SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
CHESAPEAKE UTILITIES CORPORATION
(Name of Issuer)
Common Stock, $.4867 Par Value
(Title of Class of Securities)
165 303 108
(CUSIP Number)
Elizabeth R. Hughes, Esquire
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, MD 21201 (410) 244-
7608
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 6, 1997
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject
of this Schedule 13D, and is filing this schedule because
of Rule 13d-1(b)(3) or (4), check the following box [ ].
The information required on the remainder of this cover
page shall not be deemed to be "filed" for the purpose of
Section 18 of the Securities Exchange Act of 1934 ("Act")
or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
(Continued on following pages)
CUSIP No.: 165 303 108 13D
1. NAME OF REPORTING PERSON: Mr. James R. Schneider
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
UNDISCLOSED
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)
[ ]
(b) [
]
3. SEC USE ONLY
4. SOURCE OF FUNDS: PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [
]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States
NUMBER OF
7. SOLE VOTING POWER: 319,500 shares
SHARES
BENEFICIALLY
8. SHARED VOTING POWER: -0-
OWNED BY
EACH
9. SOLE DISPOSITIVE POWER: 319,500 shares
REPORTING
PERSON 10. SHARED DISPOSITIVE POWER: -0-
WITH
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 319,500 shares
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [
]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
7.2%
14. TYPE OF REPORTING PERSON: IN
Item 1. Security and Issuer.
The class of equity to which this statement refers is
Common Stock, $.4867 par value, of Chesapeake Utilities
Corporation, a Delaware corporation (the "Issuer"), which
has its principal executive office at 909 Silver Lake
Boulevard, Dover, Delaware. The Issuer's telephone number
is (302) 734-6713.
Item 2. Identity and Background.
(a) James R. Schneider
(b) Tri-County Gas Co., Inc.
1820 North Salisbury Boulevard
Salisbury, MD 21801
(c) Vice President
Tri-County Gas Co., Inc.
1820 North Salisbury Boulevard
Salisbury, MD 21801
Tri-County Gas Co., Inc. is a distributor of
propane gas.
(d) Mr. Schneider has not been convicted in a criminal
proceeding (excluding traffic violations or
similar misdemeanors).
(e) Mr. Schneider has not been a party to a civil
proceeding described in Item 2(e) of Schedule
13D.
(f) Mr. Schneider is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
Prior to March 6, 1997, Mr. Schneider owned 474 shares
of Common Stock of Tri-County Gas Co., Inc., a Maryland
corporation ("Tri-County"). Mr. Schneider's share ownership
represented one-half of the outstanding equity securities of
Tri-County. Further, Mr. Schneider is a partner of BJ
Limited, a Maryland partnership ("BJ"). Mr. Schneider's
partnership interest represents the ownership of one-half of
BJ and its assets.
On March 6, 1997, pursuant to an agreement and plan of
merger dated January 10, 1997 (the "Merger Agreement"), a
copy of which is included as Exhibit 1 hereto, among and
between the Issuer, CPK-A Sub, a Delaware corporation and
wholly owned subsidiary of the Issuer ("Merger Sub"), Tri-
County, William P. Schneider and James R. Schneider
(collectively, the "Schneiders"), (i) Merger Sub was merged
with and into Tri-County with Tri-County continuing as the
surviving corporation and wholly owned subsidiary of the
Issuer, (ii) the shares of Common Stock of Merger Sub
outstanding immediately prior to the Merger were converted,
in the aggregate, into 1,000 shares of Common Stock of Tri-
County, and (iii) each issued and outstanding share of
Common Stock of Tri-County was automatically converted into
the right to receive 672.9957805 shares of fully paid and
nonassessable Common Stock of Issuer. Pursuant to such
transaction, Mr. Schneider acquired 319,000 shares of
Issuer's Common Stock.
Further, on March 6, 1997, pursuant to an asset
purchase agreement dated February 3, 1997 (the "Asset
Purchase Agreement"), a copy of which is included as Exhibit
2 hereto, among and between the Issuer, Eastern Shore Real
Estate, Inc., a Delaware corporation and wholly owned
subsidiary of Issuer ("ESRE"), BJ and the Schneiders, i) BJ
and the Schneiders transferred certain real and personal
property as set forth in the Asset Purchase Agreement to
ESRE, ii) BJ and the Schneiders assigned to ESRE and ESRE
assumed certain liabilities set forth in the Asset Purchase
Agreement, and iii) ESRE delivered to each of James R.
Schneider and William P. Schneider 500 shares of Issuer's
Common Stock.
Item 4. Purpose of Transaction.
The shares reported in this Schedule 13D are held for
investment purposes. Mr. Schneider intends, however, to
continue to review his investment in the Issuer on the basis
of various factors, including the Issuer's business, results
of operations, financial condition and future prospects,
conditions in the securities market, general economic and
industry conditions and individual tax and other portfolio
considerations. Based upon such review Mr. Schneider will
take such action as he deems appropriate in light of the
circumstances existing from time to time. In this
connection, Mr. Schneider may, subject to factors he deems
relevant, purchase or otherwise acquire additional shares
from time to time in the open market or in privately
negotiated transactions or otherwise; or sell or otherwise
dispose of, shares beneficially owned, whether now or in the
future, from time to time in the open market, in privately
negotiated transactions to one or more purchasers, or
otherwise.
Except as set forth pursuant to Item 3 above, Mr.
Schneider has not at the present time formulated any plans
or proposals of the type referred to in clauses (a) through
(j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) Aggregate Number of Shares of Common Stock:
319,500 shares
Percentage of Class: 7.2%*
*Percentage calculation based on capitalization of Issuer
set forth in Issuer's Current Report on Form 8-K dated
January 10, 1997.
(b) All shares set forth in Item 5(a) are owned by Mr.
Schneider with sole power to vote and dispose of such
shares.
(c) On March 6, 1997, Mr. Schneider acquired 319,500
shares of Issuer's Common Stock as set forth in Item 3
above.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the
Issuer.
Mr. Schneider has entered into a Registration Rights
Agreement with the Issuer pertaining to 319,500 shares of
Issuer's Common Stock. A copy of such agreement is attached
hereto as Exhibit 3. Pursuant to such agreement, within 60
days following the time at which results covering at least
30 days of post-Merger combined operations of the Issuer
have been filed with the Securities and Exchange Commission
(the "Commission"), sent to stockholders of the Issuer or
otherwise publicly issued, the Issuer will, subject to the
terms of this Agreement, and subject to the full cooperation
of Mr. Schneider, at its expense, file with the Commission a
registration statement (the "Registration Statement")
covering the sale by Mr. Schneider of the Registrable
Securities. The Issuer will use its reasonable best efforts
to cause the Registration Statement to become effective as
promptly as practicable and to maintain the effectiveness of
the Registration Statement for a period of three (3) years
from the Effective Time, as that term is defined in the
Merger Agreement, or such shorter time as may be required by
Rule 144(k) under the Securities Act of 1933, as amended
(the "Securities Act"), or any successor provision. The
Issuer may postpone for a reasonable period of time, not to
exceed 60 days, the filing or effectiveness of the
Registration Statement, or the undertaking of any work by
the Issuer with respect to the preparation of the
Registration Statement, if the Board of Directors of the
Issuer in good faith determines that such filing or
registration would reasonably be expected to have a material
adverse effect on any plan or proposal by the Issuer with
respect to any financing, acquisition, recapitalization,
reorganization or other material transaction.
Mr. Schneider has agreed that in any calendar quarter he
will not offer to sell, sell or otherwise dispose of any
amount of Registrable Securities in excess of one percent
(1%) of the total number of shares of Common Stock then
issued and outstanding.
Item 7. Material to be Filed as Exhibits.
Exhibit No. Item
1 Agreement and Plan of Merger
2 Asset Purchase Agreement
3 Registration Rights Agreement
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
Dated: March 6, 1997 /s/James R. Schneider
James R. Schneider
BA3DOCS1\0055304.01
EXHIBIT INDEX
Exhibit No. Item
1 Agreement and Plan of Merger
2 Asset Purchase Agreement
3 Registration Rights Agreement
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement")
is made and entered into this 10th day of January, 1997, by
and among Chesapeake Utilities Corporation, a Delaware
corporation ("Chesapeake"), CPK Sub-A, Inc., a Delaware
corporation ("CPK Sub-A"), Tri-County Gas Company, Inc., a
Maryland corporation ("Tri-County"), and James R. Schneider
and William P. Schneider, residents of Maryland (each, a
"Shareholder" and collectively, the "Shareholders").
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject
to the conditions hereof, as promptly as practicable following
the satisfaction or waiver of the conditions set forth in
Article VIII hereof, but in no event later than two business
days thereafter, unless the parties hereto shall otherwise
agree, articles of merger (the "Articles of Merger") and a
certificate of merger (the "Certificate of Merger") providing
for the merger of CPK Sub-A with and into Tri-County (the
"Merger") shall be duly prepared, executed and filed by Tri-
County, as the surviving corporation (the "Surviving
Corporation"), in accordance with the relevant provisions of
the Maryland General Corporation Law (the "MGCL") and the
Delaware General Corporation Law (the "DGCL") and the Merger
shall become effective. Following the Merger, the Surviving
Corporation shall continue under the same name as Tri-County
and the separate corporate existence of CPK Sub-A shall cease.
The date and time the Merger becomes effective is referred to
herein as the "Effective Time." Immediately prior to the
filing of the Articles of Merger and the Certificate of
Merger, a closing (the "Closing") shall take place at the
offices of Covington & Burling, 1201 Pennsylvania Avenue,
Washington, D.C., or such other place and at such time as the
parties shall agree.
SECTION 1.2 Effects of the Merger. The Merger
shall have the effects set forth in Section 3-114 of the MGCL
and Sections 259, 260 and 261 of the DGCL.
