EARTHSTONE ENERGY INC appointed new CEO

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

Departure of Directors and Named Executive Officers 

In accordance with the terms of the Merger Agreement, Robert J. Anderson, Frank A. Lodzinski, Frost W. Cochran, David S. Habachy, Jay F. Joliat, Phillip D. Kramer, Ray Singleton, Douglas E. Swanson, Jr., Brad A. Thielemann, Zachary G. Urban and Robert L. Zorich, such members compromising all of the directors of the Company prior to the Effective Time, resigned as directors of the Company effective as of the Effective Time. None of these resignations were a result of any disagreement with the Company, its management or its board of directors. Earthstone Energy, LLC will be managed by its sole member, Permian Resources. 

Also effective as of the Effective Time, Robert J. Anderson ceased to serve as the President and Chief Executive Officer of the Company, Mark Lumpkin, Jr. ceased to serve as the Executive Vice President and Chief Financial Officer of the Company, Steven C. Collins ceased to serve as Executive Vice President, Chief Operations Officer of the Company, Timothy D. Merrifield ceased to serve as Executive Vice President, Geology and Geophysics of the Company, and Tony Oviedo ceased to serve as Executive Vice President, Accounting and Administration of the Company. Earthstone Energy, LLC, as a member managed limited liability company, will be ultimately managed by the directors and officers of its sole member, Permian Resources. 


Compensatory Arrangements 

On October 31, 2023, the Compensation Committee of the Board of Directors (the "Earthstone Board") of the Company (and, with respect to the amendment (the "Executive CIC Severance Plan Amendment") to the Earthstone Energy, Inc. Second Amended and Restated Change in Control and Severance Benefit Plan (the "Executive CIC Severance Plan"), the Earthstone Board) approved: 


- 
transaction bonuses under the executive retention program previously disclosed by the Company and Permian Resources in the joint proxy statement/prospectus filed on September 26, 2023 for each of Messrs. Anderson, Lumpkin, Collins, Merrifield and Oviedo in an amount equal to 100% of each such officer's annualized base salary ($650,000 for Mr. Anderson, $450,000 for each of Messrs. Lumpkin and Collins, $400,000 for Mr. Merrifield and $425,000 for Mr. Oviedo) to be paid on the Closing Date in recognition of their extraordinary efforts to consummate the Mergers; 


- 
an amendment to the award agreements governing all outstanding Earthstone RSUs to provide for a Cash Dividend Right (as defined in the Earthstone LTIP), or if the applicable award agreement already provides for a Cash Dividend Right, to clarify the language regarding such right, in either case, in accordance with the Earthstone LTIP, with such amendment subject to entry into a restrictive covenant agreement for certain officers and senior managers of the Company; 


- 
an amendment to the award agreements governing all outstanding Earthstone PSUs to (i) provide for a Cash Dividend Right, or if the applicable award agreement already provides for a Cash Dividend Right, to clarify the language regarding such right, in either case, in accordance with the Earthstone LTIP, and (ii) provide for vesting of such awards at the maximum performance level immediately prior to the Effective Time, in each case, with such amendment subject to entry into a restrictive covenant agreement for certain officers and senior managers of the Company; and 


- 
the Executive CIC Severance Plan Amendment, which, in addition to making certain administerial and clarifying changes to the Executive CIC Severance Plan: 


(i) 
requires payment of 100% of each Eligible Individual's AIP (each such capitalized term as defined in the Executive CIC Severance Plan) for the 2023 annual incentive year to the extent such Eligible Individual's employment is terminated without Cause or such Eligible Individual resigns for a CIC Good Reason (each such capitalized term as defined in the Executive CIC Severance Plan and referred to herein as a "Qualifying Termination") following the Effective Time and during the fourth calendar quarter of 2023 rather than a prorated AIP (provided, that if an Eligible Individual experiences a Qualifying Termination during the fourth calendar quarter of 2023 but following payment of his or her AIP for 2023, such Eligible Individual shall not be eligible to receive an additional AIP for 2023); 


(ii) 
revises the definition of "AIP" for scheduled Eligible Individuals (including each of Messrs. Anderson, Lumpkin, Collins, Merrifield and Oviedo) for Qualifying Terminations that occur after October 31, 2023 but on or prior to December 31, 2023 to mean the annual incentive payment determined by multiplying such Eligible Individual's target annual incentive payment opportunity for 2023 by (x) if the Eligible Individual was employed by the Company or any of its affiliates in 2022 and eligible to receive a full annual incentive payment for the 2022 annual incentive year, such Eligible Individual's annual incentive performance multiplier for the 2022 annual incentive year, based on actual performance, or (y) if the Eligible Individual was not employed by the Company or any of its affiliates in 2022 or was not eligible to receive a full annual incentive payment for the 2022 annual incentive year, the annual incentive performance multiplier that applied for similarly situated employees of the Company or any of its affiliates for the 2022 annual incentive year, based on actual performance; 


(iii) 
revises provisions pertaining to the timing of payments of premiums for continued health coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended for the relevant periods provided for under the Executive CIC Severance Plan (the "COBRA Premium Period") to require that such payments be made by the Company in a single lump sum on the same date that other cash Severance Obligations (as defined in the Executive CIC Severance Plan) are paid under the Executive CIC Plan, rather than in monthly installments over the relevant COBRA Premium Period; 


(iv) 
requires cash Severance Obligations to be paid (unless otherwise agreed) within ten business days following the date on which an Eligible Individual's general release of claims becomes irrevocable; and 


(v) 
subjects all Severance Obligations to a revised general release of claims. 


The second and third bullets under Item 2.02 are incorporated by reference into this Item 5.02. The foregoing descriptions of the amendment to the award agreements governing all outstanding Earthstone RSUs, the amendment to the award agreements governing all outstanding Earthstone PSUs, and the Executive CIC Severance Plan Amendment are subject to and qualified in their entirety by reference to Exhibits 10.1, 10.2 and 10.3 of this Current Report on Form 8-K, which are incorporated by reference into this Item 5.02.