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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): June 28, 2020

 

CHESAPEAKE ENERGY CORPORATION

(Exact name of Registrant as specified in its Charter)  

 

Oklahoma   1-13726   73-1395733
(State or other jurisdiction of   (Commission File No.)   (IRS Employer Identification No.)
incorporation)        

 

6100 North Western Avenue, Oklahoma City, OK

  73118
(Address of principal executive offices)   (Zip Code)

 

(405) 848-8000

 

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.01 per share CHK New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On June 28, 2020, Chesapeake Energy Corporation (“Chesapeake”) and certain of its subsidiaries (together with Chesapeake, the “Company”) entered into a restructuring support agreement (the “RSA”) with certain holders (collectively, the “Consenting Stakeholders”) of (i) obligations under that certain Amended and Restated Credit Agreement, dated as of September 12, 2018, by and among Chesapeake, as borrower, the Debtor guarantors party thereto, MUFG Union Bank, N.A., as administrative agent, and the other lender, issuer, and agent parties thereto (the “Revolving Credit Facility”); (ii) obligations under that certain Term Loan Agreement, dated as of December 19, 2019, by and among Chesapeake, as borrower, the Debtor guarantors party thereto, GLAS USA LLC., as administrative agent, and the lender parties thereto (the “FLLO Term Loan”); and (iii) obligations under the 11.500% Senior Secured Second Lien Notes due 2025 (the “Second Lien Notes”) issued pursuant to that certain indenture, dated as of December 19, 2019, by and among Chesapeake, as issuer, certain guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee and collateral trustee (the “Second Lien Notes Indenture”) to support a restructuring (the “Restructuring”) on the terms set forth in the RSA and the term sheet annexed to the RSA (the “Restructuring Term Sheet”). Certain Consenting Stakeholders also hold Unsecured Notes (as defined in the Restructuring Term Sheet) and the corresponding claims are also subject to the terms and obligations under the RSA. The RSA contemplates that the Company will implement the Restructuring through the Chapter 11 Cases (as defined below) pursuant to a consensual plan of reorganization (the “Plan”) and the various related transactions set forth in or contemplated by the RSA and the Restructuring Term Sheet.

 

Pursuant to the terms of the RSA and the Restructuring Term Sheet, below is a summary of the treatment that the stakeholders of the Company would receive under the Plan:

 

  · Holders of Other Secured Claims. Each holder of other secured claims would receive, at the Company’s option and in consultation with a requisite number of holders of claims who are backstopping a rights offering pursuant to the Plan: (a) payment in full in cash; (b) the collateral securing its secured claim; (c) reinstatement of its secured claim; or (d) such other treatment rendering its secured claim unimpaired in accordance with section 1124 of the Bankruptcy Code.

 

  · Holders of Other Priority Claims. Each holder of other priority claims would receive treatment in a manner consistent with section 1129(a)(9) of the Bankruptcy Code.

 

  · Holders of Revolving Credit Facility Claims. On the effective date of the Plan (the “Plan Effective Date”), each holder of obligations under the Revolving Credit Facility would receive, at such holder’s option, its pro rata share of either Tranche A RBL Exit Facility Loans or Tranche B RBL Exit Facility Loans, each on a dollar for dollar basis

 

  · Holders of FLLO Term Loan Facility Claims. On the Plan Effective Date, each holder of obligations under the FLLO Term Loan Facility would receive its pro rata share of (i) 76% of the reorganized Company’s new common equity interests (the “New Common Stock”), subject to the terms set forth in the Restructuring Term Sheet and (ii) the right to participate in a rights offering on the terms set forth in the Restructuring Term Sheet.

 

  · Holders of Second Lien Notes Claims. On the Plan Effective Date, each holder of the Second Lien Notes would receive its pro rata share of (i) 12% of the New Common Stock, subject to the terms set forth in the Restructuring Term Sheet, (ii) the right to participate in a rights offering on the terms set forth in the Restructuring Term Sheet, and (iii) warrants to purchase 10% of New Common Stock on certain terms set forth in the Restructuring Term Sheet, warrants to purchase another 10% of New Common Stock on certain other terms set forth in the Restructuring Term Sheet, and 50% of warrants to purchase another 10% of New Common Stock on certain other terms set forth in the Restructuring Term Sheet (the “New Class C Warrants”).

 

  · Holders of Unsecured Notes Claims. On the Plan Effective Date, each holder of the Unsecured Notes would receive its pro rata share of (i) 12% of the New Common Stock, subject to the terms set forth in the Restructuring Term Sheet (the “Unsecured Claims Recovery”), and (ii) 50% of the New Class C Warrants.

 

 

 

  · Holders of General Unsecured Claims. On the Plan Effective Date, each holder of allowed general unsecured claims would receive its pro rata share of the Unsecured Claims Recovery.

 

  · Equity Holders. Each holder of an equity interest in Chesapeake would have such interest cancelled, released, and extinguished without any distribution.

 

The RSA contains certain covenants on the part of each of the Company and the Consenting Stakeholders, including limitations on the parties’ ability to pursue alternative transactions (subject to customary provisions regarding the ability of the Company’s board of directors to satisfy its fiduciary duties), commitments by the Consenting Stakeholders to vote in favor of the Plan and commitments of the Company and the Consenting Stakeholders to negotiate in good faith to finalize the documents and agreements contemplated by and required to implement the Plan. The RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including without limitation, the failure to achieve certain milestones and certain breaches by the parties under the RSA.

 

Although the Company intends to pursue the Restructuring in accordance with the terms set forth in the RSA, there can be no assurance that the Company will be successful in completing a Restructuring or any other similar transaction on the terms set forth in the RSA, on different terms, or at all.

 

The foregoing description of the RSA, including the Restructuring Term Sheet attached thereto, does not purport to be complete and is qualified by reference to the full text of the RSA, a copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.

 

Item 1.03 Bankruptcy or Receivership.

 

Chapter 11 Filing

 

On June 28, 2020, the Company filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Company has filed a motion with the Bankruptcy Court seeking joint administration of the Chapter 11 Cases under the caption In re Chesapeake Energy Corporation.

 

The Company will continue to operate its business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

 

DIP Credit Facility

 

On June 28, 2020, prior to the commencement of the Chapter 11 Cases, the Company entered into a commitment letter (the “Commitment Letter”) with certain of the lenders under the Revolving Credit Facility and/or their affiliates (collectively, the “Commitment Parties”), pursuant to which, and subject to the satisfaction of certain customary conditions, including the approval of the Bankruptcy Court, the Commitment Parties have agreed to provide the Company and certain of its subsidiaries with a senior secured superpriority debtor-in-possession revolving credit facility in an aggregate principal amount of up to $925 million (the “DIP Credit Facility”), which, upon satisfaction of certain conditions, including the effectiveness of the Plan, will become a longer term senior secured exit revolving facility (the “Exit Revolving Facility”) and senior secured term loan (the “Exit Term Loan” and, together with the Exit Revolving Facility, the “Exit Credit Facilities”). The terms and conditions of the DIP Credit Facility are set forth in the DIP Credit Agreement (the “DIP Credit Agreement”) attached to the Commitment Letter. The proceeds of all or a portion of the DIP Credit Facility may be used for, among other things, postpetition working capital, permitted capital investments, general corporate purposes, letters of credit, administrative costs, premiums, expenses and fees for the transactions contemplated by the Chapter 11 Cases, payment of court approved adequate protection obligations, and other such purposes consistent with the DIP Credit Facility. The terms and conditions of the Exit Credit Facilities are reflected in an exit facilities term sheet attached as an exhibit to the Restructuring Term Sheet (the “Exit Facilities Term Sheet”). Upon of the satisfaction of certain conditions set forth in the Exit Facilities Term Sheet, including compliance with (i) a minimum liquidity of $500 million and (ii) a 2.25:1.00 leverage ratio test, the DIP Credit Facility commitments will be converted into Exit Credit Facilities of up to $2.5 billion, consisting of a reserve-based revolving credit facility of up to $1.75 billion and a first lien last-out term loan facility of up to $750 million.

 

 

 

The foregoing description of the DIP Credit Facility, the DIP Credit Agreement and the Exit Credit Facilities does not purport to be complete and is qualified in its entirety by reference to the final, executed Commitment Letter, a copy of which is filed herewith as Exhibit 10.2 and is incorporated herein by reference, which includes as attachments the DIP Credit Agreement and Exit Facilities Term Sheet, as may be approved by the Bankruptcy Court.

 

Item 2.04 Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

 

The filing of the Chapter 11 Cases described above in Item 1.03 constitutes an event of default that accelerated the Company’s obligations under the following debt instruments (the “Debt Instruments”):

 

  · $2,003 million, including letters of credit, outstanding under the Revolving Credit Facility.

 

  · $1,500 million outstanding under the FLLO Term Loan.

 

  · $2,330 million in outstanding aggregate principal amount of the Second Lien Notes issued pursuant to the Second Lien Notes Indenture.

 

  · $176 million in outstanding aggregate principal amount of the 6.625% Senior Notes due 2020 issued pursuant to the 6.625% Senior Notes due 2020 Indenture.

 

  · $74 million in outstanding aggregate principal amount of the 6.875% Senior Notes due 2020 issued pursuant to the 6.875% Senior Notes due 2020 Indenture.

 

  · $166 million in outstanding aggregate principal amount of the 6.125% Senior Notes due 2021 issued pursuant to the 6.125% Senior Notes due 2021 Indenture.

 

  · $127 million in outstanding aggregate principal amount of the 5.375% Senior Notes due 2021 issued pursuant to the 5.375% Senior Notes due 2021 Indenture.

 

  · $272 million in outstanding aggregate principal amount of the 4.875% Senior Notes due 2022 issued pursuant to the 4.875% Senior Notes due 2022 Indenture.

 

  · $168 million in outstanding aggregate principal amount of the 5.750% Senior Notes due 2023 issued pursuant to the 5.750% Senior Notes due 2023.

 

  · $623 million in outstanding aggregate principal amount of the 7.000% Senior Notes due 2024 issued pursuant to the 7.000% Senior Notes due 2024 Indenture.

 

  · $246 million in outstanding aggregate principal amount of the 8.000% Senior Notes due 2025 issued pursuant to the 8.000% Senior Notes due 2025 Indenture.

 

  · $46 million in outstanding aggregate principal amount of the 8.000% Senior Notes due 2026 issued pursuant to the 8.000% Senior Notes due 2026 Indenture.

 

 

  · $119 million in outstanding aggregate principal amount of the 7.500% Senior Notes due 2026 issued pursuant to the 7.500% Senior Notes due 2026 Indenture.

 

  · $253 million in outstanding aggregate principal amount of the 8.000% Senior Notes due 2027 issued pursuant to the 8.000% Senior Notes due 2027 Indenture.

 

  · $1,064 million in outstanding aggregate principal amount of the Convertible Notes issued pursuant to the Convertible Notes Indenture.

 

  · $2 million in outstanding aggregate principal amount of the WildHorse Notes pursuant to the WildHorse Notes Indenture.

 

The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.

 

Item 7.01 Regulation FD Disclosure.

 

Press Release

 

In connection with the filing of the Chapter 11 Cases, Chesapeake issued a press release on June 28, 2020, a copy of which is attached to this Form 8-K as Exhibit 99.1.

 

Cleansing Material

 

Prior to the filing of the Chapter 11 Cases, the Company entered into confidentiality agreements (collectively, the “NDAs”) with certain of the Consenting Stakeholders. Pursuant to the NDAs, the Company agreed to publicly disclose certain information, including material non-public information disclosed to such Consenting Stakeholders (the “Cleansing Material”) upon the occurrence of certain events set forth in the NDAs. A copy of the Cleansing Material is attached to this Form 8-K as Exhibit 99.2.

 

The information included in this Form 8-K under Item 7.01 and Exhibits 99.1 and 99.2 are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that Section, unless the registrant specifically states that the information is to be considered “filed” under the Exchange Act or incorporates it by reference into a filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”).

 

Additional Information on the Chapter 11 Cases.

 

Court filings and information about the Chapter 11 Cases can be found at a website maintained by the Company’s noticing and claims agent, Epiq Corporate Restructuring, LLC, at https://dm.epiq11.com/chesapeake, or by calling (855) 907-2082 (toll-free).

 

Item 8.01 Other Events.

 

Cautionary Note Regarding Chesapeake’s Common Stock

 

Chesapeake cautions that trading in Chesapeake’s securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for Chesapeake’s securities may bear little or no relationship to the actual recovery, if any, by holders of Chesapeake’s securities in the Chapter 11 Cases. Chesapeake expects that its equity holders could experience a significant or complete loss on their investment, depending on the outcome of the Chapter 11 Cases.

 

 

Forward Looking Statements

 

This Current Report on Form 8-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward looking statements are statements other than statements of historical fact. They are generally identified by the words the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “may,” “should,” “could,” “will,” “would,” and “will be,” and variations of such words and similar expressions, although not all forward-looking statements contain these identifying words. They include statements regarding our current expectations or forecasts of future events, including matters relating to the continuing effects of the COVID-19 pandemic and the impact thereof on our business, financial condition and results of operations; actions by, or disputes among or between, members of OPEC+; market factors, market prices; our ability to meet debt service requirements; our expectations regarding the borrowing base under our revolving credit facility; our evaluation of strategic alternatives, cost-cutting measures, reductions in capital expenditures, refinancing transactions, capital exchange transactions, asset divestitures, operational efficiencies, future impairments, cost savings due to operational and capital efficiencies related to the WildHorse Merger; the operation or effects of the Section 382 Rights Plan and the use of NOLs to offset future taxable income. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Although we believe the expectations and forecasts reflected in the forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate or changed assumptions or by known or unknown risks and uncertainties. These risks and uncertainties include, but are not limited to: the impact of the COVID-19 pandemic and its effect on our business, financial condition, employees, contractors, vendors and the global demand for oil and natural gas and U.S. and world financial markets; the Company’s ability to obtain Bankruptcy Court approval with respect to motions or other requests made to the Bankruptcy Court; the ability of the Company to negotiate, develop, confirm, and consummate the Plan; the effects of the Chapter 11 Cases on the Company’s liquidity or results of operations or business prospects; the effects of the Chapter 11 Cases on the Company’s business and the interests of various constituents; the length of time that the Company will operate under Chapter 11 protection; risks associated with third-party motions in the Chapter 11 Cases; the Company’s ability to comply with the covenants under our revolving credit facility and other indebtedness and the related impact on our ability to continue as a going concern; the volatility of oil, natural gas and NGL prices, which are affected by general economic and business conditions, as well as increased demand for (and availability of) alternative fuels and electric vehicles; uncertainties inherent in estimating quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of development expenditures; the Company’s ability to replace reserves and sustain production; drilling and operating risks and resulting liabilities; the Company’s ability to generate profits or achieve targeted results in drilling and well operations; the limitations the Company’s level of indebtedness may have on our financial flexibility; the Company’s inability to access the capital markets on favorable terms; the availability of cash flows from operations and other funds to finance reserve replacement costs or satisfy the Company’s debt obligations; adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims; legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal; terrorist activities and/or cyber-attacks adversely impacting the Company’s operations; effects of acquisitions and dispositions, including the Company’s acquisition of WildHorse and its ability to realize related synergies and cost savings; effects of purchase price adjustments and indemnity obligations; and other important risks, assumptions and other important factors that could cause actual results to differ materially from those expressed in the forward-looking statements and which are described under “Risk Factors” in Item 1A of Chesapeake’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and any updates to those factors set forth in Chesapeake’s subsequent quarterly reports on Form 10-Q or current reports on Form 8-K. Chesapeake undertakes no obligation to release publicly any revisions to any forward looking statements, to report events or to report the occurrence of unanticipated events.

 

 

Item 9.01 Exhibits.

 

(d)

 

Exhibit No.   Document Description
10.1*   Restructuring Support Agreement, dated June 28, 2020.
10.2*   Commitment Letter, dated June 28, 2020.
99.1   Chesapeake Energy Corporation press release, dated June 28, 2020.
99.2   Consenting Stakeholder Cleansing Materials.
104   Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

 

* Certain schedules and similar attachments have been omitted. The Company agrees to furnish a supplemental copy of any omitted schedule or attachment to the SEC upon request.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    CHESAPEAKE ENERGY CORPORATION
     
  By: /s/ James R. Webb
    James R. Webb
    Executive Vice President – General Counsel and Corporate Secretary
     
Date: June 29, 2020    

 

 

 

 

Exhibit 10.1

 

Execution Version

 

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

 

RESTRUCTURING SUPPORT AGREEMENT

 

This RESTRUCTURING SUPPORT AGREEMENT (including all exhibits, annexes, and schedules hereto in accordance with Section 14.02, collectively, this “Agreement”) is made and entered into as of June 28, 2020 (the “Execution Date”), by and among the following parties (each of the following described in sub-clauses (i) through (v) of this preamble, and any person or entity that becomes a party hereto in accordance with the terms hereof, collectively, the “Parties”):1

 

i. The undersigned parties that (a) have executed and delivered counterpart signature pages to this Agreement, a joinder to this Agreement substantially in the form attached hereto as Exhibit D (a “Joinder”), or a Transfer Agreement to counsel to the Company Parties, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders and (b) have committed to become, or have become, a DIP Lender in the Chapter 11 Cases (collectively, the “Consenting DIP Lenders”).

 

ii. the undersigned holders of Revolving Credit Facility Claims that have executed and delivered counterpart signature pages to this Agreement, a Joinder, or a Transfer Agreement to counsel to the Company Parties, counsel to the Consenting DIP Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders (collectively, the “Consenting Revolving Credit Facility Lenders”);

 

iii. the undersigned holders of FLLO Term Loan Facility Claims that have executed and delivered counterpart signature pages to this Agreement, a Joinder or a Transfer Agreement to counsel to the Company Parties, counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, and counsel to the Consenting Second Lien Noteholders (collectively, the “Consenting FLLO Term Loan Facility Lenders”);

 

iv. the undersigned holders of, or investment advisors, sub-advisors, or managers of discretionary accounts that hold, Second Lien Notes Claims that have executed and delivered counterpart signature pages to this Agreement, a Joinder, or a Transfer Agreement to counsel to the Company Parties, counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, and counsel to the Consenting FLLO Term Loan Facility Lenders (collectively, the “Consenting Second Lien Noteholders” and, together with the Entities referenced in clauses (i) - (iii), collectively, the “Consenting Stakeholders”); and

 

 

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

 

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v. Chesapeake Energy Corporation, a corporation incorporated under the Laws of Oklahoma, or any of its Affiliates listed on Exhibit A to this Agreement that has executed and delivered counterpart signature pages to this Agreement to counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders (each, a “Company Party” and, collectively, the “Company Parties”).

 

RECITALS

 

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

 

WHEREAS, the Company Parties intend to implement the Restructuring Transactions through the commencement by the Debtors of voluntary cases under chapter 11 of the Bankruptcy Code in the Bankruptcy Court (the cases commenced, the “Chapter 11 Cases”); and

 

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

 

NOW, THEREFORE, in consideration of the covenants and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Party, severally and not jointly, intending to be legally bound hereby, agrees as follows:

 

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AGREEMENT

  

Section 1.             Definitions and Interpretation.

 

1.01.       Definitions. Capitalized terms used but not defined in this Agreement have the meanings given to such terms in Exhibit 1 to Exhibit B attached hereto.

 

1.02.       Interpretation. For purposes of this Agreement:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(j)           the phrase “counsel to the Company Parties” refers to Kirkland & Ellis LLP;

 

(k)          the phrase “counsel to the Consenting DIP Lenders” refers in this Agreement to counsel specified in Section 14.10(b);

 

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(l)           the phrase “counsel to the Consenting Revolving Credit Facility Lenders” refers in this Agreement to counsel specified in Section 14.10(c);

 

(m)         the phrase “counsel to the Consenting FLLO Term Loan Facility Lenders” refers in this Agreement to counsel specified in Section 14.10(d);

 

(n)          the phrase “counsel to the Consenting Second Lien Noteholders” refers in this Agreement to counsel specified in Section 14.10(e); and

 

(o)          the phrase “counsel to the Consenting Stakeholders” means counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders.

 

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

 

(a)          the holders of 100% of the aggregate Revolving DIP Loan Commitments under the DIP Facility (inclusive of validly executed but unsettled trades) shall have executed and delivered counterpart signature pages of this Agreement to counsel to the Company Parties, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders;

 

(b)          the holders of at least 66.67% of the aggregate outstanding principal amount under the Revolving Credit Facility (inclusive of validly executed but unsettled trades) shall have executed and delivered counterpart signature pages of this Agreement to counsel to the Company Parties, counsel to the Consenting DIP Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders;

 

(c)          the holders of at least 66.67% of the aggregate outstanding principal amount under the FLLO Term Loan Facility (inclusive of validly executed but unsettled trades) shall have executed and delivered counterpart signature pages of this Agreement to counsel to the Company Parties, counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, and counsel to the Consenting Second Lien Noteholders;

 

(d)          the holders of at least 50% of the aggregate outstanding principal amount of Second Lien Notes shall have executed and delivered counterpart signature pages of this Agreement to counsel to the Company Parties, counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, and counsel to the Consenting FLLO Term Loan Facility Lenders;

 

(e)          the Company Parties shall have executed and delivered counterpart signature pages of this Agreement to counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders; and

 

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(f)           the Company Parties shall have paid in full all Restructuring Expenses incurred and invoiced at least one (1) Business Day prior to the Agreement Effective Date that were not previously paid by the Company Parties, and shall pay all remaining outstanding Restructuring Expenses at least one (1) day prior to Petition Date.

 

The Company Parties shall be provided signature pages of the Consenting Stakeholders in unredacted form; provided, that the Company Parties and counsel to the Company Parties shall not make any public disclosure of any kind that would disclose either: (i) the holdings of any Consenting Stakeholders (including the signature pages hereto, which shall not be publicly disclosed or filed) or (ii) the identity of any Consenting Stakeholder, in each case without the prior written consent of such Consenting Stakeholder or the order of a Bankruptcy Court or other court with competent jurisdiction. For the avoidance of doubt, if there is a subsequent Termination Date as to the Company Parties pursuant to Section 12.02, Section 12.03, Section 12.04, Section 12.05, Section 12.06, or Section 12.07, any and all provisions of the Agreement referencing “counsel to the Company Parties,” a “Company Party,” or the “Company Parties” are, and shall continue to be, in full force and effect with respect to the Consenting Stakeholders as if such provisions were written without reference to “counsel to the Company Parties,” a “Company Party,” or the “Company Parties” and this Agreement, shall be in full force and effect with respect to each other Party hereto until the occurrence of a Termination Date as to such Party.

 

Section 3.             Definitive Documents.

 

3.01.       The Definitive Documents governing the Restructuring Transactions shall include, without limitation, the following: (A) the Plan and its exhibits, ballots, and solicitation procedures; (B) the Confirmation Order; (C) the Disclosure Statement; (D) the order of the Bankruptcy Court approving the Disclosure Statement and the other Solicitation Materials; (E) the First Day Pleadings and all orders sought pursuant thereto; (F) the Plan Supplement; (G) the DIP Order, DIP Credit Agreement, and any and all other DIP Documents and related documentation; (H) the Backstop Commitment Agreement, (I) Backstop Commitment Agreement Approval Order, Rights Offering Procedures, Registration Rights Agreement and any and all documentation required to implement, issue, and distribute the New Common Stock; (J) the documents or agreements related to the New Warrants; (K) the Exit Facilities Documents and related documentation; (L) the Management Incentive Plan; (M) the New Organizational Documents and all other documents or agreements for the governance of Reorganized Chesapeake, including the list of directors of reorganized Chesapeake and any certificates of incorporation and shareholders’ agreements or supplements as may be reasonably necessary or advisable to implement the Restructuring; and (N) such other agreements and documentation reasonably desired or necessary to consummate and document the transactions contemplated by this Agreement, the Restructuring Term Sheet, and the Plan.

 

3.02.       The Definitive Documents executed prior to the Execution Date or contemporaneously herewith or in a form attached to this Agreement or the Restructuring Term Sheet are acceptable to the Parties. The Definitive Documents not executed or in a form attached to this Agreement or the Restructuring Term Sheet as of the Execution Date remain subject to negotiation and completion. Upon completion, the Definitive Documents and every other document, deed, agreement, filing, notification, letter or instrument related to the Restructuring Transactions shall contain terms, conditions, representations, warranties, and covenants consistent with the terms of this Agreement, as they may be modified, amended, or supplemented in accordance with Section 13. Further,

 

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(a)          the Definitive Documents not executed or in a form attached to this Agreement as of the Execution Date and any amendment to the Definitive Documents shall at all times be in form and substance reasonably acceptable to the Required Plan Sponsors2 and the Company Parties and, solely as affects their rights or treatment in any material respect, the Required Consenting DIP Lenders;

 

(b)          the Definitive Documents set forth in Section 3.01(A)-(E), (F) (other than documents included in the Plan Supplement which are specifically enumerated in Section 3.01), (G)-(H) and (K), and any modifications, amendments, or supplements to the foregoing, shall at all times be in form and substance reasonably acceptable to the Required Consenting DIP Lenders;

 

(c)          the New Warrants, the Rights Offering Procedures, the Registration Rights Agreement and any and all documentation required to implement, issue, and distribute the New Common Stock, and any modifications, amendments, or supplements to the foregoing, shall at all times be in form and substance reasonably acceptable to the Consenting Second Lien Noteholders holding at least 66.67% of the aggregate outstanding principal amount of the Second Lien Note Claims that are held by Consenting Second Lien Noteholders;

 

(d)          the Backstop Commitment Agreement shall be in form and substance acceptable to each Backstop Party;3 provided that if the Backstop Commitment Agreement is not in form and substance acceptable to any particular Consenting FLLO Term Loan Facility Lender, or Consenting Second Lien Noteholder, such Consenting FLLO Term Loan Facility Lender, or Consenting Second Lien Noteholder may refuse to be a Backstop Party but such event shall not give rise to any termination of this Agreement so long as: (i) the Rights Offering is fully backstopped by the Backstop Parties; and (ii) the terms of the Backstop Commitment Agreement do not have a disproportionate and adverse effect on such Consenting FLLO Term Loan Facility Lender, or Consenting Second Lien Noteholder in any material respect as compared to all other Consenting FLLO Term Loan Facility Lenders, or Consenting Second Lien Noteholders, respectively, proposed to be Backstop Parties; and

 

(e)          the DIP Documents and Exit Facilities Documents shall be, and shall be deemed to be, acceptable to the Consenting Stakeholders and Company Parties to the extent they are consistent with the DIP Term Sheet and Exit Facilities Term Sheet; provided that the Consenting Stakeholders and Company Parties reserve all rights with respect to all terms (including any amendments thereto) in the DIP Documents and Exit Facilities Documents that are not specified in the DIP Term Sheet and Exit Facilities Term Sheet.

 

 

2 “Required Plan Sponsors” means the Backstop Parties holding FLLO Term Loan Facility Claims and commitments to Backstop the Rights Offering such that the Required Plan Sponsors Percentage exceeds 66 2/3%. “Required Plan Sponsors Percentage” means a fraction, expressed as a percentage, (a) the numerator of which shall be the sum of (i) the aggregate outstanding principal amount of FLLO Term Loan Facility Claims that are held by the relevant Backstop Parties and (ii) the percentage of the Backstop ascribed to the relevant Backstop Parties (as set forth in the Backstop Commitment Agreement) multiplied by the Rights Offering Amount and (b) the denominator of which shall be the sum of (i) the aggregate outstanding principal amount of FLLO Term Loan Facility Claims that are held by all of the Backstop Parties and (ii) the Rights Offering Amount.

 

3 “Backstop Party” means each of the members of the FLLO Ad Hoc Group and Franklin that are signatories to the Backstop Commitment Agreement

 

 

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Section 4.             Commitments of the Consenting Stakeholders.

 

4.01.       General Commitments, Forbearances, and Waivers.

 

(a)          During the Agreement Effective Period, each Consenting Stakeholder, severally and not jointly, agrees, in respect of all of its Company Claims, to:

 

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

 

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

 

(iii)           use commercially reasonable efforts to oppose, subject to applicable Laws, any party or person from taking any actions contemplated in Section 4.02(b);

 

(iv)           use any commercially reasonably efforts to give, subject to applicable Laws, any notice, order, instruction, or direction to the applicable Agents/Trustees necessary to give effect to the Restructuring Transactions; and

 

(v)            negotiate in good faith and use commercially reasonable efforts to execute and implement the Definitive Documents that are consistent with this Agreement.

 

(b)          During the Agreement Effective Period, subject to applicable Laws and as otherwise set forth in this Agreement, each Consenting Stakeholder, severally, and not jointly, agrees, in respect of all of its Company Claims, that it shall not directly or indirectly:

 

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

 

(ii)            either itself or through any representatives or agents, solicit, initiate, negotiate, facilitate, propose, continue or respond to any Alternative Restructuring Proposal from or with any Entity or propose, file, support, consent to, seek formal or informal credit committee approval of, or vote for any Alternative Restructuring Proposal (and shall immediately inform the other Consenting Stakeholders and the Company Parties of any notification of any Alternative Restructuring Proposal); provided, that notwithstanding the foregoing, any Consenting Stakeholder or its representatives may respond to and participate in discussions with any third party who has made, or intends to make, any bona fide, unsolicited proposal to acquire any material assets of the Company Parties or an Alternative Restructuring Proposal to the Company Parties and take actions to facilitate or encourage the proposing Entity to submit such material asset acquisition proposal or Alternative Restructuring Proposal to the Company Parties;

 

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

 

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

 

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

 

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

 

(vii)          object to or commence any legal proceeding challenging the adequate protection granted or proposed to be granted to the holders of the Revolving Credit Facility Claims, the FLLO Term Loan Facility Claims, or the Second Lien Notes Claims under the DIP Order; or

 

(viii)         file or support, directly or indirectly, a motion, application, adversary proceeding, or cause of action (a) challenging the validity, enforceability, perfection or priority of, or seeking avoidance or subordination of the DIP Claims, the Revolving Credit Facility Claims, the FLLO Term Loan Facility Claims, the Second Lien Notes Claims, or the Liens securing such Claims, or (b) otherwise seeking to impose liability upon or enjoin the DIP Lenders, Revolving Credit Facility Lenders, FLLO Term Loan Facility Lenders, or the Second Lien Noteholders.

 

4.02.       Commitments with Respect to Chapter 11 Cases.

 

(a)          During the Agreement Effective Period, each Consenting Stakeholder that is entitled to vote to accept or reject the Plan pursuant to its terms, severally, and not jointly, agrees that it shall, subject to receipt by such Consenting Stakeholder, whether before or after the commencement of the Chapter 11 Cases, of the Solicitation Materials:

 

(i)             vote each of its Company Claims to accept the Plan by delivering its duly executed and completed ballot accepting the Plan on a timely basis following the commencement of the solicitation of the Plan and its actual receipt of the Solicitation Materials and the ballot that meet the requirements of Sections 1125 and 1126 of the Bankruptcy Code; provided, however, that the consent or votes of the Consenting Stakeholders shall be immediately revoked and deemed void ab initio upon the occurrence of the Termination Date (other than a Termination Date caused solely by the Plan Effective Date);

 

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

 

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

 

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

 

Section 5.             Additional Provisions Regarding the Consenting Stakeholders’ Commitments. Notwithstanding anything contained in this Agreement, nothing in this Agreement shall: (a) be construed to prohibit any Consenting Stakeholder from appearing as a party in interest in any matter to be adjudicated in the Chapter 11 Cases, so long as such appearance and the positions advocated in connection therewith are not inconsistent with this Agreement and are not for the purpose of delaying, interfering, impeding, or taking any other action to delay, interfere or impede, directly or indirectly, the Restructuring Transactions; (b) affect the ability of any Consenting Stakeholder to consult with any other Consenting Stakeholder, the Company Parties, or any other party in interest in the Chapter 11 Cases (including any official committee and the United States Trustee); (c) impair or waive the rights of any Consenting Stakeholder to assert or raise any objection permitted under this Agreement in connection with the Restructuring Transactions; (d) prevent any Consenting Stakeholder from enforcing this Agreement or contesting whether any matter, fact, or thing is a breach of, or is inconsistent with, this Agreement; (e) obligate a Consenting Stakeholder to deliver a vote to support the Plan or prohibit a Consenting Stakeholder from withdrawing such vote, in each case from and after the Termination Date as to a Consenting Stakeholder (other than a Termination Date as a result of the occurrence of the Plan Effective Date) and, for the avoidance of doubt, upon the Termination Date (other than a Termination Date as a result of the occurrence of the Plan Effective Date), such Consenting Stakeholder’s vote shall automatically be deemed void ab initio and such Consenting Stakeholder shall have a reasonable opportunity to cast a vote; (f) be construed to prohibit any Consenting Stakeholder from either itself or through any representatives or agents, soliciting, initiating, negotiating, facilitating, proposing, continuing, or responding to any proposal to purchase or sell Company Claims, so long as such Consenting Stakeholder complies with Section 8.01, or (g) prevent the DIP Agent or DIP Lenders from exercising any of its or their rights and privileges under the DIP Documents. Nothing in this Agreement shall impair or affect the rights or obligations of any party under the DIP Documents or DIP Order.

 

Section 6.             Commitments of the Company Parties.

 

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

 

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(a)          support and take all steps reasonably necessary and desirable to consummate the Restructuring Transactions in accordance with this Agreement and within the timeframes outlined herein;

 

(b)          support and take all steps necessary and desirable to facilitate solicitation of the Plan in accordance with this Agreement and within the timeframes outlined herein;

 

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

 

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

 

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

 

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

 

(g)          provide draft copies of all substantive motions, documents, and other pleadings to be filed in the Chapter 11 Cases to counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders as soon as reasonably practicable, but in no event less than two (2) Business Days prior to the date when the Company Parties intend to file such documents and, without limiting any approval rights set forth in this Agreement, consult in good faith with counsel to the DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders regarding the form and substance of any such proposed filing. Notwithstanding the foregoing, in the event that two (2) Business Days’ notice is not reasonably practicable under the circumstances, the Company Parties shall provide draft copies of any such motions, documents, or other pleadings to counsel to the applicable Consenting Stakeholders as soon as otherwise reasonably practicable before the date when the Company Parties intend to file any such motion, documents, or other pleading;

 

(h)          provide, and direct their employees, officers, advisors, and other representatives to provide, to each of the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, and the Consenting Second Lien Noteholders, and each of their respective legal and financial advisors (i) reasonable access to the Company Parties’ books and records during normal business hours on reasonable advance notice to the Company Parties’ representatives and without disruption to the operation of the Company Parties’ business, (ii) reasonable access to the management and advisors of the Company Parties on reasonable advance notice to such persons and without disruption to the operation of the Company Parties’ business, and (iii) such other information as reasonably requested by the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, the Consenting Second Lien Noteholders or their respective legal and financial advisors; notwithstanding the foregoing, the Company Parties shall not be required (x) to permit any inspection, or to disclose any information, that in the reasonable judgment of the Company Parties, would cause the Company Party to violate its respective obligations with respect to confidentiality to a third party, (y) to disclose any legally privileged information of the Company Party, or (z) to violate applicable Law;

 

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(i)           actively oppose and object to the efforts of any person seeking to object to, delay, impede, or take any other action to interfere with the acceptance, implementation, or consummation of the Restructuring Transactions (including, if applicable, the filing of timely filed objections or written responses) to the extent such opposition or objection is reasonably necessary or desirable to facilitate implementation of the Restructuring Transactions;

 

(j)           actively oppose and object to any motion, application, adversary proceeding, or cause of action (a) challenging the validity, enforceability, perfection or priority of, or seeking avoidance or subordination of the DIP Claims; the Revolving Credit Facility Claims, the FLLO Term Loan Facility Claims, or the Second Lien Notes Claims or the Liens securing such Claims, (b) otherwise seeking to impose liability upon or enjoin the DIP Lenders, the Revolving Credit Facility Lenders, the FLLO Term Loan Facility Lenders, or the Second Lien Noteholders, (c) seeking the entry of an order directing the appointment of a trustee or examiner (with expanded powers beyond those set forth in sections 1106(a)(3) and (4) of the Bankruptcy Code), (d) seeking the entry of an order converting the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, (e) seeking the entry of an order dismissing the Chapter 11 Cases, or (f) seeking the entry of an order modifying or terminating the Company Parties’ exclusive right to file and/or solicit acceptances of a plan of reorganization, as applicable;

 

(k)          actively oppose or object to any effort by a third party seeking standing to bring any motion, application, adversary proceeding, or cause of action described in Section 6.01(j);

 

(l)           upon reasonable request of any of the Consenting Stakeholders, inform counsel to the Consenting Stakeholders as to: (i) the material business and financial (including liquidity) performance of the Company Parties; (ii) the status and progress of the Restructuring Transactions, including progress in relation to the negotiations of the Definitive Documents; and (iii) the status of obtaining any necessary or desirable authorizations (including any consents) from each Consenting Stakeholder, any competent judicial body, governmental authority, banking, taxation, supervisory, or regulatory body or any stock exchange;

 

(m)         inform counsel to the Consenting Stakeholders as soon as reasonably practicable after becoming aware of: (i) any matter or circumstance which they know, or believe is likely, to be a material impediment to the implementation or consummation of the Restructuring Transactions; (ii) any notice of any commencement of any material involuntary insolvency proceedings, legal suit for payment of debt or securement of security from or by any person in respect of any Company Party; (iii) a breach of this Agreement (including a breach by any Company Party); and (iv) any representation or statement made or deemed to be made by them under this Agreement which is or proves to have been incorrect or misleading in any material respect when made or deemed to be made;

 

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(n)          to the extent any legal or structural impediment arises under Section 6.01(m) that would prevent, hinder or delay the consummation of the Plan, use commercially reasonable efforts to negotiate with the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, and the Consenting Second Lien Noteholders in good faith in an effort to agree to appropriate additional or alternative provisions or alternative implementation mechanics to address any such impediment; provided, that the economic outcome for the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, and the Consenting Second Lien Noteholders and other material terms of this Agreement must be substantially preserved in such alternate provisions or implementation mechanics;

 

(o)          to the extent the Company Parties decide to seek Bankruptcy Court approval of (a) a key employee incentive plan for insider employees (the “KEIP”), and/or (b) a key employee retention plan for key non-insider employees (the “KERP”), such plans shall be in a form acceptable to the Consenting Stakeholders with respect to the terms of such KEIP and/or KERP prior to filing motion(s) seeking approval of the KEIP and/or KERP; provided, however, the KERP effective as of May 1, 2020 shall be deemed acceptable to the Consenting Stakeholders;

 

(p)          use commercially reasonable efforts to seek additional support for the Restructuring from their other material stakeholders to the extent reasonably prudent and, to the extent the Company Parties receive any Joinders or Transfer Agreements, to notify the Consenting Stakeholders of such Joinders and Transfer Agreements; and

 

(q)          promptly pay Restructuring Expenses.

 

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

 

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

 

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

 

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

 

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

 

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Section 7.             Additional Provisions Regarding Company Parties’ Commitments.

