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):  August 26, 2016 (August 25, 2016)

 

Jones Energy, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-36006

 

80-0907968

(State or Other Jurisdiction of
Incorporation or Organization)

 

(Commission File
Number)

 

(I.R.S. Employer Identification No.)

 

807 Las Cimas Parkway, Suite 350
Austin, Texas

 

78746

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (512) 328-2953

 

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:

 

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

 

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

 

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

 

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

 

 

 



 

Item 3.03. Material Modification of the Rights of Security Holders.

 

As previously announced, on August 19, 2016, the Company and JEH LLC entered into an Underwriting Agreement with Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC (the “Preferred Stock Underwriters”) with respect to the offer and sale of 1,600,000 shares of the Company’s 8.0% Series A Perpetual Convertible Preferred Stock, par value $0.001 per share (the “Preferred Stock”), plus the option of the Preferred Stock Underwriters to purchase an additional 240,000 shares of Preferred Stock, which option was exercised in full.  The closing of the sale of Preferred Stock occurred on August 26, 2016.

 

Under the terms of the Preferred Stock, the Company’s ability to declare or pay dividends or make distributions on, or purchase, redeem or otherwise acquire for consideration, shares of the Company’s Class A common stock, par value $0.001 per share (the “Class A Common Stock”), or any junior stock or parity stock currently outstanding or issued in the future, will be subject to certain restrictions in the event that the Company does not pay in full or declare and set aside for payment in full all accrued and unpaid dividends on the Preferred Stock (including certain unpaid excess cash payment amounts excused from payment as a dividend due to restrictions in credit facilities or other indebtedness or legal requirements (“Unpaid Excess Cash Payment Amounts”)). The terms of the Preferred Stock are more fully set forth in the Certificate of Designations (as defined below) described in Item 5.03 below and attached hereto as Exhibit 3.1 and incorporated herein by reference. A copy of the form of certificate for the Preferred Stock is attached hereto as Exhibit 4.1 and incorporated herein by reference.

 

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Changes in Fiscal Year.

 

Certificate of Designations of the Company’s 8.0% Series A Perpetual Convertible Preferred Stock

 

In connection with the issuance of the Preferred Stock, on August 25, 2016, the Company filed with the Delaware Secretary of State a Certificate of Designations of 8.0% Series A Perpetual Convertible Preferred Stock (the “Certificate of Designations”) for the purpose of amending its amended and restated certificate of incorporation, as amended, to establish the designations, preferences, limitations and relative rights of the Preferred Stock. The Certificate of Designations became effective upon filing.

 

Holders of Preferred Stock are entitled to receive, when, as and if declared by the Company’s board of directors, cumulative dividends at the rate of 8.0% per annum (the “dividend rate”) per share on the $50.00 liquidation preference per share of the Preferred Stock, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, beginning on November 15, 2016. Dividends may be paid in cash or, subject to certain limitations, in Class A Common Stock, or a combination thereof.

 

Each share of Preferred Stock has a liquidation preference of $50.00 per share and is convertible, at the holder’s option at any time, initially into approximately 15.6961 shares of common stock of the Company (which is equivalent to an initial conversion price of approximately $3.19 per share), subject to specified adjustments and limitations as set forth in the Certificate of Designations. Based on the initial conversion rate and the full exercise of the

 

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Preferred Stock Underwriters’ over-allotment option, approximately 28.9 million shares of common stock of the Company would be issuable upon conversion of all the Preferred Stock.

 

On or after August 15, 2021, the Company may, at its option, give notice of its election to cause all outstanding shares of Preferred Stock to be automatically converted into shares of Class A Common Stock at the conversion rate, if the closing sale price of the Class A Common Stock equals or exceeds 175% of the conversion price for at least 20 trading days in a period of 30 consecutive trading days.

 

On August 15, 2024 (the “designated redemption date”), each holder of Preferred Stock may require us to redeem any or all Preferred Stock held by such holder outstanding on the designated redemption date at a redemption price equal to a liquidation preference of $50.00 per share plus all accrued dividends on the shares to but excluding the designated redemption date that have not been paid plus any Unpaid Excess Cash Payment Amounts (the “redemption price”).  The redemption price may be paid in cash or, subject to certain limitations, in Class A Common Stock, or a combination thereof.

 

Except as required by law or the Company’s Amended and Restated Certificate of Incorporation, which includes the Certificate of Designations, the holders of Preferred Stock have no voting rights (other than with respect to certain matters regarding the Preferred Stock or when dividends payable on the Preferred Stock have not been paid for an aggregate of six quarterly dividend periods, or more, whether or not consecutive, as provided in the Certificate of Designations).

 

In addition, upon the Company’s voluntary or involuntary liquidation, winding-up or dissolution, each holder of Preferred Stock will be entitled to receive a liquidation preference in the amount of $50.00 per share of Preferred Stock, plus an amount equal to accrued and unpaid dividends on the shares to but excluding the date fixed for liquidation, winding-up or dissolution, plus any Unpaid Excess Cash Payment Amounts, to be paid out of the Company’s assets legally available for distribution to the Company’s stockholders, after satisfaction of liabilities to the Company’s creditors and holders of shares of senior stock and before any payment or distribution is made to holders of junior stock (including the Company’s Class A Common Stock and Class B Common Stock).

 

The foregoing description of the Certificate of Designations is subject to, and qualified in its entirety by, the full text of the Certificate of Designations, a copy of which is attached hereto as Exhibit 3.1 and is incorporated herein by reference.

 

Fourth Amended and Restated Limited Liability Company Agreement of Jones Energy Holdings, LLC

 

In connection with the issuance of Preferred Stock, JEH LLC amended and restated its Limited Liability Company Agreement (as amended, the “JEH LLC Agreement”). The amendments to the JEH LLC Agreement included, among other things, the creation of a new series of preferred units (the “JEH Mirror Preferred Units”). In consideration of the Company’s contribution of the net proceeds from the sale of the Preferred Stock to JEH LLC, JEH LLC has issued to the Company a number of JEH Mirror Preferred Units equal to the number of shares of

 

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Preferred Stock issued by the Company in the offering of Preferred Stock after the full exercise of the Preferred Stock Underwriters’ over-allotment option.

 

The terms of the JEH Mirror Preferred Units have designations, preferences and other rights such that the economic interests attributable to the JEH Mirror Preferred Units are substantially the same as the economic rights of the Preferred Stock.

 

The terms of the JEH Mirror Preferred Units provide that unless distributions have been declared and paid upon, or declared and a sum sufficient for the payment thereof have been set apart for payment upon all JEH Mirror Preferred Units issued by JEH LLC for the then-current quarterly distribution period, then, during such quarterly distribution period only, JEH LLC may not repurchase its JEH LLC Units or any other units ranking junior to the JEH Mirror Preferred Units and may not declare or pay or set apart payment for distributions on JEH LLC Units or any such junior units (other than mandatory tax distributions payable to the Company and distributions that are intended to satisfy our obligations under the tax receivable agreement, dated July 29, 2013, among us, JEH LLC and the other parties thereto). The terms of the JEH Mirror Preferred Units also provide that, in the event that JEH LLC liquidates, dissolves or winds up, JEH LLC may not declare or pay or set apart payment on its JEH LLC Units or any other units ranking junior to the JEH Mirror Preferred Units unless the outstanding liquidation preference on all outstanding JEH Mirror Preferred Units have been repaid via redemption or otherwise, subject to certain exceptions.

 

The foregoing description is not complete and is qualified in its entirety by reference to the full text of the JEH LLC Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated in this Item 5.03 by reference.

 

Item 7.01. Regulation FD Disclosure.

 

On August 26, 2016, the Company issued a press release announcing the closing of its previously announced acquisition of producing and undeveloped oil and gas assets in the Anadarko Basin for an as-adjusted closing purchase price of $26.3 million, subject to customary post-closing adjustments. The company funded the acquisition with cash on hand. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information in this Item 7.01 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 the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing. The Company does not assume any obligation to update such information in the future.

 

Item 8.01.                                         Other Information.

 

On August 25, 2016, the Preferred Stock Underwriters exercised their over-allotment option to purchase an additional 240,000 shares of Preferred Stock in full, bringing the total shares to be purchased in the recent public offering of Preferred Stock to 1,840,000. The total net proceeds from the offering of Preferred Stock (after underwriters’ compensation but before

 

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estimated expenses), including the exercise of the underwriters’ over-allotment option, is approximately $88.3 million.

 

Item 9.01.                                         Financial Statements and Exhibits.

 

(d)            Exhibits.

 

EXHIBIT
NUMBER

 

DESCRIPTION

 

 

 

3.1

 

Certificate of Designations of the 8.0% Series A Perpetual Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware and effective August 25, 2016 (including form of stock certificate)

4.1

 

Form of certificate for the 8.0% Series A Perpetual Convertible Preferred Stock (included as Exhibit A to Exhibit 3.1)

5.1

 

Opinion of Baker Botts L.L.P., relating to the Company’s Class A Common Stock

5.2

 

Opinion of Baker Botts L.L.P., relating to the Company’s 8.0% Series A Perpetual Convertible Preferred Stock

8.1

 

Opinion of Baker Botts L.L.P., as to certain tax matters relating to the Company’s Class A Common Stock

8.2

 

Opinion of Baker Botts L.L.P., as to certain tax matters relating to the Company’s 8.0% Series A Perpetual Convertible Preferred Stock

10.1

 

Fourth Amended and Restated Limited Liability Company Agreement of Jones Energy Holdings, LLC

23.1

 

Consent of Baker Botts L.L.P. (included in Exhibit 5.1 hereto).

23.2

 

Consent of Baker Botts L.L.P. (included in Exhibit 5.2 hereto).

23.3

 

Consent of Baker Botts L.L.P. (included in Exhibit 8.1 hereto).

23.4

 

Consent of Baker Botts L.L.P. (included in Exhibit 8.2 hereto).

99.1

 

Press Release, dated August 26, 2016

 

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SIGNATURES

 

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.

 

 

JONES ENERGY, INC.

 

 

 

 

 

 

Date: August 26, 2016

By:

/s/ Robert J. Brooks

 

 

Robert J. Brooks

 

 

Executive Vice President and Chief Financial Officer

 

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INDEX TO EXHIBITS

 

EXHIBIT
NUMBER

 

DESCRIPTION

 

 

 

3.1

 

Certificate of Designations of the 8.0% Series A Perpetual Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware and effective August 25, 2016 (including form of stock certificate)

4.1

 

Form of certificate for the 8.0% Series A Perpetual Convertible Preferred Stock (included as Exhibit A to Exhibit 3.1)

5.1

 

Opinion of Baker Botts L.L.P., relating to the Company’s Class A Common Stock

5.2

 

Opinion of Baker Botts L.L.P., relating to the Company’s 8.0% Series A Perpetual Convertible Preferred Stock

8.1

 

Opinion of Baker Botts L.L.P., as to certain tax matters relating to the Company’s Class A Common Stock

8.2

 

Opinion of Baker Botts L.L.P., as to certain tax matters relating to the Company’s 8.0% Series A Perpetual Convertible Preferred Stock

10.1

 

Fourth Amended and Restated Limited Liability Company Agreement of Jones Energy Holdings, LLC

23.1

 

Consent of Baker Botts L.L.P. (included in Exhibit 5.1 hereto).

23.2

 

Consent of Baker Botts L.L.P. (included in Exhibit 5.2 hereto).

23.3

 

Consent of Baker Botts L.L.P. (included in Exhibit 8.1 hereto).

23.4

 

Consent of Baker Botts L.L.P. (included in Exhibit 8.2 hereto).

99.1

 

Press Release, dated August 26, 2016

 

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Exhibit 3.1

 

JONES ENERGY, INC.

 


 

CERTIFICATE OF DESIGNATIONS

 

Pursuant to Section 151 of the General
Corporation Law of the State of Delaware

 


 

8.0% SERIES A PERPETUAL CONVERTIBLE PREFERRED STOCK

 

(Par Value $0.001 Per Share)

 

Jones Energy, Inc. (the “ Corporation ”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “ DGCL ”), hereby certifies that, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation by the Amended and Restated Certificate of Incorporation of the Corporation (as so amended and as further amended from time to time in accordance with its terms and the DGCL, the “ Certificate of Incorporation ”), which authorizes the Board of Directors, by resolution, to set forth the designation, rights, powers and preferences, and the qualifications, limitations and restrictions thereof, in one or more series of up to 100,000,000 shares of preferred stock, par value $0.001 per share (the “ Preferred Stock ”), and in accordance with the provisions of Section 151 of the DGCL, the Board of Directors duly adopted on August 25, 2016 the following resolution, which resolution remains in full force and effect on the date hereof:

 

RESOLVED , that, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation by the provisions of Section 4.3 of the Certificate of Incorporation of the Corporation and in accordance with the provisions of Section 151 of the DGCL, the Board of Directors hereby creates and provides for the issuance of a series of Preferred Stock, herein designated as the 8.0% Series A Perpetual Convertible Preferred Stock, which shall consist initially of 1,840,000 shares of Preferred Stock (subject to increase or decrease as described herein in accordance with Section 151(g) of the DGCL), and the designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions, of the shares of such series (in addition to the designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Certificate of Incorporation that are applicable to Preferred Stock of all series) are hereby fixed as follows:

 

1.                                       General .

 

(a)                                  There shall be created from the 100,000,000 shares of Preferred Stock of the Corporation authorized to be issued pursuant to the Certificate of Incorporation, a series of Preferred Stock designated as “8.0% Series A Perpetual Convertible Preferred Stock” par value $0.001 per share (the “ Series A Preferred Stock ”), and the authorized number of shares of Series A Preferred Stock shall be 1,840,000. Shares of Series A Preferred Stock that are purchased or

 

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otherwise acquired by the Corporation, or that are converted into shares of Class A Common Stock, shall be cancelled and shall revert to authorized but unissued shares of Series A Preferred Stock.

 

(b)                                  The Series A Preferred Stock, with respect to dividend rights and rights upon the liquidation, winding-up or dissolution of the Corporation, ranks: (i) senior to all Junior Stock; (ii) on a parity with all Parity Stock; and (iii) junior to all Senior Stock, in each case as provided more fully herein.

 

2.                                       Definitions . As used herein, the following terms shall have the following meanings:

 

(a)                                  Acquisition Termination Redemption Conversion Value ” shall mean, with respect to the applicable Acquisition Termination Redemption Date, the product of (i) 15.6961 and (ii) the average of the per share VWAP of Class A Common Stock for each day during a 20 consecutive Trading Day period ending immediately prior to the Acquisition Termination Redemption Date.

 

(b)                                  Acquisition Termination Redemption Date ” shall have the meaning specified in Section 8(b) .

 

(c)                                   Acquisition Termination Redemption Notice ” shall have the meaning specified in Section 8(b) .

 

(d)                                  Acquisition Termination Redemption Price ” shall have the meaning specified in Section 8(a) .

 

(e)                                   Additional Fundamental Change Amount ” shall have the meaning specified in Section 5(c) .

 

(f)                                    Agent Members ” shall have the meaning specified in Section 13(a)(ii) .

 

(g)                                   Board ” shall mean the Board of Directors of the Corporation or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.

 

(h)                                  Business Day ” shall mean any day other than Saturday, Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.

 

(i)                                      Capital Stock ” shall mean, for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that entity; provided that , “Capital Stock” shall not include any convertible or exchangeable debt securities which, prior to conversion or exchange, will rank senior in right of payment to the Series A Preferred Stock.

 

(j)                                     Certificated Series A Preferred Stock ” shall have the meaning specified in Section 13(a)(iii) .

 

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(k)                                  Class A Common Stock ” shall mean the Class A Common Stock, par value $0.001 per share, of the Corporation, subject to Section 10(i) .

 

(l)                                      Class B Common Stock ” shall mean the Class B Common Stock, par value $0.001 per share, of the Corporation.

 

(m)                              Closing Sale Price ” of the Class A Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported in composite transactions for the principal United States national or regional securities exchange on which the Class A Common Stock is traded or, if the Class A Common Stock is not listed for trading on a United States national or regional securities exchange on the relevant date, the last quoted bid price for the Class A Common Stock in the over-the-counter market on the relevant date, as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a quotation, the Closing Sale Price shall be the average of the mid-point of the last bid and ask prices for the Class A Common Stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Corporation for this purpose. The Closing Sale Price of any other security shall be determined in the same manner as set forth in this Section 2(m)  for the determination of the Closing Sale Price of the Class A Common Stock.

 

(n)                                  Common Public Offering Price ” shall mean $2.77.

 

(o)                                  Conversion Agent ” shall have the meaning specified in Section 10(b) .

 

(p)                                  Conversion Date ” shall have the meaning specified in Section 10(b) .

 

(q)                                  Conversion Price ” shall mean, at any time, $50.00 divided by the Conversion Rate in effect at such time.

 

(r)                                     Conversion Rate ” shall have the meaning specified in Section 10(a) .

 

(s)                                    DTC ” or “ Depository ” shall mean The Depository Trust Corporation, or any successor depository.

 

(t)                                     Designated Redemption Date ” shall have the meaning specified in Section 9(a) .

 

(u)                                  Dividend Payment Date ” shall mean February 15, May 15, August 15 and November 15 of each year, commencing on November 15, 2016.

 

(v)                                  Dividend Rate ” shall mean the rate per annum of 8.0% per share of Series A Preferred Stock on the Liquidation Preference.

 

(w)                                Dividend Record Date ” shall mean, with respect to any Dividend Payment Date, the February 1, May 1, August 1 or November 1, as the case may be, immediately preceding such Dividend Payment Date.

 

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(x)                                  Effective Date ” shall mean the date on which a Fundamental Change event occurs or becomes effective, except that, as used in Section 10(d) , Effective Date shall mean the first date on which shares of the Class A Common Stock trade on the applicable exchange or market, regular way, reflecting the relevant share subdivision or share combination, as applicable.

 

(y)                                  Event ” shall have the meaning specified in Section 6(e) .

 

(z)                                   Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(aa)                           Ex-Date ,” when used with respect to any issuance, dividend or distribution on Class A Common Stock, shall mean the first date on which the Class A Common Stock trades on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance, dividend or distribution from the Corporation or, if applicable, from the seller of the Class A Common Stock on such exchange or market (in the form of due bills or otherwise), as determined by such exchange or market.

 

(bb)                           Floor Price ” shall mean $0.83, subject to adjustment in a manner inversely proportional to any anti-dilution adjustment to the Conversion Rate pursuant to Section 10(d) .

 

(cc)                             A “ Fundamental Change ” shall be deemed to have occurred at any time after the Series A Preferred Stock is originally issued if any of the following occurs:

 

(i)                                      the consummation of any transaction (other than any transaction described in clause (ii) below, whether or not the proviso therein applies) the result of which is that a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Corporation, JEH LLC, one of the Corporation’s majority-owned Subsidiaries and our or their employee benefit plans or, provided that the Qualifying Owners taken together do not in the aggregate own more than 51% of the outstanding voting power of the Corporation’s common equity, a Qualifying Owner, has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of more than 50% of the voting power of the Corporation’s common equity;

 

(ii)                                   the consummation of (A) any recapitalization, reclassification or change of the Corporation’s common stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or changes resulting from a subdivision or combination), as a result of which the Corporation’s common stock would be converted into, or exchanged for, stock, other securities or other property or assets; (B) any consolidation, merger or combination of the Corporation pursuant to which the Corporation’s common stock would be converted into, or exchanged for, stock, other securities or other property or assets; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Corporation and its Subsidiaries, taken as a whole, to any Person other than one of the Corporation’s Subsidiaries; provided , however , that none of the transactions described in clauses (A), (B) or (C) shall constitute a “Fundamental Change” if (x) the holders of all classes of the Corporation’s common equity immediately prior to such transaction

 

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continue to own at least, directly or indirectly, more than 50% of the surviving corporation or transferee, or the parent thereof, immediately after such event or (y) such transaction is effected solely to change the Corporation’s jurisdiction of formation or to form a holding company for the Corporation and that results in a share exchange or reclassification or similar exchange of the outstanding Class A Common Stock solely into common stock of the surviving entity; and provided, further , that no exchange of shares of Class B Common Stock for shares of Class A Common Stock pursuant to the Exchange Agreement, dated July 26, 2013, by and among the Corporation, JEH LLC and the members of JEH LLC, as such agreement may be amended from time to time, shall constitute a “Fundamental Change”;

 

(iii)                                the Corporation’s common stock (or other common stock into which the Series A Preferred Stock is convertible) ceases to be listed or quoted on any of the New York Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or any of their respective successors);

 

(iv)                               the stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation (other than in a transaction described in clause (ii) above); or

 

(v)                                  the Corporation (or any successor to the Corporation permitted pursuant to the terms hereof) ceases to be, either directly or indirectly through one or more of the Corporation’s Subsidiaries, the managing member of JEH LLC or the Corporation ceases to control JEH LLC;

 

provided , however , that a transaction or transactions described in clause (i) or (ii) above shall not constitute a “Fundamental Change” if at least 90% of the consideration received or to be received by holders of Class A Common Stock (excluding cash payments made pursuant to dissenters’ appraisal rights) in connection with such transaction or transactions that would otherwise constitute a “Fundamental Change” consists of shares of common stock or common equity interests that are listed or quoted on any of the New York Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or any of their respective successors), or that will be so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction or transactions the Series A Preferred Stock becomes convertible into such consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights).

 

(dd)                           Fundamental Change Notice ” shall have the meaning specified in Section 5(d) .

 

(ee)                             Global Series A Preferred Stock ” shall have the meaning specified in Section 13(a)(i) .

 

(ff)                               Holder ” shall mean a holder of record of shares of Series A Preferred Stock.

 

(gg)                             Initial Conversion Value ” shall mean the product of (i) 15.6961 and (ii) the Common Public Offering Price.

 

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(hh)                           Initial Issue Date ” shall mean August 26, 2016, the original date of issuance of the Series A Preferred Stock.

 

(ii)                                   Initial Price ” shall mean $2.77.

 

(jj)                                 JEH LLC ” shall mean Jones Energy Holdings, LLC, a Delaware limited liability company.

 

(kk)                           Junior Stock ” shall mean (i) all classes of the Corporation’s common stock, including the Class A Common Stock and Class B Common Stock, and (ii) each other class or series of the Corporation’s Capital Stock established after the Initial Issue Date, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Series A Preferred Stock as to dividend rights and distribution rights upon the liquidation, winding-up or dissolution of the Corporation.

 

(ll)                                   Liquidation Preference ” shall mean, with respect to each share of Series A Preferred Stock, $50.00.

 

(mm)                   Make-Whole Premium ” shall have the meaning specified in Section 5(b)(i) .

 

(nn)                           Mandatory Conversion Date ” shall have the meaning specified in Section 11(b) .

 

(oo)                           Market Value ” shall mean the average of the per share VWAP of Class A Common Stock for each day during a five consecutive Trading Day period ending immediately prior to the date of determination.

 

(pp)                           Notice of Conversion ” shall have the meaning specified in Section 10(b) .

 

(qq)                           Notice of Redemption ” shall have the meaning specified in Section 9(b) .

 

(rr)                                 Officer ” shall mean the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Corporation.

 

(ss)                               Officers’ Certificate ” shall mean a certificate signed by two Officers.

 

(tt)                                 Optional Redemption ” shall have the meaning specified in Section 8(a) .

 

(uu)                           Parity Stock ” shall mean any class or series of the Corporation’s Capital Stock established after the Initial Issue Date, the terms of which expressly provide that such class or series will rank on parity with the Series A Preferred Stock as to dividend rights and distribution rights upon the liquidation, winding up or dissolution of the Corporation.

 

(vv)                           Pending STACK/SCOOP Acquisition ” shall mean the transaction contemplated by the Purchase Agreement, pursuant to which JEH LLC would acquire from SCOOP Energy Company, LLC oil and gas properties located in the STACK/SCOOP play in the Eastern Anadarko Basin in Central Oklahoma.

 

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(ww)                       Person ” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

 

(xx)                           Purchase Agreement ” shall mean the Purchase and Sale Agreement, dated as of August 18, 2016, by and between JEH LLC and SCOOP Energy Company, LLC.

 

(yy)                           Qualifying Owners ” shall mean, collectively, (i) Metalmark Capital Partners (C) II, L.P., (ii) any fund, investment account or other investment vehicle managed by Metalmark Capital Management II LLC, (iii) any affiliate of Metalmark Capital Partners (C) II, L.P., a majority of whose outstanding voting securities are, directly or indirectly, held by Metalmark Capital Partners II GP, L.P., or any individuals that are affiliates of Metalmark Capital Partners (C) II, L.P., (iv) Jones Energy Management, LLC, (v) any affiliate of Jones Energy Management, LLC, a majority of whose outstanding voting securities are, directly or indirectly, held by Jones Energy Management, LLC, (vi) JET 3 GP, LLC, and (vii) any affiliate of JET 3 GP, LLC, a majority of whose outstanding voting securities are, directly or indirectly, held by JET 3 GP, LLC.

 

(zz)                             Record Date ” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Class A Common Stock (or other applicable security) have the right to receive any cash, securities or other property or in which Class A Common Stock (or such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of the holders of Class A Common Stock (or such other security) entitled to receive such cash, securities or other property (whether such date is fixed by the Board, statute, contract or otherwise).

 

(aaa)                    Redemption and Paying Agent ” shall have the meaning specified in Section 9(b) .

 

(bbb)                    Redemption Price ” shall have the meaning specified in Section 9(a) .

 

(ccc)                       Redemption Right ” shall have the meaning specified in Section 9(a) .

 

(ddd)                    Redemption Value ” shall mean the average of the per share VWAP of Class A Common Stock for each day during a 20 consecutive Trading Day period ending on the Trading Day immediately prior to the Designated Redemption Date.

 

(eee)                       Reference Property ” shall have the meaning specified in Section 10(i) .

 

(fff)                          Reorganization Event ” shall have the meaning specified in Section 10(i) .

 

(ggg)                       Scheduled Trading Day ” shall mean a day that is scheduled to be a Trading Day on the principal U.S. national or regional securities exchange or market on which the Class A Common Stock is listed or admitted for trading.  If the Class A Common Stock is not so listed or admitted for trading, Scheduled Trading Day shall mean a Business Day.

 

(hhh)                    SEC ” shall mean the Securities and Exchange Commission.

 

7



 

(iii)                                Securities Act ” shall mean the Securities Act of 1933, as amended.

 

(jjj)                             Senior Stock ” shall mean any class or series of the Corporation’s Capital Stock established after the Initial Issue Date, the terms of which expressly provide that such class or series will rank senior to the Series A Preferred Stock as to dividend rights and distribution rights upon the liquidation, winding up or dissolution of the Corporation.

 

(kkk)                    Series A Preferred Stock ” shall have the meaning specified in Section 1(a) .

 

(lll)                                Special Rights End Date ” shall have the meaning specified in Section 5(a) .

 

(mmm)        Spin-Off ” shall have the meaning specified in Section 10(d)(iii) .

 

(nnn)                    Stock Price ” shall mean (i) if holders of shares of Class A Common Stock receive in exchange for their Class A Common Stock only cash in the transaction constituting a Fundamental Change, the cash amount paid per share, or (ii) otherwise, the average of the Closing Sale Prices of the Class A Common Stock on the 10 consecutive Trading Days immediately preceding, but excluding, the Effective Date of the Fundamental Change.

 

(ooo)                    Subsidiary ” shall mean, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person.

 

(ppp)                    Trading Day ” shall mean a day during which trading in the Class A Common Stock generally occurs on the New York Stock Exchange or, if the Class A Common Stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Class A Common Stock is then listed or, if the Class A Common Stock is not listed on a national or regional securities exchange, on the principal other market on which the Class A Common Stock is then listed or admitted for trading.  If the Class A Common Stock is not so listed or traded, Trading Day means a Business Day.

 

(qqq)                    Transfer Agent ” shall mean American Stock Transfer & Trust Company, LLC, acting as the Corporation’s duly appointed transfer agent, registrar, redemption, conversion and dividend disbursing agent for the Series A Preferred Stock and Class A Common Stock. The Corporation may, in its sole discretion, remove the Transfer Agent with 10 days’ prior notice to the Transfer Agent and Holders; provided that the Corporation shall appoint a successor Transfer Agent who shall accept such appointment prior to the effectiveness of such removal.

 

(rrr)                             Unpaid Excess Cash Amount ” shall mean, with respect to the applicable Holder, any unpaid excess cash payment amounts excused from payment as a dividend due to restrictions in credit facilities or other indebtedness or legal requirements as set forth in Section 4(d) .

 

(sss)                          Voting Rights Class ” shall have the meaning specified in Section 6(a) .

 

8



 

(ttt)                             Voting Rights Triggering Event ” shall mean a time at which dividends on, or any Unpaid Excess Cash Amount, on the Series A Preferred Stock, or dividends on any other series of Preferred Stock or preference securities that ranks equally with the Series A Preferred Stock as to payment of dividends and with similar voting rights are in arrears and unpaid with respect to six or more quarterly dividend periods (whether or not consecutive and including the dividend period beginning on the Initial Issue Date and ending on November 15, 2016).

 

(uuu)                    VWAP ” shall mean the volume-weighted average price, as displayed under the heading “Bloomberg VWAP” on Bloomberg page “JONE <equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on each such trading day (or if such volume-weighted average price is unavailable on any such day, the closing sale price shall be used for such day). The per share VWAP on each such day will be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.

 

3.                                       Dividends .

 

(a)                                  Subject to the rights of holders of Senior Stock, Holders shall be entitled to receive, when, as and if declared by the Board out of funds of the Corporation legally available for payment, cumulative dividends at the Dividend Rate.  Dividends on the Series A Preferred Stock shall be payable quarterly in arrears at the Dividend Rate, and shall accumulate, whether or not earned or declared, from the most recent date as to which dividends have been paid, or, if no dividends have been paid, from the Initial Issue Date (whether or not (i) in any dividend period or periods any agreements of the Corporation prohibit the current payment of dividends, (ii) there shall be funds of the Corporation legally available for the payment of such dividends or (iii) the Corporation declares the payment of dividends), and may be paid in cash or, where freely transferable (other than by the Corporation’s affiliates), in Class A Common Stock as provided pursuant to Section 4 . Dividends shall be payable quarterly in arrears on each Dividend Payment Date (commencing on November 15, 2016) to the Holders as they appear on the Corporation’s stock register at 5:00 p.m., New York City time, on the relevant Dividend Record Date. Accumulated and unpaid dividends on shares of Series A Preferred Stock for any past dividend periods may be declared and paid at any time to Holders not more than 30 nor less than 10 calendar days immediately preceding any Dividend Payment Date and shall not bear interest.  In addition, the Corporation may declare and pay an additional dividend in cash as part of any dividend otherwise declared and paid on shares of Series A Preferred Stock in an amount equal to all or a portion of any Unpaid Excess Cash Amount.  The Corporation shall provide not less than 20 Scheduled Trading Days’ notice prior to any such Dividend Payment Date.  Dividends payable for any period less than a full quarterly dividend period (based upon the number of days elapsed during the period) shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

(b)                                  No dividend shall be declared or paid upon, or any sum of cash or number of shares of Class A Common Stock set apart for the payment of dividends upon, any outstanding share of the Series A Preferred Stock with respect to any dividend period unless all accrued dividends for all preceding periods have been declared and paid upon, or a sufficient sum or

 

9



 

number of shares of Class A Common Stock has been set apart for the payment of such dividends upon, all outstanding shares of Series A Preferred Stock.

