PHX Minerals (PHX) - 2025 Q2 - Quarterly Results

Agreement Overview This agreement outlines the terms for WhiteHawk Acquisition's acquisition of PHX Minerals via a tender offer and merger Parties and Transaction WhiteHawk Acquisition will acquire PHX Minerals for $4.35 per share through a two-step tender offer and merger process Key Transaction Terms | Term | Details | | :--- | :--- | | Acquirer | WhiteHawk Acquisition, Inc. ("Parent") | | Target | PHX Minerals Inc. ("Company") | | Offer Price | $4.35 per Company Common Share in cash | | Transaction Structure | Cash tender offer followed by a merger under DGCL Section 251(h) | - The Company's Board of Directors has unanimously determined the agreement and transactions are advisable and fair, and recommends that stockholders tender their shares in the offer[11] - Concurrently with the agreement, certain specified stockholders have entered into Tender and Support Agreements, committing to tender their shares[12] - Parent has secured financing through Equity Commitment Letters and a Limited Guarantee to ensure funds are available for the transaction[12] The Offer This article details the terms of the tender offer, including conditions, timing, and required actions by both parties The Offer Merger Sub will commence a cash tender offer for all Company shares, contingent upon a majority of shares being tendered Offer Details | Parameter | Value | | :--- | :--- | | Offer Price | $4.35 per share, in cash | | Shares Sought | Any and all outstanding Company Common Shares | | Initial Expiration | 12:00 midnight, NYC time, on the 20th Business Day after commencement | - The offer is subject to the "Minimum Condition", requiring a number of shares representing at least a majority of all outstanding shares be validly tendered[15] - Merger Sub is required to extend the offer for up to three consecutive 10-business-day periods if the Minimum Condition is the sole unsatisfied condition[21] - Parent and Merger Sub must file a Tender Offer Statement on Schedule TO with the SEC on the day the offer commences[28][31] Company Actions The Company must file a Schedule 14D-9 with its board recommendation and provide stockholder lists to facilitate the offer - The Company must file a Schedule 14D-9 with the SEC concurrently with the Schedule TO, which will contain the Company Board's recommendation to stockholders[33] - The Company is required to provide Parent and Merger Sub with access to its stockholder list and other information to help communicate the offer[35] - Parent and Merger Sub must hold the stockholder information in confidence and use it only in connection with the offer and merger[35] The Merger This article describes the mechanics of the merger, which will follow the successful completion of the tender offer The Merger Following the tender offer, Merger Sub will merge into the Company, which will become a wholly-owned subsidiary of Parent - Following the tender offer, Merger Sub will merge into the Company, which will survive as a wholly-owned subsidiary of Parent[37] - The merger will be governed by Section 251(h) of the DGCL, eliminating the need for a vote by the Company's stockholders[37] - At the effective time of the merger, the Company's certificate of incorporation and bylaws will be amended and restated[38] Closing and Effective Time of the Merger The merger closing will occur on the same day as the tender offer acceptance and becomes effective upon filing a Certificate of Merger - The merger closing will occur on the same business day as the Acceptance Time of the tender offer, subject to the satisfaction of all conditions[40] - The merger becomes effective at the time the Certificate of Merger is filed with the Delaware Secretary of State[40] Governance Matters The directors of Merger Sub will become the directors of the surviving corporation immediately following the merger - At the Effective Time, the directors of Merger Sub will become the directors of the Surviving Corporation[42] Conversion of Securities in the Merger This article details the conversion of Company shares and equity awards into cash consideration following the merger Conversion of Securities Each remaining Company share will be converted into the right to receive the cash merger consideration, with certain exceptions - Each outstanding Company Common Share will be converted into the right to receive the Merger Consideration, which is equal to the Offer Price[44] - Shares owned by the Company, Parent, or Merger Sub ("Cancelled Shares") will be cancelled and retired with no consideration paid[46] Payment for Securities; Surrender of Certificates Parent will appoint a Paying Agent to manage the exchange of stock certificates and book-entry shares for cash payments - Parent will appoint a Paying Agent and deposit the aggregate Merger Consideration into an Exchange Fund for the benefit of stockholders[49] - Holders of physical stock certificates must surrender them with a duly executed Letter of Transmittal to receive payment[50] - Holders of book-entry shares will receive payment automatically through DTC's customary procedures[51] - Any portion of the Exchange Fund unclaimed after 12 months will be returned to the Surviving Corporation[53] Dissenting Shares Stockholders who properly exercise appraisal rights under Delaware law will be entitled to the fair value of their shares - Stockholders who properly demand appraisal rights under Section 262 of the DGCL will not receive the Merger Consideration[56] - If a holder fails to perfect or withdraws their appraisal rights, their shares will be converted into the right to receive the Merger Consideration[56] - The Company must promptly notify Parent of any appraisal demands and may not settle any such demands without Parent's written consent[56] Treatment of Company Equity Awards Outstanding Company equity awards will be converted into cash payments, with specific vesting treatments for different award types - Company Time-Based Restricted Shares will be converted into Restricted Cash Awards, vesting on the earlier of their original