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| CPK > SEC Filings for CPK > Form 8-K on 20-Apr-2009 | All Recent SEC Filings |
20-Apr-2009
Entry into a Material Definitive Agreement
Covenants
The Merger Agreement also contains customary covenants by each party to the
Merger Agreement. Such covenants include, among others, (a) covenants for the
parties to operate their respective businesses in the ordinary course,
(b) covenants limiting or restricting the applicable party from engaging in the
following: (i) certain acquisitions of assets or equity interests of third
parties, including acquisitions by merger or consolidations with third parties;
(ii) certain sales, leases, licenses, encumbrances or other dispositions of
certain assets; (iii) making certain loans, advances or capital contributions to
third parties; (iv) creating, incurring, assuming or suffering to exist certain
indebtedness, debt securities, guarantees, loans or advances not in existence on
the date of the Merger Agreement, subject to certain exceptions with respect to
Chesapeake and its subsidiaries; and (c) covenants prohibiting the declaration
or payment of dividends or distributions on or the making of other distributions
in respect of any of the parties' capital stock, except the declaration and
payment of regular quarterly cash dividends in amounts consistent with past
practice (subject to normal increases consistent with past practice) with usual
record and payment dates for such dividends in accordance with past dividend
practice. Chesapeake and Florida Public Utilities have agreed that,
notwithstanding section (c) above, they will coordinate with the other with
respect to the payment of dividends on their respective common stock, including
the determination of the record dates and payment dates related thereto, so that
the holders of Chesapeake common stock or Florida Public Utilities common stock
would not receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of common stock or any shares of
Chesapeake common stock that any such holder receives in exchange for Florida
Public Utilities common stock in the Merger.
S-4 Registration Statement/Joint Proxy Statement and Prospectus/Stockholder
Meetings
Chesapeake and Florida Public Utilities have each agreed to prepare and file
with the Securities and Exchange Commission (the "SEC") a mutually acceptable
Joint Proxy Statement/Prospectus and Chesapeake has agreed to prepare and file
with the SEC a registration statement on Form S-4 to register the shares that it
will issue to Florida Public Utilities' stockholders in connection with the
Merger. Each party also agreed to cause a stockholder meeting to be held as
promptly as practicable after the SEC has declared the Form S-4 effective to
consider approval of the Merger and the other transactions contemplated by the
Merger Agreement.
The Merger Agreement provides that the Florida Public Utilities' Board of
Directors shall recommend adoption of the Merger Agreement by Florida Public
Utilities' stockholders and that neither the Board of Directors nor any
committee thereof shall (a) (i) withdraw, qualify or modify in any manner
adverse to Chesapeake, or publicly propose to withdraw, qualify or modify in any
manner adverse to Chesapeake, the approval, recommendation or declaration of
advisability by such Board of Directors or any such committee thereof of the
Merger Agreement, the Merger or the other transactions contemplated by the
Merger Agreement or (ii) recommend, adopt or approve, or publicly propose to
recommend, adopt or approve, any alternative business combination transaction
proposal (any such action described in this Section (a) being a "Recommendation
Change") or (b) approve or recommend, or publicly propose to approve or
recommend, or, except in conjunction with exercising its right to terminate the
Merger Agreement pursuant to the provisions thereof, allow Florida Public
Utilities or any of its subsidiaries to execute or enter into, any letter of
intent, memorandum of understanding, agreement in principle, merger agreement,
acquisition agreement, purchase agreement, option agreement, joint venture
agreement, partnership agreement or other
similar agreement constituting or related to any alternative business
combination transaction proposal, except that at any time prior to obtaining the
approval by the Florida Public Utilities' stockholders, the Florida Public
Utilities' Board of Directors may make a Recommendation Change if the Board of
Directors determines in good faith (after consultation with outside counsel)
that the failure to do so would be reasonably likely to be inconsistent with its
fiduciary duties to the Florida Public Utilities' stockholders under applicable
law and the Board of Directors follows the procedures in doing so as set forth
in the Merger Agreement. Even if a Recommendation Change is made, the Merger
Agreement shall be submitted to the Florida Public Utilities' stockholders at
the stockholders' meeting for the purpose of obtaining the stockholder approval
unless the Merger Agreement has been terminated pursuant to terms of the Merger
Agreement.
