Item 1.01 Entry into a Material Definitive
Agreement.
Agreement and Plan of Merger
On September 6, 2022, Sitio
Royalties Corp., a Delaware corporation (“Sitio”), Sitio Royalties Operating Partnership, LP, a Delaware limited partnership
and subsidiary of Sitio (“Sitio Opco”), Snapper Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of
Sitio (“New Parent”), Snapper Merger Sub IV, Inc., a Delaware corporation and wholly owned subsidiary of New Parent (“Bass
Merger Sub”), Snapper Merger Sub V, Inc., a Delaware corporation and wholly owned subsidiary of New Parent (“Sitio Merger
Sub”), and Snapper Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of Sitio Opco (“Opco
Merger Sub LLC”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Brigham Minerals, Inc.,
a Delaware corporation (“Brigham”) and Brigham Minerals Holdings, LLC, a Delaware limited liability company and subsidiary
of Brigham (“Brigham Opco”). Capitalized terms used herein but not otherwise defined will have the meanings ascribed to them
in the Merger Agreement.
Pursuant to the terms of the
Merger Agreement, Sitio will acquire Brigham in an all-stock transaction through: (i) the merger of Brigham Merger Sub with and into Brigham
(the “Brigham Merger”), with Brigham surviving the Brigham Merger as a wholly owned subsidiary of New Parent, (ii) the merger
of Sitio Merger Sub with and into Sitio (the “Sitio Merger”), with Sitio surviving the Sitio Merger as a wholly owned subsidiary
of New Parent, and (iii) the merger of Opco Merger Sub LLC with and into Brigham Opco (the “Opco Merger,” and, together with
the Brigham Merger and the Sitio Merger, the “Mergers”), with Brigham Opco surviving the Opco Merger as a wholly owned subsidiary
of Sitio Opco, in each case on the terms set forth in the Merger Agreement. The Sitio Merger and the Brigham Merger shall become effective
concurrently (such time as the Sitio Merger and the Brigham Merger become effective, the “First Effective Time”), and the
Opco Merger shall become effective immediately following the First Effective Time (such time as the Opco Merger becomes effective, the
“Second Effective Time”).
On the terms and subject to
the conditions set forth in the Merger Agreement, (i) at the First Effective Time, (A) each share of Brigham’s Class A common stock,
par value $0.01 per share, issued and outstanding immediately prior to the First Effective Time will be converted into the right to receive
1.133 fully-paid and nonassessable shares of Class A common stock, par value $0.0001 per share, of New Parent (the “New Parent Class
A Common Stock”), (B) each share of the Brigham’s Class B common stock, par value $0.01 per share, issued and outstanding
immediately prior to the First Effective Time will be converted into the right to receive 1.133 fully-paid and nonassessable shares of
Class C common stock, par value $0.0001 per share, of New Parent (the “New Parent Class C Common Stock”), (C) each share of
Sitio’s Class A common stock, par value $0.0001 per share (the “Sitio Class A Common Stock”), issued and outstanding
immediately prior to the First Effective Time will be converted into one share of New Parent Class A Common Stock and (D) each share of
Sitio’s Class C common stock, par value $0.0001 per share (the “Sitio Class C Common Stock” and, together with the Sitio
Class A Common Stock, the “Sitio Common Stock”), issued and outstanding immediately prior to the First Effective Time, will
be converted into one share of New Parent Class C Common Stock, in each case, excluding shares owned by Sitio, Brigham or any wholly owned
subsidiary of Sitio or Brigham and, to the extent applicable, shares owned by stockholders who have perfected and not withdrawn a demand
for appraisal rights pursuant to the Delaware General Corporation Law and, (ii) at the Second Effective Time, each Brigham Opco Unit issued
and outstanding immediately prior to the Second Effective Time will be converted into the right to receive 1.133 common units representing
limited partnership interests in Sitio Opco (the “Opco LP Units”).
As a result of the Mergers
and as of the closing of the Mergers (the “Closing”), Sitio stockholders immediately prior to the First Effective Time will
own approximately 54% of the outstanding shares of New Parent, and Brigham stockholders immediately prior to the First Effective Time
will own approximately 46% of the outstanding shares of New Parent. Following the Closing, New Parent will operate under the name Sitio
Royalties Corp.