 

7.01.       Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall require a Company Party or the board of directors, board of managers, or similar governing body of a Company Party, after consulting with counsel, to take any action or to refrain from taking any action with respect to the Restructuring Transactions to the extent taking or failing to take such action would be inconsistent with applicable Law or its fiduciary obligations under applicable Law, and any such action or inaction pursuant to this Section 7.01 shall not be deemed to constitute a breach of this Agreement. The Company Parties shall give prompt written notice to the Consenting Stakeholders of any determination in accordance with this Section 7.01 to take or refrain from taking any action. This Section 7.01 shall not impede any Party’s right to terminate this Agreement pursuant to Section 12.01(i).

 

7.02.       Notwithstanding anything to the contrary in this Agreement (but subject to Section 7.01), each Company Party and its respective directors, officers, employees, investment bankers, attorneys, accountants, consultants, and other advisors or representatives shall have the right to consider, respond to, and facilitate Alternative Restructuring Proposals, but may not solicit an Alternative Restructuring Proposal, offer, indication of interest or inquiry for one or more Alternative Restructuring Proposals, and in furtherance thereof, may: (a) provide access to non-public information concerning any Company Party to any Entity or enter into Confidentiality Agreements or nondisclosure agreements with any Entity; (b) maintain or continue discussions or negotiations with respect to Alternative Restructuring Proposals; (c) otherwise cooperate with, assist, participate in, or facilitate any inquiries, proposals, discussions, or negotiation of Alternative Restructuring Proposals; and (d) enter into or continue discussions or negotiations with holders of Claims against or Interests in a Company Party (including any Consenting Stakeholder), any other party in interest in the Chapter 11 Cases (including any official committee and the United States Trustee), or any other Entity regarding the Restructuring Transactions or Alternative Restructuring Proposals. If any Company Party receives an Alternative Restructuring Proposal, or any update to an Alternative Restructuring Proposal from the counterparty thereto, then such Company Party shall (A) within two (2) Business Days of receiving such proposal, provide counsel to the Consenting Stakeholders with all documentation received in connection with such Alternative Restructuring Proposal; (B) provide counsel to the Consenting Stakeholders with regular updates as to the status and progress of such Alternative Restructuring Proposal; and (C) respond promptly to reasonable information requests and questions from counsel to the Consenting Stakeholders relating to such Alternative Restructuring Proposal.

 

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

 

Section 8.             Transfer of Interests and Securities.

 

8.01.       During the Agreement Effective Period, no Consenting Stakeholder shall Transfer any ownership (including any beneficial ownership as defined in the Rule 13d-3 under the Securities Exchange Act of 1934, as amended) in any Company Claims to any affiliated or unaffiliated party, including any party in which it may hold a direct or indirect beneficial interest, unless:

 

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(a)          the authorized transferee is either (1) a qualified institutional buyer as defined in Rule 144A of the Securities Act, (2) a non-U.S. person in an offshore transaction as defined under Regulation S under the Securities Act, (3) an institutional accredited investor (as defined by Rule 501(a)(1), (2), (3), and (7) of the Securities Act), or (4) a Consenting Stakeholder not in breach of this Agreement;

 

(b)          either (i) the transferee executes and delivers to counsel to the Consenting Stakeholders and counsel to the Company Parties, at or before the time of the proposed Transfer, a Transfer Agreement or (ii) the transferee is a Consenting Stakeholder or an affiliate thereof and the transferee provides notice of such Transfer (including the amount and type of Company Claim/Interest Transferred) to counsel to the Company Parties and counsel to the Consenting Stakeholders by the close of business on the second Business Day following such Transfer; and

 

(c)          such Transfer shall not violate the terms of any order entered by the Bankruptcy Court with respect to preservation of net operating losses.

 

8.02.       Upon compliance with the requirements of Section 8.01, the transferor shall be deemed to relinquish its rights (and be released from its obligations) under this Agreement to the extent of the rights and obligations in respect of such transferred Company Claims. With respect to Company Claims held by the relevant transferee upon consummation of a Transfer, such transferee is deemed to make all of the representations and warranties of a Consenting Stakeholder and undertake all obligations relevant to such transferor (including, for the avoidance of doubt, the commitments made in Section 4.02) set forth in this Agreement. Any Transfer in violation of Section 8.01 shall be void ab initio.

 

8.03.       This Agreement shall in no way be construed to preclude any Consenting Stakeholders from acquiring additional Company Claims; provided, however, that (a) such additional Company Claims shall automatically and immediately upon acquisition by a Consenting Stakeholder be deemed subject to the terms of this Agreement (regardless of when or whether notice of such acquisition is given to counsel to the Company Parties or to counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, and counsel to the Consenting Second Lien Noteholders) and (b) on the effective date of such transfer, such Consenting Stakeholder must provide notice of such acquisition (including the amount and type of Company Claim acquired) to counsel to the Company Parties within five (5) Business Days of such acquisition.

 

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

 

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8.05.       Notwithstanding Section 8.01, (a) a Consenting Stakeholder may Transfer any Company Claims to an Entity that is an Affiliate, affiliated fund, or affiliated entity with a common investment advisor, which Entity shall automatically be bound by this Agreement upon the Transfer of such Company Claims and (b) a Qualified Marketmaker that acquires any Company Claims from such Consenting Stakeholder with the purpose and intent of acting as a Qualified Marketmaker for such Company Claims shall not be required to execute and deliver a Transfer Agreement in respect of such Company Claims if such Qualified Marketmaker subsequently Transfers such Company Claims (by purchase, sale assignment, participation, or otherwise) to a transferee that is a Consenting Stakeholder or a transferee who executes and delivers to counsel to the Consenting Stakeholders and counsel to the Company Parties, at or before the time of the proposed Transfer, a Transfer Agreement. Notwithstanding the foregoing, to the extent any Consenting Stakeholder is acting in its capacity as a Qualified Marketmaker, it may Transfer any Company Claims that it acquires from a holder of such Company Claims that is not a Consenting Stakeholder without the requirement that the transferee be or become a Consenting Stakeholder or execute a Transfer Agreement.

 

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

 

8.07.       Additional Consenting Stakeholders. Any holder of the DIP Claims, the Revolving Credit Facility Claims, the FLLO Term Loan Facility Claims, or the Second Lien Notes Claims that is not a party to this Agreement as of the Agreement Effective Date may, at any time after the Agreement Effective Date, become a Consenting Stakeholder by executing and delivering to counsel to the Consenting DIP Lenders, counsel to the Consenting Revolving Credit Facility Lenders, counsel to the Consenting FLLO Term Loan Facility Lenders, counsel to the Consenting Second Lien Noteholders and counsel to the Company Parties a Joinder, pursuant to which such Person shall be bound by the terms of this Agreement.

 

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

 

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

 

(b)          it has the full power and authority to act on behalf of, vote and consent to matters concerning, such Company Claims;

 

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

 

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(d)          it has the full power to vote, approve changes to, and Transfer all of its Company Claims referable to it as contemplated by this Agreement subject to applicable Law; and

 

(e)          solely with respect to holders of Company Claims, (i) it is either (A) a qualified institutional buyer as defined in Rule 144A of the Securities Act, (B) not a U.S. person (as defined in Regulation S of the Securities Act), or (C) an institutional accredited investor (as defined by Rule 501(a)(1), (2), (3), and (7) of the Securities Act), and (ii) any securities acquired by the Consenting Stakeholder in connection with the Restructuring Transactions will have been acquired for investment and not with a view to distribution or resale in violation of the Securities Act.

 

Section 10.           Representations and Warranties of Company Parties. Each Company Party severally, and not jointly, represents and warrants that:

 

(a)          as of the date such Company Party becomes a Party, each Company Party believes that entry into this Agreement is consistent with the exercise of such Company Party’s fiduciary duties; and

 

(b)          as of the Agreement Effective Date, the Company Parties and their professionals are not entertaining, encouraging, soliciting, or discussing any offers, indications of interest, or inquiries for an Alternative Restructuring Proposal with any party and have not entertained, encouraged, solicited, or discussed any such Alternative Restructuring Proposal with any party within one week of the Agreement Effective Date, except as disclosed to the Consenting Stakeholders.

 

Section 11.          Mutual Representations, Warranties, and Covenants

 

. Each of the Consenting Stakeholders and each Company Party, in each case severally and not jointly, represents, warrants, and covenants to each other Party, as of the date such Party executed and delivers this Agreement or Joinder(s) and as of immediately prior to the Plan Effective Date:

 

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

 

(b)          except as expressly provided in this Agreement, the Plan, and the Bankruptcy Code, no consent or approval is required by any other Entity in order for it to effectuate the Restructuring Transactions contemplated by, and perform its respective obligations under, this Agreement;

 

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

 

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

 

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

 

Section 12.          Termination Events.

 

12.01.     Consenting Stakeholder Termination Events

 

. This Agreement may be terminated (a) with respect to the Consenting DIP Lenders, by the Required Consenting DIP Lenders4 by the delivery to the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, the Consenting Second Lien Noteholders, and the Company Parties of a written notice in accordance with Section 14.10; (b) with respect to the Consenting Revolving Credit Facility Lenders, by the Required Consenting Revolving Credit Facility Lenders5 by the delivery to the Consenting DIP Lenders, the Consenting FLLO Term Loan Facility Lenders, the Consenting Second Lien Noteholders, and the Company Parties of a written notice in accordance with Section 14.10; (c) with respect to the Consenting FLLO Term Loan Facility Lenders, by the Required Consenting FLLO Term Loan Facility Lenders6 by the delivery to the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting Second Lien Noteholders, and the Company Parties of a written notice in accordance with Section 14.10; and (d) with respect to the Consenting Second Lien Noteholders, by the Required Consenting Second Lien Noteholders,7 by the delivery to the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, Consenting FLLO Term Loan Facility Lenders, and the Company Parties of a written notice in accordance with Section 14.10 hereof upon the occurrence of the following events:

 

(a)          the breach in any material respect by a Company Party of its obligations under this Agreement, which breach is not cured within five (5) Business Days after such Company Party has been given written notice of such breach by another Party in accordance with Section 14.10 hereof, or if a Company Party files, publicly announces, or informs the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, and the Consenting Second Lien Noteholders of its intention to file a chapter 11 plan that contains terms and conditions that: (i) do not provide the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, or the Consenting Second Lien Noteholders, as applicable, with the economic recovery set forth in the Restructuring Term Sheet or (ii) are not otherwise consistent with this Agreement and the Restructuring Term Sheet;

 

 

4 “Required Consenting DIP Lenders” means Consenting DIP Lenders holding at least 51% of the aggregate Revolving DIP Loan Commitments under the DIP Facility that are held by Consenting DIP Lenders.

 

5 “Required Consenting Revolving Credit Facility Lenders” means Consenting Revolving Credit Facility Lenders holding at least 51% of the aggregate outstanding principal amount of the Revolving Credit Facility Claims that are held by Consenting Revolving Credit Facility Lenders.

 

6 “Required Consenting FLLO Term Loan Facility Lenders” means Consenting FLLO Term Loan Facility Lenders holding at least 66.67% of the aggregate outstanding principal amount of the FLLO Term Loan Facility Claims that are held by Consenting FLLO Term Loan Facility Lenders.

 

7 “Required Consenting Second Lien Noteholders” means Consenting Second Lien Noteholders holding at least 66.67% of the aggregate outstanding principal amount of the Second Lien Note Claims that are held by Consenting Second Lien Noteholders, but not less than two of the number of all Consenting Second Lien Noteholders.

 

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(b)          a material breach by any Company Party of any representation, warranty, or covenant of such Company Party set forth in this Agreement that (to the extent curable) remains uncured for a period of five (5) Business Days after such Company Party has been given written notice of such breach by another Party in accordance with Section 14.10 hereof;

 

(c)          the issuance by any governmental authority, including any regulatory authority or court of competent jurisdiction, of any final, non-appealable ruling or order that (i) enjoins the consummation of a material portion of the Restructuring Transactions and (ii) remains in effect for ten (10) Business Days; provided, that this termination right may not be exercised by any Party that sought or requested such ruling or order in contravention of any obligation set out in this Agreement;

 

(d)          the entry of an order by the Bankruptcy Court, or the filing of a motion or application by any Company Party seeking an order (without the prior written consent of the Required Consenting Stakeholders8), (i) converting one or more of the Chapter 11 Cases of a Company Party to a case under chapter 7 of the Bankruptcy Code, (ii) appointing an examiner with expanded powers beyond those set forth in sections 1106(a)(3) and (4) of the Bankruptcy Code or a trustee in one or more of the Chapter 11 Cases of a Company Party, (iii) dismissing the Chapter 11 Cases, or (iv) rejecting this Agreement;

 

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

 

(f)           any Debtor files with the Bankruptcy Court any motion or application seeking authority to sell any material assets (other than (i) any sales contemplated in the Restructuring Term Sheet or disclosed in writing by the Company Parties or their advisors and in reasonable detail to the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, and the Consenting Second Lien Noteholders or their respective advisors prior to the execution of any definitive sale agreement in respect of such sale or the filing of any motion or application by the Company Parties seeking Bankruptcy Court approval of such sale and the Required Consenting Stakeholders have consented in writing to such sale (provided, that, if such sale would have a material, disproportionate and adverse effect on any of the Company Claims held by the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, or the Consenting Second Lien Noteholders, a written consent to such sale shall also have been provided by either or all of the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, or the Consenting Second Lien Noteholders, respectively, upon which such material, disproportionate, and adverse effect shall, or shall reasonably be expected to, result) and (ii) any sales pursuant to any order establishing procedures for the sale of de minimis assets);

 

 

8 “Required Consenting Stakeholders” means the Required Consenting DIP Lenders, the Required Consenting Revolving Credit Facility Lenders, and the Required Plan Sponsors.

 

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(g)          the occurrence of any one of the following events:

 

(i)            the Debtors or any Affiliate of the Debtors files a motion, application, adversary proceeding, or cause of action (a) challenging the validity, enforceability, perfection or priority of, or seeking avoidance, subordination, or recharacterization of the DIP Claims, the Revolving Credit Facility Claims, the FLLO Term Loan Facility Claims or the Second Lien Notes Claims, as applicable, or the Liens securing any of such Claims, as applicable, or (b) otherwise seeking to impose liability upon or enjoin the DIP Lenders, the Revolving Credit Facility Lenders, the FLLO Term Loan Facility Lenders, or the Second Lien Noteholders, as applicable;

 

(ii)            the Debtors or any Affiliate of the Debtors support any application, adversary proceeding, or Cause of Action referred to in the immediately preceding clause (i) filed by a third party, or consents to the standing of any such third party to bring such application, adversary proceeding, or Cause of Action;

 

(h)          the modification of the employment terms of any member of Chesapeake’s senior management team without the consent of the Required Consenting Stakeholders, including any further modification of the Chesapeake’s compensation program as amended on May 5, 2020;

 

(i)           the failure to comply with or achieve any one of the milestones set forth in the Restructuring Term Sheet, unless such milestone is extended with the express prior written consent of the Required Consenting Stakeholders, which consent may be provided via email from counsel to each of such Required Consenting Stakeholders; provided that milestones (d) and (g) in the Restructuring Term Sheet relating to the Exit Facilities may be extended with the express prior written consent of the Required DIP Lenders and without the consent of any other Consenting Stakeholders;

 

(j)           a Company Party or the board of directors, board of managers, or such similar governing body of a Company Party takes or refrains from taking any action in any respect on the basis of a determination made pursuant to Section 7.01;

 

(k)          any Company Party (i) files, amends, or modifies, or files a pleading seeking approval of, any Definitive Document or authority to amend or modify any Definitive Document, in a manner that is inconsistent with the consent rights set forth in Section 3.02 or constitutes a breach of this Agreement, (ii) withdraws the Plan without the prior consent of the Required Consenting Stakeholders, or (iii) publicly announces its intention to take any such acts listed in the foregoing clause (i) or (ii), in the case of each of the foregoing clauses (i) and (ii), which remains uncured (to the extent curable) for five (5) Business Days after such terminating Consenting Stakeholders transmit a written notice in accordance with Section 14.10 detailing any such breach;

 

(l)           the occurrence and continuation of any event of default under the DIP Credit Agreement that is not cured in accordance with the DIP Credit Agreement;

 

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(m)         the board of directors, board of managers, or such similar governing body of any Company Party determines, after consulting with counsel, (i) that proceeding with any of the Restructuring Transactions would be inconsistent with the exercise of its fiduciary duties or applicable Law or (ii) in the exercise of its fiduciary duties, to pursue an Alternative Restructuring Proposal and any Company Party (a) makes a public announcement that it intends to accept an Alternative Restructuring Proposal or (b) enters into a definitive agreement with respect to an Alternative Restructuring Proposal;

 

(n)          the Debtors’ use of cash collateral, the DIP Facility, or the Backstop Commitment Agreement has been terminated in accordance with each of their respective terms;

 

(o)          if any of the Company Parties enters into an agreement with a counterparty to a swap, collar, option or other hedging arrangement to terminate such swap, collar, option, or other hedging arrangement without obtaining the prior written consent of the Required Consenting Stakeholders;

 

(p)          the failure by the Debtors to make adequate protection payments to the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, or Franklin, as applicable, in accordance with the DIP Order following approval of such DIP Order by the Bankruptcy Court;

 

(q)          the entry of an order by the Bankruptcy Court or any other court of competent jurisdiction, or the filing of a motion, application, or other pleading by any Company Party seeking an order (without the prior written consent of the Required Consenting Stakeholders), reversing or vacating the Confirmation Order.

 

12.02.     Consenting DIP Lender Termination Rights. The Required Consenting DIP Lenders may terminate this Agreement as to all Parties upon prior written notice to all Parties in accordance with Section 14.10 hereof upon the occurrence of any of the following events:

 

(a)           termination of this Agreement by either the Required Consenting FLLO Term Loan Facility Lenders, the Required Consenting Second Lien Noteholders, or the Company Parties;

 

(b)          any Debtor, any Consenting FLLO Term Loan Facility Lender, or any Consenting Second Lien Noteholder files a motion, application, adversary proceeding, or cause of action (A) challenging the validity, enforceability, perfection or priority of, or seeking avoidance, subordination, or recharacterization of the DIP Claims or the Liens securing such Claims or (B) otherwise seeking to impose liability upon or enjoin the DIP Lenders or the Revolving Credit Facility Lenders;

 

(c)          any Debtor, any Consenting FLLO Term Loan Facility Lender, or any Consenting Second Lien Noteholder supports any application, adversary proceeding or cause of action referred to in Section 12.04(b) filed by any third party, or consents to the standing of such third party to bring such application, adversary proceeding or cause of action; or

 

(d)          the breach in any material respect by one or more of the Consenting FLLO Term Loan Facility Lenders or the Consenting Second Lien Noteholders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting FLLO Term Loan Facility Lenders or Consenting Second Lien Noteholders of notice of such breach; provided, however, that so long as non-breaching Consenting FLLO Term Loan Facility Lenders party hereto continue to hold at least 66.67% of the outstanding Revolving Credit Facility Claims or FLLO Term Loan Claims, respectively, or non-breaching Consenting Second Lien Noteholders party hereto continue to hold at least 50% of the outstanding Second Lien Notes Claims, such termination shall be effective only with respect to such breaching Consenting FLLO Term Loan Facility Lender(s) or Consenting Second Lien Noteholder(s), respectively.

 

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12.03.     Consenting Revolving Credit Facility Lender Termination Rights. The Required Consenting Revolving Credit Facility Lenders may terminate this Agreement as to all Parties upon prior written notice to all Parties in accordance with Section 14.10 hereof upon the occurrence of any of the following events:

 

(a)          termination of this Agreement by either the Required Consenting FLLO Term Loan Facility Lenders, the Required Consenting Second Lien Noteholders, or the Company Parties;

 

(b)          any Debtor, any Consenting FLLO Term Loan Facility Lender, or any Consenting Second Lien Noteholder files a motion, application, adversary proceeding, or cause of action (A) challenging the validity, enforceability, perfection or priority of, or seeking avoidance, subordination, or recharacterization of the Revolving Credit Facility Claims or the Liens securing such Claims or (B) otherwise seeking to impose liability upon or enjoin the Revolving Credit Facility Lenders;

 

(c)          any Debtor, any Consenting FLLO Term Loan Facility Lenders, or any Consenting Second Lien Noteholder supports any application, adversary proceeding or cause of action referred to in Section 12.04(b) filed by any third party, or consents to the standing of such third party to bring such application, adversary proceeding or cause of action; or

 

(d)          the breach in any material respect by one or more of the Consenting FLLO Term Loan Facility Lenders or the Consenting Second Lien Noteholders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting DIP Lenders, Consenting FLLO Term Loan Facility Lenders or Consenting Second Lien Noteholders of notice of such breach; provided, however, that so long as non-breaching Consenting FLLO Term Loan Facility Lenders continue to hold at least 66.67% of FLLO Term Loan Claims, or non-breaching Consenting Second Lien Noteholders party hereto continue to hold at least 50% of the outstanding Second Lien Notes Claims, respectively, such termination shall be effective only with respect to such breaching Consenting FLLO Term Loan Facility Lender(s) or Consenting Second Lien Noteholder(s), respectively.

 

12.04.     Consenting FLLO Term Loan Facility Lender Termination Rights. The Required Consenting FLLO Term Loan Facility Lenders may terminate this Agreement as to all Parties upon prior written notice to all Parties in accordance with Section 14.10 hereof upon the occurrence of any of the following events:

 

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(a)           termination of this Agreement by any of the Required Consenting DIP Lenders, the Required Consenting Revolving Credit Facility Lenders, the Required Consenting Second Lien Noteholders, or the Company Parties;

 

(b)          any Debtor, any Consenting DIP Lender, any Consenting Revolving Credit Facility Lender, or any Consenting Second Lien Noteholder files a motion, application, adversary proceeding, or cause of action (A) challenging the validity, enforceability, perfection or priority of, or seeking avoidance, subordination or recharacterization of the FLLO Term Loan Facility Claims or the Liens securing such Claims or (B) otherwise seeking to impose liability upon or enjoin the FLLO Term Loan Facility Lenders;

 

(c)          any Debtor, any Consenting DIP Lender, any Consenting Revolving Credit Facility Lenders, or any Consenting Second Lien Noteholder supports any application, adversary proceeding or cause of action referred to in Section 12.04(b) filed by any third party, or consents to the standing of such third party to bring such application, adversary proceeding or cause of action; or

 

(d)          the breach in any material respect by one or more of the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders or the Consenting Second Lien Noteholders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting DIP Lender, Consenting Revolving Credit Facility Lenders or Consenting Second Lien Noteholders of notice of such breach; provided, however, that so long as non-breaching Consenting DIP Lenders continue to hold or control at least 100% of the outstanding DIP Claims, non-breaching Consenting Revolving Credit Facility Lenders party hereto continue to hold at least 66.67% of the outstanding Revolving Credit Facility Claims, or non-breaching Consenting Second Lien Noteholders party hereto continue to hold at least 50% of the Second Lien Notes Claims, such termination shall be effective only with respect to such breaching Consenting DIP Lender(s), Consenting Revolving Credit Facility Lender(s) or Consenting Second Lien Noteholder(s), respectively; provided, further, that in the event that one or more of the Consenting DIP Lenders breaches this Agreement in any material respect such that the breach would otherwise give rise to a termination right under this Section 12.04(d) if such breach were to remain uncured for a five (5) Business Day period, each Consenting FLLO Term Loan Facility Lender and each Consenting Second Lien Noteholder shall have the right, but not the obligation, to purchase the DIP Claims held by such breaching Consenting DIP Lender(s) during the five (5) Business Day cure period, in which case the breach shall be deemed cured and no termination right would arise under this Section 12.04(d).

 

12.05.     Consenting Second Lien Noteholder Termination Rights. The Required Consenting Second Lien Noteholders may terminate this Agreement as to all Parties upon prior written notice to all Parties in accordance with Section 14.10 hereof upon the occurrence of any of the following events:

 

(a)           termination of this Agreement by either the Required Consenting DIP Lenders, the Required Consenting Revolving Credit Facility Lenders, Required Consenting FLLO Term Loan Facility Lenders, or the Company Parties;

 

(b)          any Debtor, any Consenting DIP Lenders, any Consenting Revolving Credit Facility Lenders, or any Consenting FLLO Term Loan Facility Lender files a motion, application, adversary proceeding, or cause of action (A) challenging the validity, enforceability, perfection or priority of, or seeking avoidance, subordination or recharacterization of the Second Lien Notes Claims or the Liens securing such Claims or (B) otherwise seeking to impose liability upon or enjoin the Second Lien Noteholders;

 

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(c)          any Debtor, any Consenting DIP Lenders, any Consenting Revolving Credit Facility Lenders, or any Consenting FLLO Term Loan Facility Lender supports any application, adversary proceeding or cause of action referred to in Section 12.05(b) filed by any third party, or consents to the standing of such third party to bring such application, adversary proceeding or cause of action; or

 

(d)          the breach in any material respect by one or more of the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders or the Consenting FLLO Term Loan Facility Lenders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting DIP Lenders, Consenting Revolving Credit Facility Lenders or Consenting FLLO Term Loan Facility Lenders of notice of such breach; provided, however, that so long as non-breaching Consenting DIP Lenders continue to hold or control at least 100% of the outstanding DIP Claims, or non-breaching Consenting Revolving Credit Facility Lenders or Consenting FLLO Term Loan Facility Lenders party hereto continue to hold at least 66.67% of the outstanding Revolving Credit Facility Claims or FLLO Term Loan Facility Claims, respectively, such termination shall be effective only with respect to such breaching Consenting DIP Lender(s), Consenting Revolving Credit Facility Lender(s) or Consenting FLLO Term Loan Facility Lender(s), respectively; provided, further, that in the event that one or more of the Consenting DIP Lenders breaches this Agreement in any material respect such that the breach would otherwise give rise to a termination right under this Section 12.05(d) if such breach were to remain uncured for a five (5) Business Day period, each Consenting FLLO Term Loan Facility Lender and each Consenting Second Lien Noteholder shall have the right, but not the obligation, to purchase the DIP Claims held by such breaching Consenting DIP Lender(s) during the five (5) Business Day cure period, in which case the breach shall be deemed cured and no termination right would arise under this Section 12.05(d).

 

12.06.     Company Party Termination Events

 

.  Any Company Party may terminate this Agreement as to all Parties upon prior written notice to all Parties in accordance with Section 14.10 hereof upon the occurrence of any of the following events:

 

(a)          the breach in any material respect by one or more of the Consenting DIP Lenders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting DIP Lenders of notice of such breach; provided, however, that so long as non-breaching Consenting DIP Lenders party hereto continue to hold or control at least 100% of the outstanding DIP Claims, such termination shall be effective only with respect to such breaching Consenting DIP Lender(s); provided, further, that in the event that one or more of the Consenting DIP Lenders breaches this Agreement in any material respect such that the breach would otherwise give rise to a termination right under this Section 12.06(a) if such breach were to remain uncured for a five (5) Business Day period, each Consenting FLLO Term Loan Facility Lender and each Consenting Second Lien Noteholder shall have the right, but not the obligation, to purchase the DIP Claims held by such breaching Consenting DIP Lender(s) during the five (5) Business Day cure period, in which case the breach shall be deemed cured and no termination right would arise under this Section 12.06(a);

 

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(b)          the breach in any material respect by one or more of the Consenting Revolving Credit Facility Lenders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting Revolving Credit Facility Lenders of notice of such breach; provided, however, that so long as non-breaching Consenting Revolving Credit Facility Lenders party hereto continue to hold at least 66.67% of the outstanding Revolving Credit Facility Claims, such termination shall be effective only with respect to such breaching Consenting Revolving Credit Facility Lender(s);

 

(c)          the breach in any material respect by one or more of the Consenting FLLO Term Loan Facility Lenders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting FLLO Term Loan Facility Lenders of notice of such breach; provided, however, that so long as non-breaching Consenting FLLO Term Loan Facility Lenders party hereto continue to hold at least 66.67% of the outstanding FLLO Term Loan Facility Claims, such termination shall be effective only with respect to such breaching Consenting FLLO Term Loan Facility Lender(s);

 

(d)          the breach in any material respect by one or more of the Consenting Second Lien Noteholders of any provision set forth in this Agreement that remains uncured for a period of five (5) Business Days after the receipt by such Consenting Second Lien Noteholders of notice of such breach; provided, however, that so long as non-breaching Consenting Second Lien Noteholders party hereto continue to hold at least 50% of the outstanding Second Lien Notes Claims, such termination shall be effective only with respect to such breaching Consenting Second Lien Noteholder(s);

 

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

 

(f)           the issuance by any governmental authority, including any regulatory authority or court of competent jurisdiction, of any final, non-appealable ruling or order that (i) enjoins the consummation of a material portion of the Restructuring Transactions and (ii) remains in effect for ten (10) Business Days after such terminating Company Party transmits a written notice in accordance with Section 14.10 hereof detailing any such issuance; provided, that this termination right shall not apply to or be exercised by any Company Party that sought or requested such ruling or order in contravention of any obligation or restriction set out in this Agreement;

 

(g)          termination of this Agreement by either the Required Consenting DIP Lenders, Required Consenting Revolving Credit Facility Lenders, the Required Consenting FLLO Term Loan Facility Lenders, or the Required Consenting Second Lien Noteholders; or

 

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

 

12.07.     Mutual Termination.  This Agreement, and the obligations of all Parties hereunder, may be terminated by mutual written agreement among: (a) the Required Consenting Stakeholders and (b) each Company Party.

 

12.08.     Automatic Termination.  This Agreement shall terminate automatically without any further required action or notice immediately upon (a) the date that is 10 days after any third party filing involuntary bankruptcy petitions in respect of the Company Parties unless such petitions have been dismissed or (b) the consummation of the Restructuring Transactions on the Plan Effective Date.

 

12.09.     Effect of Termination.  Upon the occurrence of a Termination Date as to a Party, this Agreement shall be of no further force and effect as to such Party and each Party subject to such termination shall be released from its commitments (including, without limitation, any commitment with respect to the Exit Facilities and the Rights Offering), undertakings, and agreements under or related to this Agreement and shall have the rights and remedies that it would have had, had it not entered into this Agreement, and shall be entitled to take all actions, whether with respect to the Restructuring Transactions or otherwise, that it would have been entitled to take had it not entered into this Agreement, including with respect to any and all Claims or Causes of Action.  Upon the occurrence of a Termination Date prior to the Confirmation Order being entered by a Bankruptcy Court, any and all consents or ballots tendered by the Parties subject to such termination before a Termination Date shall be deemed, for all purposes, to be null and void from the first instance and shall not be considered or otherwise used in any manner by the Parties in connection with the Restructuring Transactions and this Agreement or otherwise; providedhowever, any Consenting Stakeholder withdrawing or changing its vote pursuant to this Section 12.09 shall promptly provide written notice of such withdrawal or change to each other Party to this Agreement and, if such withdrawal or change occurs on or after the Petition Date, file notice of such withdrawal or change with the Bankruptcy Court. Nothing in this Agreement shall be construed as prohibiting a Company Party or any of the Consenting Stakeholders from contesting whether any such termination is in accordance with its terms or to seek enforcement of any rights under this Agreement that arose or existed before a Termination Date. Except as expressly provided in this Agreement, nothing herein is intended to, or does, in any manner waive, limit, impair, or restrict (a) any right of any Company Party who is a Party or the ability of any Company Party who is a Party to protect and reserve its rights (including rights under this Agreement), remedies, and interests, including its claims against any Consenting Stakeholder, and (b) any right of any Consenting Stakeholder, or the ability of any Consenting Stakeholder, to protect and preserve its rights (including rights under this Agreement), remedies, and interests, including its claims against any Company Party or Consenting Stakeholder. No purported termination of this Agreement shall be effective under this Section 12.09 or otherwise if the Party seeking to terminate this Agreement is in material breach of this Agreement, except a termination pursuant to Section 12.06(d) or Section 12.06(g). Nothing in this Section 12.09 shall restrict any Company Party’s right to terminate this Agreement in accordance with Section 12.06(d).

 

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Section 13.           Amendments and Waivers.

 

(a)          This Agreement may not be modified, amended, or supplemented, and no condition or requirement of this Agreement may be waived, in any manner except in accordance with this Section 13.

 

(a)          This Agreement may be modified, amended, or supplemented, or a condition or requirement of this Agreement may be waived, in a writing signed by: (a) each Company Party, (b) Consenting DIP Lenders holding 66.67% of the aggregate outstanding principal amount of the DIP Claims that are held by Consenting DIP Lenders, (c) solely with respect to any amendment to their treatment or termination rights, Consenting Revolving Credit Facility Lenders holding at least 66.67% of the aggregate outstanding principal amount of the Revolving Credit Facility Claims that are held by Consenting Revolving Credit Facility Lenders; provided, that any such amendment shall be on no less favorable economic terms than currently provided for those creditors that elect to receive Tranche B Exit Facility Loans unless otherwise consented to by the Tranche B Lenders, and (d) the Required Plan Sponsors; provided, however, that if the proposed modification, amendment, waiver, or supplement has a material, disproportionate, and adverse effect on any of the Company Claims held by a Consenting Stakeholder, then the consent of each such affected Consenting Stakeholder shall also be required to effectuate such modification, amendment, waiver or supplement; provided further that if the proposed modification, supplement amendment, or waiver would modify the treatment of DIP Claims or have a material, disproportionate, or adverse effect on the value of DIP Claims, “66.67%” in clause (b) above shall be replaced with 100%.

 

(b)          Any proposed modification, amendment, waiver or supplement that does not comply with this Section 13 shall be ineffective and void ab initio.

 

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

 

Section 14.           Miscellaneous.

 

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

 

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

 

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

 

14.04.     Complete Agreement.  Except as otherwise explicitly provided herein, this Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements, oral or written, among the Parties with respect thereto (including, for the avoidance of doubt, that certain Restructuring Support Agreement, dated as of June 19, 2020, by and among the Consenting FLLO Term Loan Facility Lenders and the Consenting Second Lien Noteholders party thereto), other than any Confidentiality Agreement.

 

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

 

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

 

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

 

14.08.     Rules of Construction.  This Agreement is the product of negotiations among the Consenting DIP Lenders, the Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, the Consenting Second Lien Noteholders, and the Company Parties, and in the enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any presumption with regard to interpretation for or against any Party by reason of that Party having drafted or caused to be drafted this Agreement, or any portion hereof, shall not be effective in regard to the interpretation hereof. The Parties were each represented by counsel during the negotiations and drafting of this Agreement and continue to be represented by counsel and, therefore, waive the application of any law, regulation, holding or rule of construction (a) providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document or (b) any Party with a defense to the enforcement of the terms of this Agreement against such Party based upon lack of legal counsel.

 

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14.09.     Successors and Assigns; Third Parties.  This Agreement is intended to bind and inure to the benefit of the Parties and their respective successors and permitted assigns, as applicable. There are no third party beneficiaries under this Agreement, and the rights or obligations of any Party under this Agreement may not be assigned, delegated, or transferred to any other Entity.

 

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

 

(a)            if to a Company Party, to:

 

Chesapeake Energy Corporation

Attention: James R. Webb, Executive Vice President, General Counsel and Corporate Secretary
E-mail address: jim.webb@chk.com

 

and

 

Kirkland & Ellis LLP
300 North LaSalle Street
Chicago, IL 60654
Attention: Patrick J. Nash, Jr., P.C., Marc Kieselstein, P.C., and Alexandra Schwarzman
E-mail addresses: patrick.nash@kirkland.com; marc.kieselstein@kirkland.com; and alexandra.schwarzman@kirkland.com

 

(b) if to a Consenting DIP Lender, to Sidley Austin LLP as counsel to the DIP Agent:

 

Sidley Austin LLP

555 West Fifth Street

Los Angeles, CA 90013

Attention: Jennifer C. Hagle and Brian E. Minyard

Email address: jhagle@sidley.com; bminyard@sidley.com

 

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(c) if to a Consenting Revolving Credit Facility Lender, to Sidley Austin LLP as counsel to the Revolving Credit Facility Administrative Agent:

 

Sidley Austin LLP

555 West Fifth Street

Los Angeles, CA 90013

Attention: Jennifer C. Hagle and Brian E. Minyard

Email address: jhagle@sidley.com; bminyard@sidley.com

 

(d) if to a Consenting FLLO Term Loan Facility Lender represented by Davis Polk & Wardwell LLP, to:

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Attention: Damian S. Schaible, Darren S. Klein, and Aryeh Ethan Falk

Email addresses: damian.schaible@davispolk.com; darren.klein@davispolk.com; and aryeh.falk@davispolk.com

 

(e) if to a Consenting Second Lien Noteholder represented by Akin Gump Strauss Hauer & Feld LLP, to:

 

Akin Gump Strauss Hauer & Feld LLP

One Bryant Park

Bank of America Tower

New York, NY 10036-6745

Attention: Michael S. Stamer, Meredith A. Lahaie, and Stephen B. Kuhn

Email addresses: mstamer@akingump.com; mlahaie@akingump.com; and skuhn@akingump.com

 

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

 

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

 

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

 

14.13.     Settlement. If the Restructuring Transactions are not consummated, or if this Agreement is terminated in accordance with its terms for any reason, the Parties fully reserve any and all of their rights and nothing herein shall constitute or be deemed to constitute such Party’s consent or approval of any chapter 11 plan of reorganization for the Company Parties or any waiver of any rights such Party may have under any subordination agreement. Pursuant to Federal Rule of Evidence 408 and any other applicable rules of evidence, this Agreement and all negotiations relating hereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce its terms or the payment of damages to which a Party may be entitled under this Agreement.

 

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

 

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

 

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

 

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

 

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

 

14.19.            Relationship Among Consenting Stakeholders.

 

(a)            Notwithstanding anything to the contrary herein, the duties and obligations of the Consenting Stakeholders under this Agreement shall be several, not joint, with respect to each Consenting Stakeholder. None of the Consenting Stakeholders shall have any fiduciary duty, any duty of trust or confidence in any form, or other duties or responsibilities in any kind or form to each other, any Consenting Stakeholder, any Company Party, or any of the Company Party’s respective creditors or other stakeholders, and there are no commitments among or between the Consenting Stakeholders as a result of this Agreement or the transactions contemplated herein or in the Restructuring Term Sheet, in each case except as expressly set forth in this Agreement. No Party shall have any responsibility by virtue of this Agreement for any trading by any other entity. It is understood and agreed that any Consenting Stakeholder may trade in any debt or equity securities of any Company Parties without the consent of the Company Parties or any Consenting Stakeholder, subject to Section 8 of this Agreement and applicable securities laws. No prior history, pattern or practice of sharing confidence among or between any of the Consenting Stakeholders, and/or the Company Parties shall in any way affect or negate this understanding and Agreement, and each Consenting Stakeholder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Consenting Stakeholder to be joined as an additional party in any proceeding for such purpose. Nothing contained in this Agreement, and no action taken by any Consenting Stakeholder pursuant hereto is intended to constitute the Consenting Stakeholders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that any Consenting Stakeholder is in any way acting in concert or as a member of a “group” with any other Consenting Stakeholder or Consenting Stakeholders within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as amended. As of the date hereof and for so long as this Agreement remains in effect, the Parties have no agreement, arrangement or understanding with respect to acting together for the purpose of acquiring, holding, voting or disposing of any securities of any of the Company Parties and do not constitute a “group” within the meaning of Section 13(d)(3) of the Exchange Act or Rule 13d-5 promulgated thereunder. For the avoidance of doubt: (1) each Consenting Stakeholder is entering into this Agreement directly with the Company Parties and not with any other Consenting Stakeholder, (2) no other Consenting Stakeholder shall have any right to bring any action against any other Consenting Stakeholder with respect to this Agreement (or any breach thereof) and (3) no Consenting Stakeholder shall, nor shall any action taken by a Consenting Stakeholder pursuant to this Agreement cause such Consenting Stakeholder to, be obligated to vote its Interests in the Company in any manner or otherwise be deemed to be acting in concert or as any group with any other Consenting Stakeholder with respect to the obligations under this Agreement nor shall this Agreement create a presumption that the Consenting Stakeholders are in any way acting as a group. All rights under this Agreement are separately granted to each Consenting Stakeholder by the Company Parties and vice versa, and the use of a single document is for the convenience of the Company Parties. The decision to commit to enter into the transactions contemplated by this Agreement has been made independently. Nothing in this Agreement shall require any Consenting Stakeholder to incur any expenses, liabilities or other obligations, or agreement to any commitments, undertakings, concessions, indemnities or other arrangements that could result in expenses or other obligations to any Consenting Stakeholder; provided, that the preceding sentence shall not serve to limit, alter or modify any Consenting Stakeholder’s express obligations hereunder.