SECTION 1.3 Certificate of Incorporation and By-
Laws. The Certificate of Incorporation of Tri-County and the
<PAGE>
By-laws of CPK Sub-A (both of which have been heretofore
delivered by Tri-County to Chesapeake or Chesapeake to Tri-
County, as the case may be), in each case as in effect
immediately prior to the Effective Time, shall be the
Certificate of Incorporation and By-laws of the Surviving
Corporation until duly amended in accordance with applicable
law.
SECTION 1.4 Directors. The directors of CPK Sub-A
immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office
until their respective successors are duly elected and
qualified in accordance with the Certificate of Incorporation
and By-laws of the Surviving Corporation, or their earlier
death, resignation or removal.
SECTION 1.5 Officers. The officers of CPK Sub-A
immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation and shall serve as the
officers of the Surviving Corporation at the pleasure of the
Board of Directors of the Surviving Corporation.
SECTION 1.6 Conversion of Shares. At the Effective
Time, by virtue of the Merger and without any action on the
part of the holders thereof:
(a) Subject to Section 2.2, each issued and
outstanding share of common stock, par value $100.00 per
share, of Tri-County (the "Tri-County Common Stock") shall
automatically be converted into the right to receive (the
"Merger Consideration") that amount of fully paid and
nonassessable shares of common stock, par value $.4867 per
share, of Chesapeake (the "Chesapeake Common Stock"), which
shall be determined by dividing 638,000 by the aggregate
number of outstanding shares of Tri-County Common Stock at the
Effective Time (the "Exchange Ratio"), provided that in the
event of a stock split or reverse stock split in either the
Tri-County Common Stock or the Chesapeake Common Stock prior
to the Effective Time, the Exchange Ratio shall be adjusted
proportionately in order to prevent either dilution or
enlargement of the rights of the Shareholders.
<PAGE>
(b) Each share of capital stock of Tri-County
that is held in the treasury of Tri-County shall be canceled
and retired and cease to exist and no consideration shall be
issued in exchange therefor.
(c) The issued and outstanding shares of
capital stock of CPK Sub-A shall be converted into and become,
in the aggregate, one thousand fully paid and nonassessable
shares of common stock of the Surviving Corporation.
ARTICLE II
EXCHANGE OF SHARES
SECTION 2.1 Surrender of Certificates. At the
Effective Time, each of the Shareholders shall surrender the
certificate or certificates that formerly represented that
Seller's shares of Tri-County Common Stock to the Surviving
Corporation, and shall thereupon receive in exchange therefor
the Merger Consideration for each share of Tri-County Common
Stock formerly represented by such certificate or
certificates, and the certificates so surrendered shall
forthwith be cancelled.
SECTION 2.2 No Fractional Shares. No certificate
or scrip representing fractional shares of Chesapeake Common
Stock shall be issued upon the surrender for exchange of
certificates of Tri-County Common Stock, and such fractional
share interests will not entitle the owner thereof to vote or
to any rights of a stockholder of Chesapeake. In lieu of any
such fractional share interest, Chesapeake shall pay to each
stockholder of Tri-County who otherwise would be entitled to
receive a fractional share of Chesapeake Common Stock (after
aggregating all certificates formerly representing shares of
Tri-County Common Stock held by the same holder) an amount of
cash determined by multiplying (i) the average of the closing
prices of Chesapeake Common Stock on the New York Stock
Exchange ("NYSE"), as reported by The Wall Street Journal, for
the twenty (20) consecutive trading days immediately preceding
the second day prior to the Effective Time, by (ii) the
fraction of a share of Chesapeake Common Stock to which such
<PAGE>
holder would otherwise be entitled pursuant to Section 1.6(a)
of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF TRI-COUNTY AND THE SHAREHOLDERS
Tri-County and each of the Shareholders, severally
and not jointly, represents and warrants to Chesapeake and CPK
Sub-A as follows:
SECTION 3.1 Corporate Organization.
(a) Tri-County is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now
being conducted. Section 3.1 of the disclosure schedule to be
delivered to Chesapeake prior to the date of this Agreement
(the "Tri-County Disclosure Schedule") sets forth the name of
each jurisdiction in which Tri-County is qualified or licensed
to do business. Tri-County is duly qualified or licensed to
do business and is in good standing in each jurisdiction in
which the property owned, leased or operated by it or the
nature of the business conducted by it makes such
qualification or licensing necessary, unless failure to
qualify would not result in a material adverse effect on
Tri-County. Tri-County has heretofore delivered to Chesapeake
accurate and complete copies of its Certificate of
Incorporation and By-laws, as in effect as of the date of this
Agreement.
(b) Tri-County does not own, directly or
indirectly, any capital stock or other equity securities or
similar interest in any corporation, partnership, joint
venture, or other business association or entity, except as
set forth on Disclosure Schedule 3.1.
SECTION 3.2 Capitalization. The authorized capital
stock of Tri-County consists of 1,000 shares of Tri-County
<PAGE>
Common Stock, of which 948 shares are issued and outstanding.
All of the issued and outstanding shares of Tri-County Common
Stock are validly issued, fully paid and nonassessable. As of
the date of this Agreement, no shares of Tri-County Common
Stock were issuable upon exercise of stock options or warrants
or conversion of any preferred stock or debt security or
instrument. Except as set forth above, there are not as of
the date of this Agreement, and at the Effective Time there
will not be, any shares of capital stock (or securities
substantially equivalent to capital stock) of Tri-County
issued or outstanding or any subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or
commitments of any character obligating Tri-County to issue,
transfer or sell any of its securities. Section 3.2 of the
Tri-County Disclosure Schedule sets forth as of the date of
this Agreement (i) the name of the holder and beneficial owner
of each outstanding share of Tri-County Common Stock, and (ii)
the number of shares of Tri-County Common Stock held by such
holder.
SECTION 3.3 Authority Relative to this Agreement;
Binding Effect.
(a) Tri-County has full corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized and approved by the Board of Directors of
Tri-County and by the unanimous vote or written consent of the
stockholders of Tri-County and no other corporate proceedings
on the part of Tri-County are necessary to authorize this
Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and
delivered by Tri-County and constitutes a legal, valid and
binding agreement of Tri-County, enforceable against Tri-
County in accordance with its terms.
(b) This Agreement has been duly and validly
executed and delivered by each Seller and constitutes a legal,
<PAGE>
valid and binding agreement of each Seller, enforceable
against each Seller in accordance with its terms.
SECTION 3.4 Consents and Approvals; No Violations.
Except for the filing and recordation of the Articles of
Merger, as required by the MGCL, and the Certificate of
Merger, as required by the DGCL, and as set forth in Section
3.4 of the Tri-County Disclosure Schedule, no filing with or
notification to, and no permit, authorization, consent, waiver
or approval of, any government, executive official thereof,
governmental or regulatory authority, agency or commission,
including courts of competent jurisdiction, domestic or
foreign (a "Governmental Entity"), is necessary for the
consummation by Tri-County and the Shareholders of the
transactions contemplated by this Agreement, excluding,
however, filings, permits, authorizations, consents, or
approvals of any kind required by the Federal Energy
Regulatory Commission ("FERC") or the Public Utility
Commission or similar utility regulatory body of the States of
Florida, Maryland or Delaware. Except as set forth in Section
3.4 of Tri-County Disclosure Schedule, neither the execution
and delivery of this Agreement by Tri-County and the
Shareholders nor the consummation by Tri-County and the
Shareholders of the transactions contemplated hereby nor
compliance by Tri-County and the Shareholders with any of the
provisions hereof will (i) conflict with or result in any
breach of any provision of the Certificate of Incorporation or
By-laws of Tri-County, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination,
cancellation or acceleration or result in the creation of any
mortgage, pledge, charge, security interest, claim or
encumbrance of any kind (collectively, a "Lien")) under, any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, agreement or other
instrument or obligation to which Tri-County or a Shareholder
is a party or by which they or any of their properties or
assets may be bound, or (iii) violate any order, writ,
injunction, decree, or statute applicable to Tri-County or a
Shareholder or any of their properties or assets, or (iv)
result in a violation of any rule or regulation applicable to
<PAGE>
Tri-County or a Shareholder or any of their properties or
assets, unless, in the case of this subsection (iv) only, such
violation would not result in a material adverse effect on Tri-
County or the Merger.
SECTION 3.5 Absence of Certain Changes. Except as
and to the extent set forth in Section 3.5 of the Tri-County
Disclosure Schedule, since November 30, 1996 Tri-County has
not:
(a) suffered any Material Adverse Change;
"Material Adverse Change" means (i) any material change in the
nature of Tri-County's business, assets, financial condition,
results of operations, or prospects, (ii) the loss of a
contract which contributed in excess of two hundred thousand
dollars ($200,000.00) of revenues to Tri-County in fiscal year
1996, and (iii) any change that creates a material limitation
on the ability to conduct the business of Tri-County as
heretofore conducted.
(b) paid, discharged or otherwise satisfied
any material claims, liabilities or obligations (absolute,
accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business
and consistent with past practice, except as expressly
permitted pursuant to Section 5.2;
(c) permitted or allowed any of its material
property or assets (real, personal or mixed, tangible or
intangible) to be subjected to any Liens, except for (i) Liens
for current taxes or other governmental charges not yet due
and payable, or the amount or validity of which is being
contested by the appropriate proceedings and for which an
appropriate reserve has been established, (ii) Liens disclosed
in Sections 3.24(b) and 3.24(c) of the Tri-County Disclosure
Schedule, (iii) Liens of carriers, warehousemen, mechanics and
materialmen and similar Liens incurred in the ordinary course
of business, and (iv) zoning, entitlement and other land use
regulations (collectively, "Permitted Liens");
<PAGE>
(d) sold, transferred, or otherwise disposed
of any of its properties or assets (real, personal or mixed,
tangible or intangible), except in the ordinary course of
business and consistent with past practice, except as
expressly permitted pursuant to Section 5.2;
(e) granted any increase in the compensation
or benefits of any officer or employee (including any such
increase pursuant to any bonus, pension, profit sharing or
other plan or commitment) or any increase in the compensation
or benefits payable or to become payable to any officer or
employee, and no such increase is customary on a periodic
basis or required by agreement or understanding;
(f) made any change in severance policy or
practices;
(g) made any expenditure capitalized in
accordance with Tri-County's current accounting policies or
acquired any property or assets (other than new materials and
supplies) for a cost in excess of $100,000, in the aggregate,
excluding from this aggregate amount expenditures in the
ordinary course of business on propane gas and propane tanks;
(h) except as expressly permitted by
Section 5.2 of this Agreement, declared, paid or set aside for
payment any dividend or other distribution in respect of its
capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other
securities of Tri-County;
(i) except as contemplated by Section 5.3 of
this Agreement, made any material change in any method of tax
or financial accounting or accounting practice or made or
changed any election for Federal income tax purposes without
the consent of Chesapeake;
(j) paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, or entered into
any agreement or arrangement with, any of its officers,
<PAGE>
directors or stockholders or any affiliate or associate of any
of its officers, directors or stockholders, except as
expressly permitted pursuant to Section 5.2 of this Agreement;
or
(k) agreed or planned, whether in writing or
otherwise, to take any action described in this Section.
