effect, as of the
Petition Date;

 

(f)   The Bankruptcy Court shall have entered a Backstop Order in form and
substance reasonably satisfactory to the Required Backstop Participants and the
Debtors and such order shall be Final;

 

(g)   The conditions to the occurrence of the Plan Effective Date as set forth
in the

 

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Plan and in the Confirmation Order shall have been satisfied or waived in
accordance with the terms thereof and the Plan;

 

(h)   All governmental and material third party notifications, filings,
consents, waivers and approvals required for the consummation of the
transactions contemplated by the Fundamental Implementation Agreements,
including the Backstop Agreement, shall have been made or received, including
approval under applicable Antitrust Laws;

 

(i)   No final judgment, injunction, decree or other material legal restraint
shall have been enacted, adopted or issued by a governmental entity of competent
jurisdiction that prohibits the consummation of the Plan, the Rights Offering or
the transactions contemplated by the Fundamental Implementation Agreements,
including the Backstop Agreement, and/or the Definitive Restructuring Documents
substantially on the terms and conditions set forth in the PSA.

 

(j)   The representations and warranties of each Debtor contained in the
Backstop Agreement qualified as to materiality shall be true and correct, and
those not so qualified shall be true and correct in all material respects, at
and as of the date on which all other conditions have been satisfied or waived
with the same effect as if made on and as of such date (except for such
representations and warranties made as of a specified date, which shall be true
and correct only as of the specified date), except where the failure to be so
true and correct would not reasonably be expected to constitute, individually or
in the aggregate, a Material Adverse Effect. For purposes of

 

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this Backstop Agreement Term Sheet, “Material Adverse Effect” means (i) any
fact, event, change, effect, development, circumstance or occurrence (each an
“Event”) that, individually or together with any other Event, has had or could
reasonably be expected to have a material and adverse effect on the condition
(financial or otherwise), business, assets, liabilities or results of operations
of the Debtors taken as a whole or (ii) any Event that could reasonably be
expected to prevent, materially delay or materially restrict or impair the
Debtors from executing the Definitive Restructuring Documents or consummating
the transactions contemplated in the Fundamental Implementation Agreements,
including the Backstop Agreement, other than, in the case of each of (i) and
(ii), the commencement of the Chapter 11 Cases and any reasonably anticipated
effects of the commencement or prosecution of the Plan;

 

(k)   Each Party shall have performed and complied, in all material respects,
with all of its covenants and agreements contained in the Backstop Agreement and
in any other document delivered pursuant to the Backstop Agreement; provided
that if the failure to comply is caused by a Backstop Participant Default, this
condition shall be satisfied if either (i) the Defaulting Backstop Participant’s
obligations pursuant to the Backstop Agreement have been assumed by
Non-Defaulting Backstop Participants pursuant to the terms hereof or (ii) the
Company provides evidence reasonably satisfactory to the Non-Defaulting Backstop
Participants that such Backstop Participant Default would not otherwise prevent
consummation of the Plan in accordance with the Restructuring Timeline;

 

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(l)    Either a Call Option or a Put Option shall have been exercised with
respect to each Unsubscribed Share;

 

(m)  The Company shall (x) have timely complied with all reporting obligations
under applicable securities laws (giving effect to any extensions granted
pursuant to the filing of a Form 12b-25 with the SEC), (y) not have become a
delinquent filer (giving effect to any extensions granted pursuant to the filing
of a Form 12b-25 with the SEC) and (z) in cooperation with counsel to the
Required Backstop Participants, have used commercially reasonable efforts to
obtain a listing on the NYSE or NASDAQ as promptly as possible following the
Plan Effective Date;

 

(n)   A Material Adverse Effect shall not have occurred after the date the PSA
is executed; and

 

(o)   The Board or any of the Debtors’ boards of directors shall not have (i)
withdrawn, qualified or modified in any materially adverse manner to the
Backstop Participants, its approval or recommendation of the Rights Offering and
related transactions and documents, (ii) approved or recommended, or resolved to
approve or recommend any Alternative Transaction, or (iii) provided notice to
counsel to the Supporting Creditors of its intent to enter into or otherwise
publicly announced its intent to pursue an Alternative Transaction.

 

All or any of the Backstop Participant Closing Conditions (other than paragraph
(i) above) may be waived in whole or in part by the Required Backstop
Participants in their sole discretion, upon written notice to all

 

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Parties to the Backstop Agreement, and if so waived, all Backstop Participants
shall be bound by such waiver; provided that paragraph (h) above may be waived
only if each Backstop Participant requiring approval under applicable Antitrust
Laws is among the Required Backstop Participants that have waived such Backstop
Participant Closing Condition.

 

“Required Backstop Participants” means, as of any date of determination, those
Backstop Participants holding at least 66 2/3% of the aggregate outstanding
Senior Notes Claims, unless the Backstop Participants collectively hold less
than 66 2/3% of the aggregate outstanding principal amount of the Senior Notes,
in which case those Backstop Participants holding at least 66 2/3% of the
aggregate outstanding principal amount of the Senior Notes held by Backstop
Participants; provided that for purposes of this definition, the term “Backstop
Participants” excludes any Backstop Participant that, on the relevant date of
determination, is in breach of any of its material obligations under the
Backstop Agreement.

Conditions to Company Obligations:  

The obligations of the Company under the Backstop Agreement shall be subject to
the satisfaction or waiver on or, as otherwise specified below, prior to the
Closing Date of usual and customary conditions, as well as such other conditions
that are satisfactory to and agreed upon by the Parties, including the following
(the “Company Closing Conditions”; and together with the Backstop Participant
Closing Conditions, the “Backstop Agreement Closing Conditions”):

 

(a)   The PSA shall not have been terminated;

 

(b)   The Bankruptcy Court shall have entered a Backstop Order in form and
substance reasonably satisfactory to the Required Backstop Participants and the
Debtors and such order shall be Final;

 

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(c)   The Bankruptcy Court shall have entered the Confirmation Order approving
the Plan and such order shall be Final;

 

(d)   The conditions to the occurrence of the Plan Effective Date as set forth
in the Plan and in the Confirmation Order shall have been satisfied or waived in
accordance with the terms thereof and the Plan;

 

(e)   No final judgment, injunction, decree or other material legal restraint
shall have been enacted, adopted or issued by a governmental entity of competent
jurisdiction that prohibits the consummation of the Plan, the Rights Offering or
the transactions contemplated by the Fundamental Implementation Agreements,
including the Backstop Agreement, and/or the Definitive Restructuring Documents
substantially on the terms and conditions set forth in the PSA;

 

(f)    All governmental and material third party notifications, filings,
consents, waivers and approvals required for the consummation of the
transactions contemplated by the Fundamental Implementation Agreements,
including the Backstop Agreement, shall have been made or received, including
approval under applicable Antitrust Laws;

 

(g)   The representations and warranties of the Backstop Participants shall be
true and correct at and as of the date on which all other conditions have been
satisfied or waived with the same effect as if made on and as of such date
(except for such representations and warranties made as of a specified date,
which shall be true and correct only as of the specified date), except where the
failure to be so true and

 

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correct would not reasonably be expected to, individually or in the aggregate,
prevent, materially delay or materially restrict or impair the Backstop
Participants from executing the Definitive Restructuring Agreements or
consummating the transactions contemplated in the Fundamental Implementation
Agreements, including the Backstop Agreement; and

 

(h)   The Backstop Participants in the aggregate shall have performed and
complied, in all material respects, with all of their covenants and agreements
contained in the Backstop Agreement and in any other document delivered pursuant
to the Backstop Agreement.

Sale, Transfer and Assignment:   Each Backstop Participant shall have the right
to designate by written notice to the Company no later than five (5) Business
Days prior to the Closing Date that some or all of the Unsubscribed Shares that
it is obligated to purchase be issued in the name of, and delivered to one or
more of its Affiliates (defined below) or Affiliated Funds (defined below)
(other than any portfolio company of such Backstop Participant or its
Affiliates) (each, a “Related Purchaser”) upon receipt by the Company of payment
therefor in accordance with the terms of the Backstop Agreement, which notice of
designation shall (i) be addressed to the Company and signed by such Backstop
Participant and each such Related Purchaser, (ii) specify the number of
Unsubscribed Shares to be delivered to or issued in the name of such Related
Purchaser upon exercise of the Call Option or Put Option and (iii) contain a
confirmation by each such Related Purchaser of the accuracy of the applicable
Backstop Participant representations set forth in the Backstop Agreement applied
to such Related Purchaser; provided, that no such

 

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designation shall relieve such Backstop Participant from its obligations under
the Backstop Agreement.

 

Each Backstop Participant may sell, transfer and assign all or any portion of
its rights and obligations under the Backstop Agreement, to (each, a
“Transferee”):

 

(a)   any Affiliated Fund;

 

(b)   one or more special purpose vehicles that are wholly owned by one or more
of such Backstop Participant and its Affiliated Funds, created for the purpose
of holding such rights and obligations under the Backstop Agreement or holding
debt or equity of the Debtors, and with respect to which such Backstop
Participant either (i) has provided an adequate equity support letter or a
guarantee of such special purpose vehicle’s obligations under the Backstop
Agreement or (ii) otherwise remains obligated to fund the obligations under the
Backstop Agreement to be sold, transferred or assigned until the consummation of
the Plan; provided, that such special purpose vehicle shall not be related to or
Affiliated with any portfolio company of such Backstop Participant or any of its
Affiliates or Affiliated Funds (other than solely by virtue of its affiliation
with such Backstop Participant) and the equity of such special purpose vehicle
shall not be directly or indirectly transferable other than to such Persons
described in clause (a) or this clause (b), and in such manner, as such Backstop
Participant’s obligations under the Backstop Agreement is transferable; or

 

(c)   any other entity to whom such Backstop Participant transfers its Covered
Interests in accordance with the PSA in full compliance with all transfer
restrictions

 

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set forth in the PSA; provided, that such Transferee agrees in writing to be
bound by the obligations of such Backstop Participant under the Backstop
Agreement and each of the Backstop Participants and the Company have agreed in
writing, after due inquiry and investigation, that such Transferee is reasonably
capable of fulfilling such obligations;

 

provided, further, that (1) in each of cases (a) (b) and (c), such, Transferee
provides a written agreement to the Company under which it (x) confirms the
accuracy of the applicable representations as applied to such Transferee, (y)
agrees to assume such Backstop Participant’s rights and obligations under the
Backstop Agreement, and (z) agrees to be fully bound by, and subject to, the
Backstop Agreement as a Backstop Participant, and (2) in each of cases (a) and
(b) no such sale, transfer or assignment shall relieve such Backstop Participant
from its obligations under the Backstop Agreement.

 

“Affiliate” means (i) a Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
such Person; or (ii) managed funds, accounts, investment managers,
representatives, agents and employees, in each case to the extent controlled by
a Person.

 

“Affiliated Fund” means any Person of whom a Backstop Participant is an
investment advisor or manager or over whom a Backstop Participant has power
and/or authority to bind with respect to securities and/or Covered Interests
owned by such Person; provided that if any Party signs onto the Backstop
Agreement solely as to a specific business desk, no Affiliate of such Backstop
Participant or other business unit within any such Party, shall be subject to
the Backstop Agreement unless they separately become a party thereto.

 

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Backstop Agreement Termination   The Backstop Agreement may be terminated at any
time prior to the Closing Date by mutual written consent of the Company and the
Required Backstop Participants (a “Mutual Termination”); provided that a Mutual
Termination shall not be effective and shall be void ab initio unless the
Company’s termination is consented to in writing by the Required Consenting Term
Lenders. Backstop Participant Termination Rights:  

So long as it is not in breach of its obligations under the Backstop Agreement,
a Backstop Participant (in such circumstances, a “Terminating Backstop
Participant”) may, at any time on or prior to the Closing Date, by written
notice to the Company and each other Backstop Participant, terminate its
obligations under the Backstop Agreement, including without limitation its
Backstop Commitment, Rights Offering Commitment, Call Option Commitment, and Put
Option obligations (a “Backstop Participant Termination”), if:

 

(a)   The Company (or any of its subsidiaries): (x) files or publicly announces
that it will file or joins in or supports any plan of reorganization (or
disclosure statement related thereto) in the Chapter 11 Cases other than the
Plan other than as permitted pursuant to the PSA; (y) terminates or files a
motion or pleading with the Bankruptcy Court seeking authority to terminate or
reject any Fundamental Implementation Agreement on account of the Board’s
fiduciary obligations; or (z) provides notice to counsel to the Supporting
Creditors of its intent to enter into or otherwise publicly announces its intent
to pursue an Alternative Transaction;

 

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(b)   Either the Confirmation Order or the Backstop Order is reversed, dismissed
or vacated, or is modified or amended after entry in a manner that is not
reasonably satisfactory to the Required Backstop Participants;

 

(c)   The Closing Date has not occurred by the Outside Date;

 

(d)   Any of the Chapter 11 Cases are dismissed or converted to a case under
chapter 7 of the Bankruptcy Code, or the Bankruptcy Court enters an order in any
of the Chapter 11 Cases appointing an examiner or trustee with expanded powers
to oversee or operate the Debtors in the Chapter 11 Cases;

 

(e)   The issuance by any governmental authority, including the Bankruptcy
Court, any regulatory authority or any other court of competent jurisdiction, of
any ruling or order enjoining the substantial consummation of the Restructuring
and the Plan on the terms and conditions set forth in the PSA and the
Fundamental Implementation Agreements; provided, however, that the Debtors shall
have ten (10) days after notice to the Company of such ruling or order to obtain
relief that would allow consummation of the Restructuring and the Plan in a
manner that (i) does not prevent or diminish in a material way compliance with
the terms of the PSA and the Fundamental Implementation Agreements and (ii) is
acceptable to the Required Backstop Participants in their reasonable discretion;

 

(f)    Upon the failure by the Company to comply in all material respects with
any of its obligations under the Backstop Agreement, if such failure continues
for

 

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ten (10) Business Days after written notice of such failure by any Backstop
Participant to the Company;

 

(g)   the Required Consenting Term Lenders terminate the PSA (solely as to each
Supporting Term Lender) pursuant to Section 11(d) of the PSA;

 

(h)   The PSA is terminated prior to the Plan Effective Date, including by such
Backstop Participant as to itself;

 

(i)    An order denying confirmation of the Plan is entered on the docket in the
Chapter 11 Cases; or

 

(j)    Any Backstop Participant Closing Condition becomes incapable of being
satisfied unless such condition is waived pursuant to the terms of the Backstop
Agreement.