 

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

 

14.20.            Email Consents. Where a written consent, acceptance, approval, or waiver is required pursuant to or contemplated by this Agreement, pursuant to Section 3.02, Section 13, or otherwise, including a written approval by the Company Parties, the Required Consenting DIP Lenders, the Required Consenting Revolving Credit Facility Lenders, the Required Consenting FLLO Term Loan Facility Lenders, the Required Consenting Second Lien Noteholders, and/or the Required Consenting Stakeholders, such written consent, acceptance, approval, or waiver shall be deemed to have occurred if, by agreement between counsel to the Parties submitting and receiving such consent, acceptance, approval, or waiver, it is conveyed in writing (including electronic mail) between each such counsel without representations or warranties of any kind on behalf of such counsel.

 

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14.21.            Settlement Discussions. This Agreement is part of a proposed settlement of matters that could otherwise be the subject of litigation among the Parties, including any such matters arising under the Intercreditor Agreement, any avoidance actions that could be brought against the DIP Lenders, Revolving Credit Facility Lenders, FLLO Term Loan Facility Lenders, or Second Lien Noteholders under section 547 of the Bankruptcy Code or any other provision of the Bankruptcy Code, or other applicable law, and any matters related to the enterprise value of the Company Parties. Subject to Section 14.13, each of the Consenting FLLO Term Loan Facility Lenders and each of the Consenting Revolving Credit Facility Lenders hereby agrees that it shall forbear from exercising any rights it may have to seek turnover of any payments made to any other Consenting Stakeholder arising under any provision of the Intercreditor Agreement, including, but not limited to any turnover provisions in sections 3.05, 402.(l), 6.01 and 7.03 thereof, or the Collateral Trust Agreement, including section 5.05, 6.02(o), 8.01 and 9.03 thereto; provided, however, that any such forbearance will expire on the Termination Date (other than a Termination Date as a result of the occurrence of the Plan Effective Date) and, following such Termination Date (other than a Termination Date as a result of the occurrence of the Plan Effective Date), the Consenting FLLO Term Loan Facility Lenders or the Consenting Revolving Credit Facility Lenders may freely exercise all rights and remedies under the Intercreditor Agreement. For the avoidance of doubt, each of the Consenting FLLO Term Loan Facility Lenders and each of the Consenting Revolving Credit Facility Lenders hereby agrees that, if a Termination Date has not occurred prior to the occurrence of the Plan Effective Date, then upon the occurrence of the Plan Effective Date, such Consenting FLLO Term Loan Facility Lender or Consenting Revolving Credit Facility Lenders shall conclusively, absolutely, unconditionally, irrevocably and forever waive any rights it may have to seek turnover of any payments to any other Consenting Stakeholder arising under any provision of the Intercreditor Agreement, including, but not limited to, any turnover provisions in sections 3.05, 4.02(l), 6.01 and 7.03 thereof. Each of the Consenting FLLO Term Loan Facility Lenders hereby agrees that it shall not seek, and shall not direct or support the collateral agent under the FLLO Term Loan Facility to seek, turnover of any payment of reasonable and documented professional fees to any of the advisors to Franklin made pursuant to this Agreement prior to the occurrence of the Termination Date (other than a Termination Date as a result of the occurrence of the Plan Effective Date) notwithstanding their rights under the Intercreditor Agreement or termination of this Agreement; provided that this sentence shall not apply to any success, completion, back-end, or similar fee of any banker or financial advisor to Franklin. Each of the Consenting Revolving Credit Facility Lenders hereby agrees that it shall not seek, and shall not direct or support the collateral agent under the Revolving Credit Facility to seek, turnover of any payment of reasonable and documented professional fees to any of the advisors to Franklin or the FLLO Ad Hoc Group made pursuant to this Agreement prior to the occurrence of the Termination Date (other than a Termination Date as a result of the occurrence of the Plan Effective Date) notwithstanding their rights under the Intercreditor Agreement or the Collateral Trust Agreement or termination of this Agreement; provided that this sentence shall not apply to any success, completion, back-end, or similar fee of any banker or financial advisor to Franklin or the FLLO Ad Hoc Group. Nothing in this Agreement shall be deemed an admission of any kind. Pursuant to Federal Rule of Evidence 408, any applicable state rules of evidence and any other applicable law, foreign or domestic, this Agreement, and all negotiations relating thereto shall not be admissible into evidence in any proceeding other than to prove the existence of this Agreement or in a proceeding to enforce the terms of this Agreement.

 

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14.22.            Good Faith Cooperation; Further Assurances. The Parties shall cooperate with each other in good faith and shall coordinate their activities (to the extent reasonably practicable) in respect of all matters concerning the implementation and consummation of the Restructuring. Further, each of the Parties shall take such action (including executing and delivering any other agreements and making and filing any required regulatory filings) as may be reasonably necessary to carry out the purposes and intent of this Agreement.

 

14.23.            Public Disclosure. Under no circumstances may any Party make any public disclosure of any kind that would disclose either: (i) the holdings of any Consenting Stakeholders (including the signature pages hereto, which shall not be publicly disclosed or filed) or (ii) the identity of any Consenting Stakeholder, in each case without the prior written consent of such Consenting Stakeholder or the order of a Bankruptcy Court or other court with competent jurisdiction.

 

14.24.            Survival. Notwithstanding (a) any Transfer of any Company Claims in accordance with this Agreement or (b) the termination of this Agreement in accordance with its terms, the agreements and obligations of the Parties in Section 12.09, Section 14, and the Confidentiality Agreements shall survive such Transfer and/or termination and shall continue in full force and effect for the benefit of the Parties in accordance with the terms hereof and thereof.

 

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

 

[All signature pages on file with the Debtors.]

 

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EXHIBIT A

 

Company Parties

 

 

 

 

Brazos Valley Longhorn, L.L.C.

 

Brazos Valley Longhorn Finance Corp.

 

Burleson Sand LLC

 

Burleson Water Resources, LLC

 

Chesapeake AEZ Exploration, L.L.C.

 

Chesapeake Appalachia, L.L.C.

 

Chesapeake-Clements Acquisition, L.L.C.

 

Chesapeake E&P Holding, L.L.C.

 

Chesapeake energy corporation

 

Chesapeake Energy Louisiana, LLC

 

Chesapeake Energy Marketing, L.L.C.

 

Chesapeake Exploration, L.L.C.

 

Chesapeake Land Development Company, L.L.C.

 

Chesapeake Midstream Development, L.L.C.

 

 

 

 

Chesapeake NG Ventures Corporation

 

Chesapeake Operating, L.L.C., on behalf of itself and as the general partner of

 

Chesapeake Louisiana, L.P.

 

Chesapeake Plains, LLC

 

Chesapeake Royalty, L.L.C.

 

Chesapeake VRT, L.L.C.

 

CHK Energy Holdings, Inc.

 

CHK NGV Leasing Company, L.L.C.

 

CHK Utica, L.L.C.

 

Compass Manufacturing, L.L.C.

 

EMLP, L.L.C., on behalf of itself and as the general partner of

 

Empress Louisiana Properties, L.P.

 

Empress, L.L.C.

 

Esquisto Resources II, LLC

 

GSF, L.L.C.

 

MC Louisiana Minerals, L.L.C.

 

MC Mineral Company, L.L.C.

 

MidCon Compression, L.L.C.

 

Nomac Services, L.L.C.

 

Northern Michigan Exploration Company, L.L.C.

 

Petromax E&P Burleson, LLC

 

Sparks Drive SWD, Inc.

 

WHE AcqCo., LLC

 

WHR Eagle Ford LLC

 

WildHorse Resources II, LLC

 

WildHorse Resources Management Company, LLC

 

Winter Moon Energy Corporation

 

 

 

 

EXHIBIT B

 

Restructuring Term Sheet

 

 

 

 

Execution Version

 

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

  

Restructuring Term Sheet

 

INTRODUCTION

 

This Restructuring Term Sheet1 describes the principal terms of the Restructuring and the Restructuring Transactions of Chesapeake Energy Corporation and its direct and indirect subsidiaries. The regulatory, corporate, tax, accounting, and other legal and financial matters related to the Restructuring have not been fully evaluated, and any such evaluation may affect the terms and structure of any Restructuring. This Restructuring Term Sheet is proffered in the nature of a settlement proposal in furtherance of settlement discussions. Accordingly, this Restructuring Term Sheet and the information contained herein are entitled to protection from any use or disclosure to any party or person pursuant to Rule 408 of the Federal Rules of Evidence and any other applicable rule, statute, or doctrine of similar import protecting the use or disclosure of confidential settlement discussions.

 

This Restructuring Term Sheet does not include a description of all of the terms, conditions, and other provisions that will be contained in the Definitive Documents governing the Restructuring, which remain subject to negotiation and completion in accordance with the Restructuring Support Agreement (“RSA”) and applicable bankruptcy law. The Restructuring will not contain any material terms or conditions that are inconsistent in any material respect with this Restructuring Term Sheet or the RSA. This Restructuring Term Sheet incorporates the rules of construction as set forth in section 102 of the Bankruptcy Code.

 

GENERAL PROVISIONS REGARDING THE RESTRUCTURING
Restructuring Summary

The Restructuring will be consummated through the commencement of the Chapter 11 Cases in the Bankruptcy Court for the Southern District of Texas to implement the Plan described herein on a pre-arranged basis.

 

The Debtors intend to enter into the Restructuring Transactions to restructure the debt under the Revolving Credit Facility, FLLO Term Loan Facility, Second Lien Notes, and Unsecured Notes and take advantage of certain features of chapter 11.

 

 

1 Capitalized terms used but not defined in this Restructuring Term Sheet have the meanings given to such terms in Exhibit 1 to this Restructuring Term Sheet.

 

 

  

GENERAL PROVISIONS REGARDING THE RESTRUCTURING
Chapter 11 Plan

On the Plan Effective Date, or as soon as is reasonably practicable thereafter, each holder of an Allowed Claim or Interest, as applicable, shall receive under the Plan the treatment described in this Restructuring Term Sheet in full and final satisfaction, settlement, release, and discharge of and in exchange for such holder’s Allowed Claim or Interest, except to the extent different treatment is agreed to by the Reorganized Debtors with the consent of the Required Consenting Stakeholders and the holder of such Allowed Claim or Interest, as applicable.

 

The Plan will constitute a separate chapter 11 plan of reorganization for each Debtor. For the avoidance of doubt, any action required to be taken by the Debtors on the Plan Effective Date pursuant to this Restructuring Term Sheet may be taken on the Plan Effective Date or as soon as is reasonably practicable thereafter; provided that the foregoing shall not apply to the Conditions Precedent to the Plan Effective Date; and provided further that all distributions to Holders of DIP Claims and Claims in Class 3 must be made on the Plan Effective Date.

Midstream Savings

The Debtors intend to achieve savings on certain midstream contracts through rejection of such contracts and/or renegotiation of terms.

 

In the event that sufficient savings (as determined by the Required Plan Sponsors) are not achieved, unless the Debtors and the Required Consenting Stakeholders agree otherwise but subject to the reasonable written consent of the DIP Agent and Required Consenting DIP Lenders, certain of the Debtors’ assets will be separated from the Debtors’ remaining assets to the extent not inconsistent with 28 U.S.C. § 959(b).  The Restructuring will then be consummated with respect to the remaining assets, and the separated assets will be wound down in a manner agreed between the Debtors and the Required Consenting Stakeholders.

DIP Facility The DIP Lenders will provide the DIP Facility.  The material terms of the DIP Facility are set forth in the term sheet attached hereto as Exhibit 2 (the “DIP Term Sheet”).
Exit Facilities On the Plan Effective Date, so long as the Conditions Precedent to the Exit Facilities have been satisfied, the Exit Facilities Lenders will provide the Exit Facilities pursuant to the Exit Facilities Credit Agreements on the terms set forth in the term sheet attached hereto as Exhibit 3 (the “Exit Facilities Term Sheet”).  The Exit Facilities Lenders have each executed a commitment letter to the Exit Facilities which incorporates the allocation of the Exit Facilities agreed by each lender prior to and as a condition precedent to the execution of the Restructuring Support Agreement. The Exit Facilities Documents shall be consistent with the Exit Facilities Term Sheet.
New Common Stock

On the Plan Effective Date, Reorganized Chesapeake shall issue a single class of common equity interests (the “New Common Stock”). The New Common Stock will be distributed in accordance with this Restructuring Term Sheet and on terms acceptable to the Required Plan Sponsors.

 

As described herein, on the Plan Effective Date, pursuant to the Rights Offering, Reorganized Chesapeake shall issue New Common Stock for an aggregate purchase price of a minimum of $600 million.

 

2

 

 

GENERAL PROVISIONS REGARDING THE RESTRUCTURING
New Warrants

On the Plan Effective Date, Reorganized Chesapeake shall issue to the holders of Allowed Second Lien Notes Claims and Allowed Unsecured Notes Claims:

· Warrants to purchase 10% of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan), with a term of 5 years, at an initial exercise price per share struck at the equity value, post new-money, implied by a total enterprise value of $4.0 billion (the “New Class A Warrants”);

 

· Warrants to purchase 10% of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan), with a term of 5 years, at an initial exercise price per share struck at the equity value, post new-money, implied by a total enterprise value of $4.5 billion (the “New Class B Warrants”);

 

· Warrants to purchase 10% of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan), with a term of 5 years, at an initial exercise price per share struck at the equity value, post new-money, implied by a total enterprise value of $5.0 billion (the “New Class C Warrants” and, together with the New Class A Warrants and New Class B Warrants, the “New Warrants”).

 

The New Warrants shall automatically terminate upon a deemed liquidation event (e.g., a merger, consolidation, asset sale of all or substantially all of the assets of Reorganized Chesapeake and its subsidiaries, taken as a whole, or similar transactions); provided that a transaction in which the New Common Stock of Reorganized Chesapeake continues to represent, or is exchanged for, at least a majority of the outstanding common equity interests of the post-transaction company shall not be a deemed liquidation event.

Cash on Hand Cash distributions, in accordance with this Restructuring Term Sheet and the Plan, shall be made from cash on hand as of the Plan Effective Date, including proceeds from the Rights Offering and the Exit Facilities.
Definitive Documents Any documents, including any Definitive Documents, that remain the subject of negotiation as of the Agreement Effective Date shall be subject to the rights and obligations set forth in Section 3 of the RSA.  Failure to reference such rights and obligations as it relates to any document referenced in this Restructuring Term Sheet shall not impair such rights and obligations.
Tax Matters The Parties will work together in good faith and will use commercially reasonable efforts to structure and implement the Restructuring in a tax efficient and cost-effective manner for the Debtors and in a manner reasonably acceptable to the Required Consenting Stakeholders.

 

3

 

  

TREATMENT OF CLAIMS AND INTERESTS OF THE DEBTORS UNDER THE PLAN
Class No. Type of Claim Treatment Impairment / Voting
Unclassified Non-Voting Claims
N/A DIP Claims Except to the extent the holder of an Allowed DIP Claim agrees to less favorable treatment, on the Plan Effective Date, each holder of an Allowed DIP Claim shall receive payment of its Allowed DIP Claims in full in cash from, at the Debtors’ option, (i) the proceeds of the Exit Facilities available as of Plan Effective Date and consistent with the Exit Facilities Term Sheet, (ii) the proceeds of the Rights Offering, and (iii) cash on hand; provided that to the extent that such DIP Lender is also an Exit Facility Lender, such DIP Lender’s Allowed DIP Claims will first be reduced dollar-for-dollar and satisfied by the amount of its Exit Facility Loans as of the Plan Effective Date. N/A
N/A Administrative Claims On the Plan Effective Date, each holder of an Allowed Administrative Claim shall receive treatment in a manner consistent with section 1129(a)(2) of the Bankruptcy Code. N/A
N/A Priority Tax Claims On the Plan Effective Date, each holder of an Allowed Priority Tax Claim shall receive treatment in a manner consistent with section 1129(a)(9)(C) of the Bankruptcy Code. N/A
Classified Claims and Interests of the Debtors
Class 1 Other Secured Claims On the Plan Effective Date, each holder of an Allowed Other Secured Claim shall receive, at the Debtors’ option and in consultation with the Required Consenting Stakeholders:  (a) payment in full in cash; (b) the collateral securing its Allowed Other Secured Claim; (c) Reinstatement of its Allowed Other Secured Claim; or (d) such other treatment rendering its Allowed Other Secured Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code. Unimpaired /
Deemed to
Accept
Class 2 Other Priority Claims Each holder of an Allowed Other Priority Claim shall receive treatment in a manner consistent with section 1129(a)(9) of the Bankruptcy Code. Unimpaired /
Deemed to
Accept
Class 3 Revolving Credit Facility Claims

On the Plan Effective Date, the Revolving Credit Facility Claims shall be Allowed and deemed to be Allowed Claims in the full amount outstanding under the Revolving Credit Facility, including all principal, any accrued and unpaid interest at the contract rate, and all accrued and unpaid fees, expenses, and non-contingent indemnity payable under the Revolving Credit Facility.

Except to the extent the holder of an Allowed Revolving Credit Facility Claim agrees to less favorable treatment, on the Plan Effective Date, each holder of an Allowed Revolving Credit Facility Claim shall receive, at such holder’s option, either (i) Tranche A RBL Exit Facility Loans or (ii) Tranche B RBL Exit Facility Loans, on a dollar for dollar basis; provided, that holders of Revolving Credit Facility Claims sufficient to constitute class acceptance for Class 3 pursuant to Section 1126(c) of the Bankruptcy Code may elect different treatment for Class 3 Claims with the consent of the Debtors, the DIP Agent, and the Required Consenting Stakeholders.

Impaired /
Entitled to
Vote
Class 4 FLLO Term Loan Facility Claims On the Plan Effective Date, the FLLO Term Loan Facility Claims shall be Allowed and deemed to be Allowed Claims in the full amount outstanding under the FLLO Term Loan Facility, including all principal, accrued and unpaid interest at the applicable default rate, and all accrued and unpaid fees, expenses, and noncontingent indemnity payable under the FLLO Term Loan Facility.  On the Plan Effective Date, each holder of an Allowed FLLO Term Loan Facility Claim shall receive its pro rata share of (i) 76% of the New Common Stock, subject to dilution on account of the Management Incentive Plan, Rights Offering, Backstop Commitment Fee, and New Warrants, and (ii) the right to participate in the Rights Offering on the terms set forth herein. Impaired /
Entitled to
Vote
Class 5 Second Lien Notes Claims On the Plan Effective Date, the Second Lien Notes Claims shall be Allowed and deemed to be Allowed Claims in the full amount outstanding under the Second Lien Notes Indenture, including the aggregate outstanding principal amount of Second Lien Notes, any premium (including the Make-Whole Premium (as defined in the Second Lien Notes Indenture)), and accrued and unpaid interest, and each holder of an Allowed Second Lien Notes Claim shall receive its pro rata share of (i) 12% of the New Common Stock, subject to dilution on account of the Management Incentive Plan, Rights Offering, Backstop Commitment Fee, and New Warrants, (ii) the right to participate in the Rights Offering on the terms set forth herein, (iii) the New Class A Warrants, (iv) the New Class B Warrants, and (v) 50% of the New Class C Warrants. Impaired / Entitled to Vote

 

4

 

 

TREATMENT OF CLAIMS AND INTERESTS OF THE DEBTORS UNDER THE PLAN
Class No. Type of Claim Treatment Impairment / Voting
Class 6 Unsecured Notes Claims

On the Plan Effective Date, the Unsecured Notes Claims shall be deemed Allowed in full, and each holder of an Allowed Unsecured Notes Claim shall receive its pro rata share of (i) the Unsecured Claims Recovery and (ii) 50% of the New Class C Warrants.

 

Unsecured Claims Recovery” means 12% of the New Common Stock, subject to dilution on account of the Management Incentive Plan, Rights Offering, Backstop Commitment Fee, and New Warrants.

Impaired /
Entitled to
Vote
Class 7 General Unsecured Claims On the Plan Effective Date, each holder of an Allowed General Unsecured Claim shall receive its pro rata share of the Unsecured Claims Recovery. Impaired /
Entitled to
Vote
Class 8 Intercompany Claims On the Plan Effective Date, each holder of an Allowed Intercompany Claim shall have its Claim Reinstated or cancelled, released, and extinguished and without any distribution at the Debtors’ election with the consent of the Required Consenting Stakeholders.   Impaired /
Deemed to
Reject or
Unimpaired /
Deemed to
Accept
Class 9 Existing Equity Interests Other Than in Chesapeake On the Plan Effective Date, each holder of an Existing Equity Interest other than in Chesapeake shall have such Interest Reinstated or cancelled, released, and extinguished and without any distribution at the Debtors’ election with the consent of the Required Consenting Stakeholders. Impaired /
Deemed to
Reject or
Unimpaired /
Deemed to
Accept
Class 10 Existing Equity Interests in Chesapeake On the Plan Effective Date, each holder of an Existing Equity Interest in Chesapeake shall have such Interest cancelled, released, and extinguished without any distribution. Impaired /
Deemed to
Reject

 

5

 

 

 

RIGHTS OFFERING AND BACKSTOP COMMITMENT
Rights Offering and Backstop Commitment

On the Plan Effective Date, the Debtors will consummate a common equity rights offering (the “Rights Offering”) for an aggregate subscription price of a minimum of $600 million (the “Rights Offering Amount”) in accordance with the Plan and the Backstop Commitment Agreement attached hereto as Exhibit 4 and the Rights Offering Procedures. Subscription rights to participate in the Rights Offering shall be distributed as follows:

 

(i)   25% of the New Common Stock to be issued pursuant to the Rights Offering shall be reserved for the Backstop Parties;

 

(ii)  63.75% of the New Common Stock to be issued pursuant to the Rights Offering shall be offered pro rata to the holders of Allowed FLLO Term Loan Facility Claims; and

 

(iii) 11.25% of the New Common Stock to be issued pursuant to the Rights Offering shall be offered pro rata to the holders of Allowed Second Lien Notes Claims.

 

The issuance of such subscription rights will be exempt from SEC registration under applicable law. The New Common Stock in the Rights Offering shall be offered at the Rights Offering Value and shall dilute the New Common Stock issued under the Plan on account of any prepetition claims (which New Common Stock, for the avoidance of doubt, shall be subject to dilution for the Management Incentive Plan and New Warrants).

 

The proceeds of the Rights Offering shall be used by the Debtors or Reorganized Chesapeake, as applicable, to fund payments under the Plan and for general corporate and strategic purposes as determined by management.

 

The Rights Offering shall be backstopped in full (the “Backstop”) by the Backstop Parties in accordance with the terms and conditions set forth in the Backstop Commitment Agreement. The Backstop Parties shall severally (but not jointly) backstop the Rights Offering (with oversubscription rights with respect to such amounts) on the terms set forth in the Backstop Commitment Agreement. The members of the FLLO Ad Hoc Group shall backstop 77% of the Rights Offering and Franklin shall backstop 23% of the Rights Offering (the “Backstop Allocations”).

 

Backstop Parties” means the members of the FLLO Ad Hoc Group and Franklin that are signatories to the Backstop Commitment Agreement.

 

Rights Offering Value” means a discount of 35% to the Plan Equity Value.

 

Plan Equity Value” means the equity value, post new-money, as implied by a Plan total enterprise value of $3.25 billion.

 

Backstop Commitment Fee The “Backstop Commitment Fee” means a nonrefundable aggregate premium equal to 10% of the aggregate amount of the Rights Offering, excluding any oversubscription amounts, payable in New Common Stock issued at the Rights Offering Value.  
Backstop Termination Fee / Put Option Premium If the Backstop Parties are entitled to payment of the Put Option Premium  (as defined in and on the terms and conditions set forth in the Backstop Commitment Agreement) in cash, the Put Option Premium shall be a superpriority administrative expense with priority over all other administrative claims except it shall be unsecured and (i) be subordinated in priority to the administrative claims provided on account of the DIP Claims and adequate protection on account of the Revolving Credit Facility Claims (and any claims to which such DIP Claims and adequate protection claims are subordinate) and (ii) payable only after all such claims set forth in clause (i) have been paid in full in cash or provided such other treatment as is agreed by (a) with respect to DIP Claims, 100% of New Money DIP Lenders and (b) with respect to Revolving Credit Facility Claims, holders of Revolving Credit Facility Claims sufficient to constitute class acceptance pursuant to Section 1126(c) of the Bankruptcy Code.

 

6

 

 

MILESTONES

 

(a)   No later than June 30, 2020, the Company Parties and Backstop Parties shall execute the Backstop Commitment Agreement and the Company Parties shall commence the Chapter 11 Cases.

 

(b)   No later than 5 days after the Petition Date, the Bankruptcy Court shall have entered the Interim DIP Order.

 

(c)   No later than 30 days after the Petition Date, the Company Parties shall have Filed a motion seeking entry of the Backstop Commitment Agreement Approval Order.

 

(d)   No later than 30 days after the Petition Date, the Company Parties shall have Filed a motion which is acceptable to the DIP Agent, seeking (i) approval of all fees to be paid with respect to the Exit Facilities and (ii) authority to pay the upfront fees, arranger fees, and any other fees under the Exit Facilities Term Sheet earned and payable prior to the effective date of a plan of reorganization (the “Exit Facilities Motion”).

 

(e)   No later than 35 days after the Petition Date, the Bankruptcy Court shall have entered the Final DIP Order.

 

(f)   No later than 60 days after the Petition Date, the Bankruptcy Court shall have entered the Backstop Commitment Agreement Approval Order.

 

(g)   No later than 60 days after the Petition Date, the Debtors shall have (i) obtained Bankruptcy Court approval of the relief requested in the Exit Facilities Motion and (ii) paid the upfront fees, arranger fees, and all other fees then earned and payable (as described in the Exit Facilities Term Sheet).

 

(h)  No later than 90 days after the Petition Date, the Company Parties shall have Filed a Plan and Disclosure Statement that provides for treatment acceptable to DIP Lenders (or such plan provides for the indefeasible repayment of the DIP Obligations and obligations under the Revolving Credit Facility in full in cash on the Effective Date and as a condition to the occurrence of the Plan Effective Date); provided, that the treatment provided in this Restructuring Term Sheet is acceptable to the DIP Lenders.

 

(i)   No later than 120 days after the Petition Date, the Company Parties shall have Filed a motion seeking approval of the Disclosure Statement.

 

(j)   No later than 160 days after the Petition Date, the Bankruptcy Court shall have entered an order approving the Disclosure Statement.

 

(k)  No later than 195 days after the Petition Date, the Bankruptcy Court shall have entered the Confirmation Order.

 

(l)   No later than 220 days after the Petition Date, the Plan Effective Date shall have occurred; provided that this milestone shall be automatically extended to the extent necessary, but in no event longer than for fifteen (15) consecutive business days to allow for the expiration of the marketing period under the Exit Facilities Term Sheet.

 

The Milestones consisting of the entry of orders or judicial resolution by the Bankruptcy Court shall be automatically extended (the “COVID-19 Extensions”) by five (5) business days to the extent it is not reasonably feasible to hold and conclude a hearing (if necessary) prior to the applicable Milestone as a result of the closure of the Bankruptcy Court due to the events or circumstances surrounding the virus known as COVID-19 (and the DIP Agent and the Required Consenting Stakeholders shall be deemed to have automatically agreed to such extension).

 

If (i) the Debtors fail to satisfy Milestones (e) or (f) set forth in the DIP Term Sheet and (ii) a board observer is appointed at the election of the DIP Agent (as contemplated by the terms of the DIP Term Sheet), then the Milestones set forth in (i)-(l) above shall be automatically extended as follows: (a) the Debtors shall file an Approved Plan and Disclosure Statement, and a motion to approve such Approved Disclosure Statement, in each case, on or before a date that is 135 days following the Petition Date; (b) such Approved Disclosure Statement shall have been approved by Bankruptcy Court by the date that is no later than 165 days after the Petition Date; (c) the Bankruptcy Court shall have entered an order confirming such Approved Plan by the date that is no later than 200 days after the Petition Date; and (d) the effective date of such Approved Plan shall have occurred by the date that is no later than 220 days after the Petition Date; provided that this milestone (d) shall be automatically extended to the extent necessary, but in no event longer than for fifteen (15) consecutive business days to allow for the expiration of the marketing period under the Exit Facilities Term Sheet.

 

If (i) the Debtors fail to satisfy Milestone (e) set forth in the DIP term sheet on the date that is 135 days following the Petition Date and, (ii) the Debtors take all actions necessary to implement a Chief Restructuring Officer pursuant to an election exercised by the DIP Agent pursuant to the terms set forth in the DIP Term Sheet, then, upon bankruptcy court approval and appointment of the CRO, the Milestones set forth in (i)-(l) above shall be extended as follows:  (a) an Approved Disclosure Statement, and the motion to approve such Approved Disclosure Statement, shall be filed with an Approved Plan approved by the CRO on or before the date that is 180 days following the Petition Date; (b) such Approved Disclosure Statement shall have been approved by Bankruptcy Court by the date that is no later than 210 days after the Petition Date; (c) the Bankruptcy Court shall have entered an order confirming such Approved Plan by the date that is no later than 245 days after the Petition Date; and (d) the Effective Date of such Approved Plan shall have occurred by the date that is no later than 260 days after the Petition Date; provided that this milestone (d) shall be automatically extended to the extent necessary, but in no event longer than for fifteen (15) consecutive business days to allow for the expiration of the marketing period under the Exit Facilities Term Sheet (as defined in the Restructuring Support Agreement); provided, further, that in no event shall the Plan Effective Date extend beyond the Scheduled Maturity Date.

 

7

 

 

 

GENERAL PROVISIONS REGARDING THE PLAN
Subordination Except as otherwise set forth in this Restructuring Term Sheet and the RSA, the classification and treatment of Claims under the Plan shall conform to the respective contractual, legal, and equitable subordination rights of such Claims, and any such rights shall be settled, compromised, and released pursuant to the Plan.
Restructuring Transactions The Confirmation Order shall be deemed to authorize, among other things, all actions as may be necessary or appropriate to effectuate any transaction described in, approved by, contemplated by, or necessary to consummate the Plan and the Restructuring Transactions therein.  On the Plan Effective Date, the Debtors, as applicable, shall issue all securities, notes, instruments, certificates, and other documents required to be issued pursuant to the Restructuring.
Cancellation of Notes, Instruments, Certificates, and Other Documents On the Plan Effective Date, except to the extent otherwise provided in this Restructuring Term Sheet or the Plan, all notes, instruments, certificates, and other documents evidencing Claims or Interests, including credit agreements and indentures, shall be canceled, and the Debtors’ obligations thereunder or in any way related thereto shall be deemed satisfied in full and discharged.
Executory Contracts and Unexpired Leases

The Plan will provide that the executory contracts and unexpired leases that are not rejected as of the Plan Effective Date (either pursuant to the Plan or a separate motion) will be deemed assumed pursuant to section 365 of the Bankruptcy Code.

 

The Parties will work together in good faith to determine which executory contracts and unexpired leases shall be assumed, assumed and assigned, or rejected in the Chapter 11 Cases.

 

The Company Parties shall host a weekly telephonic meeting with the DIP Agent, the Revolving Credit Facility Administrative Agent, the FLLO Ad Hoc Group, and Franklin to discuss whether to reject or assume any midstream contracts, and (if applicable) the strategy to renegotiate any midstream contracts.

Retention of Jurisdiction The Plan will provide that the Bankruptcy Court shall retain jurisdiction for usual and customary matters.
Discharge of Claims and Termination of Interests Pursuant to section 1141(d) of the Bankruptcy Code and except as otherwise specifically provided in the Plan or in any contract, instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Plan Effective Date, of Claims (including any Intercompany Claims that the Debtors resolve or compromise after the Plan Effective Date), Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights against, and Interests in the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Plan Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services that employees of the Debtors have performed prior to the Plan Effective Date and that arise from a termination of employment, any contingent or non-contingent liability on account of representations or warranties issued on or before the Plan Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not (a) a Proof of Claim based upon such debt or right is Filed or deemed Filed pursuant to section 501 of the Bankruptcy Code, (b) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy Code, or (c) the holder of such a Claim or Interest has accepted the Plan.  The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the occurrence of the Plan Effective Date.
Releases by the Debtors, Releases by Holders of Claims and Interests, Exculpation, and Injunction

The Plan shall include the release, exculpation, and injunction provisions set forth in Exhibit 5 attached hereto.

 

The Consenting Revolving Credit Facility Lenders, the Consenting FLLO Term Loan Facility Lenders, and the Consenting Second Lien Noteholders will, pursuant to the RSA, agree to “opt in” to or not to “opt out” of, as applicable, the consensual “Third-Party” releases, including those granted to the Company Parties’ current and former officers, directors, and employees.

 

8

 

 

OTHER MATERIAL PROVISIONS REGARDING THE RESTRUCTURING
Management Incentive Plan On the Plan Effective Date, the Reorganized Debtors will implement a management incentive plan (the “Management Incentive Plan”).  All grants under the Management Incentive Plan shall be determined at the sole discretion of the New Board including, without limitation, with respect to the participants, allocation, timing, and the form and structure of the options, warrants and/or equity compensation to be provided thereunder and taking into account market compensation levels and historical equity compensation structures.
Governance

The new board of directors of Reorganized Chesapeake (the “New Board”) shall be appointed in accordance with the terms of the Governance Term Sheet attached hereto as Exhibit 6, and the identities of the New Board shall be set forth in the Plan Supplement to the extent known at the time of Filing.

 

Corporate governance for Reorganized Chesapeake, including charters, bylaws, operating agreements, or other organization documents, as applicable (the “New Organizational Documents”), shall be consistent with this Restructuring Term Sheet and section 1123(a)(6) of the Bankruptcy Code and shall be in form and substance satisfactory to the Required Plan Sponsors.

Exemption from SEC Registration

The issuance of all securities under the Plan (other than securities issued pursuant to the Backstop set forth in the Backstop Commitment Agreement) will be exempt from SEC registration under section 1145 of the Bankruptcy Code to the fullest extent permissible.

 

Each Backstop Party that receives securities under the Plan will be entitled to registration rights and sale support rights with respect to all such securities to be documented in a registration rights agreement in form and substance satisfactory to the Required Plan Sponsors.

Employment Obligations Pursuant to the RSA and this Restructuring Term Sheet, the Parties consent to the continuation of the Debtors’ wages, compensation, and benefits programs according to existing terms and practices, including executive compensation programs and any motions in the Bankruptcy Court for approval thereof.  On the Plan Effective Date, the Debtors shall (a) assume all employment agreements, indemnification agreements, or other agreements entered into with current and former employees or (b) enter into new agreements with such employees on terms and conditions acceptable to the Debtor and such employee.  Notwithstanding the foregoing, any employment agreements or other employment-related agreements that provide for any acceleration or enhancement of payments (including severance payments) , vesting, benefits or other rights, in connection with a transaction that constitutes a change in control, change of control or similar concept under such agreements, shall only be assumed if and to the extent that the Debtors’ obtain waivers specifying that the consummation of the Restructuring Transactions shall not trigger any such rights under such agreements.
Indemnification Obligations Consistent with applicable law, all indemnification provisions in place as of the Plan Effective Date (whether in the by-laws, certificates of incorporation or formation, limited liability company agreements, other organizational documents, board resolutions, indemnification agreements, employment contracts, or otherwise) for current and former directors, officers, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Parties, as applicable, shall be reinstated and remain intact, irrevocable, and shall survive the effectiveness of the Restructuring on terms no less favorable to such current and former directors, officers, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Parties than the indemnification provisions in place prior to the Restructuring.
Retained Causes of Action The Reorganized Debtors, as applicable, shall retain all rights to commence and pursue any Causes of Action, other than any Causes of Action that the Debtors have released pursuant to the release and exculpation provisions outlined in this Restructuring Term Sheet and implemented pursuant to the Plan.

 

9

 

 

 

Conditions Precedent to the Plan Effective Date

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

 

(a)   the Bankruptcy Court shall have entered the Confirmation Order, which shall:

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)   the final version of each of the Plan, the Definitive Documents, and all documents contained in any supplement to the Plan, including the Plan Supplement and all of the schedules, documents, and exhibits contained therein shall have been Filed in a manner consistent in all material respects with the RSA, this Restructuring Term Sheet, and the Plan;

 

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

 

(e)   the Final Order approving the DIP Facility shall remain in full force and effect and no event of default shall have occurred and be continuing thereunder;

 

 

10

 

 

OTHER MATERIAL PROVISIONS REGARDING THE RESTRUCTURING
 

(f)   the Backstop Commitment Agreement Approval Order and Backstop Commitment Agreement shall remain in full force and effect;

 

(g)   all professional fees and expenses of retained professionals that require the Bankruptcy Court’s approval shall have been paid in full or amounts sufficient to pay such fees and expenses after the Plan Effective Date shall have been placed in a professional fee escrow account pending the Bankruptcy Court’s approval of such fees and expenses;

 

(h)   to the extent invoiced, the payment in cash in full of all Restructuring Expenses;

 

(i)    the Debtors shall have obtained exit financing in an amount and on terms satisfactory to the Required Consenting Stakeholders (which shall not be withheld in bad faith);

 

(j)    the Debtors shall have Minimum Liquidity2 of at least $500 million;

 

(k)   the Debtors shall have Total Leverage3 no greater than 2.25x;

 

(l)   the Debtors’ PDP PV10 test ratio shall be no less than 1.5x; and

 

(m) the Debtors shall have implemented the Restructuring Transactions and all transactions contemplated in this Restructuring Term Sheet in a manner consistent with the RSA, this Restructuring Term Sheet, and the Plan.

 

For the avoidance of doubt, if the Minimum Liquidity condition set forth in subsection (j) above, the Total Leverage condition set forth in subsection (k) above, and/or the PDP PV10 ratio set forth in subsection (l) above would not otherwise be satisfied, the Required Plan Sponsors may agree, in their sole discretion, to increase the Rights Offering amount above $600 million on the same terms, including the Rights Offering Value and with an allocation consistent with the Backstop Allocations, in order to enable such conditions to be satisfied, provided that no Backstop Party’s Backstop Commitment may be increased without its consent.