SECTION 3.6 Unaudited Financial Statements. Tri-
County shall have furnished to Chesapeake prior to the date of
this Agreement an unaudited balance sheet of Tri-County as of
November 30, 1996 and an unaudited statement of operations for
the eleven month period ending November 30, 1996
(collectively, the "Unaudited Financial Statements"). Such
Unaudited Financial Statements shall be certified by the Chief
Executive Officer of Tri-County to his knowledge as having
been prepared under his supervision; as presenting the
financial position of Tri-County in accordance with generally
accepted accounting principles consistently applied; to be
true, correct and complete in all material respects; and to
reflect accurately the books and records of Tri-County, in all
material respects, subject to normal year-end adjustments .
SECTION 3.7 No Undisclosed Liabilities. Except as
and to the extent provided in the Unaudited Financial
Statements or Section 3.7 of the Tri-County Disclosure
Schedule, Tri-County did not have on November 30, 1996 any
material liabilities (whether contingent or absolute, direct
or indirect, known or unknown to Tri-County or matured or
unmatured) not fully reflected or fully reserved against in
the Unaudited Financial Statements. Except as set forth in
Section 3.7 of the Tri-County Disclosure Schedule, since
November 30, 1996, Tri-County has not incurred any liability
except in the ordinary course of business consistent with past
practice.
SECTION 3.8 No Default. Except as set forth in
Section 3.8 of the Tri-County Disclosure Schedule, Tri-County
is not in default or violation (and no event has occurred that
with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of
<PAGE>
(i) its Certificate of Incorporation or its By-laws, (ii) any
note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation to which Tri-County is a
party or by which it or any of its properties or assets may be
bound (unless, in the case of a contract, such default would
not have a material adverse effect on Tri-County), or (iii)
any order, writ, injunction, decree, statute, rule or
regulation applicable to Tri-County or any of its properties
or assets, unless such default or violation will not have a
material adverse effect on Tri-County.
SECTION 3.9 Litigation. Except as set forth in
Section 3.9 of the Tri-County Disclosure Schedule, there is no
action, suit, proceeding, arbitration, or investigation
pending or threatened by or before any Governmental Entity
involving Tri-County or any of its properties or assets.
Neither Tri-County nor any of its properties or assets is
subject to any order, writ, judgment, injunction, decree,
determination or award. There is no action, suit, proceeding,
arbitration or investigation initiated by Tri-County currently
pending or that Tri-County presently intends to initiate.
SECTION 3.10 Compliance with Applicable Law.
(a) Except as set forth in Section 3.10 of the
Tri-County Disclosure Schedule, the business of Tri-County has
not been conducted in violation of any applicable law,
ordinance, rule, regulation, decree or order of any
Governmental Entity, unless such violation will not result in
a material adverse effect on Tri-County. Tri-County holds all
permits, licenses, variances, exemptions, orders and approvals
of all Governmental Entities necessary for the lawful conduct
of its businesses (the "Tri-County Permits") and is in
compliance with the terms of the Tri-County Permits, unless
the failure to obtain any Tri-County Permits or be in
compliance therewith will not result in a material adverse
effect on Tri-County. Except as set forth in Section 3.10 of
the Tri-County Disclosure Schedule, neither Tri-County nor
either Shareholder has received any notification of any
asserted present or past failure by Tri-County to comply with
such laws, rules or regulations or such Tri-County Permits
<PAGE>
which have not been previously cured, and to the knowledge of
Tri-County, there is no pending audit, investigation or other
review by any Governmental Entity to determine the existence
of any violation of such laws, rules or regulations or such
Tri-County Permits.
(b) For purposes of this Agreement, "knowledge
of Tri-County" or "known by Tri-County" shall include
knowledge of either Tri-County or either of the Shareholders.
SECTION 3.11 Taxes.
(a) From October 1, 1987 until December 31,
1996, Tri-County has been an S corporation as defined by
Section 1361(a)(1) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder
(the "Code").
(b) The amounts, if any, provided as a
liability on the Unaudited Financial Statements for all Taxes
(as hereinafter defined) are adequate to cover all unpaid
liabilities for all Taxes, whether or not disputed, that have
accrued or will accrue with respect to or are applicable to
the period ended on and including the Effective Time
(including, without limitation, as a result of the
transactions contemplated by this Agreement) or to any years
and periods prior thereto and for which Tri-County may be
directly or contingently liable in its own right or as a
transferee of the assets of, or successor to, any person. Tri-
County has incurred no Tax liabilities other than in the
ordinary course of business for any taxable year for which the
applicable statute of limitations has not expired. There are
no Liens for Taxes (other than Liens for current Taxes not yet
due and payable, or the amount or validity of which is being
contested by the appropriate proceedings and for which an
appropriate reserve has been established) upon the properties
or assets of Tri-County. Tri-County has not granted or been
requested to grant any waiver of any statutes of limitations
applicable to any claim for Taxes. Apart from the election
referenced in Code Section 1362(a) and normal elections for
<PAGE>
inventory, amortization, and depreciation, Tri-County has made
no material elections for federal income tax purposes.
(c) Tri-County (i) has filed (or has had filed
on its behalf) or will file or cause to be filed timely all
Tax Returns (as hereinafter defined) required by applicable
law to be filed prior to or as of the Effective Time and (ii)
has paid all Taxes shown thereon as owing. Each such Tax
Return is true, accurate and complete. All Taxes that Tri-
County is required by law to withhold or collect, including
sales and use taxes, and amounts required to be withheld for
Taxes of employees and other withholding taxes, have been duly
withheld or collected and, to the extent required, have been
paid over in a timely manner to the proper governmental
authorities or are held in separate bank accounts for such
purpose.
(d) No extensions of time have been granted
for Tri-County to file any Tax Return required by applicable
law to be filed prior to or as of the Effective Time, which
have expired, or will expire, prior to or as of the Effective
Time without such Tax Return having been filed.
(e) To the knowledge of the Shareholders, or
as should be reasonably known by Tri-County, none of the Tax
Returns filed by or on behalf of Tri-County are currently
undergoing any Audit (as hereinafter defined), Tri-County has
received no notice that any Tax Return will undergo any Audit,
and no facts exist that would constitute grounds for the
assessment against Tri-County of any material additional Taxes
by any governmental authority for periods that have not been
audited. No material issues have been raised in any Audit by
any governmental authority with respect to the business and
operations of Tri-County that, by application of similar
principles, reasonably could be expected to result in a
proposed adjustment to the liability for Taxes for any other
period not so examined. No deficiency or adjustment for any
Taxes has been threatened, proposed, asserted, or assessed
against Tri-County.
<PAGE>
(f) No power of attorney has been granted by
Tri-County with respect to any matter relating to Taxes which
is currently in force.
(g) Tri-County is not a party to any agreement
providing for the allocation or sharing of Taxes.
(h) Tri-County has not entered into any
agreement that would result in the disallowance of any tax
deduction pursuant to Code Section 280G.
(i) No "consent" within the meaning of Code
Section 341(f) has been filed with respect to Tri-County.
(j) Neither of the Shareholders is a "foreign
person" as defined in Code Section 1445(f)(3).
(k) None of the assets of Tri-County
constitutes tax-exempt bond financed property or tax-exempt
use property within the meaning of Code Section 168, and none
of the assets reflected on the Unaudited Financial Statements
is subject to a lease, safe harbor lease or other arrangement
as a result of which Tri-County is not treated as the owner of
such assets for federal income tax purposes.
(l) To the knowledge of or as reasonably
should be known by Tri-County, the basis of all depreciable or
amortizable assets, and the methods used in determining
allowable depreciation or amortization (including cost
recovery) deductions of Tri-County, are materially correct and
in compliance with the Code.
(m) To the knowledge of Tri-County, Tri-County
is not required to make any material adjustment under Code
Section 481(a) by reason of a change or proposed change in
accounting method or otherwise.
<PAGE>
(n) For purposes of this Agreement:
(i) the term "Taxes" shall mean all
taxes, charges, fees, duties (including customs duties),
levies or other assessments, including income, gross
receipts, net proceeds, ad valorem, turnover, real and
personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational,
interest equalization, windfall profits, severance,
license, payroll, environmental, capital stock,
disability, employee's income withholding, other
withholding, unemployment and Social Security taxes,
which are imposed by any federal, state, local or foreign
governmental authority, and such term shall include any
interest, penalties or additions to tax attributable
thereto;
(ii) the term "Tax Return" shall include
all federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and
information returns and any amended Tax Return relating
to Taxes; and
(iii) the term "Audit" shall include any
taxing authority's audit, assessment of Taxes, or other
examination proceedings or appeal of such proceedings
relating to Taxes.
SECTION 3.12 ERISA.
