Exhibit 10.4

Execution Version

VOTING AGREEMENT

THIS VOTING AGREEMENT (this “Agreement”) is dated as of May 9, 2017, by and
among Earthstone Energy, Inc., a Delaware corporation (“Earthstone”), EnCap
Investments L.P., a Delaware limited partnership (“EnCap”), Oak Valley
Resources, LLC, a Delaware limited liability company (“OVR”), and Bold Energy
Holdings, LLC, a Texas limited liability company (“Bold” and, together with
EnCap and OVR, the “Stockholders”).

WHEREAS, Earthstone, Earthstone Energy Holdings, LLC, a Delaware limited
liability company (“EEH”), Lynden USA Inc., a Utah corporation
(“Lynden”),  Lynden USA Operating, LLC, a Texas limited liability company
(“Lynden Sub”), Bold and  Bold Energy III, LLC, a Texas limited liability
company and subsidiary of Bold (“Bold Sub”), have executed, delivered, and
closed a Contribution Agreement, dated as of November 7, 2016 and as amended on
March 21, 2017 (the “Contribution Agreement”), that provided for, among other
things, (i) the contribution to EEH by Earthstone of certain assets of
Earthstone in exchange for units of EEH; (ii) the contribution to EEH by Lynden
of all of the membership interests of Lynden Sub, in exchange for units of EEH;
(iii) the contribution to EEH by Bold of all of the membership interests of Bold
Sub in exchange for units of EEH; (iv) Earthstone’s recapitalization of its
outstanding common stock as of the Closing Date into Class A Common Stock and
authorization of the Class B Common Stock; and (v) Bold’s purchase of Class B
Common Stock representing approximately 60% of the Common Stock of Earthstone
directly from Earthstone for cash (collectively such transactions are referred
to as the “Combination Transaction”)  (capitalized terms used and not otherwise
defined herein shall have the meanings attributed thereto in the Contribution
Agreement);

WHEREAS, each of the Stockholders is, as of the date hereof, the record and/or
beneficial owner of that number of shares of (i) Class A Common Stock, par value
$0.001 per share (the “Class A Common Stock”), of Earthstone, and (ii) Class B
Common Stock, par value $0.001 per share (“Class B Common Stock” and, together
with Class A Common Stock, “Common Stock”), of Earthstone, in each case, as set
forth opposite such Stockholder’s name on Schedule A hereto;

WHEREAS, prior to the Closing, the board of directors of Earthstone included
three representatives of EnCap, two members of Earthstone management, and two
independent directors;

WHEREAS, upon the Closing, the board of directors of Earthstone was expanded to
nine members, four designated by EnCap, three independent directors, and two
members of Earthstone management;

WHEREAS, upon the Closing, the post-combination members of Bold and OVR own and
control a majority of the outstanding Common Stock and, therefore, possess
sufficient shares to alter the composition of the board of directors of
Earthstone through director elections.

NOW, THEREFORE, in consideration of the execution and delivery by Earthstone and
Bold of the Contribution Agreement and the mutual representations, warranties,
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

Section 1.Representations and Warranties of the Stockholders. As of the date
hereof, each of the Stockholders hereby represents and warrants to Earthstone,
severally and not jointly, as follows:

(a)Such Stockholder is the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and
unless otherwise indicated, the record owner of the shares of Common Stock (as
may be adjusted from time to time pursuant to Section 4 hereof, the “Shares”)
set forth opposite such Stockholder’s name on Schedule A to this Agreement and
such Shares represent all of the shares of Common Stock beneficially owned by
such Stockholder as of the date hereof.  For purposes of this Agreement, the
term “Shares” shall include any shares of Common Stock issuable to such
Stockholder upon exercise or conversion of any existing right, contract, option,
or warrant to purchase, or securities convertible into or exchangeable for,
Common Stock, as the case may be (“Stockholder Rights”) that are currently
exercisable or convertible or become exercisable or convertible

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and any other shares of Common Stock such Stockholder may acquire or
beneficially own during the term of this Agreement.

(b)Such Stockholder has all requisite organizational power and authority to
execute and deliver this Agreement and to perform its obligations contemplated
hereby. This Agreement has been validly executed and delivered by such
Stockholder and, assuming that this Agreement constitutes the legal, valid and
binding obligation of Earthstone and the other parties hereto, constitutes the
legal, valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms (except insofar as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ rights generally, or by principles
governing the availability of equitable remedies).