 

(c)                                   So long as any shares of Series A Preferred Stock remain outstanding, no dividends or other distributions (other than a dividend or distribution payable solely in shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock) and cash in lieu of fractional shares) may be declared, made or paid upon, or set apart for payment upon, any Parity Stock or Junior Stock, nor may any Parity Stock or Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for the redemption of any Parity Stock or Junior Stock) by the Corporation or on behalf of the Corporation, unless all accumulated and unpaid dividends (together with any additional dividends in the amount of any Unpaid Excess Cash Amount) have been or contemporaneously are declared and paid upon, or a sum sufficient or number of shares of common stock of the Corporation has been set apart for the payment of such dividends upon, the Series A Preferred Stock and any Parity Stock for all dividend payment periods ending on or prior to the date of such declaration, payment, redemption, purchase or acquisition.  The foregoing limitation shall not apply to: (i) conversion into or exchange for shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock) and cash solely in lieu of fractional shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock), (ii) payments in connection with the satisfaction of employees’ tax withholding obligations pursuant to employee benefit plans or outstanding awards (and payment of any corresponding requisite amounts to the appropriate governmental authority), (iii) purchases, redemptions or other acquisitions of Parity Stock or Junior Stock in connection with the administration of any benefit or other incentive plan, including any employment contract, in the ordinary course of business, (iv) any dividends or distributions of rights paid or made by in connection with a stockholders’ rights plan or any redemption or repurchase of rights pursuant to any stockholders’ rights plan, or (v) the deemed purchase or acquisition of fractional interests in shares of Parity Stock or Junior Stock pursuant to the conversion or exchange provisions of such Parity Stock or Junior Stock or the security being converted or exchanged.  Notwithstanding the foregoing, if full dividends have not been paid on the Series A Preferred Stock and any Parity Stock, dividends may be declared and paid on the Series A Preferred Stock and such Parity Stock so long as the dividends are declared and paid pro rata so that the amounts of dividends declared per share on the shares of Series A Preferred Stock and shares of such Parity Stock shall in all cases bear to each other the same ratio that accumulated and unpaid dividends per share on the shares of Series A Preferred Stock (plus any Unpaid Excess Cash Amount) and shares of such Parity Stock bear to each other.

 

(d)                                  Holders of shares of Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends.

 

(e)                                   If any Dividend Payment Date falls on a day that is not a Business Day, the required payment will be made on the next succeeding Business Day and no interest or dividends on such payment will accrue or accumulate, as the case may be, in respect of the delay.

 

(f)                                    The Holders at 5:00 p.m., New York City time, on a Dividend Record Date shall be entitled to receive the dividend payment on their respective shares of Series A Preferred Stock on the corresponding Dividend Payment Date notwithstanding the conversion of such shares in

 

10



 

accordance with Section 10 following such Dividend Record Date or the Corporation’s default in payment of the dividend due on such Dividend Payment Date. However, notwithstanding the foregoing, shares of Series A Preferred Stock surrendered for conversion during the period between 5:00 p.m., New York City time, on any Dividend Record Date and 5:00 p.m., New York City time, on the Business Day immediately preceding the corresponding Dividend Payment Date must be accompanied by payment of an amount of cash equal to the dividend payable on such shares on that Dividend Payment Date; provided that no such payment is required in respect of a mandatory conversion pursuant to Section 11 during such period or if the Special Rights End Date occurs during such period. Except as provided in Section 10 with respect to a voluntary conversion, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares of Series A Preferred Stock or for dividends on the shares of Class A Common Stock issued upon conversion.

 

(g)                                   Subject to the foregoing, such dividends (payable in cash, securities or other property) as may be determined by the Board may be declared and paid on any of the Corporation’s securities, including Class A Common Stock, from time to time out of funds legally available for such payment, and the Holders shall not be entitled to participate in any such dividends.

 

4.                                       Method of Payment of Dividends .

 

(a)                                  Subject to the restrictions set forth herein, the Corporation may pay any dividend on the Series A Preferred Stock for a current dividend period or any prior dividend period (including in connection with the payment of declared and unpaid dividends pursuant to Section 5 (including Section 5(f) ) and Section 11 , determined in its sole discretion: (i) in cash; (ii) by delivery of shares of Class A Common Stock; or (iii) by delivery of any combination of cash and shares of Class A Common Stock.  All cash payments to which a Holder is entitled in connection with a dividend declared on the Series A Preferred Stock will be rounded to the nearest cent.

 

(b)                                  If the Corporation elects to make a dividend payment, or any portion thereof, in shares of Class A Common Stock, such shares shall be valued for such purpose, in the case of any dividend payment, or portion thereof, at 95% of the average of the per share VWAP of its Class A Common Stock for each day during a five consecutive Trading Day period ending immediately prior to the Dividend Payment Date for such dividend.

 

(c)                                   The Corporation shall make each dividend payment on the Series A Preferred Stock in cash, except to the extent the Corporation elects to make all or any portion of such payment in shares of the Class A Common Stock.  The Corporation shall give the Holders notice of any such election and the portion of such payment that will be made in cash and the portion that will be made in Class A Common Stock no later than 10 Scheduled Trading Days prior to the Dividend Payment Date for such dividend.

 

(d)                                  Notwithstanding the foregoing, in no event shall the number of shares of Class A Common Stock delivered in connection with any declared dividend exceed a number equal to the total dividend payment divided by the Floor Price.  For the avoidance of doubt, if the Corporation is unable to pay any shortfall in such dividend in cash, the Corporation shall have no obligation to pay such shortfall, except that such shortfall amount shall be added to the amount payable to

 

11



 

the Holders upon liquidation, dissolution or winding up of the Corporation as set forth in Section 7 .  To the extent that the amount of the declared dividend as to which the Corporation has elected to deliver shares of Class A Common Stock in lieu of cash exceeds the number of shares of Class A Common Stock delivered in connection with such dividend multiplied by 95% of the Market Value, the Corporation shall, notwithstanding any notice by the Corporation to the contrary, pay such excess amount in cash, provided that the Corporation’s credit facilities permit the payment of dividends on Series A Preferred Stock, the Corporation is able to do so under the terms of its then-outstanding indebtedness and the Corporation is otherwise legally able to do so. For the avoidance of doubt, if the Corporation is unable to pay such excess amounts in cash in accordance with the foregoing sentence, the Corporation shall have no further obligation to pay such excess amount, except that such excess amount shall be added to the amount payable with respect to such shares of Series A Preferred Stock upon the liquidation, dissolution or winding up of the Corporation as set forth in Section 7 .

 

(e)                                   Notwithstanding the above, the Corporation shall not pay any portion of a dividend on Series A Preferred Stock by delivery of Class A Common Stock unless (i) the Class A Common Stock to be delivered as payment therefor is freely transferable by the recipient thereof without further action on its behalf other than by reason of the fact that such recipient is an affiliate of the Corporation, or (ii) a shelf registration statement relating to such Class A Common Stock has been filed with the SEC and is effective to permit the resale of such Class A Common Stock by the holders thereof.

 

5.                                       Special Rights Upon a Fundamental Change .

 

(a)                                  A Holder shall have the right, in connection with any Fundamental Change, to convert shares of Series A Preferred Stock in accordance with Section 10 for that number of shares of Class A Common Stock set forth in Section 5(b)  at any time during the period beginning at 9:00 a.m., New York City time, on the Trading Day immediately following the Effective Date of a Fundamental Change and ending at 5:00 p.m., New York City time, on the 20th Trading Day immediately following such Effective Date (unless extended in accordance with Section 5(c) ) (such end date, the “ Special Rights End Date ”), subject to the provisions of this Section 5 .

 

(b)                                  If a Holder converts shares of its Series A Preferred Stock pursuant to this Section 5 during the period set forth in Section 5(a) , the Corporation shall deliver to such converting Holder, for each share of Series A Preferred Stock surrendered for conversion, the greater of:

 

(i)                                      a number of shares of Class A Common Stock equal to the sum of (A) the Conversion Rate and (B) the Make-Whole Premium determined pursuant to Section 5(f) , if any; and

 

(ii)                                   a number of shares of Class A Common Stock equal to the Conversion Rate, which will be adjusted to equal (A) the sum of the Liquidation Preference plus an amount equal to all accrued dividends on such share to but excluding the settlement date for such conversion that have not been paid, or declared and a sum sufficient for the payment thereof set apart, plus any Unpaid Excess Cash Amount on such share, divided by (B) the average of the Closing Sale Prices of the Class A Common Stock for the five

 

12



 

consecutive Trading Days ending on the third Business Day prior to such settlement date.  Notwithstanding the foregoing, the Conversion Rate as adjusted as described in this clause (ii) will not exceed 27.2132 shares of Class A Common Stock per share of Series A Preferred Stock (subject to adjustment in the same manner as the Conversion Rate as provided in Section 10 ).

 

(c)                                   For any shares of Series A Preferred Stock that are converted pursuant to this Section 5 during the period set forth in Section 5(a) , subject to the limitations described herein, the Corporation shall have the right to pay the Make-Whole Premium, in its sole discretion, (i) in cash; (ii) by delivery of shares of Class A Common Stock; or (iii) by delivery of any combination of cash and shares of Class A Common Stock.  The Corporation shall pay such Make-Whole Premium in cash, except to the extent the Corporation elects to make all or any portion of such payment in shares of Class A Common Stock.  Notwithstanding the foregoing, in no event will the number of shares of Class A Common Stock equal to the then-applicable Conversion Rate plus the Make-Whole Premium, in the aggregate, exceed a number of shares equal to (i) the sum of such amounts (the “ Additional Fundamental Change Amount ”), divided by (ii) the greater of (A) the Floor Price and (B) 95% of the Stock Price.  To the extent that the Additional Fundamental Change Amount exceeds the product of the number of shares of Class A Common Stock delivered in respect of such Additional Fundamental Change Amount and 95% of the Stock Price, the Corporation shall, notwithstanding any notice by the Corporation to the contrary, pay such excess amount in cash, provided that the Corporation’s credit facilities permit the payment of dividends on the Series A Preferred Stock, the Corporation is able to do so under the terms of its then-outstanding indebtedness and the Corporation is otherwise legally able to do so.  For the avoidance of doubt, if the Corporation is unable to pay such excess amount in cash in accordance with the foregoing sentence, the Corporation shall have no further obligation to pay such excess amount.

 

(d)                                  The Corporation shall give notice (a “ Fundamental Change Notice ”) of each Fundamental Change to all Holders no later than 20 calendar days prior to the anticipated Effective Date (determined in good faith by the Board) of the Fundamental Change or, if such prior notice is not practicable, no later than two Business Days after such Fundamental Change.  If the Corporation notifies Holders of a Fundamental Change later than the 20th calendar day prior to the Effective Date of such Fundamental Change, the Special Rights End Date will be extended by a number of days equal to the number of days from, and including, the 20th calendar day prior to the Effective Date of such Fundamental Change to, but excluding, the date of the notice; provided that the Special Rights End Date will not be extended beyond the Mandatory Conversion Date.

 

(e)                                   The Fundamental Change Notice shall be given in any manner compliant with the procedures of the Depository in effect at such time to each Holder on the date such notice is given.  The Fundamental Change Notice shall state (i) the anticipated Effective Date of such Fundamental Change; (ii) the Special Rights End Date; (iii) the name and address of the Transfer Agent; and (iv) the procedures that Holders must follow to exercise their conversion right pursuant to this Section 5 .

 

(f)                                    The number of additional shares of Class A Common Stock, if any, to be added to Conversion Rate per share of Series A Preferred Stock in connection with a Fundamental Change

 

13



 

pursuant to Section 5(b)(i)  above (the “ Make-Whole Premium ”) shall be determined by reference to the table below, based on the Effective Date and the Stock Price with respect to such Fundamental Change.

 

 

 

Stock Price(1)

 

Effective Date

 

$2.77

 

$3.00

 

$3.19

 

$3.50

 

$4.00

 

$5.00

 

$5.58

 

$6.00

 

$7.00

 

$8.00

 

$9.00

 

$10.00

 

$11.00

 

$12.00

 

August 26, 2016

 

2.3544

 

2.2170

 

1.9525

 

1.5844

 

1.1464

 

0.5995

 

0.4046

 

0.2982

 

0.1350

 

0.0520

 

0.0133

 

0.0000

 

0.0000

 

0.0000

 

August 15, 2017

 

2.3544

 

2.4966

 

2.2125

 

1.8176

 

1.3489

 

0.7648

 

0.5556

 

0.4399

 

0.2555

 

0.1509

 

0.0912

 

0.0554

 

0.0321

 

0.0170

 

August 15, 2018

 

2.3544

 

2.4332

 

2.1480

 

1.7542

 

1.2915

 

0.7238

 

0.5236

 

0.4140

 

0.2406

 

0.1431

 

0.0878

 

0.0544

 

0.0322

 

0.0175

 

August 15, 2019

 

2.3544

 

2.4022

 

2.1079

 

1.7039

 

1.2349

 

0.6744

 

0.4834

 

0.3807

 

0.2213

 

0.1330

 

0.0836

 

0.0536

 

0.0329

 

0.0185

 

August 15, 2020

 

2.3544

 

2.4094

 

2.0966

 

1.6668

 

1.1696

 

0.5958

 

0.4130

 

0.3193

 

0.1817

 

0.1113

 

0.0748

 

0.0526

 

0.0352

 

0.0214

 

August 15, 2021

 

2.3544

 

2.4667

 

2.1432

 

1.7000

 

1.1785

 

0.4956

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

August 15, 2022

 

2.3544

 

2.5204

 

2.1822

 

1.7302

 

1.2133

 

0.5275

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

August 15, 2023

 

2.3544

 

2.5310

 

2.1598

 

1.6863

 

1.1810

 

0.5270

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

August 15, 2024 and thereafter

 

2.3544

 

1.9884

 

1.5453

 

1.1502

 

0.9811

 

0.6800

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

 


(1) The Stock Prices set forth in the table above shall be adjusted as of any date on which the Conversion Rate is adjusted.  The adjusted Stock Prices shall be equal to the Stock Prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Stock Price adjustment and the denominator of which is the Conversion Rate as so adjusted.  The number of additional shares in the table above will be adjusted in the same manner and at the same time as the Conversion Rate as set forth under Section 10 .

 

(g)                                   The exact Stock Price and Effective Date may not be set forth on the table above, in which case:

 

(i)                                      if the Stock Price is between two Stock Prices on the table or the Effective Date is between two Effective Dates on the table, the Make-Whole Premium shall be determined by straight-line interpolation between the Make-Whole Premium set forth for the higher and lower Stock Prices or the earlier and later Effective Dates, as applicable, based on a 365-day year;

 

(ii)                                   if the Stock Price is in excess of $12.00 per share (subject to adjustment in the same manner as the Stock Prices), no Make-Whole Premium will be added to the Conversion Rate; and

 

(iii)                                if the Stock Price is less than $2.77 per share (subject to adjustment in the same manner as the Stock Prices), no Make-Whole Premium will be added to the Conversion Rate.

 

(h)                                  Whenever any provision of this Certificate of Designations requires the Corporation to calculate the Closing Sale Prices or the Stock Prices for purposes of determining any market value in connection with a dividend payment made in share of Class A Common Stock or any Make-Whole Premium in connection with a Fundamental Change, the Board shall make appropriate adjustments to each to account for any adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate where the Record Date of the event occurs, at any time during the period when such Closing Sale Prices or Stock Prices are to be calculated.

 

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6.                                       Voting .  The shares of Series A Preferred Stock shall have no voting rights except as set forth below or as otherwise required by Delaware law:

 

(a)                                  If at any time a Voting Rights Triggering Event has occurred, then the Holders, voting as a single class with any other series of Preferred Stock or preference securities having similar voting rights that are exercisable (and with voting rights allocated pro rata based on the liquidation preference of the Series A Preferred Stock and each such other series of Preferred Stock or preference securities) (together, the “ Voting Rights Class ”), shall be entitled at the next regular or special meeting of stockholders of the Corporation to elect two additional directors to the Board. Upon the election of any such additional directors, the number of directors that comprise the Board shall be increased by such number of additional directors.

 

(b)                                  The voting rights set forth in Section 6(a)  may be exercised at a special meeting of the Corporation’s stockholders, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such special or annual meeting until such time as all dividends and Unpaid Excess Cash Amounts in arrears, the nonpayment of which caused the Voting Rights Triggering Event, shall have been paid in full, at which time or times, automatically and without any further action by any Person, such voting rights shall terminate.

 

(c)                                   At any meeting at which the holders of shares of the Voting Rights Class shall have the right to elect directors as provided in Section 6(a) , the presence in person or by proxy of the holders of shares representing more than fifty percent (50%) in voting power of the then outstanding shares of the Voting Rights Class shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. The affirmative vote of the holders of shares representing more than fifty percent (50%) in voting power of the then outstanding shares of the Voting Rights Class present at such meeting, in person or by proxy, shall be sufficient to elect any such director.  Any director elected pursuant to the voting rights set forth in this Section 6 may be removed at any time without cause by the holders of record of shares representing more than fifty percent (50%) in voting power of the then outstanding shares of the Voting Rights Class at any time during which such holders’ rights pursuant to Section 6(a)  continue.  Any vacancy in respect of any such additional director arising at any time during which such holders’ rights pursuant to Section 6(a)  continue (other than prior to the first election immediately following the applicable Voting Rights Triggering Event) may be filled by the written consent of the director elected by the Voting Rights Class remaining in office, or, if none remains in office, by a vote of the holders of shares representing more than fifty percent (50%) in voting power of the then outstanding shares of the Voting Rights Class; provided that the filling of each vacancy shall not violate the Amended and Restated Bylaws of the Corporation as in effect on the effective date of this Certificate of Designations or the corporate governance requirements of The New York Stock Exchange (or any other exchange or automated quotation system on which securities of the Corporation may be listed or quoted) that requires listed or quoted companies to have a majority of independent directors.  Directors elected pursuant to the voting rights set forth in Section 6(a)  shall be entitled to one vote per director on any matter.

 

(d)                                  Any director elected pursuant to the voting rights set forth in Section 6(a)  shall hold office until the next annual meeting of stockholders; provided, however , notwithstanding the foregoing, at such time as all dividends and Unpaid Excess Cash Amounts in arrears, the nonpayment of which caused the Voting Rights Triggering Event, have been paid in full, then,

 

15



 

automatically and without any further action by any Person, the terms of office of directors elected pursuant to the voting rights set forth in this Section 6 shall cease and the number of directors comprising the Board shall be reduced accordingly.

 

(e)                                   So long as any shares of Series A Preferred Stock remain outstanding, unless a greater percentage shall then be required by law, the Corporation shall not, without the affirmative vote or consent of the Holders of at least a majority of the shares of Series A Preferred Stock outstanding at the time, voting together as a single class with all series of Parity Stock upon which similar voting rights have been conferred and are exercisable, given in person or by proxy, either in writing or at a meeting: (i) authorize or create, or increase the authorized or issued amount of, any class or series of Senior Stock or reclassify any of our authorized Capital Stock into shares of Senior Stock, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any shares of Senior Stock; or (ii) amend, alter or repeal the provisions of the Certificate of Incorporation, whether by merger, consolidation or otherwise (each of clause (i) and (ii), an “ Event ”), so as to materially and adversely affect any right, preference, privilege or voting power of the shares of Series A Preferred Stock; provided, however , with respect to the occurrence of any Event set forth in clause (ii) above, so long as any shares of Series A Preferred Stock remain outstanding with the terms thereof materially unchanged, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of Holders; and, provided, further , that any increase in the amount of authorized Preferred Stock (including the Series A Preferred Stock) or the creation or issuance of any additional shares of Series A Preferred Stock or other series of Preferred Stock, or any increase in the amount of authorized shares of such series, in each case, which would constitute Parity Stock or Junior Stock, shall not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of Holders.

 

(f)                                    In all cases in which Holders shall be entitled to vote, each share of Series A Preferred Stock shall be entitled to one vote, provided that if one or more other series of preferred stock or preference securities is outstanding and entitled to vote as part of the Voting Rights Class, voting rights shall be allocated pro rata based on the liquidation preference of the Series A Preferred Stock and each such other series of preferred stock or preference securities included as part of the Voting Rights Class.

 

7.                                       Liquidation Rights .

 

(a)                                  In the event of any liquidation, winding up or dissolution of the Corporation, whether voluntary or involuntary, each Holder shall be entitled to receive in respect of its shares of Series A Preferred Stock and to be paid out of the assets of the Corporation legally available for distribution to its stockholders, after satisfaction of liabilities to the Corporation’s creditors and holders of shares of Senior Stock and before any payment or distribution is made to holders of Junior Stock (including the Class A Common Stock and the Class B Common Stock), the Liquidation Preference per share of Series A Preferred Stock plus an amount equal to all accrued dividends on such shares to but excluding the date of liquidation, winding up or dissolution that have not been paid, or a sum sufficient for the payment thereof set apart plus any Unpaid Excess Cash Amount on such shares.

 

16



 

(b)                                  Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the assets or business of the Corporation (other than in connection with the liquidation, winding up or dissolution of the Corporation), nor the merger or consolidation of the Corporation into or with any other Person, nor any share exchange or division involving the Corporation in pursuance of applicable statutes providing for the consolidation, merger, share exchange or division, shall be deemed to be a liquidation, winding up or dissolution, whether voluntary or involuntary, for the purposes of this Section 7 , notwithstanding that, for other purposes, such as for tax purposes, such an event may constitute a liquidation, dissolution or winding up. In addition, no payment shall be made to Holders pursuant to this Section 7 upon the liquidation, dissolution or winding up, whether voluntary or involuntary, of any of the Corporation’s Subsidiaries or upon any reorganization of the Corporation’s Subsidiaries without the approval of the Corporation or its stockholders (including a merger or conversion of JEH LLC into a corporation if the managing member determines, in its sole discretion, that it is no longer in the interests of JEH LLC to continue as a partnership for U.S. federal income tax purposes).

 

(c)                                   After the payment to the Holders of the shares of Series A Preferred Stock of full preferential amounts provided for in this Section 7 , the Holders of Series A Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

 

(d)                                  In the event the assets of the Corporation available for distribution to the Holders and holders of shares of Parity Stock upon any liquidation, winding up or dissolution of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this Section 7 , such Holders and such holders of shares of Parity Stock shall share, equally and ratably in proportion to the respective full amounts to which such holders are entitled pursuant to this Section 7 , in any distribution of the assets of the Corporation.

 

8.                                       Acquisition Termination Redemption .

 

(a)                                  No sinking fund is provided for the Series A Preferred Stock.  If the Purchase Agreement terminates (other than by consummation of the Pending STACK/SCOOP Acquisition), the Corporation shall have the right, at its option, to redeem (an “ Optional Redemption ”) all, but not less than all, of the shares of Series A Preferred Stock outstanding at the time of such redemption, on an Acquisition Termination Redemption Date to occur on or prior to February 13, 2017, at a redemption price equal to the sum of (i) $50.50, (ii) accumulated and unpaid dividends to, but excluding, the Acquisition Termination Redemption Date plus any Unpaid Excess Cash Amount and (iii) 90% of the excess, if any, of the Acquisition Termination Redemption Conversion Value over the Initial Conversion Value (unless the Acquisition Termination Redemption Date falls after a regular Dividend Record Date but on or prior to the immediately succeeding Dividend Payment Date, in which case the Corporation shall pay the full amount of accumulated and unpaid dividends to the applicable Holders as of 5:00 p.m., New York City time, on such Dividend Record Date, and the Acquisition Termination Redemption Price shall not include any such accumulated and unpaid dividends) (the “ Acquisition Termination Redemption Price ”).  The Acquisition Termination Redemption Price shall be paid by the Corporation in cash to each Holder.  For the avoidance of doubt, the Series A Preferred Stock are not redeemable pursuant to this Section 8 after February 13, 2017.

 

17



 

(b)                                  In case the Corporation exercises its Optional Redemption right to redeem all of the Series A Preferred Stock pursuant to Section 8(a) , it shall fix a date, which must be a Business Day, for redemption (an “ Acquisition Termination Redemption Date ”), and the Corporation shall deliver to each Holder so to be redeemed a notice of such Optional Redemption (an “ Acquisition Termination Redemption Notice ”) not less than 40 nor more than 60 calendar days prior to the Acquisition Termination Redemption Date in any manner compliant with the procedures of the Depository in effect at such time.

 

(c)                                   The Acquisition Termination Redemption Notice, if sent in any manner compliant with the procedures of the Depository in effect at such time, shall be conclusively presumed to have been duly given, whether or not the Holder of any Series A Preferred Stock receives such notice. In any case, failure to give such Acquisition Termination Redemption Notice in a manner compliant with the procedures of the Depository in effect at such time or any defect in the Acquisition Termination Redemption Notice to the Holder of any shares of Series A Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A Preferred Stock.

 

(d)                                  Each Acquisition Termination Redemption Notice shall specify, among other things:

 

(i)                                      the Acquisition Termination Redemption Date;

 

(ii)                                   the Acquisition Termination Redemption Price (or manner of calculation if not then known);

 

(iii)                                that on the Acquisition Termination Redemption Date, the Acquisition Termination Redemption Price will become due and payable upon each such share of Series A Preferred Stock, and that dividends thereon, if any, shall cease to accrue on and after said date;

 

(iv)                               that Holders of the Series A Preferred Stock may surrender their Series A Preferred Stock for conversion at any time prior to the close of business on the Business Day immediately preceding the Acquisition Termination Redemption Date;

 

(v)                                  the Conversion Rate as of the date of such notice; and

 

(vi)                               the CUSIP, ISIN or other similar numbers, if any, assigned to such Series A Preferred Stock and that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Series A Preferred Stock.

 

9.                                       Redemption at the Option of the Holder .

 

(a)                                  On August 15, 2024 (the “ Designated Redemption Date ”), each Holder shall have the right (the “ Redemption Right ”) to require the Corporation to redeem any or all of such Holder’s shares of Series A Preferred Stock outstanding as of the Designated Redemption Date, in each case to the extent not prohibited by law and out of funds legally available for such payment, at a redemption price per share equal to the Liquidation Preference plus an amount equal to all accrued dividends on such share to but excluding the Designated Redemption Date

 

18



 

that have not been paid, or declared and a sum sufficient for the payment thereof set apart, plus any Excess Unpaid Cash Amount on such share (the “ Redemption Price ”).  If the Designated Redemption Date falls on a day that is not a Business Day, the payment of the Redemption Price shall be made on the next succeeding Business Day and no interest or dividends on such payment will accrue or accumulate, as the case may be, in respect of such delay.

 

(b)                                  In order to exercise its Redemption Right in respect of the Designated Redemption Date and as a condition to such Holder’s right to receive of receive the Redemption Price as set forth in Section 9(a) , the applicable Holder shall, no later than 5:00 p.m., New York City time, on the date that is 60 calendar days prior to the Designated Redemption Date (or the next Business Day, if such date is not a Business Day): (i) deliver to the Transfer Agent, in its capacity as redemption and paying agent (or such other agent designated by the Corporation) (the “ Redemption and Paying Agent ”) a duly completed notice of redemption (a “ Notice of Redemption ”) in compliance with the procedures of the Depository in effect at such time for tendering interests in global certificates, stating the number of shares of Series A Preferred Stock of such Holder being tendered for redemption on the Designated Redemption Date; and (ii) (A) in the event such Holder is a holder of a beneficial interest in any shares of Global Series A Preferred Stock to be so redeemed, make book-entry transfer of such shares of Series A Preferred Stock in compliance with the procedures of the Depository in effect at such time for tendering interests in global certificates or (B) in the event such Holder holds any shares of Certificated Series A Preferred Stock to be so redeemed, surrender such shares of Certificated Series A Preferred Stock being tendered for redemption on the Designated Redemption Date to the Redemption and Paying Agent.  Notwithstanding anything herein to the contrary, any Holder delivering to the Redemption and Paying Agent a Notice of Redemption shall have the right to withdraw, in whole or in part, such Notice of Redemption at any time prior to 5:00 p.m., New York City time, on the Business Day immediately preceding the Designated Redemption Date by delivery of a written notice of withdrawal to the Redemption and Paying Agent in accordance with applicable procedures of the Depository then in effect.

 

(c)                                   The Corporation may elect to pay the Redemption Price, determined in its sole discretion: (i) in cash; (ii) by delivery of shares of Class A Common Stock; or (iii) by delivery of any combination of cash and shares of Class A Common Stock.  The Corporation shall pay the Redemption Price in cash, except to the extent the Corporation publishes notice in the form of a press release (in accordance with Section 9(d) ) on or prior to 40 calendar days prior to the Designated Redemption Date electing to make all or any portion of such payment of the Redemption Price in shares of Class A Common Stock as set forth above.  If the Corporation elects to make any such payment, or portion thereof, in shares of Class A Common Stock, such shares of Class A Common Stock shall be valued for such purpose at 95% of the Redemption Value.  Notwithstanding the foregoing, in no event will the number of shares of Class A Common Stock delivered in connection with the Redemption Price exceed the Redemption Price divided by the greater of (i) the Floor Price and (ii) 95% of the Redemption Value.  To the extent that the Redemption Price exceeds the product of the number of shares of Class A Common Stock delivered in respect of the Redemption Price and 95% of the Redemption Value, the Corporation shall pay such excess amount in cash.

 

(d)                                  In order to exercise its right to pay all or any portion of the Redemption Price in shares of Class A Common Stock, the Corporation shall issue a notice in the form of a press

 

19



 

release for publication on the Dow Jones News Service or Bloomberg Business News (or another broadly disseminated news or press release service selected by the Corporation) at least 40 calendar days prior to the Designated Redemption Date, or such earlier date as may be required by applicable law.  In addition to any information required to be stated in such press release by applicable law or regulation, the press release shall state, as appropriate, (i) the Designated Redemption Date; (ii) the latest time and date at which a Holder must deliver to the Redemption and Paying Agent (named therein) a Notice of Redemption to exercise such Holder’s Redemption Right with respect to the Designated Redemption Date and the procedures that must be followed to deliver shares of Series A Preferred Stock tendered for redemption on the Designated Redemption Date; (iii) the portion of the Redemption Price (expressed in a percentage or fraction, if less than all) to be paid in shares of Class A Common Stock (subject to the limitation on payment in shares set forth in Section 9(c) ); and (iv) the first date of the 20 consecutive Trading Day period used in determining the Redemption Value applicable to the Designated Redemption Date.

 

(e)                                   If the Corporation does not have sufficient funds legally available to redeem, as of the Designated Redemption Date, all shares of Series A Preferred Stock with respect to which Holders have exercised their respective Redemption Rights, the Corporation shall redeem on the Designated Redemption Date, pro rata among such Holders exercising their respective Redemption Rights, that number of shares of Series A Preferred Stock with an aggregate Redemption Price equal to the amount of funds legally available for the redemption of shares of Series A Preferred Stock on such Designated Redemption Date.  At such time (as soon as practicable thereafter) as the Corporation has sufficient funds legally available to redeem shares of Series A Preferred Stock with respect to which Holders exercised their respective Redemption Rights, but which the Corporation has not redeemed because of the foregoing limitation at the applicable Redemption Price, the Corporation shall provide notice to such Holders of the availability of such funds and the Holders, within 30 calendar days of such notice, may elect to redeem such unredeemed shares.  If the Corporation does not redeem in full all shares of Series A Preferred Stock with respect to which Redemption Rights are properly exercised on the Designated Redemption Date, the Corporation shall pay dividends on such shares of Series A Preferred Stock not redeemed at a rate equal to 10% per annum on the Liquidation Preference, accruing daily from the Designated Redemption Date until the date on which the Redemption Price, plus all unpaid dividends accrued pursuant to this Section 9(e)  thereon, whether or not declared, are paid in full in respect of such shares of Series A Preferred Stock.  The inability of the Corporation to pay any or all of the Redemption Price for any reason shall not relieve the Corporation of its obligation to effect any required redemption when, as and if permitted by applicable law.

 

(f)                                    So long as any shares of Series A Preferred Stock remain outstanding from and after the Designated Redemption Date, unless the Redemption Price has been paid in full in respect of all shares of Series A Preferred Stock properly tendered for redemption on the Designated Redemption Date, no dividends or other distributions (other than a dividend or distribution payable solely in shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock) and cash in lieu of fractional shares) may be declared, made or paid upon, or set apart for payment upon, any Parity Stock or Junior Stock, nor may any Parity Stock or Junior Stock be redeemed, repurchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for the redemption of

 

20



 

any Parity Stock or Junior Stock) by the Corporation or on the Corporation’s behalf unless the Redemption Price has been paid in full upon, or a sum sufficient for the payment thereof is set apart for such payment upon, the Series A Preferred Stock and any dividends on all Parity Stock for all dividend periods ending on or prior to the Designated Redemption Date have been declared and paid, or declared and a sufficient sum has been set apart for the payment of such dividends, upon all outstanding shares of Parity Stock.  The foregoing limitation shall not apply to: (i) conversion into or exchange for shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock) and cash solely in lieu of fractional shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock), (ii) payments in connection with the satisfaction of employees’ tax withholding obligations pursuant to employee benefit plans or outstanding awards (and payment of any corresponding requisite amounts to the appropriate governmental authority), (iii) purchases, redemptions or other acquisitions of Parity Stock or Junior Stock in connection with the administration of any benefit or other incentive plan, including any employment contract, in the ordinary course of business, (iv) any dividends or distributions of rights paid or made in connection with a stockholders’ rights plan or any redemption or repurchase of rights pursuant to any stockholders’ rights plan, or (v) the deemed purchase or acquisition of fractional interests in shares of Parity Stock or Junior Stock pursuant to the conversion or exchange provisions of such Parity Stock or Junior Stock or the security being converted or exchanged.

 

(g)                                   If a Holder does not elect to exercise its Redemption Right with respect to all of such Holder’s shares of Series A Preferred Stock, the shares of Series A Preferred Stock held by such Holder and not tendered for redemption by the Corporation will remain outstanding until otherwise subsequently converted, redeemed, reclassified or canceled.  From and after the redemption date with respect to any share of Series A Preferred Stock for which a Holder elects to effect a redemption pursuant to this Section 9 , and which the Corporation has redeemed in accordance with this Section 9 , (i) dividends shall cease to accrue on such share, (ii) such share shall no longer be deemed outstanding and (iii) all rights with respect to such share shall cease and terminate.  For the avoidance of doubt, notwithstanding anything contained herein to the contrary, until a share of Series A Preferred Stock is redeemed by the payment in full of the applicable Redemption Price, such share of Series A Preferred Stock shall remain outstanding and will be entitled to all of the powers, designations, preferences and other rights provided for in this Certificate of Designations.

 

(h)                                  If the Corporation issues shares of Class A Common Stock in satisfaction of all or a portion of the Redemption Price, the Corporation shall comply with all applicable federal and state securities laws and stock exchange rules in connection therewith.  The Corporation shall not pay any portion of the Redemption Price on Series A Preferred Stock by delivery of Class A Common Stock unless (i) the Class A Common Stock to be delivered as payment therefor is freely transferable by the recipient thereof without further action on its behalf other than by reason of the fact that such recipient is an affiliate of the Corporation, or (ii) a shelf registration statement relating to such Class A Common Stock has been filed with the SEC and is effective to permit the resale of such Class A Common Stock by the holders thereof.

 

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10.                                Conversion .

 

(a)                                  Each Holder shall have the right at any time, at its option, to convert, subject to the terms and provisions of this Section 10 , any or all of such Holder’s shares of Series A Preferred Stock at an initial conversion rate of 15.6961 shares of fully paid and nonassessable shares of Class A Common Stock, subject to adjustment as provided in this Section 10 , (the “ Conversion Rate ”), per share of Series A Preferred Stock.  Upon conversion of any share of Series A Preferred Stock, the Corporation shall deliver to the converting Holder, in respect of each share of Series A Preferred Stock being converted, a number of shares of Class A Common Stock equal to the Conversion Rate on the third Business Day immediately following the relevant Conversion Date.

 

(b)                                  Before any Holder shall be entitled to convert a share of Series A Preferred Stock as set forth in Section 10(a) , such Holder shall (i) in the event such Holder holds a beneficial interest in Global Series A Preferred Stock, comply with the procedures of the Depository in effect at the time of conversion for converting a beneficial interest in a global security and, if required, pay funds equal to any dividend payable on the next Dividend Payment Date to which such Holder is not entitled pursuant to Section 3(f) , and (ii) in the event such Holder holds Certificated Series A Preferred Stock, (1) complete and manually sign the conversion notice on the back of such share of Certificated Series A Preferred Stock (or a facsimile thereof), stating the number of shares of Series A Preferred Stock to be converted and the name or names (with addresses) in which such Holder wishes the certificate or certificates for any shares of Class A Common Stock to be delivered to be registered (a “ Notice of Conversion ”), a form of which is attached hereto as Exhibit B , and deliver such Notice of Conversion, which is irrevocable, to the Transfer Agent, in its capacity as the conversion agent (or such other agent designated by the Corporation) (the “ Conversion Agent ”), (2) surrender such shares of Certificated Series A Preferred Stock to the Conversion Agent, (3) if required, furnish appropriate endorsements and transfer documents, (4) if required, pay funds equal to any dividend payable on the next Dividend Payment Date to which such Holder is not entitled pursuant to Section 3(f) , and (5) if required, pay all transfer or similar taxes, if any, as set forth more fully herein.  The Conversion Agent shall notify the Corporation of any conversion pursuant to this Section 10 on the Conversion Date for such conversion. The date on which a Holder complies with the procedures in this Section 10(b)  is the “ Conversion Date .”  If more than one share of Series A Preferred Stock shall be surrendered for conversion at one time by the same Holder, the number of shares of Class A Common Stock to be delivered upon conversion of such shares of Series A Preferred Stock shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered.

 

(c)                                   Immediately prior to 5:00 p.m., New York City time, on the Conversion Date with respect to a conversion, conversion of the shares of Series A Preferred Stock surrendered for conversion shall be deemed to have been effected, and, as of 5:00 p.m., New York City time, on the Conversion Date, the converting Holder of such shares of Series A Preferred Stock shall be deemed to be the holder of record of the Class A Common Stock issuable upon conversion of such Holder’s Series A Preferred Stock notwithstanding that the share register of the Corporation shall then be closed or that certificates representing such Class A Common Stock shall not then be actually delivered to such Holder. On the date of any conversion, all rights with respect to the shares of Series A Preferred Stock so converted, including the rights, if any, to receive notices,

 

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will terminate, excepting only the rights of holders thereof to (i) receive certificates for the number of whole shares of Class A Common Stock into which such shares of Series A Preferred Stock have been converted; and (ii) exercise the rights to which they are thereafter entitled as holders of Class A Common Stock.

 

(d)                                  The Conversion Rate shall be adjusted, without duplication, upon the occurrence of any of the following events:

 

(i)                                      If the Corporation exclusively issues shares of Class A Common Stock as a dividend or distribution on all shares of Class A Common Stock, or if the Corporation effects a share subdivision or share combination, the Conversion Rate shall be adjusted based on the following formula:

 

CR 1   = CR 0   x

OS 1

OS 0

 

where,

 

CR 0

=

the Conversion Rate in effect immediately prior to 5:00 p.m., New York City time, on the Record Date for such dividend or distribution, or immediately after 9:00 a.m., New York City time, on the Effective Date of such share subdivision or share combination, as the case may be;

 

 

 

CR 1

=

the Conversion Rate in effect immediately after 5:00 p.m., New York City time, on the Record Date for such dividend or distribution, or immediately after 9:00 a.m., New York City time, on the Effective Date of such share subdivision or share combination, as the case may be;

 

 

 

OS 0

=

the number of shares of Class A Common Stock outstanding immediately prior to 5:00 p.m., New York City time, on the Record Date for such dividend or distribution, or immediately prior to 9:00 a.m., New York City time, on the Effective Date of such share subdivision or share combination, as the case may be; and

 

 

 

OS 1

=

the number of shares of Class A Common Stock outstanding immediately after, and solely as a result of, giving effect to such dividend or distribution, or such share subdivision or share combination, as the case may be.

 

Any adjustment made under this Section 10(d)(i)  shall become effective immediately after 5:00 p.m., New York City time, on the Record Date for such dividend or distribution, or immediately after 9:00 a.m., New York City time, on the Effective Date for such share subdivision or share combination, as the case may be. If any dividend, distribution, share subdivision or share combination of the type described in this Section 10(d)(i)  is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the earlier of (A) the date the Board determines not to pay or make such dividend, distribution, subdivision or combination and (B) the

 

23



 

date the dividend or distribution was to be paid or the date the subdivision or combination was to be effective, to the Conversion Rate that would then be in effect if such dividend, distribution, subdivision or combination had not been declared.

 

For the purposes of this Section 10(d)(i) , the number of shares of Class A Common Stock outstanding at 5:00 p.m., New York City time, on the Record Date shall not include shares held in treasury, but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Class A Common Stock.

 

The Corporation shall not pay any dividend or make any distribution on shares of Class A Common Stock held in treasury.

 

 

(ii)                                   If the Corporation distributes to all or substantially all holders of its Class A Common Stock any rights, options or warrants entitling them, for a period expiring not more than 45 days after the date of issuance thereof, to purchase or subscribe for shares of Class A Common Stock at a price per share that is less than the average of the Closing Sale Prices of Class A Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date of such distribution, the Conversion Rate shall be increased based on the following formula:

 

CR 1   = CR 0   x

OS 0   + X

OS 0   + Y

 

where,

 

CR 0

=

the Conversion Rate in effect immediately prior to 5:00 p.m., New York City time, on the Record Date for such distribution;

 

 

 

CR 1

=

the Conversion Rate in effect immediately after 5:00 p.m., New York City time, on the Record Date for such distribution;

 

 

 

OS 0

=

the number of shares of Class A Common Stock outstanding immediately prior to 5:00 p.m., New York City time, on the Record Date for such distribution;

 

 

 

X

=

the total number of shares of Class A Common Stock issuable pursuant to such rights, options or warrants; and

 

 

 

Y

=

the number of shares of Class A Common Stock equal to the quotient of (A) the aggregate price payable to exercise such rights, options or warrants and (B) the average of the Closing Sale Prices of the Class A Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date of such distribution.

 

Any increase made under this Section 10(d)(ii)  shall become effective immediately after 5:00 p.m., New York City time, on the Record Date for such

 

24



 

distribution. To the extent that shares of Class A Common Stock are not issued prior to the expiration or termination of such rights, options or warrants, the Conversion Rate shall be decreased, effective as of the date of such expiration, to the Conversion Rate that would then be in effect had the increase with respect to the distribution of such rights, options or warrants been made on the basis of delivery of only the number of shares of Class A Common Stock actually delivered. If such rights, options or warrants are not so distributed, the Conversion Rate shall be decreased, effective as of the earlier of (A) the date the Board determines not to make such distribution and (B) the date such rights, options or warrants were to have been issued, to be the Conversion Rate that would then be in effect if such Record Date for such distribution had not occurred. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Conversion Rate shall not be adjusted until the triggering events occur.

 

For purposes of this Section 10(d)(ii) , in determining whether any rights, options or warrants entitle the holders thereof to subscribe for or purchase shares of Class A Common Stock at less than the average of the Closing Sale Prices of the Class A Common Stock for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date of such distribution, and in determining the aggregate offering price of such shares of Class A Common Stock, there shall be taken into account any consideration received by the Corporation for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board.

 

For the purposes of this Section 10(d)(ii) , the number of shares of Class A Common Stock outstanding shall not include shares held in treasury, but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Class A Common Stock.

 

The Corporation shall not issue any such rights, options or warrants in respect of shares of Class A Common Stock held in treasury.

 

(iii)                                If the Corporation distributes shares of its Capital Stock, evidences of its indebtedness or other assets, securities or property of the Corporation or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of Class A Common Stock, excluding (A) dividends, distributions, rights, options, warrants or other issuances as to which an adjustment was effected pursuant to Section 10(d)(i)  or Section 10(d)(ii) , (B) rights issued to all holders of Class A Common Stock pursuant to a rights plan, where such rights are not presently exercisable, trade with Class A Common Stock and the plan provides that Holders will receive such rights along with any Class A Common Stock received upon conversion of the Series A Preferred Stock, (C) dividends or distributions paid exclusively in cash as to which an adjustment was effected pursuant to (or a cash amount paid pursuant to the last paragraph of) Section 10(d)(iv)  and (D) Spin-Offs as to which the provisions set forth below in the last two paragraphs of this Section 10(d)(iii) shall apply, then the Conversion Rate shall be increased based on the following formula:

 

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CR 1   = CR 0   x

SP 0

SP 0  –  FMV

 

where,

 

CR 0

=

the Conversion Rate in effect immediately prior to 5:00 p.m., New York City time, on the Record Date for such distribution;

 

 

 

CR 1

=

the Conversion Rate in effect immediately after 5:00 p.m., New York City time, on the Record Date for such distribution;

 

 

 

SP 0

=

the average of the Closing Sale Prices of the Class A Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date for such distribution; and

 

 

 

FMV

=

the fair market value as of the Record Date for such distribution (as determined by the Board) of the shares of the Corporation’s Capital Stock (other than Class A Common Stock), evidences of indebtedness, assets, securities, property, rights, options or warrants distributed with respect to each outstanding share of Class A Common Stock.

 

Any increase made under the portion of this Section 10(d)(iii)  above shall become effective immediately after 5:00 p.m., New York City time, on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be decreased, effective as of the earlier of (A) the date the Board determines not to pay the distribution and (B) the date such distribution was to have been paid, to be the Conversion Rate that would then be in effect if such distribution had not been declared.

 

Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP 0 ” (as defined above), in lieu of the foregoing increase, each Holder shall receive, for each share of Series A Preferred Stock held by it, at the same time and upon the same terms as holders of the Class A Common Stock, the amount and kind of the Corporation’s Capital Stock (other than Class A Common Stock), evidences of indebtedness, other assets, securities or property of the Corporation, or rights, options or warrants to acquire the Corporation’s Capital Stock or other securities that such Holder would have received as if such Holder owned a number of shares of Class A Common Stock equal to the Conversion Rate in effect immediately prior to 5:00 p.m., New York City time, on the Record Date for the distribution.

 

With respect to an adjustment pursuant to this Section 10(d)(iii)  where there has been a payment of a dividend or other distribution on the Class A Common Stock consisting solely of shares of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Corporation where such Capital Stock or similar equity interest is, or will be when issued, listed or admitted for trading on a U.S. national securities exchange (a “ Spin-Off ”), the Conversion Rate will be increased based on the following formula:

 

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CR 1   = CR 0   x

FMV + MP 0

MP 0

 

where,

 

CR 0

=

the Conversion Rate in effect immediately prior to 5:00 p.m., New York City time, on the 10th Trading Day immediately following, and including, the Ex-Date for the Spin-Off;

 

 

 

CR 1

=

the Conversion Rate in effect immediately after 5:00 p.m., New York City time, on the 10th Trading Day immediately following, and including, the Ex-Date for the Spin-Off;

 

 

 

FMV

=

the average of the Closing Sale Prices of the Capital Stock or similar equity interest distributed to holders of the Class A Common Stock applicable to one share of Class A Common Stock over the 10 consecutive Trading Day period immediately following, and including, the Ex-Date for the Spin-Off; and

 

 

 

MP 0

=

the average of the Closing Sale Prices of the Class A Common Stock over the 10 consecutive Trading Day period immediately following, and including, the Ex-Date for the Spin-Off.

 

The adjustment to the Conversion Rate under the preceding paragraph shall become effective at 5:00 p.m., New York City time, on the 10th Trading Day immediately following, and including, the Ex-Date for the Spin-Off; provided that, for purposes of determining the Conversion Rate in respect of any conversion during the 10 Trading Days following, and including, the Ex-Date of any Spin-Off, references to “10 consecutive Trading Days” within the portion of this Section 10(d)(iii)  related to Spin-Offs shall be deemed to be replaced with such lesser number of consecutive Trading Days as have elapsed between the Ex-Date of such Spin-Off and the relevant Conversion Date.

 

(iv)                               If any cash dividend or distribution is made to all or substantially all holders of Class A Common Stock (excluding dividends or distributions made in connection with the liquidation, dissolution or winding up of the Corporation and any consideration payable in connection with a tender or exchange offer made by the Corporation or any of its Subsidiaries), the Conversion Rate shall be adjusted based on the following formula:

 

CR 1   = CR 0   x

SP 0

SP 0   – C

 

where,

 

CR 0

=

the Conversion Rate in effect immediately prior to 5:00 p.m., New York City time, on the Record Date for such dividend or distribution;

 

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CR 1

=

the Conversion Rate in effect immediately after 5:00 p.m., New York City time, on the Record Date for such dividend or distribution;

 

 

 

SP 0

=

the average of the Closing Sale Prices of the Class A Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date for such dividend or distribution; and

 

 

 

C

=

the amount in cash per share of Class A Common Stock the Corporation distributes to all or substantially all holders of its Class A Common Stock.

 

Any adjustment made under this Section 10(d)(iv)  shall become effective immediately after 5:00 p.m., New York City time, on the Record Date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective as of the earlier of (A) the date the Board determines not to pay or make such dividend or distribution and (B) the date such dividend or distribution was to have been paid, to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

 

Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP 0 ” (as defined above), in lieu of the foregoing increase, each Holder shall receive, for each share of Series A Preferred Stock, at the same time and upon the same terms as holders of Class A Common Stock, the amount of cash that such Holder would have received as if such Holder owned a number of shares of Class A Common Stock equal to the Conversion Rate on the Record Date for such cash dividend or distribution.

 

(v)                                  If the Corporation or any of its Subsidiaries successfully completes a tender or exchange offer pursuant to a Schedule TO or registration statement on Form S-4 for Class A Common Stock (but, for the avoidance of doubt, excluding any securities convertible, exercisable or exchangeable for Class A Common Stock), where the cash and value of any other consideration included in the payment per share of Class A Common Stock exceeds the average of the Closing Sale Prices of the Class A Common Stock over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer, the Conversion Rate shall be adjusted based on the following formula:

 

CR 1   = CR 0   x

AC + (SP 1  x OS 1 )

SP 1   x OS 0

 

where,

 

CR 0

=

the Conversion Rate in effect immediately prior to 5:00 p.m., New York City time, on the last Trading Day of the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires;

 

 

 

CR 1

=

the Conversion Rate in effect immediately after 5:00 p.m., New York City time,

 

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on the last Trading Day of the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires;

AC

=

the aggregate value of all cash and any other consideration (as determined by the Board) paid or payable for shares of Class A Common Stock purchased in such tender or exchange offer;

 

 

 

OS 0

=

the number of shares of Class A Common Stock outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to the purchase of all shares of Class A Common Stock accepted for purchase or exchange in such tender or exchange offer);

 

 

 

OS 1

=

the number of shares of Class A Common Stock outstanding immediately after the date such tender or exchange offer expires (after giving effect to the purchase of all shares of Class A Common Stock accepted for purchase or exchange in such tender or exchange offer); and

 

 

 

SP 1

=

the average of the Closing Sale Prices of the Class A Common Stock over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.

 

Any adjustment made under this Section 10(d)(v)  shall occur at 5:00 p.m., New York City time, on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that, for purposes of determining the Conversion Rate in respect of any conversion during the 10 Trading Days immediately following, and including, the Trading Day next succeeding the date that any such tender or exchange offer expires, references to “10 consecutive Trading Days” within this Section 10(d)(v)  shall be deemed to be replaced with such lesser number of consecutive Trading Days as have elapsed between the date such tender or exchange offer expires and the relevant Conversion Date.

 

In the event that the Corporation or one of its Subsidiaries is obligated to purchase shares of Class A Common Stock pursuant to any such tender offer or exchange offer, but the Corporation or such Subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall be readjusted to be such Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made.

 

(vi)                               All calculations and other determinations under this Section 10(d)  shall be made by the Corporation and shall be made to the nearest one-ten thousandth (1/10,000th) of a share. Notwithstanding anything herein to the contrary, no adjustment under this Section 10(d)  shall be made to the Conversion Rate unless such adjustment would result in a change of at least 1% in the Conversion Rate then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, if any, which, together with any adjustment or adjustments

 

29



 

so carried forward, shall amount to a change of at least 1% in such Conversion Rate; provided , however , that the Corporation shall make all such carried-forward adjustments, regardless of whether the aggregate adjustment is less than 1%, (A) on December 31 of each calendar year, (B) on the Conversion Date for any conversions of Series A Preferred Stock, (C) upon the occurrence of a Fundamental Change and (D) in the event that the Corporation exercises its mandatory conversion right pursuant to Section 11 .  No adjustment to the Conversion Rate shall be made if it results in a Conversion Price that is less than the par value (if any) of the Class A Common Stock.  The Corporation shall not take any action that would result in the Conversion Price being less than the par value (if any) of the Class A Common Stock pursuant to this Certificate of Designations and without giving effect to the previous sentence.

 

(vii)                            In addition to those adjustments required by clauses (i), (ii), (iii), (iv) and (v) of this Section 10(d) , and to the extent permitted by applicable law and subject to the applicable rules of the New York Stock Exchange, the Corporation from time to time may increase the Conversion Rate by any amount for a period of at least 20 Business Days or any longer period permitted or required by law, so long as the increase is irrevocable during that period and the Board determines that such increase would be in the Corporation’s best interest.  In addition, the Corporation may (but is not required to) increase the Conversion Rate as it determines to be advisable in order to avoid or diminish any tax to holders of Class A Common Stock or rights to purchase Class A Common Stock in connection with a dividend or distribution of shares (or rights to acquire shares) or similar event.  Whenever the Conversion Rate is increased pursuant to any of the preceding two sentences, the Corporation shall mail to each Holder at its last address appearing on the stock register of the Corporation a notice of the increase at least 15 calendar days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect.

 

(viii)                         For purposes of this Section 10(d) , the number of shares of Class A Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation so long as the Corporation does not pay any dividend or make any distribution on shares of Class A Common Stock held in the treasury of the Corporation, but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Class A Common Stock.

 

(ix)                               Notwithstanding the foregoing in this Section 10(d)  and for the avoidance of doubt, the Conversion Rate shall not be adjusted for: (A) the issuance of Class A Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Corporation or JEH LLC and the investment of additional optional amounts in shares of Class A Common Stock under any plan; (B) the issuance of Class A Common Stock, options, restricted stock, restricted stock units, performance units or rights to purchase those shares or similar equity instruments pursuant to any present or future employee, director, trustee or consultant benefit plan, employee agreement or arrangement or program of the Corporation or JEH LLC; (C) the issuance of Class A Common Stock pursuant to any option, warrant, right or excisable, exchangeable or convertible security outstanding as of the Initial Issue Date;

 

30



 

(D) a change in the par value of Class A Common Stock; (E) a sale of Class A Common Stock for cash, other than in a transaction described in Section 10(d)(ii)  or Section 10(d)(iii) ; (F) a tender offer solely to holders of fewer than 100 shares of Class A Common Stock; (G) a third-party tender or exchange offer, other than a tender or exchange offer by one of the Corporation’s Subsidiaries as described in Section 10(d)(v) ; (H) accrued and unpaid interest; (I) accumulated and unpaid dividends or distributions, except as provided in Section 5 and Section 11 ; (J) the issuance or repurchase of limited liability company units by the Corporation or JEH LLC and the issuance or repurchase of Class A Common Stock or Class B Common Stock or payment of cash upon redemption thereof; (K) payments by the Corporation or JEH LLC pursuant to the Tax Receivable Agreement, dated July 29, 2013, by and among the Corporation, JEH LLC and the members of JEH LLC; and (L) the issuance of Class A Common Stock as a result of exchanges under the Exchange Agreement, dated July 26, 2013, by and among the Corporation, JEH LLC and the members of JEH LLC.  Except as described in this Section 10 , we will not adjust the conversion rate.

 

(e)                                   Notwithstanding anything to the contrary in this Section 10(d) , no adjustment to the Conversion Rate shall be made with respect to any transaction described in Section 10(d)(ii)  through Section 10(d)(iv)  (other than for share subdivisions or share combinations) if the Corporation makes provision for each Holder to participate in such transaction, at the same time as holders of Class A Common Stock, without conversion, as if such Holder held a number of shares of Class A Common Stock equal to the Conversion Rate in effect on the Record Date or Effective Date, as the case may be, for such transaction, multiplied by the number of shares of Series A Preferred Stock held by such Holder.

 

(f)                                    Notwithstanding Section 10(d)(ii)  and Section 10(d)(iii) , if the Corporation has a rights plan (including the distribution of rights pursuant thereto to all holders of Class A Common Stock) in effect while any shares of Series A Preferred Stock remain outstanding, Holders will receive, upon conversion of shares of Series A Preferred Stock, in addition to shares of Class A Common Stock to which each such Holder is entitled, a corresponding number of rights in accordance with such rights plan.  If, prior to any conversion of shares of Series A Preferred Stock, such rights have separated from the shares of Class A Common Stock in accordance with the provisions of the applicable rights plan so that Holders would not be entitled to receive any rights in respect of Class A Common Stock delivered upon conversion of Series A Preferred Stock, the Conversion Rate will be adjusted at the time of separation as if the Corporation had distributed to all holders of Class A Common Stock, shares of Capital Stock, evidences of indebtedness, assets, securities, property, rights, options or warrants as described in Section 10(d)(iii)  above, subject to readjustment in the event of the expiration, termination or redemption of such rights.  Any distribution of rights, options or warrants pursuant to a rights plan that would allow a Holder to receive upon conversion of shares of Series A Preferred Stock, in addition to any shares of Class A Common Stock to which such Holder is entitled, the rights described therein (unless such rights, options or warrants have separated from the Class A Common Stock (in which case each fixed Conversion Rate will be adjusted at the time of separation as if the Corporation made a distribution to all holders of Class A Common Stock as described in Section 10(d)(iii) , subject to readjustment in the event of the expiration, termination or redemption of such rights)) shall not constitute a distribution of rights, options or warrants that would entitle such Holder to an adjustment to the Conversion Rate.

 

31



 

(g)                                   For the avoidance of doubt, if the Corporation shall take a record of the holders of its Class A Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter (and before the dividend or distribution has been paid or delivered to stockholders) legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the Conversion Rate then in effect shall be required by reason of the taking of such record.

 

(h)                                  Upon any increase in the Conversion Rate, the Corporation promptly shall deliver to each Holder a certificate signed by an Officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated, and specifying the increased Conversion Rate then in effect following such adjustment.

 

(i)                                      In the case of:

 

(i)                                      any recapitalization, reclassification or change of Class A Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or changes resulting from a subdivision or combination),

 

(ii)                                   any consolidation, merger or combination involving the Corporation,

 

(iii)                                any sale, lease or other transfer to a third party of the consolidated assets of the Corporation and the Corporation’s Subsidiaries substantially as an entirety, or

 

(iv)                               any statutory share exchange of the Corporation’s securities with another person (other than in connection with a merger or acquisition),

 

in each case, as a result of which Class A Common Stock is converted into, or exchanged for, stock, other securities or other property or assets (including cash or any combination thereof) (any such transaction or event, a “ Reorganization Event ”), then, at and after the effective time of such Reorganization Event, the right to convert each share of Series A Preferred Stock into shares of Class A Common Stock shall be changed into a right to convert such share of Series A Preferred Stock into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of shares of Class A Common Stock equal to the Conversion Rate immediately prior to such Reorganization Event would have been entitled to receive upon such Reorganization Event (such stock, securities or other property or assets, the “ Reference Property ”).  In the event that, in connection with any such Reorganization Event, the holders of Class A Common Stock have the opportunity to elect the form of all or any portion of the consideration to be received by such holders in such Reorganization Event, the Reference Property into which shares of Series A Preferred Stock will be convertible shall be deemed to be the weighted average of the types and amounts of consideration received by the holders of Class A Common Stock that affirmatively make such election (or of all holders of Class A Common Stock if no holders of Class A Common Stock make such election).  The Corporation shall not become a party to any Reorganization Event unless its terms are consistent with this Section 10(i) .  Notwithstanding Section 10(d) , no adjustment to the Conversion Rate shall be made for any Reorganization Event to the extent

 

32



 

stock, securities or other property or assets become the Reference Property receivable upon conversion of Series A Preferred Stock.

 

The Corporation shall provide, by amendment hereto effective upon any such Reorganization Event, for anti-dilution and other adjustments that shall be as nearly equivalent as is possible to the adjustments provided for in this Section 10 .  The provisions of this Section 10(i)  shall apply to successive Reorganization Events.

 

None of the foregoing provisions of this Section 10(i)  shall affect the right of a Holder to convert its Series A Preferred Stock into shares of Class A Common Stock as set forth in Section 10(a)  prior to the effective time of such Reorganization Event.

 

In this Certificate of Designations, if Class A Common Stock has been replaced by Reference Property as a result of any such Reorganization Event, references to “Class A Common Stock” are intended to refer to such Reference Property.

 

(j)                                     The Corporation shall at all times reserve and keep available for issuance upon the conversion of shares of Series A Preferred Stock a number of its authorized but unissued shares of Class A Common Stock equal to the aggregate Liquidation Preference divided by the Closing Sale Price of the Class A Common Stock on August 18, 2016, and shall take all action required to increase the authorized number of shares of Class A Common Stock if at any time there shall be insufficient unissued shares of Class A Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series A Preferred Stock (including any Make-Whole Premium in connection with a Fundamental Change) or the payment or partial payment of dividends declared on Series A Preferred Stock that are payable in Class A Common Stock.

 

(k)                                  A converting Holder is not required to pay any transfer or similar taxes due upon conversion of such Holder’s shares of Series A Preferred Stock, except that such Holder shall pay such transfer or similar taxes payable relating to any transfer involved in the issuance or delivery of shares of Class A Common Stock, if any, due upon conversion of such shares of Series A Preferred Stock in a name other than that of the converting Holder.  The Corporation may require that such converting Holder establish to the reasonable satisfaction of the Corporation, that such converting Holder has paid in full all applicable transfer or similar taxes, if any, payable by such converting Holder prior to issuing and delivered the shares of Class A Common Stock due upon conversion of such converting Holder’s shares of Series A Preferred Stock.  Notwithstanding the foregoing, upon surrender of a share of Series A Preferred Stock for conversion, the Holder thereof shall deliver to the Corporation cash equal to the amount the Corporation is required to deduct and withhold under applicable law in connection with such conversion; provided, however , that if such Holder does not deliver such cash, the Corporation or an applicable withholding agent may deduct and withhold on cash dividends, shares of Class A Common stock or sale proceeds paid, subsequently paid or credited (or on the consideration otherwise delivered) with respect to such Holder or its successors and assigns.

 

33



 

11.                                Mandatory Conversion .

 

(a)                                  At any time on or after August 15, 2021, the Corporation shall have the right, at its option, to elect to cause all outstanding shares of Series A Preferred Stock to be automatically converted into that number of shares of Class A Common Stock for each share of Series A Preferred Stock equal to the Conversion Rate in effect on the Mandatory Conversion Date. The Corporation may exercise its right to cause a mandatory conversion pursuant to this Section 11 only if the Closing Sale Price of the Class A Common Stock equals or exceeds 175% of the Conversion Price then in effect for at least 20 Trading Days (whether or not consecutive) in a period of 30 consecutive Trading Days, including the last Trading Day of such 30 Trading Day period, ending on, and including, the Trading Day immediately preceding the Business Day on which the Corporation issues a press release announcing the mandatory conversion as described in Section 11(b) .

 

(b)                                  To exercise the mandatory conversion right described in Section 11(a) , the Corporation must issue a press release giving notice of such mandatory conversion for publication on the Dow Jones News Service or Bloomberg Business News (or another broadly disseminated news or press release service selected by the Corporation) prior to 9:00 a.m., New York City time, on the first Trading Day following any date on which the condition described in Section 11(a)  is met, announcing such a mandatory conversion. The conversion date will be a date selected by the Corporation (the “ Mandatory Conversion Date ”) and will be no later than 10 calendar days after the date on which the Corporation issues the press release described in this Section 11(b) .  In addition to any information required by applicable law or regulation, such press release and notice of a mandatory conversion shall state, as appropriate: (i) the Mandatory Conversion Date; (ii) the number of shares of Class A Common Stock to be issued upon conversion of each share of Series A Preferred Stock; and (iii) that dividends on the Series A Preferred Stock to be converted will cease to accrue on the Mandatory Conversion Date.

 

(c)                                   On and after the Mandatory Conversion Date, dividends shall cease to accrue on the Series A Preferred Stock called for a mandatory conversion pursuant to this Section 11 and all rights of Holders shall terminate except for the right to receive the shares of Class A Common Stock issuable upon conversion thereof. The full amount of any dividend payment with respect to the Series A Preferred Stock called for a mandatory conversion pursuant to this Section 11 on a date during the period beginning at 5:00 p.m., New York City time, on any Dividend Record Date and ending at 5:00 p.m., New York City time, on the corresponding Dividend Payment Date shall be payable on such Dividend Payment Date to the record holder of such share at 5:00 p.m., New York City time, on such Dividend Record Date if such share has been converted after such Dividend Record Date and prior to such Dividend Payment Date. Except as provided in the immediately preceding sentence with respect to a mandatory conversion pursuant to this Section 11 , no payment or adjustment shall be made upon conversion of Series A Preferred Stock for accumulated and unpaid dividends with respect to the Series A Preferred Stock or dividends with respect to the Class A Common Stock issued upon such conversion thereof.

 

(d)                                  The Corporation may not authorize, issue a press release or give notice of any mandatory conversion pursuant to this Section 11 unless, prior to giving the conversion notice, all accumulated and unpaid dividends on the Series A Preferred Stock (whether or not declared) for dividend periods ended prior to the date of such conversion notice (together with additional

 

34



 

dividends in the amount of any Unpaid Excess Cash Amount) shall have been paid or such accumulated and unpaid dividends (together with additional dividends in the amount of any Unpaid Excess Cash Amount) are declared and a sum (which may include shares of our Class A Common Stock) sufficient for payment of such dividends shall have been set aside for payment on or prior to the Mandatory Conversion Date.

 

12.                                No Fractional Shares No fractional shares of Class A Common Stock or securities representing fractional shares of Class A Common Stock will be delivered upon redemption or conversion of the Series A Preferred Stock, whether voluntary or mandatory, or in respect of dividend payments on Series A Preferred Stock made in shares of Class A Common Stock.  Instead, the Corporation shall round up to the nearest whole share the number of shares of Class A Common Stock to be delivered.

 

13.                                Certificates .

 

(a)                                  Form and Dating. The Series A Preferred Stock and the Transfer Agent’s certificate of authentication shall be substantially in the form set forth in Exhibit A , which is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series A Preferred Stock certificate may have notations, legends or endorsements required by law or stock exchange rules; provided that any such notation, legend or endorsement is in a form acceptable to the Corporation.  Each Series A Preferred Stock certificate shall be dated the date of its authentication.

 

(i)                                      Global Series A Preferred Stock . The Series A Preferred Stock shall be issued initially in the form of one or more fully registered global certificates with the global securities legend set forth in Exhibit A hereto (the “ Global Series A Preferred Stock ”), which shall be deposited on behalf of the Holders represented thereby with the Transfer Agent, as custodian for DTC (or with such other custodian as DTC may direct), and registered in the name of Cede & Co. or other nominee of DTC, duly executed by the Corporation and authenticated by the Transfer Agent as hereinafter provided. The number of shares of Series A Preferred Stock represented by Global Series A Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Transfer Agent and DTC or its nominee as hereinafter provided. All shares of Class A Common Stock issued in respect of shares of Series A Preferred Stock on any Conversion Date or paid as a dividend on any Dividend Payment Date shall be freely transferable without restriction under the Securities Act (other than by the Corporation’s affiliates), and such shares shall be eligible for receipt in global form through the facilities of DTC.

 

(ii)                                   Book-Entry Provisions . In the event Global Series A Preferred Stock is deposited with or on behalf of DTC, the Corporation shall execute and the Transfer Agent shall authenticate and deliver initially one or more Global Series A Preferred Stock certificates that (a) shall be registered in the name of Cede & Co. as nominee for DTC as depository for such Global Series A Preferred Stock, or other nominee of DTC and (b) shall be delivered by the Transfer Agent to DTC or, pursuant to DTC’s instructions, held by the Transfer Agent as custodian for DTC.  Members of, or participants in, DTC (“ Agent Members ”) shall have no rights under this Certificate of Designations with respect to any Global Series A Preferred Stock held on their behalf by DTC or by the

 

35



 

Transfer Agent as the custodian of DTC or under such Global Series A Preferred Stock, and DTC may be treated by the Corporation, the Transfer Agent and any agent of the Corporation or the Transfer Agent as the absolute owner of such Global Series A Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Corporation, the Transfer Agent or any agent of the Corporation or the Transfer Agent from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a holder of a beneficial interest in any Global Series A Preferred Stock.

 

(iii)                                Certificated Series A Preferred Stock . Except as provided in this Section 13(a)  or in Section 13(c) , owners of beneficial interests in Global Series A Preferred Stock will not be entitled to receive physical delivery of Series A Preferred Stock in fully registered certificated form (“ Certificated Series A Preferred Stock ”).

 

(b)                                  Execution and Authentication. The Chairman of the Board, the President or a Vice President and either the Treasurer or an Assistant Treasurer of the Corporation, or the Secretary or Assistant Secretary of the Corporation shall sign each Series A Preferred Stock certificate for the Corporation by manual or facsimile signature, and such certificates may bear the seal of the Corporation or a facsimile thereof.

 

If any person who has signed or whose facsimile signature has been placed upon a Series A Preferred Stock certificate on behalf of the Corporation shall have ceased to be Chairman of the Board or shall have ceased to be an Officer before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer at the date of its issuance.

 

A Series A Preferred Stock certificate shall not be valid until an authorized signatory of the Transfer Agent manually signs the certificate of authentication on the Series A Preferred Stock certificate. The signature shall be conclusive evidence that the Series A Preferred Stock certificate has been authenticated in accordance with this Certificate of Designations.

 

The Transfer Agent shall authenticate and deliver certificates for up to 1,840,000 shares of Series A Preferred Stock for original issue upon a written order of the Corporation signed by two Officers of the Corporation. Such order shall specify the number of shares of Series A Preferred Stock to be authenticated and the date on which the original issue of the Series A Preferred Stock is to be authenticated.

 

The Transfer Agent may appoint an authenticating agent reasonably acceptable to the Corporation to authenticate the certificates for the Series A Preferred Stock. Unless limited by the terms of such appointment, an authenticating agent may authenticate certificates for the Series A Preferred Stock whenever the Transfer Agent may do so. Each reference in this Certificate of Designations to authentication by the Transfer Agent includes authentication by such agent. An authenticating agent has the same rights as the Transfer Agent or agent for service of notices and demands.

 

36



 

(c)                                   Transfer and Exchange .

 

(i)                                      Transfer and Exchange of Certificated Series A Preferred Stock . When Certificated Series A Preferred Stock is presented to the Transfer Agent with a request to register the transfer of such Certificated Series A Preferred Stock or to exchange such Certificated Series A Preferred Stock for an equal number of shares of Certificated Series A Preferred Stock, the Transfer Agent shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided that the Certificated Series A Preferred Stock surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Corporation and the Transfer Agent, duly executed by the holder thereof or its attorney duly authorized in writing.

 

(ii)                                   Restrictions on Transfer of Certificated Series A Preferred Stock for a Beneficial Interest in Global Series A Preferred Stock . Certificated Series A Preferred Stock may not be exchanged for a beneficial interest in Global Series A Preferred Stock except upon satisfaction of the requirements set forth below. Upon receipt by the Transfer Agent of Certificated Series A Preferred Stock, duly endorsed or accompanied by appropriate instruments of transfer, in form reasonably satisfactory to the Corporation and the Transfer Agent, together with written instructions directing the Transfer Agent to make, or to direct DTC to make, an adjustment on its books and records with respect to such Global Series A Preferred Stock to reflect an increase in the number of shares of Series A Preferred Stock represented by the Global Series A Preferred Stock, then the Transfer Agent shall cancel such Certificated Series A Preferred Stock and cause, or direct DTC to cause, in accordance with the standing instructions and procedures existing between DTC and the Transfer Agent, the number of shares of Series A Preferred Stock represented by the Global Series A Preferred Stock to be increased accordingly. If no Global Series A Preferred Stock is then outstanding, the Corporation shall issue and the Transfer Agent shall authenticate, upon written order of the Corporation in the form of an Officers’ Certificate, a new Global Series A Preferred Stock representing the appropriate number of shares.

 

(iii)                                Transfer and Exchange of Global Series A Preferred Stock . The transfer and exchange of Global Series A Preferred Stock or beneficial interests therein shall be effected through DTC, in accordance with this Certificate of Designations (including applicable restrictions on transfer set forth herein, if any) and the procedures of DTC therefor.

 

(iv)                               Transfer of a Beneficial Interest in Global Series A Preferred Stock for Certificated Series A Preferred Stock .

 

(A)                                If at any time: (1) DTC notifies the Corporation that DTC is unwilling or unable to continue as depository for the Global Series A Preferred Stock and a successor depository for the Global Series A Preferred Stock is not appointed by the Corporation within 90 days after delivery of such notice; or (2) DTC ceases to be a clearing agency registered under the Exchange Act and a successor depository for the Global Series A Preferred Stock is not appointed by the Corporation within 90 days, then the Corporation shall execute, and the Transfer Agent,

 

37



 

upon receipt of a written order of the Corporation signed by two Officers of the Corporation requesting the authentication and delivery of Certificated Series A Preferred Stock to the Persons designated by the Corporation, shall authenticate and deliver Certificated Series A Preferred Stock equal to the number of shares of Series A Preferred Stock represented by the Global Series A Preferred Stock, in exchange for such Global Series A Preferred Stock.  Subject to the foregoing, the beneficial interests in a Global Series A Preferred Stock shall not be exchangeable for Certificated Series A Preferred Stock.

 

(B)                                Certificated Series A Preferred Stock issued in exchange for a beneficial interest in a Global Series A Preferred Stock pursuant to this Section 13(c)(iv)  shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Transfer Agent. The Transfer Agent shall deliver such Certificated Series A Preferred Stock to the Persons in whose names such Series A Preferred Stock are so registered in accordance with the instructions of DTC.

 

(v)                                  Restrictions on Transfer of Global Series A Preferred Stock . Notwithstanding any other provisions of this Certificate of Designations (other than the provisions set forth in Section 13(c)(iv) ), Global Series A Preferred Stock may not be transferred as a whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor depository or a nominee of such successor depository.

 

(vi)                               Cancellation or Adjustment of Global Series A Preferred Stock . At such time as all beneficial interests in Global Series A Preferred Stock have either been exchanged for Certificated Series A Preferred Stock, converted or canceled, such Global Series A Preferred Stock shall be returned to DTC for cancellation or retained and canceled by the Transfer Agent. At any time prior to such cancellation, if any beneficial interest in Global Series A Preferred Stock is exchanged for Certificated Series A Preferred Stock, converted or canceled, the number of shares of Series A Preferred Stock represented by such Global Series A Preferred Stock shall be reduced and an adjustment shall be made on the books and records of the Transfer Agent with respect to such Global Series A Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.

 

(vii)                            Obligations with Respect to Transfers and Exchanges of Series A Preferred Stock .

 

(A)                                To permit registrations of transfers and exchanges, the Corporation shall execute and the Transfer Agent shall authenticate Certificated Series A Preferred Stock and Global Series A Preferred Stock as required pursuant to the provisions of this Section 13(c) .

 

38



 

(B)                                All Certificated Series A Preferred Stock and Global Series A Preferred Stock issued upon any registration of transfer or exchange of Certificated Series A Preferred Stock or Global Series A Preferred Stock shall be the valid Capital Stock of the Corporation, entitled to the same benefits under this Certificate of Designations as the Certificated Series A Preferred Stock or Global Series A Preferred Stock surrendered upon such registration of transfer or exchange.

 

(C)                                Prior to due presentment for registration or transfer of any shares of Series A Preferred Stock, the Transfer Agent and the Corporation may deem and treat the Person in whose name such shares of Series A Preferred Stock are registered as the absolute owner of such Series A Preferred Stock and neither the Transfer Agent nor the Corporation shall be affected by notice to the contrary.

 

(D)                                No service charge shall be made to a Holder for any registration of transfer or exchange upon surrender of any Series A Preferred Stock certificate or Class A Common Stock certificate at the office of the Transfer Agent maintained for that purpose. However, except as otherwise set forth herein, the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Series A Preferred Stock certificates or Class A Common Stock certificates.

 

(viii)                         No Obligation of the Transfer Agent .

 

(A)                                The Transfer Agent shall have no responsibility or obligation to any beneficial owner of Global Series A Preferred Stock, any Agent Member or any other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Series A Preferred Stock or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice or the payment of any amount, under or with respect to such Global Series A Preferred Stock. All notices and communications to be given to the Holders and all payments to be made to such Holders under this Certificate of Designations shall be given or made only to the Holders (which shall be DTC or its nominee in the case of the Global Series A Preferred Stock). The rights of beneficial owners in any Global Series A Preferred Stock shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Transfer Agent may rely and shall be fully protected in relying upon information furnished by DTC with respect to its Agent Members and any beneficial owners.

 

(B)                                The Transfer Agent shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Certificate of Designations or under applicable law

 

39



 

with respect to any transfer of any interest in any Series A Preferred Stock (including any transfers between or among DTC participants, members or beneficial owners in any Global Series A Preferred Stock) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Certificate of Designations, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

 

(d)                                  Replacement Certificates. If any of the Series A Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the Corporation shall issue, in exchange and in substitution for and upon cancellation of the mutilated Series A Preferred Stock certificate, or in lieu of and substitution for the Series A Preferred Stock certificate lost, stolen or destroyed, a new Series A Preferred Stock certificate of like tenor and representing an equivalent number of shares of Series A Preferred Stock, but only upon receipt of evidence of such loss, theft or destruction of such Convertible Series A Preferred Stock certificate and indemnity, if requested, satisfactory to the Corporation and the Transfer Agent.

 

(e)                                   Temporary Certificates. Until definitive Series A Preferred Stock certificates are ready for delivery, the Corporation may prepare and the Transfer Agent shall authenticate temporary Series A Preferred Stock certificates. Any temporary Series A Preferred Stock certificates shall be substantially in the form of definitive Series A Preferred Stock certificates but may have variations that the Corporation considers appropriate for temporary Series A Preferred Stock certificates. Without unreasonable delay, the Corporation shall prepare and the Transfer Agent shall authenticate definitive Series A Preferred Stock certificates and deliver them in exchange for temporary Series A Preferred Stock certificates.

 

(f)                                    Cancellation. In the event the Corporation shall purchase or otherwise acquire Certificated Series A Preferred Stock, the same shall thereupon be delivered to the Transfer Agent for cancellation.

 

(i)                                      At such time as all beneficial interests in Global Series A Preferred Stock have either been exchanged for Certificated Series A Preferred Stock, converted, repurchased or canceled, such Global Series A Preferred Stock shall thereupon be delivered to the Transfer Agent for cancellation.

 

(ii)                                   The Transfer Agent and no one else shall cancel and destroy all Series A Preferred Stock certificates surrendered for transfer, exchange, replacement or cancellation and deliver a certificate of such destruction to the Corporation unless the Corporation directs the Transfer Agent to deliver canceled Series A Preferred Stock certificates to the Corporation.  The Corporation may not issue new Series A Preferred Stock certificates to replace Series A Preferred Stock certificates to the extent they evidence Series A Preferred Stock which the Corporation has purchased or otherwise acquired.

 

40



 

14.                                Other Provisions .

 

(a)                                  With respect to any notice to a Holder required to be provided hereunder, neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular Holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other Holders or affect the legality or validity of any distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon any such action. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder receives the notice.

 

(b)                                  Shares of Series A Preferred Stock that have been issued and reacquired in any manner, including shares of Series A Preferred Stock that are purchased or exchanged or converted, shall (upon compliance with any applicable provisions of the laws of Delaware) have the status of authorized but unissued shares of Preferred Stock of the Corporation undesignated as to series and may be designated or redesignated and issued or reissued, as the case may be, as part of any series of Preferred Stock of the Corporation; provided that any issuance of such shares as Series A Preferred Stock must be in compliance with the terms hereof.

 

(c)                                   All notice periods referred to herein shall commence on the date of the mailing of the applicable notice.  Notice to any Holder shall be given to the registered address set forth in the Corporation’s records for such Holder, or for Global Series A Preferred Stock, to the Depository in accordance with its procedures.

 

(d)                                  Any payment required to be made hereunder on any day that is not a Business Day shall be made on the next succeeding Business Day and no interest or dividends on such payment will accrue or accumulate, as the case may be, in respect of such delay.

 

(e)                                   Holders of shares of Series A Preferred Stock shall not be entitled to any preemptive rights to acquire additional Capital Stock of the Corporation.

 

[The Remainder of this Page Intentionally Left Blank]

 

41



 

IN WITNESS WHEREOF , the undersigned has caused this Certificate of Designations to be duly executed this 25th day of August, 2016.

 

 

JONES ENERGY, INC.

 

 

 

 

 

By:

/s/ Jonny Jones

 

Name:

Jonny Jones

 

Title:

Chief Executive Officer

 

Signature Page to Certificate of Designations of Jones Energy, Inc.

 



 

EXHIBIT A

 

FORM OF CERTIFICATED SERIES A PREFERRED STOCK CERTIFICATE

 

FACE OF SECURITY

 

[THIS GLOBAL CERTIFICATE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE CERTIFICATE OF DESIGNATIONS GOVERNING THIS CERTIFICATE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THIS GLOBAL CERTIFICATE MAY BE DELIVERED TO THE TRANSFER AGENT FOR CANCELLATION PURSUANT TO SECTION 14 OF THE CERTIFICATE OF DESIGNATIONS AND (2) THIS GLOBAL CERTIFICATE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY IN ACCORDANCE WITH THE CERTIFICATE OF DESIGNATIONS.

 

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SERIES A PREFERRED STOCK IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”) TO THE CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1)

 


(1)  Insert if a global security.

 



 

Certificate Number [  ]

Number of Shares of

Series A Preferred Stock [      ]

 

CUSIP No.: 48019R207

ISIN No. US48019R2076

 

8.0% Series A Perpetual Convertible Preferred Stock

of

JONES ENERGY, INC.

 

JONES ENERGY, INC., a Delaware corporation (the “ Corporation ”) hereby certifies that [                    ] (the “ Holder ”) is the registered owner of [          ] fully paid and non-assessable shares of preferred stock, par value $0.001 per share, of the Corporation, designated as the 8.0% Series A Perpetual Convertible Preferred Stock (the “ Series A Preferred Stock ”).  The shares of Series A Preferred Stock are transferrable on the books and records of the Transfer Agent, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer.  The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series A Preferred Stock represented hereby are as specified in, and the shares of the Series A Preferred Stock are issued and shall in all respects be subject to the provisions of, the Certificate of Designations dated August 25, 2016, as the same may be amended from time to time (the “ Certificate of Designations ”).  Capitalized terms used herein but not defined shall have the meaning given to them in the Certificate of Designations.  The Corporation will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Corporation at its principal place of business.

 

Reference is hereby made to the Certificate of Designations, which shall for all purposes have the same effect as if set forth at this place.

 

Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.

 

Unless the Transfer Agent’s Certificate of Authentication hereon has been properly executed, these shares of Series A Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid for any purpose.

 

IN WITNESS WHEREOF, the Corporation has executed this certificate this [     ] day of [                    ], 20[  ]

 

 

JONES ENERGY, INC.

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 



 

TRANSFER AGENT’S CERTIFICATE OF AUTHENTICATION

 

These are shares of Series A Preferred Stock referred to in the within-mentioned Certificate of Designations.

 

 

Dated:

 

 

 

 

 

 

 

 

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

 

 

 

 

 

By:

 

 

 

Authorized Signatory

 



 

REVERSE OF SECURITY

 

The Corporation will furnish without charge and upon written request to each Holder the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock and the qualifications, limitations or restrictions of such preferences and/or rights. Requests may be made to:

 

Jones Energy, Inc.

807 Las Cimas Parkway, Suite 350

Austin, Texas 78746

Facsimile No.: (512) 328-5394

Attention: Chief Financial Officer

 



 

ASSIGNMENT

 

To assign this Series A Preferred Stock certificate, fill in the form below:

 

FOR VALUE RECEIVED, the undersigned hereby assigns and transfer the shares of Series A Preferred Stock evidenced hereby to:

 

 

(Insert assignee’s legal name)

 

 

(Insert assignee’s social security or tax identification number)

 

 

 

(Insert assignee’s name, address and zip code)

 

and irrevocably appoints:

 

 

 

as agent to transfer the shares of Series A Preferred Stock evidenced hereby on the books of the Transfer Agent.  The agent may substitute another to act for him or her.

 

 

Date:

 

 

 

 

 

 

Your Signature:

 

 

(Sign exactly as your name appears on the face of this certificate)

 

Signature Guarantee (2):

 

 

 


(2)  Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 



 

EXHIBIT B

 

FORM OF NOTICE OF CONVERSION

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Series A Preferred Stock)

 

The undersigned hereby irrevocably elects to convert (the “ Conversion ”) shares of 8.0% Series A Perpetual Convertible Preferred Stock (the “ Series A Preferred Stock ”) of Jones Energy, Inc. (the “ Corporation ”), represented by stock certificate No(s) [     ] (the “ Preferred Stock Certificates ”), into shares of Class A common stock, par value $0.001 per share, of the Corporation (“ Class A Common Stock ”) according to the conditions of the Certificate of Designations of the Series A Preferred Stock (the “ Certificate of Designations ”).  The Corporation will pay any documentary, stamp or similar issue or tax on the issuance of shares of Class A Common Stock upon conversion of the Series A Preferred Stock, unless the tax is due because the undersigned requests such shares of Class A Common Stock to be issued in a name other than the undersigned’s name, in which case the undersigned will pay the tax.  A copy of each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof).

 

Capitalized terms used but not defined herein shall have the meaning given to them in the Certificate of Designations.

 

Number of shares of Series A Preferred Stock to be converted:

 

Name(s) (with address(es)) in which the certificate(s) for any shares of Class A Common Stock are to be registered (1):

 

 

Signature:

 

 

 

 

 

Name of registered Holder:

 

 

 

 

 

Fax No.:

 

 

 

 

 

Telephone No.:

 

 

 


(1)  The Corporation is not required to issue shares of Class A Common Stock until you, among other things, (a) if required, furnish appropriate endorsements and transfer documents and (b), if required, pay funds equal to any dividend payable on the next Dividend Payment Date to which you are not entitled.

 


Exhibit 5.1

 

GRAPHIC

98 SAN JACINTO BLVD.

SUITE 1500

AUSTIN, TEXAS

78701-4078

 

TEL   +1

512.322.2500

FAX  +1

512.322.2501

BakerBotts.com

AUSTIN

BEIJING

BRUSSELS

DALLAS

DUBAI

HONG KONG

 

HOUSTON

LONDON

MOSCOW

NEW YORK

PALO ALTO

RIO DE JANEIRO

RIYADH

WASHINGTON

 

August 26, 2016

 

Jones Energy, Inc.

807 Las Cimas Parkway, Suite 350

Austin, Texas 78746

 

Ladies and Gentlemen:

 

We have acted as counsel to Jones Energy, Inc., a Delaware corporation (the “Company”), in connection with the proposed offering and sale by the Company of up to 24,150,000 shares of Class A common stock, par value $0.001 per share, of the Company (the “Class A Common Stock”) pursuant to that certain Underwriting Agreement with respect to the Class A Common Stock dated August 19, 2016 (the “Underwriting Agreement”) by and among the Company and Jones Energy Holdings, LLC, a Delaware limited liability company, on the one hand, and Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as representatives of the several underwriters named in Schedule 1 thereto (the “Underwriters”), on the other.

 

In connection with this opinion, we have examined and relied upon the accuracy of original, certified copies or photocopies of such records, agreements, certificates and other documents as we have deemed necessary or appropriate to enable us to render the opinions set out below, including (i) the registration statement on Form S-3 (Registration No. 333-211568) (the “Base Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act”); (ii) the registration statement on Form S-3 (Registration No. 333-213201) (the “Additional Registration Statement” and, together with the Base Registration Statement, the “Registration Statement”) filed by the Company with the Commission under the Rule 462(b) of the Act; (iii) the prospectus included in the Registration Statement dated July 26, 2016 (the “Base Prospectus”); (iv) the prospectus supplement to the Base Prospectus dated August 19, 2016 with respect to the Class A Common Stock (together with the Base Prospectus, the “Prospectus”); (v) the Underwriting Agreement; (vi) the General Corporation Law of the State of Delaware (the “DGCL”); (vii) the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, each as amended to date, of the Company and (viii) the Company’s records and documents, certificates of representatives of the Company and public officials, and other instruments and documents as we deemed necessary or advisable for the purposes of this opinion.

 

In making our examination, we have assumed that all signatures on documents examined by us are genuine, that all documents submitted to us as originals are authentic and complete, that all documents submitted to us as certified or photostatic copies conform with the original copies of such documents and that all information submitted to us was accurate and complete.  In addition, we have relied, without independent investigation, upon the factual

 



 

accuracy of the representations and warranties contained in the certificates we examined. We have also assumed that all shares of Class A Common Stock will be issued and sold in the manner set forth in the Prospectus and the Underwriting Agreement and that any certificates for the shares of Class A Common Stock will be duly countersigned, registered and electronically transmitted by the transfer agent and registrar for the Company.

 

Based upon the foregoing, and subject to the assumptions, limitations and qualifications set forth herein, we are of the opinion that the shares of Class A Common Stock have been duly authorized and, when issued and delivered by the Company against payment therefor in accordance with the Underwriting Agreement and as described in the Registration Statement, will be validly issued, fully paid and nonassessable.

 

The foregoing opinion is limited in all respects to the DGCL and the applicable federal laws of the United States, each as published in effect on the date hereof, and applicable reported judicial decisions, rules and regulations interpreting and implementing those laws.  We express no opinion as to the effect of the laws of any other jurisdiction.

 

We hereby consent to the filing of this opinion as Exhibit 5.1 to the Company’s Current Report on Form 8-K dated on or about the date hereof, to the incorporation by reference of this opinion into the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the Prospectus forming a part of the Registration Statement.  In giving this consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.

 

 

Very truly yours,

 

 

 

 

 

/s/ Baker Botts L.L.P.

 

2


Exhibit 5.2

 

GRAPHIC

98 SAN JACINTO BLVD.

SUITE 1500

AUSTIN, TEXAS

78701-4078

 

TEL   +1

512.322.2500

FAX  +1

512.322.2501

BakerBotts.com

AUSTIN

BEIJING

BRUSSELS

DALLAS

DUBAI

HONG KONG

HOUSTON

LONDON

MOSCOW

NEW YORK

PALO ALTO

RIO DE JANEIRO

RIYADH

WASHINGTON

 

August 26, 2016

 

Jones Energy, Inc.

807 Las Cimas Parkway, Suite 350

Austin, Texas 78746

 

Ladies and Gentlemen:

 

We have acted as counsel to Jones Energy, Inc., a Delaware corporation (the “Company”), in connection with the proposed offering and sale by the Company of up to 1,840,000 shares of 8.0% Series A Perpetual Convertible Preferred Stock, par value $0.001 per share, with a liquidation preference of $50.00 per share, of the Company (the “Securities”) pursuant to that certain Underwriting Agreement with respect to the Securities dated August 19, 2016 (the “Underwriting Agreement”) by and among the Company and Jones Energy Holdings, LLC, a Delaware limited liability company, on the one hand, and Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as underwriters (the “Underwriters”), on the other.

 

In connection with this opinion, we have examined and relied upon the accuracy of original, certified copies or photocopies of such records, agreements, certificates and other documents as we have deemed necessary or appropriate to enable us to render the opinions set out below, including (i) the registration statement on Form S-3 (Registration No. 333-211568) (the “Base Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act”); (ii) the registration statement on Form S-3 (Registration No. 333-213201) (the “Additional Registration Statement” and, together with the Base Registration Statement, the “Registration Statement”) filed by the Company with the Commission under Rule 462(b) of the Act; (iii) the prospectus included in the Registration Statement dated July 26, 2016 (the “Base Prospectus”); (iv) the prospectus supplement to the Base Prospectus dated August 19, 2016 with respect to the Securities (together with the Base Prospectus, the “Prospectus”); (v) the Underwriting Agreement; (vi) the General Corporation Law of the State of Delaware (the “DGCL”); (vii) the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, each as amended to date, of the Company; (viii) the Certificate of Designations of the 8.0% Series A Perpetual Convertible Preferred Stock of the Company included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on August 26, 2016 (the “Certificate of Designations”) and (ix) the Company’s records and documents, certificates of representatives of the Company and public officials, and other instruments and documents as we deemed necessary or advisable for the purposes of this opinion.

