Summary
(Updated May 7, 2009)
Fort Chicago Energy Partners L.P. (the "Partnership") has established a rights plan (the "Rights Plan"), the terms and conditions of which are set out in the Unitholder Rights Plan Agreement amended and restated as of May 7, 2009, (the "Rights Plan Agreement") between the Partnership and Computershare Trust Company of Canada, as rights agent.
View the Rights Plan Agreement.
Purpose of the Rights Plan
The Rights Plan was adopted to ensure the fair and equal treatment of all holders of Class A Units in the event of an unsolicited take-over bid for the limited partnership units of the Partnership (the "Class A Units"). The Rights Plan was also adopted to provide all holders of Class A Units with an equal opportunity to share in any premium paid upon an acquisition of control of the Partnership and to allow both the holders of Class A Units and the board of directors of Fort Chicago Energy Management Ltd. (the "General Partner"), the general partner of the Partnership, adequate time to assess a take-over bid made for the Class A Units in relation to the circumstances and prospects of the Partnership and to allow a reasonable period of time for the board of directors of the General Partner to explore and develop alternative courses of action in an attempt to maximize unitholder value, if the board of directors of the General Partner is of the opinion that it is appropriate to do so.
The provisions of the Rights Plan relating to Permitted Bids, which are described below under "Summary of the Rights Plan - Permitted Bid", will permit holders of Class A Units to tender to a take-over bid which is a "Permitted Bid" regardless of the views of the board of directors of the General Partner as to the acceptability of the bid. If an acquiror determines not to meet the requirements of a Permitted Bid, the board of directors of the General Partner may, through the opportunity to negotiate with the acquiror, be able to influence the fairness of the terms of the take-over bid. Holders of Class A Units are advised that the Rights Plan may preclude their consideration or acceptance of offers which are inadequate and do not meet the requirements of a Permitted Bid. The directors of the General Partner will continue to be bound to consider fully and fairly any take-over bid for the Class A Units and to discharge their responsibilities with a view to the best interests of the holders of Class A Units.
Summary of the Rights Plan
The following is a summary description of the general operation of the Rights Plan. Capitalized terms used below but not defined have the meanings ascribed to them in the Rights Plan Agreement. This summary is qualified in its entirety by reference to the text of the Rights Plan Agreement.
The Rights
On October 9, 1997, the Board of Directors authorized the issuance at the close of business on January 7, 1998 (the "Record Time") of one Right in respect of each outstanding Class A Unit to holders of record at the Record Time. In addition, the Board of Directors authorized the issuance of one Right in respect of each Class A Unit issued after the Record Time and prior to the earlier of the Separation Time and the Expiration Time. On the same date, the Partnership entered into the Unitholder Rights Plan Agreement with Montreal Trust Company of Canada, as rights agent, regarding the exercise of the Rights, the issue of certificates evidencing the Rights and other related matters.
Each Right entitles the registered holder thereof to purchase from the Partnership on the occurrence of certain events, one Class A Unit at the price of $100 per unit, subject to adjustments (the "Exercise Price"). The exercise price payable and the number of securities issuable upon the exercise of the Rights are subject to adjustment from time to time to prevent dilution upon the occurrence of certain corporate events affecting the Class A Units. If a Flip-in Event occurs, each Right would then entitle the registered holder to receive, upon exercise thereof, that number of Class A Units that have a market value at the date of that occurrence equal to twice the Exercise Price. The Rights are not exercisable until the Separation Time and prior to the Expiration Time. The Rights expire upon the earlier of the Termination Time and the termination of the annual meeting of holders of Class A Units held in the year 2012, unless earlier redeemed by the Board of Directors with the consent of holders of Class A Units.
Overview of the Rights Plan
The Rights Plan utilizes the mechanism of the Permitted Bid to ensure that a person seeking control of the Partnership allows holders of Class A Units and the Board of Directors adequate time to assess the bid. The purpose of the Permitted Bid is to allow a potential bidder to avoid the dilutive features of the Rights Plan by making a bid in conformity with the conditions specified in the Permitted Bid provisions which include, among other things, the requirement that the Permitted Bid remain open for not less than 60 days. If a person makes a Take-over Bid that is a Permitted Bid, the Second Amended and Restated Rights Plan will not affect the transaction in any respect.
The Rights Plan should not deter a person seeking to acquire control of the Partnership if that person is prepared to make a Take-over Bid pursuant to the Permitted Bid requirements or is prepared to negotiate with the Board of Directors. Otherwise, a person will likely find it impractical to acquire 20% or more of the outstanding Class A Units because the Rights Plan will substantially dilute the holdings of a person or group that seeks to acquire such an interest other than by means of a Permitted Bid or on terms approved by the Board of Directors. When a person or group become an Acquiring Person, the Rights Beneficially Owned by those persons or their transferees become void thereby diluting their holdings. The possibility of such dilution is intended to encourage such a person to make a Permitted Bid or to seek to negotiate with the Board of Directors the terms of an offer which is fair to all holders of Class A Units.