The completion of the Mergers
is subject to certain customary mutual conditions, including (i) the receipt of the required approvals from Sitio’s and Brigham’s
respective stockholders, (ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, (iii) the
absence of any governmental order or law that makes consummation of the Mergers illegal or otherwise prohibited, (iv) New Parent’s
registration statement on Form S-4 having been declared effective by the U.S. Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “Securities Act”), and (v) the shares of New Parent Class A Common Stock
issuable in
connection
with the Merger having been authorized for listing on the New York Stock Exchange, subject to official notice of issuance. 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), the absence of a material adverse effect on the other party, the other party having
performed in all material respects its obligations under the Merger Agreement, and the receipt by such party of a favorable tax opinion.
Pursuant
to the Merger Agreement, Sitio, as the sole stockholder of New Parent, agreed to elect as directors of New Parent, to be effective as
of the First Effective Time, (i) five persons designated by Sitio, who, prior to the First Effective Time, are members of Sitio’s
board of directors, to the board of directors of New Parent (the “New Parent Board”) and (ii) four persons designated by Brigham,
who, prior to the First Effective Time, are members of the board of directors of Brigham (the “Brigham Board” and such persons,
the “Brigham Designated Directors”), to the New Parent Board. The New Parent Board will consist of nine directors. New
Parent agreed, following the Closing, to take all actions reasonably necessary to ensure that each Brigham Designated Director is included
in the slate of nominees recommended by the New Parent Board to the stockholders of New Parent for election as directors at the 2023 annual
meeting of stockholders of New Parent.
The Merger Agreement also
contains covenants of Brigham, including, among other things, covenants (i) not to solicit proposals relating to alternative transactions,
(ii) subject to certain exceptions, not to enter into discussions concerning or provide information in connection with alternative transactions,
(iii) subject to certain exceptions, to recommend that its stockholders adopt the Merger Agreement, (iv) not to fail to make, withdraw,
modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to Sitio, the Brigham Board’s recommendation
that the stockholders of Brigham approve and adopt the Merger Agreement and the transactions contemplated thereby (the “Brigham
Board Recommendation”), and (v) not to recommend the approval or adoption of, or publicly propose to recommend, approve or adopt,
any competing proposal.
Prior to, but not after, receipt
of the approval of the Merger Agreement and the transactions contemplated thereby by Brigham’s stockholders (the “Brigham
Stockholder Approval”), the Brigham Board may, in response to an unsolicited superior proposal for an alternative transaction or
an intervening event, effect a change to the Brigham Board Recommendation (a “Brigham Change of Recommendation”)in certain
limited circumstances, subject to complying with certain notice and other specified conditions, including giving Sitio the opportunity
to propose revisions to the terms of the Merger Agreement during the applicable match right period as set forth in the Merger Agreement.
The Merger Agreement contains
certain termination rights for each of Sitio and Brigham, including, among other rights, the right to terminate (i) by mutual written
consent of Sitio and Brigham, (ii) by either Sitio or Brigham, if (A) the Closing has not occurred on or before 5:00 p.m. Houston, Texas
time on June 6, 2023, (B) the other party breaches any of their respective representations or warranties or if such party fails to perform
their respective covenants such that certain conditions to closing cannot be satisfied, and the breach or breaches of such representations
or warranties or the failure to perform such covenant, as applicable, is not cured or cannot be cured in accordance with the terms of
the Merger Agreement or (C) the Brigham Stockholder Approval has not been obtained upon a vote at a duly held special meeting of Brigham’s
stockholders to vote upon the transactions contemplated by the Merger Agreement, (iii) by Sitio, in the event of a Brigham Change of Recommendation,
upon which Brigham will be required to pay Sitio a termination fee of $65,000,000 (the “Company Termination Fee”), and (iv)
by Brigham, in order to enter into a definitive agreement with respect to a superior proposal, upon which Brigham will be required to
pay Sitio the Company Termination Fee.
In the event the Merger Agreement
is terminated by either Sitio or Brigham due to a breach of the other party’s representations, warranties or covenants or inaccuracy
of such party’s representations such that certain conditions to closing cannot be satisfied and, in each case, such breach is not
cured in accordance with the terms of the Merger Agreement, and (i) an alternative proposal has been made prior to such termination and
(ii) the breaching party enters into a definitive agreement with respect to any alternative transaction within six months after the date
of such termination involving more than 50% of the breaching party’s equity or assets, then the breaching party will be required
to pay the non-breaching party a termination fee. Under these circumstances, if Sitio is the breaching party, then Sitio will be required
to pay Brigham a termination fee of $75,000,000. If Brigham is the breaching party, then Brigham will be required to pay Sitio the Company
Termination Fee.
