Chesapeake Energy Corporation filed SEC Form 8-K: Entry into a Material Definitive Agreement, Completion of Acquisition or Disposition of Assets, Creation of a Direct Financial Obligation, Leadership Update, Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year, Regulation FD Disclosure, Financial Statements and Exhibits
UNITED STATES
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Introductory Note
On October 1, 2024, Expand Energy Corporation (formerly known as Chesapeake Energy Corporation), an Oklahoma corporation (the “Company”, “Expand Energy” or “Chesapeake”), completed its previously announced merger with Southwestern Energy Company, a Delaware corporation (“Southwestern”), pursuant to that certain Agreement and Plan of Merger, dated as of January 10, 2024 (the “Merger Agreement”), by and among the Company, Southwestern, Hulk Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, and Hulk LLC Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub LLC”). Pursuant to the terms of the Merger Agreement, Merger Sub Inc. was merged with and into Southwestern (the “Merger”), with Southwestern continuing as the surviving corporation and as a wholly owned subsidiary of the Company. Immediately following the effective time of the Merger (the “Effective Time”), the surviving corporation was merged with and into Merger Sub LLC, with Merger Sub LLC continuing as the surviving entity and as a wholly owned subsidiary of the Company (the “Second Merger”). Following the effective time of the Second Merger, Merger Sub LLC was merged with and into the Company with the Company continuing as the surviving entity (the “Third Merger”).
Pursuant to the Merger Agreement, following the Effective Time, the Company changed its name to “Expand Energy Corporation”. In addition, the Company changed its NASDAQ ticker symbol “CHK” to “EXE” and expects to begin trading under the “EXE” trading symbol effective as of the open of trading on the Nasdaq Global Select Market on October 2, 2024.
| Item 1.01. | Entry into a Material Definitive Agreement. |
In connection with the Third Merger and on the date thereof, the Company became the successor issuer in respect to Southwestern’s (i) $389 million aggregate principal amount of 4.950% Senior Notes due 2025 (the “SWN 2025 Notes”), (ii) $304 million aggregate principal amount of 8.375% Senior Notes due 2028 (the “SWN 2028 Notes”), (iii) $700 million aggregate principal amount of 5.375% Senior Notes due 2029 (the “SWN 2029 Notes”), (iv) $1,200 million aggregate principal amount of 5.375% Senior Notes due 2030 (the “SWN 2030 Notes”) and (v) $1,150 million aggregate principal amount of 4.750% Senior Notes due 2032 (the “SWN 2032 Notes” and together with the SWN 2025 Notes, the SWN 2028 Notes, the SWN 2029 Notes and the SWN 2030 Notes, the “SWN Notes”). The Company assumed the obligations under (i) the SWN 2025 Notes pursuant to Supplemental Indenture No. 9 (“SWN 2025 Notes Supplemental Indenture No. 9”) to a base indenture dated January 23, 2015, by and among Southwestern and U.S. Bank National Association, as Trustee, (ii) the SWN 2028 Notes pursuant to Supplemental Indenture No. 9 (“SWN 2028 Notes Supplemental Indenture No. 9”) to a base Indenture dated September 25, 2017, by and among Southwestern and U.S. Bank National Association, as Trustee, (iii) the SWN 2029 Notes pursuant to Supplemental Indenture No. 6 (“Supplemental Indenture No. 6”) to a base indenture dated August 30, 2021 (the “2021 Base Indenture”) by and among Southwestern and Regions Bank, as Trustee, (iv) the 2030 Notes pursuant to Supplemental Indenture No. 7 (“Supplemental Indenture No. 7”) to the 2021 Base Indenture and (v) the 2032 Notes pursuant to Supplemental Indenture No. 8 (“Supplemental Indenture No. 8” and, together with SWN 2025 Notes Supplemental Indenture No. 9, SWN 2028 Notes Supplemental Indenture No. 9, Supplemental Indenture No. 6 and Supplemental Indenture No. 7, the “SWN Supplemental Indentures”) to the 2021 Base Indenture. In addition, pursuant to each SWN Supplemental Indenture, existing subsidiaries of the Company that guarantee the CHK Notes (as defined below) have provided guarantees of the SWN Notes.