(a) Except as and to the extent described in
Section 3.12(a) of the Tri-County Disclosure Schedule, Tri-
County does not maintain or contribute to any "employee
benefit plan," as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder
("ERISA"). The employee benefits plans disclosed in Section
3.12(a) of the Tri-County Disclosure Schedule are referred to
as the "ERISA Plans." With respect to each ERISA Plan, Tri-
County has provided Chesapeake with a true and complete copy
<PAGE>
of each of the following (to the extent applicable to such
ERISA Plan): (i) the current plan document (including all
amendments adopted since the most recent restatement) and the
most recent summary plan description (including all summaries
of material modifications prepared since the most recent
summary plan description); (ii) the annual report on Form 5500
for the most recent year for which such report has been filed;
(iii) each related trust agreement, insurance contract (with
the exception of a group annuity contract that serves as a
funding vehicle under Tri-County's retirement savings plan,
which Tri-County shall use best efforts to provide to
Chesapeake before the Effective Time), or investment
management agreement (including all amendments to each such
document); and (iv) the most recent Internal Revenue Service
("IRS") determination letter. Except as and to the extent
described in Section 3.12(a) of the Tri-County Disclosure
Schedule, any obligation of Tri-County to provide
postretirement benefits or postemployment benefits under any
ERISA Plan is reflected in Tri-County's most recent financial
statement in accordance with Statements of Financial
Accounting Standards 106 and 112.
(b) Tri-County has complied in all material
respects with all applicable provisions of ERISA and the Code
and with any other laws, rules, and regulations that are
applicable to the ERISA Plans, except for compliance failures
that individually or in the aggregate would not have a
material adverse effect on Tri-County. Each ERISA Plan that
is intended to be "qualified" within the meaning of Code
Section 401(a) has been determined by the IRS to be qualified,
or application for such a determination has been made prior to
the expiration of the applicable remedial amendment period,
and nothing has occurred since the date of such determination
or application that is reasonably likely to result in the
disqualification of any such ERISA Plan. No ERISA Plan is
subject to any ongoing audit, investigation, or other
administrative proceeding of any governmental entity, and no
ERISA Plan is the subject of any pending application for
administrative relief under any voluntary compliance program
or closing agreement program of the IRS or the Department of
Labor. No person or entity has engaged in any "prohibited
<PAGE>
transaction" (as such term is defined in ERISA and the Code)
with respect to any ERISA Plan. Tri-County has paid or
remitted all contributions to any ERISA Plan within the time
required by applicable law and, if applicable, within the
deadline for claiming a tax deduction for the year with
respect to which the contribution is made.
(c) Tri-County has not offered to provide
health insurance coverage to any individual, or to the family
members of any individual, for any period extending beyond the
termination of the individual's employment, except to the
extent required by the health care continuation coverage
("COBRA") provisions in ERISA and the Code.
(d) Tri-County has not at any time during the
ten calendar years preceding the year of the Merger
maintained, or contributed to, any defined benefit plan
covered by Title IV of ERISA, or incurred any liability under
Title IV of ERISA, and the transactions contemplated by this
Agreement will not subject Tri-County to any liability under
Title IV of ERISA. Tri-County has not at any time maintained,
or contributed to, any multiemployer plan described in Section
3(37) of ERISA, or incurred any withdrawal liability under
ERISA, and the transactions contemplated by this Agreement
will not subject Tri-County to any withdrawal liability under
ERISA.
(e) There are no pending or, to the knowledge
of Tri-County, threatened claims (other than routine claims
for benefits) by or on behalf of any ERISA Plan, or otherwise
involving any ERISA Plan, by any participant, beneficiary, or
fiduciary under such ERISA Plan.
(f) Section 3.12(f) of the Tri-County
Disclosure Schedule contains a list of all employee benefit
plans (other than the ERISA Plans listed in Section 3.12(a) of
the Tri-County Disclosure Schedule), nonqualified deferred
compensation arrangements, stock incentive or stock option
plans, executive contracts, termination or severance
agreements, change in control agreements, or other
arrangements maintained or contributed to by Tri-County to
<PAGE>
provide compensation or termination pay to its employees in a
form other than current cash wages. The employee benefit
plans disclosed in Section 3.12(f) of the Tri-County
Disclosure Schedule are referred to as the "Non-ERISA Plans."
Tri-County has provided Chesapeake with a true and complete
copy of any document creating or governing any Non-ERISA Plan.
Tri-County has complied in all material respects with any
laws, rules, and regulations that are applicable to the Non-
ERISA Plans, except for compliance failures that individually
or in the aggregate would not have a material adverse effect
on Tri-County. Tri-County has no plan or commitment, whether
legally binding or not, to create any additional Non-ERISA
Plan or to change the terms of any existing Non-ERISA Plan.
Except as disclosed in Section 3.12(f) of the Tri-County
Disclosure Schedule, the transactions contemplated by this
Agreement will not increase or accelerate any amount due under
any Non-ERISA Plan, require assets to be set aside or other
forms of security to be provided with respect to any liability
under any Non-ERISA Plan, or result in any "parachute payment"
(within the meaning of Code Section 280G) under any Non-ERISA
Plan.
(g) Except as set forth in Section 3.12(g) of
the Tri-County Disclosure Schedule, each ERISA Plan and Non-
ERISA Plan can be terminated within a period of 30 days,
without payment of additional compensation or amount or the
additional vesting or acceleration of any benefits, unless
such compensation, the vesting of such benefits, or other
effects of such termination would not, individually or in the
aggregate, have a material adverse effect on Tri-County.
SECTION 3.13 Environmental Matters.
(a) Except as set forth in Section 3.13 of the
Tri-County Disclosure Schedule, neither Tri-County nor either
Shareholder has learned, been advised, or received any
communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise that alleges
or suggests that, Tri-County, BJ Limited Partnership or either
Shareholder is not in full compliance with the Environmental
Laws. Section 3.13 of the Tri-County Disclosure Schedule
<PAGE>
lists the permits or other governmental authorizations that
Tri-County has pursuant to the Environmental Laws.
(b) To the knowledge of Tri-County, there are
no Environmental Claims (as hereinafter defined) pending or
threatened against Tri-County, BJ Limited Partnership or
either Shareholder or against any person or entity whose
liability for any Environmental Claim Tri-County, BJ Limited
Partnership or either Shareholder holds, has retained, or has
assumed either contractually or by operation of law and
neither Tri-County nor either Shareholder knows of any facts
or allegations that could result in future Environmental
Claims.
(c) To the knowledge of Tri-County, none of
the Real Property, as such term is defined in Section 3.24,
nor any property owned or leased by Tri-County is on the
National Priorities List or the Comprehensive Environmental
Response Compensation and Liability Information System, and no
such property is a Resource Conservation and Recovery Act
"permitted facility." No such property is permitted by the
State of Maryland to be used as a landfill or disposal site of
any type.
(d) To the knowledge of Tri-County, Section
3.13 of the Tri-County Disclosure Schedule lists all tanks
(except propane tanks) owned, leased, operated or used by Tri-
County, or which are currently used by Tri-County and are
located on the Real Property, as such term is defined in
Section 3.24.
(e) For purposes of this Agreement:
(i) "Environmental Claim" means any
claims, action, cause of action, litigation, proceeding,
order, decree, investigation or notice (written or oral)
by any person or entity alleging potential liability or
responsibility (including, without limitation, potential
liability or responsibility for investigatory costs,
cleanup costs, costs of compliance with laws,
requirements, guidelines, or orders, governmental
<PAGE>
response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of,
based on or resulting from (a) the presence, or release
into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated
by Tri-County or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental
Law.
(ii) "Environmental Laws" means all
Federal, state, local and foreign laws, regulations,
ordinances, rules, guidelines, orders, directives,
judgments and determinations relating in any way to
pollution or protection of human health or the
environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface
strata), including, without limitation, laws and
regulations relating to emissions, discharges, releases
or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of
Environmental Concern, as amended from time to time.
(iii) "Materials of Environmental Concern"
means chemicals, pollutants, contaminants, hazardous
materials, hazardous substances, hazardous wastes, toxic
substances, petroleum and petroleum products, and any
substance controlled or regulated by any Environmental
Law.
SECTION 3.14 Pooling Matters. The representations,
warranties and covenants of Tri-County set forth in the draft
letter from Tri-County to Coopers & Lybrand, dated as of the
date of this Agreement, are true and correct in all material
respects and will be true and correct in all material respects
as of the Effective Time (except as such matters may be
subject to the control of Chesapeake or its affiliates). Tri-
County shall execute such letter at the Closing.
<PAGE>
SECTION 3.15 Change in Control. Except as set
forth in Section 3.15 of the Tri-County Disclosure Schedule,
Tri-County is not a party to any contact, agreement or
understanding involving in excess of two hundred thousand
dollars ($200,000.00) which contains a "change in control,"
"potential change in control" or similar provision. Except as
set forth in Section 3.15 of the Tri-County Disclosure
Schedule, the consummation of the transactions contemplated by
this Agreement will not (either alone or upon the occurrence
of any additional acts or events) result in any payment
(whether of severance pay or otherwise) becoming due from Tri-
County to any person.
SECTION 3.16 Intellectual Property.
(a) Except as set forth in Section 3.16(a) of
the Tri-County Disclosure Schedule, Tri-County owns, or is
licensed or otherwise has the full right to use, all
copyrights, trademarks and service marks (including all
applications and registrations therefor), trade names,
computer software, patents (including applications therefor),
and all other intellectual property that is necessary for the
conduct of its business as heretofore conducted (collectively,
the "Intellectual Property").
(b) Except as set forth in Section 3.16(b) of
the Tri-County Disclosure Schedule, there are no outstanding
claims, judgments, settlements or proceedings against Tri-
County asserting the invalidity, abuse, misuse or
unenforceability of any of the Intellectual Property and there
are no threatened claims or proceedings relating to the
validity of or enforceability of the Intellectual Property.
To the knowledge of Tri-County, there are no pending or
threatened opposition or other administrative proceedings with
respect to any Intellectual Property which is the subject of a
pending application that would prevent the registration in due
course of such Intellectual Property.
