Item 1.01.
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Entry Into a Material Definitive Agreement.
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On January 13, 2017, Noble Energy, Inc. (the “Company”
or “Noble Energy”), Wild West Merger Sub, Inc., a Delaware corporation and indirect wholly owned subsidiary of the
Company (“Merger Sub”), NBL Permian LLC, a Delaware limited liability company and indirect wholly owned subsidiary
of the Company (“Merger Sub II”), and Clayton Williams Energy, Inc., a Delaware corporation (“CWEI”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the Company will acquire CWEI in exchange
for a combination of shares of common stock, par value $0.01 per share, of the Company (“Noble Energy Common Shares”)
and cash. Upon the terms and subject to the conditions of the Merger Agreement, (i) Merger Sub will merge with and into CWEI (the
“Merger”), with CWEI continuing as the surviving corporation in the Merger and an indirect wholly owned subsidiary
of the Company, and (ii) thereafter, CWEI will merge with and into Merger Sub II, with Merger Sub II continuing as the surviving
company and an indirect wholly owned subsidiary of the Company.
Under the terms of the Merger Agreement, at the effective time
of the Merger (the “Effective Time”), each share of common stock, par value $0.10 per share, of CWEI (each, a “CWEI
Common Share”) issued and outstanding immediately prior to the Effective Time (other than CWEI Common Shares held in treasury
and CWEI Common Shares held by stockholders who properly comply in all respects with the provisions of Section 262 of the General
Corporation Law of the State of Delaware (“DGCL”) as to appraisal rights) and each unexercised warrant to purchase
or otherwise acquire CWEI Common Shares (each, a “CWEI Warrant”) issued and outstanding as of the Effective Time, will
be cancelled and extinguished and automatically converted into the right to receive, at the election of the stockholder or warrant
holder, as applicable, and subject to proration as described below, one of the following forms of consideration (the “Merger
Consideration”):
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•
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for
each CWEI Common Share, one of (i) 3.7222 Noble Energy Common Shares (the “Share Consideration”); (ii)(A) $34.75 in
cash (subject to applicable withholding tax), without interest and (B) 2.7874 Noble Energy Common Shares (the “Mixed Consideration”);
or (iii) $138.39 in cash (subject to applicable withholding tax), without interest (the “Cash Consideration”); and
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for
each CWEI Warrant, either (i) the Share Consideration in respect of the number of CWEI Common Shares that would be issued upon
a cashless exercise of such CWEI Warrant immediately prior to the Effective Time (“Warrant Notional Common Shares”);
(ii) the Mixed Consideration in respect of the number of Warrant Notional Common Shares represented by such CWEI Warrant; or (iii)
the Cash Consideration in respect of the number of Warrant Notional Common Shares represented by such CWEI Warrant.
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The Merger Consideration is subject to proration so that the
aggregate Merger Consideration paid in respect of all CWEI Common Shares and CWEI Warrants consists of 75% Noble Energy Common
Shares and 25% cash. No fractional Noble Energy Common Shares will be issued in the Merger, and holders of CWEI Common Shares will,
instead, receive cash in lieu of fractional Noble Energy Common Shares, if any. The implied value of the aggregate Merger Consideration
is $2.7 billion based on the per share closing trading price of Noble Energy Common Shares on January 13, 2017.
At the Effective Time, each share of preferred stock, par value
$0.10 per share, of CWEI (each, a “CWEI Preferred Share”) issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive cash in an amount equal to $1.00 (subject to any applicable withholding tax),
without interest.
Each option to purchase CWEI Common Shares (each, a “CWEI
Option”) that is outstanding immediately prior to the Effective Time will vest and be exchanged for the number of Noble Energy
Common Shares, rounded down to the nearest whole share, equal to the quotient obtained by dividing (i) the product of (A) the number
of CWEI Common Shares subject to the CWEI Option and (B) the amount, if any, by which the per share closing trading price of CWEI
Common Shares on the business day immediately before the closing date of the Merger exceeds the exercise price per CWEI Common
Share otherwise purchasable pursuant to the CWEI Option immediately prior to the Effective Time by (ii) the average of the closing
sale prices of a Noble Energy Common Share as reported on the New York Stock Exchange for the ten consecutive full trading days,
ending at the close of trading on the full trading day immediately preceding the date on which the Effective Time occurs. If such
calculation results in zero or a negative number, the applicable CWEI Option shall be forfeited for no consideration.
At the Effective Time, the restricted CWEI Common Shares (“CWEI
Restricted Share”) outstanding immediately prior to the Effective Time will be converted into a number of restricted Noble
Energy Common Shares equal to the number of CWEI Restricted Shares multiplied by the Share Consideration, rounded up to the nearest
whole share, and subject to the same vesting, repurchase and other restrictions as the CWEI Restricted Shares.
Each of the Company, Merger Sub and CWEI has made
customary representations and warranties and agreed to customary covenants in the Merger Agreement. The Merger is subject to
various closing conditions, including but not limited to (i) approval of the Merger Agreement by at least a majority of
the outstanding CWEI Common Shares, (ii) the expiration or earlier termination of the waiting period under the
Hart–Scott–Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any law, order or
injunction prohibiting the Merger, (iv) the accuracy of each party’s representations and warranties,
(v) each party’s compliance with its covenants and agreements contained in the Merger Agreement and (vi) that
the aggregate number of CWEI Common Shares as to which appraisal rights are exercised does not exceed 10% of the outstanding
CWEI Common Shares.