 

If any Backstop Participant validly terminates its Backstop Commitment
obligations under the Backstop Agreement in accordance with the terms hereof,
each non-terminating Backstop Participant (a “Non-Terminating Backstop
Participant”) shall have the right (the “Post-Termination Subscription Right”),
but not the obligation, to within five (5) Business Days of such termination to
assume and exercise up to 100% of the Terminating Backstop Participant’s rights
and obligations under the Backstop Agreement, including the Backstop Commitment,
Call Option Commitment, Call Option rights, and Put Option obligations, to be
allocated to each Non-Terminating Backstop Participant based on its Backstop Pro
Rata Share (adjusted, as applicable, for the removal of any terminating or
defaulting Backstop Participant and any Backstop Participant not wishing to
exercise its Post-Termination Subscription Right) on the terms and subject to
the conditions set forth in the Backstop Agreement; provided that,

 

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notwithstanding the foregoing, no Terminating Backstop Participant shall be
relieved of any such Terminating Backstop Participant’s breach of this Backstop
Agreement prior to such termination.

 

In the event the Non-Terminating Backstop Participants in the aggregate elect to
assume and exercise more than 100% of the Terminating Backstop Participant’s
rights and obligations under the Backstop Agreement, the allocation of such
rights and obligations to each Non-Terminating Backstop Participant shall be
adjusted proportionate to their respective Backstop Pro Rata Shares, so that the
aggregate allocation to the Non-Terminating Backstop Participants equals 100% of
the Terminating Backstop Participant’s rights and obligations under the Backstop
Agreement.

 

If, within eight (8) Business Days of any Backstop Participant Termination or
Backstop Participant Default, no other Backstop Participant has agreed to assume
the rights and obligations of the Defaulting Backstop Participant or the
Terminating Backstop Participant, as applicable, the Backstop Agreement shall
automatically terminate with respect to all Parties unless prior to such eight
(8th) Business Day, solely with respect to a Backstop Participant Default, the
Company provides evidence reasonably satisfactory to the Non-Defaulting Backstop
Participants that such Backstop Participant Default would not otherwise prevent
consummation of the Plan in accordance with the Restructuring Timeline (such
automatic termination, the “Automatic Termination”). For the avoidance of doubt,
a default by a Backstop Participant shall not constitute a Backstop Participant
Termination.

 

Upon the termination of the Backstop Agreement in its entirety resulting from an

 

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Automatic Termination (other than an Automatic Termination resulting from a
Backstop Participant Default) or a Backstop Participant Termination pursuant to
clauses (a), (e), (f) or (h) (with respect to (h), to the extent the PSA is
terminated as a result of a breach thereof by the Company), the Company shall
pay or cause to be paid to the Non-Defaulting Backstop Participants a
non-refundable aggregate fee in cash in immediately available funds in an
aggregate amount equal to $3,850,000 (the “Termination Fee”). The claim of the
Non-Defaulting Backstop Participants for the Termination Fee shall be an
unsecured claim subordinated in right of payment solely to the Term Loan Claims,
and shall not be paid by the Company unless and until the Term Loan Claims have
been paid in full in Cash.

 

The Termination Fee shall be allocated to each such Non-Defaulting Backstop
Participant pro rata based on its Backstop Pro Rata Share (adjusted, as
applicable, for the removal of any Defaulting Backstop Participant).

Company Termination Rights:  

So long as it is not in breach of its obligations under the Backstop Agreement
the Company may, at any time prior to the Closing Date by written notice to the
Backstop Participants, terminate the Backstop Agreement (a “Company
Termination”):

 

(a)   upon the Company terminating the PSA in accordance with its terms;

 

(b)   within three (3) Business Days after the giving of written notice by the
Company to the Supporting Creditors of a determination by the Board, in good
faith, based on the advice of its outside counsel, that proceeding with the
Restructuring and pursuit of confirmation and consummation of the Plan would be
inconsistent with the Board’s fiduciary obligations under applicable law;

 

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(c)   upon the issuance by any governmental authority, including the Bankruptcy
Court, any regulatory authority or any other court of competent jurisdiction, of
any ruling or order enjoining the substantial consummation of the Restructuring
and the Plan on the terms and conditions set forth in the PSA and the
Fundamental Implementation Agreements; provided, however, that the Backstop
Participants shall have ten (10) days after notice to the Backstop Participants
of such ruling or order to obtain relief that would allow consummation of the
Restructuring and the Plan in a manner that (i) does not prevent or diminish in
a material way compliance with the terms of the PSA and the Fundamental
Implementation Agreements and (ii) is acceptable to the Debtors in their
reasonable discretion;

 

(d)   upon the failure by the Backstop Participants in the aggregate to comply
in all material respects with any of their obligations under the Backstop
Agreement, if such failure continues for ten (10) Business Days after written
notice of such failure by the Company to the Backstop Participants;

 

(e)   The PSA shall have terminated prior to the Plan Effective Date; and

 

(f)   The Plan Effective Date shall not have occurred on or prior to the Outside
Date.

 

A Company Termination shall not be effective and shall be void ab initio unless
consented to in writing by the Required Consenting Term Lenders.

Put Premium   As consideration for the Put Option, the Backstop Commitment and
the other agreements of the Backstop Participants in

 

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the Backstop Agreement, including the Incremental Liquidity Facility, the
Company shall pay or cause to be paid to the Non-Defaulting, Non-Terminating
Backstop Participants a nonrefundable aggregate premium of shares of Reorganized
Key Common Stock in amount equal to the sum of:

 

(a)   6% of the issued and outstanding shares on the Plan Effective Date,
calculated after giving effect to (v) shares issued on account of the Put
Premium, (w) shares issued on account of the Senior Notes Exchange, (x) the
Equity Exchange Shares, (y) shares issued in connection with the consummation of
the Rights Offering, including all shares issued to the Backstop Participants
under the Backstop Agreement and (z) the Incremental Liquidity Facility Shares,
if any, but excluding any shares issued pursuant to Warrants and the New MIP, if
any (the “Percentage Put Premium”); plus

 

(b)   the quotient of (i) $1.5 million divided by (ii) the weighted average
price of all shares issued and outstanding shares on the Plan Effective Date,
including (v) shares issued on account of the Put Premium, (w) shares issued on
account of the Senior Notes Exchange, (x) the Equity Exchange Shares, (y) shares
issued in connection with the consummation of the Rights Offering, including all
shares issued to the Backstop Participants under the Backstop Agreement and (z)
the Incremental Liquidity Facility Shares, if any, but excluding any shares
issued pursuant to the Warrants and the New MIP, if any (the “Dollar Put
Premium” and, together with the Percentage Put Premium, the “Put Premium”).2

 

2  The Put Premium and the components thereof shall be calculated in a manner
consistent with the illustrative calculations provided in Schedule 4 to the Plan
Term Sheet.

 

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The Put Premium shall be paid on the Closing Date to the Non-Defaulting,
Non-Terminating Backstop Participants, whether or not the Put Option is
exercised and whether or not the Incremental Liquidity Facility is exercised,
and shall be allocated to each such Non-Defaulting, Non-Terminating Backstop
Participant, pro rata based on its Backstop Pro Rata Share (adjusted, as
applicable, for the removal of any Terminating Backstop Participant or
Defaulting Backstop Participant).

 

For the avoidance of doubt, if a Backstop Participant is a Defaulting Backstop
Participant, it shall not be entitled to payment of any of the Put Premium or
the Termination Fee.

Backstop Agreement Other Provisions   Indemnification and Contribution:   The
Backstop Agreement shall include customary indemnification and contribution
provisions, which shall survive termination of the Backstop Agreement. Investor
Rights Agreement:   Any recipient of shares issued pursuant to the Backstop
Agreement shall execute and become party to the Investor Rights Agreement.
Governing Law:   The governing law of the Backstop Agreement shall be New York
law. Incremental Liquidity Facility:   Five (5) Business Days prior to the
anticipated Plan Effective Date, the advisors to the Debtors and the Backstop
Participants shall make a determination (and advise the Backstop Participants)
as to whether the Company will satisfy the Minimum Liquidity Threshold on the
anticipated Plan Effective Date.

 

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If the Minimum Liquidity Threshold will not be satisfied on the anticipated Plan
Effective Date, Reorganized Key will issue up to $25 million of additional
Reorganized Key Common Stock (the “Incremental Liquidity Facility Shares”), at a
per share price as set forth on Schedule 4 to the Plan Term sheet, which per
share price shall be equal to: 62.5% of the Price Per Share Pre-Liquidity Shares
(as such price is set forth in Schedule 4 hereto) for the first $10 million of
additional capital (tranche 1); 50% of the Price Per Share Pre-Liquidity Shares
for the second $10 million of additional capital (tranche 2); and 32.5% of the
Price Per Share Pre-Liquidity Shares for the last $5 million of additional
capital (tranche 3), in an aggregate amount necessary for the Company to meet
the Minimum Liquidity Threshold (such offering, which shall be made in
conjunction with the Rights Offering the “Incremental Liquidity Facility”). If
the Qualifying Noteholders and Qualifying Equity Holders have not subscribed for
all of the Incremental Liquidity Shares to be issued pursuant to the Incremental
Liquidity Facility, the Backstop Participants shall purchase all such
unsubscribed Incremental Liquidity Shares (such shares, the “Unsubscribed
Incremental Liquidity Shares”) subject to the terms and conditions of the
Backstop Agreement (including the implementation of a put/call structure
consistent with the Backstop Agreement structure with respect to the Rights
Offering).

 

If a fully funded $25 million Incremental Liquidity Facility would be
insufficient to satisfy the Minimum Liquidity Threshold, the Backstop
Participant Closing Conditions shall not be satisfied (but may be waived) and no
amounts shall be required to be funded by the Backstop Participants under the
Backstop Agreement.

 

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  The Company and the Backstop Participants shall work in good faith to agree to
the procedures and mechanics of implementing the Incremental Liquidity Facility
consistent with the Plan Term Sheet, including the implementation of a put/call
structure consistent with the Backstop Commitment’s structure, which mechanics
and procedures shall be included in the Backstop Agreement.

 

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Schedule 1

Schedule of Backstop Participants

[To be redacted]

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PLAN TERM SHEET – EXHIBIT 4

Key Energy Services, Inc. (the “Company”)

Corporate Governance Term Sheet1

Equity

 

  •   Single class of shares; 1 vote per share (except for the Preferred Voting
Share (defined below) to be issued to Platinum).

 

  •   No lock-up.

Board

 

  •   Except as provided herein, 10 member board of directors (the “Board”).2

 

  •   Initial directors to be selected once (prior to Plan Effective Date), for
a 2-year term (the “Initial Board Term”), as follows:

 

  •   5 initial directors selected by Platinum (as bondholder), with 8 votes
total (3 directors with 2 votes each, and 2 directors with 1 vote each; provided
that one of the single-vote directors must be Reorganized Key’s CEO (the “CEO
Director”));3

 

  •   2 initial directors selected by the Committee4 other than Platinum (as
bondholders), each with 1 vote; and

 

  •   3 initial independent directors, as defined by NYSE/NASDAQ5 rules (1
selected by Platinum (as bondholder); 1 selected by the Committee other than
Platinum (as bondholder); 1 to be mutually agreed upon by Platinum and the
Committee other than Platinum (each as bondholders), each with 1 vote.

 

  •   After the Initial Board Term (so long as Reorganized Key has been listed
on the NYSE or NASDAQ):

 

  •   Board will have 9 members.

 

  •   Platinum shall be entitled to appoint 5 directors, 2 of which shall have 2
votes each, and 1 of which shall be an independent director, which independent
director shall have 1 vote (collectively, the “Platinum Appointed Directors”),
and Platinum shall be issued, on the Plan Effective Date, a non-economic
non-transferrable preferred share to implement such appointment rights (or such
other comparable mechanic to replicate the purpose thereof, the “Preferred
Voting Share”);

 

 

1  Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Plan Support Agreement among Debtors, and certain
of the Company’s creditors that are signatories thereto, including Platinum
Equity Advisors, LLC (together with any of its controlled affiliates, managed
funds and/or accounts, collectively, “Platinum”), and the members of the
Committee (as defined herein). The Plan shall incorporate provisions to the
extent needed to implement the terms of this Corporate Governance Term Sheet.

2  Platinum would like the option to increase the board to 11 members, and
eliminate the super vote structure, in which case, Platinum could elect
directors to account for each super vote.

3  If the CEO Director seat is vacant, including due to a removal, the Board
shall be reduced to 9 directors. In addition, until a replacement CEO Director
is appointed, only 2 of the 4 remaining non-independent directors selected by
Platinum shall have 2 votes each and the other 2 remaining non-independent
directors selected by Platinum shall have 1 vote each.

4  “Committee” shall refer to the non-Platinum Backstop Participants (as defined
in the Plan Term Sheet).

5  References to NASDAQ refer to the NASDAQ Global Select Market.

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  •   The Preferred Voting Share will be cancelled automatically if, at any
time, (a) Platinum beneficially owns less than (i) 91.578%6 of the shares of the
Company owned by it on the Plan Effective Date, solely as a result of Platinum
selling such shares, (ii) 42.5%7 of the issued and outstanding shares of the
Company (excluding shares issued pursuant to the New MIP), or (iii) 40.0% of the
issued and outstanding shares of the Company; or (b) Reorganized Key has not
been listed on the NYSE or NASDAQ prior to the conclusion of the Initial Board
Term.