SECTION 3.17 Contracts and Commitments. Except as
set forth in Section 3.17 of the Tri-County Disclosure
Schedule:
<PAGE>
(a) Tri-County has no agreements, contracts,
commitments, or restrictions that are material to its
business, prospects, financial condition, working capital,
assets, liabilities (absolute, accrued, contingent or
otherwise) or operations;
(b) There are no purchase contracts or
commitments under which Tri-County is required to pay in
excess of two hundred thousand dollars ($200,000.00), which
continue for a period of more than twelve (12) months;
(c) There are no outstanding sales contracts
or commitments of Tri-County that call for the payment to, or
receipt by, Tri-County of more than two hundred thousand
dollars ($200,000.00), which continue for a period of more
than twelve (12) months;
(d) Tri-County has no outstanding contracts
with officers, directors or employees that are not cancelable
by it on notice of not longer than thirty (30) days and
without liability, penalty, or premium or any agreement or
arrangement providing for the payment of any bonus or
commissions based on sales or earnings, except such agreements
as are expressly permitted by Section 5.2;
(e) Tri-County is not restricted by agreement
from carrying on its business anywhere in the world;
(f) Tri-County has no debt obligation for
borrowed money, including guarantees of or agreements to
acquire any such debt obligation of others;
(g) Tri-County has no power of attorney
outstanding or any obligations or liabilities (whether
absolute, accrued, contingent, or otherwise), as guarantor,
surety, co-signer, endorser, co-maker or indemnitor for the
obligation of any person, corporation, partnership, joint
venture, association, organization, or other entity; and
(h) None of the officers, directors or
stockholders of Tri-County has any interest in any property,
<PAGE>
real or personal, tangible or intangible, including without
limitation Intellectual Property, that is used in the business
of Tri-County.
SECTION 3.18 Labor Relations. As of the date
hereof, there is no strike or other labor dispute pending
against Tri-County. Tri-County is not bound by or subject to
(and none of its properties or assets is bound by or subject
to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor
union has requested or sought to represent any of the
employees, representatives or agents of Tri-County, nor is Tri-
County aware of any labor organization activity involving its
employees. Except as previously disclosed to Chesapeake, no
officer or, to the knowledge of Tri-County, any key employee
of Tri-County has any plans to terminate his employment with
Tri-County.
SECTION 3.19 Employee Benefit Plans. Except as
disclosed in Section 3.12 or Section 3.19 of the Tri-County
Disclosure Schedule, Tri-County has previously given to
Chesapeake true and correct copies of its work rule manuals,
rules, policies or other guidelines relating to employee
compensation, retirement and severance and each employment or
consulting contract to the extent they exist. Except as set
forth in Section 3.12 or Section 3.19 of the Tri-County
Disclosure Schedule and except as previously disclosed to
Chesapeake in writing, there are no other significant employee
benefit plans, programs or arrangements, maintained or
contributed to by Tri-County.
SECTION 3.20 Personnel. Tri-County has furnished
to Chesapeake a list of the names and current salaries of each
officer and employee of Tri-County as of the date of this
Agreement. Section 3.20 of the Tri-County Disclosure Schedule
sets forth a complete and correct list of all written
employment, compensation, severance, consulting or
indemnification contracts between Tri-County and its present
or former employees, officers, directors and consultants to
the extent Tri-County has any continuing obligations
<PAGE>
thereunder. Tri-County has made available to Chesapeake true
and correct copies of all such agreements.
SECTION 3.21 Insurance. Section 3.21(a) of the Tri-
County Disclosure Schedule contains an accurate and complete
list of all policies of fire, liability, workmen's
compensation and other forms of insurance owned or held by Tri-
County, except with respect to the policies as disclosed in
Section 3.12 of the Tri-County Disclosure Schedule. Except as
set forth in Section 3.21 of the Tri-County Disclosure
Schedule, all such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and
including the Effective Time will have been paid, and no
notice of cancellation of termination has been received with
respect to any such policy. Except as set forth in Section
3.21 of the Tri-County Disclosure Schedule, such policies will
remain in full force and effect through the respective dates
set forth in Section 3.21(a) of the Tri-County Disclosure
Schedule without the payment of additional premiums, and will
not be materially affected by, or terminate or lapse by reason
of, the transactions contemplated by this Agreement. All
known claims, if any, made against Tri-County that are covered
by insurance have been disclosed to and accepted by the
appropriate insurance companies and, to the best knowledge of
Tri-County, are being defended by such appropriate insurance
companies and are described in Section 3.21(b) of the Tri-
County Disclosure Schedule, and, except as disclosed in
Section 3.21(b) of the Tri-County Disclosure Schedule, no
claims have been denied coverage during the last three years.
SECTION 3.22 Receivables. All accounts and notes
due and uncollected as reflected on the Unaudited Financial
Statements, and all accounts and notes due and uncollected
arising subsequent to November 30, 1996 (i) have arisen in the
ordinary course of business of Tri-County, except as set forth
in Section 3.22 of the Tri-County Disclosure Schedule and
(ii) represent valid obligations due to Tri-County enforceable
in accordance with their terms, net of applicable reserves.
Tri-County has previously made available to Chesapeake lists
of the aging and amounts of all accounts and notes due and
uncollected at November 30, 1996.
<PAGE>
SECTION 3.23 Related Party Contracts. Except as
set forth in Section 3.23 of the Tri-County Disclosure
Schedule, Tri-County has no agreements, arrangements or
commitments with related parties (including stockholders,
directors and officers), other than the related-party
agreements described in Sections 3.17(d) and 3.17(i) of the
Tri-County Disclosure Schedule. Except as set forth in
Section 3.23 of the Tri-County Disclosure Schedule, each of
the related-party agreements was entered into between Tri-
County and the party thereto on an arm's length basis on terms
no less favorable to Tri-County than it could obtain from an
unrelated third party.
SECTION 3.24 Real Property; Leased Premises.
(a) Section 3.24 of the Tri-County Disclosure
Schedule sets forth a true and complete list and description
of all real property and land owned by Tri-County or BJ
Limited Partnership, or owned by either Shareholder and used
in the business of Tri-County or BJ Limited Partnership, and
the buildings, improvements and structures located thereon,
except for the Leased Premises (as defined below)
(collectively, the "Real Property").
(b) Tri-County has good and marketable title
to the Real Property in fee simple and to the structures and
fixtures attached or appurtenant to the Real Property, free
and clear of all Liens, except (i) as set forth in Section
3.24 of the Tri-County Disclosure Schedule, and (ii) Permitted
Liens.
(c) Section 3.24(c) of the Tri-County
Disclosure Schedule sets forth a true and complete list of
each lease of premises executed by or binding upon Tri-County
as lessee, sublessee, tenant or assignee (the "Leased
Premises"), whether written or unwritten. Except as set forth
in Section 3.24(c) of the Tri-County Disclosure Schedule, each
such lease is in full force and effect without any default or
breach thereof by Tri-County or, to the knowledge of Tri-
County, by any other party thereto. True and complete copies
of all written leases listed on Schedule 3.24(c) of the Tri-
<PAGE>
County Disclosure Schedule (including all amendments, addenda,
waivers and all other binding documents relating thereto) have
been made available to Chesapeake.
(d) Except as set forth in Section 3.24(d) of
the Tri-County Disclosure Schedule, Tri-County has not
received any notice of or writing referring to any
requirements by any insurance company that has issued a policy
covering any part of any Real Property or Leased Premises or
by any board of fire underwriters or other body exercising
similar functions, requiring any repairs or work to be done on
any part of any Real Property or Leased Premises.
SECTION 3.25 Absence of Certain Payments. Neither
Tri-County or any of its affiliates or any of their respective
officers, directors, employees or agents or other people
acting on behalf of any of them have (i) engaged in any
activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation,
decree, directive or order of any other country and (ii)
without limiting the generality of the preceding clause (i),
used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government
officials or others. None of Tri-County or any of its
affiliates or any of their respective directors, officers,
employees or agents of other persons acting on behalf of any
of them, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
SECTION 3.26 Disclosure. No representation or
warranty by Tri-County or either Shareholder in this Agreement
and no statement in any document, schedule or certificate
furnished or to be furnished by Tri-County or either
Shareholder to Chesapeake or any of its representatives
pursuant to the provisions hereof or in connection with the
transactions contemplated hereby contains any untrue statement
of material fact or omits to state any material fact necessary
in order to make the statements herein or therein, in light of
the circumstance under which they were made, not misleading.
<PAGE>
SECTION 3.27 PUHCA.
(a) Tri-County is not, and at the Effective
Time will not be, a "public-utility company," as that term is
defined in Section 2(a)(5) of the Public Utility Holding
Company Act of 1935, and the rules and regulations thereunder
(the "1935 Act").
(b) Upon consummation of the Merger, neither
of the Shareholders, individually or in the aggregate, shall
constitute a "holding company" with respect to Chesapeake, as
that term is defined in Section 2(a)(7) of the 1935 Act.
(c) Neither Shareholder directly or indirectly
owns, controls, or holds with power to vote five percent or
more of the outstanding voting securities of a public-utility
company, as that term is defined in Section 2(a)(5) of the
1935 Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CHESAPEAKE
Chesapeake represents and warrants to Tri-County and
the Shareholders as follows:
SECTION 4.1 Corporate Organization. Each of
Chesapeake and CPK Sub-A is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being
conducted. Chesapeake is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of
the business conducted by it makes such qualification or
licensing necessary, unless failure to do so would not result
in a material adverse effect (for purposes of this Agreement,
the phrase "material adverse effect on Chesapeake" will mean
such effect on Chesapeake and its subsidiaries, taken as a
whole). Chesapeake has heretofore delivered to Tri-County and
<PAGE>
the Shareholders accurate and complete copies of (i) its
Certificate of Incorporation and By-laws, as in effect as of
the date of this Agreement, and (ii) the Certificate of
Incorporation and By-laws of CPK Sub-A, as in effect as of the
date of this Agreement.