(c)The execution and delivery of this Agreement by such Stockholder does not,
and the performance of this Agreement by such Stockholder will not, (i) conflict
with the certificate of formation or limited liability company agreement of such
Stockholder as presently in effect, (ii) conflict with or violate any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to such
Stockholder or by which it is bound or affected, (iii) (A) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, (B) give to any other person any rights of
termination, amendment, acceleration or cancellation of, or (C) result in the
creation of any pledge, claim, lien, charge, encumbrance or security interest of
any kind or nature whatsoever upon any of the properties or assets of the
Stockholder under, any agreement, contract, indenture, note or instrument to
which such Stockholder is a party or by which it is bound or affected, except
for such breaches, defaults or other occurrences that would not prevent or
materially delay the performance by such Stockholder of any of such
Stockholder’s obligations under this Agreement, or (iv) except for applicable
requirements, if any, of the Exchange Act, the Securities Act of 1933, as
amended (the “Securities Act”), the New York Stock Exchange Market (the “NYSE”)
or the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”), require any filing by such Stockholder with, or any permit,
authorization, consent or approval of, any governmental or regulatory authority,
except where the failure to make such filing or obtain such permit,
authorization, consent or approval would not prevent or materially delay the
performance by such Stockholder of any of such Stockholder’s obligations under
this Agreement.

(d)The Shares and the certificates representing the Shares owned by such
Stockholder are held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all pledges, liens, charges,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder or under applicable federal and state
securities laws or under the agreements set forth on Schedule B hereto.  Such
Stockholder owns of record or beneficially no shares of Common Stock other than
such Stockholder’s Shares as set forth on Schedule A.  

(e)As of the date hereof, neither such Stockholder, nor any of its respective
properties or assets is subject to any order, writ, judgment, injunction,
decree, determination or award that would prevent or delay the consummation of
the transactions contemplated hereby.

Section 2.Representations and Warranties of Earthstone. Earthstone hereby
represents and warrants to the Stockholders as follows:

(a)Earthstone is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Earthstone has
all requisite organizational power and authority to execute and deliver this
Agreement, to perform its respective obligations hereunder and to consummate the
transactions contemplated hereby, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by Earthstone and, assuming that
this Agreement constitutes the legal, valid and binding obligation of the
parties hereto, constitutes the legal, valid and binding obligation of
Earthstone, enforceable against Earthstone in accordance with the terms of this
Agreement (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally, or by principles governing the availability of
equitable remedies).

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(b)The execution and delivery of this Agreement by Earthstone does not, and the
performance of this Agreement by Earthstone will not, (i) conflict with the
certificate of incorporation or bylaws or similar organizational documents of
Earthstone as presently in effect, (ii) conflict with or violate any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Earthstone or by which it is bound or affected, (iii) (A) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, (B) give to any other person any rights of
termination, amendment, acceleration or cancellation of, or (C) result in the
creation of any pledge, claim, lien, charge, encumbrance or security interest of
any kind or nature whatsoever upon any of the properties or assets of Earthstone
or any of its subsidiaries under, any agreement, contract, indenture, note or
instrument to which Earthstone or any of its subsidiaries is a party or by which
Earthstone or any of its subsidiaries is bound or affected, except for such
breaches, defaults or other occurrences that would not prevent or materially
delay the performance by Earthstone of its obligations under this Agreement, or
(iv) except for applicable requirements, if any, of the Exchange Act, the
Securities Act, the NYSE or the HSR Act, require any filing by Earthstone with,
or any permit, authorization, consent or approval of, any governmental or
regulatory authority, except where the failure to make such filing or obtain
such permit, authorization, consent or approval would not prevent or materially
delay the performance by Earthstone of its obligations under this Agreement.

(c)As of the date hereof, none of Earthstone, its subsidiaries or any of their
respective properties or assets are subject to any order, writ, judgment,
injunction, decree, determination or award that would prevent or delay the
consummation of the transactions contemplated hereby.

Section 3.Covenants of the Stockholders. The Stockholders, severally and not
jointly, agree as follows:

(a)For so long as this Agreement is in effect, such Stockholder shall not vote
any Shares or take any other action that would in any way alter the composition
of Earthstone’s board of directors from its composition immediately following
the Closing. For purposes of clarity, and the avoidance of doubt, immediately
following the Closing, Earthstone’s board of directors shall be composed of nine
members, four of which shall be designated by EnCap (the “EnCap Designated
Directors”), three of which shall be independent (the “Independent Directors”),
and two of which shall be members of Earthstone’s management, including
Earthstone’s Chief Executive Officer (the “Earthstone Designated Directors” and,
together with the Independent Directors, the “Non-EnCap Designated Directors”).
Notwithstanding the foregoing, or any provision of this Agreement to the
contrary, at any time during the effectiveness of this Agreement during which
EnCap’s collective ownership of Earthstone, beneficially and of record, exceeds
50% of the total issued and outstanding Common Stock of Earthstone, EnCap may
remove and replace one Non-EnCap Designated Director, and his or her successors,
and such removal will be conducted in accordance with the provisions of
Earthstone’s certificate of incorporation and bylaws then in effect.