 

  •   Except with respect to the Platinum Appointed Directors, each director
(which may include the CEO Director) shall be nominated by the board and voted
on by stockholders; provided that there shall always continue to be at least 3
independent directors;

 

  •   Except with respect to the Platinum Appointed Directors, each director
shall have 1 vote;

 

  •   Directors shall have 1-year terms; and

 

  •   Following cancellation of the Preferred Voting Share (other than as a
result of item (b) in such definition), the next board election shall be handled
by a simple majority vote of the outstanding shares as per Delaware law.

 

  •   If Reorganized Key has not been listed on the NYSE or NASDAQ prior to the
conclusion of the Initial Board Term, then until it has been so listed:8

 

  •   The two departing directors who had been selected by the original
non-Platinum members of Committee during the Initial Board Term will nominate
(i) their successors as well as (ii) the independent director (to replace the
independent director appointed by such group). Such nominated directors
(collectively, the “Committee Nominee Successors”) will be voted on by the
non-Platinum stockholders; and

 

  •   The remaining directors shall be nominated by the Initial Board and voted
on by stockholders; provided that there shall always continue to be at least 3
independent directors.

    

 

6  This 91.578% is based on Platinum owning 47.5% of the outstanding shares on
the Plan Effective Date. The goal of this clause (i) is to permit Platinum to
sell up to 4% of the shares it owns on the Plan Effective Date without losing
the Preferred Voting Share. The percentage shall be adjusted on the Plan
Effective Date pending a final determination of Platinum’s ownership on the Plan
Effective Date to provide under clause (i) for sales of up to 4%.

7  42.50% threshold shall be adjusted downward to a maximum of 40% to the extent
Reorganized Key issues shares for the purpose of satisfying the market cap
requirements of the NYSE or NASDAQ in order to obtain a listing.

8  Upon the end of each of the subsequent 1-year terms and so long as
Reorganized Key has not been listed on the NYSE or NASDAQ, the directors shall
be nominated and elected in the same manner.

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Reporting / Listing

 

  •   Reorganized Key continues to be reporting company pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

  •   Reorganized Key and Platinum commit to undertake commercially reasonable
efforts to be listed on NYSE or NASDAQ as soon as reasonably practicable, and in
any event no later than 6 months after the Plan Effective Date.

 

  •   Reorganized Key to abide by NYSE governance standards as of the Plan
Effective Date (e.g., committee compositions, internal controls and guidelines,
etc.), subject to “controlled company” exception.

CASA

 

  •   The Company shall enter into the Corporate Advisory Services Agreement
(the “CASA”) in the form attached as Exhibit 5 to the Plan Term Sheet

Minority Protections

 

  •   Any time Reorganized Key does not have securities registered under section
12(b) of the Exchange Act listed on NYSE or NASDAQ:

 

  •   The following actions shall require approval of a Supermajority9 of the
director votes prior to listing:

 

  •   Entering into any fundamental transaction involving a sale of the Company
(including consolidation, reorganization, merger or sale of all or substantially
all of the assets) other than: (a) pursuant to the Bankruptcy Code or (b) with
an implied equity value of greater than $700 million;

 

  •   Acquisitions, investments, and divestitures in excess of $25 million in
cash or stock;

 

  •   Incurrence of indebtedness for borrowed money in excess of $5 million,
other than for purposes of refinancing the New Term Loan or the New ABL at the
same or lower rates;

 

  •   Changing the size of the Board (except (i) adding independent directors,
or (ii) in connection with a fundamental transaction (including consolidation,
reorganization, merger or sale of all or substantially all of the assets)
approved in accordance with agreed upon terms);

 

  •   Creating new Board committees or delegating authority to Board committees
beyond that in the initial charters for such committees other than as required
by law;

 

  •   Equity redemptions and repurchases for an amount in excess of $5 million
in any transaction and $10 million in the aggregate in any fiscal year other
than (x) redemptions and repurchases offered on a pro rata basis among the
Reorganized Key shareholders, and (y) repurchases from any employee, consultant
or officer of the Company who ceases to be an employee, consultant or officer of
the Company; and

 

  •   Amendments to the bylaws.

 

9  “Supermajority” shall mean (a) if the CEO Director seat is occupied, at least
9 of the 13 director votes, including (X) 7 votes cast by the directors selected
by Platinum (excluding independent directors) and (Y) at least 2 votes cast by
directors not selected or nominated by Platinum (excluding the CEO Director)
that are independent or nominated by the Committee (or the Committee Nominee
Successors, if applicable); provided that during the Initial Board Term approval
of at least one non-independent director appointed by the Committee shall be
required; and (b) if the CEO Director seat is vacant, at least 8 of the 11
director votes, including (X) 6 votes cast by the directors selected by Platinum
(excluding independent directors) and (Y) at least 2 votes cast by directors not
selected or nominated by Platinum that are independent or nominated by the
Committee (or the Committee Nominee Successors, if applicable); provided that
during the Initial Board Term approval of at least one non-independent director
appointed by the Committee shall be required.

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

  •   The following actions shall require approval of a supermajority of 65% of
shareholders prior to the listing:

 

  •   Issuances of equity or convertible securities where the issuance equals
20% or more of the pre-transaction shares or the common stock issued will have
voting power of 20% or more of the common stock outstanding before the issuance;
other than such issuances that are for the purpose of and to the extent
necessary to satisfy the market cap requirements of the NYSE or NASDAQ in order
to obtain a listing; in each case, subject to pre-emptive rights available to
the other Backstop Participants if Platinum or any of its affiliates
participates in such an offering, on a pro rata basis based on their
shareholdings).

 

  •   At any time, irrespective of listing status:

 

  •   Entering into any related party, Related Advisor (as defined in the CASA)
or affiliate transactions, including any amendments to the CASA, (other than
(i) compensation of Board members in the ordinary course, (ii) execution of the
CASA on the Plan Effective Date, (iii) arm’s length commercial transactions in
the ordinary course of business between any Platinum portfolio company and the
Company if the aggregate transaction value between such Platinum portfolio
company and the Company does not exceed $1 million per calendar year), and
(iv) any other transactions required by the plan support agreement), shall
require approval by a Supermajority of the director votes.

 

  •   Adopting any restrictions on the transferability of any shares of
Reorganized Key shall require approval by a Supermajority of the director votes.

 

  •   The approval, authorization, vesting or making any payments or awards
under the 2016 PIP shall require approval by a Supermajority of the director
votes.

 

  •   Any issuance of shares in which Platinum or any of its affiliates would
participate, other than an issuance available on the same terms to all
stockholders on a pro rata basis shall require approval by the majority of
non-Platinum stockholders.

 

  •   A Company decision to delist from NYSE or NASDAQ, as applicable, shall
require unanimous approval by the Company’s board, except where such delisting
is necessary to effect a permitted cash-out or stock merger of the Company.

Registration Rights

 

  •   Reorganized Key and Platinum commit to file a resale shelf registration
statement (the “Shelf Registration Statement”) covering all Registrable
Securities10 of each Backstop

 

10 

“Registrable Securities” means any shares of Reorganized Key Common Stock
beneficially owned by a Backstop Party and any other securities issued or
issuable with respect to, on account of or in exchange for Registrable
Securities, whether by stock split, stock dividend, recapitalization, merger,
charter amendment or otherwise that are held by a Backstop Party or any
transferee or assignee of any Backstop Party after giving effect to a permitted
transfer (each, a “Holder”); provided such shares shall cease to be Registrable
Securities when (i) a registration statement registering such Registrable
Securities under the Securities Act has been declared effective and such
Registrable Securities have been sold, transferred or otherwise disposed of by
the Holder thereof pursuant to such effective registration statement, (ii) such
Registrable Securities are sold, transferred or otherwise disposed of pursuant
to Rule 144 under the Securities Act, or (iii) (x) the Reorganized Key Common
Stock has been listed for trading on a national securities exchange for at least
90 days and (y) such Registrable Securities are held by any Holder who, together
with its Affiliates, at the time of determination, holds in the aggregate less
than 1% of the Company’s then outstanding shares of Reorganized Key Common Stock
which may be sold pursuant to Rule 144(b)(1) under the Securities Act without
limitations on volume or manner of sale or a notice requirement.

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Participant (together with its Affiliates, a “Backstop Party”) within 60 days
after the Plan Effective Date and use commercially reasonable efforts to cause
such Shelf Registration Statement to be declared effective as promptly as
practicable and in no event later than 60 days after the filing of the Shelf
Registration Statement.

 

  •   The Shelf Registration Statement (on Form S-1 and, when Reorganized Key
becomes eligible, on Form S-3) covering the Registrable Securities of each
Backstop Party will be kept effective (subject to customary blackouts) for so
long as any Backstop Party holds Registrable Securities.

 

  •   Beginning 120 days after the Plan Effective Date, to the extent the
Company does not have available such an effective Shelf Registration Statement,
each Backstop Party that holds Registrable Securities shall have two
(2) long-form demand registration rights per calendar year (subject to customary
blackouts); provided that any such demand shall be for an offering with
estimated gross proceeds of at least $12.5 million in Registrable Securities
(taking into account the requests of all requesting Backstop Parties); provided
further that in no event shall the Company be required to comply with more than
one (1) long-form demands by the non-Platinum Backstop Parties in any six-month
period.

 

  •   The shelf takedowns or demands by a Backstop Party referred to above shall
be underwritten as requested by such Backstop Party; provided that (x) the
Company shall only be required to support underwritten offerings not earlier
than 180 days after the Plan Effective Date, limited to two (2) such
underwritten offerings each calendar year and no more than six (6) underwritten
offerings in the aggregate, in each case, requested by non-Platinum Backstop
Parties, and (y) any such underwritten offering supported by the Company shall
be for an offering with estimated gross proceeds of at least $12.5 million in
Registrable Securities (taking into account the request of all requesting
Backstop Parties).

 

  •   Customary piggyback rights.

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PLAN TERM SHEET – EXHIBIT 5

CORPORATE ADVISORY SERVICES AGREEMENT1

This CORPORATE ADVISORY SERVICES AGREEMENT (this “Agreement”) is entered into as
of             , 2016 (the “Effective Date”)2 by and between Key Energy
Services, Inc., a Delaware corporation, (the “Company”) and Platinum Equity
Advisors, LLC (“Platinum”), a Delaware limited liability company (“Advisor”).

RECITALS

A. The Company specializes in providing onshore, rig-based well services,
including well maintenance and work over services as well as fluid management
and fishing and rental services, to oil and natural gas producers (collectively,
the “Business”).

B. On the Effective Date, Advisor began to perform and have since been
performing certain services with respect to the Business, and, in exchange for
such services, the Company agrees to pay Advisor certain fees and to provide for
other consideration, all as set forth herein.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:

1. Appointment. The Company, on behalf of itself and its subsidiaries
(collectively, the “Group”), hereby retains Advisor to render those services as
set forth in Exhibit A hereto, together with such other services as the Company
may request from time to time (collectively, the “Services”).

2. Term and Termination.

(a) Term. The initial term (the “Initial Term”) of this Agreement shall commence
on the Plan Effective Date and end on December 31, 2019. No earlier than ninety
(90) days and no later than sixty (60) days prior to the expiration of each of
the Initial Term and any Successive Terms (as defined below), the Independent
Directors of the Board will undertake a review of the services provided by
Advisor during the preceding term and the needs of the Company and decide in
their sole discretion, acting by majority, whether to renew this Agreement upon
the same terms and subject to the same conditions as set forth herein. The
Independent Directors of the Board shall notify Advisor within five (5) business
days of its decision. Failure to notify Advisor in writing within such time
period that the Independent Directors of the Board elect to renew this Agreement
shall result in automatic termination. If the Independent Directors of the
Company’s Board decide to renew this Agreement, this Agreement shall be extended
for successive one (1) year terms (ending on December 31 of the calendar year)
(each one-year period, a “Successive Term”). This Agreement may only be
terminated in accordance with this Section 2.

(b) Termination. This Agreement may be terminated at any time (i) by mutual
written consent of the parties hereto; (ii) by Advisor, upon ninety (90) days’
prior written notice to the Company; (iii) by the Company, following a material
breach of the terms hereof by Advisor, and Advisor having failed to cure such
material breach within thirty (30) days following receipt by it of written
notice of such breach; (iv) by the Company, at any time due to gross negligence
or willful misconduct by Advisor in performing its obligations pursuant to this
Agreement, and (v) automatically 45 days following the date that Platinum owns
less than 33% of outstanding Shares. Upon termination of this Agreement, the
Company shall pay to Advisor, if applicable, all accrued and unpaid Advisory
Fees (pursuant to this Agreement) and all unpaid Out-of-Pocket Expenses
(pursuant to Section 5(b)) due with respect to the period prior to the date of
termination. The obligations of the Company to pay any and all accrued and
unpaid obligations under this Section 2(b) shall survive any termination of this
Agreement.

 

2  Parties intend to execute this Agreement on the Plan Effective Date.

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(c) For the purposes of this Agreement, the following terms shall have the
following meanings:

“Affiliate” means with respect to any person or entity, any other person or
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person or entity, where “control”
means the possession, directly or indirectly, of the power to direct the
management and policies of a person or entity whether through the ownership of
voting securities, contract or otherwise.

“Board” means the board of directors of the Company.

“Emergence Credit Facilities” means the New ABL Agreement and the New Term Loan
Credit Agreement.

“Independent Director” shall have the meaning ascribed to it in the NYSE listing
rules, provided, that if the Company is listed for trading on the NASDAQ Global
Select Market, the Nasdaq listing rules shall govern the meaning of Independent
Director.