The Merger Agreement contains
customary representations and warranties of Sitio and Brigham 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 Sitio and Brigham, including, among others, covenants relating to the conduct of their respective businesses
during the interim period between the date of the Merger Agreement and the Closing, the obligation of each party to refrain from taking
certain actions without the other party’s consent and the obligation of Brigham to call a meeting of its stockholders for purposes
of obtaining the Brigham Stockholder Approval.
Pursuant to the Merger Agreement,
Sitio and New Parent agreed to enter into, at or prior to the Closing, a Registration Rights Agreement (the “Registration Rights
Agreement”), in substantially the form attached as Exhibit B to the Merger Agreement, with certain holders pursuant to which New
Parent will agree to file within 15 business days after the Closing a shelf registration statement under the Securities Act to permit
the public resale of certain securities of New Parent held by such holders and use its commercially reasonable efforts to cause such registration
statement to become effective as soon as practicable after the filing thereof, subject to certain customary thresholds and conditions.
Sitio and New Parent will agree to pay certain expenses of the parties incurred in connection with the exercise of their rights under
the Registration Rights Agreement, and indemnify them for certain securities law matters in connection with any registration statement
filed pursuant thereto.
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
the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein
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
Sitio, Brigham or their respective subsidiaries or affiliates or to modify or supplement any factual disclosures about Sitio or Brigham
included in their public reports filed with the SEC. The representations, warranties and covenants contained in the Merger Agreement were
made only for purposes of such agreements and as of specific dates, were solely for the benefit of the respective parties to such 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 respective parties to such agreements instead of establishing these matters as facts,
and may be subject to standards of materiality 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 of 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 Sitio’s public
disclosures.
Voting and Support Agreements
Immediately following the
execution and delivery of the Merger Agreement, Sitio, Brigham and each of (a) BX Royal Aggregator LP, a Delaware limited partnership
(“Royal Aggregator”) and Rock Ridge Royalty Company LLC, a Delaware limited liability company (“Rock Ridge” and
together with Royal Aggregator, “Blackstone”), (b) KMF DPM HoldCo, LLC (“KMF”), Chambers DPM HoldCo, LLC (“Chambers”,
and together with KMF, “Kimmeridge”) and (c) Source Energy Leasehold, LP, a Delaware limited partnership (“SEL”)
and Permian Mineral Acquisitions, LP, a Delaware limited partnership (“PMA” and together with SEL, “Oaktree” and,
collectively with Blackstone and Kimmeridge, the “Supporting Stockholders”) entered into Voting and Support Agreements (the
“Support Agreements”). The Support Agreements provide, among other things, the obligation of the Supporting Stockholders,
collectively representing approximately 83.7% of the issued and outstanding shares of Sitio Common Stock, to approve the transactions
contemplated by the Merger Agreement via written consent on the terms set forth therein, and, for certain of the Supporting Stockholders,
to vote in favor of the Brigham Designated Directors to be nominated to the New Parent Board at the 2023 annual meeting of stockholders
of New Parent. Pursuant to the Support Agreements with Kimmeridge and Oaktree, Kimmeridge and Oaktree, which collectively represent approximately
58.9% of the issued and outstanding shares of Sitio Common Stock, agreed not to transfer or otherwise dispose of any Sitio Class A Common
Stock, Sitio Class C Common Stock or Sitio Opco Units beneficially owned by them, other than certain permitted transfers, during the term
of the Support Agreements.
The foregoing description
of the Support Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Support
Agreements, copies of which are filed as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K and are incorporated herein by
reference.
No Offer or Solicitation
This communication relates
to a proposed business combination transaction (the “Merger”) between Sitio and Brigham. This communication is for informational
purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any
vote or approval, in any jurisdiction, pursuant to the Merger or otherwise, nor shall there be any sale, issuance, exchange or transfer
of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer of securities shall be
made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Important Additional Information
In connection with the Merger,
the post-combination company, New Parent, will file with the SEC a registration statement on Form S-4, which will include a proxy statement
of Brigham, a consent solicitation statement of Sitio and a prospectus of New Parent. The Merger will be submitted to Brigham’s
stockholders for their consideration. Sitio, Brigham and New Parent may also file other documents with the SEC regarding the Merger. After
the registration statement has been declared effective by the SEC, a definitive consent solicitation statement/proxy statement/prospectus
will be mailed to the stockholders of Sitio and Brigham. This document is not a substitute for the registration statement and consent
solicitation statement/proxy statement/prospectus that will be filed with the SEC or any other documents that Sitio, Brigham or New Parent
may file with the SEC or send to stockholders of Sitio or Brigham in connection with the Merger. INVESTORS AND STOCKHOLDERS OF SITIO AND
BRIGHAM ARE URGED TO READ THE REGISTRATION STATEMENT AND CONSENT SOLICITATION STATEMENT/PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE
AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS,
CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND RELATED MATTERS.
