Item 1.01. Entry Into a Material
Definitive Agreement
On May 23, 2021, Cimarex Energy Co. (“Cimarex”)
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cabot Oil & Gas Corporation (“Cabot”)
and Double C Merger Sub, Inc., a wholly owned subsidiary of Cabot (“Merger Sub”).
The Merger Agreement provides that, among other
things and subject to the terms and conditions of the Merger Agreement, (1) Merger Sub will be merged with and into Cimarex (the “Merger”),
with Cimarex surviving and continuing as the surviving corporation in the Merger, and, (2) at the effective time of the Merger (the “Effective
Time”), each outstanding share of common stock of Cimarex (other than certain Excluded Shares, Converted Shares, or shares of
Cimarex common stock subject to a Cimarex Restricted Share Award (each as defined in the Merger Agreement)) will be converted into the
right to receive 4.0146 (the “Exchange Ratio”) shares of common stock of Cabot (the “Merger Consideration”).
Following the closing of the Merger, Cimarex’s existing stockholders and Cabot’s existing stockholders will own approximately
50.5% and 49.5%, respectively, of the issued and outstanding shares of the combined company.
The board of directors of Cimarex has unanimously
(1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and
in the best interests of, Cimarex and its stockholders, (2) approved the Merger Agreement and the transactions contemplated thereby, including
the Merger and (3) resolved to recommend that Cimarex stockholders adopt the Merger Agreement.
Post-Closing Governance
The parties
have agreed to certain governance-related matters, some of which will also be set forth in an amendment to the bylaws of the combined
company at the Effective Time (the form of which is attached as Annex D to the Merger Agreement).
The Merger
Agreement provides that, at the Effective Time, the combined company’s board of directors will have ten members, five who, prior
to the Effective Time, were Cimarex directors (including Mr. Thomas E. Jorden, Cimarex’s Chairman, Chief Executive Officer and President),
and five who, prior to the Effective Time, were Cabot directors (including Dan O. Dinges, Cabot’s Chairman, President and Chief
Executive Officer). Until the completion of the combined company’s 2024 annual meeting (the “Expiration Date”), the
continuing Cimarex directors will have the right to approve any nominee to fill a vacancy among such directors, and the continuing Cabot
directors will have a reciprocal right to approve any nominee to fill vacancies among such directors.
Mr.
Jorden will serve as President and Chief Executive Officer and a member of the board of the combined company. Mr. Dinges will serve
as Executive Chairman of the combined company for a term expiring no later than December 31, 2022, at which time the Executive
Chairman position will be eliminated and the board will elect a Chairman (who may be any member of the board). Following the
Effective Time, the affirmative vote of at least 75% of the combined company’s board of directors (excluding, as applicable,
the person who is the subject of such vote) will be required for (1) the removal of Mr. Dinges from (or failure to appoint, re-elect
or re-nominate Mr. Dinges to, as applicable) his position as Executive Chairman of the combined company prior to December 31, 2022,
and (2) the removal of Mr. Jorden from (or failure to appoint, re-elect or re-nominate Mr. Jorden to, as applicable) his
positions as the President and Chief Executive Officer of the combined company and as a member of the combined company’s board
of directors prior to the Expiration Date. Other senior leadership positions of the combined company will be filled by current
executives of Cimarex and Cabot as set forth in the Merger Agreement.
Each of the
combined company’s board committees will have equal representation of Cimarex and Cabot directors, with committee chairs determined
in accordance with the bylaw amendment. Through the Expiration Date, the lead independent director of the combined company will be a continuing
Cimarex director if the Chairman is a continuing Cabot director, and a continuing Cabot director if the Chairman is a continuing Cimarex
director.
Pursuant
to the Merger Agreement, at closing, the combined company’s headquarters will be located in Houston, Texas, and the combined company
will be given a new name selected by mutual agreement of Cimarex and Cabot before closing.
Treatment of Equity Awards and Preferred Stock
The Merger Agreement provides that at the Effective
Time, each outstanding Cimarex equity award granted prior to the date of the Merger Agreement and/or held by a non-employee member of
the board of directors of Cimarex will accelerate and vest, with any applicable performance metrics deemed met at the greater of the target
level of performance and the level based on the results achieved during the applicable performance period (which shall be deemed to end
prior to the Effective Time), as determined by the compensation committee of the board of directors of Cimarex. Cimarex restricted share
awards and Cimarex deferred stock unit awards will be cancelled and converted into the right to receive the Merger Consideration with
respect to each vested share of Cimarex common stock subject to such award (with a cash payment for the excess shares of Cimarex common
stock that vest above the target performance level with respect to Cimarex’s 2020 performance awards), and each outstanding option
to purchase Cimarex common stock will be converted automatically into an option to purchase a number of shares of Cabot common stock,
as adjusted based on the Exchange Ratio.
