Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On May 15, 2016, Range
Resources Corporation, a Delaware corporation (“Range”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Memorial Resource Development Corp., a Delaware corporation (“MRD”), and Medina Merger
Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Range (“Merger Sub”), pursuant to which Range will acquire MRD in exchange for newly issued shares of Range common stock, par value $0.01 per share (“Range
Common Stock”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will be merged with and into MRD, with MRD continuing as the surviving entity and a wholly owned subsidiary of Range
(the “Merger”).
Under the terms and conditions of the Merger Agreement, prior to the effective time of the Merger (the “Effective
Time”), each issued and outstanding share of MRD common stock, par value $0.01 per share (“MRD Common Stock”) will be converted into the right to receive 0.375 of a share of Range Common Stock (subject to potential adjustment in the
Merger Agreement for stock splits, stock dividends, reverse stock splits and similar corporate events, the “Merger Consideration”). In connection with the Merger, each outstanding share of restricted MRD Common Stock will fully vest
immediately prior to the Effective Time and be treated as a share of MRD Common Stock for all purposes of the Merger Agreement, including the right to receive the Merger Consideration.
Pursuant to the Merger Agreement, prior to the Effective Time and subject to certain procedures, Range will increase the size of the Range Board by one member
and the MRD Board will designate a member of the MRD Board to be nominated as a director to the Range Board to fill the vacancies created on the Range Board to fill such increase, subject to consent by Range’s Governance and Nominating
Committee of such designee. Range and MRD also agreed to use reasonable best efforts to cause an individual to be approved by the Range Board, subject to consent by Range’s Governance and Nominating Committee, prior to the earlier of the filing
of the final pre-mailing amendment to the Joint Proxy Statement with the Securities and Exchange Commission (the “SEC”), or June 30, 2016, whichever is earlier.
MRD has agreed, subject to certain exceptions, to certain prohibitions (the “non-solicitation provisions”) not to directly or indirectly initiate,
solicit or knowingly encourage or knowingly facilitate the making of competing acquisition proposals (“competing proposals”) or to enter into discussions concerning, or to provide confidential information in connection with, competing
proposals. MRD has also agreed to cease all existing discussions with third parties regarding any competing proposals.
The completion of the Merger is
subject to satisfaction or waiver of certain closing conditions, including but not limited to: (i) adoption of the Merger Agreement by MRD’s stockholders and approval of the issuance of Range Common Stock as Merger Consideration (the
“Range Stock Issuance”) by Range’s stockholders, (ii) the expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), (iii) there being no
law, order, decree, ruling or injunction prohibiting consummation of the Merger, (iv) the effectiveness of the registration statement on Form S-4 pursuant to which the shares of Range Common Stock to be issued as Merger Consideration will be
registered, (v) the authorization for listing of the shares of Range Common Stock to be issued in the Merger on the New York Stock Exchange, (vi) subject to specified materiality standards, the accuracy of the representations and
warranties of the other party, (vii) compliance by the other party in all material respects with its covenants and (viii) the consummation of MRD’s previously announced sale of Memorial Production Partners GP LLC to Memorial
Production Partners LP.
The MRD Board may, subject to certain conditions, change its recommendation to MRD’s stockholders to vote in favor of
adoption of the Merger Agreement, or terminate the Merger Agreement if, in connection with receipt of a competing proposal that did not result from a material breach of the non-solicitation provisions, it determines in good faith after consulting
with outside legal counsel and financial advisors that such competing proposal constitutes a “superior proposal” and that the failure to enter into such competing proposal would be inconsistent with its duties under applicable law. The MRD
Board also may, subject to certain conditions, change its recommendation to MRD’s stockholders to vote in favor of adoption of the Merger Agreement (but may not terminate the Merger Agreement) in response to certain “intervening
events” if it determines in good faith after consulting with outside legal counsel and financial advisors that the failure to effect such change in recommendation would be inconsistent with its duties under applicable law.
Pursuant to the Merger Agreement, in response to an intervening event, the Range Board may, subject to certain conditions, change its recommendation that the
Range stockholders approve the Range Stock Issuance, but only if the Range Board reasonably determines in good faith that failure to effect such change in recommendation would be inconsistent with its duties under applicable law.
The Merger Agreement contains customary representations and warranties from both MRD and Range, and each party
has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of its business during the interim period between the execution of the Merger Agreement and the effective time of the Merger, (2) the
obligation to use reasonable best efforts to cause the Merger to be consummated and to obtain expiration of the waiting period under the HSR Act, subject to certain exceptions, (3) the obligation of MRD to call a meeting of its stockholders to
approve the Merger Agreement and, subject to certain exceptions, to recommend that its stockholders approve the Merger Agreement and the Merger and (4) the obligation of Range to call a meeting of its stockholders to approve the Range Stock
Issuance and, subject to certain exceptions, to recommend that its stockholders approve the Range Stock Issuance.
The Merger Agreement allows each of MRD
and Range to terminate the Merger Agreement if (1) Range and MRD agree to terminate the Merger Agreement upon mutual written consent; (2) the Merger is not consummated on or before December 15, 2016; (3) the requisite approval of adoption of the
Merger Agreement is not obtained from MRD’s stockholders or the requisite approval of the Range Stock Issuance is not obtained from Range’s stockholders; (4) a permanent injunction prohibits the Merger or a law makes the Merger illegal or
otherwise prohibited; or (5) the other party breaches a representation, warranty or covenant, and such breach results in the failure of certain closing conditions to be satisfied. The Merger Agreement also provides that the Merger Agreement may be
terminated (i) by MRD, in the event that MRD enters into a “superior proposal” (provided that MRD simultaneously tenders to Range the applicable termination fee described below), (ii) by Range, if the MRD Board changes its recommendation
to its stockholders to approve the adoption of the Merger Agreement, (iii) by either MRD or Range, if the other party breaches its obligations pursuant to the Merger Agreement to hold its respective stockholder meeting or to prepare the joint proxy
statement, (iv) by MRD, if the Range Board changes its recommendation to its stockholders to approve the Range Stock Issuance, and (v) by Range, in order to enter into a “superior proposal” (provided that Range simultaneously tenders to
MRD the applicable termination fee described below).
