Item
1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On October 14, 2019, Jagged Peak Energy
Inc., a Delaware corporation (“Jagged Peak”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with Parsley Energy, Inc., a Delaware corporation (“Parsley”), and Jackal Merger Sub, Inc., a Delaware corporation
and wholly owned subsidiary of Parsley (“Merger Sub”), pursuant to which (i) Merger Sub will merge with and into
Jagged Peak (the “Merger”), with Jagged Peak surviving the Merger as a wholly owned subsidiary of Parsley organized
under the laws of the state of Delaware (the “Surviving Corporation”) and (ii) following the Merger, the Surviving
Corporation will merge with and into wholly owned limited liability company subsidiary of Parsley organized under the laws of
the state of Delaware (“LLC Sub” and such merger, the “LLC Sub Merger”), with LLC Sub continuing as the
surviving entity in the LLC Sub Merger and a wholly owned subsidiary of Parsley.
On the terms and subject to the conditions
set forth in the Merger Agreement, upon consummation of the Merger, each share of Jagged Peak common stock, par value $0.01 per
share (“Jagged Peak Common Stock”), issued and outstanding immediately prior to the effective time of the Merger (the
“Effective Time”) (excluding certain Excluded Shares and Non-Cancelled Shares (each, as defined in the Merger Agreement))
shall be converted into the right to receive from Parsley 0.447 fully-paid and nonassessable shares of Class A common stock,
par value $0.01 per share, of Parsley (“Parsley Class A Common Stock”), with cash to be paid in lieu of fractional
shares.
The Merger Agreement contains customary
representations and warranties of Parsley and Jagged Peak 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 Parsley and Jagged Peak, including covenants relating to conducting their respective businesses in the
ordinary course and to refrain from taking certain actions without the other party’s consent. The Merger Agreement also
contains covenants of Jagged Peak not to solicit proposals relating to alternative transactions or, subject to certain exceptions,
enter into discussions concerning or provide information in connection with alternative transactions and, subject to certain exceptions,
to recommend that its stockholders approve and adopt the Merger Agreement. The Merger Agreement also contains covenants of Parsley
not to solicit proposals relating to alternative transactions or enter into discussions concerning or provide information in connection
with alternative transactions and, subject to certain exceptions, to recommend that its stockholders approve the issuance of Parsley
Class A Common Stock in connection with the Merger.
The completion of the Merger is subject
to certain customary mutual conditions, including (i) the receipt of the required approvals from Jagged Peak’s and
Parsley’s stockholders, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Act and
any other applicable antitrust laws, (iii) the absence of any governmental order or law that makes consummation of the Merger
illegal or otherwise prohibited, (iv) Parsley’s registration statement on Form S-4 having been declared effective
by the U.S. Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, (v) Parsley Class A
Common Stock issuable in connection with the Merger having been authorized for listing on the New York Stock Exchange, upon official
notice of issuance, and
(vi) the receipt by each party of a customary opinion that
the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the U.S. tax code.
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.
Prior to, but not after, the adoption of
the Merger Agreement by Jagged Peak’s stockholders, the board of directors of Jagged Peak (the “Jagged Peak Board”)
may withhold, withdraw, qualify or modify its recommendation that Jagged Peak’s stockholders adopt the Merger Agreement
as result of (i) a Company Superior Proposal or (ii) a Company Intervening Event (as each is defined in the Merger Agreement),
if the Jagged Peak Board determines that the failure to make such a change of recommendation would be inconsistent with the fiduciary
duties owed by the Jagged Peak Board to Jagged Peak’s stockholders under applicable law, subject to complying with certain
notice and other specified conditions, including giving Parsley the opportunity to propose revisions to the Merger Agreement during
a match right period.
Prior to, but not after, the approval of
the issuance of Parsley Class A Common Stock in connection with the Merger by Parsley’s stockholders, the board of
directors of Parsley (the “Parsley Board”) may withhold, withdraw, qualify or modify its recommendation that Parsley’s
stockholders approve the issuance of Parsley Class A Common Stock in connection with the Merger as result of a Parent Intervening
Event (as defined in the Merger Agreement), if the Parsley Board determines that the failure to make such a change of recommendation
would be inconsistent with the fiduciary duties owed by the Parsley Board to Parsley’s stockholders under applicable law,
subject to complying with certain notice and other specified conditions, including giving Jagged Peak the opportunity to propose
revisions to the terms of the Merger Agreement during a match right period.
