California Resources Corporation
09/17/2025 | Press release | Distributed by Public on 09/17/2025 14:51
Material Agreement (Form 8-K)
Item 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On September 14, 2025, California Resources Corporation, a Delaware corporation ("Parent" or "CRC"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and among Parent, Berry Corporation (bry), a Delaware corporation (the "Company" or "Berry") and Dornoch Merger Sub, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Parent ("Merger Sub"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a direct, wholly-owned subsidiary of Parent (the "Surviving Corporation").
On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the "Effective Time"), (i) each share of common stock, par value $0.001 per share, of the Company ("Company Common Stock") issued and outstanding immediately prior to the Effective Time (other than shares of Company Common Stock owned by Parent, the Company, Merger Sub or any other direct or indirect wholly-owned subsidiary of Parent or the Company, in each case, not held on behalf of third parties (such shares, the "Excluded Shares")) will be automatically converted into, and become exchangeable for, 0.0718 (the "Exchange Ratio") shares of common stock, par value $0.01 per share, of Parent ("Parent Common Stock"); (ii) each Excluded Share will be automatically cancelled and cease to exist without payment of any consideration therefor; and (iii) each equity interest of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation. The issuance of Parent Common Stock in respect of the Merger will be registered under a registration statement on Form S-4 that will be filed by Parent, which will include a proxy statement of the Company and a prospectus of Parent (the "Registration Statement").
At the Effective Time, any vesting conditions applicable to each outstanding Company restricted stock unit that is not subject to performance-based vesting conditions (a "Company RSU") under the Stock Plans (as defined in the Merger Agreement) that will accelerate at the Effective Time in accordance with its terms as in effect as of the date of the Merger Agreement (each such Company RSU, a "Single Trigger Company RSU") will automatically accelerate in full, and each Single Trigger Company RSU will automatically be cancelled and will only entitle the holder thereof to receive (without interest) an amount in cash equal to (1)(x) the number of shares of Company Common Stock subject to such Single Trigger Company RSU immediately prior to the Effective Time multiplied by (y) the Equity Award Cash-Out Price (as defined in the Merger Agreement), plus (2) all unpaid dividend equivalents, if any, as of the Effective Time with respect to such Single Trigger Company RSU, less (3) applicable taxes required to be withheld with respect to such payment.
At the Effective Time, each Company RSU under the Stock Plans that is not a Single Trigger Company RSU, whether vested or unvested, will automatically cease to represent a restricted stock unit denominated in shares of Company Common Stock and will be converted into a restricted stock unit denominated in shares of Parent Common Stock (a "Parent RSU"). The number of shares of Parent Common Stock subject to each such Parent RSU will be equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Company RSU immediately prior to the Effective Time multiplied by (y) the Exchange Ratio.
At the Effective Time, any vesting conditions applicable to each outstanding performance-based restricted stock unit (a "Company PSU") under the Stock Plans that will accelerate at the Effective Time in accordance with its terms as in effect as of the date of the Merger Agreement (each such Company PSU, a "Single Trigger Company PSU"), whether vested or unvested, will automatically accelerate, and each Single Trigger Company PSU will automatically be cancelled and will only entitle the holder thereof to receive (without interest), an amount in cash equal to (1)(x) the number of shares of Company Common Stock subject to such Single Trigger Company PSU immediately prior to the Effective Time based on target performance or, solely to the extent required by the terms of the applicable award agreement, the greater of target performance and actual performance as of immediately prior to the Effective Time as reasonably determined by the Company Compensation Committee (as defined in the Merger Agreement) after good faith consultation with Parent multiplied by (y) the Equity Award Cash-Out Price, plus (2) all unpaid dividend equivalents, if any, as of the Effective Time with respect to such Single Trigger Company PSU (in respect of a number of shares of Company Common Stock based on target performance or, solely to the extent required by the terms of the applicable award agreement, the greater of target performance and actual performance through the Effective Time as reasonably determined by the Company Compensation Committee), less (3) applicable taxes required to be withheld with respect to such payment.