date or 90 days post-closing[58] - Company Performance-Based Restricted Shares will vest in full, assuming maximum performance, and be cancelled in exchange for a cash payment[59] - Company DCP Units will be cancelled and converted into the right to receive a cash payment equal to the Merger Consideration[61] Withholding Rights The paying parties are entitled to deduct and withhold any amounts required by applicable tax law from payments - The paying parties are entitled to deduct and withhold from any payments the amounts required by any applicable tax law[63] Further Actions Post-merger, the new leadership will execute all necessary actions to formally vest all assets in the Surviving Corporation - Post-merger, the leadership of Parent and the Surviving Corporation will execute all necessary documents to confirm the transfer of all rights and assets[65] Representations and Warranties of the Company This article contains the Company's formal statements regarding its corporate, financial, operational, and legal status Corporate and Financial Matters The Company represents its valid incorporation, capitalization, board approval, and sound financial condition as of May 2025 Company Capitalization (as of May 6, 2025) | Security Type | Authorized | Issued and Outstanding | | :--- | :--- | :--- | | Common Shares | 75,000,000 | 37,922,368 | | Preferred Shares | 10,000 | 0 | - As of the Capitalization Date, there were 1,400,358 Company Restricted Shares and 299,255 Company DCP Units outstanding[74] - The Company Board has unanimously approved the merger and resolved that it be governed by Section 251(h) of the DGCL[78] - Since December 31, 2024, there has not been any event that has had a Company Material Adverse Effect[92] Operational and Legal Matters The Company provides representations on its employee benefits, labor relations, material contracts, and legal compliance - The Company represents that the merger will not trigger severance or result in "excess parachute payments" under Section 280G of the Code[99] - The Company is not a party to any collective bargaining agreements, and there are no pending union representation demands[104] - There are no pending or threatened proceedings that would have a Company Material Adverse Effect[113] - The Company and its subsidiaries are in compliance with applicable Environmental Laws, except where non-compliance would not be material[115] Transaction-Related Matters The Company confirms it has received a fairness opinion and that no state anti-takeover statutes apply to the merger - The Company Board received an opinion from RBC Capital Markets, LLC, stating that the consideration is fair from a financial point of view[142] - The Company represents that the information it provides for the Schedule 14D-9 will be accurate and comply with applicable laws[143] - No state anti-takeover statutes, such as Section 203 of the DGCL, are applicable to the merger or the other transactions[148] Representations and Warranties of Parent and Merger Sub This article contains formal statements from Parent and Merger Sub regarding their corporate status and financing capabilities Parent and Merger Sub Representations Parent and Merger Sub confirm their authority and represent that they have secured sufficient financing for the transaction - Merger Sub was formed solely for the purpose of the merger and has not engaged in any other business activities[167] - Parent and Merger Sub represent that the Surviving Corporation will be solvent immediately after the consummation of the transaction[168] - Parent has provided true and complete copies of the Equity and Debt Commitment Letters, which represent sufficient funds for the transaction[171] - Parent and Merger Sub acknowledge that their obligation to consummate the transaction is not contingent upon obtaining financing[176] Covenants This article outlines the binding agreements and obligations of each party between the signing and closing of the transaction Conduct of Business Pending Closing The Company agrees to operate in the ordinary course of business and is restricted from certain actions without Parent's consent - The Company must conduct its operations in the ordinary course of business consistent with past practice until the closing[181] - The Company is prohibited from actions like issuing new equity, making acquisitions over $100,000, or paying dividends other than its regular quarterly dividend[182][183] No Solicitation by the Company The Company is prohibited from soliciting alternative acquisition proposals but retains a "fiduciary out" for superior offers - The Company is prohibited from initiating, soliciting, or knowingly encouraging any alternative "Company Acquisition Proposal"[190] - The Company Board may engage with an unsolicited proposal if it could lead to a "Superior Company Proposal" and is required by its fiduciary duties[191] - Before changing its recommendation, the Company must provide Parent a five-business-day notice period to negotiate and improve its offer[195] Employee Benefit Matters Parent commits to providing continuing employees with comparable compensation and benefits through the end of 2025 - Through December 31, 2025, Parent will provide continuing employees with substantially comparable compensation and benefits[209] - The merger is acknowledged as a "Change in Control," which may trigger certain provisions in existing employee benefit plans[210] - Continuing employees will receive credit for their years of service with the Company for vesting and eligibility purposes in Parent's benefit plans[212] Indemnification of Directors and Officers Parent agrees to honor all indemnification obligations and maintain D&O insurance for the Company's directors and officers for six years - For six years post-merger, the Surviving Corporation will indemnify all past and present directors and officers to the fullest extent permitted by law[217] - The Surviving Corporation will maintain D&O insurance coverage for six years that is substantially equivalent to existing policies[220] Financing Covenants Parent must use its best efforts to obtain its committed financing, while the Company agrees to provide reasonable cooperation - The Company must provide reasonable best efforts cooperation to Parent in connection with the arrangement of the Debt Financing[231] - Parent and Merger Sub must use reasonable best efforts to arrange, obtain, and consummate the Equity and Debt Financing[233][238] - Parent is prohibited from amending financing letters if such changes would delay or prevent the closing or reduce the total financing amount[233][238] - If debt financing becomes unavailable, Parent must use reasonable best efforts to obtain Alternative Financing on comparable terms[238] Conditions to Consummation of the Merger This article specifies the conditions that must be met for the merger to proceed after the tender offer is completed Conditions to the Merger The merger is conditioned upon the successful completion of the tender offer and the absence of any legal prohibitions - A key condition to the merger is that Merger Sub must have irrevocably accepted for payment all Company shares validly tendered in the Offer[241] - The merger cannot proceed if any governmental entity has enacted a law or issued an order that makes the merger illegal[242] Termination, Amendment and Waiver This article details the conditions under which the agreement can be terminated and the financial consequences of doing so Termination The agreement can be terminated under specific circumstances, including by a set date or if one party breaches its terms - The agreement can be terminated by either party if the tender offer is not consummated by the Outside Date of November 10, 2025[244] - Parent may terminate if the Company Board effects a Company Change of Board Recommendation[244] - The Company may terminate to enter into an agreement for a Superior Company Proposal, provided it pays the Company Termination Fee[245] - The Company may terminate if Merger Sub fails to consummate the offer after all conditions have been satisfied[245] Termination Fees and Expenses A reciprocal termination fee of $6.8 million is payable by either the Company or Parent under specific termination scenarios Termination Fees | Fee | Amount | Payable By | Payable To | Triggering Conditions | | :--- | :--- | :--- | :--- | :--- | | Company Termination Fee | $6,800,000 | Company | Parent | Termination by Parent due to a change in board recommendation, or by the Company to accept a superior proposal. | | Parent Termination Fee | $6,800,000 | Parent | Company | Termination by the Company because Merger Sub fails to consummate the offer when all conditions are satisfied. | - The termination fees are not a penalty but are considered liquidated damages, representing the sole and exclusive remedy for specified termination events[252][253] General Provisions This article contains standard legal clauses governing the interpretation and enforcement of the merger agreement Boilerplate and Legal Clauses The agreement is governed by Delaware law, allows for specific performance, and limits liability to the signatory parties - Representations, warranties, and covenants generally do not survive the Effective Time, except for those that contemplate performance after closing[258] - The agreement is governed by the laws of the State of Delaware, and any legal proceedings must be brought exclusively in Delaware courts[346][347] - The parties are entitled to seek specific performance and injunctions to prevent breaches of the agreement[353] - The Company has the right to seek specific performance to compel Parent to close, but only if the debt financing has been funded[354][355] - The non-recourse clause limits liability to the contracting parties, protecting their respective directors, officers, and affiliates from claims[356] Annex A – Conditions to the Offer This annex lists the specific conditions that must be met for Merger Sub to be obligated to purchase the tendered shares Conditions to the Offer The offer is primarily conditioned on a majority of shares being tendered and the absence of a Material Adverse Effect - The primary condition is the Minimum Condition, requiring a majority of shares to be tendered[362] - Other key conditions include no legal injunctions, the accuracy of Company representations, and that no Company Material Adverse Effect shall have occurred[362][363] - These conditions are for the sole benefit of Parent and Merger Sub and may be waived by them, with certain exceptions[364] Exhibit A – Form Tender and Support Agreement This exhibit provides the form of agreement signed by key stockholders committing their support for the transaction Tender and Support Agreement Overview Certain stockholders agree to tender their shares, vote against competing proposals, and grant Parent an irrevocable proxy - Stockholders party to this agreement commit to promptly tender all their shares into the Offer and not withdraw them[373][374] - Stockholders agree to vote against any competing Company Acquisition Proposal and any other action that would interfere with the merger[379] - Stockholders grant Parent an irrevocable proxy to vote their shares in accordance with the agreement's terms[381] - Stockholders are prohibited from selling or transferring their shares during the agreement period, with limited exceptions[394][396] Exhibit B – Form of Amended and Restated Certificate of Incorporation This exhibit presents the new certificate of incorporation that will govern the Surviving Corporation after the merger Amended and Restated Certificate of Incorporation The new certificate authorizes 150 shares of common stock, provides director indemnification, and opts out of Section 203 - The authorized capital stock of the Surviving Corporation will be 150 shares of Common Stock with a par value of $0.01[433] - The certificate includes provisions to eliminate the personal liability of directors for monetary damages for breaches of fiduciary duty[435] - The corporation expressly elects not to be governed by Section 203 of the DGCL, a common anti-takeover provision[437]