“Plan Effective Date” shall have the meaning ascribed to it in that certain Plan
Support Agreement, dated as of August 24, 2016 among the Company and each of the
holders party thereto.

“Shares” means shares of the Company’s common stock.

3. Scope of Work. The Services will be performed for the Group. The Company
shall be responsible for all amounts due hereunder; provided the Company, at its
election, may seek reimbursement of an appropriate portion of such fees from
other members of the Group. Advisor and the Board shall meet and confer from
time to time regarding the Services contemplated hereby; provided, however, that
no minimum number of hours is required to be devoted by Advisor. The Company
acknowledges that (x) Advisor’s services are not exclusive to the Company and
(y) Advisor may render similar services to other persons and entities; provided
that Advisor shall not render similar services to any competitor of the Group,
unless Advisor has established appropriate information barriers or
confidentiality firewalls between Advisor’s personnel advising the Group and
Advisor’s personnel advising competitors of the Group. No Services provided
hereunder constitute or shall be construed as investment advice or a
recommendation to proceed or not to proceed with any particular action,
including any proposed investment or acquisition by the Company, if any. The
performance of the Services shall not create a fiduciary relationship between
Advisor on one hand, and members of the Group, on the other. The Company
acknowledges and agrees that, in the course of providing the Services, in no
case is Advisor providing: (i) advice as to the value of securities or the
advisability of investing in, purchasing, or selling securities or
(ii) investment advice or recommendations as to or on: (A) the advisability of
the prospects of or for any particular company or security, or (B) the price or
future price of or price levels of any security, security index, securities
market, commodity, commodity index or commodity market. The Company further
acknowledges and agrees that it is responsible and liable for any actions or
determinations (including any investment decisions) made by the Group.

4. Quality of Services. Advisor shall render the Services in a professional,
timely and workmanlike manner. The Services will be performed with the same
degree of diligence and care as such Services are performed by Advisor for other
portfolio companies of its managed funds.

5. Compensation.

(a) The Company shall pay, or cause its subsidiary entities to pay, to Advisor
an advisory fee (the “Advisory Fee”) of $2,750,000 per annum in arrears as
specified below (the “Base Fee Amount”). Subject to subparagraph (d) of this
Section, the Advisory Fee shall be paid in cash (or accrued, as required by
subparagraphs (c) and (d).

 

2

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(b) Subject to subparagraph (d) below, payment (or accrual) of the Advisory Fee
shall be made in equal quarterly installments (each a “Quarterly Installment
Payment”) of $687,500 in cash in arrears for each preceding quarter on
January 1, April 1, July 1 and October 1 of each calendar year (each a
“Quarterly Installment Payment Date”); provided that the first Quarterly
Installment Payment Date shall be the first such date following the Effective
Date (the “First Installment Date”) and shall include an amount equal to the
product of (i) $2,750,000 multiplied by (ii) a fraction, the numerator of which
is the number of days from the Effective Date through the First Installment
Date, inclusive, and the denominator of which is 365.

(c) If the Emergence Credit Facilities prohibit the Company from paying the
Advisory Fee in cash, such fee shall accrue and the payment thereof deferred
until such time as such prohibition is waived, terminated or otherwise removed,
at which time all deferred Advisory Fees shall be immediately due and payable,
subject to subparagraph (d) below.

(d) Notwithstanding any other provision in this Agreement, as long as the Shares
are not listed for trading on either the NYSE or NASDAQ Global Select Market,
the Company shall not make (but shall accrue) any Quarterly Installment Payment.
If the Shares are not listed for trading on either the NYSE or NASDAQ Global
Select Market at any time on or after the date that is 6 months after the Plan
Effective Date (the “Listing Target Date”), then any Advisory Fee accrued for
the period (x) between the Listing Target Date and the date the Shares are
actually listed for trading on either the NYSE or NASDAQ Global Select Market or
(y) during any period thereafter that the Shares are not actually listed for
trading on either the NYSE or NASDAQ Global Select Market, shall accrue at 50%
of the Base Fee Amount until such listing is achieved; provided, that such
reduced rate shall not apply if (a) the Company is notified in writing by NYSE
or NASDAQ, as applicable, that it was not listed solely due to not meeting the
requisite financial criteria for listing under NYSE’s Rule 102.01C or NASDAQ’s
Rule 5315(f)(3), as applicable, or, (b) if not so notified, Platinum and
non-Platinum Backstop Parties who wish to participate in such determination
mutually determine that the Company was not listed solely due to not meeting the
requisite financial criteria for listing. Following the date the Shares are and
so long as the Shares remain listed on either the NYSE or NASDAQ Global Select
Market, the Advisory Fee shall return to the Base Fee Amount for the period
following such listing.

(e) The Advisory Fee shall be subject to value added tax, sales tax or other
similar taxes, where applicable.

(f) The Company shall reimburse, or cause its subsidiaries to reimburse, Advisor
monthly for Out-of-Pocket Expenses (as defined below), incurred following the
Effective Date. For the purposes of this Agreement, “Out-of-Pocket Expenses”
means (i) the documented, reasonable and actual out-of-pocket costs and expenses
incurred by the Advisor while delivering products and/or services to the Company
in connection with the Services (excluding wages, salaries, and all other
customary overhead expenses of the Advisor), (ii) reasonable fees and
disbursements of unaffiliated third party advisors or consultants while
delivering products and/or services to the Company (but excluding for the
avoidance of doubt such fees and disbursements incurred in advising Advisor or
its Affiliates including in its capacity as an investor in the Company),
(iii) costs of any outside services of independent contractors such as financial
printers, couriers, business publications, online financial services or similar
services; provided, that such Out-of-Pocket Expenses (1) shall not exceed
$375,000 during a calendar year and (2) shall not include any fees or
disbursements to any external advisor, consultant or contractor, unless (a) such
external advisor, consultant or contractor is not a Related Advisor and (b) such
fees or disbursements were incurred for services that could not have been
provided by Platinum on its own. “Related Advisor” shall mean (i) any
Affiliates, current employees of Platinum, former employees of Platinum who were
employed by Platinum within three (3) years prior to date such fees or
disbursements were or were expected to be incurred, or any entity majority owned
or managed by any of the foregoing, (ii) any person or entity that earns more
than 50% of its annual revenue from Platinum or its Affiliates, or (iii) Palm
Tree Advisors LLC or any of its successors or Affiliates.

(g) The provisions of this Section 5 shall survive the termination of this
Agreement.

(h) The Platinum-appointed directors of the Board that are not Independent
Directors shall not receive any fees on account of serving on the Board.

 

3

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6. Default of Advisor. Notwithstanding anything contained in this Agreement to
the contrary, in the event that Advisor shall default in any of its material
obligations hereunder and such default shall continue for a period of twenty
(20) days following receipt of notice of such default, then the Company shall
have the right to withhold all compensation otherwise payable to Advisor
hereunder until such default is fully cured, and to set off against such
compensation any obligations of Advisor hereunder.

7. Representation and Warranties.

(a) Advisor represents and warrants that as of the date hereof that Advisor is a
company duly organized and validly existing under the laws of the state of
Delaware, and all corporate and other internal authorization required for the
execution of this Agreement have been obtained, and (ii) this Agreement does not
materially violate any agreements to which Advisor is a party.

(b) The Company represents and warrants to Advisor that as of the date hereof
that the Company is a company duly organized and validly existing under the laws
of the State of Delaware, and all corporate and other internal authorization
required for the execution of this Agreement have been obtained, and (ii) this
Agreement does not materially violate any agreements to which the Company is a
party.

8. Indemnification; Limitation of Liability.

(a) Indemnification. The Company will indemnify and hold harmless Advisor and
its Affiliates and their respective partners (both general and limited), members
(both managing and otherwise), officers, directors, employees, agents and
representatives (each such person being an “Indemnified Party”) from and against
any and all losses, claims, damages and liabilities, whether joint or several
(the “Liabilities”), related to, arising out of or in connection with the
Services contemplated by this Agreement or the engagement of Advisor pursuant
to, and the performance by Advisor of the Services contemplated by this
Agreement, whether or not pending or threatened, whether or not an Indemnified
Party is a party, whether or not resulting in any liability and whether or not
such action, claim, suit, investigation or proceeding is initiated or brought by
or on behalf of the Company or any other Group member. The Company will
reimburse any Indemnified Party for all reasonable costs and expenses (including
reasonable attorneys’ fees and expenses) as they are incurred in connection with
investigating, preparing, pursuing, defending or assisting in the defense of any
action, claim, suit, investigation or proceeding for which the Indemnified Party
would be entitled to indemnification under the terms of the previous sentence,
or any action or proceeding arising therefrom, whether or not such Indemnified
Party is a party thereto. The Company hereby acknowledges that certain
Indemnified Parties have certain rights to indemnification, advancement of
expenses and/or insurance provided by Advisor and its Affiliates in connection
with the Indemnified Party’s activities on behalf of Advisor and its Affiliates,
including acting as a director of a current or former portfolio company that
Advisor and its Affiliates intend to be secondary to the primary obligation of
the Company to indemnify such Indemnified Party pursuant to and in accordance
with the indemnification provision in this Section 8(a). The Company
acknowledges and agrees that (a) the Company is the indemnitor of first resort
and the Company is wholly and primarily responsible for the payment of any and
all indemnification to which any Indemnified Party is entitled under this
Section 8(a) or otherwise pursuant to any rights that the Company has granted to
such Indemnified Party in connection with its performance of the Services, and
any obligation of Advisor and its Affiliates to provide indemnification for the
same expenses or liabilities incurred by such Indemnified Party is secondary,
(b) any such indemnification and expenses shall be paid by or on behalf of the
Company, and (c) the Company irrevocably waives, relinquishes and releases
Advisor and its Affiliates from any and all claims against Advisor and its
Affiliates for contribution, reimbursement, subrogation, set-off, exoneration or
otherwise from any of Advisor and its Affiliates thereof for amounts paid in
respect thereof. The Company further agrees to indemnify, reimburse and hold
harmless each of Advisor and its Affiliates for any and all amounts for which
the Company is wholly and primarily responsible under this Section 8(a) in the
event that any of Advisor and its Affiliates actually pays any such amounts for
any reason to or on

 

4

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behalf of any Indemnified Party. The Company will not be liable under the
foregoing indemnification provision with respect to any particular loss, claim,
damage, liability, cost or expense of an Indemnified Party that is determined by
a court of competent jurisdiction, in a final judgment from which no further
appeal may be taken, to have resulted primarily from the willful misconduct or
bad faith of such Indemnified Party. The attorneys’ fees and other expenses of
an Indemnified Party shall be paid by the Company as they are incurred
conditioned upon receipt, in each case, of an undertaking by or on behalf of the
Indemnified Party to repay such amounts if a court of competent jurisdiction
renders a final non-appealable judgment that the Liabilities in question
resulted primarily from willful misconduct, gross negligence or bad faith of
such Indemnified Party. If such indemnification is for any reason not available
or insufficient to hold an Indemnified Party harmless, the Company agrees to
contribute to the Liabilities involved in such proportion as is appropriate to
reflect the relative benefits received (or anticipated to be received) by the
Group, on the one hand, and by Advisor, on the other hand, with respect to the
Services or, if such allocation is determined by a court or arbitral tribunal to
be unavailable, in such proportion as is appropriate to reflect other equitable
considerations such as the relative fault of the Group, on the one hand, and of
Advisor, on the other hand; provided, however, that to the extent permitted by
applicable law, the Indemnified Parties shall not be responsible for amounts in
excess of the Advisory Fee accrued by the Company in the prior twelve months
(but only to the extent actually received by Advisor. Relative benefits to the
Group, on the one hand, and to Advisor, on the other hand, with respect to the
Services shall be deemed to be in the same proportion as (i) the total value
received or proposed to be received by the Group in connection with the Services
or any transactions to which the Services relate bears to (ii) all fees actually
received by Advisor in connection with the Services. The provisions of this
Section 8(a) shall survive the termination of this Agreement.

(b) Limitation of Liability. Notwithstanding anything herein to the contrary,
the maximum aggregate monetary or other liability that Advisor shall have to the
Company, a Group member or any other party (including, without limitation, the
Company’s or a Group member’s officers, directors, employees, agents and other
representatives and stockholders) with respect to any and all claims (on a
cumulative basis) related to or in connection with the breach or alleged breach
hereof by Advisor, or related to or in connection with the Services provided or
to be provided hereunder, shall be limited to the Advisory Fee accrued by the
Company in the prior twelve months (but only to the extent actually received by
Advisor). Notwithstanding anything herein to the contrary, Advisor shall not be
liable under any circumstance for any special, consequential, indirect, punitive
or exemplary, or similar, damages arising from its provision of the Services or
otherwise related to or in connection with this Agreement. The provisions of
this Section 8(b) shall survive the termination of this Agreement.

9. Permissible Activities. Subject to applicable law, nothing herein will in any
way preclude Advisor or its Affiliates (other than the Group and its respective
employees) or their respective partners (both general and limited), members
(both managing and otherwise), officers, directors, employees, agents or
representatives from engaging in any business activities or from performing
services for its or their own account or for the account of others, including
for companies that may be in competition with the business conducted by the
Group.

10. Accuracy and Confidentiality of Information to be Provided.

(a) The Company will furnish or cause to be furnished to Advisor such
information as Advisor believes reasonably appropriate to its Services
hereunder, and Advisor acknowledges that it will have access to confidential
information, records, trade secrets of the Company and certain proprietary
information of a business, financial, marketing, technical or other nature
pertaining to the Company (all such information so furnished, the
“Information”). Without limiting the generality of the foregoing, the Company
agrees to furnish to Advisor monthly financial data of the type customarily
prepared by the Company for senior management, except to the extent that the
Company and Advisor may otherwise mutually agree with respect to the extent
and/or the frequency of the data to be so furnished to Advisor. The Company
recognizes and confirms that Advisor (a) will use and rely primarily on the
Information and on information available from generally recognized public
sources in performing the Services contemplated by this Agreement without having
independently verified the same, (b) does not assume responsibility for the
accuracy or completeness of the Information and such other information and
(c) is entitled to rely upon the Information without independent verification.

