NOTE 14. EQUITY

Issuance of Common Stock and Cancellation of Units

In accordance with the Plan, on the Effective Date:

the Company issued a total of 10,000,016 shares of its common stock, which included the issuance of (i) 9,500,000 shares pro rata to holders of the Senior Notes with claims allowed under the Plan and (ii) 500,016 shares pro rata to holders of units of EVEP prior to the Effective Date;

the Company issued 800,000 warrants to purchase 800,000 shares of the Company’s common stock to holders of units of EVEP prior to the Effective Date;

the Predecessor common units were cancelled; and

each Predecessor common unitholder received its pro rata share of: (i) 5% of the New Common Stock and (ii) the Warrants as discussed above.

On the Effective Date, there were 10,000,016 shares of New Common Stock issued and outstanding. As of December 31, 2018, there were 10,054,816 shares issued and 10,042,468 shares outstanding.

Warrants

On the Effective Date, the Company entered into a warrant agreement with Computershare Trust Company N.A., as warrant agent, pursuant to which the Company issued Warrants to purchase up to 800,000 shares of the Company’s common stock (representing 8% of the Company’s outstanding total issued and outstanding common stock as of the Effective Date including shares of the Company’s common stock issuable upon full exercise of the Warrants, but excluding any common stock issuable under the MIP), exercisable for a five year period commencing on the Effective Date at an exercise price of $37.48 per warrant.

The fair values for the Warrants upon issuance have been estimated using the Black-Scholes option pricing model using the following assumptions:


	Warrants Issued in
	Successor Period
Risk–free interest rate		2.8	%
Dividend yield		—	%
Expected life (years)		5.0
Expected volatility		69.0	%
Strike price	$	37.48
Calculated fair value	$	9,345

Predecessor

At December 31, 2017, owner’s equity consisted of 49,368,869 common units outstanding, representing a 98% limited partnership interest in the Predecessor and a 2% general partnership interest.

The common units had limited voting rights as set forth in the partnership agreement.

Pursuant to the partnership agreement, if at any time the general partner and its affiliates owned more than 80% of the common units outstanding, the general partner had the right, but not the obligation, to “call” or acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then current market value. The general partner had the right to assign this call right to any of its affiliates or to the Predecessor.

The general partner owned a 2% interest in the Predecessor. This interest entitled the general partner to receive distributions of available cash from operating surplus as discussed further below under “Cash Distributions.” The partnership agreement set forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders, Class B unitholders and general partner would receive.

The general partner had the management rights as set forth in the partnership agreement.

Predecessor Allocations of Net Income

Net income was allocated between the general partner and the limited partners in accordance with the provisions of the partnership agreement. Net income was generally allocated first to the general partner and the limited partners in an amount equal to the net losses allocated to the general partner and the limited partners in the current and prior tax years under the partnership agreement. The remaining net income was allocated to the general partner and the limited partners in accordance with their respective percentage interests of the general partner and limited partners.

Predecessor Cash Distributions

The Predecessor’s credit facility prohibited the Partnership from making cash distributions if any default or event of default, as defined in the credit facility, occurred or would result from the cash distribution.

Within 45 days after the end of each quarter, the Predecessor would distribute all of its available cash (as defined in the partnership agreement) to its general partner and unitholders of record on the applicable record date. The amount of available cash generally was all cash on hand at the end of the quarter; less the amount of cash reserves established by the general partner to provide for the proper conduct of business, to comply with applicable laws, any of the debt instruments, or other agreements or to provide funds for distributions to unitholders and to the general partner for any one or more of the next four quarters; plus all cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. Working capital borrowings were generally borrowings that were made under the Partnership’s credit facility and in all cases was used solely for working capital purposes or to pay distributions to partners.

The partnership agreement required that the Predecessor make distributions of available cash from operating surplus in the following manner:

first, 98% to the unitholders, pro rata, and 2% to the general partner, until the Predecessor distributed for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; and

thereafter, cash in excess of the minimum quarterly distributions is distributed to the unitholders and the general partner based on the percentages below.

The minimum quarterly distribution was not guaranteed and distributions below the minimum quarterly distribution were not accrued in arrears.

The general partner was entitled to incentive distributions if the amount distributed with respect to one quarter exceeded specified target levels shown below:


			Marginal Percentage
			Interest in Distributions
	Total Quarterly Distributions		Limited		General
	Target Amount		Partner		Partner
Minimum quarterly distribution		$0.7615	98	%	2	%
First target distribution		Up to $0.875725	98	%	2	%
Second target distribution		Above $0.875725, up to $0.951875	85	%	15	%
Thereafter		Above $0.951875	75	%	25	%

The Predecessor did not pay any distributions during the five months ended May 31, 2018 or during the year ended December 31, 2017. The following sets forth the distributions paid during the year ended December 31, 2016 (relating to the fourth quarter of 2015):


		Distribution		Total
Date Paid	Period Covered	per Unit		Distribution
February 12, 2016	October 1, 2015 – December 31, 2015	$	0.075	$	3,868
				$	3,868

During the five months ended May 31, 2018 and the years ended December 31, 2017 and 2016, the board of directors of EV Management announced that it had elected to suspend distributions for all quarters of those periods.