 

Waiver of Conditions Precedent to the Plan Effective Date The Debtors, with the prior written consent of the Required Consenting Stakeholders (not to be withheld unreasonably), may waive any one or more of the Conditions Precedent to the Plan Effective Date.

 

 

2 “Minimum Liquidity” to be defined in a customary manner and to be net of payables more than 90 days past due.

3 “Total Leverage” has the meaning ascribed to Total Leverage Ratio in the Exit Facilities Term Sheet.

 

11

 

 

OTHER MATERIAL PROVISIONS REGARDING THE RESTRUCTURING
Settlement

Pursuant to the RSA and this Restructuring Term Sheet, the Parties agree to settle matters that could otherwise be the subject of litigation among the Parties, including any such matters arising under the Intercreditor Agreement and any matters related to the enterprise value of the Company Parties.

 

If a Termination Date has not occurred prior to the Plan Effective Date, then on the Plan Effective Date, in conjunction with the issuance of new securities under the Plan, the Backstop with respect to the Rights Offering, the DIP Facility, the Exit Facilities and the various compromises of rights and claims on which this Term Sheet and the Restructuring Transactions are predicated, among other things, the FLLO Term Loan Facility Lenders shall conclusively, absolutely, unconditionally, irrevocably and forever waive any rights they may have to seek turnover of any payments arising under any provision of the Intercreditor Agreement, including, but not limited to, any turnover provisions in sections 3.05, 4.02(l), 6.01 and 7.03 thereof.

DIP Order/Cash Collateral Order

The Parties hereto agree and consent that the DIP Order and any cash collateral order approved in the Chapter 11 Cases shall provide that the Debtors will pay the fees and expenses of professionals of (i) the collateral trustee under the Collateral Trust Agreement (including Paul Hastings LLP), (ii) the FLLO Term Loan Facility Administrative Agent (including Arnold & Porter Kaye Scholer LLP and one local counsel in the relevant jurisdiction), (iii) the FLLO Ad Hoc Group (including Davis Polk & Wardwell LLP, Vinson & Elkins LLP, one local counsel in each other relevant local jurisdiction, and Perella Weinberg Partners LP) ((ii)-(iii), collectively the “FLLO Professionals”), (iv) the Second Lien Collateral Trustee (including Morgan, Lewis & Bockius LLP and one local counsel in the relevant jurisdiction) and (v) Franklin (including Akin Gump Strauss Hauer & Feld LLP, Moelis & Company LLC, one local counsel in each other relevant local jurisdiction, and FTI Consulting, Inc.) ((iv)-(v), collectively, the “Second Lien Professionals”); provided that:

 

(I)           (a) the payment of the fees and expenses of the FLLO Professionals shall only be payable as a form of adequate protection for so long as (1) the Restructuring Support Agreement has not been terminated as to the DIP Lenders, Required Consenting Revolving Credit Facility Lenders, or FLLO Ad Hoc Group, or (2) an alternative restructuring support agreement or similar agreement with respect to the restructuring of the Debtors’ debt and businesses remains in effect between the DIP Agent, the DIP Lenders, 66.67% of the Revolving Credit Facility Lenders, and the FLLO Ad Hoc Group, in each case, at which time such adequate protection shall terminate, provided that in the event such adequate protection payments terminate pursuant to the foregoing, (a) all parties shall retain all rights pursuant to the Collateral Trust Agreement, which rights are fully reserved, including, without limitation, the rights, if any, of the Existing FLLO Agent or Existing FLLO Lenders to seek different or additional adequate protection in accordance with section 6.02(f) of the Collateral Trust Agreement and (b) the Company Parties shall pay all fees and expenses of the FLLO Professionals incurred prior to termination of adequate protection as described herein; and

 

(II)          the payment of the fees and expenses of the Second Lien Professionals shall only be payable as a form of adequate protection for so long as the Restructuring Support Agreement has not been terminated as to the Company Parties, DIP Lenders, Required Consenting Revolving Credit Facility Lenders, or Franklin (at which time such adequate protection shall terminate), provided that in the event such adequate protection payments terminate pursuant to the foregoing, (a) all parties shall retain all rights pursuant to the Intercreditor Agreement, including, without limitation, the rights, if any, of such parties to seek different or additional adequate protection in accordance with section 4.02(f) of the Intercreditor Agreement and (b) the Company Parties shall pay all fees and expenses of the Second Lien Professionals incurred prior to termination of adequate protection as described herein.

 

This provision shall survive the termination of the RSA.

 

12

 

 

Exhibit 1

 

Execution Version

Definitions

 

Term Definition
Additional Consenting Stakeholder Any holder of Claims that is not a party to the RSA as of the Agreement Effective Date who, at any time after the Agreement Effective Date, becomes a party to the RSA as an applicable Consenting Stakeholder.
Administrative Claim A Claim for costs and expenses of administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2), 507(b), or 1114(e)(2) of the Bankruptcy Code, including:  (a) the actual and necessary costs and expenses incurred on or after the Petition Date until and including the Plan Effective Date of preserving the Estates and operating the Debtors’ businesses; (b) Allowed Professional Claims; and (c) all fees and charges assessed against the Estates pursuant to section 1930 of chapter 123 of title 28 of the United States Code.  
Affiliate As defined in section 101(2) of the Bankruptcy Code.
Agent Any administrative agent, collateral agent, or similar Entity under the Exit Facilities, the DIP Facility, the Revolving Credit Facility, and/or the FLLO Term Loan Facility.
Agents/Trustees Collectively, each of the Agents and Trustees.
Agreement Effective Date The date on which the conditions set forth in Section 2 of the RSA have been satisfied or waived by the appropriate Party or Parties in accordance with the RSA.
Agreement Effective Period With respect to a Party, the period from the Agreement Effective Date to the Termination Date applicable to that Party.
Allowed With respect to any Claim or Interest, except as otherwise provided herein:  (a) a Claim or Interest in a liquidated amount as to which no objection has been Filed prior to the applicable claims objection deadline and that is evidenced by a Proof of Claim or Interest, as applicable, timely Filed by the applicable Bar Date or that is not required to be evidenced by a Filed Proof of Claim or Interest, as applicable, under the Plan, the Bankruptcy Code, or a Final Order; (b) a Claim or Interest that is scheduled by the Debtors as neither disputed, contingent, nor unliquidated, and for which no Proof of Claim or Interest, as applicable, has been timely Filed in an unliquidated or a different amount;  (c) a Claim or Interest that is upheld or otherwise Allowed (i) pursuant to the Plan; (ii) in any stipulation that is approved by the Bankruptcy Court; (iii) pursuant to any contract, instrument, indenture, or other agreement entered into or assumed in connection herewith; or (iv) by Final Order (including any such Claim to which the Debtors had objected or which the Bankruptcy Court had disallowed prior to such Final Order); provided that with respect to a Claim or Interest described in clauses (a) through (c) above, such Claim or Interest shall be considered Allowed only if and to the extent that with respect to such Claim or Interest no objection to the allowance thereof has been or, in the Debtors’ or Reorganized Debtors’ reasonable good faith judgment, may be interposed within the applicable period of time fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or such an objection is so interposed and the Claim or Interest, as applicable, shall have been Allowed by a Final Order; provided, further, that no Claim of any Entity subject to section 502(d) of the Bankruptcy Code shall be deemed Allowed unless and until such Entity pays in full the amount that it owes such Debtor or Reorganized Debtor, as applicable.  Any Claim that has been or is hereafter listed in the Schedules as contingent, unliquidated, or disputed, and for which no Proof of Claim or Interest is or has been timely Filed, is not considered Allowed and shall be deemed expunged without further action by the Debtors and without further notice to any party or action, approval, or order of the Bankruptcy Court.  For the avoidance of doubt, a Proof of Claim or Interest Filed after the Bar Date shall not be Allowed for any purposes whatsoever absent entry of a Final Order allowing such late-Filed Claim.  “Allow,” “Allowing,” and “Allowance” shall have correlative meanings.

 

 

 

 

Term Definition
Alternative Restructuring Proposal Any inquiry, proposal, offer, bid, term sheet, discussion, or agreement with respect to a sale, disposition, new-money investment, restructuring, reorganization, merger, amalgamation, acquisition, consolidation, dissolution, debt investment, equity investment, liquidation, tender offer, recapitalization, plan of reorganization, share exchange, business combination, or similar transaction involving any one or more Company Parties or the debt, equity, or other interests in any one or more Company Parties that is an alternative to one or more of the Restructuring Transactions.
Backstop As defined in this Restructuring Term Sheet.
Backstop Commitment Agreement That certain Backstop Commitment Agreement to be negotiated between the Company Parties and the Backstop Parties, which shall be executed prior to the Petition Date.
Backstop Commitment Agreement Approval Order An order of the Bankruptcy Court that that is not stayed under Bankruptcy Rule 6004(h) or otherwise that (a) authorizes the Company Parties to execute and deliver the Backstop Commitment Agreement, pursuant to section 365 of the Bankruptcy Code and (b) provides that the Backstop Commitment Fee shall constitute allowed administrative expenses of the Debtors’ estates under sections 503(b) and 507 of the Bankruptcy Code and shall be payable by the Debtors as provided in the Backstop Commitment Agreement without further order of the Bankruptcy Court.
Backstop Commitment Fee As defined in this Restructuring Term Sheet.
Backstop Parties As defined in this Restructuring Term Sheet.
Bankruptcy Code Title 11 of the United States Code, 11 U.S.C. §§ 101–1532, as amended.
Bankruptcy Court The United States Bankruptcy Court for the Southern District of Texas.
Bankruptcy Rules The Federal Rules of Bankruptcy Procedure.
Bar Date The date established by the Bankruptcy Court by which Proof of Claims or Proof of Interests must be Filed with respect to such Claims or Interests, other than Administrative Claims, Claims held by Governmental Units, or other Claims or Interests for which the Bankruptcy Court entered an order excluding the holders of such Claims or Interests from the requirement of Filing Proof of Claims or Proof of Interests.

 

2

 

 

Term Definition
Business Day Any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state of New York.
Cause of Action Any claims, interests, damages, remedies, causes of action, demands, rights, actions, suits, obligations, liabilities, accounts, defenses, offsets, powers, privileges, licenses, Liens, indemnities, guaranties, and franchises of any kind or character whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, contingent or non-contingent, liquidated or unliquidated, secured or unsecured, assertable, directly or derivatively, matured or unmatured, suspected or unsuspected, in contract, tort, law, equity, or otherwise.  Causes of Action also include: (a) all rights of setoff, counterclaim, or recoupment and claims under contracts or for breaches of duties imposed by law; (b) the right to object to or otherwise contest Claims or Interests; (c) claims pursuant to sections 362, 510, 542, 543, 544 through 550, or 553 of the Bankruptcy Code; and (d) such claims and defenses as fraud, mistake, duress, and usury, and any other defenses set forth in section 558 of the Bankruptcy Code.
Chapter 11 Cases As defined in the RSA.
Chesapeake Chesapeake Energy Corporation or any successor or assign, by merger, consolidation, or otherwise, prior to the Plan Effective Date.
Claim Any claim, as defined in section 101(5) of the Bankruptcy Code, against any of the Debtors.
Class A category of holders of Claims or Interests pursuant to section 1122(a) of the Bankruptcy Code.
Collateral Trust Agreement That certain Collateral Trust Agreement dated December 19, 2019 by and between MUFG Union Bank, N.A., as Collateral Trustee and Revolver Agent, and GLAS USA LLC, as Original Term Loan Agent, and as acknowledged and agreed by certain of the Debtors (as from time to time amended and restated)
Company Parties As defined in the RSA.
Company Claims Claims against any Company Party.
Conditions Precedent to the Plan Effective Date As defined in this Restructuring Term Sheet.
Conditions Precedent to the Exit Facilities The conditions precedent to the closing of the Exit Facilities identified on Exhibit D to the Exit Facilities Term Sheet
Confidentiality Agreement An executed confidentiality agreement, including with respect to the issuance of a “cleansing letter” or other public disclosure of material non-public information agreement, in connection with any proposed Restructuring Transactions.

 

3

 

 

 

Term Definition
Confirmation Entry of the Confirmation Order on the docket of the Chapter 11 Cases.
Confirmation Date The date on which the Bankruptcy Court enters the Confirmation Order on the docket of the Chapter 11 Cases within the meaning of Bankruptcy Rules 5003 and 9021.
Confirmation Hearing The hearing(s) before the Bankruptcy Court under section 1128 of the Bankruptcy Code at which the Debtors seek entry of the Confirmation Order.
Confirmation Order The order of the Bankruptcy Court confirming the Plan under section 1129 of the Bankruptcy Code.
Consenting FLLO Term Loan Facility Lenders As defined in the RSA.
Consenting Revolving Credit Facility Lenders As defined in the RSA.
Consenting Second Lien Noteholders As defined in the RSA.
Consenting Stakeholders As defined in the RSA.
Consenting Unsecured Noteholders Unsecured Noteholders that are Party to the RSA.
Consummation The occurrence of the Plan Effective Date.
COVID-19 Extensions As defined in this Restructuring Term Sheet.
CRO As defined in this Restructuring Term Sheet.
Debtor Each Company Party that has commenced Chapter 11 Cases.
Definitive Documents The documents listed in Section 3 of the RSA.
DIP Agent MUFG Union Bank, N.A., in its capacity as administrative agent and collateral agent under the DIP Credit Agreement.
DIP Claims All Claims derived from, based upon, or secured pursuant to the DIP Credit Agreement or DIP Order, including Claims for all principal amounts outstanding, interest, fees, expenses, costs, professional fee reimbursements, transaction fees, Superpriority Hedge Claims, and other charges arising thereunder or related thereto, in each case, with respect to the DIP Facility.
DIP Credit Agreement That certain superpriority secured debtor-in-possession credit agreement that governs the DIP Facility (as may be amended, supplemented, or otherwise modified from time to time) which shall be consistent with the DIP Term Sheet and shall be executed by Chesapeake Energy Corporation, as borrower, the Debtor guarantors that are party thereto, the DIP Lenders, and the DIP Agent following entry of the Interim DIP Order.

 

4

 

 

Term Definition
DIP Documents Collectively, the DIP Credit Agreement and any and all other agreements, documents, and instruments delivered or to be entered into in connection therewith, including any guarantee agreements, pledge and collateral agreements, intercreditor agreements, and other security documents, in each case consistent with the DIP Term Sheet and subject to the consent rights described in the definition of DIP Facility below.
DIP Facility That certain debtor-in-possession financing facility in accordance with the terms and conditions set forth in the DIP Credit Agreement, provided that the terms set forth in the DIP Term Sheet shall be deemed acceptable to the FLLO Ad Hoc Group and Franklin; and provided further that the terms of the DIP Facility that are not set forth in the DIP Term Sheet shall otherwise be acceptable to the Required Consenting Parties (which approval shall not be withheld in bad faith).
DIP Lenders The lenders party to the DIP Credit Agreement with respect to the DIP Facility.
DIP Obligations As defined in the DIP Order.
DIP Order Collectively, the Interim DIP Order and Final DIP Order.
DIP Term Sheet As defined in this Restructuring Term Sheet.
Disclosure Statement The related disclosure statement with respect to the Plan.
Entity As defined in section 101(15) of the Bankruptcy Code.
Estate The estate of any Debtor created under sections 301 and 541 of the Bankruptcy Code upon the commencement of the applicable Debtor’s Chapter 11 Case.
Exculpated Parties Collectively, and in each case in its capacity as such: (a) the Debtors; (b) any official committees appointed in the Chapter 11 Cases and each of their respective members; (c) the Consenting FLLO Term Loan Facility Lenders, (d) the Consenting Second Lien Noteholders, (e) the Consenting Unsecured Noteholders, (f) the Backstop Parties, (g) the Consenting Revolving Credit Facility Lenders, (h) the DIP Lenders, (i) the Exit Facilities Lenders, (j) the Agents, and (k) with respect to each of the foregoing, such Entity and its current and former Affiliates, and such Entity’s and its current and former Affiliates’ current and former equity holders, subsidiaries, officers, directors, managers, principals, members, employees, agents, advisory board members, financial advisors, partners, attorneys, accountants, investment bankers, consultants, representatives, and other professionals, each in their capacity as such.
Execution Date As defined in the RSA.
Existing Equity Interest An Interest in a Company Party existing as of the Agreement Effective Date.  Notwithstanding the foregoing, Existing Equity Interests do not include Intercompany Interests.

 

5

 

 

Term Definition
Exit Facilities Collectively, the Exit RBL Facility and Exit FLLO Term Loan Facility, provided that the terms set forth in the Exit Facilities Term Sheet shall be deemed acceptable to the Company Parties, the FLLO Ad Hoc Group, and Franklin; provided, further that the terms of the Exit Facilities that are not set forth in the Exit Facilities Term Sheet shall otherwise be acceptable to the Required Consenting Stakeholders (which approval shall not be withheld in bad faith).
Exit Facilities Agent MUFG Union Bank, N.A., in its capacity as administrative agent for the Exit Facilities.
Exit Facilities Credit Agreements Those certain credit agreements that will govern the Exit Facilities (as each may be amended, supplemented, or otherwise modified from time to time), in each case which shall be consistent with the Exit Facilities Term Sheet.
Exit Facilities Documents Collectively, the Exit Facilities Credit Agreements and any and all other agreements, documents, and instruments delivered or to be entered into in connection therewith, including any guarantee agreements, pledge and collateral agreements, intercreditor agreements, and other security documents, in each case if any, the form and substance of which shall be consistent with the Exit Facilities Term Sheet and subject to the consent rights set forth in the definition of Exit Facilities above.
Exit Facilities Lenders The lenders party to the credit agreements documenting the Exit RBL Facility and Exit FLLO Term Loan.
Exit Facilities Motion As defined in this Restructuring Term Sheet.
Exit Facilities Term Sheet As defined in this Restructuring Term Sheet.
Exit FLLO Term Loan Facility As defined in the Exit Facilities Term Sheet.
Exit FLLO Term Loan “FLLO Term Loans” as defined in the Exit Facilities Term Sheet.
Exit Facility Loans Collectively, the Tranche A RBL Exit Facility Loans, Tranche B RBL Exit Facility Loans, and Exit FLLO Term Loans.
Exit RBL Facility As defined in the Exit Facilities Term Sheet.
File, Filed, or Filing File, filed, or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases.
Final DIP Order Any order regarding postpetition debtor in possession secured financing approved by the Bankruptcy Court in these Chapter 11 Cases (including with respect to any budgets governing or relating to such use) on a final basis, the form and substance of which shall be consistent with the DIP Term Sheet.
Final Order An order or judgment of the Bankruptcy Court, or court of competent jurisdiction with respect to the subject matter that has not been reversed, stayed, modified, or amended, as entered on the docket in any Chapter 11 Case or the docket of any court of competent jurisdiction, and as to which the time to appeal, or seek certiorari or move for a new trial, reargument, or rehearing has expired and no appeal or petition for certiorari or other proceedings for a new trial, reargument, or rehearing has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been or may be timely Filed has been withdrawn or resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought or the new trial, reargument, or rehearing will have been denied, resulted in no stay pending appeal of such order, or has otherwise been dismissed with prejudice; provided that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be Filed with respect to such order will not preclude such order from being a Final Order.

 

6

 

 

Term Definition
First Day Pleadings The pleadings and related documentation requesting certain emergency relief, or supporting the request for such relief, to be Filed on or around the Petition Date and to be heard at the “first day” hearing.
FLLO Ad Hoc Group The ad hoc group of FLLO Term Loan Facility Lenders represented by Davis Polk & Wardwell LLP.
FLLO Term Loan Facility The facility outstanding under the FLLO Term Loan Facility Credit Agreement.
FLLO Term Loan Facility Administrative Agent GLAS USA LLC, in its capacity as administrative agent for the FLLO Term Loan Facility.
FLLO Term Loan Facility Claim Any Claim on account of the FLLO Term Loan Facility.
FLLO Term Loan Facility Credit Agreement That certain term loan agreement, dated as of December 19, 2019 ((i) as supplemented by that certain Class A Term Loan Supplement, dated as of December 19, 2019 (as amended, restated or otherwise modified from time to time), by and among Chesapeake, as borrower, the Debtor guarantors party thereto, the FLLO Term Loan Facility Administrative Agent, and the lender parties thereto, and (ii) as further amended, restated, or otherwise modified from time to time), by and among Chesapeake, as borrower, the Debtor guarantors party thereto, the FLLO Term Loan Facility Administrative Agent, and the lender parties thereto.
FLLO Term Loan Facility Lenders Holders of Allowed FLLO Term Loan Facility Claims.
FLLO Term Loan Facility Loans The term loans issued under and on the terms set forth under the FLLO Term Loan Facility.
Franklin Franklin Advisers, Inc., as investment manager on behalf of certain funds and accounts.
General Unsecured Claims Any Unsecured Claim against a Debtor.
Governmental Unit As defined in section 101(27) of the Bankruptcy Code.
Impaired With respect to any Class of Claims or Interests, a Class of Claims or Interests that is impaired within the meaning of section 1124 of the Bankruptcy Code.
Incremental Roll-Up Loans As defined in the DIP Term Sheet.
Intercompany Claim A Claim held by a Debtor against a Debtor.
Intercompany Interest An Interest in a Debtor held by a Debtor.
Intercreditor Agreement That certain Intercreditor Agreement dated as of December 19, 2019 between MUFG Union Bank, N.A. as Priority Lien Agent, and Deutsche Bank Trust Company Americas, as Second Lien Collateral Trustee and Acknowledged and Agreed by Chesapeake Energy Corporation and certain of its subsidiaries.
Interest Any equity security (as defined in section 101(16) of the Bankruptcy Code) in any Debtor and any other rights, options, warrants, stock appreciation rights, phantom stock rights, restricted stock units, redemption rights, repurchase rights, convertible, exercisable or exchangeable securities or other agreements, arrangements or commitments of any character relating to, or whose value is related to, any such interest or other ownership interest in any Debtor.
Interim DIP Order Any order regarding postpetition debtor in possession secured financing approved by the Bankruptcy Court in these Chapter 11 Cases (including with respect to any budgets governing or relating to such use) on an interim basis, the form and substance of which shall be consistent with the DIP Term Sheet.
Joinder A joinder agreement whereby a holder of Claims that is not a Party to the RSA as of the Agreement Effective Date may become a Consenting Stakeholder by executing such joinder agreement.
KEIP As defined in the RSA.
KERP As defined in the RSA.
Law Any federal, state, local, or foreign law (including common law), statute, code, ordinance, rule, regulation, order, ruling, or judgment, in each case, that is validly adopted, promulgated, issued, or entered by a governmental authority of competent jurisdiction (including the Bankruptcy Court).
Lien As defined in section 101(37) of the Bankruptcy Code.
Management Incentive Plan As defined in this Restructuring Term Sheet.
Majority DIP Lenders As defined in the DIP Order.
New Board As defined in this Restructuring Term Sheet.
New Class A Warrants As defined in this Restructuring Term Sheet.

 

7

 

 

Term Definition
New Class B Warrants As defined in this Restructuring Term Sheet.
New Class C Warrants As defined in this Restructuring Term Sheet.
New Common Stock As defined in this Restructuring Term Sheet.
New Money Roll-Up Loans As defined in the DIP Term Sheet.
New Organizational Documents As defined in this Restructuring Term Sheet.
New Warrants As defined in this Restructuring Term Sheet.
Other Priority Claim Any Claim other than an Administrative Claim or a Priority Tax Claim entitled to priority in right of payment under section 507(a) of the Bankruptcy Code.
Other Secured Claim Any Secured Claim other than a Revolving Credit Facility Claim, a FLLO Term Loan Facility Claim, a Second Lien Notes Claim, or a DIP Claim.  
Parties As defined in the RSA.
Permitted Transferee Each transferee of any Company Claims who meets the requirements of Section 8 of the RSA.
Petition Date The date on which the Chapter 11 Cases are commenced.
Plan The joint plan of reorganization Filed by the Debtors under chapter 11 of the Bankruptcy Code that embodies the Restructuring Transactions.
Plan Effective Date The date that is the first Business Day after the Confirmation Date on which all Conditions Precedent to the Plan Effective Date have been satisfied or waived in accordance with the Plan.
Plan Equity Value As defined in this Restructuring Term Sheet.
Plan Supplement Any compilation of documents and forms of documents, agreements, schedules, and exhibits to the Plan, which shall be Filed by the Debtors prior to the Confirmation Hearing, and additional documents Filed with the Bankruptcy Court prior to the Plan Effective Date as amendments to the Plan Supplement, each of which shall be consistent in all respects with, and shall otherwise contain, the terms and conditions and be subject to the consent rights set forth in the RSA and this Restructuring Term Sheet, where applicable.
Priority Tax Claims Any Claim of a Governmental Unit of the kind specified in section 507(a)(8) of the Bankruptcy Code.
Professional Claim A Claim by a professional seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under sections 330, 331, 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code.
Proof of Claim A proof of claim Filed against any of the Debtors in the Chapter 11 Cases by the applicable bar date as established by the Court.
Proof of Interest A proof of Interest Filed against any of the Debtors in the Chapter 11 Cases.

 

8

 

 

Term Definition
Put Option Premium As defined in the Backstop Commitment Agreement.
Qualified Marketmaker An Entity that (a) holds itself out to the public or the applicable private markets as standing ready in the ordinary course of business to purchase from customers and sell to customers Company Claims (or enter with customers into long and short positions in Company Claims), in its capacity as a dealer or market maker in Company Claims and (b) is, in fact, regularly in the business of making a market in claims against issuers or borrowers (including debt securities or other debt).
Registration Rights Agreement The registration rights agreement pursuant to which each Backstop Party shall be entitled to registration rights, to be entered into as of the Plan Effective Date.
Reinstatement or Reinstated With respect to Claims and Interests, that the Claim or Interest shall be rendered unimpaired in accordance with section 1124 of the Bankruptcy Code.
Released Parties Collectively, and in each case in its capacity as such:  (a) each Debtor; (b) each Reorganized Debtor; (c) each Company Party; (d) each of the Debtors’ current and former directors and officers; (e) each DIP Lender; (f) each Exit Facilities Lender; (g) each Agent; (h) each Trustee; (i) the Consenting Revolving Credit Facility Lenders; (j) the Consenting FLLO Term Loan Facility Lenders, (k) the Consenting Second Lien Noteholders, (l) the Consenting Unsecured Noteholders, (m) the Backstop Parties; (n) all holders of Interests; (o) with respect to each of the foregoing (a) through (o), each of such Entity and its current and former Affiliates, and such Entities’ and their current and former Affiliates’ current and former members, directors, managers, officers, equity holders (regardless of whether such interests are held directly or indirectly), predecessors, successors, and assigns, subsidiaries, and each of their respective current and former members, equity holders, officers, directors, managers, principals, members, employees, agents, advisory board members, financial advisors, partners, attorneys, accountants, investment bankers, consultants, representatives, and other professionals, each in their capacity as such; provided that in each case, an Entity shall not be a Released Party if it: (x) elects to opt out of the releases contained in the Plan; or (y) timely Files with the Bankruptcy Court on the docket of the Chapter 11 Cases an objection to the releases contained in the Plan that is not resolved before Confirmation.
Releasing Parties Collectively, and in each case in its capacity as such:  (a) each Debtor; (b) each Reorganized Debtor; (c) each Company Party; (d) each DIP Lender; (e) each Exit Facilities Lender; (f) each Agent; (g) each Trustee; (h) the Consenting FLLO Term Loan Facility Lenders, (i) the Consenting Revolving Credit Facility Lenders; (j) the Consenting Second Lien Noteholders, (k) the Consenting Unsecured Noteholders, (l) the Backstop Parties; (m) all holders of Claims; (n) all holders of Interests; (o) with respect to each of the foregoing (a) through (o), such Entity and its current and former Affiliates, and such Entities’ and their current and former Affiliates’ current and former members, directors, managers, officers, equity holders (regardless of whether such interests are held directly or indirectly), predecessors, successors, and assigns, subsidiaries, and each of their respective current and former members, equity holders, officers, directors, managers, principals, members, employees, agents, advisory board members, financial advisors, partners, attorneys, accountants, investment bankers, consultants, representatives, and other professionals, in each case, solely in their respective capacities as such with respect to such Entity and solely to the extent such Entity has the authority to bind such Affiliate in such capacity; provided that in each case, an Entity shall not be a Releasing Party if it:  (x) elects to opt out of the releases contained in the Plan; or (y) timely Files with the Bankruptcy Court on the docket of the Chapter 11 Cases an objection to the releases contained in the Plan that is not resolved before Confirmation.
Reorganized Chesapeake Reorganized Chesapeake, or any successor or assign, by merger, consolidation, or otherwise, on or after the Plan Effective Date.
Reorganized Debtors A Debtor, or any successor or assign thereto, by merger, consolidation, or otherwise, on and after the Plan Effective Date.

 

9

 

 

Term Definition
Required Consenting FLLO Term Loan Facility Lenders As defined in the RSA.
Required Consenting Revolving Credit Facility Lenders As defined in the RSA.
Required Consenting DIP Lenders As defined in the RSA.
Required Consenting Second Lien Noteholders As defined in the RSA.
Required Consenting Stakeholders As defined in the RSA.
Required Consenting Stakeholders Percentage As defined in the RSA.
Required Plan Sponsors As defined in the RSA.
Restructuring The restructuring of Chesapeake and its direct and indirect subsidiaries, as described in the RSA and this Restructuring Term Sheet.
Restructuring Expenses

The prepetition and postpetition reasonable and documented fees and expenses of the FLLO Professionals and the Second Lien Professionals; provided that:

(a)       the fees and expenses of the FLLO Professionals shall only be Restructuring Expenses for so long as (1) the Restructuring Support Agreement has not been terminated as to the DIP Lenders, Required Consenting Revolving Credit Facility Lenders, or FLLO Ad Hoc Group or (2) an alternative restructuring support agreement or similar agreement with respect to the restructuring of the Debtors’ debt and businesses remains in effect between the DIP Agent, the DIP Lenders, 66.67% of the Revolving Credit Facility Lenders, and the FLLO Ad Hoc Group, in each case, at which time such fees and expenses shall cease to be Restructuring Expenses (a “FLLO Restructuring Expenses Termination Event”), provided, that in the event a FLLO Restructuring Expenses Termination Event occurs, (a) all parties shall retain all rights pursuant to the Collateral Trust Agreement, which rights are fully reserved, including, without limitation, the rights, if any, of the Existing FLLO Agent or Existing FLLO Lenders to seek different or additional adequate protection in accordance with section 6.02(f) of the Collateral Trust Agreement and (b) the fees and expenses of the FLLO Professionals incurred prior to such FLLO Restructuring Expenses Termination Event shall be Restructuring Expenses; and

(b)       the fees and expenses of the Second Lien Professionals shall only be Restructuring Expenses for so long as the Restructuring Support Agreement has not been terminated as to the Company Parties, DIP Lenders, Required Consenting Revolving Credit Facility Lenders, or Franklin (a “Second Lien Restructuring Expenses Termination Event”); provided, that in the event a Second Lien Restructuring Expenses Termination Event occurs, (a) all parties shall retain all rights pursuant to the Intercreditor Agreement, including, without limitation, the rights, if any, of such parties to seek different or additional adequate protection in accordance with section 4.02(f) of the Intercreditor Agreement and (b) the fees and expenses of the Second Lien Professionals incurred prior to such Second Lien Restructuring Expenses Termination Event shall be Restructuring Expenses.

Restructuring Term Sheet As defined in the RSA.
Restructuring Transactions As defined in the RSA.
Revolving Credit Facility The facility outstanding under the Revolving Credit Facility Credit Agreement.
Revolving Credit Facility Administrative Agent MUFG Union Bank, N.A., in its capacity as administrative agent for the Revolving Credit Facility.
Revolving Credit Facility Claim Any Claim on account of the Revolving Credit Facility.
Revolving Credit Facility Credit Agreement That certain amended and restated credit agreement, dated as of September 12, 2018 (as amended, restated, or otherwise modified from time to time), by and among Chesapeake, as borrower, the Debtor guarantors party thereto, the Revolving Credit Facility Administrative Agent, and the other lender, issuer, and agent parties thereto.

 

10

 

 

Term Definition
Revolving Credit Facility Lenders Holders of Allowed Revolving Credit Facility Claims.
Revolving Credit Facility Loans The loans issued under and on the terms set forth under the Revolving Credit Facility.
Revolving DIP Loan Commitments As defined in the DIP Term Sheet.
Revolving DIP Loans As defined in the DIP Order.
Rights Offering As defined in this Restructuring Term Sheet.
Rights Offering Amount As defined in this Restructuring Term Sheet.
Rights Offering Procedures The procedures governing the Rights Offering attached as an exhibit to the Backstop Commitment Agreement.
Rights Offering Value As defined in this Restructuring Term Sheet.
Roll-Up Loans As defined in the DIP Order.
RSA As defined in the introduction to this Restructuring Term Sheet.
SEC The Securities and Exchange Commission.
Second Lien Noteholders Holders of Allowed Second Lien Notes Claims.
Second Lien Notes The 11.500% senior notes due 2025 issued by Chesapeake pursuant to the Second Lien Notes Indenture.  
Second Lien Notes Claim Any Claim on account of the Second Lien Notes.
Second Lien Notes Indenture That certain indenture dated as of December 19, 2019, by and among Chesapeake, as issuer, certain Debtors guarantors party thereto, and the Second Lien Notes Trustee, as may be amended, supplemented, or otherwise modified from time to time.
Second Lien Notes Trustee Deutsche Bank Trust Company Americas, in its capacity as trustee and collateral trustee for the Second Lien Notes Indenture.
Secured When referring to a Claim: (a) secured by a Lien on collateral to the extent of the value of such collateral, as determined in accordance with section 506(a) of the Bankruptcy Code or (b) subject to a valid right of setoff pursuant to section 553 of the Bankruptcy Code.
Secured Tax Claim Any Secured Claim that, absent its Secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code (determined irrespective of time limitations), including any related Secured Claim for penalties.
Securities Act The Securities Act of 1933, as amended, 15 U.S.C. §§ 77a–77aa, or any similar federal, state, or local law.
Solicitation Materials The court-approved Plan and Disclosure Statement and related documentation to be distributed to holders of Claims entitled to vote on the Plan.
Superpriority Hedge Claims As defined in the DIP Order
Termination Date The date on which termination of the RSA as to a Party is effective in accordance with Section 12 of the RSA.
Total Leverage As defined in this Restructuring Term Sheet.
Tranche A RBL Exit Facility Loans As defined in the Exit Facilities Term Sheet.
Tranche B RBL Exit Facility Loans As defined in the Exit Facilities Term Sheet.
Transfer To sell, resell, reallocate, use, pledge, assign, transfer, hypothecate, participate, donate or otherwise encumber or dispose of, directly or indirectly (including through derivatives, options, swaps, pledges, forward sales or other transactions).
Transfer Agreement An executed form of the transfer agreement providing, among other things, that a transferee is bound by the terms of the RSA and substantially in the form attached to the RSA as Exhibit C.
Trustee Any indenture trustee, collateral trustee, or other trustee or similar entity under the Second Lien Notes or the Unsecured Notes.
Unimpaired With respect to a Class of Claims or Interests, a Class of Claims or Interests that is not Impaired.
United States Trustee The United States Trustee for the jurisdiction in which the Chapter 11 Cases are commenced.
Unsecured Claim Any Claim that is not a Secured Claim.
Unsecured Claims Recovery As defined in this Restructuring Term Sheet.
Unsecured Noteholders Holders of Allowed Unsecured Notes Claims.
Unsecured Notes The 6.625% senior notes due 2020, the 6.125% senior notes due 2021, the 5.375% senior notes due 2021, the 4.875% senior notes due 2022, the 5.750% senior notes due 2023, the 7.000% senior notes due 2024, the 8.000% senior notes due 2025, the 8.000% senior notes due 2026, the 7.500% senior notes due 2026, the 8.000% senior notes due 2027, the 5.500% convertible senior notes due 2026, and the 6.875% senior notes due 2025, all issued by certain Company Parties pursuant to the Unsecured Notes Indentures.
Unsecured Notes Claim Any Claim on account of the Unsecured Notes.

 

11

 

 

 

Term Definition
Unsecured Notes Indentures

Those certain indentures dated as of the following dates:

 

·     August 2, 2010 (6.625% senior notes due 2020);

·     February 11, 2011 (6.125% senior notes due 2021);

·     April 1, 2013 (5.375% senior notes due 2021);

·     April 24, 2014 (4.875% senior notes due 2022);

·     April 1, 2013 (5.750% senior notes due 2023);

·     September 27, 2018 (7.000% senior notes due 2024);

·     December 20, 2016 (8.000% senior notes due 2025);

·     April 3, 2019 (8.000% senior notes due 2026);

·     September 27, 2018 (7.500% senior notes due 2026);

·     June 6, 2017 (8.000% senior notes due 2027);

·     October 5, 2016 (5.500% convertible senior notes due 2026); and

·     February 1, 2017 (6.875% senior notes due 2025),

 

each by and among certain of the Company Parties and the Unsecured Notes Trustees, as may be amended, supplemented, or otherwise modified from time to time.

Unsecured Notes Trustees

The following entities:

 

·     The Bank of New York Trust Company, N.A. (6.625% senior notes due 2020);

·     The Bank of New York Trust Company, N.A. (6.125% senior notes due 2021);

·     The Bank of New York Trust Company, N.A. (5.375% senior notes due 2021);

·     Deutsche Bank Trust Company Americas (4.875% senior notes due 2022);

·     The Bank of New York Trust Company, N.A. (5.750% senior notes due 2023);

·     Deutsche Bank Trust Company Americas (7.000% senior notes due 2024);

·     Deutsche Bank Trust Company Americas (8.000% senior notes due 2025);

·     Deutsche Bank Trust Company Americas (8.000% senior notes due 2026);

·     Deutsche Bank Trust Company Americas (7.500% senior notes due 2026);

·     Deutsche Bank Trust Company Americas (8.000% senior notes due 2027);

·     Deutsche Bank Trust Company Americas (5.500% convertible senior notes due 2026); and

·     U.S. Bank National Association (6.875% senior notes due 2025),

 

each in its capacity as trustee for the Unsecured Notes Indentures.

 

12

 

 

Exhibit 2

 

DIP Facility Term Sheet

 

  CHK DIP Credit Facility Term Sheet
  1  

 

 

Execution Version

 

SUMMARY OF PROPOSED TERMS AND CONDITIONS
FOR DIP FINANCING AND USE OF CASH COLLATERAL

 

Chesapeake Energy Corporation et al.,
as Debtors and Debtors-in-Possession
June 28, 2020

 

Capitalized terms used in this term sheet and not otherwise defined shall have the meaning given to such terms in the Amended and Restated Credit Agreement, dated as of September 12, 2018 (as amended, supplemented, and otherwise modified from time to time, the “Prepetition Credit Agreement”), among the Borrower (as defined below), the Prepetition Lenders (as defined below) and the Prepetition Agent (as defined below) or the Restructuring Support Agreement (as defined below).