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At the Effective Time, each Company PSU under the Stock Plans that is not a Single Trigger Company PSU (each, a "Non-Single Trigger Company PSU"), whether vested or unvested, will automatically cease to represent a performance stock unit denominated in shares of Company Common Stock and will be converted into a Parent RSU. The number of shares of Parent Common Stock subject to each such Parent RSU will be equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such Non-Single Trigger Company PSU immediately prior to the Effective Time, based on the greater of target performance and actual performance through the Effective Time as reasonably determined by the Company Compensation Committee in consultation with Parent, multiplied by (y) the Exchange Ratio.
The Merger Agreement contains customary representations, warranties and pre-closing covenants made by Parent, the Company and Merger Sub, including the covenants by each of Parent and the Company to conduct its respective business in the ordinary course, and to refrain from taking certain specified actions, in each case, without the consent of the other party. Parent has conditionally bound a buy-side representations and warranties insurance policy. The representations and warranties insurance policy will be subject to certain customary retention amounts, exclusions and deductibles.
Consummation of the Merger is subject to customary conditions, including, among others: the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company Common Stock entitled to vote on the matter (the "Requisite Company Vote"); expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and receipt of the FERC Approval (as defined in the Merger Agreement); effectiveness of the Registration Statement; approval of the listing on the New York Stock Exchange of the shares of Parent Common Stock issuable to the holders of shares of Company Common Stock with respect to the Merger, subject to an official notice of issuance; and the absence of any law or order that prohibits the consummation of the Merger. 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 qualifiers), the other party having performed in all material respects its obligations under the Merger Agreement and the absence of any event or development that would constitute a Company Material Adverse Effect or Parent Material Adverse Effect (each as defined in the Merger Agreement), as applicable, since the date of the Merger Agreement, and solely with respect to the Company's obligation, the receipt of a tax opinion to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the Merger should qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
In addition, Parent and the Company are each required to use their respective reasonable best efforts to consummate and make effective, in the most expeditious manner reasonably practicable, the transactions contemplated by the Merger Agreement, including to obtain applicable approvals or clearances of the Merger under the HSR Act and Section 203 of the U.S. Federal Power Act (the "FPA"), except that the Merger Agreement does not require Parent to offer, propose, negotiate, commit to, take or effect any action that would constitute a Burdensome Condition (as defined in the Merger Agreement) for the purpose of avoiding any impediment under the Antitrust Laws (as defined in the Merger Agreement) or the FPA. Consummation of the transaction is not subject to any financing condition.
The Merger Agreement provides certain termination rights for each of Parent and the Company, including: (i) upon mutual written consent of Parent and the Company; (ii) by either party: (A) if any law or governmental order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger becomes final and non-appealable, (B) if the Merger is not consummated on or before March 14, 2026 (the "Outside Date") (subject to up to two three-month extensions by either party upon written notice in certain circumstances), or (C) if the Requisite Company Vote has not been obtained at the Company Stockholders Meeting (as defined in the Merger Agreement); (iii) by Parent if: (A) the Company's board of directors (the "Company Board") makes a Change of Recommendation (as defined in the Merger Agreement) prior to obtaining the Requisite Company Vote, (B) prior to the Effective Time, (1) the Company fails to perform its covenants or agreements under the Merger Agreement, or (2) the Company breaches its representations or warranties or any representation or warranty of the Company becomes untrue, and in the case of each of the foregoing clauses (1) and (2), such that the corresponding closing conditions in the Merger Agreement would not be satisfied and such breach or failure to perform or to be true and correct is not curable prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of 30 days following written notice thereof by Parent or three business days prior to the Outside Date, or (C) prior to the Effective Time, there has occurred a Company Material Adverse Effect (as defined in the Merger Agreement) such that the corresponding closing condition in the Merger Agreement would not be satisfied and that is not curable prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of 75 days following written notice thereof by Parent or three business days prior to the Outside Date; and (iv) by the Company if: (A) the Company Board terminates the Merger Agreement under specified circumstances to accept
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an unsolicited Superior Proposal (as defined in the Merger Agreement) from a third party, (B) prior to the Effective Time, (1) Parent or Merger Sub fails to perform its covenants or agreements under the Merger Agreement, or (2) Parent or Merger Sub breaches its representations or warranties or any representation or warranty of Parent or Merger Sub becomes untrue, and in the case of each of the foregoing clauses (1) and (2), such that the corresponding closing conditions in the Merger Agreement would not be satisfied and such breach or failure to perform or to be true and correct is not curable prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of 30 days following written notice thereof by the Company or three business days prior to the Outside Date, or (C) prior to the Effective Time, there has occurred a Parent Material Adverse Effect (as defined in the Merger Agreement) such that the corresponding closing condition in the Merger Agreement would not be satisfied and that is not curable prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of 75 days following written notice thereof by the Company or three business days prior to the Outside Date.