 

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(b) During the term of this Agreement, and for a period of 2 years after the
termination of this Agreement for any reason, Advisor shall not directly or
indirectly disclose Information to any person or entity or use any Information
for its own benefit or the benefit of any other person or entity without the
Company’s prior written consent. All records, files, documents and equipment
relating to the Company’s business which Advisor shall prepare, use, or come
into contact with, shall be and remain the Company’s sole property and shall be
returned to the Company (or, at Advisor’s option, destroyed) upon termination of
this Agreement for any reason. Notwithstanding anything to the contrary in this
Agreement, Advisor may disclose any Information in the event that Advisor is
required by applicable law, subpoena, court order, legal process, rule,
regulation, or governmental or regulatory body to disclose all or any portion of
the Information.

11. Independent Contractor. Advisor shall act solely as an independent
contractor and shall have complete charge of its personnel engaged in the
performance of the Services or any other advice or services contemplated by this
Agreement. As an independent contractor, Advisor shall have authority only to
act as an advisor to the Company and shall have no authority to enter into any
agreement or to make any representation, commitment or warranty binding upon the
Company or to obtain or incur any right, obligation or liability on behalf of
the Company. Nothing contained in this Agreement shall cause Advisor to be
deemed a partner of or joint venturer with the Company. Nothing contained in
this Agreement shall be deemed or construed by the parties or any third party to
create the relationship of partners or joint ventures between Advisor or any of
its partners or members or any of their Affiliates, investment managers,
investment Advisor or partners, and the Company.

12. Notices. All notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall be delivered by hand, sent
by recognized overnight courier or given by email sent to the addresses set
forth below. All such communications shall be deemed to have given or made when
delivered by hand, sent by email upon confirmed receipt, or one business day
after being delivered to a recognized overnight courier.

 

  (a) If to Advisor, to:

Platinum Equity Advisors, LLC

360 N. Crescent Dr.

Beverly Hills, CA 90210

Attn: Eva Kalawski, General Counsel

 

  (b) If to the Company, to:

Katherine Hargis

Vice President, Chief Legal Officer and Secretary

Key Energy Services, Inc.

1301 McKinney Street, Suite 1800

Houston, Texas 77010

khargis@keyenergy.com

13. Modification. This Agreement may not be modified or amended in any manner
other than by an instrument in writing signed by all of the parties hereto, or
their respective successors or permitted assigns.

14. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes any prior
agreement or understanding among them with respect to such subject matter.

 

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15. Severability. Each provision of this Agreement shall be considered
severable, and if for any reason any provision that is not essential to the
effectuation of the basic purposes of this Agreement is determined to be invalid
and contrary to any existing or future law, such invalidity shall not impair the
operation of or affect those provisions of this Agreement that are valid.

16. Waiver. No provision of this Agreement shall be deemed to have been waived
unless such waiver is in writing and signed by or on behalf of the party
granting the waiver. The waiver of either party of any breach of this Agreement
shall not operate or be construed to be a waiver of any subsequent breach.

17. Assignment. This Agreement may not be assigned by any party hereto without
the written consent of the other party; provided, that Advisor shall be entitled
to assign this Agreement to any Affiliate of Advisor. Any assignment in
violation of the foregoing shall be null and void.

18. Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York. Each of the parties agrees
that all actions, suits or proceedings arising out of or based upon this
Agreement or the subject matter hereof shall be brought and maintained
exclusively in the federal and state courts located in the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York. Each of the parties hereto by execution hereof
(i) hereby irrevocably submits to the jurisdiction of the federal and state
courts located in the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York for the
purpose of any action, suit or proceeding arising out of or based upon this
Agreement or the subject matter hereof and (ii) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that is
not subject personally to the jurisdiction of the above-named courts, that it is
immune from extraterritorial injunctive relief or other injunctive relief, that
its property is exempt or immune from attachment or execution, that any such
action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be enforced
in or by any of the above-named courts. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, at the
address specified in or pursuant to Section 12 is reasonably calculated to give
actual notice and waives and agrees not to assert by way of motion, as a defense
or otherwise, in any such action, suit or proceeding any claim that service of
process made in accordance with Section 12 does not constitute good and
sufficient service of process. The provisions of this Section 18 shall not
restrict the ability of any party to enforce in any court any judgment obtained
in a federal or state court located in the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York.

TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF
THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER
AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM
IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN
CONTRACT OR TORT OR OTHERWISE. Each of the parties hereto acknowledges that it
has been informed by the other party that the provisions of this paragraph
constitute a material inducement upon which such party is relying and will rely
in entering into this Agreement and the transactions contemplated hereby. Any of
the parties hereto may file an original counterpart or a copy of this Agreement
with any court as written evidence of the consent of each of the parties hereto
to the waiver of its right to trial by jury.

 

7

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19. Dispute Resolution.

(a) In the event of any controversy or claim arising out of or relating to this
Agreement (hereafter, a “Dispute”), Advisor and Board Representative shall work
in good faith, using reasonable best efforts and recognizing their mutual
interests, to resolve such Dispute in a manner satisfactory to both parties. If
Advisor and Board Representative do not resolve such Dispute within thirty
(30) business days after notice of the Dispute is provided to the other party,
the Dispute shall be determined by arbitration (the “Arbitration”) administered
by the American Arbitration Association in accordance with the provisions of its
Commercial Arbitration Rules (the “Rules”).

(b) The Arbitration shall be administered before one arbitrator, who shall be
selected jointly by Advisor and Board Representative, or if such parties cannot
agree on the selection of the arbitrator, shall be selected by the American
Arbitration Association (provided that any arbitrator selected by the American
Arbitration Association shall not be affiliated with either party without the
written consent of the non-affiliated party). Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. The arbitrator shall be
empowered to enter an equitable decree mandating specific enforcement of the
terms of this Agreement. The Company and Advisor shall equally bear all expenses
of the American Arbitration Association (including those of the arbitrator)
incurred in connection with the Arbitration, provided, however, that the
applicable party shall bear all such expenses if the arbitrator or relevant
trier-of-fact determines that such party’s claim or position was frivolous.

(c) “Board Representative” means an Independent Director appointed by a vote of
the majority of the Company’s Independent Directors.

20. Successors and Assigns. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
permitted assigns.

21. Counterparts. This Agreement may be executed in several counterparts
(including via facsimile or other electronic method), each of which shall be
deemed an original but all of which shall constitute one and the same
instrument. It shall not be necessary for all parties to execute the same
counterpart hereof.

22. No Third-Party Beneficiaries. No persons other than the parties to this
Agreement may directly or indirectly rely upon or enforce the provisions of this
Agreement, whether as a third party beneficiary or otherwise.

23. Headings. All section headings in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section.

24. Interpretation. Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns stated in the masculine, the feminine or neuter gender
shall include the masculine, the feminine and the neuter. The construction of
this Agreement shall not take into consideration the party who drafted or whose
representative drafted any portion of this Agreement, and no canon of
construction shall be applied that resolves ambiguities against the drafter of a
document.

[signature page follows]

 

8

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.

 

PLATINUM EQUITY ADVISORS, LLC     KEY ENERGY SERVICES, INC. By:  

 

    By:  

 

Name:       Name:   Title:       Title:  

 

9

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EXHIBIT A TO CORPORATE ADVISORY SERVICES AGREEMENT

 

•   General business advice.

 

•   Advice regarding structuring and negotiating transactions.

 

•   Advice regarding identifying, structuring, negotiating, obtaining bank,
institutional and other sources of financing for the Company and the Group.

 

•   Advice regarding financial activities consisting of (but not limited to)
consulting and assistance for Company accounting; financial and administrative
advice; processing of accounting data, general accounts, stocks accounting,
sales and purchase ledgers, financial statements and balance sheet statistics,
the supplying of the services of analysis of information systems for data
processing.

 

•   Advice to management and financial planning advice, including advice on
utilization of assets.

 

•   Advice the Company and the Group in establishing accounting policies.

 

•   Such other advice to the Company and the Group, their counsel and auditors
as generally may be required to properly carry on the business and operations of
the Company and the Group;

 

•   Administrative advice, including:

 

  (i) advice on the performance of financial analyses and research by the
Company and the Group, or any clients of the Company or the Group, including
financial forecasting, strategic planning, budgeting, and analysis;

 

  (ii) advice on and assistance in technology relationships with third party
providers and partners;

 

  (iii) advice to the Company, the Group or any clients of the Company or the
Group, in matters relating to human resource management, together with advice in
employee recruitment; and

 

  (iv) advice to the Company, the Group or any clients of the Company or the
Group in connection with capital investments, requests for capital investment
and justification for such requests.

 

•   Financial advice, including:

 

  (i) advice in the coordination and oversight of the short-term and long-term
financing requirements of the Company, the Group or any clients of the Company
or the Group (including as to cash-flow projections);

 

  (ii) advice on and oversight of the investments to be carried out by the
Company, the Group or any clients of the Company or the Group;

 

  (iii) advice in the coordination of cash and equivalents held by the Company,
the Group or any clients of the Company or the Group, including cash in hand,
and investments of cash and equivalents on a consolidated basis; advice on the
control and recovery of liabilities and receivables;

 

  (iv) advice in the coordination of the management of foreign currencies and
hedging operations; and

 

  (v) review of and subsequent advice regarding the business plan of the
Company, the Group or any clients of the Company or the Group.

 

10

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•   Commercial and marketing activities:

 

  (i) Purchasing Activities — Advice to the Company, the Group or any clients of
the Company or the Group, on purchasing activities for products, components,
services, packaging, and logistics, and in particular for the following tasks:

 

  •   help in the choice of suppliers;

 

  •   setting requirements for quotations and comparative analyses;

 

  •   negotiation and ordering of products and services;

 

  •   negotiation of claims against suppliers; and

 

  •   organizing corporate purchases.

 

  (ii) Sales and Marketing Activities — Advice to the Company, the Group or any
clients of the Company or the Group in sales and marketing activities, in
particular for the following tasks:

 

  •   choice of strategic vendors;

 

  •   investigation and development of new markets;

 

  •   development and maintenance of international commercial relations;

 

  •   organization of strategic meetings;

 

  •   production of guidelines for external and internal communications;

 

  •   development of trading guidelines;

 

  •   management of relationships with consultants and analysts; and

 

  •   development of strategic partnerships.

 

•   Advice regarding provision of marketing, advertising and promotional
activities consisting of (but not limited to) branding of the Group with a view
of increasing the revenues of the Company and the Group and furthermore any
activity which forms an integral part of a marketing and advertising campaign.

 

•   General corporate stewardship services.

 

11

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PLAN TERM SHEET – EXHIBIT 6

Terms of Warrants

Capitalized terms used herein and not otherwise defined have the meaning
ascribed to such terms in the Plan Term Sheet. Definitions shall apply to the
plural as well as the singular number.

(1) Warrants. On the Plan Effective Date, each Holder of Existing Key Common
Stock shall receive its Percentage Allocation of warrants exercisable for an
aggregate number of shares of Reorganized Key Common Stock equal to (a) (x) 50%
multiplied by (y) 10% of the Base Share Count1 (such warrants, the “4-Year
Warrants”) and (b) (x) 50% multiplied by (y) 10% of the Base Share Count1 (such
warrants, the “5-Year Warrants” and, collectively with the 4-Year Warrants, the
“Warrants”). Each Warrant will initially represent the right to purchase one
share of Reorganized Key Common Stock.

(2) Term/Exercise Price. The 4-Year Warrants shall be exercisable at any time on
or prior to the earlier of (A) the fourth anniversary of the Effective Date and
(B) the consummation of a Cash Exit Transaction (defined below), in each case,
at a per share exercise price equal to the quotient of (x) $800 million divided
by (y) the Base Share Count. The 5-Year Warrants shall be exercisable at any
time on or prior to the earlier of (A) the fifth anniversary of the Effective
Date and (B) the consummation of a Cash Exit Transaction, in each case, at a per
share exercise price equal to (x) $1 billion divided by (y) the Base Share
Count. The Warrants will include a reduction to their respective exercise prices
to reflect the decrease in equity value resulting from any cash dividends paid
on Reorganized Key Common Stock prior to exercise or any other distributions
made on Reorganized Key Common Stock prior to exercise that do not otherwise
result in an antidilution adjustment. The Warrants are exercisable for cash or
on a cashless basis (in which case the Warrants would be exercised for a number
of shares of Reorganized Key Common Stock with a value equal to the in-the-money
value of the Warrants at the time of exercise). In the case of a cashless
exercise, if the shares of Reorganized Key Common Stock are not publicly traded
on a nationally recognized exchange, then the value of a share of Reorganized
Key Common Stock shall be determined in good faith by the board of directors of
Reorganized Key subject to an appraisal by a third party in the event of a
dispute of such valuation by Warrant holder; provided that, in the case of an
exercise in connection with a Cash Exit Transaction, the cash consideration paid
per share of Reorganized Key Common Stock in such Cash Exit Transaction shall be
deemed to be the value of a share of Reorganized Key Common Stock.

 

1  The “Base Share Count” shall equal the sum of (1) the issued and outstanding
shares on the Plan Effective Date calculated after giving effect to (w) the
shares issued on account of the Percentage Put Premium (x) shares issued on
account of the Senior Notes Exchange, (y) the Equity Distribution Shares, and
(z) the shares issued in connection with the consummation of the Rights
Offering, including all shares issued to the Backstop Participants under the
Backstop Agreement on account of the Rights Offering, but prior to (a) the
shares issued pursuant to the New MIP, if any, (b) the Incremental Liquidity
Facility Shares, if any, and (c) the shares issued on account of the Dollar Put
Premium, plus (2) the shares issuable upon exercise of the Warrants. Each of the
4-Year Warrants and 5-Year Warrants shall be for an equal number of shares of
Reorganized Key Common Stock and the Warrants shall collectively equal 10% of
the Base Share Count. The Base Share Count and the components thereof shall be
calculated in a manner consistent with the illustrative calculations provided in
Schedule 4 to the Plan Term Sheet.