Conditions to Closing
Consummation of the Merger is subject to customary conditions, including, among
others, (a) the approval of the stockholders of each of Chesapeake and Florida
Public Utilities, (b) the absence of any material adverse effect, (c) the
expiration or termination of the applicable Hart-Scott-Rodino Act waiting
period, (d) the absence of any order or injunction prohibiting the consummation
of the Merger, (e) the effectiveness of the registration statement of Chesapeake
filed on Form S-4, (f) the approval of the listing of the shares of Chesapeake
common stock to be issued in the Merger on the New York Stock Exchange, (g) the
accuracy of the parties' respective representations and warranties as set forth
in the Merger Agreement, except where the failure of a party's representations
and warranties to be true and correct has not had and is not reasonably likely
to have a material adverse effect, (h) the receipt of a legal opinion stating,
among other things, that the Merger will constitute a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended, and (i) the
receipt of all approvals or reviews required by federal and state regulatory
authorities, including the necessary state public service and utility
commissions.
Non-Solicitation
Florida Public Utilities has also agreed, among other covenants related to
potential alternative business combination transactions, not to solicit or
initiate any inquiry or any proposal or offer relating to any alternative
business combination transactions, and not to enter into discussions concerning,
or provide confidential information in connection with, alternative business
combination transactions, except as expressly permitted under, and in accordance
with the terms of, the Merger Agreement. Florida Public Utilities and its Board
of Directors is permitted to engage in discussions or negotiations with, and
provide information to, any person in response to an unsolicited bona fide
written alternative business combination transaction proposal if, among other
conditions, (a) the Florida Public Utilities stockholders' meeting has not
occurred, (b) the Board of Directors has determines in good faith (i) after
consultation with its independent financial advisor, that such transaction
proposal is a superior proposal to, or there is a reasonable likelihood that
such transaction proposal could result in a superior proposal to that of
Chesapeake, and (ii) after consultation with its outside legal counsel, that
failure to take such action would be reasonably likely to be inconsistent with
its fiduciary duties under applicable law, and (c) prior to providing any
information or data to any person or entering into discussions or negotiations
with any person, Florida Public Utilities notifies Chesapeake promptly of such
inquiries, proposals or offers received by, or any such discussions or
negotiations sought to be initiated or continued with, any of the directors,
officers, employees, agents or representatives of Florida Public Utilities or
any of its subsidiaries indicating, in connection with such notice, the material
terms and conditions of any
inquiries, proposals or offers, provided that such notice shall not be required
to contain any information the provision of which the Board of Directors
determines in good faith, after consultation with its outside legal counsel,
would be reasonably likely to be inconsistent with its fiduciary duties under
applicable law. Under the Merger Agreement, in order for an alternative business
combination transaction proposal to be a superior proposal it must be an
unsolicited bona fide written offer made by a third party in respect of a
transaction (or series of related transactions) that if consummated would result
in such third party acquiring, directly or indirectly, more than 50% of the
voting power of the Florida Public Utilities common stock or more than 50% of
the assets of Florida Public Utilities and its subsidiaries, taken as a whole,
which transaction the Florida Public Utilities Board of Directors determines in
its good faith judgment (after consultation with a financial advisor of
nationally recognized reputation) (i) to be more favorable from a financial
point of view to its stockholders than the Merger (taking into account the
person making the offer, the terms and conditions of such offer and the Merger
Agreement (including any changes to the financial terms of the Merger Agreement
proposed by Chesapeake in response to such offer or otherwise), as well as any
other factors deemed relevant by the Florida Public Utilities' Board of
Directors) and (ii) reasonably capable of being financed and completed, taking
into account all financial, legal, regulatory, timing and other aspects of such
proposal deemed relevant by the Florida Public Utilities' Board of Directors.
Termination Rights
The Merger Agreement contains certain termination rights for both Chesapeake and
Florida Public Utilities, including the right of either party to terminate the
Merger Agreement if (a) the Merger has not been consummated by January 31, 2010;
(b) if stockholders' meetings are held but approval of the Merger by
Chesapeake's or Florida Public Utilities' stockholders is not obtained; or (c) a
governmental entity shall have issued an order or taken other action that
prohibits the actions contemplated by the Merger Agreement.