Any Cimarex equity awards granted after the date
of the Merger Agreement (other than awards granted to non-employee members of the Cimarex board of directors) will be converted into a
corresponding award with respect to Cabot common stock, with the number of shares of Cabot common stock underlying such award determined
based on the Exchange Ratio. Each such converted Cabot equity award will continue to be subject to the same terms and conditions as applied
to the corresponding Cimarex equity award.
Each share of Cimarex’s 8.125% Series A Cumulative
Perpetual Convertible Preferred Stock issued and outstanding immediately prior to the Effective Time will remain outstanding following
the Merger.
Conditions to the Merger
The completion of the Merger is subject to satisfaction
or waiver of certain customary mutual closing conditions, including (1) the receipt of the required approvals from Cimarex stockholders
and Cabot stockholders, (2) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the “HSR Act”), (3) the absence of any governmental order or law that makes consummation of the
Merger illegal or otherwise prohibited, (4) the effectiveness of the registration statement on Form S-4 to be filed by Cabot pursuant
to which the shares of Cabot common stock to be issued in connection with the Merger are registered with the Securities and Exchange Commission
(the “SEC”), and (5) the authorization for listing of Cabot common stock to be issued in connection with the Merger
on the NYSE. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and
warranties being true and correct (subject to certain materiality exceptions) and the other party having performed in all material respects
its obligations under the Merger Agreement, and the receipt of an officer’s certificate from the other party to such effect.
Representations, Warranties and Covenants
The Merger Agreement contains customary
representations and warranties of Cimarex and Cabot relating to their respective businesses, financial statements and public
filings, in each case generally subject to customary materiality qualifiers. Additionally, the Merger Agreement provides for
customary pre-closing covenants of Cimarex and Cabot, including, subject to certain exceptions, covenants relating to conducting
their respective businesses in the ordinary course consistent with past practice, excluding any commercially reasonable deviations
due to material changes in commodity prices or COVID-19, and to refraining from taking certain actions without the other
party’s consent. Cimarex and Cabot also agreed to use their respective reasonable best efforts to cause the Merger to be
consummated and to obtain expiration or termination of the waiting period under the HSR Act.
The Merger Agreement provides that, during the
period from the date of the Merger Agreement until the Effective Time, each of Cimarex and Cabot will be subject to certain restrictions
on its ability to solicit alternative acquisition proposals from third parties, to provide non-public information to third parties and
to engage in discussions with third parties regarding alternative acquisition proposals, subject to customary exceptions. Cimarex is required
to call a meeting of its stockholders to adopt the Merger Agreement and, subject to certain exceptions, to recommend that its stockholders
approve the Merger Agreement. Cabot is required to call a meeting of its stockholders to approve the issuance of Cabot common stock in
the Merger and amendment to Cabot’s certificate of incorporation to increase the number of authorized shares thereunder (of which
only the stock issuance approval is a condition to the completion of the Merger).
Termination
The Merger Agreement contains termination rights
for each of Cimarex and Cabot, including, among others, if the consummation of the Merger does not occur on or before January 23, 2022
(the “End Date”). Upon termination of the Merger Agreement under certain circumstances, including (1) termination in
the event of a change of recommendation by a party’s board of directors or a willful and material breach by a party of its non-solicitation
obligations (if the terminating party has been adversely affected thereby), or (2) termination by either party because the Merger has
not been consummated by the End Date, in the event that either a party’s stockholder approval shall not have been obtained and such
party’s board has made a change in its recommendation or such party has willfully and materially breached its non-solicitation obligations
and the non-breaching party has been adversely affected thereby, Cimarex or Cabot, as applicable, would be required to pay the other party
a termination fee of $250 million. In addition, if (1) the Merger Agreement is terminated because of a failure to obtain either party’s
stockholder approval, and on or before the date of any such termination an alternative acquisition proposal has been publicly announced
at least five business days prior to such party’s stockholders’ meeting, or (2) the Merger Agreement is terminated because
the Merger has not been consummated by the End Date or the Merger Agreement is terminated due to a breach by either Cimarex or Cabot that
would cause a closing condition not to be satisfied and an alternative acquisition proposal shall have been publicly announced at least
five business days prior to the date of such termination, then Cimarex or Cabot, as applicable, will be required to pay the other party
a termination fee of $250 million if such party, within nine months after the date of such termination, enters into a definitive agreement
with respect to, or consummates, an alternative acquisition proposal.
In addition, if the Merger Agreement is terminated
because of a failure of Cimarex stockholders or Cabot stockholders to approve the applicable proposals, Cimarex or Cabot, as applicable,
may be required to reimburse the other party for its expenses in an amount equal to $40 million. In no event will either party be entitled
to receive more than one termination fee, net of any expense reimbursement.
The foregoing description of the Merger Agreement
and the transactions contemplated thereby in this Current Report on Form 8-K is only a summary and 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 filed as Exhibit 2.1 hereto
and incorporated by reference herein.
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 Cimarex.
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 are not
third-party beneficiaries under the Merger Agreement and 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 Cimarex’s
public disclosures.