The SWN 2025 Notes mature on January 23, 2025 and bear interest at a rate of 4.950% per annum, with interest payable on January 23 and July 23 of each year. The SWN 2028 Notes mature on September 15, 2028 and bear interest at a rate of 8.375% per annum, with interest payable on March 15 and September 15 of each year. The SWN 2029 Notes mature on February 1, 2029 and bear interest at a rate of 5.375% per annum, with interest payable on February 1 and August 1 of each year. The SWN 2030 Notes mature on March 15, 2030 and bear interest at a rate of 5.375% per annum, with interest payable on March 15 and September 15 of each year. The SWN 2032 Notes mature on February 1, 2032 and bear interest at a rate of 4.750% per annum, with interest payable on February 1 and August 1 of each year.
The foregoing description of the SWN Supplemental Indentures is qualified in its entirety by reference to each of the SWN Supplemental Indentures and the related Supplemental Indentures and Indentures that preceded each of the SWN Supplemental Indentures, which are attached hereto as Exhibits 4.1 through 4.29 and incorporated herein by reference.
In addition, the Company entered into (i) Supplemental Indenture No. 3 to the Indenture dated February 5, 2021, by and among Chesapeake Escrow LLC, as issuer, the guarantors signatory thereto and Deutsche Bank Trust Company, as Trustee governing the Company’s existing 5.500% Senior Notes due 2026 (the “CHK 2026 Notes”) and 5.875% Senior Notes due 2029 (the “CHK 2029 Notes”) and (ii) Supplemental Indenture No. 5 to the Indenture dated April 7, 2021, by and among Vine Energy Holdings LLC, the guarantors signatory thereto and Wilmington Trust, National Association, as Trustee governing the Company’s existing 6.750% Senior Notes due 2029 (the “CHK-VINE 2029 Notes” and together with the CHK 2026 Notes and the CHK 2029 Notes, the “CHK Notes”), in each case to add as guarantors of the CHK Notes, the subsidiaries of Southwestern that guarantee the SWN Notes. The foregoing description is qualified in its entirety by reference to the indentures and supplemental indentures governing the CHK Notes attached hereto as Exhibits 4.30 through 4.36, each of which is incorporated herein by reference.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
The disclosure set forth in the “Introductory Note” above is incorporated into this Item 2.01 by reference.
At the Effective Time, each share of Southwestern common stock, par value $0.01 per share (“Southwestern Common Stock”), issued and outstanding immediately prior to the Effective Time (excluding certain excluded shares held by Southwestern as treasury shares, or by the Company, Merger Sub Inc. or Merger Sub LLC, and certain equity awards of Southwestern) was converted into the right to receive 0.0867 (the “Exchange Ratio”) of a share of the Company’s common stock, par value $0.01 per share (“Company Common Stock”). No fractional shares of Company Common Stock were issued in the Merger, and holders of shares of Southwestern Common Stock received cash in lieu of fractional shares of Company Common Stock, if any, in accordance with the terms of the Merger Agreement.
In addition, at the Effective Time:
| · | each outstanding and unexercised option award of Southwestern as of immediately prior to the Effective Time ceased to represent a right to acquire shares of Southwestern Common Stock and was automatically canceled and terminated without consideration payable or owed thereto; |
| · | each outstanding restricted stock award of Southwestern was automatically fully vested and each such restricted stock award was converted into the right to receive a number of shares of Company Common Stock equal to (i) the Exchange Ratio, multiplied by (ii) the total number of shares of Southwestern Common Stock attributable to such restricted stock award; |
| · | each outstanding restricted stock unit award of Southwestern under Southwestern’s Nonemployee Director Deferred Compensation Plan was automatically fully vested, canceled, and converted into the right to receive a number of shares of Company Common Stock equal to (i) the Exchange Ratio, multiplied by (ii) the total number of shares of Southwestern Common Stock subject to such restricted stock unit award, together with accrued dividend equivalent payments in each case issuable and payable at the times specified in Southwestern’s Nonemployee Director Deferred Compensation Plan and in accordance with such director’s deferral elections as set forth in the applicable Deferred Compensation Agreement; |
| · | each outstanding restricted stock unit award of Southwestern that (i) was granted pursuant to Southwestern’s 2013 Incentive Plan, or (ii) was granted prior to the date of the Merger Agreement and was held by an employee of Southwestern or its Subsidiaries (as defined in the Merger Agreement) whose employment was terminated upon or immediately after the Effective Time, and was subject only to time-based vesting conditions, was fully vested, canceled and converted into the right to receive a number of shares of Company Common Stock equal to (A) the Exchange Ratio, multiplied by (B) the total number of shares of Southwestern Common Stock subject to each such restricted stock unit award, together with accrued dividend equivalent payments, in each case issuable and payable in accordance with the terms of the applicable award agreement; |
| · | each outstanding restricted stock unit award that was granted pursuant to Southwestern’s 2022 Incentive Plan (and not described above) and that was subject only to time-based vesting conditions was canceled and converted into an award of restricted stock units in respect of shares of Company Common Stock (rounded to the nearest whole share) equal to the product of (i) the total number of shares of Southwestern Common Stock subject to such restricted stock unit award immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Such restricted stock unit award shall vest and become payable on the same terms and conditions (including “double-trigger” vesting provisions) as are set forth in the corresponding award agreement (except that such award will be payable in Company Common Stock); |
| · | each outstanding performance unit award that (i) was granted pursuant to Southwestern’s 2013 Incentive Plan, or (ii) was granted prior to the date of the Merger Agreement and was held by an employee of Southwestern or its Subsidiaries (as defined in the Merger Agreement) whose employment was terminated upon or immediately after the Effective Time was (A) automatically fully vested and became payable at the greater of (1) the level based on actual performance determined as of immediately prior to the Effective Time in accordance with the terms of the applicable award agreement and (2) the target level (the number of shares of Southwestern Common Stock payable pursuant to the foregoing, the “Earned Company Performance Shares”), and (B) canceled and converted into the right to receive a number of shares of Company Common Stock equal to (1) the Exchange Ratio, multiplied by (2) the number of Earned Company Performance Shares, together with accrued dividend equivalent payments, in each case issuable and payable in accordance with the terms of the applicable award agreement; |
| · | each outstanding performance unit award of Southwestern that was granted pursuant to Southwestern’s 2022 Incentive Plan (and not described above) was deemed to correspond to a number of Earned Company Performance Shares, and was canceled and converted into an award of time-based vesting restricted stock units in respect of that number of shares of Company Common Stock (rounded to the nearest whole share) equal to (i) the number of Earned Company Performance Shares with respect to such performance unit award multiplied by (ii) the Exchange Ratio. Such restricted stock units shall time-vest at the end of the original performance period and are otherwise subject to and payable on the same terms and conditions (including “double-trigger” vesting provisions) as are set forth in the corresponding award agreement (except that such award will be payable in shares of Company Common Stock); |
| · | each outstanding performance cash unit award of Southwestern that (i) was granted pursuant to Southwestern’s 2013 Incentive Plan, or (ii) was granted prior to the date of the Merger Agreement and was held by an employee of Southwestern or its Subsidiaries (as defined in the Merger Agreement) whose employment was terminated upon or immediately after the Effective Time was automatically, by virtue of the occurrence of the Closing (as defined in the Merger Agreement), fully vested and payable in cash in an amount equal to $1.00 per unit granted under such performance cash unit award multiplied by the greater of (A) the percentage earned based on actual performance determined as of immediately prior to the Effective Time in accordance with the terms of the applicable award agreement and (B) 100%; and |
| · | each outstanding performance cash unit award of Southwestern that was granted pursuant to Southwestern’s 2022 Incentive Plan (other than those described above) was deemed earned at a level equal to $1.00 per unit granted under such performance cash unit award multiplied by the greater of (i) the percentage earned based on actual performance determined as of immediately prior to the Effective Time in accordance with the terms of the applicable award agreement and (ii) 100%. Such amount will vest and become payable in cash at the end of the original performance period associated with the corresponding performance cash unit award of Southwestern and was otherwise subject to and payable on the same terms and conditions (including “double-trigger” vesting provisions) as are set forth in the corresponding award agreement. |
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached as Exhibit 2.1 to this Current Report on Form 8-K and the terms of which are incorporated herein by reference.