Chesapeake may, subject to certain conditions, terminate the Merger Agreement in
the event that (i) Florida Public Utilities breaches any representation or
warranty or fails to perform any covenant or agreement set forth in the Merger
Agreement or any of its representations or warranties have become untrue, and
such breach is not cured within any applicable cure period, (ii) there is a
material adverse change with respect to Florida Public Utilities, or (iii) there
is a Recommendation Change.
Florida Public Utilities may, subject to certain conditions, terminate the
Merger Agreement in the event that (i) Chesapeake or Merger Sub breaches any
representation or warranty or fails to perform any covenant or agreement set
forth in the Merger Agreement or any of their representations or warranties have
become untrue, and such breach is not cured within any applicable cure period,
(ii) there is a material adverse change with respect to Chesapeake, or
(iii) Florida Public Utilities' Board of Directors authorizes Florida Public
Utilities, following a determination by the Board of Directors in good faith
(after consultation with outside counsel) that the failure to do so would be
reasonably likely to be inconsistent with its fiduciary duties to Florida Public
Utilities' stockholders under applicable law, to enter into a binding written
agreement concerning a transaction that constitutes a superior proposal (a
"Superior Proposal Acceptance"), if (A) Florida Public Utilities notifies
Chesapeake in writing that it intends to enter into such an agreement, and
(B) Chesapeake does not make, within three business days of receipt of Florida
Public Utilities' written notification of its intention to enter into a binding
agreement for such superior proposal, an offer that the Florida Public
Utilities' Board of Directors determines, in good faith after consultation with
a financial
advisor of nationally recognized reputation, is at least as favorable to the
Florida Public Utilities' stockholders as such superior proposal.
If the Merger Agreement is terminated because of a Recommendation Change or a
Superior Proposal Acceptance, or under certain other circumstances described in
the Merger Agreement, Florida Public Utilities shall pay to Chesapeake a
termination fee equal to $3.4 million on the first business day following the
date of termination of the Merger Agreement.
Management and Board Oversight
Upon completion of the Merger, it is anticipated that John R. Schimkaitis,
President and Chief Executive Officer for Chesapeake, will become Chairman and
Chief Executive Officer of the surviving corporation to be operated as "Florida
Public Utilities Company." Other officers of the surviving corporation will
include Charles L. Stein and George M. Bachman, as well as Chesapeake's current
corporate officers. Mr. Stein and Mr. Bachman are currently the Chief Operating
Officer and Chief Financial Officer, respectively, of Florida Public Utilities,
and will continue in such roles in the surviving corporation following the
Merger. Two members of Florida Public Utilities' current Board of Directors will
be appointed to Chesapeake's Board of Directors. Ralph J. Adkins, Chairman of
the Chesapeake's Board of Directors will continue to serve as Chesapeake's
Chairman following the Merger. The surviving corporation's Board of Directors
will include the same slate of directors as Chesapeake's Board as modified as
described above.
Florida Public Utilities Change of Control and Employment Arrangements and
Agreements
At the effective time of the Merger, John T. English will retire as Chairman of
the Board, President and Chief Executive Officer of Florida Public Utilities. As
a result of the Merger and his associated retirement, Mr. English will receive a
single lump sum cash change in control payment in the amount of $780,000 as of
the effective time of the Merger. To assist in the integration of the two
companies, Chesapeake's Board of Directors will retain Mr. English as a
consultant upon the closing of the Merger for up to twenty-four months
thereafter. Mr. English's Consulting Agreement provides for up to 400 hours of
consulting services per year at mutually agreeable times as requested by
Chesapeake's Board. During the term of the Consulting Agreement, Mr. English
shall be paid a consulting fee of $8,500 per month for each month, or portion
thereof, that he provides consulting services.
After the Merger, Mr. Stein and Mr. Bachman will be retained by the surviving
corporation in their roles as Chief Operating Officer and Chief Financial
Officer, respectively. Mr. Stein and Mr. Bachman have entered into amended and
restated employment agreements which will become effective upon consummation of
the Merger (hereinafter referred to as the "Stein Employment Agreement" and the
"Bachman Employment Agreement," respectively). Pursuant to the amended and
restated agreements, Mr. Stein and Mr. Bachman will be paid stay bonuses of
$575,000 and $520,000, respectively, in conjunction with their continuing roles
as of the effective time of the Merger. The Stein Employment Agreement and the
Bachman Employment Agreement include standard Chesapeake change in control
provisions and covenants regarding confidentiality and non-solicitation and
retain the compensatory arrangements that exist in their current employment
agreements with Florida Public Utilities, including base salary and bonus
program provisions. Both the Stein Employment Agreement and the Bachman
Employment Agreement provide for a three-year term of employment commencing upon
consummation of the Merger.
Under the amended and restated employment agreements, if Mr. Stein or
Mr. Bachman terminate employment with "good reason" during the employment term,
then he will receive a lump sum payment equal to the sum of the base salary and
incentive bonus that would be payable over the balance of the employment term,
if any. The amount of the annual incentive bonus award for this purpose will be
based on the highest award actually received during the employment term if the
amount is otherwise undetermined for any portion of the employment term. He will
also be provided with the same employment benefits for the balance of the
employment term, to the extent permitted by applicable law. In addition, if
there is a change in control of Chesapeake during the employment term, it will
be automatically extended for an additional three-year term ("extended term").
If the employment agreement is terminated by Chesapeake during any such extended
term without "good cause", Mr. Stein or Mr. Bachman will be entitled to a lump
sum severance payment equal to three times the sum of his annual base salary
plus average short and long term bonuses received over the prior three years,
and the present value of additional benefits that would have been paid under the
applicable retirement plans if he had continued employment through the extended
term. The total amount payable under this provision is subject to reduction,
however, if necessary to avoid triggering an "excess parachute payment" excise
tax under the Internal Revenue Code.
Additional Information and Where to Find It
In connection with the proposed Merger, Chesapeake's registration statement on
Form S-4, which will include a Joint Proxy Statement of Chesapeake and Florida
Public Utilities and a prospectus, as well as other materials, will be filed
with the SEC. WE URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND JOINT
PROXY STATEMENT/PROSPECTUS AND THESE OTHER MATERIALS CAREFULLY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CHESAPEAKE,
FLORIDA PUBLIC UTILITIES AND THE PROPOSED MERGER. Investors will be able to
obtain free copies of the registration statement and proxy statement/prospectus
(when available) as well as other filed documents containing information about
Chesapeake and Florida Public Utilities at http://www.sec.gov, the SEC's Web
site. Free copies of Chesapeake's SEC filings are also available on Chesapeake's
Web site at investor.shareholder.com/CPK/sec.cfm and free copies of Florida
Public Utilities' SEC filings are also available on Florida Public Utilities'
Web site at www.fpuc.com/about_us/invest.asp.
Analyst and Media Webcast Information
Chesapeake and Florida Public Utilities will host a conference call and webcast
for members of the investment community at 1:30 p.m. EDT. To participate in the
call, analysts are asked to dial 1-866-821-5457.
Participants in the Solicitation
Chesapeake and Florida Public Utilities and their respective directors,
executive officers, other members of management and employees may be deemed,
under SEC rules, to be participants in the solicitation of proxies with respect
to the proposed Merger. Information about the directors and executive officers
of Florida Public Utilities is set forth in the proxy statement for Florida
Public Utilities' 2009 Annual Meeting of Stockholders, as filed with the SEC on
a Schedule 14A on April 6, 2009 and Form 10-K filed with the SEC on March 20,
2009. Information about the directors and executive officers of Chesapeake is
set forth in the proxy statement for Chesapeake's 2009 Annual Meeting of
Stockholders, as filed with the SEC on a Schedule 14A on March 27, 2009 and Form
10-K filed with the SEC on March 9, 2009. Additional information regarding the
interests of those participants and other persons who may be deemed participants
in the Merger may be obtained by reading the registration statement, Joint Proxy
Statement/Prospectus and other materials to be filed with the SEC regarding the
proposed Merger when it becomes available. You may obtain free copies of these
documents as described previously.
Item 8.01. Other Events.
On April 20, 2009, Chesapeake and Florida Public Utilities issued a joint press
release announcing the execution of the Merger Agreement. A copy of such press
release is attached hereto as Exhibit 99.1
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 2.1 - Agreement and Plan of Merger among Chesapeake Utilities
Corporation, CPK Pelican, Inc., and Florida Public Utilities Company, dated
April 17, 2009.*
Exhibit 99.1 - Joint Press Release of Chesapeake Utilities Corporation and
Florida Public Utilities Company, dated April 20, 2009.
* Contents of the parties' disclosure schedules to the Merger Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Chesapeake will furnish supplementally a copy of the disclosure schedules to the SEC upon request.
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