SECTION 4.2 Capitalization. The authorized capital
stock of Chesapeake consists of 12,000,000 shares of
Chesapeake Common Stock and 2,000,000 shares of preferred
stock, of which 3,800,516 shares of Chesapeake Common Stock
were issued and outstanding as of December 31, 1996. All of
issued outstanding shares of Chesapeake Common Stock are
validly issued, fully paid and nonassessable and free of
preemptive rights. As of December 31, 1996, 113,051 shares of
Chesapeake Common Stock were issuable upon exercise of
warrants or stock options and 198,137 shares of Chesapeake
Common Stock were reserved for issuance under such plans. In
addition, there are $4,095,000 face amount convertible debt
securities outstanding. Except as set forth above and as set
forth in Section 4.2 of the disclosure schedule to be
delivered to Tri-County and the Shareholders prior to the date
of this Agreement (the "Chesapeake Disclosure Schedule"), or
as may be required in connection with Chesapeake's ongoing
acquisition activities, there are not any shares of capital
stock (or securities substantially equivalent to capital
stock) of Chesapeake issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character
obligating Chesapeake to issue, transfer or sell any of its
securities.
SECTION 4.3 Authority Relative to this Agreement.
Each of Chesapeake and CPK Sub-A has full corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized and approved by the Boards of Directors of
Chesapeake and CPK Sub-A and by Chesapeake as the sole
stockholder of CPK Sub-A and no other corporate proceedings on
the part of Chesapeake or CPK Sub-A are necessary to authorize
<PAGE>
this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly
executed and delivered by each of Chesapeake and CPK Sub-A and
constitutes a legal, valid and binding agreement of each of
Chesapeake and CPK Sub-A, enforceable against each of
Chesapeake and CPK Sub-A in accordance with its terms.
SECTION 4.4 Consents and Approvals; No Violations.
Except for the filing and recordation of the Articles of
Merger, as required by the MGCL, and the Certificate of
Merger, as required by the DGCL, or as set forth in Section
4.4 of the Chesapeake Disclosure Schedule, no filing with or
notification to, and no permit, authorization, consent, waiver
or approval of, any Governmental Entity, is necessary for the
consummation by Chesapeake of the transactions contemplated by
this Agreement. Except as set forth in Section 4.4 of the
Chesapeake Disclosure Schedule, neither the execution and
delivery of this Agreement by Chesapeake or CPK Sub-A nor the
consummation by Chesapeake and CPK Sub-A of the transactions
contemplated hereby nor compliance by Chesapeake or CPK Sub-A
with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the Certificate of
Incorporation or By-laws of Chesapeake or any of its
subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
cancellation or acceleration or result in the creation of any
Lien) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation to which Chesapeake or any
of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, or statute
applicable to Chesapeake or CPK Sub-A or any of their
properties or assets, or (iv) result in a violation of any
rule or regulation applicable to Chesapeake or CPK Sub-A or
any of their properties or assets, unless, in the case of this
subsection (iv) only, such violation would not result in a
material adverse effect on Chesapeake or CPK Sub-A or the
Merger.
<PAGE>
SECTION 4.5 SEC Reports. Chesapeake has filed on a
timely basis all required forms, reports, registration
statements and documents with the Securities and Exchange
Commission ("SEC") since January 1, 1994 (collectively, the
"Chesapeake SEC Reports"), each of which has complied in all
materials respects with all applicable requirements of the
Securities Act of 1933 (the "Securities Act") and the
Securities Exchange Act of 1934 (the "Exchange Act"), as each
was in effect on the dates so filed. Chesapeake has
heretofore delivered to Tri-County and the Shareholders in the
form filed with the SEC, its (i) Annual Reports on Form 10-K
for each of the last three (3) fiscal years and (ii) all
definitive proxy statements relating to Chesapeake meetings of
stockholders (whether annual or special) held since January 1,
1994, all Quarterly Reports on Form 10-Q for the last three
(3) fiscal years, Annual Reports to Shareholders for the last
three (3) fiscal years and all Current Reports on Form 8-K
filed in the last three (3) fiscal years. The audited
consolidated financial statements and unaudited consolidated
interim financial statements of Chesapeake included in the
Chesapeake SEC Reports are true, correct and complete in all
material respects; fairly present, in conformity with
generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Chesapeake
and its consolidated subsidiaries as of the dates thereof and
their consolidated results of operations, changes in financial
position and changes in stockholders equity and cash flows for
the periods then ended (subject to normal year-end and audit
adjustments in the case of any unaudited interim financial
statements); and comply as to form in all material respects
with the rules and regulations of the SEC with respect
thereto.
SECTION 4.6 CPK Sub-A. CPK Sub-A has not conducted
any operations or incurred any liabilities or obligations
other than arising under or in connection with its formation
and the transactions contemplated by this Agreement.
SECTION 4.7 Chesapeake Shares. All of the shares
of Chesapeake Common Stock to be issued in connection with the
<PAGE>
Merger will, at the time of such issuance, be validly issued,
fully paid and nonassessable and free of preemptive rights and
free of any adverse liens, claims, charges or encumbrances.
SECTION 4.8 Disclosure. No representation or
warranty by Chesapeake in this Agreement and no statement
contained in any document (including without limitation, the
Chesapeake SEC Reports), schedule or certificate furnished or
to be furnished by Chesapeake to Tri-County or the
Shareholders or any of their representatives pursuant to the
provisions hereof or in connection with the transactions
contemplated hereby, contains any untrue statement of material
fact or omits to state any material fact necessary in order to
make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.9 Pooling Matters. The representations,
warranties and covenants of Chesapeake set forth in the draft
letter from Chesapeake to Coopers & Lybrand, dated as of the
date of this Agreement, are true and correct in all material
respects and will be true and correct in all material respects
as of the Effective Time (except as such matters may be
subject to the control of Tri-County or its affiliates).
Chesapeake shall execute such letter at the Closing.
SECTION 4.10 Absence of Certain Changes. Except as
and to the extent set forth in the Chesapeake SEC Reports or
in Section 4.10 of the Chesapeake Disclosure Schedule, since
September 30, 1996, Chesapeake has not:
(a) suffered any Material Adverse Change;
"Material Adverse Change" means (i) any material adverse
change in the nature of Chesapeake's business, assets,
financial condition, results of operations, net income, or
prospects, (ii) the loss of a contract which would have a
material adverse effect on Chesapeake, and (iii) any change
that creates a material limitation on the ability of
Chesapeake to conduct its business substantially as heretofore
conducted. For purposes of this Section 4.10 only, material
adverse effect on net income shall mean a decrease of ten
percent or more in net income for Chesapeake and its
<PAGE>
consolidated subsidiaries in any calendar quarter from the
comparable calendar quarter in the preceding fiscal year,
excluding any decrease reasonably attributable to (i)
temperature fluctuations or (ii) other matters previously
disclosed in the Chesapeake SEC Reports.
(b) agreed or planned, whether in writing or
otherwise, to take any action described in this Section.
SECTION 4.11 No Undisclosed Liabilities. Except as
and to the extent provided in Section 4.11 of the Chesapeake
Disclosure Schedule, Chesapeake did not have at September 30,
1996 any material liabilities (whether contingent or absolute,
direct or indirect, known or unknown to Chesapeake or matured
or unmatured) not fully reflected or fully reserved against in
the Chesapeake SEC Reports. Except as set forth in Section
4.11 of the Chesapeake Disclosure Schedule, since September
30, 1996, Chesapeake has not incurred any liability in excess
of $2,000,000 except in the ordinary course of business
consistent with past practice.
SECTION 4.12 No Default. Except as set forth in
the Chesapeake SEC Reports and Section 4.12 of the Chesapeake
Disclosure Schedule, Chesapeake is not in default or violation
(and no event has occurred that with notice or the lapse of
time or both would constitute a default or violation) of any
term, condition or provision of (i) its Certificate of
Incorporation or its By-laws, (ii) to its knowledge, any note,
bond, mortgage, indenture, license, contract, agreement or
other instrument or obligation to which Chesapeake is a party
or by which, it or any of its properties or assets may be
bound, (iii) any order, writ, injunction, decree, or to its
knowledge, any statute, rule or regulation applicable to
Chesapeake or any of its properties of assets, unless such
default or violation would not have a material adverse effect
on Chesapeake.
SECTION 4.13 Litigation. Except as set forth in
Chesapeake SEC Reports or on Section 4.13 of the Chesapeake
Disclosure Schedule, there is no material action, suit,
proceeding, arbitration, or investigation pending or
<PAGE>
threatened by or before any Governmental Entity involving
Chesapeake or any of its properties or assets. Except as set
forth in the Chesapeake SEC Reports or on Section 4.13 of the
Chesapeake Disclosure Schedule, neither Chesapeake nor any of
its material properties or assets is subject to any material
order, writ, judgment, injunction, decree, determination or
award.
SECTION 4.14 Compliance with Applicable Law.
Except as set forth in the Chesapeake SEC Reports or Section
4.14 of the Chesapeake Disclosure Schedule, the business of
Chesapeake has not been conducted in violation of any
applicable law, ordinance, rule, regulation, decree or order
of any Governmental Entity unless such violation would not
result in a material adverse effect on Chesapeake. Chesapeake
holds and is in compliance with all permits, licenses,
variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of its
businesses (the "Chesapeake Permits"), unless the failure to
obtain or be in compliance with any of the Chesapeake Permits
would not result in a material adverse effect on Chesapeake.
Except as set forth in the Chesapeake SEC Reports or in
Section 4.14 of the Chesapeake Disclosure Schedule, Chesapeake
has not received any notification of any asserted present or
past failure by Chesapeake to comply with such laws, rules or
regulations or such Chesapeake Permits which have not been
previously cured, and to Chesapeake's knowledge, there is no
pending audit, investigation or other review by any
Governmental Entity to determine the existence of any
violation of such laws, rules or regulations or such
Chesapeake Permits.