Investors and stockholders
will be able to obtain free copies of the registration statement and the consent solicitation statement/proxy statement/prospectus (when
available) and all other documents filed or that will be filed with the SEC by Sitio, Brigham or New Parent, through the website maintained
by the SEC at http://www.sec.gov.
Participants in the Solicitation
Sitio, Brigham and their respective
directors and executive officers may be deemed to be participants in the solicitation of proxies from Brigham’s stockholders in
connection with the Merger. Information regarding the directors and executive officers of Brigham is set forth in Brigham’s Definitive
Proxy Statement on Schedule 14A for its 2022 Annual Meeting of Stockholders, which was filed with the SEC on April 13, 2022. Information
regarding the directors and executive officers of Sitio is set forth in Sitio’s Definitive Proxy Statement on Schedule 14A for its
Special Meeting of Stockholders, which was filed with the SEC on May 5, 2022, and certain of its Current Reports on Form 8-K. Other information
regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or
otherwise, will be contained in the consent solicitation statement/proxy statement/prospectus and other relevant materials to be filed
with the SEC when they become available. You may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov.
Forward-Looking Statements
The information included herein
and in any oral statements made in connection herewith include “forward-looking statements” within the meaning of Section
27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of
present or historical fact included herein, regarding the proposed Merger between Sitio and Brigham, the likelihood that the conditions
to the consummation of the Merger will be satisfied on a timely basis or at all, Sitio’s and Brigham’s ability to consummate
the Merger at any time or at all, the benefits of the Merger and the post-combination company’s future financial performance following
the Merger, as well as the post-combination company’s strategy, future operations, financial position, estimated revenues, and losses,
projected costs, prospects, plans and objectives of management are forward looking statements. When used herein, including any oral statements
made in connection herewith, the words “may,” “could,” “believe,” “anticipate,” “intend,”
“estimate,” “expect,” “project” and similar expressions and the negative of such words and
similar
expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying
words. These forward-looking statements are based on Sitio’s and Brigham’s management’s current expectations and assumptions
about future events and are based on currently available information as to the outcome and timing of future events. Such statements may
be influenced by factors that could cause actual outcomes and results to differ materially from those projected. Except as otherwise
required by applicable law, Sitio and Brigham disclaim any duty to update any forward-looking statements, all of which are expressly
qualified by the statements in this section, to reflect events or circumstances after the date hereof. Sitio and Brigham caution you
that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many
of which are beyond the control of Sitio and Brigham. These risks include, but are not limited to, the post-combination company’s
ability to successfully integrate Sitio’s and Brigham’s businesses and technologies; the risk that the expected benefits
and synergies of the Merger may not be fully achieved in a timely manner, or at all; the risk that Sitio or Brigham will not, or that
following the Merger, New Parent will not, be able to retain and hire key personnel; the risk associated with Sitio’s and Brigham’s
ability to obtain the approvals of their respective stockholders required to consummate the Mergers and the timing of the closing of
the Merger, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all or the failure of
the transaction to close for any other reason or to close on the anticipated terms, including the anticipated tax treatment; the risk
that any regulatory approval, consent or authorization that may be required for the Merger is not obtained or is obtained subject to
conditions that are not anticipated; unanticipated difficulties or expenditures relating to the transaction, the response of business
partners and retention as a result of the announcement and pendency of the transaction; Sitio’s ability to finance New Parent (including
the repayment of certain of Brigham’s indebtedness) on acceptable terms or at all; uncertainty as to the long-term value of New
Parent’s common stock; and the diversion of Sitio’s and Brigham’s management’s time on transaction-related matters.
Should one or more of the risks or uncertainties described herein and in any oral statements made in connection therewith occur, or should
underlying assumptions prove incorrect, actual results and plans could different materially from those expressed in any forward-looking
statements. Additional information concerning these and other factors that may impact Sitio’s and Brigham’s expectations
and projections can be found in Sitio’s periodic filings with the SEC, including Sitio’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2021, Part II, Item 1A “Risk Factors” in Sitio’s Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K and Brigham’s periodic filings with the SEC, including Brigham’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2021 and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Sitio’s
and Brigham’s SEC filings are available publicly on the SEC’s website at www.sec.gov.