Note 15 – Commitments and Contingencies

Commitments Related to Asset Retirement Obligations

We have entered into decommissioning security agreements related to abandonment liabilities for certain of our U.K. oil and gas properties. Under these agreements, we are required to post security from time to time in the form of letters of credit, cash or other agreed-upon consideration. Prior to entry into the LC Issuance Agreement on September 30, 2014 (see below), the commitments under these agreements were not recorded as liabilities, and fees and expenses related to these agreements were included in “Letter of credit fees” in other expenses on our Condensed Consolidated Statements of Operations.

LC Issuance Agreement

On September 30, 2014, in conjunction with the Amended Term Loan Facility, the Company entered into an LC Issuance Agreement (the “LC Issuance Agreement”), pursuant to which Credit Suisse agreed to issue letters of credit for Endeavour UK’s account in the amount of approximately £63.1 million as of March 31, 2015, of which £42.5 million, £11.9 million and £8.7 million and relate to decommissioning obligations at Alba, IVRRH and Renee and Rubie, respectively.

The letters of credit secure decommissioning obligations in connection with certain of Endeavour’s U.K. Continental Shelf petroleum production. The Company collateralized its obligations under the LC Issuance Agreement and all letters of credit issued thereunder by posting cash collateral, which has been funded with the proceeds from the Amended Term Loan Facility.

The posted cash collateral balance of $95.4 million related to the LC Issuance Agreement as of March 31, 2015 is reflected as “Restricted cash, long-term portion” in our Condensed Consolidated Balance Sheets. The liability related to the posted cash collateral is included as part of the $440 million Amended Term Loan Facility long-term debt obligation. The LC Issuance Agreement was entered into to replace the Combined Procurement Agreement.

Combined Procurement Agreement

On January 24, 2014, we entered into a letter of credit procurement agreement (the “Combined Procurement Agreement”) with an unaffiliated third party (“Payee”), where we agreed to reimburse the Payee for any expense incurred by it in connection with the posting of cash collateral to secure letters of credit issued for our account in the amount of approximately £78 million. The letters of credit secured decommissioning obligations in connection with certain of our U.K. licenses. The Combined Procurement Agreement was entered into to replace the previous procurement agreements.

Under the Combined Procurement Agreement, we paid a quarterly fee computed at a rate of LIBOR plus 7.00% per year (provided that LIBOR shall equal at least 1.25% per year) on the aggregate balance of posted cash collateral.

Concurrent with our entry into the LC Issuance Agreement on September 30, 2014, the Combined Procurement Agreement was terminated, and we paid all outstanding interest and fees of $1.9 million and $2.4 million, respectively.

Terminated Acquisition of Marcellus Assets

SM Energy Company “SM Energy” filed a lawsuit against us in Texas state court on December 20, 2011 alleging that we breached an agreement for the purchase of oil and gas leases, producing properties, geophysical data, a pipeline and related assets in the Marcellus shale play in Pennsylvania by terminating it and refusing to close on the transactions. On April 16, 2014, we reached an agreement with SM Energy to settle and dismiss the litigation. In accordance with the settlement agreement, we:

forfeited our $6 million deposit;

paid SM Energy $5 million;

will pay an additional $4.5 million in three graduated payments, beginning in April 2015; and

issued warrants to purchase 2.1 million shares of our common stock with exercise price of $5.29 per share.

As a result of this settlement, we recorded $19.0 million in total settlement expense during the first quarter of 2014.

Claim by Mr. William Transier

We maintained an employment agreement with Mr. Transier that provided for certain severance benefits. Mr. Transier resigned from his positions as Chief Executive Officer and President effective December 1, 2014. Mr. Transier filed a claim with the United States Bankruptcy Court for the District of Delaware on December 16, 2014 in the amount of approximately $6.2 million.

Mr. Transier has asserted that, per his employment agreement, he is entitled to a pro-rata portion of his annual target bonus for the year in which his termination occurred which equates to approximately $0.7 million.

Additionally he asserts that his contract requires the payment on termination of employment during the contract term (i) at the Company’s election other than as a result of the executive’s misconduct or disability or (ii) at the executive’s election following a “corporate change” or a breach of the employment agreement by us or other “good reason.” Citing “corporate change” and “good reason,” Mr. Transier’s severance claim of approximately $5.5 million is calculated as follows:

(i)

three times the sum of the executive’s most recent annual salary and deemed bonus (the average bonus paid during the most recent two years);

(ii)

all unvested employee restricted stock awards, performance shares and cash performance awards would vest upon any such termination; and

(iii)

three years of continued coverage for accident and group health insurance benefits substantially similar to those he received immediately prior to the date of termination.

We have not accrued any portion of the severance claim as a pre-petition liability as of March 31, 2015.

Legal Proceedings

Refer to Note 1 — General for information concerning the Bankruptcy Cases.