SECTION 4.15 Taxes.
(a) Chesapeake has (i) duly filed with the
appropriate governmental authorities all Tax Returns (as
defined in Section 4.15(c)) required to be filed by it for
all periods ending on or prior to the date hereof, and such
Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full all Taxes (as defined in
Section 4.15(b)) due in connection with or with respect to the
<PAGE>
filing of such Tax Returns and have paid all other Taxes as
are due, except such as are being contested in good faith by
appropriate proceeding and with respect to which Chesapeake is
maintaining reserves adequate for their payment. Neither the
Internal Revenue Service (the "IRS") nor any other
governmental entity or taxing authority or agency is now
asserting, either through audits, administrative proceedings,
court proceedings or otherwise, or threatening to assert
against any deficiency or claim for additional Taxes.
Chesapeake has not been granted any waiver of any statute of
limitations with respect to, or any extension of a period for
the assessment of, any Tax that is currently in effect. There
are no tax liens on any assets of Chesapeake. Chesapeake has
not received a ruling or entered into an agreement with the
IRS, or any other governmental entity or taxing authority or
agency that would have a material adverse effect on Chesapeake
after the Effective Time. The accruals and reserves for Taxes
reflected in Chesapeake's most recent balance sheet included
in the Chesapeake SEC Report are adequate to cover all Taxes
accruable through the date thereof (including Taxes being
contested) in accordance with generally accepted accounting
principles. Except for Chesapeake and its subsidiaries'
intercompany tax allocation agreements, no agreements relating
to allocating or sharing of Taxes exist among Chesapeake and
its subsidiaries and no tax indemnities given by Chesapeake in
connection with a sale of stock or assets remain in effect.
(b) For purposes of this Agreement, the term
"Taxes" shall mean all taxes, including, without limitation,
income, gross receipts, excise, property, sales, withholding,
social security, occupation, use, service, service use,
license, payroll, franchise, transfer and recording taxes,
fees and charges, windfall profits, severance, customs,
import, export, employment or similar taxes, charges, fees,
levies or other assessments imposed by the United States, or
any state, local or foreign government or subdivision or
agency thereof, whether computed on a separate, consolidated,
unitary, combined or any other basis, and such terms shall
include any interest, fines, penalties or additional amounts
and any interest in respect of any additions, fines or
<PAGE>
penalties attributable or imposed or with respect to any such
taxes, charges, fees, levies or other assessments.
(c) For purposes of this Agreement, the term
"Tax Return" shall mean any return, report or other document
or information required to be supplied to a taxing authority
in connection with Taxes.
(d) Indemnification for Certain Tax Matter.
If, within the three (3) year period subsequent to the date of
this Agreement, the amount of taxable income for any taxable
period that expires prior to the Closing Date (a "Prior
Period") reported on any federal or state income tax return of
Tri-County for such Prior Period (a "Prior Period Return")
increases because of (i) the filing subsequent to the
Effective Time of an amendment to any such Prior Period Return
by Tri-County or a successor in interest to Tri-County or (ii)
any adjustment subsequent to the Effective Time to the amount
of taxable income reported on any such Prior Period Return
related to any Audit of such Prior Period Return by any tax
authority (collectively, an "Adjustment"), then, to the extent
that an Adjustment both (x) results in an increase in the
federal or state income tax liability of the Sellers for any
Prior Period (a "Tax Liability") and (y) will result in a
reduction in the amount of the federal or state taxable income
(a "Tax Benefit") of the Surviving Corporation for a taxable
period ending subsequent to the Closing Date (a "Subsequent
Period") due to, for example, increased depreciation
deductions, then the Surviving Corporation shall indemnify the
Sellers for the amount of any Tax Liability, exclusive of
penalty or interest, but only to the extent of the present
value of the resulting Tax Benefit to the Surviving
Corporation for all Subsequent Periods, assuming that the
Surviving Corporation shall be taxed in all Subsequent Periods
at the federal or state income tax rate (as appropriate) in
effect at the time when the Sellers provide written notice to
Chesapeake that an Adjustment has occurred. The present value
shall be computed with reference to the appropriate Applicable
Federal Rate, as promulgated by the Internal Revenue Service.
The limitations included in Section 9.2(a) shall not apply to
<PAGE>
this Section 4.15(d). Section 9.1 shall not apply to Section
4.15(d).
SECTION 4.16 ERISA.
(a) Except as listed in Section 4.16(a) of the
Chesapeake Disclosure Schedule, Chesapeake does not maintain
or contribute to any "employee benefit plan," as such term is
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA"). The employee
benefits plans disclosed in Section 4.16(a) of the Chesapeake
Disclosure Schedule are referred to as the "ERISA Plans."
With respect to each ERISA Plan, Chesapeake has provided Tri-
County with a true and complete copy of the most recent
summary plan description (including all summaries of material
modifications prepared since the most recent summary plan
description).
(b) Chesapeake has complied in all respects
with all applicable provisions of ERISA and the Code except
for compliance failures that individually or in the aggregate
would not have a material adverse effect on Chesapeake. Each
ERISA Plan that is intended to be "qualified" within the
meaning of Code Section 401(a) has been determined by the IRS
to be qualified, or application for such a determination has
been made prior to the expiration of the applicable remedial
amendment period, and nothing has occurred since the date of
such determination or application that would have a material
adverse effect on Chesapeake. No ERISA Plan is subject to any
ongoing audit, investigation, or other administrative
proceeding of any governmental entity, and no ERISA Plan is
the subject of any pending application for administrative
relief under any voluntary compliance program or closing
agreement program of the IRS or the Department of Labor.
(c) Except for the Chesapeake Utilities
Corporation Pension Plan (the "Pension Plan"), Chesapeake has
not at any time maintained, or contributed to, any defined
benefit plan covered by Title IV of ERISA.
<PAGE>
(d) There are no pending or, to the knowledge
of Chesapeake, threatened claims (other than routine claims
for benefits) by or on behalf of any ERISA Plan (or otherwise
involving any ERISA Plan) by any participant, beneficiary, or
fiduciary under such ERISA Plan which would have a material
adverse effect on Chesapeake.
SECTION 4.17 Labor Relations. As of the date
hereof, there is no strike or other labor dispute pending
against Chesapeake. Except as set forth in Chesapeake SEC
Reports or Section 4.18 of the Chesapeake Disclosure Schedule,
Chesapeake is not bound by or subject to (and none of its
properties or assets is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or
sought to represent any of the employees, representatives or
agents of Chesapeake, nor is Chesapeake aware of any labor
organization activity involving its employees. Neither the
Chief Executive Officer nor the Chief Operating Officer of
Chesapeake has any plans to terminate his employment with
Chesapeake.
SECTION 4.18 Employee Benefit Plans. Except as
disclosed in Sections 4.16 or Section 4.18 of the Chesapeake
Disclosure Schedule, Chesapeake has previously given to Tri-
County true and correct copies of its personnel manuals,
rules, policies or other guidelines relating to employee
compensation and retirement. Except as set forth in Sections
4.16 or Section 4.18 of the Chesapeake Disclosure Schedule or
in the SEC Reports and except as previously disclosed to Tri-
County in writing, there are no other significant employee
benefit plans, programs or arrangements, maintained or
contributed to by Chesapeake (excluding severance, employment
or consulting contracts).
SECTION 4.19 Related Party Contracts. Except as
set forth in the Chesapeake SEC Reports or in Section 4.20 of
the Chesapeake Disclosure Schedule, Chesapeake has no
agreements, arrangements or commitments with related parties
(including stockholders, directors and officers) and each of
the related-party agreements was entered into between
<PAGE>
Chesapeake and the party thereto on an arm's-length basis on
terms no less favorable to Chesapeake than it could obtain
from an unrelated third party.
SECTION 4.20 Absence of Certain Payments. Neither
Chesapeake or any of its affiliates or any of their respective
officers, directors, employees or agents or other people
acting on behalf of any of them have (i) engaged in any
activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation,
decree, directive or order of any other country and (ii)
without limiting the generality of the preceding clause (i)
used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government
officials or others. None of Chesapeake or any of its
affiliates or any of their respective directors, officers,
employees or agents of other persons acting on behalf of any
of them, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
SECTION 4.21 Environmental Matters. Except as set
forth in the Chesapeake Disclosure Schedule or in the SEC
Reports, to Chesapeake's knowledge Chesapeake has no material
liabilities relating to environmental matters.
SECTION 4.22 Regulation as a Utility. Neither
Chesapeake nor any of its subsidiaries is regulated as a
public utility in any foreign country or in any of the United
States other than Delaware, Maryland, and Florida. Chesapeake
is not a Holding Company and is not subject to regulation
under the Public Utility Holding Company Act of 1935, as
amended (the "1935 Act").
SECTION 4.23 Subsidiaries.
(a) Chesapeake's 1996 Corporate Profile sets
forth a complete list of each Chesapeake Subsidiary and
Chesapeake Joint Venture, with the exception of CPK Sub-A.
<PAGE>
(b) Except as set forth in Section 4.23 of the
Chesapeake Disclosure Schedule, no Chesapeake Subsidiary or
Chesapeake Joint Venture is a Public Utility Company, a
Holding Company, a Subsidiary Company or an Affiliate of any
public utility company within the meaning of Sections 2(a)(5),
2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act, respectively, or
is otherwise subject to regulation under the 1935 Act.
(c) Except as set forth in Section 4.23 of the
Chesapeake Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Chesapeake
Subsidiary are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned,
directly or indirectly, by Chesapeake free and clear of any
liens, claims, encumbrances, security interests, equities,
charges and options of any nature whatsoever, and there are no
outstanding subscriptions, options, calls contracts, voting
trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating any such
Chesapeake Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital
stock, or granting to any person other than Chesapeake or a
Chesapeake Subsidiary any right to participate in its
dividends or earnings or obligating it to grant, extend or
enter into any such agreement or commitment.