 

Borrower: Chesapeake Energy Corporation, as debtor and debtor in possession (the “Borrower”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the jointly administered cases of Borrower and certain of its affiliates (collectively, the “Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).
   
Guarantors: All obligations under the DIP Facility (as defined below) and the other DIP Loan Documents (as defined below) and any DIP Hedges (as defined below) will be unconditionally guaranteed (the “Guarantee”) by each subsidiary of the Borrower that is a debtor-in-possession under the Bankruptcy Code, including each subsidiary of the Borrower which is a Guarantor as such term is defined in the Prepetition Credit Agreement as of the Petition Date (as defined below) (such parties, the “Guarantors”; and, together with the Borrower, the “Debtors”, which have been identified on Schedule 1 hereto).
   
Prepetition Agent: MUFG Union Bank, N.A., in its capacity as Administrative Agent under the Prepetition Credit Agreement (the “Prepetition Agent”) and related prepetition loan documents (collectively, the “Prepetition Loan Documents” and the loan facility evidenced thereby, the “Prepetition RBL Facility”).
   
Prepetition Lenders: Those lenders who are parties to the Prepetition Credit Agreement as of the Petition Date (the “Prepetition Lenders”).
   

DIP Agent:

 

MUFG Union Bank, N.A., in its capacity as Administrative Agent under the DIP Credit Agreement (the “DIP Agent”).

 

 

 

 

DIP Lenders: The Prepetition Lenders providing Revolving DIP Loan Commitments and/or receiving Roll-Up Claims (each as defined below) under the DIP Facility (the “DIP Lenders”). The DIP Lenders who elect to participate in the DIP Facility pursuant to the respective Revolving DIP Loan Commitments set forth on Schedule 2 hereto are referred to herein as the “New Money DIP Lenders.” Participation in the Revolving DIP Loan Commitments will be open to all Prepetition Lenders on a pro rata basis.
   
Majority DIP Lenders: New Money DIP Lenders (as defined below) holding more than 50% of the Revolving DIP Loan Commitments under the DIP Facility shall constitute the “Majority DIP Lenders”.
   
Petition Date: The date the Debtors file their Chapter 11 petitions (the “Petition Date”).
   
DIP Facility and Roll-Up:

The DIP Lenders will provide to the Debtors a priming, senior secured, super-priority debtor-in-possession credit facility (the “DIP Facility”) comprising: (i) a revolving loan facility made available to the Borrower (the “Revolving DIP Loans”) in the aggregate maximum principal amount of up to $925 million (including a sub-facility of up to $200 million for the issuance of letters of credit, which shall (a) permit the issuance of letters of credit on the Closing Date (as defined below) for general corporate purposes, including to replace, backstop or provide credit support for any letters of credit issued pursuant to the Prepetition RBL Facility (including by “grandfathering” such letters of credit into the Revolving DIP Loan facility) and (b) reduce availability under the DIP Facility on a dollar-for-dollar basis) (the “Revolving DIP Loan Commitment”), and (ii) a conversion of all of the Loans outstanding under the Prepetition Credit Agreement on the date the DIP Facility becomes effective (the “Closing Date”) in excess of $750 million to loans under the DIP Facility (the “Roll-Up Loans” and, together with the Revolving DIP Loans, the “DIP Facility Loans”); provided, however that the amount of the Roll-Up Loans shall not be less than $925 million.1 Upon the conversion of the Roll-Up Loans in connection therewith, the Roll-Up Loans shall cease to be indebtedness under the Prepetition Credit Agreement and shall be deemed DIP Obligations (as defined below) in all respects, including for purposes of having the benefit of Section 364(e) of the Bankruptcy Code. The Revolving DIP Loans (and, for the avoidance of doubt, the DIP Hedges (as defined below)) shall be given payment priority over the Roll-Up Loans, including in the event of a sale or other disposition of the DIP Collateral (defined below), a prepayment of the DIP Facility Loans, or the exercise of remedies by the DIP Lenders.

 

The Roll-Up Loans shall be calculated and structured as follows: (i) Roll-Up Loans consisting of $925 million of Loans outstanding under the Prepetition Credit Agreement held by the DIP Lenders providing the Revolving DIP Loan Commitments (the “New Money DIP Lenders”) converted to loans under the DIP Facility (the “New Money Roll-Up Loans”) and (ii) Roll-Up Loans consisting of the amount of all Loans outstanding under the Prepetition Credit Agreement on the Closing Date in excess of $750 million, less $925 million (the “Incremental Roll-Up Loans”). The Incremental Roll-Up Loans shall be allocated to New Money DIP Lenders and Prepetition Lenders that are not providing Revolving DIP Loan Commitments (the “Non-Participating Lenders”), based on (i) with respect to the Non-Participating Lenders, their respective prepetition pro rata Prepetition RBL Facility commitment percentages and (ii) with respect to the New Money DIP Lenders, their respective pro rata share of the Revolving DIP Loan Commitments.

 

Revolving DIP Loan Commitments in an amount of up to $[325 million] (the “Interim Commitment”) of the Revolving DIP Loans approved by the Bankruptcy Court pursuant to the Interim Order shall be made available to the Debtors during the period from the date of entry of the Interim Order by the Bankruptcy Court through the date of entry of the Final Order (as defined below) by the Bankruptcy Court, and the balance of the Revolving DIP Loan Commitment shall be available only upon and after entry of the Final Order. Upon the entry of the Interim Order, the conversion of New Money Roll-Up Loans shall be in an amount equal to the Interim Commitment approved by the Bankruptcy Court, with the balance of the New Money Roll-Up Loans and the Incremental Roll-Up Loans converting upon entry of the Final Order. Pending the entry of the Final Order, the DIP Agent and the New Money DIP Lenders shall be afforded all of the protections contained in the Interim Order.

 

The Revolving DIP Loans, subject to the foregoing and other applicable conditions and consistent with past ordinary course processing procedures, will be funded on (i) in the event of LIBOR Revolving DIP Loans (to be defined in the DIP Credit Agreement), the third business day following the submission of a proper notice of borrowing if requested by 1:00 p.m. New York time, or (ii) in the event of ABR Revolving DIP Loans (to be defined in the DIP Credit Agreement), the next business day following the submission of a proper notice of borrowing if such request is made by 1:00 p.m. New York time. If such notice of borrowing is submitted after 1:00 p.m. New York Time, such notice of borrowing shall be deemed to have been delivered on the business day following the date specified in the foregoing sentence.

 

 

 

1 Based on current assumptions regarding outstanding Loans under the Prepetition Credit Agreement, the implied ratio of the Roll-Up Loans is approximately $1.27 of Loans under the Prepetition Credit Agreement to $1.00 of Revolving DIP Loan Commitments.

 

  CHK DIP Credit Facility Term Sheet
  2  

 

 

Exit Facilities: Pursuant to a Restructuring Support Agreement, dated June 28, 2020, by and among the Debtors, the DIP Lenders, certain holders of FLLO Term Loans and certain holders of Second Lien Notes (as amended, restated, supplemented or otherwise modified from time to time, the “Restructuring Support Agreement”), the DIP Facility and remaining obligations under the Prepetition RBL Facility shall be converted into Exit Facilities consisting of a $1.75 billion Exit RBL Facility and up to a $750 million Exit FLLO Term Loan Facility, which Exit Facilities shall be provided by the DIP Lenders on terms and conditions to be set forth in an Exit Facility Term Sheet and subject to the requirements of the Restructuring Support Agreement.
   
Use of Proceeds: The DIP Facility may be used only for (i) post-petition working capital purposes of the Debtors, current interest and fees under the DIP Facility; (ii) the payment of adequate protection payments to the Prepetition Agent and the Prepetition Lenders, including fees payable under the Prepetition Credit Agreement; (iii) expenses and professional fees for (a) the collateral trustee under the Collateral Trust Agreement, (b) the FLLO Agent, (c) the FLLO Ad Hoc Group (as defined in the Restructuring Support Agreement), (d) Deutsche Bank Trust Company Americas, as the Second Lien Collateral Trustee (defined below) and (e) Franklin Advisers Inc. (“Franklin”) solely to the extent and as set forth below; and (iv) the allowed administrative costs and expenses of the Cases, in each case, solely in accordance with the Approved Budget (subject to the Variance Limit) and the Financing Orders (each as defined below) incorporating the terms hereof.
   
DIP Facility Interest Rate and Fees:

See Schedule 3 hereto with respect to rates and fees.

 

The DIP Loan Documents will contain provisions to be mutually agreed with respect to a replacement of the London interbank offered rate.

   
Priority and Security: Subject to the Carve-Out, all obligations of the Debtors under the DIP Facility (the “DIP Obligations”) and any DIP Hedges shall be:
   
  (i) entitled to super-priority claim status under Section 364(c)(1) of the Bankruptcy Code with priority over all administrative expense claims and unsecured claims now existing or hereafter arising under the Bankruptcy Code (other than as provided in respect of DIP Hedges as described below), including, without limitation, the prepetition claims and adequate protection claims of the Prepetition Agent on behalf of the Prepetition Lenders and the prepetition claims of the FLLO Agent on behalf of the FLLO Lenders (each as defined below), subject only to the Carve-Out.  The super-priority claims of the DIP Lenders may be repaid from any cash of the Debtors, including without limitation, Cash Collateral and, subject to entry of the Final Order, any Avoidance Action Proceeds (as defined below); provided that the super-priority claims granted to the DIP Lenders on account of the Roll-Up Loans shall be immediately junior in payment priority and subject to the super-priority claims granted to the New Money DIP Lenders on account of the Revolving DIP Loans and DIP Hedges;

 

  CHK DIP Credit Facility Term Sheet
  3  

 

 

  (ii)  secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a first priority, perfected lien on all of the Debtors’ rights in property of the Debtors’ estates as of the Petition Date that, as of the Petition Date, were unencumbered (and do not become perfected subsequent to the Petition Date as permitted by Section 546(b) of the Bankruptcy Code) (but including, subject to entry of the Final Order, the proceeds of Avoidance Actions (as defined below) and property received or recovered thereby (the “Avoidance Action Proceeds”));
   
   (iii)  secured, pursuant to Section 364(c)(3) of the Bankruptcy Code, by a junior priority, perfected lien on all of the Debtors’ rights in property of the Debtors’ estates as of the Petition Date that, as of the Petition Date, were subject to a lien permitted under the terms of the Prepetition Credit Agreement that was perfected prior to the Petition Date or is perfected subsequent to the Petition Date as permitted by Section 546(b) of the Bankruptcy Code (other than the Liens securing the obligations under the Prepetition Credit Agreement, the FLLO Term Loan (as defined below) and the 11.5% Senior Secured Second Lien Notes due 2025 issued by the Debtors pursuant to that certain Indenture dated as of December 19, 2019 (the “Second Lien Indenture” and the notes issued thereunder, the “Second Lien Notes”), which liens are addressed in (iv) below); and
   
  (iv) secured, pursuant to Section 364(d)(1) of the Bankruptcy Code, by valid, enforceable, priming first priority, fully perfected security interests in and liens upon all of the Debtors’ rights in property of the Debtors’ estates as of the Petition Date and all of the Debtors’ rights in property acquired post-petition (and proceeds thereof), whether now existing or hereafter acquired or arising that secure the obligations under the Prepetition Credit Agreement, the FLLO Term Loan and the Second Lien Notes (but subject to clause (iii) above) (such lien, together with the liens described in clauses (ii) and (iii) above, the “DIP Liens” and the collateral described in clauses (ii)–(iv) above, collectively, the “DIP Collateral”);
   
 

DIP Collateral shall also include any and all rents, issues, products, offspring, proceeds and profits generated by any item of DIP Collateral, without the necessity of any further action of any kind or nature by the DIP Agent or the DIP Lenders in order to claim or perfect such rents, issues, products, offspring, proceeds and/or profits.

 

Notwithstanding anything to the contrary contained herein, in no event shall any estate causes of action under Chapter 5 of the Bankruptcy Code (the “Avoidance Actions”) constitute DIP Collateral or be subject to a DIP Lien; provided, however, DIP Collateral shall include, and the DIP Liens shall attach to, Avoidance Action Proceeds subject to entry of the Final Order as set forth in (ii) above.

 

The DIP Liens shall not be subject or subordinate to (i) subject to entry of the Final Order only, any lien or security interest that is avoided and preserved for the benefit of the Debtors and their estates under section 551 of the Bankruptcy Code, (ii) any liens arising after the Petition Date including, without limitation, any liens or security interests granted in favor of any federal, state, municipal or other governmental unit, commission, board or court for any liability of the Debtors, or (iii) any intercompany or affiliate liens of the Debtors.

 

The DIP Liens will automatically attach to the DIP Collateral and become valid and perfected immediately upon entry of the Interim Order without the requirement of any further action by the DIP Agent or the DIP Lenders. The DIP Liens granted to the DIP Lenders with respect to the Roll-Up Loans will be pari passu (on a pro rata basis) to the DIP Liens granted to the New Money DIP Lenders with respect to the Revolving DIP Loans and to the DIP Liens securing DIP Hedges; provided, however, that (i) the Revolving DIP Loans and DIP Hedges shall have payment priority over the Roll-Up Loans pursuant to the DIP Credit Agreement and the Financing Orders, and (ii) the New Money Roll-Up Loans shall have payment priority over the Incremental Roll-Up Loans pursuant to the DIP Credit Agreement and the Financing Orders.

 

  CHK DIP Credit Facility Term Sheet
  4  

 

 

Use of Cash Collateral:2 All cash and cash equivalents of the Debtors, whenever or wherever acquired, and the proceeds of all collateral pledged to the DIP Agent constitute cash collateral, as contemplated by Section 363 of the Bankruptcy Code (“Cash Collateral”).  Cash Collateral may be used only for (i) working capital purposes of the Debtors, (ii) interest and fees under the DIP Facility, (iii) payment of adequate protection payments to the Prepetition Agent and Prepetition Lenders, (iv) payment of expenses and professional fees for (a) the collateral trustee under the Collateral Trust Agreement, (b) the FLLO Agent, (c) the FLLO Ad Hoc Group, (d) Deutsche Bank Trust Company Americas, as the Second Lien Collateral Trustee (the “Second Lien Collateral Trustee”) and (e) Franklin solely to the extent and as set forth below, and (iv) the allowed costs and expenses of the Cases, in each case, solely in accordance with the Approved Budget and the Financing Orders incorporating the terms hereof (subject to the Variance Limit).
   
Hedging:

The Debtors shall negotiate in good faith with each Prepetition Lender (or affiliate of a Prepetition Lender) which is the counterparty (collectively, the “Hedge Counterparties”) under one or more existing commodity price hedging agreements (each, an “ISDA Transaction”) with one or more of the Debtors to mutually terminate and close out all of the outstanding ISDA Transactions between the Debtors and such Hedge Counterparty on one or more day(s) to be agreed which, in any event, will be no fewer than 3 days prior to the Petition Date; provided that if the Debtors and any Hedge Counterparty are unable to reach agreement on a mutual termination of such ISDA Transactions, such Hedge Counterparty shall retain its rights, powers, and remedies under the terms of the applicable ISDA Master Agreement that governs such ISDA Transactions. To the extent that the parties mutually agree upon the termination and close out of outstanding ISDA Transactions prior to the Petition Date, the Debtors shall irrevocably instruct each Hedge Counterparty to pay any termination amounts owed to the Debtors directly to the Prepetition Agent to be applied to repay any outstanding obligations under the Prepetition Credit Facility (and the Commitments thereunder will be automatically reduced on a dollar-for-dollar basis by the amount repaid). After the Petition Date, to the extent any Hedge Counterparty (i) terminates and closes out any outstanding ISDA Transactions existing as of the Petition Date or (ii) makes any settlement payments in respect of such ISDA Transactions existing as of the Petition Date, all such termination or settlement amounts owed to the Debtors, as applicable, shall be immediately applied to repay outstanding obligations under the Prepetition Credit Facility. It is understood that this provision is not intended as, and does not constitute, an agreement with respect to, or a modification or waiver of any of Hedge Counterparty’s rights, powers and remedies (including netting rights) under the applicable ISDA Master Agreement that governs the applicable ISDA Transactions, all of which are reserved, and that any such agreement, modification or waiver will be evidenced by a separate instrument among the Borrower, the Prepetition Agent, certain Prepetition Lenders and the relevant Hedge Counterparties.

 

The Debtors may enter into commodity hedge transactions with New Money DIP Lenders or their affiliates subject to minimum requirements and maximum limitations set forth below pursuant to Master ISDAs and Schedules on terms to be agreed between the parties thereto, which Master ISDAs and Schedules shall be entered into following entry of the Hedging Order (as defined below) (the “DIP Hedges”). Subject to the Carve-Out, and solely upon entry of the Hedging Order, the DIP Hedges shall be allowed superpriority claims, pursuant to section 364(c)(1), with pari passu priority to the Revolving DIP Loans (but, for the avoidance of doubt with priority over the Roll-Up Loans) and with priority over all other claims (including claims otherwise having priority under section 507 of the Bankruptcy Code or otherwise) (the “Hedge Administrative Claim”).

 

Hedging Order” means interim or final (as applicable) order granting a motion authorizing the Debtors to continue prepetition hedging arrangements and enter into postpetition hedging arrangements, among other relief, which such order shall be in form and substance reasonably satisfactory to the DIP Agent and Majority DIP Lenders. The Debtors may file a “first day” motion seeking entry of the Hedging Order, which such motion shall be in form and substance reasonably satisfactory to the DIP Agent, and seek a hearing on such motion at the “second day” hearing in the Cases.

 

Beginning on the date that is thirty (30) days after the Petition Date, which may be extended in the DIP Agent’s sole discretion (with respect to the July 1, 2020 Reserve Report (as defined below) on July 1, 2020, and tested with the delivery of each subsequent Reserve Report, the Debtors shall enter into and maintain DIP Hedges consisting of commodity hedging agreements that hedge a minimum of 50% of the reasonably anticipated projected monthly production from proved developed producing oil and gas reserves (in each case, calculated separately for (i) crude oil and (ii) natural gas and natural gas liquids, taken together, and in the case of clauses (i) and (ii), based on the most recently delivered Reserve Report) for a rolling twenty-four (24) month period.

 

The Debtors shall be permitted to enter into DIP Hedges so long as, at the time such DIP Hedge is entered into, the term of which does not exceed 60 months and the notional volumes of which do not exceed (a) for the 24 month period from the date such commodity hedge transaction is executed, 90% of the reasonably anticipated projected monthly production from proved developed producing oil and gas reserves and (b) for the 24-month period thereafter, 80% of the reasonably anticipated projected monthly protection from proved developed producing oil and gas reserves (in each case, calculated separately for (i) crude oil and (ii) natural gas and natural gas liquids, taken together, and in the case of clauses (i) and (ii), based on the most recently delivered Reserve Report).

 

 

 

2 Financing Order to include certain provisions, protections, and reservations of rights for the Prepetition Agent and the Prepetition Lenders and other prepetition secured parties with respect to consent to use cash collateral. Any omissions of such provisions, protections, and reservations in this DIP Facility Term Sheet are not a waiver or concession of such provision, protection, or reservation.

 

  CHK DIP Credit Facility Term Sheet
  5  

 

 

 

Conditions Precedent: The closing of the DIP Facility and the Debtors’ right to use Cash Collateral pursuant to the terms hereof will be subject to the satisfaction of all conditions precedent to be set forth in the DIP Credit Agreement (as defined below) deemed necessary or appropriate by the DIP Agent and the Prepetition Agent, as applicable, including but not limited to:
   
 

(i) [satisfactory completion of legal and collateral due diligence and transaction structuring, including due diligence concerning the Cases and the receipt of all required court approvals of the DIP Facility and any other motions of the Debtors of concern to the DIP Lenders;

 

(ii) the DIP Agent shall have received executed counterparts to the DIP Facility from each DIP Lender;]3

   
 

(iii) no later than 2 days prior to the Petition Date, the DIP Agent and the Prepetition Agent shall have received a cash forecast for the period from the Petition Date through the Scheduled Maturity Date (as defined below) setting forth projected cash flows and disbursements, to be in form, scope and substance acceptable to the DIP Agent, the New Money DIP Lenders, and the Prepetition Agent and Majority Lenders (the “Initial Approved Budget”);

 

(iv) the Debtors shall have provided the DIP Agent and the DIP Lenders with a copy of the cash management motion and proposed order to be filed with the Bankruptcy Court in connection with the commencement of the Cases. The cash management order filed by the Debtors and entered by the Bankruptcy Court shall be in form and substance reasonably satisfactory to the DIP Agent;

 

(v) the Debtors shall not have executed, entered into or otherwise committed to any plan or restructuring support agreement or any other agreement or understanding concerning the terms of a chapter 11 plan or other exit strategy without the consent of the DIP Agent;

 

(vi) an interim debtor-in-possession financing order, substantially on the terms contemplated in this DIP Term Sheet (and otherwise acceptable to the DIP Agent) (the “Interim Order”), shall have been entered by the Bankruptcy Court within five (5) days following the Petition Date and shall not have been vacated, reversed or stayed, appealed, or modified or amended without the prior written consent of the DIP Agent and, if such modification or amendment is materially adverse to the DIP Lenders, the Majority DIP Lenders. Notwithstanding anything to the contrary contained herein, funding of any Interim Commitment shall be subject to entry of the Interim Order and funding of the balance of the commitments under the DIP Facility and continued authority to use Cash Collateral shall be subject to entry, within 35 days following the Petition Date, of a final debtor-in-possession financing/use of cash collateral order, substantially on the terms contemplated by this DIP Term Sheet and in form and substance acceptable to the DIP Agent (the “Final Order” and, together with the Interim Order, collectively, the “Financing Orders”), which shall not have been vacated, reversed or stayed, appealed (and for which the appeal period has expired or has been waived), or modified or amended without the prior written consent of the DIP Agent and, if such modification or amendment is materially adverse to the DIP Lenders, the Majority DIP Lenders;

 

 

 

3             To be omitted from definitive credit agreement.

 

  CHK DIP Credit Facility Term Sheet
  6  

 

 

  (vii) orders approving all “first day” motions shall have been entered, and, in the case of any “first day” motions and orders that affect the rights or duties of the DIP Agent or DIP Lenders, in form and substance reasonably acceptable to the DIP Agent;
   
 

(viii) the execution and delivery, in form and substance acceptable to the DIP Agent and the New Money DIP Lenders in their sole discretion, of a definitive credit agreement (the “DIP Credit Agreement”) and related security agreement(s) and guarantees, security documents, and other agreements, customary opinions, instruments and documents required by the DIP Agent and the New Money DIP Lenders (collectively, and together with the DIP Credit Agreement, the “DIP Loan Documents”);

 

(ix) the representations and warranties of the Debtors contained in the DIP Loan Documents shall be true and correct in all material respects (or, in the case of any representation and warranty that is qualified as to “Material Adverse Effect” or otherwise as to “materiality”, in all respects) as of the Closing Date (or as of such earlier date if the representation or warranty specifically relates to an earlier date);

 

(x) except as disclosed to the DIP Agent and the DIP Lenders in writing, since the date of execution of the Commitment Letter, there shall have been no Material Adverse Effect (as defined in the DIP Loan Documents);

 

(xi) payment in full in cash of the Upfront DIP Fee and DIP Backstop Fee as set forth in Schedule 3 hereto;

 

(xii) reimbursement in full in cash of the reasonable and documented out-of-pocket professional fees, costs and expenses of the DIP Agent;

 

(xiii) the DIP Agent shall have received (for distribution to the DIP Lenders), by at least three (3) business days prior to the Closing Date “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, beneficial ownership and other similar information that may be required by any New Money DIP Lender;

 

(xiv) upon the entry of the Interim Order, the DIP Agent shall, for the benefit of the DIP Agent and the DIP Lenders, have valid, perfected and enforceable first priority or superpriority priming, as applicable, liens on the DIP Collateral to the extent set forth in the Interim Order, subject only to the Carve-Out and the liens permitted by the DIP Loan Documents;

 

(xv) there shall not exist any action, suit, investigation, litigation or proceeding pending or threatened (other than the Cases) in any court or before any governmental authority that, in the reasonable opinion of the DIP Agent, materially and adversely affects any of the transactions contemplated hereby, or that has or could be reasonably likely to result in a Material Adverse Effect;

 

(xvi) any proceeds of the termination, offset, modification or other unwind or monetization of prepetition hedge agreements received by the Borrower, Guarantors, or their subsidiaries prior to the effectiveness of the DIP Facility shall have been applied to the obligations under the Prepetition Credit Agreement on a pro rata basis and after giving effect to such application and other ordinary course payments of the Prepetition Loans prior to the Petition Date, there shall not be more than $2.005 billion of aggregate exposure (including Loans and participations in Letters of Credit under the Prepetition RBL Facility as of the Petition Date (and, for the avoidance of doubt, there shall be no exposure in respect of Swingline Loans));

 

(xvii) on or prior to the Petition Date, the Borrower shall have executed the Commitment Letter dated as of June 28, 2020 by and among the Borrower and each Commitment Party (as defined therein) (the “Commitment Letter”);

 

(xviii) the Debtors shall have obtained documentation evidencing a $600 million equity commitment and/or a committed backstopped equity rights offering reasonably acceptable to the DIP Agent and the Majority DIP Lenders, subject only to Bankruptcy Court approval, it being understood that the draft of the Backstop Commitment Agreement provided to, and accepted by, the DIP Agent prior to the Petition Date is satisfactory to the DIP Agent and the Majority DIP Lenders; and

 

  CHK DIP Credit Facility Term Sheet
  7  

 

 

 

[(xix) such other deliverables as the DIP Agent and the Prepetition Agent may require.]4

 

Modifications of the Financing Orders shall require approval of the DIP Agent and the Prepetition Agent in their sole discretion; provided that modifications of the Financing Orders that are materially adverse to the DIP Lenders shall also require approval of the Majority DIP Lenders.

   
Representations and Warranties:

Each of the Debtors under the DIP Loan Documents will make the representations and warranties set forth in Article VIII of the Prepetition Credit Agreement and the other Prepetition Loan Documents (other than any representation of warranty in respect of solvency), modified as necessary to reflect the filing of the Cases and the Debtors’ financial condition, other representations and warranties customarily found in loan documents for similar debtor-in-possession financings, and with such other modifications and such other representations and warranties as the DIP Agent may require, including, but not limited to:

 

(a) orders of the Bankruptcy Court related to the financing contemplated by the DIP Facility remain in effect;

 

(b) there are no defaults under material agreements arising after the Petition Date, (i) that would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (ii) for which exercise of remedies would not be stayed by section 362 of the Bankruptcy Code; and

 

(c) the Debtors have not failed to disclose any material assumptions with respect to the Initial Approved Budget and, as of the Closing Date, affirm the reasonableness of the assumptions in the Initial Approved Budget in all material respects, subject to customary qualifiers.

   
Milestones:

Each of the Debtors will agree to comply with the following deadlines (each of which may be extended as set forth further below or with the prior written consent of the DIP Agent and Majority DIP Lenders without further order of the Bankruptcy Court) (collectively, the “Milestones”):

 

(a)           The Bankruptcy Court shall have entered the Interim Order no later than 5 days after the Petition Date;

 

(b)           No later than the date that is 30 days after the Petition Date, the Debtors shall have filed a motion, in form and substance acceptable to the DIP Agent, seeking (i) approval of all fees to be paid with respect to the Exit Facilities and (ii) authority to pay the upfront fees, arranger fees, and any other fees under the Exit Facilities Term Sheet earned and payable prior to the effective date of a plan of reorganization (the “Exit Facilities Motion”).

 

(c)           The Bankruptcy Court shall have entered the Final Order no later than 35 days after the Petition Date;

 

(d)           No later than the date that is 60 days after the Petition Date, the Debtors shall have (i) obtained Bankruptcy Court approval of the relief requested in the Exit Facilities Motion and (ii) paid the upfront fees, arranger fees, and all other fees then earned and payable (as described in the Exit Facilities Term Sheet);

 

(e)           The Debtors shall file a chapter 11 plan (a “Plan”) and a disclosure statement for the Plan (a “Disclosure Statement”) that provides for treatment acceptable to the DIP Lenders (or such Plan provides for the indefeasible repayment of the DIP Obligations and obligations under the Prepetition RBL Facility in full in cash on the Effective Date and as a condition to emergence) (such Plan, an “Approved Plan”, such Disclosure Statement, an “Approved Disclosure Statement”, and together with an Approved Plan, collectively an “Approved Plan and Disclosure Statement”), in each case, no later than 90 days after the Petition Date; provided, that for so long as the Restructuring Support Agreement is in effect the treatment provided in the Restructuring Support Agreement is acceptable to the DIP Lenders;

 

(f)            No later than the date that is 90 days after the Petition Date, the Court shall have entered the Backstop Commitment Agreement Approval Order (as defined in the Restructuring Term Sheet) and the Backstop Commitment Agreement shall remain effective and binding on the parties thereto;

 

(g)           the Debtors shall have filed a motion for approval of the Approved Disclosure Statement no later than 120 days after the Petition Date;

 

(h)           the Approved Disclosure Statement shall be approved by the Bankruptcy Court by the date that is no later than 160 days after the Petition Date;

 

(i)            the Bankruptcy Court shall have entered an order confirming the Approved Plan by the date that is no later than 195 days after the Petition Date; and

 

(j)            the effective date of the Approved Plan (the “Effective Date”) shall have occurred by the date that is no later than 220 days after the Petition Date; provided that this milestone shall be automatically extended to the extent necessary, but in no event longer than for fifteen (15) consecutive business days to allow for the expiration of the marketing period under the Exit Facilities Term Sheet (as defined in the Restructuring Support Agreement.

 

 

 

4             To be omitted from definitive credit agreement.

 

  CHK DIP Credit Facility Term Sheet
  8  

 

 

 

The Milestones consisting of the entry of orders or judicial resolution by the Bankruptcy Court shall be automatically extended (the “COVID-19 Extensions”) by five (5) business days to the extent it is not reasonably feasible to hold and conclude a hearing (if necessary) prior to the applicable Milestone as a result of the closure of the Bankruptcy Court due to the events or circumstances surrounding the virus known as COVID-19 (and the DIP Agent shall be deemed to have automatically agreed to such extension).

 

If the Debtors fail to satisfy clause (e) or (f) above, then the Required Plan Sponsors, for the benefit of all Consenting FLLO Term Loan Facility Lenders and Consenting Second Lien Noteholders (each as defined in the Restructuring Support Agreement) and the DIP Agent shall each have the right to appoint a board observer, effective immediately, who shall attend any board of directors meetings and management meetings concerning the restructuring (it being understood that nothing herein prohibits or otherwise limits the board of directors from meeting in executive session; provided that if any officer attends such executive session concerning the restructuring the board observer shall also attend). In consideration for the immediate and effective appointment of the DIP Agent’s board observer, the Milestones shall be extended as follows: (a) the Debtors shall file an Approved Plan and Disclosure Statement, and a motion to approve such Approved Disclosure Statement, in each case, on or before a date that is 135 days following the Petition Date; (b) such Approved Disclosure Statement shall have been approved by Bankruptcy Court by the date that is no later than 165 days after the Petition Date; (c) the Bankruptcy Court shall have entered an order confirming such Approved Plan by the date that is no later than 200 days after the Petition Date; and (d) the Effective Date of such Approved Plan shall have occurred by the date that is no later than 220 days after the Petition Date, provided that this milestone (d) shall be automatically extended to the extent necessary, but in no event longer than for fifteen (15) consecutive business days to allow for the expiration of the marketing period under the Exit Facilities Term Sheet (as defined in the Restructuring Support Agreement).

 

If the Milestone set forth in clause (e) above is not satisfied on or before the date that is 135 days following the Petition Date, then (x) at the request of the DIP Agent, the Debtors shall immediately take all actions necessary on an expedited basis to implement the appointment of a Chief Restructuring Officer (“CRO”) acceptable to the DIP Agent in its sole discretion who shall (i) be vested with the executive authority to oversee the Debtors’ restructuring, subject to oversight by the board of directors in accordance with applicable law, (ii) attend any board of directors meetings and management meetings concerning the restructuring (it being understood that nothing herein prohibits or otherwise limits the board of directors from meeting in executive session; provided that if any officer attends such executive session concerning the restructuring the CRO shall also attend), (iii) report directly to the board of directors, (iv) provide updates to the Bankruptcy Court; and (v) otherwise satisfy the requirements of 11 U.S.C. §327; and (y) the Debtors’ shall file an Approved Plan on or before the date that is 180 days after the Petition Date that has been approved by the CRO.

 

Upon Bankruptcy Court approval and appointment of the CRO, the Milestones shall be extended as follows: (a) an Approved Disclosure Statement, and the motion to approve such Approved Disclosure Statement, shall be filed with an Approved Plan approved by the CRO on or before the date that is 180 days following the Petition Date; (b) such Approved Disclosure Statement shall have been approved by Bankruptcy Court by the date that is no later than 210 days after the Petition Date; (c) the Bankruptcy Court shall have entered an order confirming such Approved Plan by the date that is no later than 245 days after the Petition Date; and (d) the Effective Date of such Approved Plan shall have occurred by the date that is no later than 260 days after the Petition Date, provided that this milestone (d) shall be automatically extended to the extent necessary, but in no event longer than for fifteen (15) consecutive business days to allow for the expiration of the marketing period under the Exit Facilities Term Sheet (as defined in the Restructuring Support Agreement); provided, further, that in no event shall the Plan Effective Date extend beyond the Scheduled Maturity Date.

   

 

  CHK DIP Credit Facility Term Sheet
  9  

 

 

Mandatory Prepayments: The Borrower shall prepay the Revolving DIP Loans, without premium or penalty, at any time that the outstanding principal amount of Revolving DIP Loans (and any exposure in respect of letters of credit issued pursuant to the letter of credit sub-facility) exceeds the Revolving DIP Loan Commitments.
   
Reporting and Information:

The DIP Loan Documents will contain the reporting and information covenants made by the Debtors under the Prepetition Credit Agreement (including those set forth in Sections 9.1 and 9.2 thereof) and the other Prepetition Loan Documents, modified in a customary manner to reflect the nature and tenor of the DIP Facility. Without limiting the foregoing, such reporting and information covenants shall include provision to the DIP Agent (for circulation to the DIP Lenders) of:

 

(a) all reports (including engineering and reserve reports) currently provided by the Debtors to the Prepetition Agent under the Prepetition Loan Documents (collectively, a “Reserve Report”); provided, however, that Reserve Reports shall be provided quarterly beginning July 1, 2020 on terms substantially similar to those contained in the Prepetition Credit Agreement with respect to “Internal Reserve Reports”; provided further that the Reserve Report to be provided on April 1, 2021 shall be prepared by an approved third party engineer on terms substantially similar to those contained in the Prepetition Credit Agreement for such reports. All Reserve Reports will be prepared using 4-year NYMEX strip pricing adjusted for applicable differentials and DIP Hedges and held flat after such 4-year period at the average of the 37th month through the 48th month’s price (“Strip Pricing”);

 

(b) within 20 days of month end, monthly production reports and lease operating statements for the previous month and monthly hedge schedule;

 

(c) within 30 days of month end, unaudited monthly balance sheet and income statement together with a compliance certificate; and

 

(d) any other business or financial information which may be reasonably requested by the DIP Agent;

 

Without limiting the generality of the foregoing, the Debtors shall deliver to the DIP Agent (i) Variance Reports (as defined below); (ii) copies of any motions to be filed by or on behalf of any Debtor in the Cases at least two (2) business days prior to such filing (or, if not practicable, as soon as reasonably practicable), (iii) all notices required to be given to all parties specified in any Financing Order; and (iv) such other information (including access to the Debtors’ books, records, personnel and advisors) as the DIP Agent may reasonably request.

 

No later than the date that is the 15th business day after the end of each month, the Debtors shall deliver to the DIP Agent and DIP Lenders in a form reasonably acceptable to the DIP Agent: a detailed forward-looking rolling three-month forecast of capital expenditures by basin and category (the “Capital Expenditure Report”) including, as applicable, a report from a financial officer comparing the capital expenditures on an accrual basis for the current month to the same period in the prior month’s Capital Expenditure Report and addressing any variance of actual performance to the Capital Expenditure Report for the prior month.

   
Budget; Variance Covenant; Other Financial Covenants:

On July 30, 2020 (the “Initial Reporting Date”), the Debtors shall prepare for the DIP Agent’s and DIP Lenders’ review and the DIP Agent’s and Majority DIP Lenders’ consent an updated thirteen-week (13-week) detailed cash projection, which shall be thereafter updated, as necessary, but shall not be updated less than once every four weeks (each, a “Proposed Budget”). Upon the Debtors’ receipt of the DIP Agent’s and Majority DIP Lenders’ consent to a Proposed Budget, (such consent not to be unreasonably conditioned, delayed, or withheld; provided that the DIP Agent and DIP Lenders shall have no less than five (5) business days to review and respond to the Proposed Budget) which approval shall be in the DIP Agent’s and Majority DIP Lenders’ reasonable discretion, such budget shall become an “Approved Budget” and shall replace the then-operative Approved Budget for all purposes. The Initial Approved Budget shall be the Approved Budget until such time as a new Proposed Budget is approved, following which such Proposed Budget shall constitute the Approved Budget until a subsequent Proposed Budget is approved. The Debtors shall operate in accordance with the Approved Budget and all disbursements shall be consistent with the provisions of the Approved Budget (subject to the Variance Limit). The Debtors may submit additional Proposed Budgets to the DIP Agent and DIP Lenders, but until the DIP Agent and Majority DIP Lenders consent to such Proposed Budget, it shall not become an Approved Budget and the Debtors shall continue to comply with the then-operative Approved Budget.

 

Beginning on July 9, 2020, and on the Thursday of each calendar week thereafter, the Debtors shall deliver to the DIP Agent, in a form consistent with the form of the Approved Budget, a variance report comparing the Debtors’ actual receipts and disbursements by line item for the prior calendar week and the prior four calendar weeks (on a cumulative basis) with the projected receipts and disbursements for such week and the prior four calendar weeks (on a cumulative basis) as reflected in the applicable Approved Budget for such weeks, which variance report shall include a report from a financial officer of the Debtors (the “Weekly Variance Report”).

 

No later than 4:00 p.m. Central Time on the Initial Reporting Date and on each Thursday thereafter that is the four (4)-week anniversary of the Initial Reporting Date (each such date, a “Monthly Variance Testing Date” and each such four-week period, the “Monthly Testing Period”), the Debtors shall provide to the DIP Agent (for circulation to the DIP Lenders) and the Prepetition Agent a report detailing (i) the aggregate disbursements of the Debtors and aggregate receipts during the applicable Monthly Testing Period for (a) LOE and capital expenditures on a combined basis, (b) all other operating disbursements (excluding LOE and capital expenditures), and (c) Debtors’ professionals’ fees; and (ii) any variance (whether positive or negative, expressed as a percentage) between the aggregate disbursements made during such Monthly Testing Period by the Debtors against the aggregate disbursements for the Monthly Testing Period, as set forth in the applicable Approved Budget (a “Monthly Variance Report,” together with the Weekly Variance Report, the “Variance Reports”).

