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: February 28, 2018

(Date of earliest event reported)

(Exact name of registrant as specified in its charter)

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:

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

On February 28, 2018, the Board of Directors (the “Board”) of Earthstone Energy, Inc., a Delaware corporation (the “Company”), approved cash bonus awards, granted awards (the “RSU Awards”) of restricted stock units of the Company (“RSU or “RSUs”) and granted awards (the “Performance Awards”) of performance units (the “Performance Units”) to certain named executive officers listed below (the “NEOs”), pursuant to the Company’s 2014 Long-Term Incentive Plan, as amended (the “Plan”), RSU award agreements and Performance Unit award agreements. The Board also approved the form of Performance Unit award agreement for executive officers that are granted Performance Units (the “Executive PSU Agreement”). The form of RSU award agreement (the “Executive RSU Agreement”) for RSU Awards granted to executive management of the Company from time to time under the Plan is included as Exhibit 10.1 hereto and the form of Executive PSU Agreement is included as Exhibit 10.2 hereto. Each RSU granted in accordance with the Executive RSU Agreement represents the contingent right to receive one share of Class A common stock, $0.001 par value per share, of the Company (“Class A Common Stock”).

The following table shows the amount of cash bonuses awarded to the NEOs:   

The following table sets forth the RSU Awards and the Performance Awards granted to the NEOs:

The RSU Awards are time vested and will vest on an equal quarterly basis over a three-year period with the first vesting date on June 30, 2018.

The Performance Units granted to each NEO are payable in shares of Class A Common Stock based upon the achievement by the Company over a period commencing on February 28, 2018 and ending on February 28, 2021 (the “Performance Period”) of performance criteria established by the Board.  The number of shares of Class A Common Stock that may be issued pursuant to a Performance Award will be determined by multiplying the number of Performance Units granted under the Performance Award by the Relative TSR Percentage.  The “Relative TSR Percentage” is the percentage, if any, achieved by attainment of the following performance criteria for the Performance Period, as certified by the Board: (i) if the Company’s total shareholder return (“TSR”) measured against the Company’s peer group is below the 35th percentile, the Relative TSR Percentage is 0%; (ii) if the TSR measured against the Company’s peer group is at the 35th percentile, the Relative TSR Percentage is 50%; (iii) if the TSR measured against the Company’s peer group is at the 50th percentile, the Relative TSR Percentage is 100%; (iv) if the TSR measured against the Company’s peer group is at the 75th percentile, the Relative TSR Percentage is 150%; and (v) if the TSR measured against the Company’s peer group is in the 90th percentile or above, the Relative TSR Percentage is 200%, with 200% being the maximum and the Board applying straight line interpolation for all points between such performance levels.  TSR for the Company and each of the peer companies is generally determined by dividing (A) the volume weighted average price of a share of stock for the trading days during the thirty calendar days ending on and including the last calendar day of the Performance Period minus the volume weighted average price of a share of stock for the trading days during the thirty calendar days ending on and including the first day of the Performance Period plus cash dividends paid over the Performance Period by (B) the volume weighted average price of a share of stock for the trading days during the thirty calendar days ending on and including the first day of the Performance Period.

Unless otherwise determined by the Board or the Compensation Committee of the Board, each recipient will forfeit his or her Performance Units if the recipient’s employment with the Company terminates during the Performance Period for any reason other than for death, disability, termination by the Company without cause or termination by the NEO for good reason.  If employment is terminated during the Performance Period due to death, disability, termination by the Company without cause or termination by the NEO for good reason, the NEO is entitled to receive payment with respect to his Performance Units based on actual performance for the Performance Period.  In the event of a change of control event of the Company during the Performance Period, the Relative TSR Percentage will be determined based on actual performance as if the Performance Period ended on the date of the change of control

event; provided that the minimum Relative TSR Percentage will be 100%, and outstanding Performance Units will be settled immediately following such date.

The description of the form of Executive RSU Agreement and the form of Executive PSU Agreement contained in this Item 5.02 do not purport to be complete and are qualified in their entirety by reference to the form of Executive RSU Agreement and the form of Executive PSU Agreement included as Exhibit 10.1 and Exhibit 10.2, respectively, to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are filed with this Current Report on Form 8-K:

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.