The Merger Agreement contains termination
rights for each of Parsley and Jagged Peak, including, among others, if the consummation of the Merger does not occur on or before
May 14, 2020 (the “Outside Date”). Upon termination of the Merger Agreement under specified circumstances, including,
generally, the termination by Parsley in the event of a change of recommendation by the Jagged Peak Board, Jagged Peak would be
required to pay Parsley a termination fee of $57,435,000. Upon termination of the Merger Agreement under specified circumstances,
including the termination by Jagged Peak in the event of a change of recommendation by Parsley Board, Parsley would be required
to pay Jagged Peak a termination fee of $189,035,000. Upon termination of the Merger Agreement by either Parsley or Jagged Peak
following a failure to obtain the Company Stockholder Approval (as defined in the Merger Agreement), Jagged Peak would be required
to pay Parsley expenses in the amount of $16,410,000. Upon termination of the Merger Agreement by either Parsley or Jagged Peak
following a failure to obtain the Parent Stockholder Approval (as defined in the Merger Agreement), Parsley would be required
to pay Jagged Peak expenses in the amount of $54,010,000.
Prior to the Effective Time, Parsley is
required to take all necessary corporate action so that upon and after the Effective Time, the size of Parsley Board is increased
by two members (each determined to be independent by the Parsley Board and mutually agreed upon between Jagged Peak and Parsley),
and, prior to the consummation of the Merger, (i) one member of the Jagged Peak Board is appointed to the Parsley Board as
a Class II director, with a term ending at the 2022 annual meeting of Parsley stockholders, to fill the vacancy created by
such increase and with such new Class II director to be appointed to the Nominating, Environmental, Social and Governance
Committee of the Parsley Board and (ii) one member of the Jagged Peak Board is appointed to Parsley Board as a Class I
director, with a term ending at the 2021 annual meeting of Parsley, to fill the other vacancy on the Parsley Board created by
such increase and with such new Class I director being appointed to the Reserves Committee of the Parsley Board.
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 by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto
and incorporated by reference herein.
Voting and Support Agreements
As an inducement to Parsley and Jagged
Peak entering into the Merger Agreement, on October 14, 2019, Q-Jagged Peak (“Quantum”) which beneficially owns,
in the aggregate, approximately 69% of the outstanding Jagged Peak Common Stock entered into a Voting and Support Agreement with
Parsley (the “Quantum Voting
Agreement”), by and among Parsley, Jagged Peak, Merger
Sub and Quantum, pursuant to which Quantum has agreed to vote its shares in favor of the matters to be submitted to Jagged Peak’s
stockholders in connection with the Merger, subject to the terms and conditions set forth in the Quantum Voting Agreement.
The Quantum Voting Agreement provides that
if the Jagged Peak Board changes its recommendation with regard to Jagged Peak stockholders’ approval of the Merger Agreement,
then the number of Quantum’s shares of Jagged Peak Common Stock subject to the obligations under the Quantum Voting Agreement
will be reduced such that the aggregate number of shares required to vote in favor of the Merger under the Voting Agreements will
be equal to the sum of (a) the number of shares that would represent 34% of the aggregate voting power of the outstanding
shares of the Jagged Peak Common Stock plus (b) the number of shares, the aggregate voting power of which, as a percentage
of the aggregate voting power of all shares not covered by clause (a), is equal to the percentage of aggregate voting power with
respect to all outstanding shares of Jagged Peak Common Stock held by stockholders of Jagged Peak voting in favor of the Merger.
Additionally, as an inducement to Parsley
and Jagged Peak entering into the Merger Agreement, on October 14, 2019, Bryan Sheffield, executive chairman of Parsley,
who beneficially owns, in the aggregate, approximately 10% of the outstanding Parsley Class A Common Stock and Class B
Common Stock, together, entered into a Voting and Support Agreement with Jagged Peak (the “Sheffield Voting Agreement”),
by and among Parsley, Jagged Peak, Merger Sub and Bryan Sheffield, pursuant to which Mr. Sheffield has agreed to vote his
shares in favor of the matters to be submitted to Parsley’s stockholders in connection with the Merger, subject to the terms
and conditions set forth in the Sheffield Voting Agreement.
The summaries of the Quantum Voting Agreement
and Sheffield Voting Agreement are qualified in their entirety by reference to the full text of the Quantum Voting Agreement and
Sheffield Voting Agreement, copies of which are attached as Exhibit 10.1 and Exhibit 10.2, respectively, to this Current
Report on Form 8-K and are incorporated into this Item 1.01 by reference.