Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ESTE > SEC Filings for ESTE > Form 8-K on 16-May-2014All Recent SEC Filings

Show all filings for EARTHSTONE ENERGY INC

Form 8-K for EARTHSTONE ENERGY INC


16-May-2014

Entry into a Material Definitive Agreement, Unregistered Sale of Equity Sec


Item 1.01 Entry into a Material Definitive Agreement.

Exchange Agreement

On May 15, 2014, Earthstone Energy, Inc., a Delaware corporation ("Earthstone" or the "Company"), and Oak Valley Resources, LLC, a Delaware limited liability company ("Oak Valley"), entered into an Exchange Agreement (the "Exchange Agreement"). The Exchange Agreement provides that, upon the terms and subject to the conditions set forth in the Exchange Agreement, Oak Valley will contribute to Earthstone the membership interests of its three subsidiaries, Oak Valley Operating, LLC, EF Non-Op, LLC and Sabine River Energy, LLC, each a Texas limited liability company, inclusive of producing assets, undeveloped acreage and an estimated $138 million of cash, in exchange for the issuance of approximately 9.1 million shares of Earthstone common stock, par value $0.001 per share (the "Common Stock"), to Oak Valley (the "Exchange"). The specified amount of cash represents existing cash on hand plus $107 million of capital commitments available to Oak Valley from its members in accordance with the terms of its limited liability company agreement. Following the Exchange, current Earthstone stockholders will own 16% of the Company's outstanding Common Stock and Oak Valley will own 84% of the Company's outstanding Common Stock. The Exchange Agreement and the Exchange have been approved by the board of directors of Earthstone (the "Board") and the board of managers of Oak Valley.

Stockholders of the Company will be asked to vote on the approval of the issuance of the shares of Common Stock to be issued in the Exchange at a special meeting that will be held on a date to be announced. In addition, at that meeting, stockholders of the Company will be asked to approve (i) an amendment to the Company's certificate of incorporation to increase the Company's authorized capital to 100,000,000 shares of Common Stock and 20,000,000 shares of preferred stock, and (ii) the approval of a new equity incentive plan authorizing up to 750,000 shares of Common Stock for issuance pursuant to awards under such plan. In connection with the execution of the Exchange Agreement, Ray Singleton, the Company's Chief Executive Officer and holder of approximately 26% of the Company's outstanding Common Stock, entered into a voting agreement whereby Mr. Singleton agreed to vote in favor of the Exchange and the related matters, unless the Exchange Agreement is terminated according to its terms prior to the stockholder meeting.

In addition to the approval of the foregoing matters by the stockholders, the closing of the Exchange is subject to customary closing conditions, including, among others, the listing approval by NYSE MKT of the shares to be issued to Oak Valley, the accuracy of each party's representations and warranties contained in the Exchange Agreement and each party's compliance with its covenants and agreements contained in the Exchange Agreement in all material respects.

Earthstone and Oak Valley have made customary representations and warranties in the Exchange Agreement for a transaction of this nature. Some of the Company's representations and warranties are qualified by reference to materiality or Material Adverse Effect, as that term is defined in the Exchange Agreement. The representations and warranties of the parties do not survive termination of the Exchange Agreement or closing of the Exchange. The assertions embodied in the representations and warranties were made solely for purposes of the Exchange Agreement between the Company and Oak Valley and may be subject to important qualifications and limitations agreed to by the parties in connection with the negotiated terms. Moreover, some of those representations and warranties were made as of a specific date, are subject to a contractual standard of materiality different from those generally applicable to stockholders and that have been used for the purpose of allocating risk between the Company and Oak Valley rather than establishing matters as facts. The Company's stockholders are not third-party beneficiaries under the Exchange Agreement and should not rely on the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or conditions of the Company or Oak Valley or any of their respective subsidiaries or affiliates.