(b)Such Stockholder shall not, except as contemplated by the terms of this
Agreement (i) enter into any voting arrangement, whether by proxy, voting
agreement, voting trust, power-of-attorney or otherwise, with respect to the
Shares or (ii) take any other action that would in any way restrict, limit or
interfere with the performance of his, her or its obligations hereunder or the
transactions contemplated hereby.

Section 4.Adjustments Upon Share Issuances, Changes in Capitalization. In the
event of any change in Common Stock or in the number of outstanding shares of
Common Stock by reason of a stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or other similar event
or transaction or any other change in the corporate or capital structure of
Earthstone (including, without limitation, the declaration or payment of an
extraordinary dividend of cash, securities or other property), and consequently
the number of Shares changes or is otherwise adjusted, this Agreement and the
obligations hereunder shall attach to any additional shares of Common Stock,
stockholder rights or other securities or rights of Earthstone issued to or
acquired by Stockholders.

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Section 5.Further Assurances. Each Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
endorsements, consents and other instruments as Earthstone may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.

Section 6.Termination. This Agreement, and all rights and obligations of the
parties hereunder, shall terminate upon the earlier of (a) the fifth anniversary
of the Closing Date; and (b) the date upon which EnCap, OVR and Bold
collectively own, of record and beneficially, less than 20% of Earthstone’s
outstanding voting interests. Notwithstanding the foregoing, Section 8 hereof
shall survive any termination of this Agreement.

Section 7.Action in Stockholder Capacity Only. Each Stockholder signs solely in
its capacity as the record holder and beneficial owner of, or the trustee of a
trust whose beneficiaries are the beneficial owners of, such Stockholder’s
Shares and nothing herein shall limit or affect any actions or omissions taken
by or fiduciary duties of, a Stockholder or any of its affiliates, in its, his
or her, as applicable, capacity as an officer or director of Earthstone to the
extent permitted by applicable law.

Section 8.Miscellaneous.

(a)Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.

(b)Expenses. All costs and expenses incurred in connection with this Agreement
and the transactions contemplated thereby shall be paid by the party incurring
such expenses.

(c)Amendments. This Agreement may not be amended except by Earthstone and all
Stockholders by an instrument in writing signed by Earthstone and the
Stockholders and in compliance with applicable law. Notwithstanding any
provision of this Agreement to the contrary, the parties agree that, in the
event that listing standards or rules promulgated by the NYSE or regulations or
guidelines promulgated by the Securities and Exchange Commission require
modification to the size of Earthstone’s board of directors, the parties will
modify or amend this Agreement as reasonably necessary to ensure compliance with
such requirements.

(d)Notice. All notices and other communications hereunder shall be in writing
and shall be deemed duly given if delivered personally, mailed by registered or
certified mail (return receipt requested), delivered by Federal Express or other
nationally recognized overnight courier service or sent via facsimile to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):

(i) if to a Stockholder, to the address set forth under the name of such
Stockholder on Schedule A hereto

 with a copy to (which shall not constitute notice):

 

 Latham & Watkins LLP
 811 Main Street, Suite 3700
 Houston, Texas 77002
 Attn:                  Michael E. Dillard
 Facsimile:         (713) 546-5401
 Email: michael.dillard@lw.com

 

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(ii)if to Earthstone:

 Earthstone Energy, Inc.

 1400 Woodloch Forest Drive, Suite 300

 The Woodlands, Texas 77380

 Attention:             Frank A. Lodzinski

 Facsimile:            (281) 295-4272

 Email: frank@earthstoneenergy.com

 with a copy to (which shall not constitute notice):

 Jones & Keller, P.C.

 1999 Broadway, Suite 3150

 Denver, CO 80202

 Attention:       Reid A. Godbolt

 Facsimile:      (303) 573-8133

 Email: rgodbolt@joneskeller.com

 

(e)Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. In this Agreement, unless a contrary intention appears, (i) the
words “herein,” “hereof” and “hereunder” and other words of similar import refer
to this Agreement as a whole and not to any particular Section or other
subdivision and (ii) reference to any Section means such Section hereof. No
provision of this Agreement shall be interpreted or construed against any party
hereto solely because such party or its legal representative drafted such
provision.

(f)Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.  Delivery of an executed counterpart signature page
of this Agreement by facsimile or by e-mail of a PDF document is as effective as
executing and delivering this Agreement in the presence of the other parties.

(g)Entire Agreement. This Agreement constitutes the entire agreement of the
parties and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or between any of them, with respect to the subject
matter hereof, and except as otherwise expressly provided herein, is not
intended to confer upon any other person any rights or remedies hereunder.