 

The Debtors shall comply with the following (collectively, the “Variance Covenant”):

 

  CHK DIP Credit Facility Term Sheet
  10  

 

 

 

As of any Monthly Variance Testing Date, for the Monthly Testing Period ending on the Sunday preceding such Monthly Variance Testing Date, the Debtors shall not allow: (i) LOE and capital expenditures on a combined basis to be greater than 110% of the estimated disbursement for such items in the Approved Budget; (ii) all other operating disbursements (excluding LOE and capital expenditures) to be greater than 115% of the estimated disbursement for such items in the Approved Budget, and (iii) Debtors’ professionals’ fees to be greater than 110% of the estimated disbursement for such items in the Approved Budget, each for such Monthly Testing Period (collectively, the “Variance Limit”). Additional variances, if any, from the Approved Budget, and any proposed changes to the Approved Budget, shall be subject to the DIP Agent’s reasonable approval. For the avoidance of doubt, any reference to “written consent” hereunder shall include consent granted by email.

 

Asset Coverage Ratio. The Debtors will not permit, as of the date of delivery of each Reserve Report, the ratio of (a) PDP PV10 (as determined in such Reserve Report and including, for the avoidance of doubt, the present value of DIP Hedges) to (b) the sum of (i) the aggregate amount of all Revolving DIP Loans (and any exposure in respect of letters of credit issued pursuant to the letter of credit sub-facility) plus (ii) the aggregate principal amount of all Roll-Up Loans plus (iii) the aggregate principal amount of all Prepetition Loans, in each case outstanding as of such date, to be less than 1.25 to 1.0.

 

Key Employee Plans. No Debtor shall (a) enter into any key employee retention plan and incentive plan, other than such plans in effect as of the Petition Date or (b) amend or modify any existing key employee retention plan and incentive plan, unless such plan, amendment or modification, as applicable, is satisfactory to the DIP Agent and Majority DIP Lenders (it being agreed and understood that the KERP of the Borrower effective as of May 1, 2020 for which the Borrower will seek Bankruptcy Court approval shall be permitted).

   
Affirmative and Negative Covenants:

The DIP Loan Documents will contain the affirmative and negative covenants made by the Debtors under the Prepetition Credit Agreement and the other Prepetition Loan Documents, with such modifications thereto and such other affirmative and negative covenants as the DIP Agent and the New Money DIP Lenders shall require; provided that the negative covenants made by the Debtors under the Prepetition Credit Agreement and the other Prepetition Loan Documents will be modified to eliminate the baskets and carve-outs set forth therein (other than baskets and carve-outs to be agreed in the DIP Loan Documents limited to those necessary for the Debtors to run their business in the ordinary course of business) and additional restrictions on the following:

 

(a) disposing of assets outside of the ordinary course of business (including, without limitation, any sale and leaseback transaction and any disposition under Bankruptcy Code section 363) in respect of transactions for total net cash proceeds of more than $5 million in the aggregate for each fiscal year (other than as contemplated by the procedures for de minimis asset transactions authorized and approved by the Bankruptcy Court);

 

(b) paying prepetition indebtedness, except as expressly provided for herein or pursuant to orders entered upon pleadings in form and substance reasonably satisfactory to the DIP Agent; and

 

(c) asserting any right of subrogation or contribution against any other Debtors until all borrowings under the DIP Facility are paid in full and the Revolving DIP Loan Commitments are terminated.

 

The DIP Loan Documents will contain an affirmative covenant that the Debtors will provide written notice to the DIP Agent and the Prepetition Agent if any of the Debtors intend to provide information with respect to the Prepetition Loan Documents to a party in interest or is compelled to provide such information by order of the Bankruptcy Court.

 

  CHK DIP Credit Facility Term Sheet
  11  

 

 

Events of Default: Events of Default” shall include events of default customarily found in loan documents for similar debtor-in-possession financings, with such modifications as the DIP Agent may require, including the occurrence of any of the following:
   
  (i) the Interim Order at any time ceases to be in full force and effect, or shall be vacated, reversed or stayed, or modified or amended without the prior written consent of the DIP Agent and, if such modification or amendment is materially adverse to the DIP Lenders, the Majority DIP Lenders;
   
 

(ii) the Final Order at any time ceases to be in full force and effect, or shall be vacated, reversed or stayed, modified or amended without the prior written consent of the DIP Agent and, if such modification or amendment is materially adverse to the DIP Lenders, the Majority DIP Lenders, or shall not have been entered within 35 days after the entry of the Interim Order (subject to any COVID-19 Extensions); provided such time may be extended by agreement among the Borrower and DIP Agent;

 

(iii) the inaccuracy in any material respect of any representation of any Debtor when made or deemed made;

   
  (iv) failure of any Debtor (a) to comply with the Variance Covenant, (b) to satisfy any Milestone, (c) to have an Approved Budget; (d) to comply with any negative covenant or certain other customary affirmative covenants in the DIP Loan Documents or with any other covenant or agreement contained in the Financing Orders in any respect or (e) to comply with any other covenant or agreement contained in the DIP Loan Documents, subject, in the case of the foregoing clause (e), to a grace period of 30 days;
   
  (v) (a) any of the Cases shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code; a Chapter 11 Trustee or an examiner (other than a fee examiner) with enlarged powers relating to the operation of the business of any Debtor (powers beyond those expressly set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code) shall be appointed, (b) any other super-priority claim (other than the Carve-Out (as defined below) and in respect of the DIP Hedges) or grant of any other lien (including any adequate protection lien) which is pari passu with or senior to the claims and liens of the DIP Agent or the Prepetition Agent shall be granted in any of the Cases, or (c) the filing of any pleading by any Debtor seeking or otherwise consenting to or supporting any of the matters set forth in clause (a) or clause (b) of this subsection (v);
   
  (vi)  other than payments authorized by the Bankruptcy Court and which are set forth in the Approved Budget (A) in respect of accrued payroll and related expenses as of the commencement of the Cases, (B) in respect of adequate protection payments set forth herein and consented to by the DIP Agent or otherwise permitted under the terms of the Collateral Trust Agreement (as defined below) or the Intercreditor Agreement (as defined below), as applicable, or (C) in respect of certain critical vendors and other creditors, in each case to the extent authorized by one or more “first day” or other orders satisfactory to the DIP Agent, any Debtor shall make any payment (whether by way of adequate protection or otherwise) of principal or interest or otherwise on account of any prepetition indebtedness or payables (including without limitation, reclamation claims);
   
  (vii) the Bankruptcy Court shall enter one or more orders during the pendency of the Cases granting relief from the automatic stay to the holder or holders of any lien to permit foreclosure (or the granting of a deed in lieu of foreclosure or the like) on assets of any Debtor or the Debtors that have an aggregate value in excess of $7.5 million without the prior written consent of the DIP Agent;
   
  (viii) the Termination Date (as defined below) shall have occurred;

 

  CHK DIP Credit Facility Term Sheet
  12  

 

 

 

(ix) the Debtors’ “exclusive period” under Section 1121 of the Bankruptcy Code for the filing of a plan of reorganization terminates for any reason;

 

(x) any Debtor petitions the Bankruptcy court to obtain additional financing pari passu or senior to the DIP Facility without the consent of the DIP Agent (other than the Carve-Out or as contemplated under the Hedging Order);

 

(xi) failure of any Debtor to comply with the terms of the applicable Financing Order;

 

(xii) the consensual use of prepetition Cash Collateral is terminated;

 

(xiii) (A) the Debtors engage in or support any challenge to the validity, perfection, priority, extent or enforceability of the DIP Facility or the Prepetition Loan Documents or the liens on or security interest in the assets of the Debtors securing the DIP Obligations or the Prepetition Obligations, including without limitation seeking to equitably subordinate or avoid the liens securing the such indebtedness or (B) the Debtors engage in or support any investigation or assert any claims or causes of action (or directly or indirectly support assertion of the same) against the DIP Agent, any DIP Lender, the Prepetition Agent or any Prepetition Lender; provided, however, that it shall not constitute an Event of Default if any of the Debtors provides information with respect to the Prepetition Loan Documents to a party in interest or is compelled to provide information by an order of the Bankruptcy Court;

 

(xiv) any person shall obtain a Section 506(a) judgment or similar determination with respect to the Prepetition Obligations;

 

(xv) the allowance of any claim or claims under Section 506(c) of the Bankruptcy Code against any of the DIP Collateral;

 

(xvi) the consummation of a sale of any material portion of the DIP Collateral (other than a sale in the ordinary course of business that is contemplated by the Approved Budget) without the advance written consent of the DIP Agent and Majority DIP Lenders if such sale or other transaction does not satisfy the DIP Obligations in full in Cash;

   
 

(xvii) the confirmation of a plan of reorganization or liquidation that does not provide for treatment acceptable to the DIP Lenders, or any Debtor proposes or supports, or fails to contest in good faith, the entry of such a plan of reorganization or liquidation, unless such plan contemplates indefeasibly paying the DIP Obligations and obligations under the Prepetition RBL Facility in full, in cash on the effective date of such plan;

 

(xviii)  entry of an order by the Bankruptcy Court in favor of the statutory committee of unsecured creditors (the “Creditors’ Committee”), if any, appointed in the Cases, any ad hoc committee, or any other party in interest, (i) sustaining an objection to claims of the DIP Agent or any of the DIP Lenders, (ii) avoiding any liens held by the DIP Agent or any of the DIP Lenders, (iii) sustaining an objection to claims of the Prepetition Agent or any of the Prepetition Lenders, or (iv) avoiding any liens held by the Prepetition Agent or any of the Prepetition Lenders except as otherwise agreed by the Prepetition Agent in writing; or

 

(xix) if (i) that certain Collateral Trust Agreement dated December 19, 2019 by and between MUFG Union Bank, N.A., as Collateral Trustee and Revolver Agent, and GLAS USA LLC, as Original Term Loan Agent, and as acknowledged and agreed by certain of the Debtors (as from time to time amended and restated) (the “Collateral Trust Agreement”), or that certain Intercreditor Agreement dated as of December 19, 2019 by and between MUFG Union Bank, N.A., as Priority Lien Agent, and Deutsche Bank Trust Company Americas, as Second Lien Collateral Trustee, and as acknowledged and agreed by certain of the Debtors (as from time to time amended and restated) (the “Second Lien Intercreditor Agreement”, and together with the Collateral Trust Agreement, collectively, the “Intercreditor Agreements”) shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with its terms against the Borrower or any party thereto or any holder of the liens subordinated thereby, or be amended, modified or supplemented to cause the liens securing the obligations of the FLLO Agent or Second Lien Collateral Trustee to be senior or pari passu in priority to the liens securing the obligations under the Prepetition Loan Documents without the consent of the Prepetition Agent, (ii) the Borrower takes any action inconsistent with the terms of any Intercreditor Agreement (other than in connection with an Approved Plan), (iii) any person bound by any Intercreditor Agreement takes any action inconsistent with the terms thereof and the Borrower shall fail to promptly take commercially reasonable actions necessary to oppose such action or (iv) any order of any court of competent jurisdiction is granted which is materially inconsistent with the terms of any Intercreditor Agreement and is adverse to the interests of the Prepetition Agent or Prepetition Lenders.

   
  Upon the occurrence and during the continuance of any Event of Default, upon the direction of the Majority DIP Lenders, the DIP Agent shall accelerate the DIP Obligations and, thereafter, may take all or any of the following actions without further order of or application to the Bankruptcy Court,5 provided that in the case of the enforcement of liens or other remedies with respect to DIP Collateral pursuant to clause (2) below, the DIP Agent shall provide the Debtors (with a copy to any counsel for the Creditors’ Committee appointed in the Cases and to the United States Trustee) with five (5) business days’ prior written notice (the “Enforcement Notice Period”) and file such notice on the docket in the Cases, during which Enforcement Notice Period any such party must file a pleading in opposition to the DIP Agent’s exercise of its rights and remedies and seek an emergency hearing prior to the conclusion of the Enforcement Notice Period  and provided further, that in any hearing following such notice, the only issue that may be raised by any party in opposition to the actions proposed or available to be taken by the DIP Agent shall be whether, in fact, an Event of Default has occurred and is continuing:

 

 

 

5 The Financing Orders will include similar language modifying automatic stay to permit Prepetition Agent to terminate right to use Cash Collateral in the event of a default.

 

  CHK DIP Credit Facility Term Sheet
  13  

 

 

  (1) declare the principal of and accrued interest on the outstanding borrowings to be immediately due and payable and terminate, as applicable, any further commitments under the DIP Facility and/or terminate, as applicable, the right of the Debtors to use Cash Collateral; and
   
 

(2)  charge the default rate of interest under the DIP Facility and take any other action or exercise any other right or remedy (including without limitation, with respect to the liens in favor of the DIP Agent on behalf of the DIP Lenders) permitted under the DIP Loan Documents or applicable law.

 

Unless during the Enforcement Notice Period the Bankruptcy Court determines that an Event of Default has not occurred (or that no Event of Default that has occurred is continuing), the DIP Agent shall have relief from the automatic stay without further notice or order and may foreclose on all or any portion of the DIP Collateral or otherwise exercise remedies against the DIP Collateral.

 

Without limiting the foregoing, but subject to the Enforcement Notice Period, upon the occurrence and during the continuation of an Event of Default, each DIP Lender (and its respective affiliates, including its various branches and offices) shall have the authority, subject to obtaining the prior written consent of the DIP Agent and to the fullest extent permitted by applicable law, to set off and apply any and all deposits (of whatever type and in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such DIP Lender (or its affiliate) to or for the credit or account of any Borrower against any and all of the DIP Obligations of such Borrower to such Lender; provided that the DIP Credit Agreement shall contain provisions with respect to setoff (and sharing of proceeds of setoff) substantially similar to the Prepetition Credit Agreement and except that the application of any proceeds from any such set off right shall be subject to the payment priority with respect to the Revolving DIP Loans described above. The foregoing right of setoff shall apply irrespective of whether such DIP Lender has made any demand under the DIP Loan Documents and even if the DIP Obligations of the Borrower are contingent or unmatured.

   
Maturity/Termination Date:

The DIP Facility and the Debtors’ right to use Cash Collateral (as applicable) shall automatically terminate without further notice or court proceedings on the earliest to occur of (i) nine (9) months after the Petition Date (the “Scheduled Maturity Date”); (ii) the date of termination of the Revolving DIP Loan Commitment and/or acceleration of any outstanding borrowings under the DIP Facility pursuant to an Event of Default; (iii) subject to the COVID-19 Extension, the first business day on which the Interim Order expires by its terms or is terminated, unless the Final Order has been entered and become effective prior thereto; (iv) conversion of any of the Cases to a case under chapter 7 of the Bankruptcy Code unless otherwise consented to in writing by the DIP Agent and Majority DIP Lenders; (v) dismissal of any of the Cases, unless otherwise consented to in writing by the DIP Agent and the Majority DIP Lenders; (vi) the closing of a sale of substantially all of the equity or assets of the Debtors (unless done pursuant to a confirmed chapter 11 plan); (vii) the date of repayment in cash in full by the Debtors of all DIP Obligations and termination of the Revolving DIP Loan Commitment in accordance with the terms of the DIP Facility; and (viii) the effective date of any Debtor’s plan of reorganization confirmed in the Cases (the “Termination Date”), unless extended, as to the DIP Facility, with the prior written consent of the DIP Agent and, in the case of clause (i), the New Money DIP Lenders and, in the case of clauses (ii) – (viii), the Majority DIP Lenders, and as to the use of Cash Collateral, with the prior written consent of the Prepetition Agent and Majority Lenders.

   
Assignments and Participations:

The DIP Lenders will be permitted to assign DIP Facility Loans and Revolving DIP Loan Commitments under the DIP Facility with the prior written consent of the Borrower (such consent not to be unreasonably withheld, conditioned or delayed) unless an Event of Default has occurred and is continuing or unless such assignments are to other DIP Lenders or affiliates or approved funds thereof. All assignments will require the consent of the DIP Agent, not to be unreasonably withheld or delayed. Each assignment will be in an amount not less than $5 million(or a lesser amount if the assigning DIP Lender’s aggregate Revolving DIP Loans, Roll-Up Loans, or Revolving DIP Loan Commitments, as applicable, amount to less than $5 million), except in the case of an assignment to a DIP Lender or an Affiliate of a DIP Lender or an assignment of the entire remaining amount of the assigning DIP Lender’s Revolving DIP Loans, Roll-Up Loans, or Revolving DIP Loan Commitments, as applicable. Subject to the limitations above, New Money DIP Lenders will be permitted to assign their respective Revolving DIP Loans and Revolving DIP Loan Commitments independently from such DIP Lender’s Roll-Up Loans, and vice versa.

 

The New Money DIP Lenders will be permitted to sell participations in DIP Facility Loans and Revolving DIP Loan Commitments without restriction. Voting rights of participants shall be limited to matters consistent with the Prepetition Credit Agreement.

 

  CHK DIP Credit Facility Term Sheet
  14  

 

 

Adequate Protection for Prepetition Agent, Prepetition Lenders, FLLO Agent, FLLO Lenders, Second Lien Collateral Trustee and Holders of Second Lien Notes :

The Prepetition Agent shall receive the following as adequate protection for the benefit of the Prepetition Lenders:

 

(i)  a super-priority claim under Section 507(b) of the Bankruptcy Code, with priority over all administrative expense claims and unsecured claims now existing or after arising, provided, however, that such super-priority claim shall be junior and subject to the Carve-Out, the super-priority claim of the DIP Agent for the benefit of the DIP Lenders in respect of the DIP Facility and the super-priority claim in respect of the DIP Hedges;

 

(ii)  a second priority, valid, enforceable, fully perfected security interest in and replacement lien on the DIP Collateral, subordinate only to (a) the liens of the DIP Agent for the benefit of the DIP Lenders in respect of the DIP Facility and the liens securing the DIP Hedges, (b) Permitted Liens, and (c) the Carve-Out;

 

(iii)  the reasonable, documented out-of-pocket fees, costs and expenses incurred or accrued by the Prepetition Agent (the foregoing to include all unpaid prepetition fees, costs and expenses) in connection with any and all aspects of the Debtors’ Cases, and including the reasonable and documented out-of-pocket fees and expenses of the legal and financial advisors and investment bankers to the Prepetition Agent and other professionals, hired by or on behalf of the Prepetition Agent;

 

(iv) upon closing of the DIP Facility, payment of all accrued and unpaid interest at the non-default rate of L + 3.5% (with a LIBOR floor of 0.00%) and fees then owing under the Prepetition Credit Agreement; and

 

(v) so long as the loans under the Prepetition Credit Facility (the “Prepetition Loans”) shall not have become Roll-Up Loans, the Prepetition Lenders shall be entitled to cash payment of all interest accruing post-petition under the Prepetition Loan Documents at the non-default rate of L + 3.5% (with a LIBOR floor of 0.00%) and fees as and when due pursuant to the Prepetition Loan Documents;

 

provided, however, that (x) the adequate protection claims and liens described in the preceding clauses (i) and (ii) shall be granted only to the extent of any diminution in the value of any Cash Collateral or other collateral arising as a result of (A) the use, sale, or lease of Cash Collateral or other collateral, (B) the granting of priming liens to secure the DIP Facility or (C) the imposition of the automatic stay, and (y) the adequate protection claim described in the preceding clause (i) and the adequate protection liens described in the preceding clause (ii) shall not attach to any Avoidance Actions but shall attach to any Avoidance Action Proceeds, subject to entry of the Final Order.

 

The Financing Orders shall provide for adequate protection in the form of replacement liens and superpriority claims, financial reporting and rights of access and information, payment of fees and expenses of professionals (as described below) for the benefit of (i) GLAS USA, LLC (“FLLO Agent”), as administrative agent under that certain Term Loan Agreement, dated as of December 19, 2019 (the “FLLO Term Loan”) or the lenders thereunder (the “FLLO Lenders”) or (ii) Second Lien Collateral Trustee or holders of Second Lien Notes to the extent permitted by the Intercreditor Agreements.

 

The foregoing adequate protection liens shall be deemed automatically perfected as of the Petition Date without further action, although if the DIP Agent, the Prepetition Agent, the FLLO Agent, or the Second Lien Collateral Trustee determine to file any financing statements, notice of liens or similar instruments, the Debtors will cooperate and assist in any such filings and the automatic stay shall be lifted to allow such filings.

 

The Debtors will pay the fees and expenses of professionals of (i) the collateral trustee under the Collateral Trust Agreement (including Paul Hastings LLP), (ii) the FLLO Term Loan Facility Administrative Agent (including Arnold & Porter Kaye Scholer LLP and one local counsel in the relevant jurisdiction), (iii) the FLLO Ad Hoc Group (including Davis Polk & Wardwell LLP, Vinson & Elkins LLP, one local counsel in each other relevant local jurisdiction, and Perella Weinberg Partners LP) ((ii)-(iii), collectively the “FLLO Professionals”), (iv) the Second Lien Collateral Trustee (including Morgan, Lewis & Bockius LLP and one local counsel in the relevant jurisdiction) and (v) Franklin (including Akin Gump Strauss Hauer & Feld LLP, one local counsel in each other relevant local jurisdiction, Moelis & Company LLC and FTI Consulting, Inc.) ((iv)-(v), collectively, the “Second Lien Professionals”); provided that (x) the payment of the fees and expenses of the FLLO Professionals shall only be payable as a form of adequate protection for so long as (1) the Restructuring Support Agreement has not been terminated as to the DIP Lenders, Required Consenting Revolving Credit Facility Lenders, or FLLO Ad Hoc Group, or (2) an alternative restructuring support agreement or similar agreement with respect to the restructuring of the Debtors’ debt and businesses remains in effect between the DIP Agent, the DIP Lenders, 66.67% of the  Revolving Credit Facility Lenders, and the FLLO Ad Hoc Group, in each case, at which time such adequate protection shall terminate, provided further that in the event such adequate protection payments terminate pursuant to the foregoing, (a) all parties shall retain all rights pursuant to the Collateral Trust Agreement, which rights are fully reserved, including, without limitation, the rights, if any, of the Existing FLLO Agent or Existing FLLO Lenders to seek different or additional adequate protection in accordance with section 6.02(f) of the Collateral Trust Agreement and (b) the Debtors shall pay all fees and expenses of the FLLO Professionals incurred prior to termination of the payment of the fees and expenses of the FLLO Professionals as a form of adequate protection as described herein; and (y) the payment of the fees and expenses of the Second Lien Professionals shall only be payable as a form of adequate protection for so long as the Restructuring Support Agreement has not been terminated as to the Debtors, DIP Lenders, Required Consenting Revolving Credit Facility Lenders, or Franklin (at which time such adequate protection shall terminate), provided further that in the event such adequate protection payments terminate pursuant to the foregoing, (a) all parties shall retain all rights pursuant to the Intercreditor Agreement, including, without limitation, the rights, if any, of such parties to seek different or additional adequate protection in accordance with section 4.02(f) of the Intercreditor Agreement and (b) the Debtors shall pay all fees and expenses of the Second Lien Professionals incurred prior to termination of the payment of the fees and expenses of the Second Lien Professionals as a form of adequate protection as described herein. This provision shall survive termination of the Restructuring Support Agreement.

 

  CHK DIP Credit Facility Term Sheet
  15  

 

 

Carve-Out: [See Exhibit A hereto.]
   
Estate Professional Fees: Financing Orders to include language confirming that nothing in such orders or otherwise shall be construed as consent to the allowance of any fees, expenses, reimbursement or compensation sought by any professional retained by the Debtors or the Creditors’ Committee, or shall affect the right of any party in interest, including any DIP Secured Party or any Prepetition Secured Party, to object to the allowance and payment of any such fees, expenses, reimbursement or compensation.
   
Section 506(c) Waiver: Except to the extent of the Carve-Out, no expenses of administration of the Cases or any future proceeding that may result therefrom, including liquidation in bankruptcy or other proceedings under the Bankruptcy Code, shall be charged against or recovered from any collateral pursuant to Section 506(c) of the Bankruptcy Code or any similar principle of law, without the prior written consent of the DIP Agent, the Prepetition Agent, the FLLO Agent, and the Existing Second Lien Notes Trustee (as defined in the Financing Orders) and no such consent shall be implied from any other action, inaction, or acquiescence by the DIP Secured Parties, the Existing RBL Secured Parties, the Existing FLLO Secured Parties or the Existing Second Lien Secured Parties (each as defined in the Financing Orders); provided that the Debtors shall irrevocably waive and shall be prohibited from asserting any claim described in this paragraph, under section 506(c) of the Bankruptcy Code or otherwise, for any costs and expenses incurred in connection with the preservation, protection or enhancement of, or realization by the DIP Secured Parties, the Existing RBL Secured Parties, the Existing FLLO Secured Parties, or the Existing Second Lien Secured Parties upon the DIP Collateral, the Existing RBL Collateral, the Existing FLLO Collateral, or the Existing Second Lien Collateral, as applicable (each as defined in the Financing Orders); provided further that the foregoing waivers shall be without prejudice to any provisions of the Final Order with respect to costs or expenses incurred following entry of such Final Order.
   
Waiver of Marshaling: Except to the extent of the Carve Out, (i) in connection with any disposition of or exercise of rights and remedies with respect to the DIP Collateral, the DIP Agent may use commercially reasonable efforts to first apply proceeds of the DIP Collateral that is not Existing Collateral to satisfy the DIP Obligations before applying proceeds of DIP Collateral that is Existing Collateral to satisfy the DIP Obligations and (ii) in no event shall any of the DIP Secured Parties, any of the Existing RBL Secured Parties, the Existing FLLO Secured Parties, or the Existing Second Lien Secured Parties (each as defined in the Financing Orders) be subject to the equitable doctrine of “marshaling” or any other similar doctrine with respect to the collateral securing the DIP Obligations, the RBL Adequate Protection Obligations, the Existing RBL Obligations, the FLLO Adequate Protection Obligations, the Existing FLLO Obligations, the Second Lien Adequate Protection Obligations, or the Existing Second Lien Obligations (each as defined in the Financing Orders).
   
Section 552(b):

The DIP Secured Parties and the Existing Secured Parties (each as defined in the Financing Orders) shall be entitled to all of the rights and benefits of Section 552(b) of the Bankruptcy Code, the “equities of the case” exception under sections 552(b)(i) and (ii) of the Bankruptcy Code shall not apply to such parties with respect to the proceeds, products, rents, issues or profits of any of their collateral, and no expenses of administration of the Cases or any future proceeding that may result therefrom, including liquidation in bankruptcy or other proceedings under the Bankruptcy Code, may be charged against proceeds, product, offspring or profits from any of the collateral under Section 552(b) of the Bankruptcy Code (subject to any provisions of the Final Order with respect to costs or expenses incurred following the entry of such Final Order).

 

Furthermore, the Debtors and their estates shall be deemed to have irrevocably waived and have agreed not to assert any claim or right under sections 552 or 726 of the Bankruptcy Code to avoid the imposition of DIP Liens, Existing Liens or the Adequate Protection Liens (each as defined in the Financing Orders) on any property acquired by any of the Debtors or any of their estates or to seek to surcharge any costs or expenses incurred in connection with the preservation, protection or enhancement of, or realization by, DIP Secured Parties and the Existing Secured Parties (each as defined in the Financing Orders) upon the DIP Collateral or the Existing Collateral (as defined in the Financing Orders), as applicable (subject to any provisions of the Final Order with respect to costs or expenses incurred following the entry of such Final Order).

   
No Priming or Pari Passu Liens: No order shall be entered authorizing or approving any liens or encumbrances on the DIP Collateral or the Prepetition Collateral, as applicable, senior to or pari passu with the liens of the Prepetition Agent for the benefit of the Prepetition Lenders, or the DIP Agent for the benefit of the DIP Lenders other than as otherwise contemplated herein.

 

  CHK DIP Credit Facility Term Sheet
  16  

 

 

Acknowledgement/Stipulations: The Debtors shall stipulate and acknowledge (i) to the amount, validity, priority and enforceability of the Obligations (as defined in the Prepetition Credit Agreement) under the Prepetition Loan Documents, (ii) that the Prepetition Agent for the benefit of the Prepetition Lenders has a valid, enforceable and fully perfected first priority lien in all of the collateral under the Prepetition Loan Documents (the “Prepetition Collateral”), including Cash Collateral, and all proceeds thereof, subject only to the DIP Liens, the Permitted Liens, and the Carve-Out, and (iii) that the Prepetition Collateral is declining in value on a daily basis as the result of the Debtors’ business operations, including current levels of resource extraction, capital expenditure, and cash flow.  The Debtors shall provide a full release to DIP Secured Parties and the Existing Secured Parties (each as defined in the Financing Orders), which would not bind the Creditors’ Committee or other party in interest until the expiration of the period described in the paragraph below titled “Challenge Period”.
   
Challenge Period:

The Financing Orders shall establish a deadline that (i) in the case of a Creditors’ Committee, is no earlier than thirty (30) days after the appointment of such committee, but in any event is within sixty (60) days of the Petition Date, or (ii) in the case of any other party in interest, is within forty (40) days of the Petition Date, by which the Creditors’ Committee, or any creditor or other party-in-interest (in any case, which has obtained the requisite standing) must commence an adversary proceeding, if at all, against the Prepetition Agent or the Prepetition Lenders for the purpose of challenging the validity, extent, priority, perfection and enforceability of the prepetition secured debt under the Prepetition Credit Agreement or the other Prepetition Loan Documents, or the liens, claims and security interests in the Prepetition Collateral in favor of the Prepetition Agent or the Prepetition Lenders or otherwise asserting any claims or causes of action against the Prepetition Agent or such Prepetition Lenders on behalf of the Debtors’ estates; provided, however, that nothing contained in this term sheet, the DIP Loan Documents or the Financing Orders shall be deemed to confer standing on the Creditors’ Committee or any other party in interest to commence such an adversary proceeding. If such an adversary proceeding is not commenced within such period, then the DIP Secured Parties and the Existing Secured Parties (each as defined in the Financing Orders) shall automatically receive full waivers and releases provided in the Financing Orders and the liens of the Prepetition Agent on behalf of the Prepetition Lenders shall be valid, perfected, enforceable and unavoidable without any further action by the Prepetition Agent or Prepetition Lenders under the terms of the Financing Orders.

 

None of the Carve-Out, any Cash Collateral, the DIP Facility Loans, the DIP Collateral or the Prepetition Collateral, may be used to challenge the amount, validity, perfection, priority or enforceability of, or assert any defense, counterclaim or offset to, the DIP Loan Documents or the Prepetition Loan Documents, or the security interests and liens securing any of the DIP Obligations or Prepetition Obligations, or to fund prosecution or assertion of any claims, or to otherwise litigate against the DIP Agent, any DIP Lender, the Prepetition Agent or any Prepetition Lender; provided that up to $50,000 shall be made available to the Creditors’ Committee for investigation costs in respect of the stipulations set forth in the Financing Orders, [which amount may be included in the Carve-Out].6

   
Expenses: The reasonable, documented out-of-pocket fees, costs and expenses incurred by the DIP Agent (the foregoing to include all unpaid prepetition fees, costs and expenses incurred by the DIP Agent in connection with the DIP Facility) in connection with any and all aspects of the Debtors’ Cases, including, without limitation, the reasonable and documented out-of-pocket fees and expenses of the DIP Agent’s legal counsel (Sidley Austin LLP), banker (Houlihan Lokey), and financial advisor (RPA Advisors) and other professionals, hired by or on behalf of the DIP Agent with the Debtors’ reasonable consent, shall be payable by the Debtors under the DIP Facility on a monthly basis, promptly upon submission by such professional of a summary invoice setting forth such fees, costs and expenses.
   
Indemnification: The Debtors shall agree to indemnify and hold harmless the DIP Agent and the DIP Lenders and each of their respective affiliates and each of their respective officers, directors, employees, agents, advisors, attorneys and representatives (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable and documented out-of-pocket fees and disbursements of counsel), that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), arising out of or in connection with or by reason of the transactions contemplated hereby, provided that no Indemnified Party will be indemnified for exclusions of the type excluded from “Indemnified Liabilities” (as such term is defined in the Prepetition Credit Facility).  In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any of the Debtors, any of their respective directors, security holders or creditors, an Indemnified Party or any other person or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated.
   
Confidentiality: Except as required by law or in connection with the implementation of this Term Sheet, the terms hereof will be kept strictly confidential by each of the Debtors and may only be disclosed to such Debtor’s affiliates, legal counsel, financial advisors and consultants who have been informed of, and agree to abide by, the confidentiality of this Term Sheet.  To the extent that any disclosure becomes legally required, the DIP Agent shall be notified promptly and before the required disclosure is made.
   

Governing Law:

The laws of the State of New York (excluding the laws applicable to conflicts or choice of law), except as governed by the Bankruptcy Code.

 

 

 

6 DIP Agent shall have authority to negotiate Investigation Budget with the Creditors’ Committee.

 

  CHK DIP Credit Facility Term Sheet
  17  

 

 

 

 

Schedule 1

 

Guarantors

 

1. Chesapeake AEZ Exploration, L.L.C.

 

2. Chesapeake Appalachia, L.L.C.

 

3. Chesapeake E&P Holding, L.L.C.

 

4. Chesapeake Energy Louisiana, LLC

 

5. Chesapeake Energy Marketing, L.L.C.

 

6. Chesapeake Exploration, L.L.C.

 

7. Chesapeake Land Development Company, L.L.C.

 

8. Chesapeake Louisiana, L.P.

 

9. Chesapeake Midstream Development, L.L.C.

 

10. Chesapeake NG Ventures Corporation

 

11. Chesapeake Operating, L.L.C.

 

12. Chesapeake Plains, LLC

 

13. Chesapeake Royalty, L.L.C.

 

14. Chesapeake VRT, L.L.C.

 

15. Chesapeake-Clements Acquisition, L.L.C.

 

16. CHK Energy Holdings, Inc.

 

17. CHK NGV Leasing Company, L.L.C.

 

18. CHK Utica, L.L.C.

 

19. Compass Manufacturing, L.L.C.

 

20. EMLP, L.L.C.

 

21. Empress Louisiana Properties, L.P.

 

22. Empress, L.L.C.

 

23. GSF, L.L.C.

 

24. MC Louisiana Minerals, L.L.C.

 

25. MC Mineral Company, L.L.C.

 

26. MidCon Compression, L.L.C.

 

27. Nomac Services, L.L.C.

 

28. Northern Michigan Exploration Company, L.L.C.

 

29. Sparks Drive SWD, Inc.

 

30. Winter Moon Energy Corporation

 

31. Brazos Valley Longhorn Finance Corp.

 

32. Brazos Valley Longhorn, L.L.C.

 

33. Burleson Sand LLC

 

34. Burleson Water Resources, LLC

 

35. Esquisto Resources II, LLC

 

36. Petromax E&P Burleson, LLC

 

37. WHE AcqCo., LLC

 

38. WHR Eagle Ford LLC

 

39. Wildhorse Resources II, LLC

 

40. Wildhorse Resources Management Company, LLC

 

 

 

 

Schedule 2

 

DIP Lender Commitments

 

[DIP Lender Commitments on file with the Debtors.]

 

 

 

 

Exhibit A

 

Carve-Out

 

1.              Carve Out.

 

(a)            Carve Out.  As used in this [Final/Interim] Order, the “Carve Out” means the sum of (i) all fees required to be paid to the Clerk of the Court and to the Office of the United States Trustee under section 1930(a) of title 28 of the United States Code plus interest at the statutory rate (without regard to the notice set forth in (iii) below); (ii) all reasonable fees and expenses up to $100,000 incurred by a trustee under section 726(b) of the Bankruptcy Code (without regard to the notice set forth in (iii) below); (iii) to the extent allowed at any time, whether by interim order, procedural order, or otherwise, all unpaid fees and expenses (the “Allowed Professional Fees”) incurred by persons or firms retained by the Debtors pursuant to section 327, 328, or 363 of the Bankruptcy Code (the “Debtor Professionals”) and the Creditors’ Committee  pursuant to section 328 or 1103 of the Bankruptcy Code (the “Committee Professionals” and, together with the Debtor Professionals, the “Professional Persons”) at any time before or on the first business day following delivery by the [DIP Agent] of a Carve Out Trigger Notice (as defined below), whether allowed by the Court prior to or after delivery of a Carve Out Trigger Notice; and (iv) Allowed Professional Fees of Professional Persons in an aggregate amount not to exceed $7.5 million incurred after the first business day following delivery by the [DIP Agent] of the Carve Out Trigger Notice, to the extent allowed at any time, whether by interim order, procedural order, or otherwise (the amounts set forth in this clause (iv) being the “Post-Carve Out Trigger Notice Cap”).  For purposes of the foregoing, “Carve Out Trigger Notice” shall mean a written notice delivered by email (or other electronic means) by the [DIP Agent] to the Debtors, their lead restructuring counsel, the U.S. Trustee, and counsel to the Creditors’ Committee, which notice may be delivered following the occurrence and during the continuation of an Event of Default and acceleration of the DIP Obligations under the DIP Facility, stating that the Post-Carve Out Trigger Notice Cap has been invoked.

 

 

 

 

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

 

 

 

 

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

 

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

 

 

 

 

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

 

 

 

 

Exhibit 3

 

Exit Facilities Term Sheet

 

 

 

  

Execution Version

 

EXHIBIT B

 

RBL Facility

Summary of Terms and Conditions

 

Set forth below is a summary of the principal terms and conditions for the RBL Facility. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Commitment Letter to which this Exhibit B is attached or on Exhibits C or D (including the Annexes hereto and thereto) attached thereto; provided, that in the event any such capitalized term is subject to multiple and differing definitions, the appropriate meaning shall be determined by reference to the context in which it is used.

 

PARTIES    
     
Borrower: Chesapeake Energy Corporation (the “Borrower”).  
     
Guarantors: All obligations of the Borrower under the RBL Facility (as defined below) and, at the Borrower’s option, under any treasury management agreement (a “Secured Treasury Management Agreement”) or any currency, interest rate protection or other hedging agreement (a “Secured Hedging Agreement”, which Secured Treasury Management Agreements and Secured Hedging Agreements shall have the same payment priority as the Tranche A RBL Loans described below), in each case entered into by the Borrower with the Administrative Agent, an RBL Lender (as defined below) or any person that is an affiliate of the Administrative Agent or an RBL Lender at the time the relevant transaction is entered into (collectively, the “Borrower Obligations”) will be unconditionally guaranteed on a senior basis (the “Guaranty”) by each of the Borrower’s wholly-owned Restricted Subsidiaries other than:  
     
  (a) immaterial subsidiaries subject to thresholds to be agreed (“Immaterial Subsidiaries”),  
     
  (b) any subsidiary that is prohibited by law, regulation or contractual obligation from providing such Guaranty or that would require a governmental (including regulatory) consent, approval, license or authorization in order to provide such Guaranty, and  
       
  (c) solely in the case of any obligation under any Secured Hedging Agreement that constitutes a “swap” within the meaning of section 1(a)(47) of the Commodity Exchange Act, any subsidiary that is not an “Eligible Contract Participant” as defined under the Commodity Exchange Act  
       
  (the “Guarantors”; the Borrower and the Guarantors, collectively, the “Loan Parties”).  

 

Term Sheet - RBL Facility

Exhibit B - Page 1

 

 

     
  For purposes of the RBL Credit Documentation (as defined below), “Restricted Subsidiary” means any existing or future direct or indirect subsidiary of the Borrower other than any Unrestricted Subsidiary (as defined below).  
     