 

In making our examination, we have assumed that all signatures on documents examined by us are genuine, that all documents submitted to us as originals are authentic and complete, that all documents submitted to us as certified or photostatic copies conform with the original copies of such documents and that all information submitted to us was accurate and

 



 

complete.  In addition, we have relied, without independent investigation, upon the factual accuracy of the representations and warranties contained in the certificates we examined.

 

Based upon the foregoing, and subject to the assumptions, limitations and qualifications set forth herein, we are of the opinion that:

 

1.         the Securities have been duly authorized and, when issued and delivered by the Company against payment therefor in accordance with the Underwriting Agreement and as described in the Registration Statement, will be validly issued, fully paid and nonassessable.

 

2.         the maximum number of shares of the Company’s Class A Common Stock, par value $0.001, initially issuable by the Company upon conversion of the Securities (the “Conversion Shares”) have been duly authorized and reserved for issuance upon conversion of the Securities and, when such Conversion Shares have been issued and delivered in accordance with the terms of the Certificate of Designations, will be validly issued, fully paid and nonassessable.

 

In rendering the opinion expressed in paragraph 2 above, we have assumed that valid book-entry notations will have been made in the register of the Company with respect to such Conversion Shares, or any certificates representing such Conversion Shares will have been duly executed, countersigned, registered and electronically transmitted by the transfer agent and the Company, in each case in accordance with the Certificate of Incorporation.

 

The foregoing opinions are limited in all respects to the DGCL and the applicable federal laws of the United States, each as published in effect on the date hereof, and applicable reported judicial decisions, rules and regulations interpreting and implementing those laws.  We express no opinion as to the effect of the laws of any other jurisdiction.

 

We hereby consent to the filing of this opinion as Exhibit 5.1 to the Company’s Current Report on Form 8-K dated on or about the date hereof, to the incorporation by reference of this opinion into the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the Prospectus forming a part of the Registration Statement.  In giving this consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.

 

 

Very truly yours,

 

 

 

 

 

/s/ Baker Botts L.L.P.

 

2


Exhibit 8.1

 

 

 

98 SAN JACINTO

BLVD.

SUITE 1500

AUSTIN, TEXAS

78701-4078

 

TEL   +1

512.322.2500

FAX  +1

512.322.2501

BakerBotts.com

AUSTIN

BEIJING

BRUSSELS

DALLAS

DUBAI

HONG KONG

HOUSTON

 

LONDON

MOSCOW

NEW YORK

PALO ALTO

RIYADH

SAN FRANCISCO

WASHINGTON

 

August 26, 2016

 

Jones Energy, Inc.

807 Las Cimas Parkway, Suite 350

Austin, Texas 78746

 

Ladies and Gentlemen:

 

We have acted as counsel for Jones Energy, Inc., a Delaware corporation (the “Company”), with respect to certain legal matters in connection with the offer and sale by the Company of up to 24,150,000 shares of Class A common stock, par value $0.001 per share, of the Company.  We have also participated in the preparation of a Prospectus Supplement, dated August 19, 2016 (the “Prospectus Supplement”), and the Prospectus dated July 26, 2016 (the “Prospectus”) forming part of the Registration Statement on Form S-3 (File No. 333-211568) (the “Registration Statement”).  At your request, this opinion is being furnished to you for filing as Exhibit 8.1 to the Current Report on Form 8-K dated on or about the date hereof (the “Current Report”).

 

In connection therewith, we prepared the discussion set forth under the caption “Material U.S. Federal Income and Estate Tax Considerations for Non-U.S. Holders” in the Prospectus Supplement (the “Discussion”).  We hereby confirm that all statements of legal conclusions, but not statements of factual matters, contained in the Discussion constitute the opinion of Baker Botts L.L.P. with respect to the matters set forth therein as of the effective date of the Prospectus Supplement, subject to the assumptions, qualifications, and limitations set forth therein.

 

In providing this opinion, we have examined and are relying upon the truth and accuracy at all relevant times of (i) the Company’s statements, covenants, and representations contained in the Registration Statement, the Prospectus, and the Prospectus Supplement and (ii) other information provided to us by the representatives of the Company.

 

We hereby consent to the filing of this opinion as an exhibit to the Current Report and to the references to our firm and this opinion contained in the Discussion.  In giving this consent, however, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.

 

 

Very truly yours,

 

 

 

/s/ BAKER BOTTS L.L.P.

 


Exhibit 8.2

 

 

 

98 SAN JACINTO

BLVD.

SUITE 1500

AUSTIN, TEXAS

78701-4078

 

TEL   +1

512.322.2500

FAX  +1

512.322.2501

BakerBotts.com

AUSTIN

BEIJING

BRUSSELS

DALLAS

DUBAI

HONG KONG

HOUSTON

 

LONDON

MOSCOW

NEW YORK

PALO ALTO

RIYADH

SAN FRANCISCO

WASHINGTON

 

August 26, 2016

 

Jones Energy, Inc.

807 Las Cimas Parkway, Suite 350

Austin, Texas 78746

 

Ladies and Gentlemen:

 

We have acted as counsel for Jones Energy, Inc., a Delaware corporation (the “Company”), with respect to certain legal matters in connection with the offer and sale by the Company of 1,840,000 shares of 8.0% Series A perpetual convertible preferred stock, par value $0.001 per share, of the Company.  We have also participated in the preparation of a Prospectus Supplement, dated August 19, 2016 (the “Prospectus Supplement”), and the Prospectus dated July 26, 2016 (the “Prospectus”) forming part of the Registration Statement on Form S-3 (File No. 333-211568) (the “Registration Statement”).  At your request, this opinion is being furnished to you for filing as Exhibit 8.1 to the Current Report on Form 8-K dated on or about the date hereof (the “Current Report”).

 

In connection therewith, we prepared the discussion set forth under the caption “Material U.S. Federal Income Tax Considerations” in the Prospectus Supplement (the “Discussion”).  We hereby confirm that all statements of legal conclusions, but not statements of factual matters, contained in the Discussion constitute the opinion of Baker Botts L.L.P. with respect to the matters set forth therein as of the effective date of the Prospectus Supplement, subject to the assumptions, qualifications, and limitations set forth therein.

 

In providing this opinion, we have examined and are relying upon the truth and accuracy at all relevant times of (i) the Company’s statements, covenants, and representations contained in the Registration Statement, the Prospectus, and the Prospectus Supplement and (ii) other information provided to us by the representatives of the Company.

 

We hereby consent to the filing of this opinion as an exhibit to the Current Report and to the references to our firm and this opinion contained in the Discussion.  In giving this consent, however, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.

 

 

Very truly yours,

 

 

 

/s/ BAKER BOTTS L.L.P.

 


Exhibit 10.1

 

 

 


 

JONES ENERGY HOLDINGS, LLC

 


 

FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

 

Dated as of August 26, 2016

 

THE COMPANY INTERESTS REPRESENTED BY THIS FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS.  SUCH INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.

 

THE COMPANY INTERESTS REPRESENTED BY THIS FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND REPURCHASE OPTIONS SET FORTH IN THIS AGREEMENT.

 

 

 



 

ARTICLE I DEFINITIONS

4

1.1

Definitions

4

1.2

Interpretative Matters

13

 

 

ARTICLE II ORGANIZATIONAL MATTERS

14

2.1

Formation of the Company

14

2.2

Fourth Amended and Restated Limited Liability Company Agreement

14

2.3

Name

14

2.4

Purpose; Powers

14

2.5

Principal Office; Registered Office

14

2.6

Term

15

2.7

Foreign Qualification

15

2.8

No State Law Partnership

15

 

 

ARTICLE III CAPITALIZATION; ADMISSION OF MEMBERS; CAPITAL ACCOUNTS

15

3.1

Capitalization

15

3.2

Admission of Members; Additional Members

18

3.3

Capital Accounts

18

3.4

Negative Capital Accounts

19

3.5

No Withdrawal

19

3.6

Loans From Unitholders

19

3.7

No Right of Partition

19

3.8

Non-Certification of Units; Legend; Units Are Securities

19

3.9

Rights of Holders of Series A Preferred Units

20

 

 

ARTICLE IV DISTRIBUTIONS

21

4.1

Distributions

21

4.2

Successors

22

4.3

Distributions In-Kind

22

4.4

Tax-Related Distributions

22

 

 

ARTICLE V ALLOCATIONS

23

5.1

Allocations

23

5.2

Special Allocations

23

5.3

Tax Allocations

25

5.4

Unitholders’ Tax Reporting

26

5.5

Indemnification and Reimbursement for Payments on Behalf of a Unitholder

26

 

 

ARTICLE VI RIGHTS AND DUTIES OF MEMBERS

27

6.1

Management

27

6.2

Liability of Unitholders

28

6.3

Investment Opportunities; Performance of Duties; Conflicts of Interest

28

6.4

Meetings

29

6.5

Actions Requiring Member Approval

29

 

 

ARTICLE VII OFFICERS

29

7.1

Officers

29

7.2

Chief Executive Officer

30

7.3

President

30

 



 

7.4

Chief Financial Officer

30

7.5

Vice Presidents

31

7.6

Secretary

31

7.7

Further Delegation of Authority

31

7.8

Fiduciary Duties

31

7.9

Performance of Duties; Liability of Officers

31

7.10

Indemnification

32

 

 

ARTICLE VIII TAX MATTERS

33

8.1

Preparation of Tax Returns

33

8.2

Tax Elections

34

8.3

Tax Controversies

34

8.4

Tax Allocations

34

8.5

Fiscal Year; Taxable Year

34

 

 

ARTICLE IX TRANSFER OF UNITS; SUBSTITUTE MEMBERS

34

9.1

Restrictions on Transfers

34

9.2

Recognition of Transfer; Substituted and Additional Members

35

9.3

Expense of Transfer; Indemnification

36

9.4

Exchange Agreement

36

 

 

ARTICLE X DISSOLUTION AND LIQUIDATION

37

10.1

Dissolution

37

10.2

Liquidation and Termination

37

10.3

Complete Distribution

38

10.4

Cancellation of Certificate

38

10.5

Reasonable Time for Winding Up

38

10.6

Return of Capital

38

10.7

HSR Act

38

 

 

ARTICLE XI GENERAL PROVISIONS

38

11.1

Power of Attorney

38

11.2

Books and Records

39

11.3

Amendments

39

11.4

Remedies

39

11.5

Successors and Assigns

39

11.6

Severability

39

11.7

Counterparts

40

11.8

Applicable Law

40

11.9

Addresses and Notices

40

11.10

Creditors

40

11.11

Waiver

40

11.12

Further Action

40

11.13

Entire Agreement

40

11.14

Delivery by Facsimile or Email

40

11.15

Survival

41

11.16

Confidentiality

41

 

SCHEDULE A

Schedule of Members

 

 

2



 

FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
JONES ENERGY HOLDINGS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY

 

This FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “ Agreement ”) of Jones Energy Holdings, LLC, a Delaware limited liability company (the “ Company ”), dated and effective as of August 26, 2016 (the “ Effective Date ”), is adopted, executed and agreed to, for good and valuable consideration, by and among the Company and each other Person who is or at any time becomes a Member in accordance with the terms of this Agreement and the Act.  Any reference in this Agreement to any Member shall include such Member’s Successors in Interest to the extent such Successors in Interest have become Substituted Members in accordance with the provisions of this Agreement.

 

RECITALS:

 

WHEREAS, the Company was formed by Jones Energy Drilling Fund, LP, a Texas limited partnership (“ JEDF ”) and Jones Energy Equity Partners, LP, a Texas limited partnership (“ JEEP ”) as a limited liability company under the Act by filing a Certificate of Formation with the Secretary of State of the State of Delaware on December 16, 2009 (the “ Certificate ”);

 

WHEREAS, JEDF and JEEP, as the Company’s initial members, entered into an initial limited liability company agreement with the Company on December 16, 2009 (such agreement, the “ Original Agreement ”);

 

WHEREAS, the Original Agreement was amended and restated in its entirety by that certain Amended and Restated Limited Liability Company Agreement of the Company, dated as of December 31, 2009 (the “ Restated LLC Agreement ”);

 

WHEREAS, the Restated LLC Agreement was amended and restated in its entirety by that certain Second Amended and Restated Limited Liability Company Agreement, dated as of December 20, 2012 (the “ Second Restated LLC Agreement ”);

 

WHEREAS, in connection with the initial public offering of Jones Energy, Inc., a Delaware corporation (“ JEI ”), the Second Restated LLC Agreement was amended and restated in its entirety by that certain Third Amended and Restated Limited Liability Company Agreement, dated as of July 26, 2013 (the “ Third Restated LLC Agreement ”);

 

WHEREAS, the Company and JEI have entered into underwriting agreements with the several underwriters named therein, providing for the offering of 21,000,000 shares of Class A Common Stock, par value $0.001 per share, of JEI (the “ August 2016 Common Stock Offering ”) and 1,600,000 shares of 8% Series A Perpetual Convertible Preferred Stock, par value $0.001 per share, of JEI (the “ August 2016 Preferred Stock Offering ”);

 

WHEREAS, in connection with the August 2016 Common Stock Offering and the August 2016 Preferred Stock Offering, it is contemplated that pursuant to this Agreement (i) immediately after consummation of the August 2016 Common Stock Offering, JEI will contribute the net proceeds thereof to the Company in exchange for 21,000,000 Common Units, (ii) immediately after consummation of the August 2016 Preferred Stock Offering, the Company will issue 1,600,000 Series A Preferred Units to JEI in exchange for JEI’s commitment to contribute the net proceeds of the August 2016 Preferred Stock

 

3



 

Offering to the Company as more particularly described in Section 3.1(c)  herein, (iii) if and to the extent the underwriters exercise their overallotment option to purchase additional shares of Class A Common Stock in connection with the August 2016 Common Stock Offering, JEI will issue additional shares of Class A Common Stock and use the net proceeds thereof to purchase an equal number of Common Units from the Company, and (iv) if and to the extent the underwriters exercise their overallotment option to purchase additional shares of Series A Preferred Stock in connection with the August 2016 Preferred Stock Offering, the Company will issue an equal number of Series A Preferred Units to JEI in exchange for JEI’s commitment to contribute to the Company the net proceeds from the exercise of such overallotment option, as more particularly described in Section 3.1(c)  herein (collectively, the “ August 2016 Offering Transactions ”); and

 

WHEREAS, the Company and the Members set forth on Schedule A attached hereto now wish to amend and restate the Third Restated LLC Agreement as set forth herein to give effect to August 2016 Offering Transactions by, among other things, creating the Series A Preferred Units (as defined below) as a new class of Units, as more fully described herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto, each intending to be legally bound, agree as follows:

 

ARTICLE I
DEFINITIONS

 

1.1                                Definitions .  Unless the context otherwise requires, the following terms shall have the following meanings for purposes of this Agreement:

 

Act ” means the Delaware Limited Liability Company Act, 6 Del. L. Sections 18-101, et seq.

 

Additional Member ” means any Person that has been admitted to the Company as a Member after the Effective Date pursuant to Section 3.2(b)  by virtue of having received its Membership Interest from the Company and not from any other Member or Assignee.

 

Adjusted Capital Account Deficit ” means, with respect to any Person’s Capital Account as of the end of any taxable year, the amount by which the balance in such Capital Account is less than zero.  For this purpose, such Capital Account balance shall be (i) reduced for any items described in Regulations Section 1.704-1(b)(2)(ii) (d)(4) , (5)  and (6) , and (ii) increased for any amount such Person is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Regulations Sections 1.704-1(b)(2)(ii) (c)  (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to minimum gain).

 

Affiliate ” when used with reference to another Person means any Person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, such other Person.  In addition, Affiliates of a Member shall include all its partners, officers, employees and former partners in their capacities as such.

 

Agreement ” has the meaning set forth in the preamble.

 

Assignee ” means any Transferee to which a Member or another Assignee has Transferred all or a portion of its interest in the Company in accordance with the terms of this Agreement, but that is not a Member.

 

4



 

Assumed Tax Rate ” means, for any taxable year, the highest marginal effective rate of federal, state and local income tax applicable to an individual resident in New York, New York (or, if higher, a corporation doing business in New York, New York) determined by applying the rates applicable to ordinary income (in cases where taxes are being determined on ordinary income allocated to a Member) and capital gains (in cases where taxes are being determined on capital gains allocated to a Member), and by assuming that state and local income taxes are not deductible in computing a Unitholder’s liability for federal income tax.  For purposes of the foregoing, it shall be assumed that taxes under Section 1411 of the Code are applicable and that the New York City unincorporated business tax and New York Metropolitan Commuter Transportation Mobility tax are not applicable.

 

August 2016 Common Stock Offering ” has the meaning set forth in the recitals.

 

August 2016 Offering Transactions ” has the meaning set forth in the recitals.

 

August 2016 Preferred Stock Offering ” has the meaning set forth in the recitals.

 

Bankruptcy ” means, with respect to any Person, the occurrence of any of the following events: (a) the filing of an application by such Person for, or a consent to, the appointment of a trustee or custodian of such Person’s assets; (b) the filing by such Person of a voluntary petition in Bankruptcy or the seeking of relief under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing of a pleading in any court of record admitting in writing such Person’s inability to pay its debts as they become due; (c) the failure of such Person to pay its debts as such debts become due; (d) the making by such Person of a general assignment for the benefit of creditors; (e) the filing by such Person of an answer admitting the material allegations of, or such Person’s consenting to, or defaulting in answering, a Bankruptcy petition filed against him in any Bankruptcy proceeding or petition seeking relief under Title 11 of the United States Code, as now constituted or as hereafter amended; or (f) the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Person a bankrupt or insolvent or for relief in respect of such Person or appointing a trustee or custodian of such Person’s assets and the continuance of such order, judgment or decree unstayed and in effect for a period of 60 consecutive calendar days.

 

Business Day ” means any calendar day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to close.

 

Capital Account ” has the meaning set forth in Section 3.3(a) .

 

Capital Contributions ” means any cash, cash equivalents or, at the consent of the Managing Member, the Fair Market Value of other property that a Member contributes to the Company with respect to any Unit or other Equity Securities issued pursuant to Article III (net of liabilities assumed by the Company or to which such property is subject).

 

Certificate ” has the meaning set forth in the preamble.

 

Chief Executive Officer ” has the meaning set forth in Section 7.2 .

 

Chief Financial Officer ” has the meaning set forth in Section 7.4 .

 

Class A Common Stock ” means the shares of Class A common stock, par value $0.001 per share, of JEI.

 

5



 

Class B Common Stock ” means the shares of Class B common stock, par value $0.001 per share, of JEI.

 

Code ” means the United States Internal Revenue Code of 1986.

 

Common Unit ” has the meaning set forth in Section 3.1(a) .

 

Company ” has the meaning set forth in the preamble.

 

Company Minimum Gain ” has the meaning set forth for the term “partnership minimum gain” in Regulations Section 1.704-2(d).

 

control ” means, when used with reference to any Person, the power to direct the management or policies of such Person, directly or indirectly, by or through stock or other equity ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or other understanding (written or oral); and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing.

 

Depreciation ” has the meaning set forth in the definition of “Net Income” or “Net Loss” under paragraph (e) therein.

 

Distribution ” means each distribution made by the Company to a Unitholder, whether in cash, property or securities of the Company, pursuant to, or in respect of, Article IV or Article X .

 

Economic Interest ” means the right to allocations of items of income, gain, loss, deduction, credit or similar items and the right to Distributions of cash and other property as provided in Section 3.9 Article IV , Article V and Article X of this Agreement and the Act, but shall not include any right to participate in the management or affairs of the Company or any right to receive information concerning the business and affairs of the Company, in each case, except as expressly otherwise provided in this Agreement or required by the Act.

 

Effective Date ” has the meaning set forth in the preamble.

 

Equity Securities ” means, as applicable, (a) any capital stock, membership interests or other share capital, (b) any securities directly or indirectly convertible into or exchangeable for any capital stock, membership interests or other share capital or containing any profit participation features, (c) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, membership interests, other share capital or securities containing any profit participation features or to subscribe for or to purchase any securities directly or indirectly convertible into or exchangeable for any capital stock, membership interests, other share capital or securities containing any profit participation features, (d) any share appreciation rights, phantom share rights or other similar rights, or (e) any Equity Securities issued or issuable with respect to the securities referred to in clauses (a) through (d) above in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization.

 

Event of Withdrawal ” means the death, retirement, resignation, expulsion, Bankruptcy or dissolution of a Unitholder or the occurrence of any other event that terminates the continued membership of a Member in the Company.

 

Exchange Agreement ” means the Exchange Agreement dated on or about the date hereof between the Company, the Members and JEI.

 

6



 

Fair Market Value ” means, with respect to any asset or securities, the fair market value for such assets or securities as between a willing buyer and a willing seller in an arm’s length transaction occurring on the date of valuation, taking into account all relevant factors determinative of value, as determined in good faith by the Managing Member.

 

Family Group ” means for any individual, such individual’s current or former spouse, their respective parents, descendants of such parents (whether natural or adopted) and the spouses of such descendants, and any trust, limited partnership, corporation or limited liability company established solely for the benefit of such individual or such individual’s current or former spouse, their respective parents, descendants of such parents (whether natural or adopted) or the spouses of such descendants.

 

Fiscal Year ” means the fiscal year of the Company and its Subsidiaries, ending on December 31 of each calendar year.

 

Governmental Entity ” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government, including any court, in each case, having jurisdiction over the Company or any of its Subsidiaries or any of the property or other assets of the Company or any of its Subsidiaries.

 

Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(a)                                  the initial Gross Asset Value of any asset contributed by a Unitholder to the Company shall be the gross Fair Market Value of such asset on the date of the contribution (which, in the case of the assets contributed by JEDF pursuant to the Jones Contribution Agreement (net of any liabilities securing such assets that the Company is considered to assume or take subject to), was deemed to equal $45,000,000);

 

(b)                                  the Gross Asset Values of all Company assets shall be adjusted to equal their respective gross Fair Market Values (after taking into account any adjustments required by Regulations Sections 1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2)) as of the following times:

 

(i)                                      the acquisition of an additional interest in the Company by a new or existing Unitholder in exchange for more than a de minimis Capital Contribution (including any issuance/distribution of Common Units to JEI in respect of the Series A Preferred Units pursuant to Section 4.1(a) ), if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative Economic Interests of the Unitholders in the Company;

 

(ii)                                   the grant of an interest in the Company (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Company or any of its Subsidiaries by an existing or a new Member acting in a “partner capacity,” or in anticipation of becoming a “partner” (in each case within the meaning of Regulations Section 1.704-1(b)(2)(iv) (d) ).

 

(iii)                                the Distribution by the Company to a Unitholder of more than a de minimis amount of Company property as consideration for an interest in the Company, if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative Economic Interests of the Unitholders in the Company;

 

7



 

(iv)                               the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii) (g) ;

 

(v)                                  in accordance with Regulations Section 1.704-1(b)(2)(iv)(s), immediately after the conversion of a Series A Preferred Unit into Common Units in accordance with Section 3.9(c) ; and

 

(vi)                               such other times as the Managing Member shall reasonably determine to be necessary or advisable in order to comply with Regulations promulgated under Subchapter K of Chapter 1 of the Code;

 

(c)                                   the Gross Asset Value of any Company asset distributed to a Unitholder shall be the gross Fair Market Value of such asset on the date of Distribution;

 

(d)                                  the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv) (m) ; provided , however , that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to the extent that the Managing Member determines that an adjustment pursuant to subparagraph (b) of this definition of Gross Asset Value is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d);

 

(e)                                   with respect to any asset that has a Gross Asset Value that differs from its adjusted tax basis, Gross Asset Value shall be adjusted by the amount of Depreciation rather than any other depreciation, amortization or other cost recovery method; and

 

(f)                                    The Gross Asset Value of any depletable property held directly or indirectly by the Company shall be adjusted by Simulated Depletion in lieu of any depletion otherwise allowable for federal income tax purposes.

 

HSR Act ” has the meaning set forth in Section 10.7 .

 

Income ” means individual items of Company income and gain determined in accordance with the definitions of Net Income and Net Loss.

 

JEDF ” has the meaning set forth in the recitals.

 

JEEP ” has the meaning set forth in the recitals.

 

JEI Excess Tax Distribution ” has the meaning set forth in Section 4.4(b) .

 

Jones Built-in Gain ” means the excess of the initial Gross Asset Value, over the adjusted tax basis, of the assets contributed by JEDF to the Company pursuant to the Jones Contribution Agreement.

 

Jones Contribution Agreement ” means that certain Contribution Agreement, dated as of December 16, 2009, by and between the Company and JEDF.

 

Loss ” means individual items of Company loss and deduction determined in accordance with the definitions of Net Income and Net Loss.

 

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Managing Member ” means JEI.

 

Member ” means each Person listed on Schedule A attached hereto and each other Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Act.  The Members shall constitute the “members” (as such term is defined in the Act) of the Company.  Except as otherwise set forth herein or in the Act, the Members shall constitute a single class or group of members of the Company for all purposes of the Act and this Agreement.

 

Member Minimum Gain ” means minimum gain attributable to Member Nonrecourse Debt determined in accordance with Regulations Section 1.704-2(i).

 

Member Nonrecourse Debt ” has the meaning set forth for the term “partner nonrecourse debt” in Regulations Section 1.704-2(b)(4).

 

Membership Interest ” means, with respect to each Member, such Member’s Economic Interest and rights as a Member.

 

Metalmark ” means, collectively, MCP (C) II Jones Intermediate LLC, (ii) MCP II Co-Investment Jones Intermediate LLC, (iii) MCP II Jones Intermediate LLC, (iv) MCP II (TE) AIF Jones Intermediate LLC, (v) MCP II (Cayman) AIF Jones Intermediate LLC and (vi) MCP II Executive Fund Jones Intermediate LLC.

 

Net Income ” or “ Net Loss ” means, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such Fiscal Year or other period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in such taxable income or loss), with the following adjustments:

 

(a)                                  any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be added to such taxable income or loss;

 

(b)                                  any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)( i ), and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be subtracted from such taxable income or loss;

 

(c)                                   in the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (b) or (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain (if the adjustment increases the Gross Asset Value of the asset) or loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset for purposes of computing Net Income or Net Loss;

 

(d)                                  gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

 

(e)                                   in lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, with respect to a Company asset having a

 

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Gross Asset Value that differs from its adjusted basis for tax purposes, “Depreciation” with respect to such asset shall be computed by reference to the asset’s Gross Asset Value in accordance with Regulations Section 1.704-1(b)(2)(iv)(g);

 

(f)                                    to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv) (m)  to be taken into account in determining Capital Accounts as a result of a Distribution other than in liquidation of a Unitholder’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss;

 

(g)                                   For purposes of determining Net Income and Net Loss, the allocation of depletable basis in, depletion allowances with respect to, and taxable gain or loss from the sale, exchange or other disposition of, the Company’s depletable properties provided for in Section 613A(c)(7)(D) of the Code and/or otherwise computed for federal income tax purposes shall be disregarded.  Instead, Net Income and Net Loss shall be determined by taking into account Simulated Depletion and Simulated Gain or Loss, as determined and defined in the following sentence.  For purposes of determining Simulated Depletion and Simulated Gain or Loss, (i) the Company shall determine its tax basis in its depletable properties (“ Simulated Basis ”) without regard to the special rules set forth in Section 613A(c)(7)(D) of the Code, (ii) the Company shall determine depletion allowances (“ Simulated Depletion ”) with respect to such depletable properties by using either the cost depletion method or the percentage depletion method (as determined by the Managing Member on a property by property basis), (iii) the Company shall reduce the Simulated Basis of such depletable properties by the Simulated Depletion attributable to such depletable properties, and (iv) the Company shall compute gain or loss on a sale, exchange, or other disposition of such depletable properties by subtracting Simulated Basis from the amount realized by the Company upon such disposition (“ Simulated Gain or Loss ”); and

 

(h)                                  Any Income or Loss that is allocated under Section 5.2 shall be excluded for purposes of computing Net Income or Net Loss.

 

Notice ” has the meaning set forth in Section 3.1(g)(i) .

 

Officers ” has the meaning set forth in Section 7.1 .

 

Original Agreement ” has the meaning set forth in the recitals.

 

Pending STACK/SCOOP Acquisition ” means the pending acquisition by the Company of certain oil and gas properties provided for in the STACK/SCOOP Purchase Agreement.

 

Percentage Interest ” of each Member is set forth on Schedule A hereto, which may be amended from time to time and which shall be equal to a fraction (expressed as a percentage), the numerator of which is the number of Common Units held by such Member and the denominator of which is the number of Common Units held by all the Members (it being understood that if the Company hereafter issues any Equity Securities other than the Common Units or Series A Preferred Units, then this definition shall be changed pursuant to an amendment of this Agreement in accordance with the terms hereof).

 

Permitted Transferee ” means, with respect to any Unitholder, (a) its Affiliates (including, in the case of any Member that is an entity, any distribution by such Member to its members, partners or shareholders (the “ Member’s Owners ”), and any related distributions by the Member’s Owners to their

 

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respective members, partners or shareholders), and (b) in the case of an individual, any member of its Family Group.

 

Person ” means an individual, a partnership (including a limited partnership), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, association or other entity or a Governmental Entity.

 

President ” has the meaning set forth in Section 7.3 .

 

Proceeding ” means any action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) involving an Indemnitee, by reason of the fact that the Indemnitee is or was an Officer, or is or was serving at the request of the Company as a manager, director, officer, employee, fiduciary or agent of another limited liability company or of a corporation partnership, joint venture, trust or other enterprise.

 

Quarterly Estimated Tax Periods ” means the two, three, and four calendar month periods with respect to which Federal quarterly estimated tax payments are made. The first such period begins on January 1 and ends on March 31. The second such period begins on April 1 and ends on May 31. The third such period begins on June 1 and ends on August 31. The fourth such period begins on September 1 and ends on December 31.

 

Regulations ” means the regulations, including temporary regulations, promulgated by the United States Treasury Department under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

Regulatory Allocations ” has the meaning set forth in Section 5.2(g) .

 

Restated LLC Agreement ” has the meaning set forth in the recitals.

 

Second Restated LLC Agreement ” has the meaning set forth in the recitals.

 

Secretary ” has the meaning set forth in Section 7.6 .

 

Securities Act ” means the United States Securities Act of 1933 and applicable rules and regulations thereunder.  Any reference herein to a specific section, rule or regulation of the Securities Act shall be deemed to include any corresponding provisions of future law.

 

Series A Preferred Stock ” means the shares of 8% Series A perpetual convertible preferred stock, par value $0.001 per share, of JEI.

 

Series A Preferred Unit ” has the meaning set forth in Section 3.1(a) .

 

Simulated Basis ” has the meaning set forth in clause (g) of the definition of “ Net Income ” and “ Net Loss .”

 

Simulated Depletion ” has the meaning set forth in clause (g) of the definition of “ Net Income ” and “ Net Loss .”

