RTLR Rattler Midstream LP

On May 15, 2022, Rattler Midstream LP (“Rattler”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Diamondback Energy, Inc. (“Diamondback”), Rattler Midstream GP LLC, the general partner of Rattler (the “General Partner”), and Bacchus Merger Sub Company, a wholly owned subsidiary of Diamondback (“Merger Sub”).

The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (a) Merger Sub will be merged with and into Rattler (the “Merger”), with Rattler surviving and continuing as the surviving entity in the Merger and (b) each issued and outstanding publicly held common unit representing a limited partner interest in Rattler (each, a “Common Unit”) (other than any Common Units owned by Diamondback and its subsidiaries) (each, a “Public Common Unit”) will be converted into the right to receive 0.113 of a share of common stock, par value $0.01 per share (“Common Stock”), of Diamondback (the “Merger Consideration”, and such ratio, the “Exchange Ratio”).

The Merger Agreement also specifies the treatment of outstanding Rattler equity awards in connection with the Merger, which shall be treated as follows at the Effective Time: (a) each Partnership Phantom Unit (as defined in the Merger Agreement), other than Director Phantom Units (as defined in the Merger Agreement), that is outstanding immediately prior to the Effective Time, will cease to relate to or represent any right to receive Common Units and will be converted, at the Effective Time, into an award of Parent RSUs (as defined in the Merger Agreement), as adjusted by the Exchange Ratio, and with such Parent RSUs otherwise on the same terms and conditions as were applicable to the corresponding Partnership Phantom Units, including any applicable payment timing provisions and distribution equivalent rights, as applicable (and, if applicable, dividend equivalent rights relating to dividends declared with respect to Common Stock during the period beginning at the Effective Time and ending on the date of settlement of such Parent RSU) and (b) each Director Phantom Unit will become fully vested and will be automatically converted into the right to receive, with respect to each Common Unit subject thereto, the Merger Consideration plus any accrued but unpaid amounts in relation to distribution equivalent rights (and, if applicable, dividend equivalent rights relating to dividends declared with respect to Common Stock during the period beginning at the Effective Time and ending on the date of settlement of such Director Phantom Unit).

At the Effective Time, (a) Diamondback E&P LLC, a wholly owned subsidiary of Diamondback (“E&P”), will continue as a Limited Partner (as defined in the Merger Agreement) of Rattler and will continue to hold all of the outstanding Class B units in Rattler, (b) by virtue of the Merger, Diamondback will be admitted as a Limited Partner of Rattler and will hold all of the outstanding Common Units in Rattler, (c) the General Partner will continue as the general partner of Rattler and (d) Rattler (as the surviving entity after the Merger) will continue without dissolution. Following the closing of the Merger, the Common Units will no longer be listed on the Nasdaq Global Select Market.

The Conflicts Committee (the “Conflicts Committee”) of the board of directors of the General Partner (the “GP Board”) has (a) unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are not adverse to the interest of Rattler, including the holders of Public Common Units, and (b) approved the Merger Agreement and the transactions contemplated thereby, including the Merger, with such approval by the Conflicts Committee constituting “Special Approval” for all purposes of the First Amended and Restated Agreement of Limited Partnership of Rattler, dated May 28, 2019 (the “Partnership Agreement”), including Section 7.9(d) thereof. The Conflicts Committee recommended to the GP Board (i) the approval of the Merger Agreement, the execution, delivery and performance of the Merger Agreement and the transactions contemplated thereby, including the Merger, and (ii) that the GP Board resolve to direct that the Merger Agreement and the transactions contemplated thereby, including the Merger, be submitted to a vote of the limited partners of Rattler (the “Limited Partners”) for approval pursuant to Section 14.3 of the Partnership Agreement.

The GP Board (acting upon the recommendation of the Conflicts Committee) has unanimously (a) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are not adverse to the interest of Rattler, including the holders of Public Common Units, (b) authorized and approved the execution, delivery and performance of the Merger Agreement and the transactions contemplated thereby, including the Merger, (c) directed that the Merger Agreement be submitted to a vote of the Limited Partners and (d) authorized the Limited Partners to act by written consent pursuant to the terms of the Partnership Agreement.

Contemporaneously with the execution of the Merger Agreement, E&P, in its capacity as the record and beneficial holder of 107,815,152 issued and outstanding Class B units in Rattler, constituting a “Unit Majority” (as defined in the Partnership Agreement), delivered its written consent approving the Merger Agreement and the transactions contemplated thereby, including the Merger (the “Written Consent”). As a result, no other vote or consent of the Limited Partners is required to approve the Merger and the other transactions contemplated by the Merger Agreement.

The Merger Agreement contains customary representations and warranties from the parties, and each party has agreed to customary covenants, including, among others, covenants relating to (a) the conduct of business during the interim period between the execution of the Merger Agreement and the Effective Time and (b) the obligation to use reasonable best efforts to cause the Merger to be consummated.

The completion of the Merger is subject to certain customary closing conditions, including, among others, (a) the Written Consent not having been amended, modified, withdrawn, terminated or revoked, (b) there being no law, injunction or judgment prohibiting consummation of the transactions contemplated under the Merger Agreement, (c) the effectiveness of a registration statement on Form S-4 relating to the shares of Common Stock to be issued as Merger Consideration, (d) authorization for listing on Nasdaq of the shares of Common Stock to be issued as Merger Consideration, (e) subject to specified materiality standards, the accuracy of certain representations and warranties of each party and (f) compliance by each party in all material respects with its covenants.

The Merger Agreement provides for certain termination rights for both Rattler and Diamondback, including in the event that (a) the parties agree by mutual written consent to terminate the Merger Agreement, (b) the Merger is not consummated by December 31, 2022, (c) a law or injunction prohibiting the consummation of the transactions contemplated by the Merger Agreement is in effect and has become final and non-appealable or (d) the other party is in material breach of the Merger Agreement and has not cured the breach within the time period specified in the Merger Agreement. The Merger Agreement provides that upon termination of the Merger Agreement due to a material breach by a party, the breaching party will be obligated to reimburse the other party for its expenses in an amount not to exceed $3.5 million.

The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached as Exhibit 2.1 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.

The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about Rattler, Diamondback or their respective subsidiaries and affiliates. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement as of the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Rattler’s or Diamondback’s public disclosures.