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(3) Exit Transactions.

In the event of a sale of all or substantially all of Reorganized Key’s assets
or the sale of all or substantially all of the then-outstanding shares of
Reorganized Key Common Stock, or a merger or consolidation by Reorganized Key
with or into another person, or any other similar extraordinary transaction
involving Reorganized Key or the Reorganized Key Common Stock not otherwise
accounted for pursuant to Section 4 below (an “Exit Transaction” and an Exit
Transaction in which holders of Reorganized Key Common Stock receive solely cash
in exchange for their shares of Reorganized Key Common Stock, a “Cash Exit
Transaction”), Reorganized Key will give notice of the Exit Transaction to the
Warrant holders as promptly as reasonably practicable upon execution of the
agreement providing for such Exit Transaction. Solely in the case of a Cash Exit
Transaction, if the Warrant holders elect not to exercise their Warrants, then
the Warrants will expire on the consummation of such Exit Transaction and be
cancelled for no consideration; provided, however, that if the cash
consideration paid per share of Reorganized Key Common Stock in such Cash Exit
Transaction exceeds the exercise price of any Warrant, the holder of such
Warrant shall be entitled to receive a cash payment equal to (i) the amount of
such excess multiplied by (ii) the number of shares underlying such Warrant. In
the case of any other Exit Transaction (including an Exit Transaction involving
partial cash consideration), a Warrant holder’s right to receive shares of
Reorganized Key Common Stock upon exercise of a Warrant shall be converted into
the right to exercise such Warrant to acquire the number of shares of stock or
other securities or property (including cash) which the Reorganized Key Common
Stock issuable upon exercise of such Warrant immediately prior to such Exit
Transaction would have been entitled to receive upon consummation of such Exit
Transaction.

(4) Antidilution Adjustments. The Warrants will contain customary antidilution
adjustments that will apply in the event of stock dividends, subdivisions,
combinations and reclassifications.

 

2

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Exhibit B

Transfer Agreement

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TRANSFER AGREEMENT

The undersigned (“Transferee”) hereby acknowledges that it has read and
understands the Plan Support Agreement, dated as of August 24, 2016 (the
“Agreement”), by and among (x) Key Energy Services, Inc., a Maryland
corporation, and each of its subsidiaries party thereto, (y) [TRANSFEROR’S NAME]
(“Transferor”) and (z) certain other Supporting Creditors party thereto, and (i)
agrees to be bound by the terms and conditions of the Agreement to the extent
Transferor was thereby bound, (ii) hereby makes all representations and
warranties made therein by all other Supporting Creditors (as defined in the
Agreement), and (iii) shall be deemed a Supporting Creditor under the terms of
the Agreement, in each case, solely with respect to the Transferred Claims. The
Transferee is acquiring Senior Notes Claims and/or Term Loan Claims, as the case
may be, from Transferor in the amounts set forth on Schedule 1 hereof (the
“Transferred Claims”). All notices and other communications given or made
pursuant to the Agreement shall be sent to the Transferee at the address set
forth below in the Transferee’s signature below.

 

Date Executed:  

 

 

[TRANSFEREE] By:  

 

Name:   Title:   Address:  

 

 

 

 

 

Attn:  

 

Fax:  

 

Email:  

 

 

 

 

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Exhibit C

Limited Consent and Second Amendment to Loan Agreement Consent and Amendment No.
3 to Limited Consent to Loan Agreement and Forbearance Agreement

[See separate attachment]

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LIMITED CONSENT AND SECOND AMENDMENT TO LOAN AGREEMENT AND AMENDMENT No. 3 TO
LIMITED CONSENT TO LOAN AGREEMENT AND FORBEARANCE AGREEMENT

This Limited Consent and Second Amendment to Loan Agreement Consent and
Amendment No. 3 to Limited Consent to Loan Agreement and Forbearance Agreement
(this “Agreement”), dated as of August 24, 2016, is among KEY ENERGY SERVICES,
INC., a Maryland corporation (the “Company”), KEY ENERGY SERVICES, LLC, a Texas
limited liability company (“Key Energy LLC”, and together with the Company,
collectively, “Borrowers”), certain subsidiaries of the Borrowers as Guarantors,
Lenders and Co-Collateral Agents party to this Agreement and BANK OF AMERICA,
N.A., a national banking association, as administrative agent for the Lenders
(in such capacity, “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, Borrowers, certain subsidiaries of Borrowers as Guarantors from time to
time party thereto, the Lenders from time to time party thereto, the
Administrative Agent, and Bank of America, N.A. and Wells Fargo Bank, National
Association, as Co-Collateral Agents, are parties to that certain Loan and
Security Agreement dated as of June 1, 2015 (as amended, supplemented, restated
or otherwise modified from time to time, the “Loan Agreement”; capitalized terms
not otherwise defined herein having the definitions provided therefor in the
Loan Agreement) and to certain other documents executed in connection with the
Loan Agreement;

WHEREAS, Borrowers, certain subsidiaries of Borrowers as Guarantors, the Lenders
party thereto, and the Administrative Agent are parties to that certain Limited
Consent to Loan Agreement and Forbearance Agreement, dated as of May 11, 2016
(the “Limited Consent and Forbearance Agreement”);

WHEREAS, substantially concurrently herewith, Borrowers are entering into a Plan
Support Agreement, an executed copy of which is attached as Exhibit A (the “Plan
Support Agreement”);

WHEREAS, the Borrowers have requested that the Lenders consent to the prepayment
of the Term Loans in an amount of up to $10,000,000 (of which $9,859,637.11 will
be applied to pay the principal amount thereof and $140,362.89 will be applied
in payment of accrued but unpaid interest thereon) (such payment, the “Specified
Term Loan Repayment”);

WHEREAS, the Lenders are willing to provide such consent on terms and subject to
conditions set forth herein;

WHEREAS, the Borrowers have further requested that the Lenders and the
Administrative Agent amend the Limited Consent and Forbearance Agreement as set
forth herein; and

WHEREAS, the Lenders and the Administrative Agent are willing to so amend the
Limited Consent and Forbearance Agreement on terms and subject to conditions set
forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties hereto agree as follows:

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

NOW, THEREFORE, the parties hereto agree as follows:

1. Limited Consent. Notwithstanding anything to the contrary contained in the
Loan Agreement, Administrative Agent and the Lenders signatory hereto
constituting Required Lenders hereby consent to the Specified Term Loan
Repayment, provided that (i) the Specified Term Loan Repayment is made on or
before August 25, 2016 and (ii) no proceeds of Revolver Loans are used to fund
the Specified Term Loan Repayment.

The consent contained in this Section 1 is limited and (i) shall only be relied
upon and used for the specific purpose set forth herein, (ii) shall not
constitute nor be deemed to constitute a waiver of (a) any Default or Event of
Default or (b) any term or condition of the Loan Agreement and the other Loan
Documents, (iii) shall not constitute nor be deemed to constitute a consent by
the Administrative Agent or any Lender to anything other than the specific
purpose set forth herein and (iv) shall not constitute a custom or course of
dealing among the parties hereto.

2. Amendments to the Loan Agreement. The Loan Agreement is hereby amended as
follows:

2.1 Section 1.1 of the Loan Agreement is amended by

(a) deleting the percentage “103%” in the definition of “Cash Collateralize” and
inserting the percentage “105%” in lieu thereof; and

(b) inserting the following new defined term in its appropriate alphabetical
order:

“Plan Support Agreement: as defined in that certain Limited Consent and Second
Amendment to Loan Agreement and Amendment No. 3 to Limited Consent to Loan
Agreement and Forbearance Agreement, dated as of August 24, 2016, 2016, among
Borrowers, Guarantors, the Administrative Agent and Lenders party thereto (the
“Limited Consent and Second Amendment and Amendment No. 3 to Forbearance
Agreement”).”

2.2 Section 2.2 of the Loan Agreement is amended and restated to read in its
entirety as follows:

“2.2. Termination of Obligations to Extend Credit.

2.2.1 Termination of Obligations to Extend Credit. Notwithstanding anything in
this Section 2, in this Agreement or in any other Loan Document to the contrary,
effective 11:59 p.m. (Central Time) on August 24, 2016 (the “Credit Extension
Termination Time”), all obligations of the Administrative Agent, Issuing Banks
and Lenders to fund any Loans, issue or arrange for issuance of any Letters of
Credit, increase, renew, extend or otherwise amend any existing Letter of
Credit, or otherwise extend any credit or financial accommodations under this
Agreement or any other Loan Documents, shall each automatically terminate
without any further action or notice from any party; provided, that, with
respect to any Letter of Credit outstanding as of the Credit Extension
Termination Time that has a stated termination date in 2016 (each such Letter of
Credit, a “Specified Letter of Credit”), the Issuing Banks agree, following a
receipt of an LC Application, to either (A) send to the applicable beneficiary
an amendment to the applicable Specified Letter of Credit that amends its expiry
date to March 31, 2017 or (B) as long as the existing Specified Letter of Credit
has been validly cancelled prior thereto, issue a new Letter of Credit in
replacement of the cancelled Specified Letter of

 

2

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Credit which has the same terms as the cancelled Specified Letter of Credit but
for the expiry date which will be March 31, 2017 (the first such extension of an
expiry date as to each such Specified Letter of Credit, the “Contemplated
Extension”). Notwithstanding any of the foregoing to the contrary, each of the
Lenders and the Borrowers hereby irrevocably authorizes the Issuing Banks to, in
their discretion after the Credit Extension Termination Time, either deliver to
the beneficiary of any “evergreen” Letter of Credit a notice of a non-renewal of
such Letter of Credit, which notice such Issuing Bank may deliver at such time
as such Issuing Bank elects, or refrain from delivering such notice and
therefore effectively renew such “evergreen” Letter of Credit; provided that,
except with respect to any Contemplated Extension, at least 15 Business Days
prior to the date a non-renewal notice must be delivered pursuant to the terms
of the applicable “evergreen” Letter of Credit (or such shorter period of time
agreed to by each Co-Collateral Agent), the applicable Issuing Bank shall
deliver a written notice to the Co-Collateral Agents that it intends to refrain
from delivering a non-renewal notice, and if the Co-Collateral Agents do not
approve in writing (which may be by email) such renewal (or if either of them
confirms that it does not approve such renewal (which confirmation may be by
email)) within five Business Day of receiving the applicable Issuing Bank’s
notice, such Issuing Bank shall deliver a non-renewal notice to the beneficiary
of such “evergreen” Letter of Credit prior to the requisite date such
non-renewal notice must be delivered. No Issuing Bank Indemnitee shall be liable
or otherwise responsible to any Lender, Borrower or other Person for such
Issuing Bank’s delivery of a non-renewal notice or for refraining from
delivering a non-renewal notice with respect to any “evergreen” Letters of
Credit issued by it in accordance with the foregoing, and the Lenders
acknowledge and agree that each such “evergreen” Letter of Credit extended (or
not extended, as the case may be) pursuant to the foregoing shall be deemed to
be and constitute a Letter of Credit that is permitted to be issued and extended
(or not extended, as the case may be) under this Agreement and that each Lender
has irrevocably and unconditionally purchased such Lenders’ Pro Rata
participations in all LC Obligations with respect thereto each “evergreen”
Letter of Credit that is as so extended (or not extended, as the case may be).

2.2.2 Continuing Rights and Obligations. Notwithstanding anything in this
Section 2, in this Agreement or in any other Loan Document to the contrary, all
provisions of the Loan Documents that by their terms survive any termination in
whole or in part of the obligation to extend credit hereunder, including all
affirmative covenants in Section 10.1, all negative covenants in Section 10.2,
Section 10.3, Sections 2.3, 3.2.2, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 5.10, 13, 15.2,
Section 4.6, and each indemnity or waiver given by any Obligor or Lender under
any Loan Document, shall survive the termination of the obligations of
Administrative Agent, Issuing Banks and Lenders pursuant to this Section.

2.2.3 Lenders’ Participation in the Existing Letters of Credit. It is understood
and agreed that Lenders’ obligations to make payments to the Administrative
Agent for the account of Issuing Banks on account of Lenders’ Pro Rata
participations in all LC Obligations with respect to the Letters of Credit
outstanding as of the Credit Extension Termination Time (including those Letters
of Credit listed on Schedule 2.2 hereto), whether pursuant to Sections 2.3.2(b)
and (c) or otherwise, shall continue and be of full force and effect at all
times as long as such Letters of Credit remain outstanding, including following
the Credit Extension Termination Time, the commencement of the Chapter 11 Cases
referenced in the Plan Support Agreement or any other Event of Default described
in Section 12.1(h).”