 

Simulated Gain or Loss ” has the meaning set forth in clause (g) of the definition of “ Net Income ” and “ Net Loss .”

 

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STACK/SCOOP Purchase Agreement ” means that certain purchase and sale agreement, dated August 18, 2016, between the Company and SCOOP Energy Company, LLC, an Oklahoma limited liability company.

 

Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing member, general partner or analogous controlling Person of such limited liability company, partnership, association or other business entity.  For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

 

Substituted Member ” means any Person that has been admitted to the Company as a Member pursuant to Section 9.2 by virtue of such Person receiving all or a portion of a Membership Interest from a Member or its Assignee and not from the Company.

 

Successor in Interest ” means any (a) trustee, custodian, receiver or other Person acting in any Bankruptcy or reorganization proceeding with respect to, (b) assignee for the benefit of the creditors of, (c) trustee or receiver, or current or former officer, director or partner, or other fiduciary acting for or with respect to the dissolution, liquidation or termination of, or (d) other Transferee, executor, administrator, committee, legal representative or other successor or assign of, any Unitholder, whether by operation of law or otherwise (including any Person acquiring (whether by merger, consolidation, sale, exchange or otherwise) all or substantially all of the assets or Equity Securities of the Company and its Subsidiaries).

 

Tax Distribution ” has the meaning set forth in Section 10.7 .

 

Tax Matters Representative ” has the meaning set forth in Section 8.3 .

 

Tax Receivable Agreement ” means the Tax Receivable Agreement dated on or about the date hereof between JEI, the Company and the current Members.

 

Third Restated LLC Agreement ” has the meaning set forth in the recitals.

 

Transaction Documents ” means, collectively, this Agreement, the Exchange Agreement and the Tax Receivable Agreement.

 

Transfer ” means any sale, transfer, assignment, pledge, mortgage, exchange, hypothecation, grant of a security interest or other direct or indirect disposition or encumbrance of an interest (whether with or without consideration, whether voluntarily or involuntarily or by operation of law).  The terms “ Transferee ,” “ Transferor ,” “ Transferred ,” and other forms of the word “ Transfer ” shall have the correlative meanings.

 

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Unit ” has the meaning set forth in Section 3.1(a) .

 

Unitholder ” means a Member or Assignee that holds an Economic Interest in any of the Units.

 

Unpaid Excess Cash Amounts ” shall mean the total amount of any unpaid excess cash payment amounts excused from payment as a dividend on the Series A Preferred Stock due to restrictions in credit facilities or other indebtedness or legal requirements as set forth in Section 4(d) of the Certificate of Designations related to the Series A Preferred Stock.

 

Vice President ” has the meaning set forth in Section 7.5 .

 

1.2              Interpretative Matters .   In this Agreement, unless otherwise specified or where the context otherwise requires:

 

(a)                                  the headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement;

 

(b)                                  words importing any gender shall include other genders;

 

(c)                                   words importing the singular only shall include the plural and vice versa;

 

(d)                                  the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation”;

 

(e)                                   the words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(f)                                    references to “Articles,” “Exhibits,” “Sections” or “Schedules” shall be to Articles, Exhibits, Sections or Schedules of or to this Agreement;

 

(g)                                   references to any Person include the successors and permitted assigns of such Person;

 

(h)                                  the use of the words “or,” “either” and “any” shall not be exclusive;

 

(i)                                      wherever a conflict exists between this Agreement and any other agreement, this Agreement shall control but solely to the extent of such conflict;

 

(j)                                     references to “$” or “dollars” means the lawful currency of the United States of America;

 

(k)                                  references to any agreement, contract or schedule, unless otherwise stated, are to such agreement, contract or schedule as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; and

 

(l)                                      the parties hereto have participated jointly in the negotiation and drafting of this Agreement; accordingly, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provisions of this Agreement.

 

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ARTICLE II
ORGANIZATIONAL MATTERS

 

2.1              Formation of the Company .  The Company was formed on December 16, 2009 as a Delaware limited liability company pursuant to the provisions of the Act.

 

2.2              Fourth Amended and Restated Limited Liability Company Agreement .  The Members agree to continue the Company as a limited liability company under the Act, upon the terms and subject to the conditions set forth in this Agreement.  This Agreement shall amend and restate the terms and conditions of the Third Restated LLC Agreement in order to give effect to the August 2016 Offering Transactions.  During the term of the Company set forth in Section 2.6 , the rights, powers, duties, obligations and liabilities of the Unitholders shall be determined pursuant to the Act and this Agreement.  To the extent that the rights, powers, duties, obligations and liabilities of any Unitholders are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control.

 

2.3              Name .  The name of the Company shall be “Jones Energy Holdings, LLC.”  The Managing Member may change the name of the Company at any time and from time to time.  Prompt notification of any such change shall be given to all Members.  The Company’s business may be conducted under its name or any other name or names deemed advisable by the Managing Member.

 

2.4              Purpose; Powers .

 

(a)                                  General Powers .  The nature of the business or purposes to be conducted or promoted by the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Act.  The Company may engage in any and all activities necessary, desirable or incidental to the accomplishment of the foregoing.  Notwithstanding anything herein to the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any purpose or power, or to do any act or thing, forbidden by law to a limited liability company organized under the laws of the State of Delaware.

 

(b)                                  Company Action .  Subject to the provisions of this Agreement and except as prohibited by applicable law, (i) the Company may, with the approval of the Managing Member, enter into and perform any and all documents, agreements and instruments, all without any further act, vote or approval of any Member, and (ii) the Managing Member may authorize any Person (including any Member or Officer) to enter into and perform any document, agreement or instrument on behalf of the Company.

 

2.5              Principal Office; Registered Office .  The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office of the initial registered agent named in the Certificate or such other office (which need not be a place of business of the Company) as the Managing Member may designate from time to time in the manner provided by law.  The initial principal office of the Company shall be located at 807 Las Cimas Parkway, Suite 350, Austin, Texas, 78746, and may be any such other place as the Managing Member may from time to time designate, which need not be in the State of Delaware, and the Company shall maintain records at such place.  The Company may maintain offices at such other place or places as the Managing Member deems advisable.  Prompt notice of any change in the principal office shall be given to all Members.

 

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2.6              Term .  The term of the Company commenced on December 16, 2009, by filing the Certificate of Formation with the office of the Secretary of State of the State of Delaware and shall continue in existence perpetually until termination or dissolution in accordance with the provisions of Article X .

 

2.7              Foreign Qualification .  The Company shall comply, to the extent procedures are available and those matters are reasonably within the control of the Officers, with all requirements necessary to qualify the Company as a foreign limited liability company in each jurisdiction where its assets or operations require it to be so qualified.

 

2.8              No State Law Partnership .  The Unitholders intend that the Company shall not be a partnership (including a limited partnership) or joint venture, and that no Unitholder or Officer shall be a partner or joint venturer of any other Unitholder or Officer by virtue of this Agreement, for any purposes other than as is set forth in the last sentence of this Section 2.8 , and this Agreement shall not be construed to the contrary.  The Unitholders intend that the Company shall be treated as a partnership for federal and, if applicable, state or local income tax purposes, and each Unitholder and the Company shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment.

 

ARTICLE III
CAPITALIZATION; ADMISSION OF MEMBERS; CAPITAL ACCOUNTS

 

3.1              Capitalization .

 

(a)                                  Units; Capitalization .  Each Member’s interest in the Company, including such Member’s interest, if any, in the capital, income, gains, losses, deductions and expenses of the Company shall be represented by units of limited liability company interest (each a “ Unit ”).  As of the Effective Date, the Company shall have two authorized classes of Units, consisting of units of limited liability company interest denominated as “Common Units” and “Series A Preferred Units.”  All Common Units shall have identical rights and privileges in all respects, and all Series A Preferred Units shall have identical rights and privileges in all respects.  The Company shall have the authority to issue an unlimited number of Units. The ownership by a Unitholder of Units shall invest such Unitholder with the Economic Interest therein (except to the extent Transferred to an Assignee).  For purposes of this Agreement, Units held by the Company or any of its Subsidiaries shall be deemed not to be outstanding.  The Company may issue fractional Units, and all Units shall be rounded to the fourth decimal place.

 

(b)                                  Issuance of Common Units in August 2016 Offering Transactions .  Immediately after consummation of the August 2016 Common Stock Offering, JEI will contribute the net proceeds thereof to the Company in exchange for 21,000,000 Common Units, and, if and to the extent the underwriters exercise their overallotment option to purchase additional shares of Class A Common Stock in connection with the August 2016 Common Stock Offering, JEI will issue additional shares of Class A Common Stock and use the net proceeds thereof to purchase an equal number of Common Units from the Company.

 

(c)                                   Issuance of Series A Preferred Units in August 2016 Offering Transactions .  Immediately after consummation of the August 2016 Preferred Stock Offering, the Company will issue 1,600,000 Series A Preferred Units to JEI in exchange for JEI’s commitment to contribute the net proceeds of the August 2016 Preferred Stock Offering to the Company.  If and to the extent the underwriters exercise their overallotment option to purchase additional shares of Series A Preferred Stock in connection with the August 2016 Preferred Stock Offering,

 

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the Company will immediately thereafter issue an equal number of Series A Preferred Units to JEI in exchange for JEI’s commitment to contribute to the Company the net proceeds from the exercise of such overallotment option.  JEI hereby agrees to satisfy the capital commitment obligations described in this Section 3.1(c) by contributing to the Company 100% of the net proceeds received by JEI in the August 2016 Preferred Stock Offering (and from the exercise of the underwriters’ overallotment option in connection with the August 2016 Preferred Stock Offering, if applicable), which contribution shall be made by JEI immediately prior to the consummation of the Pending STACK/SCOOP Acquisition.  If the STACK/SCOOP Purchase Agreement terminates in accordance with its terms prior to the consummation of the transactions contemplated thereby and JEI elects to redeem all of its Series A Preferred Stock, (i) all of the Series A Preferred Units held by JEI, and JEI’s capital commitment obligation described in this Section 3.1(c), shall be cancelled automatically (without any further action by JEI or the Company) simultaneously with the redemption by JEI of the Series A Preferred Stock (such transaction, the “ STACK/SCOOP Termination Redemption ”) and (ii) to the extent that the amount of cash paid by JEI to the holders of Series A Preferred Stock in such redemption exceeds the net proceeds received by JEI in the August 2016 Preferred Stock Offering (and from the exercise of the underwriters’ overallotment option in connection with the August 2016 Preferred Stock Offering, if applicable), the Company will distribute to JEI an amount of cash equal to such excess.  If the STACK/SCOOP Purchase Agreement terminates in accordance with its terms prior to the consummation of the transactions contemplated thereby and JEI determines that it will not elect to redeem its Series A Preferred Stock, JEI shall promptly satisfy the capital commitment obligations described in this Section 3.1(c) by contributing to the Company 100% of the net proceeds received by JEI in the August 2016 Preferred Stock Offering (and from the exercise of the underwriters’ overallotment option in connection with the August 2016 Preferred Stock Offering, if applicable).

 

(d)                                  Issuance of Additional Units .  The Managing Member shall have the right to cause the Company to issue and/or create and issue at any time after the date hereof, and for such amount and form of consideration as the Managing Member may determine, additional Units or other Equity Securities of the Company (including creating classes or series thereof having such powers, designations, preferences and rights as may be determined by the Managing Member), subject to Section 11.3 . The Managing Member shall have the power to make such amendments to this Agreement in order to provide for such powers, designations, preferences and rights as the Managing Member in its discretion deems necessary or appropriate to give effect to such additional authorization or issuance in accordance with the provisions of this Section 3.1(d)  and Section 11.3 .

 

(i)                                      If, following the August 2016 Offering Transactions, JEI issues shares of Class A Common Stock (other than an issuance of the type covered by Section 3.1(d)(ii)  or the last sentence of Section 4.1(a) ), JEI shall promptly contribute to the Company all the net proceeds (if any) received by JEI with respect to such Class A Common Stock. Upon the contribution by JEI to the Company of all of such net proceeds (if any) so received by JEI, the Managing Member shall cause the Company to issue a number of Common Units equal to the number of shares of Class A Common Stock issued, registered in the name of JEI, such that, at all times, the number of Common Units held by JEI equals the number of outstanding shares of Class A Common Stock.

 

(ii)                                   At any time JEI issues one or more shares of Class A Common Stock in connection with an equity incentive program, whether such share or shares are issued upon exercise (including cashless exercise) of an option, settlement of a restricted stock unit, as restricted stock or otherwise, the Managing Member shall cause

 

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the Company to issue an equal number of Common Units, registered in the name of JEI; provided that JEI shall be required to contribute all (but not less than all) the net proceeds (if any) received by JEI from or otherwise in connection with such issuance of one or more shares of Class A Common Stock, including the exercise price of any option exercised, to the Company. If any such shares of Class A Common Stock so issued by JEI in connection with an equity incentive program are subject to vesting or forfeiture provisions, then the Common Units that are issued by the Company to JEI in connection therewith in accordance with the preceding provisions of this Section 3.1(d)(ii)  shall be subject to vesting or forfeiture on the same basis; if any of such shares of Class A Common Stock vest or are forfeited, then an equal number of Common Units issued by the Company in accordance with the preceding provisions of this Section 3.1(d)(ii)  shall automatically vest or be forfeited. Any cash or property held by either JEI or the Company or on either’s behalf in respect of dividends paid on restricted Class A Common Stock that fail to vest shall be returned to the Company upon the forfeiture of such restricted Class A Common Stock.

 

(iii)                                If, following the August 2016 Offering Transactions, JEI issues additional shares of Series A Preferred Stock, JEI shall promptly contribute to the Company all the net proceeds (if any) received by JEI with respect to such Series A Preferred Stock. Upon the contribution by JEI to the Company of all of such net proceeds (if any) so received by JEI, the Managing Member shall cause the Company to issue a number of Series A Preferred Units equal to the number of shares of Series A Preferred Stock issued, registered in the name of JEI, such that, at all times, the number of Series A Preferred Units held by JEI equals the number of outstanding shares of Series A Preferred Stock.

 

(iv)                               For purposes of this Section 3.1(d) , “net proceeds” means gross proceeds to JEI from the issuance of Class A Common Stock or other securities less all bona fide out-of-pocket expenses of JEI, the Company and their respective Subsidiaries in connection with such issuance.

 

(e)                                   Repurchase or Redemption of Class A Common Stock .  If, at any time, any shares of Class A Common Stock are repurchased or redeemed (whether by exercise of a put or call, pursuant to an open market purchase, automatically or by means of another arrangement) by JEI for cash and subsequently cancelled, then the Managing Member shall cause the Company, immediately prior to such repurchase or redemption of Class A Common Stock, to redeem an equal number of Common Units held by JEI, at an aggregate redemption price equal to the aggregate purchase or redemption price of the Class A Common Stock being repurchased or redeemed by JEI (plus any expenses related thereto) and upon such other terms as are the same for the Class A Common Stock being repurchased or redeemed by JEI.

 

(f)                                    Changes in Class A Common Stock or Series A Preferred Stock .  Any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of Class A Common Stock shall be accompanied by an identical subdivision or combination, as applicable, of Common Units.  Any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of Series A Preferred Stock shall be accompanied by an identical subdivision or combination, as applicable, of Series A Preferred Units.

 

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(g)                                   Safe Harbor Election .

 

(i)                                      By executing this Agreement, each Member authorizes and directs the Company to elect to have the “safe harbor” described in the proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43 (the “ Notice ”) apply to any interest in the Company transferred to a service provider by the Company on or after the effective date of such Revenue Procedure in connection with services provided to the Company.  For purposes of making such safe harbor election, the Tax Matters Representative is hereby designated as the “partner who has responsibility for federal income tax reporting” by the Company and, accordingly, for execution of a “safe harbor election” in accordance with Section 3.03(1) of the Notice.  The Company and each Member hereby agree to comply with all requirements of the safe harbor described in the Notice, including the requirement that each Member shall prepare and file all federal income tax returns reporting the income tax effects of each safe harbor partnership interest issued by the Company in a manner consistent with the requirements of the Notice.

 

(ii)                                   Each Member authorizes the Tax Matters Representative to amend Section 3.1(g)  of this Agreement to the extent necessary to achieve substantially the same tax treatment with respect to any interest in the Company transferred to a service provider by the Company in connection with services provided to the Company as set forth in Section 4 of the Notice ( e.g. , to reflect changes from the rules set forth in the Notice in subsequent Internal Revenue Service or Treasury Department guidance); provided that such amendment is not materially adverse to any Member (as compared with the after-tax consequences that would result if the provisions of the Notice applied to all interests in the Company transferred to a service provider by the Company in connection with services provided to the Company).

 

3.2              Admission of Members; Additional Members .

 

(a)                                  Schedule of Members .  The Company shall maintain and keep at its principal executive office a schedule of Members (attached hereto as Schedule A ) on which it shall set forth the names and address of each Member and the aggregate number of Units of each class.

 

(b)                                  Addition or Withdrawal of Members .  The Managing Member shall cause Schedule A to be amended from time to time to reflect the admission of any Additional Member, the withdrawal or termination of any Member, receipt by the Company of notice of any change of address of a Member or the occurrence of any other event requiring amendment of Schedule A .

 

3.3              Capital Accounts .

 

(a)                                  The Company shall maintain a separate capital account for each Unitholder according to the rules of Regulations Section 1.704-1(b)(2)(iv) (each a “ Capital Account ”).  The Capital Account of each Unitholder shall be credited initially with an amount equal to such Unitholder’s cash contributions and the initial Gross Asset Value of property contributed to the Company by the Unitholder (net of any liabilities securing such contributed property that the Company is considered to assume or take subject to).

 

(b)                                  The Capital Account of each Unitholder shall (i) be credited with all Income and Net Income allocated to such Unitholder pursuant to Section 5.1 and Section 5.2 , and with the amount of cash and the initial Gross Asset Value of property subsequently contributed to

 

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the Company by the Unitholder (net of any liabilities securing such contributed property that the Company is considered to assume or take subject to), and (ii) be debited with all Loss and Net Loss allocated to such Unitholder pursuant to Section 5.1 and Section 5.2 , and with the amount of cash and the Gross Asset Value of any property (net of liabilities assumed by such Unitholder and liabilities to which such property is subject) distributed by the Company to such Unitholder.

 

(c)                                   The Company may, upon the occurrence of the events specified in Regulations Sections 1.704-1(b)(2)(iv)(f) or (s), increase or decrease the Capital Accounts of the Unitholders in accordance with the rules of such Regulations and Regulations Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Company property.

 

(d)                                  For purposes of applying the rules in paragraph (a), at the time JEI contributes the net proceeds from the August 2016 Offering Transactions to the Company pursuant to Section 3.1(b)  or Section 3.1(c) , JEI shall be treated as making a capital contribution to the Company in an amount equal to the gross proceeds received by JEI in the August 2016 Offering Transactions, and the Company shall be treated as having paid the underwriter’s fees and other costs of the August 2016 Offering Transactions that are paid out of the proceeds of those offerings.  For purposes of applying the rules in paragraphs (a) and (b), any issuance/distribution of Common Units to JEI in respect of the Series A Preferred Units pursuant to Section 4.1(a)  shall be treated as (i) a distribution of cash in an amount equal to the number of Common Units so distributed/issued, multiplied by the average of the high and low trading prices of a share of Class A Common Stock on the date of such distribution, followed immediately thereafter by (ii) a contribution of the amount described in clause (i) to the Company in exchange for the Common Units so issued.

 

3.4              Negative Capital Accounts .  No Unitholder shall be required to pay to any other Unitholder or the Company any deficit or negative balance that may exist from time to time in such Unitholder’s Capital Account (including upon and after dissolution of the Company).

 

3.5              No Withdrawal .  No Person shall be entitled to withdraw any part of such Person’s Capital Contributions or Capital Account or to receive any Distribution from the Company, except as expressly provided herein.

 

3.6              Loans From Unitholders .  Loans by Unitholders to the Company shall not be considered Capital Contributions.  If any Unitholder shall loan funds to the Company, then the making of such loans shall not result in any increase in the Capital Account balance of such Unitholder.  The amount of any such loans shall be a debt of the Company to such Unitholder and shall be payable or collectible in accordance with the terms and conditions upon which such loans are made.

 

3.7              No Right of Partition .  No Unitholder shall have the right to seek or obtain partition by court decree or operation of law of any property of the Company or any of its Subsidiaries or the right to own or use particular or individual assets of the Company or any of its Subsidiaries, or, except as expressly contemplated by this Agreement, be entitled to Distributions of specific assets of the Company or any of its Subsidiaries.

 

3.8              Non-Certification of Units; Legend; Units Are Securities .

 

(a)                                  Units shall be issued in non-certificated form; provided that the Managing Member may cause the Company to issue certificates to a Unitholder representing the

 

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Units held by such Unitholder.  If any Unit certificate is issued, then such certificate shall bear a legend substantially in the following form:

 

This certificate evidences Units representing an interest in Jones Energy Holdings, LLC and shall be a security within the meaning of Article 8 of the Uniform Commercial Code.

 

The interest in Jones Energy Holdings, LLC represented by this certificate is subject to restrictions on transfer set forth in that certain Fourth Amended and Restated Limited Liability Company Agreement of Jones Energy Holdings, LLC, dated as of August 26, 2016, by and among Jones Energy Holdings, LLC and each of the members from time to time party thereto, as the same may be amended from time to time.

 

(b)                                  The Company hereby irrevocably elects that all Units will be deemed to be “securities” within the meaning of Section 8-102(a)(15) and as provided by Section 8-103(c) of the Uniform Commercial Code as in effect from time to time in the State of Delaware or analogous provisions in the Uniform Commercial Code in effect in any other jurisdiction.

 

3.9              Rights of Series A Preferred Units .  The Series A Preferred Units shall have the following rights, preferences and privileges and shall be subject to the following duties and obligations:

 

(a)                                  Distributions .  JEI shall be entitled to receive liquidating distributions in respect of the Series A Preferred Units in the manner set forth in Section 10.2(a)(ii)(x) .   JEI shall be entitled to receive distributions other than liquidating distributions in respect of the Series A Preferred Units in the manner set forth in Section 4.1(a) .

 

(b)                                  Voting Rights .  Except as provided in the following sentence, the holders of the Series A Preferred Units shall not be entitled to vote on any matters requiring the approval or vote of the holders of Units, except as required by applicable law.  Notwithstanding any other provision of this Agreement, in addition to all other requirements imposed by the Act, and all other voting rights granted under this Agreement, the affirmative vote of the holder of a majority of the outstanding Series A Preferred Units, voting separately as a class based upon one vote per Series A Preferred Unit, shall be necessary on any matter that (i) adversely affects any of the rights, preferences and privileges of the Series A Preferred Units or (ii) amends or modifies any of the terms of the Series A Preferred Units.

 

(c)                                   Conversion . Each time that a share of Series A Preferred Stock is converted into shares of Class A Common Stock, an equal number of Series A Preferred Units shall automatically convert (without any further action of the Company or JEI) into Common Units at the same conversion ratio as applied to the conversion of the Series A Preferred Stock into Class A Common Stock.  For example, if 5,000 shares of Series A Preferred Stock are converted into 45,000 shares of Class A Common Stock, then 5,000 Series A Preferred Units shall automatically convert into 45,000 Common Units.

 

(d)                                  Repurchase and Redemption .  Immediately prior to the time that a share of Series A Preferred Stock is to be repurchased or redeemed by JEI (other than a redemption that occurs pursuant to the STACK/SCOOP Termination Redemption, the treatment of which is addressed in Section 3.1(c) ), the Company shall repurchase or redeem an equal number of Series A Preferred Units in exchange for the same consideration that is to be paid by JEI in the repurchase or redemption of the Series A Preferred Stock.  For example, if 100,000 shares of

 

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Series A Preferred Stock are to be repurchased by JEI in exchange for $3,000,000 in cash and 400,000 shares of Class A Common Stock, then 100,000 Series A Preferred Units shall be repurchased by the Company from JEI in exchange for $3,000,000 in cash and 400,000 Common Units.

 

(e)                                   Exceptions .  Notwithstanding subsections (c) and (d), no repurchase, redemption or conversion shall be effected to the extent such repurchase, redemption or conversion would render the Company insolvent or violate Applicable Law or any restrictions contained in any Agreement to which the Company is a party.  For purposes of the foregoing sentence, insolvency means the inability of the Company to meet its payment obligations when due.  Notwithstanding subsection (d), no repurchase or redemption of the Series A Preferred Units shall be required or effected if such redemption would cause the Series A Preferred Units to be treated as “disqualified stock,” “disqualified capital stock” or any equivalent term under any credit agreement, loan agreement, indenture or other credit facility to which the Company is a party at the time of the repurchase or redemption.

 

(f)                                    Tax Treatment .  It is intended that the conversion right applicable to the Series A Preferred Units will be treated as a noncompensatory option within the meaning of Regulations Section 1.721-2(f).  Consistent with such intention, the Company shall comply with the allocation provisions set forth in Regulations Sections 1.704-1(b)(2)(iv)(s) and 1.704-1(b)(4)(x) (including making any required “corrective” allocations in accordance with those Regulations).

 

ARTICLE IV
DISTRIBUTIONS

 

4.1              Distributions .                          (a)                                  Immediately prior to the time that any cash dividends are to be paid by JEI in respect of the Series A Preferred Stock, the Company shall make a cash distribution to JEI in respect of the Series A Preferred Units in an amount equal to the amount of cash dividends to be paid by JEI in respect of the Series A Preferred Stock.  At the time that any dividends are to be paid in kind by JEI in respect of the Series A Preferred Stock through the issuance of shares of Class A Common Stock, the Company shall distribute/issue Common Units to JEI in respect of the Series A Preferred Units in a number equal to the number of shares of Class A Common Stock then being distributed by JEI in respect of the Series A Preferred Stock.

 

(b)                                  After making or providing for any distributions under Section 3.1(c) , Section 4.1(a)  and Section 4.4 , distributions to the holders of Common Units may be declared by the Managing Member out of funds legally available therefor in such amounts and on such terms (including the payment dates of such distributions) as the Managing Member shall determine using such record date as the Managing Member may designate; such distributions shall be made to the holders of the Common Units as of the close of business on such record date on a pro rata basis (except that repurchases or redemptions made in accordance with Section 3.1(e)  or payments made in accordance with Section 7.10 need not be on a pro rata basis); in accordance with the number of Common Units owned by each Member as of the close of business on such record date; provided, however, that the Managing Member shall have the obligation to make distributions as set forth in Sections 3.1(e), 4.4 and 7.10 ;

 

(c)                                   Notwithstanding any other provision herein to the contrary, no distributions shall be made to any Member to the extent such distribution would render the Company insolvent or violate Applicable Law or any restrictions contained in any Agreement to which the Company is a party.  For purposes of the foregoing sentence, insolvency means the

 

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inability of the Company to meet its payment obligations when due. Promptly following the designation of a record date and the declaration of a distribution pursuant to this Section 4.1 , the Managing Member shall give notice to each Member of the record date, the amount and the terms of the distribution and the payment date thereof.

 

4.2              Successors .  For purposes of determining the amount of Distributions, each Unitholder shall be treated as having made the Capital Contributions and as having received the Distributions made to or received by its predecessors in respect of any of such Unitholder’s Units.

 

4.3              Distributions In-Kind .  To the extent that the Company distributes property in-kind to the Unitholders (other than distributions of Common Units), the Company shall be treated as making a Distribution equal to the Fair Market Value of such property for purposes of Section 4.1 and such property shall be treated as if it were sold for an amount equal to its Fair Market Value.  Any resulting gain or loss shall be allocated to the Unitholders’ Capital Accounts in accordance with Section 5.1 and Section 5.2 .

 

4.4              Tax-Related Distributions.

 

(a)                                  Subject to the Act, to any restrictions contained in any agreement to which the Company is bound and after making or providing for the distributions set forth in Section 4.1(a) , but prior to making the distributions set forth in Section 4.1(b) , no later than the tenth day following the end of the Quarterly Estimated Tax Period in the case of the first three Quarterly Estimated Tax Periods of each calendar year, and no later than twenty days prior to the end of the Quarterly Estimated Tax Period in the case of the last Quarterly Estimated Tax Period of each calendar year, the Company shall, to the extent that the Company has cash available therefor, make a Distribution in cash (each, a “Tax Distribution”) among the Unitholders, on a pro rata basis in accordance with the number of Common Units owned by each Unitholder, in an amount equal to the excess of (a) the product of (i) the excess of the taxable income of the Company attributable to such Quarterly Estimated Tax Period and all prior Quarterly Estimated Tax Periods in such calendar year, over the portion thereof expected to be allocated to JEI in respect of the Series A Preferred Units pursuant to Section 5.1(a) , based upon information available to the Company and adjusted to take into account good faith projections by the Company of taxable income or loss for the remainder of the calendar year, multiplied by (ii) the Assumed Tax Rate, over (b) distributions made by the Company pursuant to this Section 4.4(a) with respect to such calendar year; provided, however , that if the Tax Distributions made during a calendar year are less than the product of (x) the actual taxable income of the Company for the calendar year (calculated as described in the last sentence of this Section 4.4(a) ) multiplied by (y) the Assumed Tax Rate, the Company shall, to the extent of available cash and borrowings of the Company, make a “true up” Tax Distribution with respect to such calendar year equal to such difference no later than March 15 of the following year.  For purposes of clauses (a)(i) and (x) above, the taxable income of the Company shall be determined by disregarding any adjustment to the taxable income of any Member that arises under Section 743(b) of the Code and is attributable to the acquisition by such Member of an interest in the Company in a transaction described in Section 743(a) of the Code.

 

(b)                                  If the cumulative amount of actual federal, state and local income tax liabilities payable by JEI, plus the cumulative amount of payments made by JEI under the Tax Receivable Agreement, through the end of any particular Quarterly Estimated Tax Period or calendar year exceeds the sum of the cumulative amount of Tax Distributions, distributions under Section 4.1(b)  and JEI Excess Tax Distributions (as defined below) made to JEI through the end of such Quarterly Estimated Tax Period or calendar year, the Managing Member shall, to the

 

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extent permitted by Applicable Law, but subject to the Act and any restrictions contained in any agreement to which the Company is bound, make additional tax distributions to JEI in an amount equal to such excess (a “ JEI Excess Tax Distribution ”).  Any such JEI Excess Tax Distribution shall be treated as an advance against and, thus, shall reduce (without duplication), any future distributions that would otherwise be made to JEI pursuant to Sections 4.1(b)  and 4.4(a) .

 

(c)                                   The Managing Member shall, to the extent permitted by Applicable Law, but subject to the Act and any restrictions contained in any agreement to which the Company is bound, make distributions to the Members, pro rata in proportion to the number of Common Units owned by each Member, in such amounts as shall (when combined with the distributions made to JEI pursuant to Sections 4.1(b)  and 4.4(a) ) enable JEI to meet its obligations pursuant to the Tax Receivable Agreement.

 

ARTICLE V
ALLOCATIONS

 

5.1              Allocations .                                 (a)                                  Following any allocation made pursuant to Section 5.2 and prior to any allocation made pursuant to Section 5 .1(b) , items of gross income and gain shall be allocated to JEI in respect of the Series A Preferred Units until the cumulative amount of items of income and gain so allocated to JEI for the current and prior fiscal years or other relevant periods equals the sum of (i) the cumulative amount of distributions received by JEI pursuant to Section 4.1(a)  in respect of the Series A Preferred Units for the current and all prior fiscal years or other relevant periods, plus (ii) the sum of the accrued and unpaid dividends and Unpaid Excess Cash Amounts on all the outstanding shares of Series A Preferred Stock as of the end of the current fiscal year or other relevant period.  For purposes of clause (i), any issuance/distribution of Common Units to JEI in respect of the Series A Preferred Units pursuant to Section 4.1(a)  shall be treated as (i) a distribution of cash in an amount equal to the number of Common Units so distributed/issued, multiplied by the average of the high and low trading prices of a share of Class A Common Stock on the date of such distribution, followed immediately thereafter by (ii) a contribution of the amount described in clause (i) to the Company in exchange for the Common Units so issued.

 

(b)                                  Following any allocation made pursuant to Section 5.1(a)  and Section 5.2 , Net Income and Net Loss (and, if necessary in the Fiscal Year in which the Company commences liquidation and all subsequent Fiscal Years, individual items of Income and Loss) shall be allocated annually (and at such other times as the Managing Member determines) to the Unitholders in such manner that the Capital Account balance of each Unitholder shall, to the greatest extent possible, be equal to the amount, positive or negative, that would be distributed to such Unitholder (in the case of a positive amount) or for which such Unitholder would be liable to the Company under this Agreement (in the case of a negative amount), if (a) the Company were to sell the assets of the Company for their Gross Asset Values, (b) all Company liabilities were satisfied (limited with respect to each nonrecourse liability to the Gross Asset Values of the assets securing such liability), (c) the Company were to distribute the proceeds of sale pursuant to Section 10.2 and (d) the Company were to dissolve pursuant to Article X , minus such Unitholder’s share of Company Minimum Gain or Member Minimum Gain, computed immediately prior to the hypothetical sale of assets.

 

5.2              Special Allocations .

 

(a)                                  Loss attributable to Member Nonrecourse Debt shall be allocated in the manner required by Regulations Section 1.704-2(i).  If there is a net decrease during a taxable

 

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year in Member Minimum Gain, Income for such taxable year (and, if necessary, for subsequent taxable years) shall be allocated to the Unitholders in the amounts and of such character as is determined according to Regulations Section 1.704-2(i)(4).  This Section 5.2(a)  is intended to be a “partner nonrecourse debt minimum gain chargeback” provision that complies with the requirements of Regulations Section 1.704-2(i)(4), and shall be interpreted in a manner consistent therewith.

 

(b)                                  Except as otherwise provided in Section 5.2(a) , if there is a net decrease in Company Minimum Gain during any taxable year, each Unitholder shall be allocated Income for such taxable year (and, if necessary, for subsequent taxable years) in the amounts and of such character as is determined according to Regulations Section 1.704-2(f).  This Section 5.2(b)  is intended to be a “minimum gain chargeback” provision that complies with the requirements of Regulations Section 1.704-2(f), and shall be interpreted in a manner consistent therewith.

 

(c)                                   If any Unitholder that unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)( d )( 4 ), ( 5 ) or ( 6 ) has an Adjusted Capital Account Deficit as of the end of any taxable year, computed after the application of Section 5.2(a)  and Section 5.2(b)  but before the application of any other provision of Section 5.1 , Section 5.2 and Section 5.3 , then Income for such taxable year shall be allocated to such Unitholder in proportion to, and to the extent of, such Adjusted Capital Account Deficit.  This Section 5.2(c)  is intended to be a “qualified income offset” provision as described in Regulations Section 1.704-1(b)(2)(ii)( d ) and shall be interpreted in a manner consistent therewith.

 

(d)                                  “Nonrecourse deductions” (as defined in Regulations §§ 1.704-2(b)(l) and (c)) shall be allocated among the Unitholders pro rata in accordance with the number of Common Units owned by each of them.

 

(e)                                   No Loss or Net Loss shall be allocated to a Unitholder to the extent such allocation would cause or increase an Adjusted Capital Account Deficit for such Unitholder.  Instead, such Loss or Net Loss shall be allocated among the other Unitholders in the same ratios that such other Unitholders are allocated Net Loss for such year under Section 5.1 .

 

(f)                                    Income and Loss described in clause (d) of the definition of Gross Asset Value shall be allocated in a manner consistent with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Regulations Section 1.704-1(b)(2)(iv)( m ).

 

(g)                                   The allocations set forth in Section 5.2(a)  through Section 5.2(f)  inclusive (the “ Regulatory Allocations ”) are intended to comply with certain requirements of Section 1.704-1(b) and 1.704-2 of the Regulations.  The Regulatory Allocations may not be consistent with the manner in which the Unitholders intend to allocate Income and Loss of the Company or to make Distributions.  Accordingly, notwithstanding the other provisions of Section 5.1 , Section 5.2 and Section 5.3 , but subject to the Regulatory Allocations, items of Income and Loss of the Company shall be allocated among the Unitholders so as to eliminate the effect of the Regulatory Allocations and thereby cause the respective Capital Account balances of the Unitholders to be in the amounts (or as close thereto as possible) they would have been if Income and Loss had been allocated without reference to the Regulatory Allocations.  In general, the Unitholders anticipate that this shall be accomplished by specially allocating other Income and Loss among the Unitholders so that the net amount of Regulatory Allocations and such special allocations to each such Unitholder is zero.

 

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(h)                                  In the case of a sale or other disposition of depletable property, the portion of the amount realized on such sale or other disposition that does not exceed the Company’s Simulated Basis in the depletable property shall be allocated among the Unitholders in the same ratios that the aggregate adjusted tax basis of the property was allocated under the last sentence of Section 5.3(f) .  The portion of the amount realized on the sale or other disposition of each such depletable property that exceeds the Company’s Simulated Basis in the property shall be allocated among the Unitholders in the same manner that Net Income (i.e., Simulated Gain) is allocated pursuant to Section 5.1 .

 

5.3              Tax Allocations .

 

(a)                                  The income, gains, losses and deductions of the Company shall be allocated for federal, state and local income tax purposes among the Unitholders in accordance with the allocation of such income, gains, losses and deductions among the Unitholders for purposes of computing their Capital Accounts; except that if any such allocation is not permitted by the Code or other applicable law, then the Company’s subsequent income, gains, losses and deductions for tax purposes shall be allocated among the Unitholders so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.

 

(b)                                  Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company on or prior to July 26, 2013 shall be allocated among the Unitholders in accordance with Code Section 704(c) so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Gross Asset Value using the traditional method described in Regulations Section 1.704-3(c); provided , that the Company shall use the traditional method with curative allocations described in Regulations Section 1.704-3(c) with respect to some or all of the Company’s properties to the extent possible to maximize the allocation of Jones Built-in Gain to JEDF (including through the allocation of depletable basis and deductions to Metalmark) without allocating an overall tax loss to Metalmark (and the Company shall use the traditional method described in Regulations Section 1.704-3(b) with respect to any Company property for which the traditional with curative allocations method is not utilized under the foregoing provisions).  It is the intent of the parties to maximize, within permissible allocation schemes, the tax burden of the Jones Built-in Gain allocable to JEDF without increasing the aggregate amount of tax distributions to be made by the Company.  Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company after  July 26, 2013 shall be allocated among the Unitholders in accordance with Code Section 704(c) so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Gross Asset Value using such method or methods described in Regulations Section 1.704-3 as are selected by the Managing Member.

 

(c)                                   If the Gross Asset Value of any Company asset is adjusted pursuant to the requirements of Regulations Section 1.704-1(b)(2)(iv)(e), (f), or (s), subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c).  If the Gross Asset Value of any Company assets is adjusted on or after July 26, 2013 pursuant to the requirements of Regulations Section 1.704-1(b)(2)(iv)(e), (f), or (s), subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value using the traditional method with curative allocations described in Regulations Section 1.704-3(c), but limited to curative allocations of gain from the sale or other disposition of each

 

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such asset (and, for the avoidance of doubt, with no curative allocations for depreciation, amortization, or depletion with respect to each such asset).

 

(d)                                  Tax credits, tax credit recapture and any items related thereto shall be allocated to the Unitholders according to their interests in such items as reasonably determined by the Managing Member taking into account the principles of Regulations Section 1.704-1(b)(4)(ii).

 

(e)                                   Depreciation, depletion, intangible drilling cost, and amortization recapture amounts under Sections 1245, 1250 or 1254 of the Code, if any, resulting from any sale or disposition of tangible or intangible depreciable, depletable, or amortizable property shall be allocated to the Unitholders in the same proportions that the depreciation, depletion, intangible drilling cost, or amortization being recaptured was allocated.

 

(f)                                    Cost and percentage depletion deductions with respect to, and any gain or loss on the sale or other disposition of, any property the production from which is or would be (in the case of nonproducing properties) subject to depletion shall be determined in a manner that is consistent with Section 613A(c)(7)(D) of the Code.  For purposes of making such determination, the Company’s adjusted tax basis in each depletable property shall be allocated under Section 613A(c)(7)(D) of the Code among the Unitholders in proportion to the number of Common Units held by each of them.

 

(g)                                   Allocations pursuant to this Section 5.3 are solely for the purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Unitholder’s Capital Account or share of Income, Loss, Distributions or other Company items pursuant to any provision of this Agreement.

 

5.4              Unitholders’ Tax Reporting .  The Unitholders acknowledge and are aware of the income tax consequences of the allocations made pursuant to this Article V and, except as may otherwise be required by applicable law or regulatory requirements, hereby agree to be bound by the provisions of this Article V in reporting their shares of Company income, gain, loss, deduction and credit for federal, state and local income tax purposes.

 

5.5              Indemnification and Reimbursement for Payments on Behalf of a Unitholder .  If the Company is required by applicable law to make any payment to a Governmental Entity that is specifically attributable to a Unitholder or a Unitholder’s status as such (including (i) federal withholding taxes, (ii) federal income taxes, interest and penalties pursuant Sections 6225, 6232 and 6233 of the Code as amended by Section 1101(c) of the Bipartisan Budget Act of 2015, (iii) state or local personal property taxes and (iv) state or local unincorporated business taxes), then such Unitholder shall indemnify the Company in full for the entire amount paid (including interest, penalties and related expenses).  The Managing Member may offset Distributions to which a Person is otherwise entitled under this Agreement against such Person’s obligation to indemnify the Company under this Section 5.5 .  A Unitholder’s obligation to indemnify the Company under this Section 5.5 shall survive termination, dissolution, liquidation and winding up of the Company, and for purposes of this Section 5.5 , the Company shall be treated as continuing in existence.  The Company may pursue and enforce all rights and remedies it may have against each Unitholder under this Section 5.5 , including instituting a lawsuit to collect such indemnification, with interest calculated at a rate equal to 10 percentage points per annum (but not in excess of the highest rate per annum permitted by applicable law).

 

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ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS

 

6.1              Management .

 

(a)                                  Management of the Company .  The business and affairs of the Company shall be managed by the Managing Member consistent with this Agreement, the Exchange Agreement and the JEI Amended and Restated Certificate of Incorporation dated on or about the date hereof (the “ JEI Certificate ”).  Subject to the express limitations contained in any provision of this Agreement, including Section 6.5 and the requirement to conduct the affairs and business of the Company in accordance with the terms of the Exchange Agreement, the Managing Member shall have complete and absolute control of the affairs and business of the Company, and shall possess all powers necessary, convenient or appropriate to carrying out the purposes and business of the Company, including, without limitation, doing all things and taking all actions necessary to carry out the terms and provisions of this Agreement.  Subject to the rights and powers of the Managing Member and the limitations thereon contained herein and in the Exchange Agreement, the Managing Member may delegate to any person any or all of its powers, rights and obligations under this Agreement and may appoint, contract or otherwise deal with any person to perform any acts or services for the Company as the Managing Member may reasonably determine.  The Managing Member is specifically authorized to execute, sign, seal and deliver in the name of and on behalf of the Company any and all agreements, certificates, instruments or other documents requisite to carrying out the intentions and purposes of this Agreement and of the Company.

 

(b)                                  Necessary Approvals .  Any action taken by the Managing Member pursuant to this Agreement shall be subject to the necessary approval of the board of directors of the Managing Member as and to the extent required by this Agreement, the JEI Certificate and to the extent consistent therewith, the bylaws of JEI.  All matters material to the affairs and business of the Company shall be determined by the board of directors of the Managing Member.

 

(c)                                   Fiduciary Duties .

 

(i)                                      Subject to, and as limited by the provisions of this Agreement, the Managing Member shall owe the to the Company and the Members duties of loyalty and due care of the type owed under the laws of the State of Delaware by the board of the Managing Member to the Managing Member and the stockholders of the Managing Member.  The provisions of this Agreement, to the extent that they restrict the duties (including fiduciary duties) and liabilities of the Managing Member otherwise existing at law or in equity or by operation of the preceding sentence, are agreed by the Members to replace such duties and liabilities of the Managing Member.

 

(ii)                                   Except as otherwise expressly provided in this Agreement, nothing contained in this Agreement shall be deemed to constitute any Member an agent or legal representative of any other Member or to create any fiduciary relationship for any purpose whatsoever, apart from such obligations between the members of a limited liability company as may be created by the Act.  The Managing Member shall not have any authority to act for, or to assume any obligation or responsibility on behalf of, any other Member.

 

(iii)                                In performing its duties, the Managing Member shall be entitled to rely in good faith on the provisions of this Agreement and on information, opinions,

 

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reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, profits or losses of the Company and its Subsidiaries or any facts pertinent to the existence and amount of assets from which Distributions to Unitholders might properly be paid), of the following other Persons or groups: (A) one or more Officers or employees of the Company or any of its Subsidiaries, (B) any attorney, independent accountant or other Person employed or engaged by the Company or any of its Subsidiaries, or (C) any other Person who has been selected with reasonable care by or on behalf of the Company or any of its Subsidiaries, in each case, as to matters which such relying Person reasonably believes to be within such other Person’s professional or expert competence.  The preceding sentence shall in no way limit any Person’s right to rely on information to the extent provided in Section 18-406 of the Act.

 

(iv)                               No individual acting on behalf of the Managing Member shall be personally liable under any judgment of a court, or in any other manner, for any debt, obligation or liability of the Company, whether that liability or obligation arises in contract, tort or otherwise solely by reason of acting on behalf of the Managing Member.

 

6.2              Liability of Unitholders .

 

(a)                                  No Personal Liability .  Except as otherwise required by applicable law or as expressly set forth in this Agreement (including in Section 10.3 ), no Unitholder shall have any personal liability whatsoever in such Unitholder’s capacity as a Unitholder, whether to the Company, to any of the other Unitholders, to the creditors of the Company or to any other third Person for the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise (including those arising as a Unitholder or an equityholder, an owner or a shareholder of another Person).  Each Unitholder shall be liable only to make such Unitholder’s Capital Contribution to the Company, if applicable, and the other payments provided for expressly herein.

 

(b)                                  Return of Distributions .  Under the Act, a Unitholder of a limited liability company may, under certain circumstances, be required to return amounts previously distributed to such Unitholder.  It is the intent of the Unitholders that no Distribution to any Unitholder pursuant to Article IV or Article X shall be deemed to constitute money or other property paid or distributed in violation of the Act, and the Unitholders agree that each such Distribution shall constitute a compromise of the Unitholders within the meaning of Section 18-502(b) of the Act, and the Unitholder receiving such Distribution shall not be required to return to any Person any such money or property, except as otherwise expressly set forth herein.  If, however, any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Unitholder is obligated to make any such payment, such obligation shall be the obligation of such Unitholder and not of the other Unitholders.

 

6.3              Investment Opportunities; Performance of Duties; Conflicts of Interest .

 

(a)                                  To the fullest extent permitted by applicable law, the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to Metalmark or Wells Fargo Central Pacific Holdings, Inc., a Delaware corporation, and any of their respective affiliates and any of their respective officers, directors, agents, shareholders, members, partners, affiliates and subsidiaries (other than the Company and its subsidiaries) (each, a “ Business Opportunities Exempt Party ”).  The Company renounces any interest or expectancy of the Company in, or in being offered an opportunity to participate in, business opportunities that are from time to time

 

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presented to any Business Opportunity Exempt Party.  No Business Opportunity Exempt Party who acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the Company shall have any duty to communicate or offer such opportunity to the Company.  No amendment or repeal of this Section 6.3 shall apply to or have any effect on the liability or alleged liability of any Business Opportunities Exempt Party for or with respect to any opportunities of which any such Business Opportunities Exempt Party becomes aware prior to such amendment or repeal.  Any Person purchasing or otherwise acquiring any interest in any shares of stock of JEI or any Units shall be deemed to have notice of and consented to the provisions of this Section 6.3 .  Neither the alteration, amendment or repeal of this Section 6.3 , nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Section 6.3 , shall eliminate or reduce the effect of this Section 6.3 in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Section 6.3 , would accrue or arise, prior to such alteration, amendment, repeal or adoption. Notwithstanding the foregoing, a Business Opportunity Exempt Party who is a director or officer of the Managing Member and who is offered a business opportunity of the Managing Member reasonably determined by the party receiving the opportunity to be expressly in his or her capacity as a director or officer of the Managing Member shall be obligated to communicate and offer such business opportunity to the Managing Member and the Managing Member, and the Company do not renounce any such opportunity. Nothing this Section 6.3 shall limit the confidentiality obligations set forth in Section 11.16 or any fiduciary obligations of the directors of the Managing Member.

 

(b)                                  In performing its, his or her duties, each of the Members shall be entitled to rely in good faith on the provisions of this Agreement and on information, opinions, reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, profits or losses of the Company and its Subsidiaries), of the following other Persons or groups: (i) one or more officers or employees of such Member or the Company or any of its Subsidiaries, (ii) any attorney, independent accountant or other Person employed or engaged by such Member or the Company or any of its Subsidiaries, or (iii) any other Person who has been selected with reasonable care by or on behalf of such Member or the Company or any of its Subsidiaries, in each case, as to matters which such relying Person reasonably believes to be within such other Person’s professional or expert competence.  The preceding sentence shall in no way limit any Person’s right to rely on information to the extent provided in Section 18-406 of the Act.

 

6.4              Meetings .  No meetings of the Members are required to be held.

 

6.5              Actions Requiring Member Approval .  The prior written consent of the Managing Member and Members holding a majority of the Common Units (other than those held by the Managing Member) shall be required for the following:

 

(a)                                  any amendment to the Certificate; and

 

(b)                                  any amendment to this Agreement.

 

ARTICLE VII
OFFICERS

 

7.1              Officers .  The Company shall have individuals as officers (the “ Officers ”), which may include a Chief Executive Officer, a President, a Chief Financial Officer, one or more Vice Presidents and a Secretary, and unless determined otherwise by the Managing Member or the

 

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Chief Executive Officer, each other officer of the Managing Member shall also be an officer of the Company, with the same title. All officers shall be appointed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer) and shall hold office until their successors are appointed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer). Two or more offices may be held by the same individual. The officers of the Company may be removed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer) at any time for any reason or no reason.  Any Officer may resign his or her office at any time.  The Managing Member may appoint such other officers and agents as it may deem necessary or advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Managing Member.

 

7.2              Chief Executive Officer .  The Chief Executive Officer of the Company (the “ Chief Executive Officer ”) shall perform such duties as may be assigned to him or her from time to time by the Managing Member.  Subject to the direction of the Managing Member, he or she shall perform all duties incident to the office of a president in a corporation organized under the Delaware General Corporation Law.  The Chief Executive Officer shall see that all resolutions and orders of the Managing Member are carried into effect, and in connection with the foregoing, shall be authorized to delegate to the President, Chief Financial Officer or a Vice President and the other Officers such of his or her powers and such of his or her duties as the Managing Member may deem to be advisable.

 

7.3              President .  The president of the Company (the “ President ”) shall perform such duties as may be assigned to him or her from time to time by the Managing Member or the Chief Executive Officer.  Subject to the direction of the Managing Member and the Chief Executive Officer, he or she shall have, and exercise, direct charge of, and general supervision over, the business and affairs of the Company.  He or she shall from time to time report to the Managing Member and the Chief Executive Officer all matters within his or her knowledge that the interest of the Company may require to be brought to its notice, and shall also have such other powers and perform such other duties as may be specifically assigned to him or her from time to time by the Managing Member.  In case of the absence or disability of the Chief Executive Officer, the duties of the office shall, if the Managing Member or the Chief Executive Officer has so authorized, be performed by the President.  The President shall see that all resolutions and orders of the Managing Member and all directives of the Chief Executive Officer in accordance with such resolutions and orders are carried into effect, and in connection with the foregoing, shall be authorized to delegate to the Chief Financial Officer, a Vice President and the other Officers such of his or her powers and such of his or her duties as the Managing Member may deem to be advisable.

 

7.4              Chief Financial Officer .  The Chief Financial Officer (the “ Chief Financial Officer ”) shall have the custody of the Company’s funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all monies and other valuable effects in the name and to the credit of the Company, in such depositories as may be designated by the Managing Member or by any Officer authorized by the Managing Member to make such designation.  The Chief Financial Officer shall exercise such powers and perform such duties as generally pertain or are necessarily incident to his or her office and shall perform such other duties as may be specifically assigned to him or her from time to time by the Managing Member the Chief Executive Officer or, the President.  In case of the absence or disability of the Chief Executive Officer or the President, the duties of the office of

 

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Chief Executive Officer shall, if the Managing Member or the President has so authorized, be performed by the Chief Financial Officer.

 

7.5              Vice Presidents .  The Vice President of the Company (a “ Vice President ”), or if there be more than one, the Vice Presidents, shall perform such duties as may be assigned to them from time to time by the Managing Member or as may be designated by the Chief Executive Officer or the President.  The Managing Member, the Chief Executive Officer and the President may, from time to time, designate any number of Vice Presidents as “Senior Vice Presidents,” and that certain Vice Presidents report to such Senior Vice Presidents.

 

7.6              Secretary .  The secretary of the Company (the “ Secretary ”) shall keep all documents described in Section 11.2 and such other documents as may be required under the Act.  The Secretary shall perform such other duties and have such other authority as may be prescribed elsewhere in this Agreement or from time to time by the Chief Executive Officer or the Managing Member.  The Secretary shall have the general duties, powers and responsibilities of a secretary of a corporation.

 

7.7              Further Delegation of Authority .  The Managing Member may, from time to time delegate to any Person (including any Member or Officer) such authority and powers to act on behalf of the Company as it shall deem advisable in its discretion.  Any delegation pursuant to this Section 7.7 may be revoked at any time and for any reason or no reason by the Managing Member.

 

7.8              Fiduciary Duties .  Subject to, and as limited by the provisions of this Agreement, the Officers, in the performance of their duties as such, shall owe to the Company and the Members duties of loyalty and due care of the type owed under the laws of the State of Delaware by the officers of the Managing Member to the Managing Member and the stockholders of the Managing Member.  The provisions of this Agreement, to the extent that they restrict the duties (including fiduciary duties) and liabilities of an Officer otherwise existing at law or in equity or by operation of the preceding sentence, are agreed by the Members to replace such duties and liabilities of such Officer.

 

7.9              Performance of Duties; Liability of Officers .  In performing his or her duties, each of the Officers shall be entitled to rely in good faith on the provisions of this Agreement and on information, opinions, reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, profits or losses of the Company and its Subsidiaries or any facts pertinent to the existence and amount of assets from which Distributions to Unitholders might properly be paid), of the following other Persons or groups: (a) one or more Officers or employees of the Company or any of its Subsidiaries, (b) any attorney, independent accountant or other Person employed or engaged by the Company or any of its Subsidiaries, or (c) any other Person who has been selected with reasonable care by or on behalf of the Company or any of its Subsidiaries, in each case, as to matters which such relying Person reasonably believes to be within such other Person’s professional or expert competence.  The preceding sentence shall in no way limit any Person’s right to rely on information to the extent provided in Section 18-406 of the Act.  No individual who is an Officer shall be personally liable under any judgment of a court, or in any other manner, for any debt, obligation or liability of the Company, whether that liability or obligation arises in contract, tort or otherwise solely by reason of being an Officer.

 

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7.10       Indemnification .

 

(a)                                  Indemnification .  The Company shall indemnify and advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or executive officer of the Company or the Managing Member or, while a director or executive officer of the Company or the Managing Member, is or was serving at the request of the Company or the Managing Member as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent permitted by the Act; provided that the foregoing shall not require the Company to indemnify or advance expenses to any person in connection with any action, suit, proceeding or claim initiated by or on behalf of such person or any counterclaim against the Company or the Managing Member initiated by or on behalf of such person. Such indemnification shall not be exclusive of other indemnification rights arising under any bylaw, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person.  Neither amendment nor repeal of this Section  7.10 nor the adoption of any provision of this Agreement inconsistent with this Section  7.10 , nor, to the fullest extent permitted by the Act, any modification of law, shall eliminate, reduce or otherwise adversely affect any right or protection of any person granted pursuant hereto in respect of any matter occurring, or any cause of action, suit or claim that, but for this Section  7.10 , would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

 

(b)                                  Rights Non-Exclusive .  The rights to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Section 7.10 , shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this Agreement, any other agreement, any vote of Members or otherwise.

 

(c)                                   Indemnification Agreements and Insurance .  The Company may enter into agreements with the Managing Member or any Officer to provide for indemnification consistent with the terms and conditions set forth in this Section 7.10 .  Unless otherwise agreed by the Managing Member, the Company shall maintain insurance, at its expense, on its own behalf and on behalf of the Indemnitees against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the Company would have the power to indemnify such person against such liability under this Section 7.10 .

 

(d)                                  Expenses .  Expenses incurred by an Indemnitee in defending a Proceeding shall be paid by the Company in advance of such Proceeding’s final disposition upon receipt of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Company.  Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Managing Member deems appropriate.  The indemnification and advancement of expenses set forth in this Section 7.10 shall continue as to an Indemnitee who has ceased to be a named Indemnitee and shall inure to the benefit of the heirs, executors, administrators, successors and permitted assigns of such a Person.

 

(e)                                   Employees and Agents .  Persons who are not covered by the foregoing provisions of this Section 7.10 and who are or were Members, employees or agents of the Company, or who are or were serving at the request of the Company as employees or agents of another limited liability company, corporation, partnership, joint venture, trust or other enterprise,

 

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may be indemnified to the extent authorized at any time or from time to time by the Managing Member.

 

(f)                                    Contract Rights .  The provisions of this Section 7.10 shall be deemed to be a contract right between the Company and each Officer who serves in such capacity at any time while this Section 7.10 and the relevant provisions of the Act or other applicable law are in effect, and any repeal or modification of this Section 7.10 or any such law shall not affect any rights or obligations then existing with respect to any state of facts or Proceeding then existing.  The indemnification and other rights provided for in this Section 7.10 shall inure to the benefit of the heirs, executors and administrators of any Indemnitee.  Except as provided in Section 7.10 or Section 7.10 , the Company shall indemnify any such Person seeking indemnification in connection with a Proceeding initiated by such Person only if such Proceeding was authorized by the Managing Member.

 

(g)                                   Merger or Consolidation; Other Enterprises .  For purposes of this Section 7.10 , references to “the Company” shall include, in addition to the resulting company, any constituent company (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its managers, directors, officers, employees or agents, so that any Person who is or was a manager, director, officer, employee or agent of such constituent company, or is or was serving at the request of such constituent company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Section 7.10 with respect to the resulting or surviving company as he or she would have with respect to such constituent company if its separate existence had continued.  For purposes of this Section 7.10 , references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a Person with respect to any employee benefit plan; and references to “serving at the request of the Company” shall include any service as a manager, officer, employee or agent of the Company that imposes duties on, or involves services by, such manager, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a Person who acted in good faith and in a manner such Person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Section 7.10 .

 

(h)                                  No Member Recourse .  Anything herein to the contrary notwithstanding, any indemnity by the Company relating to the matters covered in this Section 7.10 shall be provided out of and to the extent of Company assets only and no Member (unless such Member otherwise agrees in writing or is found in a final decision of a court of competent jurisdiction to have personal liability on account thereof) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity of the Company.

 

ARTICLE VIII
TAX MATTERS

 

8.1              Preparation of Tax Returns .  The Tax Matters Representative shall arrange for the preparation and timely filing of all returns required to be filed by the Company.  Each Member will upon request supply to the Tax Matters Representative (a) all pertinent information in its possession relating to the operations of the Company necessary to enable the Company’s returns to be prepared and filed and (b) information available to the Member regarding the amount of depletion deductions claimed by, and adjusted tax basis of, such Member (and to the

 

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extent applicable, direct and indirect owners of the Member) with respect to the depletable properties of the Company and its Subsidiaries.

 

8.2              Tax Elections .  The taxable year shall be the Fiscal Year unless the Managing Member shall determine otherwise in compliance with applicable laws.  The Tax Matters Representative shall determine whether to make or revoke any available election pursuant to the Code.  Each Member will upon request supply any information necessary to give proper effect to such election.

 

8.3              Tax Controversies . The Managing Member is hereby designated as the “tax matters partner” (within the meaning of Section 6231(a)(7) of the Code prior to amendment by Section 1101(c) of the Bipartisan Budget Act of 2015) of the Company (with respect to taxable years beginning prior to January 1, 2018), and shall be the “partnership representative” (within the meaning of Section 6223(a) of the Code as amended by Section 1101(c) of the Bipartisan Budget Act of 2015), of the Company (with respect to taxable years beginning after December 31, 2017) (in each such capacity, the “ Tax Matters Representative ”).  The Tax Matters Representative is authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services reasonably incurred in connection therewith.  Each Member agrees to cooperate reasonably with the Company and to do or refrain from doing any or all things reasonably requested by the Company with respect to the conduct of such proceedings.  The Tax Matters Representative shall keep the Members reasonably informed of the progress of any examinations, audits or other proceedings, and shall provide the Members with information on a full and timely basis.

 

8.4              Tax Allocations .  All matters concerning allocations for United States federal, state, and local and non-United States income tax purposes, including accounting procedures, not expressly provided for by the term of this Agreement shall be determined in good faith by the Managing Member.

 

8.5              Fiscal Year; Taxable Year .  Each of the Fiscal Year and the taxable year of the Company shall end on December 31 of each calendar year; provided that the taxable year of the Company shall end on a different date if necessary to comply with Section 706 of the Code.