Trading of Rights
The Rights are not exercisable initially and certificates representing the Rights will not be sent to holders of Class A Units. Until the Separation Time, the Rights will be evidenced only by outstanding Common Share certificates. The Rights Plan provides that, until the Separation Time, the Rights will be transferred only with the associated Class A Units. Until the Separation Time, or earlier termination or expiration of the Rights, each new share certificate issued upon transfer of existing Class A Units or the issuance of additional Class A Units, will contain a legend incorporating the terms of the Rights Plan Agreement by reference. As soon as is practicable following the Separation Time, separate certificates evidencing the Rights (the "Rights Certificates") will be mailed to the holders of record of Class A Units as of the Close of Business at the Separation Time, and thereafter the Rights Certificates alone will evidence the Rights.
Separation Time
The Rights will be exercisable and begin to trade separately from the Class A Units after the Separation Time. Separation Time means the Close of Business on the tenth Business Day after the earlier of:
(a) the first date (the "Unit Acquisition Date") of public announcement by the Partnership or a person or a group of affiliated or associated persons (an "Acquiring Person") that it has acquired Beneficial Ownership of 20% or more of the outstanding Class A Units other than as a result of, among other things:
(i) a reduction of the number of Class A Units outstanding pursuant to an acquisition or redemption or conversion by the Partnership of the Class A Units;
(ii) a "Permitted Bid" or a "Competing Permitted Bid" (see below);
(iii) acquisitions of units in respect of which the Board of Directors has waived the provisions of the Second Amended and Restated Rights Plan in accordance with the terms thereof, or
(iv) acquisitions of Class A Units pursuant to any distribution reinvestment plan of the Partnership, a rights offering by the Partnership, a distribution of Class A Units or a split of Class A Units or other event pursuant to which a person becomes the Beneficial Owner of Class A Units on the same pro rata basis as other holders of Class A Units, and acquisitions pursuant to a prospectus offering, private placement or plan of arrangement, amalgamation or other statutory procedure requiring the approval of holders of Class A Units;
(b) the date of commencement of, or the first public announcement of the intent of any person, other than the Partnership or any subsidiary controlled by the Partnership, to commence a Take-over Bid to acquire 20% or more of the outstanding Class A Units; and
(c) the date upon which a Permitted Bid or Competing Permitted Bid ceases to be such;
or such later date as may be determined by the Board of Directors acting in good faith.
Acquiring Person
An Acquiring Person is, generally, a person who Beneficially Owns 20% or more of the outstanding Class A Units.
The Rights Plan provides certain exceptions to the definition of Acquiring Person, including the Partnership or any subsidiary, a person who acquires 20% or more of the outstanding Class A Units through a Permitted Bid acquisition or certain prescribed exempt acquisitions. The Rights Plan also excludes from the definition of Beneficial Ownership, amongst others, a person in its capacity as Investment Manager, Trust Company or Plan Trustee (and clients and accounts of such persons) provided that the person is not making or proposing to make a Take-over Bid. Furthermore, a person is deemed not to be the Beneficial Owner of Class A Units where the holder of such Class A Units has agreed to deposit or tender its Class A Units pursuant to a Permitted Lock-up Agreement to a Take-over Bid made by such person.
In order for an agreement to constitute a Permitted Lock-up Agreement, certain conditions must be met including, among other things, that the terms of the Permitted Lock-up Agreement are publicly disclosed and the Permitted Lock-up Agreement permits the Locked-up Person to withdraw its Class A Units in order to deposit or tender the Class A Units to another Take-over Bid or support another transaction so long as such Take-over Bid or transaction:
(d) offers a price or value that exceeds the price or value offered under the take-over bid referred to in the Permitted Lock-up Agreement (the "Lock-up Bid"); or
(e) is for a number of Class A Units which is greater than the number of Class A Units that the Offeror has offered to purchase under the Lock-up Bid by such number as may have been agreed to in the Permitted Lock-up Agreement, provided that such agreed upon number is not greater than 7% of the number of Class A Units offered to be purchased under such Lock-up Bid at a price or value that is not less than the price or value offered under such Lock-up Bid; or
(f) offers a price or value which is greater than the price or value offered under the Lock-up Bid by as much as or more than a specified amount provided that such specified amount is not greater than 7% of the offering price or value offered under such Lock-up Bid.
In addition, under a Permitted Lock-up Agreement, no "break up" fees, "top up" fees, penalties, expenses or other amounts that exceed in the aggregate the greater of: (i) the cash equivalent of 2 1/2% of the price or value of the consideration payable under the Lock-up Bid; and (ii) 50% of the amount by which the price or value of the consideration received by a Locked-up Person under another Take-over Bid or transaction exceeds what such Locked-up Person would have received under the Lockup Bid; can be payable by such Locked-up Person if the Locked-up Person fails to deposit or tender Class A Units to the Lock-up Bid or withdraws Class A Units previously tendered thereto in order to deposit such Class A Units to another Take-over Bid or support another transaction.
