8-K

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: June 4, 2015

(Date of earliest event reported)

(Exact name of registrant as specified in its charter)

Delaware	001-35049	84-0592823
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1400 Woodloch Forest Drive, Suite 300

The Woodlands, Texas 77380

(Address of principal executive offices) (Zip Code)

(281) 298-4246

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

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 1.01 Entry into a Material Definitive Agreement.

On June 4, 2015, Earthstone Energy, Inc., a Delaware corporation (the “Company”), Oak Valley Resources, LLC, a Delaware limited liability company (“Oak Valley”), Sabine River Energy, LLC, a Texas limited liability company (“Sabine”), Earthstone Operating, LLC, a Texas limited liability company (formerly Oak Valley Operating, LLC) (the “Operator”), Parallel Resource Partners, LLC, a Delaware limited liability company (“Parallel”), and Flatonia Energy, LLC, a Delaware limited liability company (“Flatonia”), entered into an amendment (the “Amendment”) to that certain Contribution Agreement dated October 16, 2014 (the “Contribution Agreement”), by and among the Company, Oak Valley, Sabine, the Operator, Parallel, and Flatonia,as referenced in the Company’s Current Report on Form 8-K filed on October 20, 2014 with the U.S. Securities and Exchange Commission (the “SEC”).

Under the original terms of the Contribution Agreement, Flatonia had the right to either (i) designate an individual who could attend and act as an observer (the “Flatonia Observer”) at any meeting of the board of directors of the Company (the “Board”) or (ii) designate an individual to be elected to the Board as a director.  Pursuant to the Amendment, Flatonia maintained its right to designate the Flatonia Observer, but, effective as of the date of the Amendment, forfeited its alternative right to designate a director.  However, Flatonia’s right to designate an individual to be elected to the Board as a director is subject to reinstatement upon the earliest to occur of the following: (a) the aggregate ownership of common stock, $0.001 par value per share (the “Common Stock”), of the Company, by Oak Valley and its direct or indirect controlled subsidiaries falls below 50% of the issued and outstanding shares of Common Stock (excluding issuances of Common Stock to third parties that are not affiliates of the Company or Oak Valley); (b) certain changes in the composition of management of the Company; (c) a Change of Control (as defined below); and (d) June 1, 2017.

The term “Change of Control” means an event deemed to have occurred if any of the following occurs: (i) any transaction or series of related transactions resulting in a direct or indirect change of control of the Operator or Sabine or the liquidation or dissolution of the Operator or Sabine, except, in each case, in connection with a transfer to a wholly-owned and wholly-controlled affiliate; provided, however, that a Change of Control of the Company shall not constitute a Change of Control of the Operator or Sabine; (ii) within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, a “person” or “group”, other than the Company and its subsidiaries (and its and their employee benefit plans) and Oak Valley and its affiliates, acquires direct or indirect “beneficial ownership” of shares of the Company’s common equity representing more than 50% of the voting power of the Company’s common equity; (iii) any sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of the consolidated assets of the Company and its subsidiaries, taken as a whole, to any person or persons; (iv) any transaction or series of related transactions in connection with which (whether by means of exchange, liquidation, consolidation, merger, combination, reclassification, recapitalization, acquisition or otherwise) all of the Common Stock is exchanged for, converted into, acquired for, or constitutes solely the right to receive, other securities, other property, assets or cash, but excluding any merger, consolidation, share exchange or acquisition of the Company with or by another person pursuant to which the persons that beneficially owned, directly or indirectly, the shares of the Company’s voting stock immediately prior to such transaction beneficially own, directly or indirectly, immediately after such transaction, shares of the surviving, continuing or acquiring corporation’s voting stock representing more than 50% of the total outstanding voting power of all outstanding classes of voting stock of the surviving, continuing or acquiring corporation in substantially the same proportions (relative to each other) as immediately prior to such transaction; provided, however, that this clause (iv) shall not include any transaction or series of related transactions for which Flatonia, in its capacity as a stockholder of the Company, voted in favor; or (v) the Company’s stockholders approve any plan or proposal for the liquidation or dissolution of the Company.

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by the terms of the Amendment, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is filed with this Current Report on Form 8-K:

Exhibit No.	Description
10.1	First Amendment to Contribution Agreement dated June 4, 2015, by and among Earthstone Energy, Inc., Oak Valley Resources, LLC, Sabine River Energy, LLC, Earthstone Operating, LLC, Parallel Resource Partners, LLC, and Flatonia Energy, LLC.

SIGNATURE

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

	EARTHSTONE ENERGY, INC.
Date: June 10, 2015	By:	/s/ Frank A. Lodzinski
		Frank A. Lodzinski
		President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	First Amendment to Contribution Agreement dated June 4, 2015, by and among Earthstone Energy, Inc., Oak Valley Resources, LLC, Sabine River Energy, LLC, Earthstone Operating, LLC, Parallel Resource Partners, LLC, and Flatonia Energy, LLC.

EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO CONTRIBUTION AGREEMENT

This First Amendment to Contribution Agreement (this “Amendment”) is dated as of June 4, 2015 by and among Flatonia Energy, LLC, a Delaware limited liability company (“Flatonia”), Parallel Resource Partners, LLC, a Delaware limited liability company (“PRP”), Sabine River Energy, LLC, a Texas limited liability company (“Sabine”), Oak Valley Operating, LLC, a Texas limited liability company (“Oak Valley Operator”), Oak Valley Resources, LLC, a Delaware limited liability company (“Oak Valley”) and Earthstone Energy, Inc., a Delaware corporation (“Earthstone”).  Each of Flatonia, PRP, Sabine, Oak Valley Operator, Oak Valley and Earthstone is sometimes referred to herein individually as a “Party,” and collectively they are referred to herein as the “Parties.”  Capitalized terms used and not otherwise defined in this Amendment shall have the respective meanings set forth in the Contribution Agreement (as defined below).

RECITALS:

WHEREAS, effective as of October 16, 2014, the parties entered into that certain Contribution Agreement (as amended, restated, supplemented, or otherwise modified from time to time, the “Contribution Agreement”);

WHEREAS, the transactions contemplated by the Contribution Agreement were consummated on December 19, 2014, as a result of which, among other things, Flatonia received a number of shares of  Earthstone Common Stock then equal to 21.4% of Earthstone Common Stock, on an as-converted, as-exercised basis;

WHEREAS, Section 9.10(a) of the Contribution Agreement grants Flatonia the right, exercisable by the Board of Managers of Flatonia, to designate one member of the Earthstone Board on the terms and subject to the conditions set forth therein, although Flatonia has not yet exercised such right;

WHEREAS, in order to facilitate Earthstone’s ability to issue registered securities under the Securities Act in an expeditious manner, Flatonia is willing to forfeit Flatonia’s board designation right, effective immediately, on the terms and subject to the conditions set forth below;

WHEREAS, Section 15.8 of the Contribution Agreement provides that the Contribution Agreement may be amended or modified by an agreement in writing executed by all Parties and expressly identified as an amendment or modification;

NOW, THEREFORE, in consideration of the premises and mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound by the terms hereof, agree as follows:

ARTICLE I
AMENDMENTS

Section 1.1Amendments.

(a)Section 9.10 of the Contribution Agreement is hereby amended to read in its entirety as follows:

Section 9.10Flatonia’s Board Observer Rights and Contingent Right to Designate a Director.  

(a)Subject to the provisions of the penultimate sentence of this Section 9.10(a) and the last sentence of Section 9.10(c), the Board of Managers of Flatonia may designate, at any time and from time to time, one individual who may attend and act as an observer (the “Flatonia Observer”) at any meeting of the Earthstone Board (whether in person, telephonic, electronic or otherwise).  For the avoidance of doubt, the Flatonia Observer will not be or count as a member of the Earthstone Board for any purpose, including, without limitation, for voting purposes or for purposes of determining whether a quorum exists.  The Flatonia Observer will execute a confidentiality agreement on a mutually agreeable form with Earthstone as a condition to being permitted to attend such meetings.  Earthstone shall give the Flatonia Observer at least two days’ prior written notice of each such meeting.  The Flatonia Observer is currently Mr. John K. Howie who will continue to be the Flatonia Observer until his resignation or replacement.  The Board of Managers of Flatonia may replace the Flatonia Observer at any time and for any reason, in the sole discretion of the Board of Managers of Flatonia.  If the individual serving as the Flatonia Observer ceases to serve in such capacity for any reason, then Flatonia shall have the right to designate a successor in accordance with this Section 9.10(a).  Earthstone shall provide to the Flatonia Observer, at the same time as provided to each member of the Earthstone Board, (x) all written consents to be executed by members of the Earthstone Board and (y) all materials provided to members of the Earthstone Board relating to Earthstone or its operations or activities, other than materials subject to any applicable attorney-client work product or accountant-client privilege, as well as any other information reasonably requested by the Flatonia Observer relating to Earthstone or its operations or activities.  Notwithstanding the foregoing provisions of this Section 9.10(a), Flatonia shall not be entitled to designate a Flatonia Observer at any time that a Flatonia Designee (as defined below) is serving on the Earthstone Board.  Further, the Earthstone Board may exclude the Flatonia Observer from any portion of an Earthstone Board meeting where privileged material is considered.