 

ARTICLE IX
TRANSFER OF UNITS; SUBSTITUTE MEMBERS

 

9.1              Restrictions on Transfers .

 

(a)                                  Transfer Restrictions .  Other than as provided for below in this Section 9.1 , no Member may sell, assign, transfer, grant a participation in, pledge, hypothecate, encumber or otherwise dispose of (such transaction being herein collectively called a “ Transfer ”) all or any portion of its Membership Interest except with the written consent of the Managing Member, which may be granted or withheld in its sole discretion. Without the consent of the Managing Member (but otherwise in compliance with Sections 9.1) , a Member may, at any time, (a) Transfer any portion of such Member’s Membership Interest pursuant to the Exchange Agreement, or (b) Transfer any portion of such Member’s Membership Interest to a Permitted Transferee of such Member. Any purported Transfer of all or a portion of a Member’s Membership Interest not complying with this Section 9.1 shall be void ab initio and shall not create any obligation on the part of the Company or the other Members to recognize that

 

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purported Transfer or to recognize the Person to which the Transfer purportedly was made as a Member. A Person acquiring a Member’s Membership Interest pursuant to this Section 9.1 shall not be admitted as a substituted or Additional Member except in accordance with the requirements of Section 9.2 , but such Person shall, to the extent of the Membership Interest transferred to it, be entitled to such Member’s (i) share of distributions, (ii) share of profits and losses, including Net Profits and Net Losses, and (iii) Capital Account in accordance with Section 3.3 . Notwithstanding anything in this Section 9.1 or elsewhere in this Agreement to the contrary, if a Member Transfers all or any portion of its Membership Interest after the designation of a record date and declaration of a distribution pursuant to Section 4.1 and before the payment date of such distribution, the transferring Member (and not the Person acquiring all or any portion of its Membership Interest) shall be entitled to receive such distribution in respect of such transferred Membership Interest.

 

(b)                                  Transfer of JEI’s Interest .  JEI may not Transfer all or any portion of its Membership Interest, except with the written consent of Members other than the Managing Member that, in the aggregate, own more than 50% of the Percentage Interests owned by all such other Members.

 

9.2              Recognition of Transfer; Substituted and Additional Members .

 

(a)                                  Except for transfers made pursuant to the Exchange Agreement, no direct or indirect Transfer of all or any portion of a Member’s Membership Interest may be made, and no purchaser, assignee, transferee or other recipient of all or any part of such Membership Interest shall be admitted to the Company as a substituted or Additional Member hereunder, unless:

 

(i)                                      the provisions of this Article IX, as applicable, shall have been complied with;

 

(ii)                                   in the case of a proposed Substituted or Additional Member that is (i) a competitor or potential competitor of JEI, the Company or their Subsidiaries, (ii) a Person with whom the JEI, the Company or their Subsidiaries has had or is expected to have a material commercial or financial relationship or (iii) likely to subject JEI, the Company or their Subsidiaries to any material legal or regulatory requirement or obligation, or materially increase the burden thereof, in each case as determined by the Managing Member in its sole discretion, the admission of the purchaser, assignee, transferee or other recipient as a Substituted or Additional Member shall have been approved by the Managing Member;

 

(iii)                                the Managing Member shall have been furnished with the documents effecting such Transfer, in form and substance reasonably satisfactory to the Managing Member, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee, transferee or other recipient, and the Managing Member shall have executed (and the Managing Member hereby agrees to execute) any other documents on behalf of itself and the Members required to effect the Transfer;

 

(iv)                               the Managing Member shall be reasonably satisfied that such Transfer will not (A) result in a violation of the Securities Act or any other applicable law; or (B) cause an assignment under the Investment Company Act;

 

(v)                                  such Transfer would not cause the Company to lose its status as a partnership for federal income tax purposes and, without limiting the generality of the

 

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foregoing, such Transfer shall not be effected on or through an “established securities market” or a “secondary market or the substantial equivalent thereof,” as such terms are used in Regulations Section 1.7704-1;

 

(vi)                               the Managing Member shall have received the opinion of counsel, if any, required by Section 9.2(c) in connection with such Transfer; and

 

(vii)                            all necessary instruments reflecting such Transfer and/or admission shall have been filed in each jurisdiction in which such filing is necessary in order to qualify the Company to conduct business or to preserve the limited liability of the Members.

 

(b)                                  Each Substituted Member and Additional Member shall be bound by all of the provisions of this Agreement. Each Substituted Member and Additional Member, as a condition to its admission as a Member, shall execute and acknowledge such instruments (including a counterpart of this Agreement or a joinder agreement in customary form), in form and substance reasonably satisfactory to the Managing Member, as the Managing Member reasonably deems necessary or desirable to effectuate such admission and to confirm the agreement of such substituted or Additional Member to be bound by all the terms and provisions of this Agreement with respect to the Membership Interest acquired by such substituted or Additional Member. The admission of a Substituted or Additional Member shall not require the consent of any Member other than the Managing Member (if and to the extent such consent of the Managing Member is expressly required by this Article IX). As promptly as practicable after the admission of a Substituted or Additional Member, the books and records of the Company and Schedule A shall be changed to reflect such admission.

 

(c)                                   As a further condition to any Transfer of all or any part of a Member’s Membership Interest, other than Transfers pursuant to the Exchange Agreement, the Managing Member may, in its discretion, require a written opinion of counsel to the transferring Member reasonably satisfactory to the Managing Member, obtained at the sole expense of the transferring Member, reasonably satisfactory in form and substance to the Managing Member, as to such matters as are customary and appropriate in transactions of this type, including, without limitation (or, in the case of any Transfer made to a Permitted Transferee, limited to an opinion) to the effect that such Transfer will not result in a violation of the registration or other requirements of the Securities Act or any other federal or state securities laws. No such opinion, however, shall be required in connection with a Transfer made pursuant to the Exchange Agreement.

 

9.3              Expense of Transfer; Indemnification .  All reasonable costs and expenses incurred by the Managing Member and the Company in connection with any Transfer of a Member’s Membership Interest, including any filing and recording costs and the reasonable fees and disbursements of counsel for the Company, shall be paid by the transferring Member. In addition, the transferring Member hereby indemnifies the Managing Member and the Company against any losses, claims, damages or liabilities to which the Managing Member, the Company, or any of their Affiliates may become subject arising out of or based upon any false representation or warranty made by, or breach or failure to comply with any covenant or agreement of, such transferring Member or such transferee in connection with such Transfer.

 

9.4              Exchange Agreement .  In connection with any Transfer of any portion of a Member’s Membership Interest pursuant to the Exchange Agreement, the Managing Member shall cause the Company to take any action as may be required under the Exchange Agreement or requested by any party thereto to effect such Transfer promptly.

 

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ARTICLE X

DISSOLUTION AND LIQUIDATION

 

10.1       Dissolution .  The Company shall not be dissolved by the admission of Additional Members or Substituted Members.  The Company shall be dissolved and its affairs wound up upon the occurrence of any of the following events:

 

(a)                                  an election by the Managing Member to dissolve, wind up or liquidate the Company;

 

(b)                                  the sale, disposition or transfer of all or substantially all of the assets of the Company;

 

(c)                                   the entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act; or

 

(d)                                  at any time there are no members of the Company, unless the Company is continued in accordance with the Act.

 

Except as otherwise set forth in this Section 10.1 , the Company is intended to have perpetual existence.  An Event of Withdrawal shall not cause a dissolution of the Company, and the Company shall continue in existence subject to the terms and conditions of this Agreement.

 

10.2       Liquidation and Termination .

 

(a)                                  On the dissolution of the Company, the Managing Member shall act as liquidator or (in its sole discretion) may appoint one (1) or more representatives, Members or other Persons as liquidator(s).  The liquidators shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act.  The costs of liquidation shall be borne as a Company expense.  Until final distribution, the liquidators shall continue to operate the Company with all of the power and authority of the Managing Member.  The steps to be accomplished by the liquidators are as follows:

 

(i)                                      the liquidators shall pay, satisfy or discharge from Company funds all of the debts, liabilities and obligations of the Company (including all expenses incurred in liquidation) or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash fund for contingent liabilities in such amount and for such term as the liquidators may reasonably determine); and

 

(ii)                                   after payment or provision for payment of all of the Company’s liabilities has been made in accordance with Section 10.1 , all remaining assets of the Company shall be distributed (x) first, to JEI in respect of the Series A Preferred Units, until JEI has received an amount equal to the total amount that would then be required to distributed by JEI in respect of all outstanding shares of Series A Preferred Stock if JEI were to then liquidate, dissolve and/or wind up and (y) thereafter, in accordance with Section 4.1(b)  (including, if applicable, the provisions of Section 4.4 ).

 

(b)                                  A final allocation of all items of income, gain, loss and expense shall be made for the taxable year in which liquidation occurs (and, if necessary to achieve the result described in this sentence and permissible under applicable tax law, for prior taxable years) in such a manner that, immediately before distribution of such remaining assets, the balance of each

 

37



 

Unitholder’s Capital Account shall be equal to the respective net amounts that would be distributed to such Unitholder under the provisions of Section 10.2(a)(ii) .

 

10.3       Complete Distribution .  The distribution to a Unitholder in accordance with the provisions of Section 4.1 constitutes a complete return to the Unitholder of its Capital Contributions and a complete distribution to the Unitholder of its interest in the Company and all the Company’s property and constitutes a compromise to which all Unitholders have consented within the meaning of the Act.

 

10.4       Cancellation of Certificate .  On completion of the distribution of Company assets as provided herein, the Company is terminated (and the Company shall not be terminated prior to such time), and the Managing Member (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of the State of Delaware, cancel any other filings made pursuant to this Agreement that are or should be canceled and take such other actions as may be necessary to terminate the Company.  The Company shall be deemed to continue in existence for all purposes of this Agreement until it is terminated pursuant to this Section  1 0.4 .

 

10.5       Reasonable Time for Winding Up .  A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 10.2 to minimize any losses otherwise attendant upon such winding up.

 

10.6       Return of Capital .  The liquidators shall not be personally liable for the return of Capital Contributions or any portion thereof to the Unitholders (it being understood that any such return shall be made solely from Company assets).

 

10.7       HSR Act .  Notwithstanding any other provision in this Agreement, in the event that the Hart-Scott-Rodino Antitrust Improvements Act of l976 (the “ HSR Act ”) is applicable to any Unitholder by reason of the fact that any assets of the Company shall be distributed to such Unitholder in connection with the dissolution of the Company, the dissolution of the Company shall not be consummated until such time as the applicable waiting periods (and extensions thereof) under the HSR Act have expired or otherwise been terminated with respect to each such Unitholder.

 

ARTICLE XI
GENERAL PROVISIONS

 

11.1       Power of Attorney .  Each Member hereby constitutes and appoints the Managing Member and the liquidators, with full power of substitution, as his, her or its true and lawful agent and attorney-in-fact, with full power and authority in his, her or its name, place and stead, to execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) this Agreement, all certificates and other instruments and all amendments thereof in accordance with the terms hereof that the Managing Member deems appropriate or necessary to form, qualify, or continue the qualification of, the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (b) all instruments that the Managing Member deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the Managing Member or the liquidators deem appropriate or necessary to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement, including a certificate of cancellation; and (d)

 

38



 

all instruments relating to the admission, withdrawal or substitution of any Member pursuant to Ar ticle III or Arti cle IV .  The foregoing power of attorney is irrevocable and coupled with an interest, and shall survive the death, disability, incapacity, dissolution, bankruptcy, insolvency or termination of any Member and the Transfer of all or any portion of his, her or its Units and shall extend to such Member’s heirs, successors, assigns and personal representatives.

 

11.2       Books and Records .  Any Member holding at least five (5) percent of the Units or any of their respective designated representatives, in person or by attorney or other agent, shall, upon written demand stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose any of the foregoing books or records; provided, that for purposes of this sentence, a proper purpose shall mean any purpose reasonably related to such Person’s interest as a Member.  In every instance where an attorney or other agent shall be the Person who seeks the right to inspection, the demand shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the Member.  The demand shall be directed to the Company at its registered office in the State of Delaware or at its principal place of business.

 

11.3       Amendments .  Subject to Section 3.9(b), this Agreement may be amended, modified, or waived only by the prior written consent of the Managing Member and Members holding a majority of the Common Units (other than those held by the Managing Member); provided , that if any such amendment, modification or waiver would affect in any material and adverse way any Member disproportionately to any other Member similarly situated, such amendment, modification or waiver shall also require the written consent of the Members so materially and adversely affected.  Notwithstanding the foregoing, any amendment that would require any Unitholder to contribute or loan additional funds to the Company or impose personal liability upon any Unitholder shall not be effective against such Unitholder without its written consent.

 

11.4       Remedies .  Each Unitholder shall have all rights and remedies set forth in this Agreement and all rights and remedies that such Person has been granted at any time under any other agreement or contract and all of the rights that such Person has under any applicable law.  Any Person having any rights under any provision of this Agreement or any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a bond or other security) to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by applicable law.

 

11.5       Successors and Assigns .  All covenants and agreements contained in this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective Successors in Interest; provided that no Person claiming by, through or under a Member (whether as such Member’s Successor in Interest or otherwise), as distinct from such Member itself, shall have any rights as, or in respect to, a Member (including the right to approve or vote on any matter or to notice thereof).

 

11.6       Severability .  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

39



 

11.7       Counterparts .  This Agreement may be executed simultaneously in two or more separate counterparts, any one of which need not contain the signatures of more than one party, but each of which shall be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto.

 

11.8       Applicable Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.  Any dispute relating hereto shall be heard in the state or federal courts of Delaware, and the parties agree to jurisdiction and venue therein.

 

11.9       Addresses and Notices .  All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given or made when (a) delivered personally to the recipient, (b) sent by facsimile to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if sent by facsimile before 5:00 p.m. New York time on a Business Day, and otherwise on the next Business Day, or (c) one Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid).  Such notices, demands and other communications shall be sent to the address for such recipient set forth on Schedule A attached hereto, or in the Company’s books and records, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.  Any notice to the Managing Member or the Company shall be deemed given if received by the Managing Member at the principal office of the Company designated pursuant to Section  2.5 .

 

11.10                                                Creditors .  None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or any of its Affiliates, and no creditor who makes a loan to the Company or any of its Affiliates may have or acquire (except pursuant to the terms of a separate agreement executed by the Company in favor of such creditor) at any time as a result of making the loan any direct or indirect interest in Company profits, losses, Distributions, capital or property other than as a secured creditor.

 

11.11                                                Waiver .  No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

 

11.12                                                Further Action .  The parties agree to execute and deliver all documents, provide all information and take or refrain from taking such actions as may be necessary or appropriate to achieve the purposes of this Agreement.

 

11.13                                                Entire Agreement .  This Agreement, the other Transaction Documents and those documents expressly referred to herein related to the subject matter hereof embody the complete agreement and understanding among the parties hereto and supersede and preempt any prior understandings, agreements or representations by or among the parties hereto, written or oral, that may have related to the subject matter hereof in any way.

 

11.14                                                Delivery by Facsimile or Email .  This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent

 

40



 

signed and delivered by means of a facsimile machine or email with scan or facsimile attachment, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.  At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties.  No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or email as a defense to the formation or enforceability of a contract, and each such party forever waives any such defense.

 

11.15                                                Survival Sections   5.4 , 5.5 , 6.2 , 7.10 , 8.3 , 11.14 , 11.15 , and 11.16 shall survive and continue in full force in accordance with its terms, notwithstanding any termination of this Agreement or the dissolution of the Company.

 

11.16                                                Confidentiality .

 

(a)                                  The Company shall not, nor shall it permit any Subsidiary to, disclose any Member’s name or identity as an investor in the Company in any press release or other public announcement or in any document or material filed with any Governmental Entity, without the prior written consent of such Member, which shall not be unreasonably withheld or delayed, unless such disclosure is otherwise required by applicable law or by any regulatory or self-regulatory organization having jurisdiction or by order of a court of competent jurisdiction, in which case (except with respect to disclosure that is required in connection with the filing of federal, state and local tax returns) prior to making such disclosure the Company shall give written notice to such Member describing in reasonable detail the proposed content of such disclosure and shall permit such Member to review and comment upon the form and substance of such disclosure and allow such Member to seek confidential treatment therefor.

 

(b)                                  Each Member expressly agrees to maintain, for so long as such Person is a Member and for two (2) years thereafter, the confidentiality of, and not to disclose to any Person other than the Company (and any successor of the Company or any Person acquiring (whether by merger, consolidation, sale, exchange or otherwise) all or a material portion of the assets or Equity Securities of the Company or any of its Subsidiaries), another Member or a Person designated by the Company or any of their respective financial planners, accountants, attorneys or other advisors, any information relating to the business (current or proposed), financial structure, financial position or financial results, clients or affairs of the Company or any of its Subsidiaries that shall not be generally known to the public, except (i) as otherwise required by applicable law or by any regulatory or self-regulatory organization having jurisdiction or by order of a court of competent jurisdiction, in which case (except with respect to disclosure that is required in connection with the filing of federal, state and local tax returns or by any regulatory or self-regulatory organization) prior to making such disclosure such Member shall give written notice to the Company describing in reasonable detail the proposed content of such disclosure and shall permit the Company to review and comment upon the form and substance of such disclosure and allow the Company to seek confidential treatment therefor, and (ii) in the case of any Member who is employed by the Company or any of its Subsidiaries, in the ordinary course of his or her duties to the Company or any of its Subsidiaries; provided , however , that a Member may report to its stockholders, limited partners, members or other owners, as the case may be, regarding the general status of its investment in the Company (without disclosing specific confidential information).  Notwithstanding the provisions of this Section 11.16 to the contrary, if any Unitholder desires to undertake any Transfer of its Units permitted by this Agreement, such

 

41



 

holder may, upon the execution of a confidentiality agreement (in form reasonably acceptable to the Company’s legal counsel) by any bona fide potential Transferee, disclose to such potential Transferee information of the sort otherwise restricted by this Section 11.16 if such holder reasonably believes such disclosure is necessary for the purpose of Transferring such Units to the bona fide potential Transferee.

 

[SIGNATURE PAGES FOLLOW]

 

42



 

SIGNATURE PAGES TO
LIMITED LIABILITY COMPANY AGREEMENT

 

IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Agreement as of the date first written above.

 

 

JONES ENERGY HOLDINGS, LLC

 

 

 

 

 

By:

/s/ Jonny Jones

 

 

Jonny Jones

 

 

Chief Executive Officer

 

 

 

 

JONES ENERGY DRILLING FUND, LP

 

 

 

By:

Jones Energy Management, LLC, its

 

General Partner

 

 

 

 

By:

/s/ Jonny Jones

 

 

Jonny Jones

 

 

Manager

 

 

 

 

JONES ENERGY EQUITY PARTNERS, LP

 

 

 

 

By:

Jones Energy Management, LLC, its

 

General Partner

 

 

 

 

By:

/s/ Jonny Jones

 

 

Jonny Jones

 

 

Manager

 

 

 

 

JONES ENERGY EQUITY PARTNERS II, LP

 

 

 

 

By:

Jones Energy Management, LLC, its

 

General Partner

 

 

 

 

By:

/s/ Jonny Jones

 

 

Jonny Jones

 

 

Manager

 

Signature Page to

Fourth Amended and Restated LLC Agreement of

Jones Energy Holdings, LLC

 



 

 

JONES ENERGY TEAM 3, LP

 

 

 

 

By:

JET 3 GP, LLC

 

Its:

General Partner

 

 

 

 

By:

Jon Rex Jones Jr. Trust V

 

Its:

Managing Member

 

 

 

 

By:

/s/ Jonny Jones

 

 

Jonny Jones

 

 

Trustee

 

 

 

 

JONES ENERGY, INC.

 

 

 

 

 

 

 

By:

/s/ Jonny Jones

 

 

Jonny Jones

 

 

Chief Executive Officer

 

Signature Page to

Fourth Amended and Restated LLC Agreement of

Jones Energy Holdings, LLC

 



 

 

MCP (C) II JONES INTERMEDIATE LLC

 

 

 

By:

Metalmark Capital Partners II GP, L.P.

 

Its:

General Partner

 

 

 

 

By:

Metalmark Capital Holdings LLC

 

Its:

General Partner

 

 

 

 

 

 

 

By:

/s/ Gregory D. Myers

 

 

Name:

Gregory D. Myers

 

 

Title:

Managing Director

 

 

 

 

MCP II CO-INVESTMENT JONES INTERMEDIATE LLC

 

 

 

 

 

By:

/s/ Gregory D. Myers

 

 

Name:

Gregory D. Myers

 

 

Title:

Managing Director

 

 

 

 

MCP II JONES INTERMEDIATE LLC

 

 

 

 

 

By:

/s/ Gregory D. Myers

 

 

Name:

Gregory D. Myers

 

 

Title:

Managing Director

 

 

 

 

MCP II (TE) AIF JONES INTERMEDIATE LLC

 

 

 

 

 

By:

/s/ Gregory D. Myers

 

 

Name:

Gregory D. Myers

 

 

Title:

Managing Director

 

 

 

MCP II (CAYMAN) AIF JONES INTERMEDIATE LLC

 

 

 

By:

/s/ Gregory D. Myers

 

 

Name:

Gregory D. Myers

 

 

Title:

Managing Director

 

 

 

MCP II EXECUTIVE FUND JONES INTERMEDIATE LLC

 

 

 

By:

/s/ Gregory D. Myers

 

 

Name:

Gregory D. Myers

 

 

Title:

Managing Director

 

Signature Page to

Fourth Amended and Restated LLC Agreement of

Jones Energy Holdings, LLC

 



 

SCHEDULE A

 

SCHEDULE OF MEMBERS

 

As of August 26, 2016

 

 

 

Number of

 

 

 

Number of Series A

 

Name and Address of Member

 

Common Units

 

Percentage Interest

 

Preferred Units

 

MCP (C) II Jones Intermediate LLC (DBA: Metalmark Capital

 

7,182,989

 

8.5827%

 

 

Partners (c) II LP)

 

 

 

 

 

 

 

c/o Metalmark Capital Holdings, LLC

 

 

 

 

 

 

 

1177 Avenue of the Americas, 40th Floor

 

 

 

 

 

 

 

New York, NY 10036

 

 

 

 

 

 

 

Attention: Gregory D. Myers

 

 

 

 

 

 

 

Fax No: (212) 823 1949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kirkland & Ellis LLP

 

 

 

 

 

 

 

601 Lexington Avenue

 

 

 

 

 

 

 

New York, NY 10022

 

 

 

 

 

 

 

Attention: Frederick Tanne, P.C. and Joshua M. Kogan

 

 

 

 

 

 

 

Facsimile No.: (212) 446 6460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MCP II Co-Investment Jones Intermediate LLC (DBA: Metalmark

 

1,791,914

 

2.1411%

 

 

Capital Partners II Co-Investment LP)

 

 

 

 

 

 

 

c/o Metalmark Capital Holdings, LLC

 

 

 

 

 

 

 

1177 Avenue of the Americas, 40th Floor

 

 

 

 

 

 

 

New York, NY 10036

 

 

 

 

 

 

 

Attention: Gregory D. Myers

 

 

 

 

 

 

 

Fax No: (212) 823 1949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kirkland & Ellis LLP

 

 

 

 

 

 

 

601 Lexington Avenue

 

 

 

 

 

 

 

New York, NY 10022

 

 

 

 

 

 

 

Attention: Frederick Tanne, P.C. and Joshua M. Kogan

 

 

 

 

 

 

 

Facsimile No.: (212) 446 6460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MCP II Jones Intermediate LLC (DBA: Metalmark Capital

 

3,357,483

 

4.0117%

 

 

Partners II LP)

 

 

 

 

 

 

 

c/o Metalmark Capital Holdings, LLC

 

 

 

 

 

 

 

1177 Avenue of the Americas, 40th Floor

 

 

 

 

 

 

 

New York, NY 10036

 

 

 

 

 

 

 

Attention: Gregory D. Myers

 

 

 

 

 

 

 

Fax No: (212) 823 1949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kirkland & Ellis LLP

 

 

 

 

 

 

 

601 Lexington Avenue

 

 

 

 

 

 

 

New York, NY 10022

 

 

 

 

 

 

 

Attention: Frederick Tanne, P.C. and Joshua M. Kogan

 

 

 

 

 

 

 

Facsimile No.: (212) 446 6460

 

 

 

 

 

 

 

 



 

 

 

Number of

 

 

 

Number of Series A

 

Name and Address of Member

 

Common Units

 

Percentage Interest

 

Preferred Units

 

MCP II (TE) AIF Jones Intermediate LLC (DBA: MCP II TE AIF LP)

 

2,570,033

 

3.0708%

 

 

c/o Metalmark Capital Holdings, LLC

 

 

 

 

 

 

 

1177 Avenue of the Americas, 40th Floor

 

 

 

 

 

 

 

New York, NY 10036

 

 

 

 

 

 

 

Attention: Gregory D. Myers

 

 

 

 

 

 

 

Fax No: (212) 823 1949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kirkland & Ellis LLP

 

 

 

 

 

 

 

601 Lexington Avenue

 

 

 

 

 

 

 

New York, NY 10022

 

 

 

 

 

 

 

Attention: Frederick Tanne, P.C. and Joshua M. Kogan

 

 

 

 

 

 

 

Facsimile No.: (212) 446 6460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MCP II (Cayman) AIF Jones Intermediate LLC (DBA: MCP II Cayman AIF LP)

 

2,973,397

 

3.5528%

 

 

c/o Metalmark Capital Holdings, LLC

 

 

 

 

 

 

 

1177 Avenue of the Americas, 40th Floor

 

 

 

 

 

 

 

New York, NY 10036

 

 

 

 

 

 

 

Attention: Gregory D. Myers

 

 

 

 

 

 

 

Fax No: (212) 823 1949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kirkland & Ellis LLP

 

 

 

 

 

 

 

601 Lexington Avenue

 

 

 

 

 

 

 

New York, NY 10022

 

 

 

 

 

 

 

Attention: Frederick Tanne, P.C. and Joshua M. Kogan

 

 

 

 

 

 

 

Facsimile No.: (212) 446 6460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MCP II Executive Fund Jones Intermediate LLC (DBA: Metalmark Capital Partners II Executive Fund LP)

 

328,400

 

0.3924%

 

 

c/o Metalmark Capital Holdings, LLC

 

 

 

 

 

 

 

1177 Avenue of the Americas, 40th Floor

 

 

 

 

 

 

 

New York, NY 10036

 

 

 

 

 

 

 

Attention: Gregory D. Myers

 

 

 

 

 

 

 

Fax No: (212) 823 1949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kirkland & Ellis LLP

 

 

 

 

 

 

 

601 Lexington Avenue

 

 

 

 

 

 

 

New York, NY 10022

 

 

 

 

 

 

 

Attention: Frederick Tanne, P.C. and Joshua M. Kogan

 

 

 

 

 

 

 

Facsimile No.: (212) 446 6460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jones Energy Drilling Fund, LP

 

5,479,437

 

6.5472%

 

 

807 Las Cimas Parkway, Suite 370

 

 

 

 

 

 

 

Austin, Texas 78746

 

 

 

 

 

 

 

Attention: Robin Picard

 

 

 

 

 

 

 

Facsimile No.: (512) 328 6971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baker Botts LLP

 

 

 

 

 

 

 

1500 San Jacinto Center

 

 

 

 

 

 

 

Austin, Texas 78701

 

 

 

 

 

 

 

Attention: Mike Bengtson

 

 

 

 

 

 

 

Facsimile No.: (512) 322 8349

 

 

 

 

 

 

 

 



 

 

 

Number of

 

 

 

Number of Series A

 

Name and Address of Member

 

Common Units

 

Percentage Interest

 

Preferred Units

 

Jones Energy Equity Partners, LP

 

1,788,076

 

2.1365%

 

 

807 Las Cimas Parkway, Suite 370

 

 

 

 

 

 

 

Austin, Texas 78746

 

 

 

 

 

 

 

Attention: Robin Picard

 

 

 

 

 

 

 

Facsimile No.: (512) 328 6971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baker Botts LLP

 

 

 

 

 

 

 

1500 San Jacinto Center

 

 

 

 

 

 

 

Austin, Texas 78701

 

 

 

 

 

 

 

Attention: Mike Bengtson

 

 

 

 

 

 

 

Facsimile No.: (512) 322 8349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jones Energy Equity Partners II, LP

 

2,938,050

 

3.5106%

 

 

807 Las Cimas Parkway, Suite 370

 

 

 

 

 

 

 

Austin, Texas 78746

 

 

 

 

 

 

 

Attention: Robin Picard

 

 

 

 

 

 

 

Facsimile No.: (512) 328 6971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baker Botts LLP

 

 

 

 

 

 

 

1500 San Jacinto Center

 

 

 

 

 

 

 

Austin, Texas 78701

 

 

 

 

 

 

 

Attention: Mike Bengtson

 

 

 

 

 

 

 

Facsimile No.: (512) 322 8349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jones Energy Team 3, LP

 

1,462,647

 

1.7477%

 

 

807 Las Cimas Parkway, Suite 370

 

 

 

 

 

 

 

Austin, Texas 78746

 

 

 

 

 

 

 

Attention: Robin Picard

 

 

 

 

 

 

 

Facsimile No.: (512) 328 6971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baker Botts LLP

 

 

 

 

 

 

 

1500 San Jacinto Center

 

 

 

 

 

 

 

Austin, Texas 78701

 

 

 

 

 

 

 

Attention: Mike Bengtson

 

 

 

 

 

 

 

Facsimile No.: (512) 322 8349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jones Energy, Inc.

 

53,819,222(1)(2)(3)

 

64.3066%

 

1,600,000(3)

 

807 Las Cimas Parkway, Suite 350

 

 

 

 

 

 

 

Austin, Texas 78746

 

 

 

 

 

 

 

Attention: Robin Picard

 

 

 

 

 

 

 

Facsimile No.: (512) 328 6971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with a copy, which shall not constitute notice, to :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baker Botts LLP

 

 

 

 

 

 

 

1500 San Jacinto Center

 

 

 

 

 

 

 

Austin, Texas 78701

 

 

 

 

 

 

 

Attention: Mike Bengtson

 

 

 

 

 

 

 

Facsimile No.: (512) 322 8349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

83,691,648

 

100.0%

 

1,600,000

 

 


(1) 139,825 of the Units of the 53,819,222 correspond with restricted stock shares of Jones Energy, Inc. granted on May 27, 2016 which vest on May 15, 2017. Unless the recipient makes a valid IRC Sec. 83(b) election, such Units will not be deemed outstanding for Jones Energy Holdings, LLC until the vesting date.

 

(2) Number of Units reflects selling through the Jones Energy, Inc. continuous offering program (“ATM Program”) as of the most recent practicable date, and may not reflect additional sales under the ATM Program since such date.

 

(3) Number of Units does not include Units issued pursuant to exercise of underwriters’ overallotment options in the August 2016 Offering Transactions.  This Exhibit will be updated if such option is exercised.

 


Exhibit 99.1

 

 

JONES ENERGY, INC. COMPLETES ANADARKO BASIN ACQUISITION

 

Austin, TX August 26, 2016 — Jones Energy, Inc. (NYSE: JONE) (“Jones Energy” or the “Company”) today announced the closing of its previously announced acquisition of producing and undeveloped oil and gas assets in the Anadarko Basin for an as-adjusted closing purchase price of $26.3 million, subject to customary post-closing adjustments.  The Company funded the acquisition with cash on hand.

 

About Jones Energy

 

Jones Energy, Inc. is an independent oil and natural gas company engaged in the development and acquisition of oil and natural gas properties in the Anadarko and Arkoma basins of Texas and Oklahoma.

 

Investor Contacts:

 

Cathleen King, 512-493-4834

Investor Relations

Or

Robert Brooks, 512-328-2953

Executive Vice President & CFO