Lead Arranger and Bookrunner: MUFG Union Bank, N.A. will act as lead arranger and bookrunner for the RBL Facility (in such capacity, the “RBL Lead Arranger”).  
     
Joint Lead Arrangers and Joint Bookrunners Bank of America, N.A., BMO Capital Markets Corp., Wells Fargo Securities, LLC, Citibank, N.A., JPMorgan Chase Bank, N.A., and Royal Bank of Canada will act as joint lead arrangers and joint bookrunners for the RBL Facility.  
     
Administrative Agent and Collateral Agent: MUFG Union Bank, N.A. will act as the sole and exclusive administrative agent and collateral agent for the RBL Lenders referred to below (in such capacities, the “RBL Agent”).  
     
RBL Lenders: Holders of Revolving Credit Facility Claims and DIP Claims (as defined in the Restructuring Support Agreement) or one or more of their designated affiliates (collectively, and together with any person that becomes a lender by assignment as set forth under the heading “Assignments and Participations” below, the “RBL Lenders”).  
Prepetition Credit Facility    
     
Borrower: Chesapeake Energy Corporation.  
     
Prepetition Credit Agreement Amended and Restated Credit Agreement, dated as of September 12, 2018 (as amended, supplemented, and otherwise modified from time to time), among the Borrower, the lenders party thereto and MUFG Union Bank, N.A., as the administrative agent thereunder (the “Prepetition Credit Agreement” and the credit facility provided thereunder, the “Prepetition Credit Facility”).  
     
RBL Facility  
   
Type and Amount:

A revolving reserve-based loan facility (the “RBL Facility”) in an initial aggregate principal amount of $1.75 billion (the loans thereunder, irrespective of tranche (as described below), the “RBL Loans”). The RBL Facility shall consist of two tranches of RBL Loans:

 

Tranche A RBL Exit Facility Loans (the “Tranche A RBL Loans”, and the commitments under the RBL Facility to make such Tranche A RBL Loans, the “RBL Tranche A Commitments”), in an amount equal to $[●], which Tranche A RBL Loans (i) will be partially funded on the Closing Date, (ii) will have a scheduled maturity of 3 years from the Closing Date, (iii) shall at all times be repaid prior to the repayment of any Tranche B RBL Loans and (iv) shall be fully revolving.

 

Tranche B RBL Exit Facility Loans (the “Tranche B RBL Loans”) in an amount equal to $[●], which Tranche B RBL Loans (i) will be fully funded on the Closing Date, (ii) will have a maturity of 4 years from the Closing Date, (iii) will be prepaid or repaid only after no Tranche A RBL Loans remain outstanding, and (iv) once so prepaid or repaid, may not be reborrowed.

 

Amounts funded (or Letters of Credit issued) under the RBL Facility will be available in U.S. dollars.

 

 
     

Term Sheet - RBL Facility

Exhibit B - Page 2

 

 

 

Availability:

The Tranche A RBL Loans shall be available on a revolving basis during the period commencing on the Closing Date and ending on the Revolving Maturity Date (as defined below); provided that no more than $1.25 billion will be funded under the RBL Facility on the Closing Date to fund a portion of the Restructuring Transactions. The full amount of the RBL Facility shall be available for same-day ABR borrowings to the extent borrowing requests are received by 11am Eastern time.

 

At all times, availability under the RBL Facility shall be equal to the lesser of the aggregate RBL Tranche A Commitments and the amount by which the then effective Borrowing Base exceeds the Credit Facilities Total Outstandings.

 

The “RBL Total Outstandings” means, at any time, the aggregate principal amount of RBL Loans (whether Tranche A RBL Loans or Tranche B RBL Loans) then outstanding plus the aggregate stated amount of all issued Letters of Credit and, without duplication, all unreimbursed disbursements on any Letter of Credit as of such date (unless cash collateralized or backstopped pursuant to arrangements reasonably acceptable to the relevant Issuing Lender).

 

The “Credit Facilities Total Outstandings” mean the RBL Total Outstandings plus the outstanding FLLO Term Loans.

 

 
     
Maturity:

The RBL Tranche A Commitments shall terminate and all Tranche A RBL Loans will mature on the date that is three (3) years after the Closing Date (the “RBL Tranche A Termination Date”).

 

The Tranche B RBL Loans will mature on the date that is four (4) years after the Closing Date (the “RBL Tranche B Termination Date”).

 

 
     
Borrowing Base: The RBL Facility shall be subject to the borrowing base described below (it being understood that the Borrowing Base under the RBL Facility is intended to encompass both the RBL Facility and the FLLO Term Loans and that, at any time that the FLLO Term Loans cease to be secured debt, the Borrowing Base will be automatically reduced to the amount of the RBL Facility portion of the Borrowing Base at such time).  The borrowing base for the RBL Facility (the “Borrowing Base”), at any time, shall be based on the aggregate present  value, discounted at 10% per annum, of (i) the proved oil and gas reserves of the Loan Parties located within the geographic boundaries of the United States included in the most recent Reserve Report (as defined below) delivered to the RBL Agent (such properties, the “Borrowing Base Properties”) and (ii) any hedge positions existing at the time of such redetermination, in each case utilizing the RBL Agent’s then current internal bank price deck and approved by the RBL Lenders as provided below.  
     
  The initial borrowing base for the RBL Facility will be $2.5 billion from the date of the initial borrowing under the RBL Facility (the “Closing Date”) until, subject to the rights of optional redetermination and the other adjustments provided for herein, the next redetermination date (provided, that the Required RBL Lenders will confirm the amount of this initial Borrowing Base (or provide a new initial Borrowing Base amount) prior to the Closing Date based on the Initial Reserve Report in a manner substantially similar to the redetermination process described below).  
     
 

The Borrowing Base shall be re-determined semi-annually on or about (i) the date that is six months from the Closing Date (the “First Scheduled Redetermination”)and (ii) thereafter, each May 1 and October 1 to occur after the Closing Date, beginning on the first such date to occur after the redetermination described in clause (i), based upon (i) a reserve report prepared as of the immediately preceding January 1 and July 1, respectively, and other related information, and delivered on or before April 1 and September 1, respectively and/or (ii) other engineering data reasonably acceptable to the RBL Agent (each such report or other engineering data, a “Reserve Report”) and other related information. Each April 1 Reserve Report shall be prepared by an Approved Petroleum Engineer (as defined below) as to 80% by volumes of the Borrowing Base Properties covered thereby, with the balance prepared by or under the supervision of the Borrower’s chief engineer. Each August 1 Reserve Report (and any Reserve Report delivered in connection with any unscheduled redetermination) may be prepared internally by petroleum engineers who are employees of the Borrower or its affiliates. The Borrowing Base shall be calculated and proposed by the RBL Agent on behalf of the Required RBL Lenders in good faith in accordance with its usual and customary oil and gas lending criteria as it exists at the particular time and as specified in the RBL Credit Documentation (as defined below) and approved by the Required RBL Lenders or all of the RBL Lenders, as the case may be. The RBL Agent shall notify the Lenders of the RBL Agent’s proposed amount of the redetermined Borrowing Base after the RBL Agent has received complete engineering reports from the Borrower and has had a reasonable opportunity to determine the proposed Borrowing Base.

 

Approved Petroleum Engineer” means any of (a) Schlumberger N.V., (b) Netherland, Sewell & Associates, Inc., (c) Cawley, Gillespie & Associates, Inc., (d) Ryder Scott Company, L.P., (e) LaRoche Petroleum Consultants, Ltd. and (f) any other independent engineer chosen by the Borrower and reasonably acceptable to the RBL Agent.

 

 

 

Term Sheet - RBL Facility

Exhibit B - Page 3

 

 

  Unscheduled redeterminations of the Borrowing Base may be made (a) following the First Scheduled Redetermination date at the request of the Required RBL Lenders not more than once between any two scheduled redeterminations and (b) at any time (including prior to the First Scheduled Redetermination date as described above) by the Borrower.    
     
  In addition to the foregoing, after the Closing Date, the Borrowing Base shall be subject to automatic reductions between redeterminations in connection with:  
     
  (i)   sales or other dispositions (including in connection with the designation of unrestricted subsidiaries and investments) of Borrowing Base Properties and early monetization or early termination of any hedge positions existing at the time of the last redetermination date and relied on by the RBL Lenders in determining the Borrowing Base since the later of (A) the last redetermination date and (B) the last adjustment made pursuant to this clause (i), with an aggregate Borrowing Base value and Hedge PV (as defined below) with respect to all such Borrowing Base Properties sold or otherwise disposed of and hedge positions monetized or terminated early exceeding 5.0% of the Borrowing Base then in effect (after giving effect to any hedge agreements entered into (1) contemporaneously with such early monetization or termination or (2) subsequent to the last redetermination of the Borrowing Base), in an amount equal to the Hedge PV with respect to such hedge positions monetized or terminated or the Borrowing Base value as determined by the RBL Agent with respect to such Borrowing Base Properties disposed, and taking into account concurrent acquisitions or other investments for which Reserve Reports have been delivered to the RBL Agent and which have been given value by the RBL Agent and the other RBL Lenders; and  
     
  (ii)    only with respect to amounts in excess of the Permitted Debt Prepayment (as defined below), the issuance of any junior lien, unsecured senior or senior subordinated indebtedness after the Closing Date (including any additional “first lien last out” indebtedness) (such additional indebtedness “Specified Additional Debt”) under the basket permitting Specified Additional Debt and any permitted refinancing indebtedness in respect thereof; and in the case of this clause (ii), the Borrowing Base shall be immediately reduced by $0.50 for every $1.00 of Specified Additional Debt that remains outstanding, other than any such indebtedness constituting a permitted refinancing of Specified Additional Debt (only to the extent that the aggregate principal amount of such refinancing indebtedness does not result in an increase in the principal amount thereof plus amounts to fund any original issue discount or upfront fees relating thereto plus amounts to fund accrued interest, fees, expenses, premiums, etc. thereon).  

 

Term Sheet - RBL Facility

Exhibit B - Page 4

 

 

 

Hedge PV” means, with respect to any commodity hedge contract, the present value, discounted at 10% per annum, of the future receipts expected to be paid to the Borrower or its restricted subsidiaries under such hedge contract netted against the RBL Agent’s then current internal bank price deck; provided, that the “Hedge PV” shall never be less than $0.00.

 

PV-10” means the present value of the Loan Parties’ oil and gas properties (calculated before federal and state income taxes (but not other taxes customarily included in such calculation, including sales, ad valorem and severance taxes), discounted at 10% per annum, of the future net revenues expected to accrue to the Loan Parties’ collective interests in such reserves during the remaining expected economic lives of such reserves, calculated in a manner consistent with past practice and other than in respect of calculating the Total PDP PV-10 (which shall be calculated using the Ten Year Strip Price), shall be calculated using the RBL Agent’s then current internal bank price deck.

 

Total PDP PV-10” means, as of any date of determination, the PV-10 of the Loan Parties’ oil and gas properties characterized as Proved Developed Producing reserves and any hedge positions existing on such date. Each calculation of such Total PDP PV-10 shall be made (a) using the Ten-Year Strip Price adjusted in a manner reasonably acceptable to the RBL Agent for any basis differential, quality and gravity, (b) using costs as of the date of estimation without future escalation, and without giving effect to non-property related expenses such as general and administrative expenses, debt service, future income tax expense and depreciation, depletion and amortization, and (c) to the extent not otherwise specified in the preceding clauses of this sentence, using reasonable economic assumptions consistent with such clauses. Total PDP PV-10 shall be calculated on a pro forma basis, giving effect to (i) acquisitions and dispositions of oil and gas properties consummated by the Borrower and the other Loan Parties since the date of the Reserve Report most recently delivered to the RBL Agent (provided that, in the case of any acquisition of oil and gas properties, the RBL Agent shall have received a Reserve Report, in form and substance reasonably satisfactory to it, evaluating the proved developed producing reserves attributable thereto) and (ii) the unwind, monetization or termination of, or the entry into, any hedge agreement to which a Loan Party is a party, in each case occurring since the date of the Reserve Report most recently delivered to the RBL Agent.

 

Ten-Year Strip Price” means, as of any date, (a) for the 120-month period commencing with the month in which such date occurs, as quoted on the New York Mercantile Exchange (the “NYMEX”) adjusted for applicable differentials (based on average of last twelve (12) months actuals) and hedge agreements and published in a nationally recognized publication for such pricing reasonably acceptable to the RBL Agent (as such prices may be corrected or revised from time to time by the NYMEX in accordance with its rules and regulations), the corresponding monthly quoted futures contract price for such months 0–120 and (b) for periods after such 120 month period, the average corresponding monthly quoted futures contract price for months 108-120.

 

 

 

Term Sheet - RBL Facility

Exhibit B - Page 5

 

 

Letters of Credit: $200 million of the RBL Tranche A Commitments shall be available for the issuance of letters of credit, including documentary letters of credit in U.S. dollars (the “Letters of Credit”), by the RBL Agent and one or more RBL Lenders reasonably acceptable to the Borrower (in such capacity, each, an “Issuing Lender”).  No Letter of Credit shall have an expiration date after the earlier of (a) 1 year after the date of issuance or such longer period of time as may be agreed to by the applicable Issuing Lender and (b) 3 business days prior to the RBL Tranche A Termination Date; provided that any Letter of Credit with a 1-year tenor may provide for automatic or “evergreen” renewal thereof for additional 1-year periods (which shall in no event extend beyond the date referred to in clause (b) above unless cash collateralized or backstopped pursuant to arrangements reasonably satisfactory to the Issuing Lender thereof).  So long as the Borrower is the primary obligor and a signatory to a request for the issuance of a Letter of Credit, Letters of Credit may be issued for the account of the Borrower or any of the Restricted Subsidiaries.  
     
  Any drawing under any Letter of Credit shall be reimbursed by the Borrower (whether with its own funds or with the proceeds of RBL Loans) within 3 business days after notice thereof is received by the Borrower from the relevant Issuing Lender.  To the extent that the Borrower does not so reimburse the Issuing Lender within such time period, the RBL Lenders shall be irrevocably and unconditionally obligated to fund participations in the reimbursement obligations on a pro rata basis based on their respective RBL Tranche A Commitments.  
     
  Letters of Credit may be issued on the Closing Date in the ordinary course of business and to replace or provide credit support for any existing letters of credit (including by “grandfathering” such existing letters of credit into the RBL Facility).  
     
Use of Proceeds: The proceeds of the RBL Loans may be used (a) on the Closing Date, (i)  to finance a portion of the Restructuring Transactions, including the refinancing of the DIP Facility and the Prepetition Credit Facility and the payment of related fees and expenses, (ii) to finance working capital and the payment of transaction costs and (iii) to finance working capital needs and other general corporate purposes and (b) after the Closing Date, to finance the working capital needs and other general corporate purposes of the Borrower and its subsidiaries (including for capital expenditures, acquisitions, working capital and/or purchase price adjustments, the payment of transaction fees and expenses, other investments, restricted payments and any other purpose not prohibited by the RBL Credit Documentation).  

 

Term Sheet - RBL Facility

Exhibit B - Page 6

 

 

CERTAIN PAYMENT PROVISIONS  
Interest Rates and Fees: As set forth on Annex I hereto.  
     
Optional Prepayments and Commitment Reductions:

RBL Loans may be prepaid and the RBL Tranche A Commitments may be reduced, in whole or in part, without premium or penalty, in minimum amounts to be agreed, at the option of the Borrower at any time upon 1 business day’s (or, in the case of a prepayment of RBL Eurodollar Loans (as defined on Annex I hereto), 3 business days’) prior notice, subject to reimbursement of the RBL Lenders’ redeployment costs in the case of a prepayment of RBL Eurodollar Loans prior to the last day of the relevant interest period. Optional prepayments of the RBL Loans shall, subject to the paragraph below, be applied to the installments of the RBL Loans as directed by the Borrower (or in the absence of direction from the Borrower, in the direct order of maturity).

 

All prepayments or repayments of RBL Loans, whether optional or mandatory, shall first be applied to Tranche A RBL Loans until no Tranche A RBL Loans remain outstanding.

 

 
     
Mandatory Prepayments: At any time when Credit Facilities Total Outstandings exceeds the Borrowing Base then in effect (such difference being a “Borrowing Base Deficiency”), the Borrower shall, within ten (10) business days after written notice from the RBL Agent to the Borrower of such Borrowing Base Deficiency, notify the RBL Agent that it intends to take one or any combination of the following actions:  
     
  (A)   within thirty (30) days after such notice from the RBL Agent, execute and deliver mortgages reasonably acceptable to the RBL Agent encumbering additional Borrowing Base Properties (accompanied by acceptable engineering reports with respect to such properties) to the extent necessary to eliminate such Borrowing Base Deficiency  (with acceptable title information with respect to 85% of the PV-10 value of such Borrowing Base Properties to follow within sixty (60) days of the delivery of such mortgages);  
     
  (B)   within thirty (30) days after such notice from the RBL Agent, prepay the RBL Loans in an amount sufficient to eliminate such Borrowing Base Deficiency; or  
     
 

(C)    prepay the RBL Loans in an amount sufficient to eliminate such Borrowing Base Deficiency in three equal monthly installments, with interest, beginning on the 30th day after the Borrower’s receipt of notice of such Borrowing Base Deficiency from the RBL Agent (as such Borrowing Base Deficiency may be increased or reduced during such three-month period as a result of a Borrowing Base redetermination or other adjustment of the Borrowing Base);

 

provided, that if the Borrowing Base is reduced as the result of (i) an asset sale or disposition of Borrowing Base Properties or the monetization or early termination of any hedge position in excess of 5% of the value of the Borrowing Base or (ii) the issuance of Specified Additional Debt (as described in the section captioned “Borrowing Base”) and a Borrowing Base Deficiency results from such reduction, then the Borrower shall immediately (and in any event within one (1) business day after the receipt of net cash proceeds therefrom) eliminate such Borrowing Base Deficiency with the proceeds of such asset sale, disposition or monetization or early termination of any hedge position or the issuance of Specified Additional Debt, as applicable. Additionally, any Borrowing Base Deficiency resulting from a voluntary termination or reduction of Commitments shall be required to be eliminated on the date of such termination.

 

Notwithstanding the foregoing, any net proceeds from the incurrence of junior debt otherwise permitted under the RBL Credit Documentation shall be used to repay the FLLO Term Loans at par (the “Permitted Debt Prepayment”).

 

In addition, the RBL Credit Documentation will contain a customary anti-cash hoarding prepayment provision that is consistent with the Prepetition Credit Facility, except that the five (5) business day cure period shall be replaced with three (3) business days and the limits on cash on hand shall be reduced from $100 million to $75 million.

 

 

 

Term Sheet - RBL Facility

Exhibit B - Page 7

 

 

 

The RBL Loans shall be prepaid and the Letters of Credit shall be cash collateralized or otherwise “backstopped” or replaced to the extent all such extensions of credit under the RBL Facility exceed the RBL Tranche A Commitments.

 

 
     
COLLATERAL Subject to the provisions of the immediately following paragraphs, the Borrower Obligations and the obligations of each other Loan Party under its Guaranty shall be secured by a perfected first-priority security interest (subject to permitted liens and other exceptions to be set forth in the RBL Credit Documentation) in substantially all of the Loan Parties’ tangible and intangible assets (including, without limitation, (i) a pledge of the capital stock of each Loan Party’s direct subsidiaries (other than Unrestricted Subsidiaries and otherwise subject to customary exceptions), (ii) all as-extracted collateral arising from the Borrowing Base Properties, accounts receivable with respect to sales of hydrocarbons from the Borrowing Base Properties, inventory and equipment related to the Borrowing Base Properties, cash and cash equivalents, general intangibles, investment property, all deposit and securities accounts and (iii) all of the Borrowing Base Properties (it being understood that the Loan Parties shall only be required at any time to maintain mortgages on at least 90% of the PV-10 value of the Borrowing Base Properties to which proved reserves are attributed) and the proceeds of the foregoing) (the “Collateral”).  
     
  Notwithstanding the foregoing, there shall be customary exclusions, consistent with the Prepetition Credit Agreement, from the Collateral, including, but not limited to (a) any property or asset the grant or perfection of a security interest in which would result in adverse tax consequences as reasonably determined by the Borrower and the RBL Agent, (b) any property or asset the grant or perfection of a security interest in which would require governmental consent, approval, license or authorization and (c) any building or manufactured (mobile home) (as defined in applicable flood insurance regulations).  
     
  The priority of security interests and relative rights of the lenders under the RBL Facility and the lenders under the FLLO Term Loan Facility shall be subject to collateral agency arrangements set forth in a collateral agency agreement (the “Collateral Agency Agreement”) substantially similar to the collateral agency agreement executed in connection with the Prepetition Credit Facility and which shall provide, among other provisions, that the obligations under the FLLO Term Loan Facility shall be junior in right of repayment to the RBL Facility at all times.  
     
  The RBL Credit Documentation will authorize the RBL Agent or other collateral trustee, as applicable, to enter into customary intercreditor arrangements in respect additional debt that is permitted to be incurred and secured under the RBL Credit Documentation on a pari passu or junior basis with the RBL Facility.  The material terms of such collateral agency arrangements shall be reasonably acceptable to the RBL Agent and the Borrower.  
     
TITLE In connection with each scheduled redetermination of the Borrowing Base, the Borrower shall deliver such information (in form and substance reasonably satisfactory to the RBL Agent) on Borrowing Base Properties as is required to demonstrate satisfactory title on 85% of the PV-10 value of the Borrowing Base Properties included in the most recent Reserve Report.  
     
CERTAIN CONDITIONS    
     
Closing Conditions: As set forth on Exhibit D.  
     
Post-Closing Conditions:

The making of each RBL Loan and the issuance, amendment, modification, renewal or extension of a Letter of Credit (other than any amendment, modification, renewal or extension of a Letter of Credit which does not increase the face amount of such Letter of Credit) after the Closing Date, in each case, shall be conditioned upon (a) the accuracy in all material respects of all representations and warranties in the RBL Credit Documentation (except in the case of any such representation which expressly relates to a given date or period, such representation and warranty shall be true and correct in all material respects as of the respective date or for the respective period, as the case may be), (b) the Borrower holding no more than $75 million of cash on hand after giving effect to such extension of credit (and the use of proceeds therefrom within 3 business days), (c) there being no default or event of default in existence at the time of, or after giving effect to the making of, such extension of credit, and (d) delivery of a customary borrowing notice or request for issuance of a Letter of Credit, as applicable.

 

 

 

Term Sheet - RBL Facility

Exhibit B - Page 8

 

 

DOCUMENTATION  
   
RBL Credit Documentation: The definitive financing documentation for the RBL Facility (the “RBL Credit Documentation”), which will be drafted by the counsel to the RBL Agent, shall, except as otherwise set forth herein, have substantially the same terms, representations and warranties, covenants and events of default as set forth in the Prepetition Credit Agreement; provided that all such terms, representations and warranties, covenants and events of default shall be modified to (a) except to the extent set forth herein, reflect terms and conditions (including carve-outs and baskets) that are customary as of the Closing Date for similarly-sized reserve based revolving credit facilities and (b) reflect such other terms as the Borrower and the RBL Lead Arranger shall agree (the “Documentation Principles”).
   
Representations and Warranties:

Subject to the Documentation Principles, to be substantially the same as the Prepetition Credit Agreement and to be limited to the following:

 

·      organizational existence and corporate status;

 

·      organizational power and authority;

 

·      due authorization, execution and delivery of the RBL Credit Documentation;

 

·      enforceability of the RBL Credit Documentation;

 

·      no conflicts of the RBL Credit Documentation with applicable law, organizational documents or contractual obligations;

 

·      financial statements for periods ended after the Closing Date;

 

·      no material adverse effect;

 

·      capitalization of subsidiaries;

 

·      compliance with laws;

 

·      use of proceeds not in violation of FCPA, OFAC and the PATRIOT Act; Beneficial Ownership Certification

 

·      governmental and third party approvals and consents;

 

·      ERISA and labor matters; environmental matters;

 

·      litigation;

 

·      ownership of property;

 

·      taxes;

 

·      Federal Reserve margin regulations; Investment Company Act;

 

·      hedge agreements;

 

·      pari passu or priority status;

 

·      true and complete disclosure; and

 

·      solvency (to be defined in a manner consistent with Annex I to Exhibit D) of the Borrower and its Restricted Subsidiaries, taken as a whole, on the Closing Date; and the creation, validity and perfection of security interests.

 

  The foregoing representations and warranties shall apply to the Borrower and its Restricted Subsidiaries (with certain exceptions to cover all subsidiaries to be agreed).

 

Term Sheet - RBL Facility

Exhibit B - Page 9

 

 

Affirmative Covenants:

Subject to the Documentation Principles, to be substantially the same as the Prepetition Credit Agreement and to be limited to the following:

 

·      delivery of (i) annual audited financial statements within five business days after the date on which such financial statements are required to be filed with the SEC (after giving effect to any permitted extensions) (or, if such financial statements are not required to be filed with the SEC, on or before the date that is 90 days after the end of each such fiscal year) (accompanied by an opinion of an independent accounting firm that is not subject to (or does not contain) a “going concern” qualification or explanatory paragraph or qualification as to the scope of the relevant audit (other than with respect to, or resulting from, (i) the occurrence of the maturity date of the RBL Facility within one year from the date such opinion is delivered or (ii) any potential inability to satisfy the Financial Covenants (as provided below) on a future date or in a future period)), (ii) quarterly unaudited financial statements (for each of the first 3 fiscal quarters of each fiscal year) within five Business Days after the date on which such financial statements are required to be filed with the SEC (after giving effect to any permitted extensions) (or, if such financial statements are not required to be filed with the SEC, on or before the date that is 60 days after the end of each such quarterly accounting period), (iii) officers’ certificates and (iv) other information reasonably requested by the RBL Agent;

 

·      beneficial ownership certification (only upon knowledge of changes thereto);

 

·      notices of default, litigation, environmental matters and certain other events;

 

·      maintenance of books and records; maintenance of existence; maintenance of insurance; maintenance of properties

 

·      payment of taxes;

 

 

Term Sheet - RBL Facility

Exhibit B - Page 10

 

 

   

·      control agreements;

 

·      compliance with laws (including ERISA and environmental laws);

 

·      maintenance of property and insurance; payment of taxes; right of the RBL Agent to inspect property and books and records (subject to frequency and cost reimbursement limitations) (no more than once per year, unless an Event of Default is ongoing);

 

·      use of proceeds;

 

·      reserve reports, lease operating statements, and hedge schedules; title information (as described above); supplemental mortgages (if necessary, with each scheduled redetermination);

 

·      designation of Unrestricted Subsidiaries;

 

·      further assurances on guaranty and Collateral matters (including, without limitation, with respect to additional guarantors, guarantees and security interests in after-acquired property), subject to the parameters set forth under “Collateral” above; and

 

·      minimum required hedging of the Borrower and its Restricted Subsidiaries attributable to PDP reserves for each of (i) crude oil and (ii) natural gas liquids and natural gas (taken together), with each of (i) and (ii) calculated separately as follows: (A) 80% from the Closing Date to the 24th month after the Closing Date; (B) 65% for the 25th month after the Closing Date to the 36th month after the Closing Date and (C) 50% for the 37th to the 48th month after the Closing Date; provided, that, if the Borrower reasonably determines that, after working in good faith with the applicable counterparties, the RBL Lenders (and their affiliates) have insufficient aggregate capacity or are unwilling or otherwise fail or refuse to enter into hedge agreements with one or more Loan Parties on commercially reasonable terms consistent with terms available to other similarly situated borrowers, then the minimum hedging requirements shall be reduced solely to the extent necessary to reflect the maximum volumes for which the RBL Lenders (and their respective affiliates) have insufficient aggregate capacity, willingness or otherwise fail or refuse to enter into such hedge agreements.

 
  The foregoing affirmative covenants shall apply to the Borrower and its Restricted Subsidiaries.

 

Term Sheet - RBL Facility

Exhibit B - Page 11

 

 

Financial Covenants:

Limited to (i) First Lien Leverage Ratio, (ii) Total Leverage Ratio, (iii) Current Ratio and (iv) Secured Debt Coverage Ratio, measured for the Borrower and the Loan Parties.

 

 

The “First Lien Leverage Ratio” shall be no more than 2.75 to 1.00 and will be defined as the ratio of (a) consolidated debt that is secured on a first-priority basis by all or any portion of the Collateral (including the Credit Facilities Total Outstandings), net of unrestricted cash and cash equivalents held in a pledged account in an amount not to exceed $100 million (the “Unrestricted Cash Amount”) to (b) Consolidated EBITDAX (subject to the last paragraph of this Section).

 

The “Total Leverage Ratio” shall be no more than 3.50 to 1.00 and will be defined as the ratio of (a) Consolidated Indebtedness (defined in a manner consistent with the Documentation Principles) net of the Unrestricted Cash Amount to (b) Consolidated EBITDAX (subject to the last paragraph of this Section).

 

The “Current Ratio” shall be no less than 1.00 to 1.00 and will be defined as the ratio of consolidated current assets of the Borrower and its Restricted Subsidiaries (including the unused amount of the RBL Tranche A Commitments as of such date, but excluding non-cash assets under FAS 133 or ASC 815) to (b) consolidated current liabilities of the Borrower and its Restricted Subsidiaries as of such date (excluding (i) non-cash obligations under FAS 133 (or ASC 815), (ii) current maturities under the Credit Facilities and other current maturities of long-term indebtedness and (iii) such other exclusions as shall be reasonably agreed to in the RBL Credit Documentation).

 

The “Secured Debt Coverage Ratio shall be no less than 1.50 to 1.00 and will be defined as the ratio of Total PDP PV-10 to total consolidated debt that is secured (including the Credit Facilities Total Outstandings and any other secured debt).

 

 

The Financial Covenants shall be tested as of the last day of each fiscal quarter of the Borrower (beginning with the first full fiscal quarter to occur after the Closing Date); provided, that the Secured Debt Coverage Ratio shall be measured semi-annually contemporaneously with the delivery of the Reserve Report (beginning with the first Reserve Report delivered after the Closing Date).

 

For purposes of the RBL Credit Documentation, “Consolidated EBITDAX” (and component definitions, including, without limitation, Consolidated Net Income) will be defined subject to the Documentation Principles, and will include certain addbacks, including, without limitation, addbacks for costs and expenses related to the implementation of fresh start accounting and costs and expenses incurred in connection with restructuring activities (including the Restructuring Transactions).

 

Term Sheet - RBL Facility

Exhibit B - Page 12

 

 

 

Specified Quarter” shall mean the fourth fiscal quarter of 2020 based on actual numbers to the extent the testing date is in 2021 and, to the extent the testing date is in 2020 based on actual numbers for such portion of the fiscal quarter prior to the Closing Date, and based on reasonable pro forma projections for such portion of the fiscal quarter after the Closing Date.

 

Consolidated EBITDAX” shall be calculated on a building annualized basis so that (i) for a testing date in 2020 or a testing date in the first fiscal quarter of 2021 (up to but not including the last day of the first fiscal quarter of 2021), Consolidated EBITDAX for such quarter shall be calculated by multiplying Consolidated EBITDAX for the Specified Quarter by four, (ii) for a testing date on the last day of the first fiscal quarter of 2021 or the second fiscal quarter of 2021 (up to but not including the last of the second fiscal quarter of 2021), Consolidated EBITDAX for such quarter shall be calculated by multiplying Consolidated EBITDAX for the first fiscal quarter of 2021 by four, (iii) for a testing date on the last day of the second fiscal quarter or in the third fiscal quarter of 2021 (up to but not including the last day of the third fiscal quarter), Consolidated EBITDAX for the such quarter shall be calculated by multiplying Consolidated EBITDAX for the first two fiscal quarters in 2021 by two and (iv) for a testing date on the last day of the third fiscal quarter of 2021 or the fourth fiscal quarter of 2021 (up to but not including the last day of the fourth fiscal quarter), the first three fiscal quarters of 2021 multiplied by four divided by three or (b) for a testing date on any date thereafter, Consolidated EBITDAX for the immediately preceding four fiscal quarter period.

 

Negative Covenants:

Subject to the Documentation Principles, to be substantially the same as the Prepetition Credit Agreement to be limited to:

 

 

(a)    indebtedness (including guarantee obligations in respect of indebtedness), with exceptions for, among other things,

 

 

(i)            purchase money indebtedness and capital leases;  

 

 

(ii)           a general incurrence-based debt basket for Specified Additional Debt subject to (a) pro forma compliance with the Financial Covenants, (b) no Default or Event of Default and (c) a Total Leverage Ratio no greater than 3.00 to 1.00;

 

(iii)          the Exit FLLO Term Loan Facility or any permitted refinancing or permitted replacements thereof; and

 

(iii)          a general debt basket in an amount to be agreed;

 

Term Sheet - RBL Facility

Exhibit B - Page 13

 

 

  (b)   liens, including a general lien basket in an amount to be agreed, liens attaching to Specified Additional Debt (as provided above) and liens securing the Exit FLLO Term Loan Facility or any last out or junior liens securing any permitted refinancing or permitted replacements thereof;
  (c)   mergers, consolidations, liquidations and dissolutions;
  (d)   sales, dispositions or transfers of assets;
  (e)   dividends or distributions on, return of capital, payment or delivery of property or cash to equity holders, or redemptions, retirement or repurchases of, or other restricted payments in respect of, the equity interests of the Borrower or the other Loan Parties;
  (f)    acquisitions, investments, loans and advances and other investments;
  (g)   limitations on junior debt payments and amendments;
  (h)   burdensome agreements in respect of negative pledge clauses with respect to the Collateral;
  (i)    transactions with affiliates;
  (j)    limitation on subsidiary distributions;
  (k)   changes in fiscal year;
  (l)    amendments of organizational documents of the Loan Parties and material contracts of the Loan Parties, in each case, that are materially adverse to the RBL Lenders;
  (m)   use of proceeds;
  (n)   sanctions; anti-corruption use of proceeds; and
  (o)   maximum permitted hedging of the Borrower and its Restricted Subsidiaries attributable to PDP reserves for each of (i) crude oil and (ii) natural gas liquids and natural gas (taken together), with each of (i) and (ii) calculated separately as follows:  (A) 90% for each of the first two years; and (B) 80% for the third year and thereafter.
  The RBL Credit Documentation will contain provisions pursuant to which, subject to customary limitations on investments in Unrestricted Subsidiaries, the Borrower will be permitted to designate (or re-designate) any existing or subsequently acquired or organized Restricted Subsidiary as an “unrestricted subsidiary” (each, an “Unrestricted Subsidiary”) and designate (or re-designate) any such Unrestricted Subsidiary as a Restricted Subsidiary; provided, that after giving effect to any such designation or re-designation, no default or Event of Default shall exist.  

 

Term Sheet - RBL Facility

Exhibit B - Page 14

 

 

Events of Default: Subject to the Documentation Principles, to be substantially the same as the Prepetition Credit Agreement (including materiality thresholds, exceptions and grace periods) and to be limited to: nonpayment of principal when due; nonpayment of interest or regularly scheduled fees; nonpayment of other amounts after five days; material inaccuracy of a representation or warranty when made; violation of a covenant (with certain covenants subject to a 30 day grace period); cross-default to material indebtedness in excess of an amount to be reasonably agreed; bankruptcy events with respect to the Borrower or a material Restricted Subsidiary; certain ERISA events; unpaid, final judgments involving a liability in excess of an amount to be reasonably agreed that have not been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; actual (or assertion by a Loan Party in writing) of the invalidity of any guarantee or any material security document; and a change of control (consistent with the Prepetition Credit Agreement but giving effect to certain “permitted holder” modifications).  
Voting: Amendments and waivers of the RBL Credit Documentation will require the approval of RBL Lenders that are non-defaulting RBL Lenders holding more than 50% of the aggregate amount of the RBL Loans and the RBL Tranche A Commitments (the “Majority RBL Lenders”), except that:
  (a)   the consent of each RBL Lender directly and adversely affected thereby (but not the Majority RBL Lenders) shall be required with respect to:
  (i)     reductions in the principal amount of any RBL Loan owed to such RBL Lender or any scheduled amortization payment thereon,
  (ii)   extensions of the final maturity of any RBL Loan owed to such RBL Lender or any scheduled amortization payment thereon or the due date of any interest or fee payment owed to such RBL Lender (in each case other than any extension for administrative convenience),
  (iii)  reductions in the rate of interest (other than a waiver of default interest) or the amount of any fees owed to such RBL Lender (it being understood that any change in the definitions of any ratio used in the calculation of such rate of interest or fees (or the component definitions) shall not constitute a reduction in any rate of interest or fees),

 

Term Sheet - RBL Facility

Exhibit B - Page 15

 

 

  (iv)  increases in the amount of such RBL Lender’s RBL Loans or RBL Tranche A Commitment (it being understood that a waiver of any condition precedent or the waiver of any default, event of default or mandatory prepayment shall not constitute an increase of any RBL Loan or RBL Tranche A Commitment of any RBL Lender), and
  (v)   extensions of the expiry date of such RBL Lender’s RBL Tranche A Commitment (it being understood that a waiver of any condition precedent or the waiver of any default, event of default or mandatory prepayment shall not constitute an extension of any commitment of any RBL Lender, which shall only require a Majority RBL Lender vote).
  (b)   the consent of 66.67% (calculated as provided above) of the Tranche A RBL Lenders (other than Non-Participating Lenders (as such term is defined in the DIP Credit Agreement) and any affiliates thereof (the “Non-Participating Lenders”)) (the “Required RBL Lenders”) shall be required in the case of decreases in, or reaffirmations of, the Borrowing Base (other than as set forth in the section titled “Borrowing Base”);
  (c)    the consent of 100% of the RBL Lenders shall be required with respect to:
  (i)    reductions of any of the voting percentages set forth in the definition of “Majority RBL Lenders” or “Required RBL Lenders”,
  (ii)    releases of all or substantially all of the Collateral, and
 

(iii)   releases of all or substantially all of the value of the Guaranty,(other than, in the case of clauses (ii) and (iii) above, to the extent otherwise in accordance with the RBL Credit Documentation).

 

(d)   the consent of 100% of the Tranche A RBL Lenders (excluding any Non-Participating Lender) shall be required with respect to any increase in the Borrowing Base (it being understood that any redetermination of the Borrower Base may be extended or postponed with the consent of Majority Lenders).

 

Notwithstanding the foregoing, amendments and waivers of the Financial Covenants (or any of financial definitions included in (and for purposes of) the Financial Covenants) will require only the consent of the Majority RBL Lenders and no other consents or approvals shall be required.

 

Term Sheet - RBL Facility

Exhibit B - Page 16

 

 

 

The RBL Credit Documentation shall contain provisions allowing the Borrower to replace a RBL Lender in connection with amendments and waivers requiring the consent of the Required RBL Lenders, all RBL Lenders or of all RBL Lenders directly affected thereby (so long as the Majority RBL Lenders or a majority of the relevant affected RBL Lenders, as the case may be, consent thereto), increased costs, taxes, etc. and “defaulting” or insolvent RBL Lenders.

 

Any provision of the RBL Credit Documentation may be amended by an agreement in writing signed by the RBL Agent and the Borrower to cure any immaterial ambiguity, omission, defect or inconsistency.