The Merger Agreement provides that the Company will be required to pay Parent a termination fee of $12,044,370.00 if the Merger Agreement is terminated under specified circumstances in which: (i) the Company Board makes a Change of Recommendation (as defined in the Merger Agreement); (ii) the Company Board terminates the Merger Agreement under specified circumstances to accept an unsolicited Superior Proposal (as defined in the Merger Agreement) from a third party; or (iii) the Merger Agreement is terminated under specified circumstances and, within nine months following such termination, the Company enters into a definitive agreement with a third party with respect to an Acquisition Proposal (as defined in the Merger Agreement, with references to 20% deemed to be references to 50% for purposes of this clause (iii)).
Additionally, in the event the Merger Agreement is terminated by the Company or Parent (i) for failure to obtain the Requisite Company Vote, the Company will be required to pay Parent the reasonable, documented, out-of-pocket costs and expenses incurred by or on behalf of Parent and its subsidiaries in connection with or related to the Merger Agreement and the transactions, and (ii) under other certain specified circumstances, Parent will be required to pay the Company the reasonable, documented, out-of-pocket costs and expenses incurred by or on behalf of the Company in connection with or related to the Merger Agreement and the transactions, in the case of each of the foregoing clauses (i) and (ii), the amount of such reimbursement not to exceed $5,000,000.00.
The Merger Agreement provides that in no event will the termination of the Merger Agreement relieve any party of any liability or damages to any other party resulting from fraud or any Willful Breach (as defined in the Merger Agreement) of the Merger Agreement that occurs prior to such termination (which liability or damages the parties acknowledge and agree will not be limited to reimbursement of out-of-pocket fees, costs or expenses incurred in connection with the transactions contemplated by the Merger Agreement, and may also include Benefit of the Bargain Damages (as defined in the Merger Agreement), in addition to any other rights or remedies available at law or equity, except that the Company's recovery in such circumstance is subject to a specified liability cap other than in the case of fraud).
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is being filed as Exhibit 2.1 hereto and is incorporated herein by reference.
The Merger Agreement, and the foregoing description of the Merger Agreement, have been included to provide investors and our stockholders with information regarding the terms of the Merger. The assertions embodied in the representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement, were solely for the benefit of the parties to the Merger Agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by information in a confidential disclosure letter provided by the Company to Parent in connection with the signing of the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders, or may have been used for the purpose of allocating risk between the parties to the Merger Agreement. Accordingly, the representations and warranties in the Merger Agreement should not be relied on by any persons as characterizations of the actual state of facts and circumstances about the Company, Parent or Merger Sub at the time they were made or otherwise, and information in the Merger Agreement should be considered in conjunction with the entirety of the factual disclosure about the Company in the Company's public reports filed with the U.S. Securities and Exchange Commission (the "SEC"). Information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company's public disclosures.
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