Flip-in Event
Ten Business Days following a transaction that results in a person becoming an Acquiring Person (a "Flip-in Event") the Rights will entitle holders to receive, upon exercise and payment of the exercise price, Class A Units with a market value equal to twice the Exercise Price of the Rights. In such event, however, any Rights Beneficially Owned by an Acquiring Person (including such person's associates and affiliates and any other person acting jointly or in concert with the Acquiring Person and any direct or indirect transferee of such persons) will be void. Holders of Rights who do not exercise their Rights upon the occurrence of a Flip-in Event may suffer substantial dilution.
Permitted Bid
A Take-over Bid will not trigger the dilutive provisions of the Rights Plan if it meets the Permitted Bid conditions prescribed in the Rights Plan Agreement. A Permitted Bid is a Take-over Bid, made by means of a take-over bid circular, which:
(g) is made to all holders of record of Class A Units, other than the Offeror;
(h) contains, and the take-up and payment for Class A Units tendered or deposited is subject to, an irrevocable and unqualified condition that no Class A Units will be taken up or paid for pursuant to the Take-over Bid prior to the Close of Business on a date which is not less than 60 days following the date of the Take-over Bid;
(i) contains irrevocable and unqualified provisions that:
(i) unless the Take-over Bid is withdrawn, Class A Units may be deposited pursuant to the Take-over Bid at any time prior to the Close of Business on the date of first take-up or payment for Class A Units under the bid and that all Class A Units deposited pursuant to the Take-over Bid may be withdrawn at any time prior to the Close of Business on such date;
(i) more than 50% of the outstanding Class A Units held by Independent Unitholders, determined as at the date of first take-up or payment for Class A Units under the Take-over Bid, must be deposited to the Take-over Bid and not withdrawn at the Close of Business on the date of first take-up or payment for Class A Units; and
(iii) in the event that more than 50% of the then outstanding Class A Units held by Independent Unitholders shall have been deposited to the Take-over Bid, the Offeror will make public announcement of that fact and the Take-over Bid will be extended on the same terms for a period of not less than 10 Business Days from the date of such public announcement.
The Rights Plan also provides for a "Competing Permitted Bid", which is a Take-over Bid made during the currency of another Permitted Bid that satisfies all of the requirements of a Permitted Bid and contains an irrevocable and unqualified condition that no Class A Units will be taken up or paid for pursuant to the Take-over Bid prior to the Close of Business on the date that is no earlier than the later of (i) the 60th day after the date on which the earliest Permitted Bid which preceded the Competing Permitted Bid was made, and (ii) 35 days after the date of the Take-over Bid constituting the Competing Permitted Bid.
Take-over Bid
A Take-over Bid is defined in the Rights Plan as an Offer to Acquire Class A Units or securities convertible into Class A Units, where the Class A Units subject to the Offer to Acquire, together with the Class A Units into which the securities subject to the Offer to Acquire are convertible, and the Offeror's Securities, constitute in the aggregate 20% or more of the outstanding Class A Units at the date of the Offer to Acquire.
Waiver and Redemption
The Board of Directors may, prior to the occurrence of a Flip-in Event, determine to waive the dilutive effects of the Rights Plan in respect of a Flip-in Event that would occur as a result of a Take-over Bid that is made by way of a take-over bid circular to all holders of Class A Units. In such case, such waiver would be deemed also to be a waiver, on the same terms and conditions, in respect of any other Flip-in Event which occurs by reason of a Take-over Bid made by way of a take-over bid circular to all holders of Class A Units made prior to the expiry of the Take-over Bid for which the initial waiver was given. The Board of Directors may, prior to a Flip-in Event and with the prior consent of holders of Class A Units, waive the dilutive effects of the Second Amended and Restated Rights Plan in respect of a Flip-in Event that would occur other than as a result of a Take-over Bid made by way of a take-over bid circular to all holders of Class A Units. The Board of Directors may also waive the Rights Plan in respect of a particular Flip-in Event that has occurred through inadvertence, provided that the Acquiring Person that inadvertently triggered such Flip-in Event reduces its beneficial holdings to less than 20% of the outstanding Class A Units.
The Board of Directors may, with the prior consent of the holders of Class A Units or holders of Rights and prior to the occurrence of a Flip-in Event, elect to redeem all, but not less than all, of the then outstanding Rights at a redemption price of $.00001 per Right. In addition, if an offeror successfully completes a Permitted Bid, the Board of Directors shall be deemed to have elected to redeem the Rights.
Amendments
The Board of Directors may, from time to time, without the approval of any holders of Rights or Class A Units, supplement or amend the Rights Plan in order to cure any ambiguity or to correct or supplement any provisions contained in the Rights Plan which may be inconsistent with any other provision thereof or otherwise defective and to take into account the issuance by the Partnership of classes or series of limited partnership units other than the Class A Units. Any supplement or amendment made after the date of ratification by holders of Class A Units of the Rights Plan but prior to the Separation Time may only be made with the prior consent of holders of Class A Units. In addition, no supplement or amendment may be made to the Rights Plan without the approval of the TSX.