(d) As used in this Agreement, (i) Chesapeake
Subsidiary shall mean any subsidiary of Chesapeake; and (ii)
Chesapeake Joint Venture shall mean any joint venture of
Chesapeake or of any Chesapeake Subsidiary.
ARTICLE V
COVENANTS OF TRI-COUNTY AND SHAREHOLDERS
Tri-County and each of the Shareholders, severally
and not jointly, each covenants and agrees as follows:
<PAGE>
SECTION 5.1 Conduct of Business Pending the Merger.
Except as otherwise specifically provided in this Agreement or
as otherwise consented to in writing by Chesapeake, from the
date of this Agreement to the Effective Time, Tri-County will
(and the Shareholders will cause Tri-County to) conduct its
operations only in the ordinary and usual course of business
and consistent with past practices and will preserve intact
its present business organization, take all reasonable efforts
to keep available the services of its present officers,
employees and consultants and preserve its present
relationships with licensors, licensees, customers, suppliers,
employees, labor organizations and others with whom it has a
significant business relationship. Without limiting the
generality of the foregoing, and except as otherwise
specifically provided in this Agreement or as set forth in
Section 5.1 of the Tri-County Disclosure Schedule, Tri-County
will not, directly or indirectly (and the Shareholders will
cause Tri-County not to), from the date of this Agreement to
the Effective Time, without the prior written consent of
Chesapeake:
(a) adopt any amendment to or otherwise change
its Certificate of Incorporation or By-laws or other
organizational documents;
(b) authorize for issuance, sale, pledge,
disposition or encumbrance, or issue, sell, pledge, dispose of
or encumber (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to
purchase, convertible securities or otherwise), any capital
stock of any class or any other securities of, or any other
ownership interest in, Tri-County or amend any of the terms of
any such securities or agreements outstanding on the date
hereof;
(c) reclassify, combine, split or subdivide
any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, securities or
property or any combination thereof) in respect of any class
or series of its capital stock, other than any dividend
<PAGE>
declared or paid prior to the date hereof or declared or paid
pursuant to Section 5.2 of this Agreement;
(d) redeem, purchase or otherwise acquire, or
propose or offer to redeem, purchase or otherwise acquire, any
outstanding shares of Tri-County Common Stock or other
securities of Tri-County;
(e) organize any new subsidiary, acquire any
capital stock or equity securities of any corporation or
acquire any equity or ownership interest (financial or
otherwise) in any business;
(f) (i) incur, assume or prepay any material
liability, including without limitation, any indebtedness for
borrowed money except in the ordinary course of business and
consistent with past practice, and in no event in excess of
$250,000, (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or
otherwise) for obligations of any third party, (iii) make any
loans, advances or capital contributions to, or investments
in, any third party, (iv) mortgage or pledge any of its
material properties or assets, tangible or intangible, or
create any material Lien thereupon other than Permitted Liens,
or (v) authorize any new capital expenditures which,
individually or in the aggregate, are in excess of $100,000;
(g) license (except to end users in the
ordinary course of business, consistent with past practice and
pursuant to a written license agreement) or otherwise
transfer, dispose of, permit to lapse or otherwise fail to
preserve any of Tri-County's Intellectual Property, or dispose
of or disclose to any person any trade secret, formula,
process or know-how not theretofore a matter of public
knowledge;
(h) enter into any agreement, contract,
commitment or transaction other than in the ordinary course of
business, consistent with past practices, that would be
required to be included in Section 3.17 of the Tri-County
<PAGE>
Disclosure Schedule if entered into prior to the date of this
Agreement;
(i) increase the compensation payable or to
become payable to its officers or employees, except for
increases in salary or wages of non-officer employees of Tri-
County in accordance with past practices or grant any
severance or termination pay or stock options to, or enter
into any employment or severance agreement with any director,
officer, or other employee of Tri-County, or establish, adopt,
enter into, or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment,
termination, severance, or other plan, agreement, trust, fund,
policy, or arrangement for the benefit of any current or
former directors, officers, or employees; provided however,
that this subsection (i) is subject in all cases to Section
5.2 ;
(j) cancel any debts or waive, release or
relinquish any material contract rights or other rights of
substantial value other than in the ordinary course of
business, consistent with past practices;
(k) authorize, recommend, propose or enter
into or announce an intention to authorize, recommend, propose
or enter into an agreement in principle or a definitive
agreement with respect to any merger, consolidation,
liquidation, dissolution, or business combination, any
acquisition of a material amount of property or assets or
securities, or any disposition of a material amount of
property or assets or securities;
(l) make any material change with respect to
accounting policies or procedures in effect as of November 30,
1996 except as may be required by generally accepted
accounting principles, and subject to Section 5.3;
(m) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) other than the payment,
<PAGE>
discharge or satisfaction in the ordinary course of business,
consistent with past practices, of liabilities reflected or
reserved against in the Unaudited Financial Statements or
incurred in the ordinary course of business consistent with
past practices since the date hereof; or
(n) commit or agree (in writing or otherwise)
to take any of the foregoing actions or any action which would
make any representation or warranty in this Agreement untrue
or incorrect, including as of the date hereof and as of the
Effective Time, as if made as of such time.
SECTION 5.2 Distributions.
(a) Total cash distributions for the year
ended 1996 to or for the benefit of the shareholders of Tri-
County Gas Company from Tri-County Gas Co. and BJ Limited
Partnership shall not exceed ninety (90%) of income available
for distribution. Income available for distribution is
determined by adding to net income the amount of management
fees representing stockholders salary. Net income is to be
determined using generally accepted accounting principles
consistent with past accounting practices of both Tri-County
Gas Co. and BJ Limited Partnership.
(b) Total cash distributions from Tri-County
Gas Co. and BJ Limited Partnership for the period ending
immediately following the Effective Time shall not exceed an
aggregate amount of twenty-four thousand dollars ($24,000.00)
on a monthly basis as management salaries, ratably for each of
the first three months between January 1, 1997 and the
Effective Time. In addition to the monthly management
salaries, an additional aggregate amount of forty thousand
dollars ($40,000.00) per month may be distributed representing
the monthly allocation of annual dividends ratably for each of
the first three months between January 1, 1997 and the
Effective Time.
(c) Up to and including the Effective Time,
Tri-County will not make any distributions other than as
expressly permitted by section 5.2(a) and (b). For this
<PAGE>
purpose, reasonable and customary business expenses consistent
with past practices shall not be considered distributions.
SECTION 5.3 Tax Status. Shareholders and Tri-
County shall take all action necessary such that as of
January 1, 1997 Tri-County will be taxed as a "C" corporation
for federal income tax purposes.
SECTION 5.4 Transfer of Assets; ESRE Merger. Prior
to the Closing, the Shareholders will cause all of the Real
Property held by BJ Limited Partnership or by either
Shareholder as of the date hereof (the "BJ Real Property") to
be transferred to Eastern Shore Real Estate, Inc. ("ESRE"), a
corporation to be organized by the Shareholders, with the
effect that ESRE will hold good and marketable title to the BJ
Real Property and to the structures and fixtures attached or
appurtenant to the BJ Real Property, free and clear of all
Liens, except (i) Liens as set forth in Section 3.24 of the
Tri-County Disclosure Schedule or (ii) Permitted Liens as
defined in Section 3.5(c) of this Agreement. Prior to the
Closing, the Shareholders will and will cause ESRE to enter
into a merger agreement by and among Chesapeake, its wholly
owned subsidiary CPK Sub-B, ESRE and the Shareholders (the
"ESRE Merger Agreement"), pursuant to which ESRE will be
merged in CPK Sub-B, which provides for the conversion of all
outstanding shares of common stock of ESRE into 1,000 shares
of Chesapeake Common Stock, which is otherwise substantially
similar to this Agreement, and which includes similar
representations, warranties, covenants and obligations of the
respective parties.
SECTION 5.5 Access to Information. Upon reasonable
notice and subject to restrictions contained in
confidentiality agreements with third parties to which Tri-
County is subject (from which Tri-County shall use reasonable
efforts to be released), Tri-County shall afford to the
officers, employees, accountants, counsel, environmental
consultants and other representatives of Chesapeake,
reasonable access, during normal business hours during the
period prior to the Effective Time, to all its properties,
books, contracts, commitments and records and, during such
<PAGE>
period, Tri-County shall furnish promptly to Chesapeake all
information concerning its business, properties and personnel
as Chesapeake may reasonably request.
SECTION 5.6 No Solicitation. Shareholders and Tri-
County will not and will cause their affiliates not to, and
will cause their respective officers, directors, employees and
agents retained by Shareholders or Tri-County or any of their
affiliates not to, initiate or solicit, directly or
indirectly, any inquiries or the making of any proposal with
respect to, or engage in negotiations concerning, provide any
information or data to, or have any discussions with, any
Third Party (as hereinafter defined) relating to, any public
offering of securities of, or acquisition, business
combination or purchase of all or any significant portion of
the properties or assets of, or any equity interest in, Tri-
County (an "Acquisition Proposal"). Shareholders and Tri-
County will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any
Third Party conducted heretofore with respect to any
Acquisition Proposal. Shareholders and Tri-County shall
immediately notify Chesapeake if, subsequent to the date
hereof, any such negotiations, provision of information or
data or discussions are entered into or made or any such
inquiries are received in respect thereof, and shall provide
details with respect thereto, including the identity of such
Third Party and the price and terms of any Acquisition
Proposal. As used in this Agreement, the term "Third Party"
means any "person" or "group", as such terms are defined in
Section 13(d) of the Exchange Act, other than Chesapeake or
any affiliate of Chesapeake.
SECTION 5.7 Further Information. As soon as
practicable after such information becomes available, and in
any event not later than thirty (30) days after the end of
each fiscal month, Tri-County shall provide to Chesapeake an
unaudited balance sheet as of the end of such month and the
related consolidated statements of results of operations and
statements of cash flows for such period.
<PAGE>
SECTION 5.8 Affiliates. Prior to the execution of
this Agreement, