|
Item 1.01
|
Entry into a Material Definitive Agreement.
|
Stock Purchase Agreement
On March 29, 2019, Aqua America, Inc. (the “Company”), entered into a Stock Purchase Agreement
(the “Stock Purchase Agreement”) with Canada Pension Plan Investment Board (the “Investor”), pursuant to
which the Company has agreed to issue and sell to the Investor in a private placement (the “Private Placement”) 21,661,095
newly issued shares of common stock, par value $0.50 per share (the “Common Stock”). The gross proceeds of the Private
Placement are expected to amount to approximately $750 million, and the Company intends to use the net proceeds from the Private
Placement to (i) fund a portion of the purchase price of the previously announced acquisition (the “Acquisition”) of
LDC Funding LLC, which is the parent company of Peoples, a natural gas distribution company serving customers in western Pennsylvania,
West Virginia, and Kentucky, (ii) redeem certain outstanding notes in connection with the Acquisition, and/or (iii) pay certain
fees and expenses related thereto (collectively, the “Acquisition Funding”). The shares issued and sold to the Investor
pursuant to the Private Placement will be priced at the lower of (1) $34.62, which represents a 4.5 percent discount to the trailing
20 consecutive trading day volume weighted average price of the Common Stock ending on, and including, March 28, 2019, and (2)
the volume weighted average price per share in the Company’s subsequent public offerings of Common Stock to fund a portion
of the Acquisition Funding.
The closing of the Private Placement (the “Closing”
and the date of the Closing, the “Closing Date”) is expected to occur concurrently with the closing of the Acquisition,
subject to certain closing conditions, including the closing of the Acquisition, the completion of additional equity offerings
which raise gross proceeds in an aggregate amount of $1,600 million and the execution and delivery of a shareholders agreement
between the Investor and the Company (the “Shareholders Agreement”).
The Stock Purchase Agreement contains customary representations,
warranties and covenants of the Company and the Investor, and the parties have agreed to indemnify each other for losses related
to breaches of their respective representations and warranties. Upon Closing, the Company has agreed to reimburse the Investor
for reasonable out-of-pocket diligence expenses of up to $4 million, subject to certain exceptions.
Standstill Obligations
Pursuant to the Stock Purchase Agreement, the Investor has agreed, subject to certain exceptions, that the
Investor’s Active Equities Group will not, without the consent of the Company’s board of directors, among other things:
(i) effect, cause or participate in (A) any acquisition of any securities of the Company (except as provided below), (B) any merger
or other business combination or tender or exchange offering involving the Company, (C) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or its subsidiaries or (D) any solicitation of proxies
or certain communications related thereto, (ii) form, join or in any way participate in a “group” with respect to the
Company, (iii) take action to seek to control or influence the management, the board of directors or policies of the Company, (iv)
discuss, enter into agreements with, assist or encourage any third-party with respect to the actions prohibited by the standstill
obligations, or make an investment in a person that engages or proposes to engage in the actions prohibited by the standstill obligations,
(v) take action which might cause or require the Company or the Investor to make a public announcement with respect to the actions
prohibited by the standstill obligations or (vi) disclose any intention, plan or arrangement inconsistent with the standstill obligations.
The Investor will not be restricted, however, from (x) acquiring any securities of the Company, if the Investor
would not own more than 9.99% of the issued and outstanding Common Stock (and no more than 20% of the issued and outstanding Common
Stock, if the Company has consented to the Investor holding in excess of 9.99% of the issued and outstanding Common Stock); (y)
participating in a transaction referenced in (i) through (vi) above that has been publicly announced as having been approved by
the Company’s board of directors; and (z) undertaking actions otherwise prohibited by the standstill obligations following
the public announcement of (1) a transaction contemplating the acquisition of 20% or more of the Company’s Common Stock or
(2) a merger or business combination where Company shareholders would hold less than 80% of the equity securities of the resulting
entity or where all or substantially all of the Company’s assets would be sold. Upon the Closing, the standstill obligations
shall be superseded by the standstill provisions of the Shareholders Agreement, and if the Closing does not occur or the Shareholders
Agreement is not executed, the standstill obligations will remain effective and survive termination of the Stock Purchase Agreement
for a period of one year after the date of the termination of the Stock Purchase Agreement.
Shareholders Agreement
At Closing, the Company will enter into the Shareholders Agreement,
substantially in the form of the Shareholders Agreement included as an exhibit to the Stock Purchase Agreement, pursuant to which
the Company and the Investor will agree to certain rights, covenants and obligations, including those summarized below.
Board Nomination Rights
The Shareholders Agreement will provide that, for as long as the Investor beneficially owns at least 5% of
the then issued and outstanding Common Stock, it may designate one individual to serve on the Company’s board of directors,
subject to satisfaction of certain requirements, and the Company shall take all necessary action to appoint, nominate or recommend
that individual for election, as applicable, to the board of directors. If the Investor ceases to beneficially own at least 5%
of the then issued and outstanding Common Stock and continues not to satisfy such requirement for the later of (i) 180 days thereafter
and (ii) the date of the next proxy statement relating to the annual meeting of shareholders of the Company, at the request of
the Company, the Investor shall cause its nominated director to resign, and the director shall resign, from the board of directors.
Transfer Restrictions
Pursuant to the Shareholders Agreement, the Investor will agree to certain transfer restrictions for a period
of 15 months from the Closing Date. During such period the Investor will agree, subject to certain exceptions, not to sell, transfer,
assign, pledge, encumber, hypothecate or otherwise dispose of the shares of Common Stock it acquires pursuant to the Stock Purchase
Agreement or pursuant to an exercise of its pre-emptive rights, as described below.
Registration Rights
The Shareholders Agreement will also provide the Investor with certain
registration rights such as shelf registration, demand underwriting and piggyback registration rights.
Pre-emptive Rights
The Company will agree under the Shareholders Agreement that, subject
to certain exceptions, for as long as the Investor beneficially owns at least 5% of the then issued and outstanding Common Stock,
the Investor will have the option to participate in certain proposed issuances of equity securities, including securities convertible
into or exchangeable for any equity security, by the Company, other than Excluded Issuances (as defined in the Shareholders Agreement),
for a
pro rata
amount equal to the Investor’s ownership percentage of the then outstanding Common Stock and on the
same pricing terms.
Standstill Obligations
Under the Shareholders Agreement, the Investor will agree to extend its standstill obligations under the Stock
Purchase Agreement until the later of (A) two years from the Closing Date or (B) the date (i)
the
Investor no longer beneficially owns at least 5% of the then issued and outstanding Common Stock and (ii) there is no Investor
board nominee or Investor nominated board member.
The foregoing description of the Stock Purchase Agreement and the Shareholders Agreement does not purport
to be complete and is qualified in its entirety by reference to the full text of the Stock Purchase Agreement, which is filed as
Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference herein, and the Form of Shareholders Agreement, which
is attached as an exhibit to the Stock Purchase Agreement and incorporated by reference herein.