Upon termination of the Merger Agreement, under certain circumstances, either party may be required
to make an expense reimbursement payment of $25,000,000 to the other party. In certain other circumstances, MRD may be required to pay Range a termination fee of $75,000,000, or Range may be required to pay MRD a termination fee of either
$125,000,000 or $300,000,000. In no event will either party be entitled to receive more than one expense reimbursement payment or more than the highest single termination fee to which either party is entitled. In addition to the termination fees
described above, each party remains liable to the other for any additional damages if such party commits an intentional and material breach of a covenant, agreement or obligation under the Merger Agreement.
The foregoing description of the Merger Agreement is only a summary, does not purport to be complete, and is qualified in its entirety by reference to the
Merger Agreement, which is filed hereto as Exhibit 2.1and is incorporated herein by reference.
Voting and Support Agreement
On May 15, 2015, MRD Holdco LLC (“Holdco”), Jay Graham, WHR Incentive LLC, a limited liability company beneficially owned by Jay Graham and
Anthony Bahr (“WHR”), and Anthony Bahr (collectively, the “Key MRD Stockholders”) entered into a Voting and Support Agreement (the “Voting Agreement”) with Range with respect to the Merger Agreement.
The Voting Agreement generally requires that each of the Key MRD Stockholders vote or cause to be voted all MRD Common Stock owned by such Key MRD Stockholder
in favor of the Merger Agreement and against alternative transactions. Subject to certain exceptions, the Voting Agreement also contains prohibitions applicable to the Key MRD Stockholders that are consistent with the non-solicitation provisions of
the Merger Agreement. Pursuant to the Voting Agreement, for 90 days following the closing date of the Merger, the Key MRD Stockholders are prohibited from effecting certain sales, transfers and dispositions of Range Common Stock received by the Key
MRD Stockholders as Merger Consideration.
In addition, until the earlier of the termination of the Merger Agreement or the consummation of the Merger,
the Voting Agreement restricts the Key MRD Stockholders from selling MRD Common Stock owned by such Key MRD Stockholders, except that immediately after the approval of the Merger Agreement and the Merger by the MRD Stockholders, Holdco may
distribute any or all of its MRD Common Stock to Natural Gas Partners VIII, L.P. (“NGP VIII”), Natural Gas Partners IX, L.P. (“NGP IX”) and NGP IX Offshore Holdings, L.P. (“NGP IX Offshore” and, together with NGP VIII
and NGP IX, the “NGP Funds”) and the holders of Holdco’s incentive units, and the NGP Funds may distribute any or all such MRD Common Stock to their respective partners. Upon such distribution, the Voting Agreement shall no longer
apply to any MRD Common Stock distributed to any person pursuant to such distribution, other than Messrs. Graham and Bahr, WHR and any person that received such distribution in its capacity as a general partner of one of the NGP Funds.
Except in certain instances, the Voting Agreement will terminate upon the earliest to occur of (a) the consummation of the Merger, (b) the
termination of the Merger Agreement pursuant to and in compliance with its terms and (c) a change of recommendation by the MRD Board.
The Voting
Agreement contains certain standstill provisions applicable for one year following the Effective Time which, among other things, restrict the Key MRD Stockholders from acquiring additional Range Common Stock, proposing certain transactions involving
Range and taking certain actions to influence the management of Range.
The Voting Agreement also includes a grant by Holdco to Messrs. Bahr and Graham and WHR of an irrevocable limited
waiver (the “Holdco Voting Agreement Waiver”) of certain provisions of the existing voting agreement among the Key MRD Stockholders and the Company dated June 18, 2014 to allow Messrs. Bahr and Graham and WHR to comply with
obligations under the Voting Agreement discussed above. The Holdco Voting Agreement Waiver will be effective until the date that Messrs. Bahr and Graham and WHR have no further obligations under the Voting Agreement.
The foregoing description of the Voting Agreement is only a summary, does not purport to be complete, and is qualified in its entirety by reference to the
Voting Agreement, which is filed hereto as Exhibit 10.1and is incorporated herein by reference.
The Merger Agreement and the Voting Agreement and the
above descriptions have been included to provide investors and security holders with information regarding the terms of the Merger Agreement and the Voting Agreement. They are not intended to provide any other factual information about MRD, Range or
their respective subsidiaries, affiliates or equity holders. The representations, warranties and covenants contained in the Merger Agreement and the Voting Agreement were made only for purposes of those agreements and as of specific dates; were
solely for the benefit of the respective parties to such agreements; and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each party to the other for the purposes of allocating
contractual risk between them that differ from those applicable to investors. Investors should be aware that the representations, warranties and covenants or any description thereof may not reflect the actual state of facts or condition of MRD,
Range or any of their respective subsidiaries, affiliates, businesses or equity holders. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement and the
Voting Agreement, which subsequent information may or may not be fully reflected in public disclosures by MRD or Range. Accordingly, investors should read the representations and warranties in the Merger Agreement and the Voting Agreement not in
isolation but only in conjunction with the other information about MRD, Range and their respective parents, affiliates and subsidiaries that the respective companies include in reports, statements and other filings they make with the SEC.