 

3

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2.3 Section 2.3.2(a) of the Loan Agreement is amended and restated to read in
its entirety as follows:

“(a) If Issuing Bank honors any request for payment under a Letter of Credit,
Borrowers shall pay to Issuing Bank, on the same day (“Reimbursement Date”), the
amount paid by Issuing Bank under such Letter of Credit, together with interest
at the interest rate for Base Rate Revolver Loans plus an additional two percent
(2%) (for the avoidance of doubt, such interest rate shall be the Base Rate plus
5.5%) from the Reimbursement Date until payment by Borrowers. The obligation of
Borrowers to reimburse Issuing Bank for any payment made under a Letter of
Credit shall be absolute, unconditional, irrevocable, and joint and several, and
shall be paid under any and all circumstances whatsoever, including: (i) any
lack of validity, enforceability, or legal effect of any Letter of Credit or
this Agreement or any term or provision therein or herein; (ii) payment against
presentation of any draft, demand or claim for payment under any Drawing
Document which proves to be fraudulent, forged, or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, or which is signed,
issued or presented by a Person or a transferee of such Person purporting to be
a successor or transferee of the beneficiary of such Letter of Credit; (iii)
Issuing Bank or any of its branches or affiliates being the beneficiary of any
Letter of Credit; (iv) Issuing Bank or any correspondent honoring a drawing
against a Drawing Document up to the amount available under any Letter of Credit
even if such Drawing Document claims an amount in excess of the amount available
under the Letter of Credit; (v) the existence of any claim, set-off, defense or
other right that any Borrower or any of its Subsidiaries may have at any time
against any beneficiary, any assignee of proceeds, Issuing Bank or any other
Person; (vi)any other event, circumstance or conduct whatsoever, whether or not
similar to any of the foregoing that might, but for this Section 2.3.2(a),
constitute a legal or equitable defense to or discharge of, or provide a right
of set-off against, any Borrower’s or any of its Subsidiaries’ reimbursement and
other payment obligations and liabilities, arising under, or in connection with,
any Letter of Credit, whether against Issuing Bank, the beneficiary or any other
Person; or (vii) the fact that any Default or Event of Default shall have
occurred and be continuing. Whether or not Borrower Agent submits a Notice of
Borrowing, Borrowers shall be deemed to have requested a Borrowing of Base Rate
Revolver Loans (with interest at the interest rate for Base Rate Revolver Loans
plus an additional two percent (2%) (for the avoidance of doubt, such interest
rate shall be the Base Rate plus 5.5%)) in an amount necessary to pay all
amounts due Issuing Bank on any Reimbursement Date and each Lender shall fund
its Pro Rata share of such Borrowing whether or not the Commitments have
terminated, an Overadvance exists or is created thereby, or the conditions in
Section 6 are satisfied.”

2.4 Section 3.1.1(a) of the Loan Agreement is amended and restated to read in
its entirety as follows:

“(a) The Obligations shall bear interest (i) if a Base Rate Loan, at the Base
Rate in effect from time to time, plus the Applicable Margin; (ii) if a LIBOR
Loan, at

 

4

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LIBOR for the applicable Interest Period, plus the Applicable Margin; and (iii)
if any other Obligation not paid when due (including, to the extent permitted by
law, interest not paid when due), at the Base Rate in effect from time to time,
plus the Applicable Margin for Base Rate Revolver Loans; provided that,
notwithstanding the foregoing, Obligations of Borrowers to reimburse Issuing
Bank for any payment made under a Letter of Credit shall bear interest as set
forth in Section 2.3.2(a) hereof”.

2.5 Section 3.2.1 of the Loan Agreement is amended and restated to read in its
entirety as follows:

“3.2.1 Unused Line Fee. Borrowers shall pay to Administrative Agent, for the Pro
Rata benefit of Lenders, a fee equal to the Unused Line Fee Rate times the
amount by which the Revolver Commitments exceed the average daily Revolver Usage
during any quarter; provided, that in lieu of the foregoing, from and after the
Credit Extension Termination Time until the date of any bankruptcy filing by or
with respect to any Borrower, Borrowers shall pay to Administrative Agent, for
the Pro Rata benefit of Lenders, a per diem fee equal to $2,134.49. Such fee
shall be due and payable in arrears, on the first day of each calendar quarter,
on date of the Credit Extension Termination Time, and on the date of any
bankruptcy filing by or with respect to any Borrower.”

2.6 Section 4.6 of the Loan Agreement is amended to restate the first sentence
thereof to read in its entirety as follows:

On the effective date of the termination of all Commitments (other than in
accordance with Section 2.2 hereof), the Obligations shall be immediately due
and payable, and each Secured Bank Product Provider may terminate its Bank
Products to the extent permitted by the agreements covering such Bank Products

2.7 Section 12.1(a) of the Loan Agreement is amended and restated to read in its
entirety as follows:

“(a) (i) Any Borrower fails to pay principal on any Loan when due (whether at
stated maturity, on demand, upon acceleration or otherwise), (ii) any Borrower
fails to pay the applicable Issuing Bank on the same day (or by 11:00 am Central
time on the next Business Day with respect to draws as to which Borrowers
receive notice of such draws after 3:00 pm Central time) such Issuing Bank
honors any request for payment under a Letter of Credit the amount paid by such
Issuing Bank under such Letter of Credit, or (iii) any Borrower fails to pay any
interest, fee or any other Obligation, and such failure continues unremedied for
a period of three (3) Business Days (it being understood and agreed that
following an entry of a cash collateral order by the Bankruptcy Court (as
defined in Plan Support Agreement) as

 

5

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contemplated by the Plan Support Agreement, failure by any Borrower to pay the
Issuing Banks the amount paid by the Issuing Banks under the Letters of Credit
and failure by any Borrower to pay any interests or fees shall be governed by
the terms and provisions of such cash collateral order);”

2.8 Section 15.2 of the Loan Agreement is amended and restated to read in its
entirety as follows:

“15.2 Indemnity.

EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY
CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING
CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON AND, IN ALL CASES, WHETHER OR NOT
CAUSED OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE OR SOLE
NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan Document have
any obligation thereunder to indemnify or hold harmless an Indemnitee with
respect to a Claim (a) that is determined in a final, non-appealable judgment by
a court of competent jurisdiction to result directly from the bad faith, gross
negligence or willful misconduct of such Indemnitee or (b) arises out of or is
in connection with any claim, litigation, loss or proceeding not involving an
act or omission of any Borrower or any of its Affiliates and that is brought by
an Indemnitee against another Indemnitee (other than against any Agent in its
capacity as such); and Claims consisting of attorneys’ fees and expenses
incurred by the Indemnitees will be limited to (a) the reasonable and documented
fees, disbursements and other charges of no more than one firm of counsel to the
Indemnitees taken as a whole (including Wells Fargo Bank, National Association,
in its capacity as a Co-Collateral Agent, as an Issuing Bank, and as a Lender)
and one firm of local counsel to the Indemnitees taken as a whole in each
appropriate jurisdiction and, in the case of an actual or potential conflict of
interest as determined by the affected Indemnitee Party, one additional counsel
to such affected Indemnitee and (b) the reasonable and documented fees,
disbursements and other charges of one firm of special counsel to Wells Fargo
Bank, National Association, in its capacity as a Co-Collateral Agent and as an
Issuing Bank.”

2.9 Schedule 2.2 to this Agreement is inserted in the Loan Agreement as
Schedule 2.2 to the Loan Agreement.

3. Amendment to Limited Consent and Forbearance Agreement. The Limited Consent
and Forbearance Agreement is hereby amended by:

3.1 amending and restating Section 2.1 thereof to read in its entirety as
follows:

“2.1 Effective as of the date hereof, Administrative Agent and the Lenders
signatory hereto, constituting Required Lenders, hereby agree that until the
expiration or termination of the Forbearance Period, they will temporarily
forbear from exercising default-related rights and remedies against the
Borrowers or any

 

6

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other Obligor solely with respect to (i) the Alleged Asset Coverage Ratio
Default and any failure to satisfy Section 10.3.2 of the Loan Agreement from and
after September 30, 2016; (ii) the accuracy of any Compliance Certificate
insofar as it concerns the Asset Coverage Ratio as of March 31, 2016; (iii) from
and after the date of any payment pursuant to the FCPA Resolution (as defined
below), failure to satisfy the financial covenants contained in Section 10.3.3
of the Loan Agreement and any default arising pursuant to Section 12.1(j) of the
Loan Agreement, (iv) from and after the Credit Extension Termination Time, any
failure to comply with Section 10.3.1 of the Loan Agreement; (v) any
cross-default to the Term Loan Agreement or Senior Notes Indenture arising from
matters that are subject to the forbearance pursuant to Section 12 of the Plan
Support Agreement for so long as such forbearance shall remain in effect
(collectively, the “Subject Defaults”); provided, however, that nothing herein
shall restrict, impair or otherwise affect any Lender’s or the Administrative
Agent’s rights and remedies under any agreements (including, without limitation,
the Intercreditor Agreement) containing subordination provisions in favor of any
or all of the Lenders or the Administrative Agent (including, without
limitation, any rights or remedies available to the Lenders or the
Administrative Agent as a result of the occurrence or continuation of the
Alleged Asset Coverage Ratio Default) or amend or modify any provision
thereof. As used herein, “FCPA Resolution” means the valid and binding cease and
desist order entered by the SEC on August 11, 2016 and effective as of August
11, 2016.”

3.2 amending and restating Section 2.2 thereof to read in its entirety as
follows:

“2.2 As used herein, the term “Forbearance Period” shall mean the period
beginning on the date hereof and ending on the earlier to occur of (the
occurrence of clause (i) or (ii), a “Termination Event”): (i) any Forbearance
Default (as hereinafter defined) or (ii) November 1, 2016 at 11:59 p.m. New York
time. As used herein, the term “Forbearance Default” shall mean (A) the
occurrence of any Default or an Event of Default other than the Subject
Defaults, (B) the failure of any Borrower or any other Obligor to comply timely
with any term, condition, or covenant set forth in this Agreement, (C) the
failure of any representation or warranty made by any Borrower or any other
Obligor under or in connection with this Agreement to be true and complete in
all material respects as of the date hereof, (D) the repudiation and/or
assertion of any defense by any Obligor with respect to this Agreement or any
Loan Document or the pursuit of any claim by any Obligor against the
Administrative Agent, any Issuing Bank, any Lender, or any other Indemnitee of
any of the foregoing, and/or (E) the termination or expiration of any other
forbearance granted by another creditor of any of the Obligors (including of the
forbearance pursuant to Section 12(a) or Section 12(b) of the Plan Support
Agreement) or taking of an enforcement action or other exercise of any or all
rights and remedies (including delivery of any notice of default or event of
default or similar notice) by any such creditor (including by the Term Loan
Agent, any “Lender” under (and as defined in) the Term Loan Credit Agreement or
any other holder of obligations under the Term Loan Credit Agreement or by any
holder of obligations under the Senior Notes Indenture) or acceleration by such
creditor of indebtedness owing to such creditor, including, without limitation,
by the Term Loan Agent, any “Lender” under (and as defined in) the Term Loan
Credit

 

7

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Agreement or any other holder of obligations under the Term Loan Credit
Agreement or by an holder of obligations under the Senior Notes Indenture.”

4. No Other Amendments or Waivers.

This Agreement, and the terms and provisions hereof, constitute the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes any and all prior or contemporaneous amendments relating to the
subject matter hereof. Except for the limited consent to the Loan Agreement
expressly set forth in Section 1 hereof, the amendments to the Loan Agreement
expressly set forth in Section 2 hereof and the amendments to the Limited
Consent and Forbearance Agreement expressly set forth in Section 3 hereof, the
Loan Agreement and the Limited Consent and Forbearance Agreement shall remain
unchanged and in full force and effect. Except as expressly set forth in Section
1, Section 2 and Section 3 hereof, the execution, delivery, and performance of
this Agreement shall not operate as a waiver of or as an amendment of, any
right, power, or remedy of Administrative Agent or the Lenders under the Limited
Consent and Forbearance Agreement, the Loan Agreement or any of the other Loan
Documents as in effect prior to the date hereof, nor constitute a waiver of any
provision of the Limited Consent and Forbearance Agreement, the Loan Agreement
or any of the other Loan Documents. The agreements set forth herein are limited
to the specifics hereof, shall not apply with respect to any facts or
occurrences other than those on which the same are based, shall not excuse
future non-compliance under the Limited Consent and Forbearance Agreement, the
Loan Agreement or other Loan Documents, and shall not operate as a consent to
any further or other matter, under the Loan Documents.

5. Use of Cash Collateral.

By their signatures below, Administrative Agent and the Lenders signatory hereto
constituting Required Lenders hereby (a) consent to the use of cash collateral
on the terms set forth in Exhibit 2 to the Plan Term Sheet (as defined in the
Plan Support Agreement) as in effect on the date hereof (the “Cash Collateral
Order Term Sheet”) in connection with a chapter 11 bankruptcy filing by the
Borrowers as contemplated by the Plan Support Agreement and (b) acknowledge and
agree that the consent of the Term Loan Agent (as defined in the Plan Support
Agreement) and the Supporting Term Lenders (as defined in the Plan Support
Agreement) to use of cash collateral is contingent on the provisions set forth
in the Cash Collateral Order Term Sheet as in effect on the date hereof being
reflected in the cash collateral orders entered by the Bankruptcy Court (as
defined in the Plan Support Agreement) in a manner reasonably satisfactory to
the Term Loan Agent and the Required Consenting Term Lenders (as defined in the
Plan Support Agreement), and agree, for so long as this Agreement is in effect,
to use commercially reasonable efforts to cause the provisions on the Cash
Collateral Order Term Sheet as in effect on the date hereof to be reflected in
the cash collateral orders entered by the Bankruptcy Court in a manner
reasonably satisfactory to the Term Loan Agent and the Required Consenting Term
Lenders and not to consent to the entry of any cash collateral orders that fail
to include the provisions set forth on the Cash Collateral Order Term Sheet as
in effect on the date hereof in a manner reasonably satisfactory to the Term
Loan Agent the Required Consenting Term Lenders (this paragraph being the “Cash
Collateral Provision”).

 

8

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The Term Loan Agent and the Supporting Creditors (as defined in the Plan Support
Agreement) are express third party beneficiaries of the Cash Collateral
Provision and this Section, and the terms and provisions of this Section
expressly inure to the benefit of the Term Loan Agent and the Supporting
Creditors, who shall be entitled to rely on and enforce the provisions of this
Section.