The Merger Agreement contains certain termination rights for
both the Company and CWEI, including if the Merger is not consummated by July 17, 2017, and further provides that, upon termination
of the Merger Agreement under certain circumstances, CWEI may be required to pay the Company a termination fee equal to $87,000,000.
The Merger Agreement is attached hereto as Exhibit 2.1 and is
incorporated into this Item 1.01 by reference. The foregoing summary of the Merger Agreement has been included to provide investors
and security holders with information regarding the terms of the Merger Agreement and is qualified in its entirety by the terms
and conditions of the Merger Agreement. It is not intended to provide any other factual information about the Company, CWEI or
their respective subsidiaries and affiliates. The Merger Agreement contains representations and warranties by each of the parties
to the Merger Agreement, which were made only for purposes of the Merger Agreement and as of dates specified therein. The representations,
warranties and covenants in the Merger Agreement were made 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 Company, CWEI or any of their respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in the Company’s or CWEI’s public disclosures.
Support Agreement
Contemporaneously with the execution of the Merger Agreement,
the Company, CWEI (solely for certain specified purposes), and certain CWEI stockholders affiliated with Ares Management, LLC
(the “Ares Stockholders”) entered into a support agreement (the “Support Agreement”) pursuant to which
the Ares Stockholders agreed, among other things, not to exercise or assert any appraisal rights under Section 262 of the DGCL
in connection with the Merger. The Ares Stockholders also have agreed, among other things, during the period from January 13,
2017 to and including the date of termination of the Merger Agreement, if any (the “Applicable Period”), to vote all
of the CWEI Common Shares and the CWEI Preferred Shares they beneficially own as of the record date of the special meeting held
for the purpose of adopting the Merger Agreement (the “Record Date”) (i) in favor of the adoption of the Merger Agreement,
(ii) against any alternative proposal, and (iii) against any amendment of CWEI’s certificate of incorporation or by-laws
or other proposal or transaction involving CWEI or any of its subsidiaries which amendment or other proposal or transaction would
in any manner delay, impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the transactions contemplated
by the Merger Agreement or change in any manner the voting rights of any outstanding class of capital stock of CWEI. As of December
31, 2016, the Ares Stockholders owned approximately 35% of the outstanding shares of CWEI.
The Support Agreement is attached hereto as Exhibit 10.1 and
is incorporated into this Item 1.01 by reference. The foregoing summary has been included to provide investors and security holders
with information regarding the terms of the Support Agreement and is qualified in its entirety by the terms and conditions of the
Support Agreement. It is not intended to provide any other factual information about the parties or their respective subsidiaries
and affiliates. The Support Agreement contains representations and warranties by each of the parties to the Support Agreement,
which were made only for purposes of the Support Agreement and as of specified dates. The representations, warranties and covenants
in the Support Agreement were made solely for the benefit of the parties to the Support 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 Support 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 or any of their respective subsidiaries or affiliates. Moreover, information concerning the
subject matter of the representations, warranties and covenants may change after the date of the Support Agreement, which subsequent
information may or may not be fully reflected in the Company’s or CWEI’s public disclosures.
Non-Dissent Agreements
Contemporaneously with the execution of the Merger Agreement,
the Company and CWEI (solely for certain specified purposes) entered into agreements not to dissent (the “Non-Dissent Agreements”)
with Clayton W. Williams, Jr. and The Williams Children’s Partnership Ltd., each a stockholder of CWEI (together, the “Non-Dissenting
Parties”), pursuant to which the Non-Dissenting Parties agreed, among other things, not to exercise or assert any appraisal
rights under Section 262 of the DGCL in connection with the Merger. The Non-Dissenting Parties also have agreed, among other things,
during the Applicable Period, to vote all of the CWEI Common Shares they beneficially own as of the Record Date against any alternative
proposals and against any amendment of CWEI’s certificate of incorporation or by-laws or other proposal or transaction involving
CWEI or any of its subsidiaries, which amendment or other proposal or transaction would in any manner delay, impede, frustrate,
prevent or nullify the Merger, the Merger Agreement or any of the transactions contemplated by the Merger Agreement or change in
any manner the voting rights of any outstanding class of capital stock of CWEI. If the Merger Agreement is terminated by Parent
in certain circumstances, including if the CWEI stockholders do not adopt the Merger Agreement, then the term of the Applicable
Period under the Non-Dissent Agreements will be extended for an additional 180 days following the termination of the Merger Agreement.
The Non-Dissent Agreements are attached hereto as Exhibits 10.2
and 10.3, respectively, and are incorporated into this Item 1.01 by reference. The foregoing summary has been included to provide
investors and security holders with information regarding the terms of the Non-Dissent Agreements and are qualified in their entirety
by the terms and conditions of the Non-Dissent Agreements. It is not intended to provide any other factual information about the
parties or their respective subsidiaries and affiliates. The Non-Dissent Agreements contain representations and warranties by each
of the parties to the Non-Dissent Agreements, which were made only for purposes of the Non-Dissent Agreements and as of specified
dates. The representations, warranties and covenants in the Non-Dissent Agreements were made solely for the benefit of the parties
to the Non-Dissent Agreements; 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 Non-Dissent Agreements
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 or any of their respective subsidiaries
or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change
after the date of the Non-Dissent Agreements, which subsequent information may or may not be fully reflected in the Company’s
or CWEI’s public disclosures.