(h)Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware, without regard to laws that may be applicable under
conflicts of laws principles. Each of the parties hereto irrevocably and
unconditionally (i) agrees that any suit, action or other legal proceeding
arising out of or relating to this Agreement or any of the agreements delivered
in connection herewith or the transactions contemplated hereby or thereby shall
be brought in the state courts of the State of Delaware (or, if such courts do
not have jurisdiction or do not accept jurisdiction, in the United States
District Court located in the State of Delaware), (ii) consents to the
jurisdiction of any such court in any such suit, action or proceeding, and (iii)
waives any objection that such party may have to the laying of venue of any such
suit, action or proceeding in any such court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8(d). Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN

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RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8(h).

(i)Specific Performance. The parties to this Agreement agree that irreparable
damage may occur in the event that any provision of this Agreement is not
performed in accordance with the terms of this Agreement and that Earthstone
shall be entitled to seek specific performance of the terms of this Agreement
without the posting of any bond or security in addition to any other remedy at
law or equity.

(j)Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.

(k)Several Liability.  Each party to this Agreement enters into this Agreement
solely on its own behalf, each such party shall solely be severally liable for
any breaches of this Agreement by such party and in no event shall any party be
liable for breaches of this Agreement by any other party hereto.

(l)Non-Recourse.  No past, present or future director, officer, employee,
incorporator, member, partner, stockholder, agent, attorney, representative or
affiliate of any Stockholder hereto or of any of their respective affiliates
shall have any liability (whether in contract or in tort) for any obligations or
liabilities of such party arising under, in connection with or related to this
Agreement or for any claim based on, in respect of, or by reason of, the
transactions contemplated hereby; provided, however, that nothing in this
Section 8(l) shall limit any liability of any Stockholder hereto for its
breaches of the terms and conditions of this Agreement.

(m)Ownership Interest.  Nothing contained in this Agreement shall be deemed to
vest in Earthstone any direct or indirect ownership or incidence of ownership of
or with respect to any Stockholder’s Shares. All rights, ownership and economic
benefits of and relating to each Stockholder’s Shares shall remain vested in and
belong to such Stockholder, and Earthstone shall have no authority to direct any
Stockholder in the voting or disposition of any of such Stockholder’s Shares,
except as otherwise provided in this Agreement.

(n)Waiver.  No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by applicable law.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, Earthstone, EnCap, OVR, and Bold have caused this Agreement
to be signed by its officer thereunto duly authorized and each Stockholder has
signed this Agreement, all as of the date first written above.

 

 

 

EARTHSTONE ENERGY, INC.

 

 

 

 

 

 

 

By:

/s/ Frank A. Lodzinski

 

 

Name:

Frank A. Lodzinski

 

 

 

 

STOCKHOLDER:

OAK VALLEY RESOURCES, LLC

 

 

 

 

 

By:

/s/ Frank A. Lodzinski

 

 

Name:

Frank A. Lodzinski

 

 

Title:

President and Chief Executive Officer

 

 

 

 

STOCKHOLDER:

ENCAP INVESTMENTS L.P.

 

 

 

 

 

By:

EnCap Energy Capital Fund IX, L.P.

 

 

 

Sole Member of Bold Energy Holdings, LLC

 

 

 

 

 

 

By:

EnCap Equity Fund IX GP, L.P.,

 

 

 

General Partner of EnCap Energy Capital Fund IX, L.P.

 

 

 

 

 

 

By:

EnCap Investments L.P.,

 

 

 

General Partner of EnCap Equity Fund IX GP, L.P.

 

 

 

 

 

 

By:

EnCap Investments GP, L.L.C.,

 

 

 

General Partner of EnCap Investments L.P.

 

 

 

 

 

 

By:

/s/ Robert L. Zorich

 

 

Name:

Robert L. Zorich

 

 

Title:

Managing Partner

 

 

 

 

 

 

 

 

 

 

STOCKHOLDER:

BOLD ENERGY HOLDINGS, LLC

 

 

 

 

 

 

By:

/s/ Joseph L. Castillo

 

 

Name:

Joseph L. Castillo

 

 

Title:

Authorized Person

 

 

 

 

 

SIGNATURE PAGE TO

VOTING AGREEMENT

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SCHEDULE A

OWNERSHIP OF SHARES

 

 

 

 

Name and Address of Stockholder

 

Number of Shares of

Class A Common Stock

Beneficially Owned

 

Number of Shares of  Class B Common

Stock Beneficially

Owned

 

 

 

 

 

 

 

EnCap Investments L.P.

1100 Louisiana Street, Suite 4900

Houston, Texas 77002

 

 

9,162,452

 

36,070,828

 

Oak Valley Resources, LLC

1400 Woodloch Forest Drive, Suite 300
The Woodlands, Texas 77380

 

 

9,162,452

 

-0-

 

Bold Energy Holdings, LLC

600 N. Marienfeld, Suite 1000
Midland, Texas 79701

 

-0-

 

36,070,828

 

 

 

 

 

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SCHEDULE B

LIST OF AGREEMENTS

 

None.