(b)Subject to the provisions of the last sentence of Section 9.10(c), if an Oak Valley Triggering Event occurs after the Closing Date, then from after the Oak Valley Triggering Event, Earthstone and Oak Valley shall, upon the written request of Flatonia, take all reasonably required action to (i) increase the size of the Earthstone Board to at least 8 directors (or such greater amount, if any, necessary for there to be at least one unfilled board seat) and (ii) appoint one individual designated in writing by the Flatonia Board of Managers to serve as a member of the Earthstone Board, which director will be

designated as a director of Earthstone (the “Flatonia Designee”).  If, at the time of such initial designation, the Earthstone Board is classified, then the Flatonia Designee will serve in the director class with the then-longest remaining term.  From and after an Oak Valley Triggering Event, but subject to the provisions of the last sentence of this Section 9.10(b), the Board of Managers of Flatonia will continue to have the right to designate a Flatonia Designee to serve as a director of Earthstone, and Earthstone and the Earthstone Board will cause each such Flatonia Designee to be nominated to serve as a director and will recommend that Earthstone’s stockholders vote in favor of the election of such Flatonia Designee.  If the Flatonia Designee ceases to serve as a member of the Earthstone Board for any reason, then Flatonia shall have the right to designate a successor in accordance with this Section 9.10(b).  Any voting securities of Earthstone held by Oak Valley or any of its Affiliates will be voted (which term will include the execution of a written consent of stockholders) in favor of the election of the Flatonia Designee and will not be voted in favor of any action that is inconsistent with the rights set forth in this Section 9.10(b).

(c)Flatonia (and any assignee permitted under this sentence) will have the right to assign all, but not less than all, of its rights under this Section 9.10 to PRP or to any Affiliate of PRP.  Notwithstanding the foregoing provisions of this Section 9.10, Flatonia’s rights under this Section 9.10 shall be extinguished if at any time PRP and its Affiliates collectively own less than 7.5% of the issued and outstanding shares of Earthstone Common Stock.  

(b)Appendix A of the Contribution Agreement is hereby amended by adding the following definition, in the appropriate alphabetical order:

“Oak Valley Triggering Event” shall mean the earliest to occur of the following: (a)  the aggregate ownership of Earthstone Common Stock by Oak Valley and its direct or indirect controlled subsidiaries falls below 50% of the issued and outstanding shares of Earthstone Common Stock; provided, however, that in calculating an Oak Valley Triggering Event, issuances of Earthstone Common Stock to third parties that are not Affiliates of Earthstone or Oak Valley shall not be taken into account; (b) a Removal Event (within the meaning of the Amended Operating Agreement) and (c) June 1, 2017.

(c)Appendix A of the Contribution Agreement is hereby amended to (i) amend the definition of “Flatonia Designee” so that the reference to “Section 9.10(a)” is replaced with “Section 9.10(b)” and (ii) amend the definition of “Flatonia Observer” so that the reference to “Section 9.10(b)” is replaced with “Section 9.10(a).”

Section 1.2Miscellaneous.

(a)Except as expressly set forth in this Amendment, the Contribution Agreement is hereby ratified and confirmed in accordance with its terms.  

(b)GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL.  

(i)THIS AMENDMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE

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WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

(ii)THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE CIVIL DISTRICT COURTS OF THE STATE OF TEXAS LOCATED IN HARRIS COUNTY, TEXAS AND APPROPRIATE APPELLATE COURTS THEREFROM, AND EACH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY DOCUMENT DELIVERED IN CONNECTION HEREWITH MAY BE HEARD AND DETERMINED IN SUCH COURTS.  THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH DISPUTE, CONTROVERSY OR CLAIM BROUGHT IN ANY SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE, CONTROVERSY OR CLAIM.  EACH PARTY AGREES THAT A JUDGMENT IN ANY SUCH DISPUTE MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY APPLICABLE LAW.

(iii)EACH OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY DOCUMENT DELIVERED IN CONNECTION HEREWITH.  EACH PARTY ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL AND THAT IT HAS KNOWINGLY AND VOLUNTARILY AGREED TO THIS WAIVER OF ITS RIGHT TO TRIAL BY JURY.

(c)This Amendment may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement.  Any Party’s delivery of an executed counterpart signature page by facsimile or email is as effective as executing and delivering this Amendment in the presence of the other Party.  No Party shall be bound until such time as all of the Parties have executed counterparts of this Amendment.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.

PARALLEL RESOURCE PARTNERS, LLC

By: /s/ John K. Howie

John K. Howie

Managing Director

FLATONIA ENERGY, LLC

By: /s/ John K. Howie

John K. Howie

President

SABINE RIVER ENERGY, LLC

By: /s/ Frank A. Lodzinski

Frank A. Lodzinski

President

OAK VALLEY RESOURCES, LLC

By: /s/ Frank A. Lodzinski

Frank A. Lodzinski

Chief Executive Officer and President

OAK VALLEY OPERATING, LLC

By: /s/ Frank A. Lodzinski

Frank A. Lodzinski

President

EARTHSTONE ENERGY, INC.

By: /s/ Frank A. Lodzinski

Frank A. Lodzinski

Chief Executive Officer and President