The Administrative Agent and the Lenders agree that money damages would be an
insufficient remedy for any breach of this Section and the Term Loan Agent and
the Supporting Creditors, as applicable, shall be entitled to specific
performance and injunctive or other equitable relief, including attorneys’ fees
and costs, as a remedy of any such breach, including an order of the Bankruptcy
Court or other court of competent jurisdiction requiring the applicable party to
comply promptly with any of its obligations hereunder, and each of the
Administrative Agent and the Lenders, and by acceptance of the benefits of this
Section, the Term Loan Agent and the Supporting Creditors, as applicable, agree
to waive any requirement for the securing or posting of a bond in connection
with such remedy, as the sole remedy to which such non-breaching party will be
entitled, at law or in equity. Each of the Administrative Agent and the Lenders,
and by acceptance of the benefits of this Section, the Term Loan Agent and the
Supporting Creditors, agree that such relief will be their only remedy against
the applicable other party with respect to any such breach, and that in no event
will the Administrative Agent and the Lenders or the Term Loan Agent and the
Supporting Creditors be liable for monetary damages (including consequential,
special, indirect or punitive damages or damages for lost profits) other than
attorneys’ fees and costs.

Notwithstanding anything to the contrary contained in this Agreement, this
Section may not be amended, supplement, waived or otherwise modified without the
prior written consent of the Term Loan Agent and the Supporting Creditors.

6. Conditions Precedent. The effectiveness of this Agreement is subject to the
satisfaction of the following conditions precedent on the date hereof:

6.1 Execution of Agreement. Each Obligor, Administrative Agent, Issuing Banks
and the Required Lenders shall have duly executed and delivered this Agreement.

6.2 Accuracy of Representations and Warranties. All representations and
warranties contained in Section 5 hereof shall be true and correct in all
respects.

6.3 Plan Support Agreement. Receipt by the Administrative Agent of evidence
reasonably satisfactory to Administrative Agent that the Plan Support Agreement
has been entered into by all requisite parties thereto.

6.4 Amendment Fee. Receipt by the Administrative Agent, for the benefit of each
Lender that executes and delivers a counterpart of this Agreement by 5:00 p.m.
(Central Time) on August 25, 2016 (each such Lender, a “Consenting Lender”), in
an amount equal to the product of each such Consenting Lender’s Revolver
Commitment (as in effect immediately prior to the effectiveness of this
Agreement) multiplied by 0.0025.

7. Representations and Warranties. Each Obligor hereby jointly and severally
represents and warrants to Administrative Agent and Lenders, that

 

9

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7.1 the execution, delivery and performance by the Obligors of this Agreement:

(a) are within each Obligor’s corporate, limited liability company or
partnership powers, as applicable, and have been duly authorized by all
necessary corporate, limited liability company or partnership, as applicable,
and, if required, equity holder action (including, without limitation, any
action required to be taken by any class of directors or other governing body of
any Obligor or any other Person, whether interested or disinterested, in order
to ensure the due authorization of the execution, delivery and performance by
the Obligors of this Agreement);

(b) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority or any other third Person
(including shareholders or other equity holders or any class of directors or
other governing body, whether interested or disinterested, of any Obligor or any
other Person), nor is any such consent, approval, registration, filing or other
action necessary for the validity or enforceability of this Agreement or the
consummation of the transactions contemplated hereby, except such as have been
obtained or made and are in full force and effect other than those third party
approvals or consents which, if not made or obtained, would not cause a Default
hereunder, or could not reasonably be expected to have a Material Adverse
Effect,

(c) will not violate any Sanctions and Applicable Law or any Organic Documents
of any Obligor or any Restricted Subsidiary, or any order of any Governmental
Authority,

(d) will not violate or result in a default under any Material Contract, or give
rise to a right thereunder to require any payment to be made by any Obligor or
any Restricted Subsidiary and

(e) will not result in the creation or imposition of any Lien on any Property of
any Obligor or any Restricted Subsidiary (other than the Liens created by the
Loan Documents);

7.2 this Agreement has been duly executed and delivered by such Obligor and
constitutes a legal, valid and binding obligation of such Obligor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law; and

7.3 no Default or Event of Default has occurred and is continuing.

8. Reaffirmation. Each of the Obligors hereby confirms its respective
guarantees, pledges, grants of security interests and other obligations, as
applicable, under and subject to the terms of each of the Loan Documents to
which it is party, and agrees that such guarantees, pledges, grants of security
interests and other obligations, and the terms of each of the Loan Documents to
which it is a party, are not impaired or affected in any manner whatsoever and
shall continue to be in full force and effect. Each Obligor acknowledges and
agrees that any of the Loan Documents to which it is a party or otherwise bound
shall continue in full force and effect, effect and that all of its obligations
thereunder (other than as expressly amended hereby) shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Agreement.

 

10

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9. General Release; Indemnity.

9.1 In consideration of, among other things, the Administrative Agent’s, Issuing
Banks’ and the Lenders’ execution and delivery of this Agreement, each of
Borrowers and the other Obligors, on behalf of itself and its agents,
representatives, officers, directors, advisors, employees, subsidiaries,
affiliates, successors and assigns (collectively, “Releasors”), hereby forever
agrees and covenants not to sue or prosecute against any Releasee (as
hereinafter defined) and hereby forever waives, releases and discharges, to the
fullest extent permitted by law, each Releasee from any and all claims
(including, without limitation, crossclaims, counterclaims, rights of set-off
and recoupment), actions, causes of action, suits, debts, accounts, interests,
liens, promises, warranties, damages and consequential damages, demands,
agreements, bonds, bills, specialties, covenants, controversies, variances,
trespasses, judgments, executions, costs, expenses or claims whatsoever, that
such Releasor now has or hereafter may have, of whatsoever nature and kind,
whether known or unknown, whether now existing or hereafter arising, whether
arising at law or in equity (collectively, the “Claims”), against any or all of
the Administrative Agent, Co-Collateral Agents, Issuing Banks, Lenders and other
Secured Parties (sometimes referred to herein individually as a “Lender Party,”
and collectively as the “Lender Parties”) in any capacity and their respective
affiliates, subsidiaries, shareholders and “controlling persons” (within the
meaning of the federal securities laws), and their respective successors and
assigns and each and all of the officers, directors, employees, agents,
attorneys, advisors and other representatives of each of the foregoing
(collectively, the “Releasees”), based in whole or in part on facts, whether or
not now known, existing on or before the date of this Agreement, that relate to,
arise out of or otherwise are in connection with: (i) any or all of the
Obligations, Loan Documents or transactions contemplated thereby or any actions
or omissions in connection therewith or (ii) any aspect of the dealings or
relationships between or among the Borrowers and the other Obligors, on the one
hand, and any or all of the Lender Parties, on the other hand, relating to any
or all of the obligations, documents, transactions, actions or omissions
referenced in clause (i) hereof, but only to the extent such dealings or
relationships relate to any or all of the obligations, documents, transactions,
actions or omissions referenced in clause (i) hereof. In entering into this
Agreement, each Borrower and each other Credit Party consulted with, and has
been represented by, legal counsel and expressly disclaims any reliance on any
representations, acts or omissions by any of the Releasees and hereby agrees and
acknowledges that the validity and effectiveness of the releases set forth above
do not depend in any way on any such representations, acts and/or omissions or
the accuracy, completeness or validity thereof. The provisions of this Section
shall survive the termination of this Agreement, the Loan Agreement, the other
Loan Documents and the Full Payment of the Obligations.

9.2 Borrowers and other Obligors each hereby agrees that it shall be, jointly
and severally, obligated to indemnify and hold the Releasees harmless with
respect to any and all liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever incurred by the Releasees, or any of them, whether direct, indirect
or consequential, as a result of or arising from or relating to any proceeding
by or on behalf of any Person, including, without limitation, the respective
officers, directors, agents, trustees, creditors, partners or shareholders of
any Borrower, any other Obligor, or any of their respective Subsidiaries,
whether asserted or unasserted, in respect of any claim for legal or equitable
remedy under any statue, regulation or common law principle arising from or in
connection with the negotiation, preparation, execution, delivery, performance,
administration and enforcement of or relating to the Obligations, the Loan
Agreement, the other Loan Documents, this Agreement or any other document
executed and/or delivered in connection herewith or therewith; provided, that
neither any Borrower nor any other Obligor shall have any obligation to
indemnify or hold harmless any Releasee hereunder with respect to liabilities to
the extent they result from the gross negligence or willful misconduct of any
Releasee as finally determined by a court of competent jurisdiction. If and to
the extent that the foregoing undertaking may be unenforceable for any reason,
Borrowers and other Obligors each agrees to make the maximum contribution to the
payment and satisfaction thereof that is permissible under applicable law. The
foregoing indemnity shall survive the termination of this Agreement, the Loan
Agreement, the other Loan Documents and the Full Payment of the Obligations.

 

11

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9.3 Each of Borrowers and other Obligors, on behalf of itself and its
successors, assigns, and other legal representatives, hereby absolutely,
unconditionally and irrevocably, covenants and agrees with and in favor of each
Releasee that it will not sue (at law, in equity, in any regulatory proceeding
or otherwise) any Releasee on the basis of any Claim released, remised and
discharged by any Borrower or any other Obligor pursuant to Section 7.1
hereof. If any Borrower, any other Obligor or any of its successors, assigns or
other legal representatives violates the foregoing covenant, Borrowers and other
Obligors, each for itself and its successors, assigns and legal representatives,
agrees to pay, in addition to such other damages as any Releasee may sustain as
a result of such violation, all attorneys’ fees and costs incurred by any
Releasee as a result of such violation.

10. Miscellaneous.

10.1 Captions. Section captions used in this Agreement are for convenience only,
and shall not affect the construction of this Agreement.

10.2 Governing Law. UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS
AGREEMENT AND ALL CLAIMS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES EXCEPT FEDERAL LAWS
RELATING TO NATIONAL BANKS.

10.3 Severability. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be valid under Applicable Law. If any provision
is found to be invalid under Applicable Law, it shall be ineffective only to the
extent of such invalidity and the remaining provisions of this Agreement shall
remain in full force and effect.

10.4 Successors and Assigns. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the sole
benefit of the parties and their respective successors and assigns.

10.5 References. Any reference to the Limited Consent and Forbearance Agreement
and the Loan Agreement contained in any notice, request, certificate, or other
document executed concurrently with or after the execution and delivery of this
Agreement shall be deemed to include this Agreement unless the context shall
otherwise require.

10.6 Loan Document. This Agreement shall be deemed to be and shall constitute a
Loan Document.

10.7 Continued Effectiveness. Notwithstanding anything contained herein, the
terms of this Agreement are not intended to and do not serve to effect a
novation as to the Loan Agreement. The Limited Consent and Forbearance
Agreement, the Loan Agreement and each of the Loan Documents remain in full
force and effect.

 

12

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10.8 Entire Agreement. This Agreement constitutes the entire agreement, and
supersede all prior understandings and agreements, among the parties relating to
the subject matter thereof.

10.9 Counterparts; Execution. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement shall become effective when
Administrative Agent has received counterparts bearing the signatures of all
parties hereto. Delivery of a signature page of this Agreement by telecopy or
other electronic means shall be effective as delivery of a manually executed
counterpart of such agreement. Any signature, contract formation or
record-keeping through electronic means shall have the same legal validity and
enforceability as manual or paper-based methods, to the fullest extent permitted
by Applicable Law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any similar state law based on the Uniform Electronic Transactions Act.

[Remainder of Page Intentionally Left Blank]

 

13

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

BORROWERS: KEY ENERGY SERVICES, INC. By  

/s/ J. Marshall Dodson

Name:   J. Marshall Dodson Title:   SVP, CFO and Treasurer KEY ENERGY SERVICES,
LLC. By  

/s/ J. Marshall Dodson

Name:   J. Marshall Dodson Title:   SVP, CFO and Treasurer GUARANTOR: KEY ENERGY
MEXICO, LLC By  

/s/ J. Marshall Dodson

Name:   J. Marshall Dodson Title:   SVP, CFO and Treasurer

 

[Signature Page to Limited Consent and Second Amendment to

Loan Agreement Consent and

Amendment No. 3 to Limited Consent to Loan Agreement and Forbearance Agreement]

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

ADMINISTRATIVE AGENT AND LENDERS: BANK OF AMERICA, N.A., as Administrative
Agent, Issuing Bank and a Lender By  

/s/ Brandon Watkins

Name:   Brandon Watkins Title:   Senior Vice President

 

[Signature Page to Limited Consent and Second Amendment to

Loan Agreement Consent and

Amendment No. 3 to Limited Consent to Loan Agreement and Forbearance Agreement]

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

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender and Issuing Bank By  

/s/ Nathan McIntosh

Name:   Nathan McIntosh Title:   Duly Authorized Signer

 

[Signature Page to Limited Consent and Second Amendment to

Loan Agreement Consent and

Amendment No. 3 to Limited Consent to Loan Agreement and Forbearance Agreement]

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

Exhibit A

Plan Support Agreement

(to be attached)

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

SCHEDULE 2.2

to

Loan and Security Agreement

OUTSTANDING LETTERS OF CREDIT

 

Applicant

  

Beneficiary

  

Issuer

  

LC#

  

Expiry Date

   Amount   Key Energy Services, Inc.    Highlands Insurance    Wells Fargo
Bank, National Association    NTS610035    December 1, 2016    $ 150,000.00   
Key Energy Services, Inc.    Liberty Mutual Insurance    Wells Fargo Bank,
National Association    NTS610034    November 30, 2016    $ 9,643,788.00   
Key Energy Services, Inc.    ACE Insurance    Wells Fargo Bank, National
Association    NTS651695    November 30, 2016    $ 28,488,900.00    Key Energy
Services, LLC.    Bond Safeguard Insurance Company and/or Lexon Insurance
Company and/or Boston Indemnity Group and/or Ironshore Specialty Insurance
Company and/or Ironshore Indemnity, Inc.    Bank of America, N.A.    68123768   
February 10, 2017    $ 244,000.00