 

Defaulting Lenders:

The RBL Credit Documentation shall contain customary limitations on and protections with respect to “defaulting” RBL Lenders (including provisions relating to cash collateral requirements for such RBL Lender; reallocation of participations in, or the Borrower providing cash collateral to support Letters of Credit; suspension of voting rights and rights to receive certain fee and other payments; termination or assignment of the commitments or RBL Loans of such defaulting RBL Lender and any RBL Lender subject to customary “EU Bail-In” provisions). Defaulting RBL Lenders will not be entitled to receive commitment or Letter of Credit fees.

 

Assignments and Participations: The RBL Lenders shall be permitted to assign all or a portion of their RBL Loans and RBL Tranche A Commitments with the consent of (a) the Borrower (such consent not to be unreasonably withheld), unless an event of default has occurred and is continuing or such assignment is to a RBL Lender, an affiliate of a RBL Lender or an Approved Fund (as defined below) (but if in respect of the RBL Facility, only to another RBL Lender under the RBL Facility); provided that the Borrower shall be deemed to have consented to any assignment unless it shall have objected thereto by written notice to the RBL Agent within 10 business days after having received written notice thereof, (b) the RBL Agent (not to be unreasonably withheld), and (c) each Issuing Lender (not to be unreasonably withheld).  In the case of partial assignments (other than to another RBL Lender, an affiliate of a RBL Lender or an Approved Fund), the minimum assignment amount shall be $15 million (and $1 million increments above such amount) unless otherwise agreed by the Borrower and the RBL Agent (or, in each case, if less, all of the relevant RBL Lender’s remaining loans and commitments of the applicable class).  The RBL Agent shall receive a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the RBL Agent) in connection with all assignments.  

 

Term Sheet - RBL Facility

Exhibit B - Page 17

 

 

 

Approved Fund” means, with respect to any RBL Lender, any person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities and is administered, advised or managed by (i) such RBL Lender, (ii) an affiliate of such RBL Lender or (iii) an entity or an affiliate of an entity that administers, advises or manages such RBL Lender.

 

 

Pledges of RBL Loans in accordance with applicable law shall be permitted without restriction.

 

Yield Protection and Taxes:

The RBL Credit Documentation shall contain customary provisions (a) protecting the RBL Lenders against increased costs or loss of yield resulting from changes in reserve, capital adequacy and other requirements of law and (b) indemnifying the RBL Lenders for “breakage costs” incurred in connection with, among other things, any prepayment of a RBL Eurodollar Loan on a day other than the last day of an interest period with respect thereto.  The RBL Credit Documentation shall contain a customary tax gross up.  

 

Expenses and Indemnification: The Borrower shall pay (a) all reasonable and documented out-of-pocket expenses (and with respect to legal expenses, limited to reasonable fees, disbursements and other charges of one primary outside counsel, and if necessary, of a single firm of local outside counsel in each material jurisdiction for all persons, taken as  whole (unless there is an actual or perceived conflict of interest in which case all such similarly situated persons, taken as a whole, may retain an outside counsel upon written notice to the Borrower and RBL Agent), in each case, to the RBL Agent) of the RBL Agent and the RBL Lead Arranger incurred on or after the Closing Date within ten (10) days after written demand thereof associated with the syndication of the RBL Facility and the preparation, execution, delivery and administration of the RBL Credit Documentation and any amendment or waiver with respect thereto and (b) all reasonable out-of-pocket expenses of the RBL Agent and the RBL Lenders within ten (10) days after written demand thereof in connection with the enforcement of the RBL Credit Documentation.

 

Term Sheet - RBL Facility

Exhibit B - Page 18

 

 

 

The RBL Agent, the RBL Lead Arranger and the RBL Lenders (and their affiliates and their respective officers, directors, employees, agents, advisors and other representatives) (each, an “indemnified person”) will be indemnified for and held harmless against, any losses, claims, damages and liabilities (it being understood that any such losses, claims, damages or liabilities that consist of legal fees and/or expenses shall be limited to the actual reasonable and documented out-of-pocket fees, disbursements and other charges of one counsel to all indemnified persons taken as a whole and, solely in the case of a conflict of interest, one additional counsel to all affected indemnified persons taken as a whole, and, if reasonably necessary, one local counsel in any relevant material jurisdiction to all indemnified persons, taken as a whole and, solely in the case of an actual or reasonably perceived conflict of interest, one additional local counsel to all affected indemnified persons, taken as a whole, in each case incurred in connection with investigating or defending any claim, litigation or proceeding relating to the RBL Facility or the use or the proposed use thereof) incurred in respect of the RBL Facility or the use or the proposed use of proceeds thereof, except to the extent they arise from the gross negligence or willful misconduct of the RBL Credit Documentation by, such indemnified person, in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction or any dispute solely among the indemnified persons (other than any claims against an indemnified person in its capacity as the RBL Agent or RBL Lead Arranger) and not arising out of any act or omission of the Borrower, or any of its subsidiaries.  None of the indemnified persons, the Borrower, any subsidiary of the Borrower or any affiliates or directors, officers, employees, agents, advisors or other representatives of any of the foregoing shall be liable for any special, indirect, consequential or punitive damages in connection with the RBL Facility (including the use or intended use of the proceeds of the RBL Facility); provided that the foregoing shall not limit the indemnification obligations in the immediately preceding sentence to the extent including in any third party claim in connection with which such indemnified person is entitled to indemnification hereunder.  Notwithstanding the foregoing, each indemnified person shall be obligated to refund and return any and all amounts paid by the Borrower to such indemnified person for fees, expenses or damages to the extent such indemnified person is not entitled to payment of such amounts in accordance with the terms hereof.

 

   Governing Law and Forum:

New York.

 

Counsel to the RBL Agent and

the RBL Lead Arranger:

 

 

Sidley Austin LLP.

 

 

Term Sheet - RBL Facility

Exhibit B - Page 19

 

 

EXHIBIT C

 

First Lien Last Out Term Loan Facility

Summary of Terms and Conditions

 

Set forth below is a summary of the principal terms and conditions for the FLLO Term Loan Facility. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Commitment Letter to which this Exhibit C is attached or on Exhibits B or D (including the Annexes hereto and thereto) attached thereto; provided, that in the event any such capitalized term is subject to multiple and differing definitions, the appropriate meaning shall be determined by reference to the context in which it is used.

 

PARTIES  
Borrower: Chesapeake Energy Corporation.
Guarantors: All obligations of the Borrower under the FLLO Term Loan Facility will be unconditionally guaranteed on a senior basis by the same Guarantors that guarantee the RBL Facility.
Lead Arranger and Bookrunner: MUFG Union Bank, N.A. will act as lead arranger and bookrunner for the FLLO Term Loan Facility (in such capacity, the “FLLO Lead Arranger”).
Joint Lead Arrangers and Joint Bookrunners Bank of America, N.A., BMO Capital Markets Corp., Wells Fargo Securities, LLC, Citibank, N.A., JPMorgan Chase Bank, N.A., and Royal Bank of Canada will act as joint lead arrangers and joint bookrunners for the FLLO Term Loan Facility.
FLLO Term Loan Administrative Agent and Collateral Agent:   MUFG Union Bank, N.A. or an affiliate thereof will act as the sole and exclusive administrative agent and collateral agent for the FLLO Term Lenders referred to below (in such capacities, the “FLLO Term Loan Agent” and, together with the RBL Agent, the “Agents”).
FLLO Term Lenders: Holders of DIP Claims (as defined in the Restructuring Support Agreement) (collectively, and together with any person that becomes a lender by assignment as set forth under the heading “Assignments and Participations” below, the “FLLO Term Lenders”).

 

Term Sheet – FLLO Term Loan Facility
Exhibit C – Page 1

 

 

TYPE AND AMOUNT OF FLLO TERM LOAN FACILITY
Type and Amount: A 5-year first lien last out term loan facility (the “FLLO Term Loan Facility”) in an aggregate principal amount of $750 million (the loans thereunder, the “FLLO Term Loans” and, together with the RBL Loans, the “Loans”).
Amortization: Commencing the first full quarter following the Closing Date, quarterly amortization of principal in equal installments of 0.25% of the funded FLLO Term Loan amounts.
Maturity: The FLLO Term Loans will mature on the date which is 5 years following the Closing Date (the “FLLO Term Loan Maturity Date”).
Availability: The FLLO Term Loans shall be made in a single drawing on the Closing Date.  Repayments and prepayments of the FLLO Term Loans may not be reborrowed.
Use of Proceeds: Same as the RBL Facility.
CERTAIN PAYMENT PROVISIONS
Interest Rates and Fees: As set forth on Annex I hereto.
Optional Prepayments:

The FLLO Term Loans will be non-callable until the second anniversary of the Closing Date (provided that the FLLO Term Loans may be repaid without premium or penalty within 90 days of the Closing Date to the extent that, at the time of such repayment, at least 50.1% of the FLLO Term Loans are held by the initial holders thereof). Thereafter, and to the extent permitted by the RBL Credit Documentation, FLLO Term Loans may be prepaid, in whole or in part, without premium or penalty (except as set forth under the heading “FLLO Term Loan Prepayment Fee” below), in minimum amounts to be agreed, at the option of the Borrower at any time upon 1 business days (or, in the case of a prepayment of Eurodollar Loans, 3 business days’) prior notice, subject to reimbursement of the FLLO Term Lenders’ redeployment costs in the case of a prepayment of Eurodollar Loans prior to the last day of the relevant interest period.

 

FLLO Term Loan Prepayment Fee:

Any (a)  optional prepayment of the FLLO Term Loans and (b) mandatory prepayment of the FLLO Term Loans with the proceeds of indebtedness that is not permitted by the Credit Documentation (any transaction described in clauses (a) through (b) above, a “Subject Prepayment Transaction”) will be subject to a customary make-whole (discounted at the applicable adjusted treasury rate plus 50 basis points) if made prior to the second anniversary of the Closing Date and thereafter subject to the following prepayment premiums (expressed as a percentage of the outstanding principal amount of the FLLO Term Loans prepaid) as set forth opposite the relevant period from the Closing Date as indicated below:

 

Year

 

Year 3:

 

Year 4:

 

Thereafter:

Call Premium

 

6.00%

 

3.00%

 

0.00%

 

Term Sheet – FLLO Term Loan Facility
Exhibit C – Page 2

 

 

Mandatory Prepayments:

Prior to the repayment in full and termination of the RBL Facility (and any permitted refinancing thereof), the Borrower shall prepay the FLLO Term Loans with 100% of the net proceeds from the incurrence of junior debt permitted under the Credit Documentation.

 

Following the repayment in full and termination of the RBL Facility, the Borrower shall make the following mandatory prepayments:

 

(a)    100% of net proceeds of certain non-ordinary course sales or other dispositions of Collateral (including as a result of casualty or condemnation) by the Loan Parties subject to a 365 day reinvestment right period (which may be extended by an additional 180 days as long as a binding commitment for such reinvestment has been entered into within such 365 day-period); and

 

(b)    On a quarterly basis, any excess cash flow (to be defined in a manner to be agreed), such that (and only to the extent) after giving pro forma effect to the prepayment of the loans in such amount, (x) the Total PDP PV-10 to (y) the Consolidated Indebtedness net of the Unrestricted Cash Amount would be equal to 2.00 to 1.00.

 

For the avoidance of doubt, all such mandatory prepayments shall be made at par.

 

COLLATERAL The Borrower obligations under the FLLO Term Loan Facility and each other Loan Party’s obligations under the Guaranty shall be secured on a first-lien basis (but with a right to repayment that is junior to the rights of the RBL Facility at all times) by the same Collateral securing the RBL Facility subject to the provisions of the Collateral Trust Agreement.  

 

Term Sheet – FLLO Term Loan Facility
Exhibit C – Page 3

 

 

 

The first lien pledges, security interest and mortgages on the Collateral shall be created and perfected on terms, and pursuant to the same collateral documentation that will be the Credit Documentation, in each case, subject to the Collateral Trust Agreement.

 

The Collateral Trust Agreement shall provide for the automatic release of any Guaranty or Collateral under the FLLO Term Loan Facility to the extent the corresponding guarantor and collateral is released under the RBL Credit Facility.

 

DOCUMENTATION  
FLLO Term Loan Credit Documentation: The definitive financing documentation for the FLLO Term Loan Facility will be the “FLLO Term Loan Credit Documentation” (together with the RBL Credit Documentation, the “Credit Documentation”), which will be drafted by the counsel to the FLLO Term Loan Agent, shall, contain the terms and conditions set forth in the Commitment Letter and such other terms as the Borrower and the FLLO Lead Arrangers shall agreement; it being understood and agreed that the FLLO Term Loan Credit Documentation shall be based on and consistent with the RBL Credit Documentation; provided, that, any extensions of time periods for the delivery of collateral, guarantees or reserve or title reporting provided by the RBL Agent or RBL Lenders shall automatically apply to the corresponding requirement under the FLLO Term Loan Credit Documentation. The principles described under this section entitled “FLLO Term Loan Credit Documentation” shall be referred to as the “FLLO Documentation Principles”.
Closing Conditions: As set forth on Exhibit D.
Representations and Warranties: Subject to the FLLO Documentation Principles, the representations and warranties shall be substantially similar to (and limited to) those representations and warranties contained in the RBL Credit Documentation.
Affirmative Covenants: Subject to the FLLO Documentation Principles, the affirmative covenants shall be substantially similar to (and limited to) those affirmative covenants contained in the RBL Credit Documentation.
Financial Covenants: Same (and limited to) financial covenants as those financial covenants contained in the RBL Credit Documentation.

 

Term Sheet – FLLO Term Loan Facility
Exhibit C – Page 4

 

 

Negative Covenants: Subject to the FLLO Documentation Principles, the negative covenants shall be substantially similar to (and limited to) those negative covenants contained in the RBL Credit Documentation.
Events of Default: Subject to the FLLO Documentation Principles, the events of default shall be substantially similar to (and limited to) the events of default contained in the RBL Credit Documentation, provided, however, that the FLLO Term Loan Credit Documentation shall contain notice provisions, thresholds, and grace and cure periods consistent with customary high yield bond indentures.
Voting: The FLLO Term Loan Credit Documentation will contain provisions for amendments, waivers and other modifications substantially similar to such provisions contained in the RBL Credit Documentation and to include customary affiliate voting provisions.
Defaulting Lenders: The FLLO Term Loan Credit Documentation shall contain customary limitations on and protections with respect to “defaulting” FLLO Term Lenders.
Assignments and Participations: The FLLO Term Loan Credit Documentation will contain provisions for assignments of and participations in the FLLO Term Loans substantially similar to the provisions for assignments of and participations in the loans contained in the RBL Credit Documentation modified to reflect the term loan nature of the FLLO Term Loans.
Yield Protection and Taxes: The FLLO Term Loan Credit Documentation will contain yield protection and tax provisions substantially similar to those contained in the RBL Credit Documentation.
Expenses and Indemnification: The FLLO Term Loan Credit Documentation will contain provisions for expense reimbursement and indemnification substantially similar to those provisions for expense reimbursement and indemnification contained in the RBL Credit Documentation, provided that expense reimbursement and indemnitees shall only be available under the FLLO Term Loan Credit Documentation for the Agents and Arrangers (and their respective affiliates).
Governing Law and Forum: New York.
Counsel to the FLLO Term Loan Agent: Sidley Austin LLP.

 

Term Sheet – FLLO Term Loan Facility
Exhibit C – Page 5

 

 

EXHIBIT D

 


Conditions Precedent

 

The availability and initial funding of the Exit RBL Facility and the Exit FLLO Term Loan Facility (collectively, the “Credit Facilities” and each a “Credit Facility”) shall be subject to the satisfaction (or waiver) of solely the following conditions. Capitalized terms used but not otherwise defined herein have the meanings assigned to such terms in the Commitment Letter to which this Exhibit D is attached (including by reference to the Restructuring Support Agreement) or on Exhibits B or C (including the Annexes thereto) attached thereto; provided, that in the event any such capitalized term is subject to multiple and differing definitions, the appropriate meaning shall be determined by reference to the context in which it is used.

 

1. Each of the Loan Parties shall have executed and delivered the relevant Credit Documentation to which it is a party, which shall, in each case, be substantially consistent with the terms of the term sheets set forth Exhibits B and C to the satisfaction of the Commitment Parties and the Borrower, including all documents and instruments required to create and perfect the security interests in the Collateral, and the Lead Arranger and the Agents shall have received: customary closing and secretary’s certificates, borrowing notices and legal opinions (including legal opinions of local counsel in each material relevant jurisdiction), corporate documents (including organizational documents and certificates of authorization and/or good standing in each jurisdiction where material Borrowing Base Properties) are located and resolutions; a certificate of the chief financial officer (or other officer with reasonably equivalent responsibilities) of the Borrower in the form attached as Annex I hereto, certifying that the Borrower and its subsidiaries, on a consolidated basis, after giving effect to the Restructuring Transactions, are solvent; and such other documents and instruments as are customary for transactions of this type (including evidence of insurance and customary lien and judgment searches reflecting the absence of liens and security interests other than those being released on or prior to the Closing Date, or which are otherwise permitted under the Credit Documentation).

 

2. The representations in the Credit Documentation shall be true and correct in all material respects (except in the case of any such representation which expressly relates to a given date or period, such representation and warranty shall be true and correct in all material respects as of the respective date or for the respective period, as the case may be).

 

3. The Restructuring shall be consummated substantially concurrently with the initial funding of the Credit Facilities on Closing Date.

 

4. The Agents shall have received a certificate of a responsible officer of the Borrower certifying (a) that the Borrower and its restricted subsidiaries have received all material third-party and governmental consents and approvals required by the terms of the Credit Documentation, (b) as to other customary matters in connection with the Closing Date, and (c) since the Petition Date, there has not been any material adverse change in, or material adverse effect on the business, operations, property, liabilities (actual or contingent) or condition (financial or otherwise) of the Loan Parties, taken as a whole, other than any change, event or occurrence, arising individually or in the aggregate, from events that could reasonably be expected to result from the filing or commencement of the Chapter 11 Cases (as defined in the Restructuring Support Agreement) or the announcement of the filing or commencement of the Chapter 11 Cases.

 

Conditions Precedent
Exhibit D – Page 1

 

 

5. The Agents shall have received (a) audited consolidated financial statements of the Borrower for the fiscal year ended December 31, 2019 and unaudited consolidated financial statements of the Borrower for each fiscal quarter thereafter ending at least 60 days prior to the Closing Date, (it being agreed and understood that the financial statements described in this clause (a) have been received by the Agents and the condition described in this clause (a) has been satisfied with respect to the fiscal year of the Borrower ended December 31, 2019, and fiscal quarter ended March 31, 2020), (b) a pro forma unaudited consolidated balance sheet of the Borrower as of the Closing Date (based on the unaudited consolidated balance sheet of the Borrower as of the most recently ended calendar month ended at least 30 calendar days before the Closing Date), after giving effect to the making of the initial extensions of credit under the Credit Facilities, the application of the proceeds thereof and to the other transactions contemplated to occur on the Closing Date, certified by the Borrower’s chief financial officer, which shall reflect no indebtedness other than the Loans made by the Lenders under each of the Credit Facilities, as applicable, on the Closing Date and other indebtedness permitted by the Credit Documentation (excluding any Specified Additional Debt), (c) at least 30 days prior to the Closing Date (or such later date as the RBL Agent may agree in its sole discretion), a reserve report, with an as of date within 150 days of the contemplated Plan Effective Date, prepared by an Approved Petroleum Engineer (as defined in the RBL Facility Term Sheet) covering the Borrowing Base Properties (the “Initial Reserve Report”) as to at least 80% by volumes of the Borrowing Base Properties covered thereby, with the balance prepared by or under the supervision of the Borrower’s chief engineer, (d) lease operating statements and production reports with respect to the oil and gas properties evaluated in the Initial Reserve Report for each fiscal quarter ended since the Petition Date and ending at least 60 days prior to the Closing Date and, to the extent that the Closing Date occurs on or after the day that is 60 days after the fiscal year ended December 31, 2020, for the fiscal year ended December 31, 2020 and (e) such other customary financial Projections in respect of the Borrower and its subsidiaries as the Lead Arranger may reasonably request in connection with the arrangement and syndication of the Exit FLLO Term Loan Facility to the extent so requested no later than 30 days prior to the Marketing Period Commencement Date (determined prior to giving effect to this clause (e)). The information required to be delivered pursuant to this paragraph 5 is referred to herein as the “Required Bank Information”.

 

6. All actions necessary to establish that each Agent will have a perfected first priority security interest in the Collateral as required by the Credit Documentation shall have been taken, including delivery of an appropriate number of counterparts for filing in all relevant jurisdictions of all documents and instruments necessary to grant the Collateral Agent a perfected security interest (subject to liens permitted under the relevant Credit Documentation) in the Collateral under the Credit Facilities shall have been delivered; provided, however, to the extent the Borrower and Guarantors are unable to (i) execute and deliver control agreements in connection with deposit accounts, commodities accounts or securities accounts or (ii) deliver insurance endorsements after the use of commercially reasonable efforts, the Borrower and the Guarantors shall have a 10 business day post-closing period (or such longer period as the RBL Agent may reasonably agree) to deliver such items in clause (i) and (ii).

 

7. The Borrower shall have delivered satisfactory title information with respect to 85% of the PV-10 value of the Borrowing Base Properties evaluated in the Initial Reserve Report; provided, however, to the extent the Borrower is unable to deliver such title after the use of commercially reasonable efforts, the Borrower shall have a 30 day post-closing period (or such longer period as the RBL Agent may reasonably agree) to deliver such title. .

 

Conditions Precedent
Exhibit D – Page 2

 

 

8. All (a) fees required to be paid on the Closing Date pursuant to the Fee Letters and (b) expenses required to be paid on the Closing Date pursuant to the Commitment Letter to the extent invoiced at least 3 business days prior to the Closing Date (the “Invoice Date”), shall, in each case, substantially concurrently with the initial borrowings have been paid (which amounts may be offset against the proceeds of the Credit Facilities).

 

9. The Agent and Commitment Parties shall have received, at least five (5) business days prior to the Closing Date, all documentation and other information required by regulatory authorities with respect to the Loan Parties under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act, that has been reasonably requested by the Commitment Parties at least 10 business days in advance of the Closing Date.

 

10. To the extent the Exit FLLO Term Loan Facility is to be funded on the Closing Date, the Lead Arranger shall have been afforded a period (the “Marketing Period”) of at least 15 consecutive business days (ending no later than the business day immediately prior to the Closing Date) upon receipt of the Required Bank Information (such date, the “Marketing Period Commencement Date”) (provided that the provision of any information as required under paragraph 5 above shall not “restart” the Marketing Period once the Marketing Period has otherwise begun) to syndicate the Exit FLLO Term Loan Facility.

 

11. The Plan (as defined in the Restructuring Support Agreement), the order entered by the Bankruptcy Court confirming the Plan (the “Confirmation Order”), and any related order of the Bankruptcy Court (and any amendments or modifications to any of the foregoing) shall be consistent with the Restructuring Support Agreement (other than any changes to the terms described therein that would not reasonably be expected to adversely affect the interests of the Agents, the RBL Lenders or the FLLO Term Lenders in any material respect) and be in substance reasonably satisfactory to the Agents and shall provide for approval of the Credit Facilities and contain customary releases and exculpations, in each case that are reasonably acceptable to the Agents.

 

12. The Confirmation Order shall be in full force and effect and shall not have been reversed, stayed, modified or amended, and shall not be subject to any pending appeals other than appeals the result of which would not have a materially adverse effect on the rights and interests of the Agents, the RBL Lenders or the FLLO Term Lenders.

 

13. The Plan Effective Date (as defined in the Restructuring Support Agreement) shall have occurred, all conditions precedent to the confirmation and effectiveness of the Plan, as set forth in the Plan (other than the effectiveness of the Credit Facilities, which shall occur contemporaneously with the Plan Effective Date), shall have been fulfilled or waived as permitted therein, including, without limitation, all transactions contemplated in the Plan or in the Confirmation Order to occur on the Plan Effective Date shall have been substantially consummated in accordance with the terms thereof and in compliance with applicable law, Bankruptcy Court and regulatory approvals.

 

14. The Agents shall have received satisfactory evidence as to the payment in full on the Plan Effective Date of all material administrative expense claims, priority claims and other claims (including professional and transaction fees) required to be paid upon the Plan Effective Date.

 

15. The lenders under the Prepetition Credit Facility shall receive the treatment outlined in the Exit RBL Facility Term Sheet, the Exit FLLO Term Loan Facility Term Sheet, the DIP Credit Agreement, the Restructuring Support Agreement, the Restructuring Term Sheet, and the Plan, and the DIP Lenders shall receive the treatment under the Restructuring Support Agreement, the Restructuring Term Sheet, and the Plan and the commitments thereunder shall have been terminated, and all security interests related thereto shall have either (a) been terminated or (b) been amended and restated to secure the Borrower’s obligations under the Credit Facilities, in either case concurrently with the Closing Date.

 

Conditions Precedent
Exhibit D – Page 3

 

 

16. Each of the Debtors shall have paid to the DIP Lenders holding DIP Loans all other payments as provided for in any final orders entered in connection with the DIP Credit Agreement and/or use of cash collateral, and the Plan, which amounts shall be applied to the repayment of the DIP Obligations in accordance with the Plan. The DIP Credit Agreement and the Restructuring Support Agreement shall be in full force and effect and no default or event of default shall have occurred and be continuing pursuant to the terms thereof.

 

17. After giving effect to the Restructuring Transactions, the pro forma Total Leverage Ratio (calculated in accordance with the “Financial Covenants” paragraph of the Exit RBL Facility Term Sheet, including the last paragraph thereof) is no greater than 2.25 to 1.00, and the RBL Agent shall have received a certificate from a financial officer of the Borrower stating the same.

 

18. After giving effect to the Restructuring Transactions, the ratio of (x) Credit Facilities Total Outstandings and any other secured debt of the Borrower as of the Closing Date to (y) Total PDP PV-10 measured on a pro forma basis, is no less than 1.50 to 1.00, and the RBL Agent shall have received a certificate from a financial officer of the Borrower stating the same.

 

19. The RBL Agent shall have received a certificate from a financial officer of the Borrower, dated as of the Closing Date, certifying that (i) the Borrower has received cash equity contributions in an aggregate amount no less than $600 million pursuant to the Backstop Commitment Agreement (as defined in the Restructuring Support Agreement), (ii) after giving effect to the Restructuring Transactions, the RBL Total Outstandings shall be no greater than $1,250 million and (iii) after giving effect to the Restructuring Transactions, minimum liquidity (to include unrestricted cash on hand and availability under the Exit RBL Facility) of the Borrower and the Restricted Subsidiaries shall be no less than $500 million.

 

Conditions Precedent
Exhibit D – Page 4

 

 

 

Annex I to Exhibit D

 

Form of Solvency Certificate

[•][•], 20[•]

 

This Solvency Certificate is being executed and delivered pursuant to Section [•] of that certain [•] (the “Credit Agreement”; the terms defined therein being used herein as therein defined).

 

I, [•], the [Chief Financial Officer/equivalent officer] of the Borrower, in such capacity and not in an individual capacity, hereby certify as follows:

 

1. I am generally familiar with the businesses and assets of the Borrower and its Restricted Subsidiaries, taken as a whole, and am duly authorized to execute this Solvency Certificate on behalf of the Borrower pursuant to the Credit Agreement; and

 

2. As of the date hereof and after giving effect to the Transactions and the incurrence of the indebtedness and obligations being incurred in connection with the Credit Agreement and the Transactions, that, (i) the sum of the debt (including contingent liabilities) of the Borrower and its subsidiaries, taken as a whole, does not exceed the fair value of the assets of the Borrower and its subsidiaries, taken as a whole; (ii) the capital of the Borrower and its subsidiaries, taken as a whole, is not unreasonably small in relation to the business of the Borrower or its subsidiaries, taken as a whole, contemplated as of the date hereof; and (iii) the Borrower and its subsidiaries, taken as a whole, do not intend to incur, or believe that they will incur, debts (including current obligations and contingent liabilities) beyond their ability to pay such debts as they mature in the ordinary course of business. For the purposes hereof, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

[Remainder of page intentionally left blank]

 

Conditions Precedent

Annex I to Exhibit D – Page 1

 

 

IN WITNESS WHEREOF, I have executed this Solvency Certificate on the date first written above.

 

  By:  
  Name: [•]
  Title: [Chief Financial Officer/equivalent officer]
   
   

 

Conditions Precedent

Annex I to Exhibit D – Page 2

 

 

 

Exhibit 4

 

Backstop Commitment Agreement

 

 

 

 

Execution Version

 

 

 

BACKSTOP COMMITMENT AGREEMENT

 

AMONG

 

Chesapeake Energy Corporation

 

AND

 

THE BACKSTOP PARTIES PARTY HERETO

 

Dated as of June 28, 2020

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
Article I DEFINITIONS 2
Section 1.1 Definitions 2
Section 1.2 Construction 14
     
Article II BACKSTOP COMMITMENT 15
Section 2.1 The Rights Offering; Subscription Rights 15
Section 2.2 The Backstop Commitment 16
Section 2.3 Backstop Party Default 16
Section 2.4 Escrow Account Funding 18
Section 2.5 Closing 19
Section 2.6 Designation and Assignment Rights 19
     
Article III PUT OPTION PREMIUM 22
Section 3.1 Put Option Premium Payable by the Company 22
Section 3.2 Payment of Put Option Premium. 23
     
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY 23
Section 4.1 Organization and Qualification 23
Section 4.2 Corporate Power and Authority 25
Section 4.3 Execution and Delivery; Enforceability 25
Section 4.4 Authorized and Issued Equity Interests 26
Section 4.5 No Conflicts. 26
Section 4.6 Consents and Approvals 26
Section 4.7 Absence of Certain Changes 27
Section 4.8 No Violation; Compliance with Laws 27
Section 4.9 Arm’s Length 27
Section 4.10 Financial Statements 27
Section 4.11 SEC Documents 27
Section 4.12 No Undisclosed Material Liabilities 27
Section 4.13 Legal Proceedings 28
Section 4.14 Labor Relations. 28
Section 4.15 Intellectual Property 29
Section 4.16 Title to Real and Personal Property 29
Section 4.17 Licenses and Permits 30
Section 4.18 Environmental 30
Section 4.19 Tax Matters 31
Section 4.20 Company Plans 33
Section 4.21 Internal Control Over Financial Reporting 34
Section 4.22 Disclosure Controls and Procedures 34
Section 4.23 Material Contracts 34
Section 4.24 No Unlawful Payments 35
Section 4.25 Compliance with Money Laundering Laws 35
Section 4.26 Compliance with Sanctions Laws 35
Section 4.27 No Broker’s Fees 36
Section 4.28 No Registration Rights 36

 

i

 

 

TABLE OF CONTENTS (cont’d)

 

    Page
     
Section 4.29 Takeover Statutes 36
Section 4.30 Insurance 36
Section 4.31 No Undisclosed Relationships 36
Section 4.32 Investment Company Act 36
Section 4.33 Disclosure Schedule, and Company SEC Document References 37
     
Article V REPRESENTATIONS AND WARRANTIES OF THE BACKSTOP PARTIES 37
Section 5.1 Organization 37
Section 5.2 Organizational Power and Authority 38
Section 5.3 Execution and Delivery 38
Section 5.4 No Conflict 38
Section 5.5 Consents and Approvals 38
Section 5.6 No Registration 38
Section 5.7 Purchasing Intent 39
Section 5.8 Sophistication; Investigation 39
Section 5.9 No Broker’s Fees 39
Section 5.10 Sufficient Funds 39
     
Article VI ADDITIONAL COVENANTS 39
Section 6.1 Conduct of Business 39
Section 6.2 Access to Information; Confidentiality 41
Section 6.3 Financial Information. 42
Section 6.4 Commercially Reasonable Efforts 43
Section 6.5 Registration Rights Agreement; Reorganized Chesapeake Organizational Documents. 43
Section 6.6 Blue Sky 44
Section 6.7 DTC Eligibility 44
Section 6.8 Use of Proceeds 45
Section 6.9 Share Legend 45
Section 6.10 Antitrust Approvals 45
Section 6.11 Alternative Restructuring Proposals 46
Section 6.12 Tax Treatment 47
Section 6.13 Expense Reimbursement 47
     
Article VII CONDITIONS TO THE OBLIGATIONS OF THE PARTIES 48
Section 7.1 Conditions to the Obligations of the Backstop Parties 48
Section 7.2 Waiver of Conditions to Obligations of Backstop Parties 50
Section 7.3 Conditions to the Obligations of the Debtors 50
     
Article VIII TERMINATION 51
Section 8.1 Consensual Termination 51
Section 8.2 Termination by the Required Backstop Parties 51
Section 8.3 Termination by the Company 53
Section 8.4 Individual Backstop Party Termination 54
Section 8.5 Effect of Termination 55

 

ii

 

 

TABLE OF CONTENTS (cont’d)

 

  Page
   
Article IX INDEMNIFICATION AND CONTRIBUTION 55
Section 9.1 Indemnification Obligations 55
Section 9.2 Indemnification Procedure 56
Section 9.3 Settlement of Indemnified Claims 57
Section 9.4 Contribution 57
Section 9.5 Treatment of Indemnification Payments 58
     
Article X GENERAL PROVISIONS 58
Section 10.1 Notices 58
Section 10.2 Assignment; Third Party Beneficiaries 59
Section 10.3 Prior Negotiations; Entire Agreement 59
Section 10.4 Governing Law; Venue 60
Section 10.5 Waiver of Jury Trial 60
Section 10.6 Counterparts 60
Section 10.7 Waivers and Amendments; Rights Cumulative; Consent 61
Section 10.8 Headings 61
Section 10.9 No Survival 61
Section 10.10 Specific Performance 61
Section 10.11 Damages 62
Section 10.12 No Reliance 62
Section 10.13 Publicity 62
Section 10.14 Settlement Discussions 62
Section 10.15 No Recourse 63
Section 10.16 Independence of Backstop Parties’ Obligations and Rights 63

 

SCHEDULES
   
Schedule 1 Backstop Commitment Schedule
   
EXHIBITS
   
Exhibit A Form of Joinder Agreement

 

iii

 

 

BACKSTOP COMMITMENT AGREEMENT

 

THIS BACKSTOP COMMITMENT AGREEMENT (this “Agreement”), dated as of June 28, 2020, is made by and among Chesapeake Energy Corporation, a corporation incorporated under the Laws of Oklahoma (the “Company”), on behalf of itself and each of the other Debtors, on the one hand, and each Backstop Party, on the other hand. The Company and each Backstop Party are referred to herein, individually, as a “Party” and collectively, as the “Parties”. Capitalized terms that are used but not otherwise defined in this Agreement shall have the meanings given to them in Section 1.1 hereof or, if not defined therein, shall have the meanings given to them in the Restructuring Support Agreement or Restructuring Term Sheet, as applicable.

 

RECITALS

 

WHEREAS, the Company (as defined in the Restructuring Support Agreement), the Backstop Parties and the Consenting Stakeholders (as defined in the Restructuring Support Agreement) have entered into a Restructuring Support Agreement, dated as of June 28, 2020 (including the terms and conditions set forth in the Restructuring Term Sheet attached as Exhibit B to the Restructuring Support Agreement (the “Restructuring Term Sheet” and collectively, including all the exhibits thereto, as may be amended, supplemented or otherwise modified from time to time, the “Restructuring Support Agreement”)), which (a) provides for the restructuring of the Debtors’ capital structure and financial obligations pursuant to a plan of reorganization to be filed in the Debtors’ jointly administered cases (the “Chapter 11 Cases”) under Title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (as it may be amended from time to time, the “Bankruptcy Code”), currently pending, or to be commenced, in the United States Bankruptcy Court for Southern District of Texas (the “Bankruptcy Court”), implementing the terms and conditions of the Restructuring Transactions and (b) requires that the Plan be consistent with the Restructuring Support Agreement;

 

WHEREAS, the Debtors plan to file with the Bankruptcy Court, in accordance with the terms of the Restructuring Support Agreement, motions seeking entry of, among others, the Backstop Commitment Agreement Approval Order, the Disclosure Statement Order, the Confirmation Order and the DIP Order; and

 

WHEREAS, pursuant to the Plan, the Restructuring Support Agreement and this Agreement, and in accordance with the Rights Offering Procedures, the Company, on behalf of Reorganized Chesapeake, will conduct a rights offering (the “Rights Offering”) for the Rights Offering Shares for an aggregate subscription price of $600 million (the “Rights Offering Amount”) and a per-share purchase price equal to the Per Share Purchase Price, and on the Plan Effective Date, Reorganized Chesapeake shall assume and perform any remaining obligations with respect to the Rights Offering and issue the Rights Offering Shares.

 

NOW, THEREFORE, in consideration of the mutual promises, agreements, representations, warranties and covenants contained herein, the Company (on behalf of itself and each other Debtor) and each of the Backstop Parties hereby agrees, severally and not jointly, as follows:

 

1

 

 

Article I
DEFINITIONS

 

Section 1.1      Definitions. Except as otherwise expressly provided in this Agreement, whenever used in this Agreement (including any Exhibits and Schedules hereto), the following terms shall have the respective meanings specified therefor below or in the Restructuring Support Agreement or Restructuring Term Sheet, as applicable:

 

66 2/3 Consenting Second Lien Noteholders” means Consenting Second Lien Noteholders holding at least 66 2/3% of the aggregate outstanding principal amount of the Second Lien Note Claims that are held by Consenting Second Lien Noteholders.

 

Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, Controls or is Controlled by or is under common Control with such Person, and shall include the meaning of “affiliate” set forth in section 101(2) of the Bankruptcy Code; provided, however, that for purposes of this Agreement, no Backstop Party shall be deemed an Affiliate of any Debtor. “Affiliated” has a correlative meaning.

 

Affiliated Fund” means, with respect to a Backstop Party, any Affiliates (including at the institutional level) of such Backstop Party or any special purpose investment vehicles, investment accounts or funds managed, advised or sub-advised by such Backstop Party, an Affiliate of such Backstop Party or by the same investment manager, advisor or sub-advisor as such Backstop Party or an Affiliate of such Backstop Party.

 

Agreement” has the meaning set forth in the Preamble.

 

Alternative Restructuring Proposal” has the meaning set forth in the Restructuring Term Sheet.

 

Antitrust Authorities” means the United States Federal Trade Commission, the Antitrust Division of the United States Department of Justice, the attorneys general of the several states of the United States and any other Governmental Unit, whether domestic or foreign, having jurisdiction pursuant to the Antitrust Laws, and “Antitrust Authority” means any of them.

 

Antitrust Laws” means the Sherman Act, the Clayton Act, the HSR Act, the Federal Trade Commission Act, and any other Law, whether domestic or foreign, governing agreements in restraint of trade, monopolization, pre-merger notification, the lessening of competition through merger or acquisition or anti-competitive conduct, and any foreign investment Laws.

 

Applicable Consent” has the meaning set forth in Section 4.6.

 

Available Shares” means, collectively, all of the Unsubscribed Shares and Direct Investment Shares that any Backstop Party fails to purchase as a result of a Backstop Party Default by such Backstop Party.