In addition, the Company has agreed to certain covenants in the Exchange Agreement, including, among other items, (i) to conduct its business in the ordinary course; (ii) subject to certain exceptions, to hold a meeting of its . . .



Item 3.02 Unregistered Sales of Equity Securities.

As discussed in Item 1.01 of this Current Report on Form 8-K, on May 15, 2014, the Company entered into an Exchange Agreement, pursuant to which Earthstone will issue to Oak Valley approximately 9.1 million shares of Common Stock subject to the conditions set forth in the Exchange Agreement. The issuance of securities is exempt from registration as a private placement under Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder, among other exemptions.



Item 3.03 Material Modification to Rights of Security Holders.

The description of the amendments to the Rights Agreement discussed in Item 1.01 above is hereby incorporated by reference.



Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 13, 2014, the Board adopted the Earthstone Energy, Inc. Employee Severance Compensation Plan (the "Severance Plan"), which will provide benefits to participating employees upon a qualifying termination of employment. All of the Company's Denver-based employees have been named participants in the Severance Plan, including the Company's Chief Executive Officer, Ray Singleton. The Company's only other executive officer, who is working for the Company pursuant to a consulting arrangement, has not been named a participant in the Severance Plan.

Under the Severance Plan, participants are entitled to receive certain severance benefits if the following conditions are met: (A) the Exchange or a similar change of control transaction is consummated, and (B) the employee's employment is terminated by the Company other than for "cause" or due to the participant's "disability," or by the employee for "good reason" within one year following such change of control transaction. The severance benefits include (i) a cash severance payment, the amount of which is equal to a number of weeks of base salary determined based on the employee's period of service, with a maximum of fifty-two (52) weeks, and (ii) up to nine (9) months of premiums for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). In the case of Mr. Singleton, the Exchange Agreement contemplates that he would remain employed by the Company following the closing in the capacity of "Executive Vice President - Northern Region." If (A) the Exchange or similar change of control transaction is consummated, and (B) Mr. Singleton is terminated by the Company from his new position other than for "cause" or disability, or if he terminates his employment for "good reason," in each case, within one year following closing, he would be entitled to receive the severance benefits provided in the Severance Plan. The amount payable to Mr. Singleton would be equal to one year of his base salary, which is currently $231,000, plus the payment of COBRA premiums as described above. If the Exchange or a similar change of control transaction is not consummated, or if Mr. Singleton is not terminated under the circumstances described above within one year following closing, he will not be entitled to receive any payment under the Severance Plan.

The foregoing description of the Severance Plan is qualified in its entirety by the terms of such plan, a copy of which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.



Item 8.01 Other Events.

On May 15, 2014, the Company issued a press release and posted on its website at www.earthstoneenergy.com an investor presentation relating to the Exchange. A copy of the press release and investor presentation are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively.




Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.   Description

    4.1       First Amendment to Rights Agreement, dated as of May
              15, 2014, among Earthstone Energy, Inc., Corporate
              Stock Transfer, Inc., and Direct Transfer LLC
              (incorporated herein by reference to Exhibit 4.1 of
              the Company's Registration Statement on Form 8-A/A,
              filed with the Securities and Exchange Commission on
              May 16, 2014).
    4.2       Second Amendment to Rights Agreement, dated as of May
              15, 2014, between Earthstone Energy, Inc. and Direct
              Transfer LLC (incorporated herein by reference to
              Exhibit 4.2 of the Company's Registration Statement
              on Form 8-A/A, filed with the Securities and Exchange
              Commission on May 16, 2014).
   10.1       Exchange Agreement between Earthstone Energy, Inc.
              and Oak Valley Resources, LLC, dated as of May 15,
              2014.
   10.2       Earthstone Energy, Inc. Employee Severance
              Compensation Plan, dated as of May 13, 2014.
   99.1       Press Release, dated as of May 15, 2014.
   99.2       Investor Presentation, dated as of May 15, 2014.


  Add ESTE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ESTE - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.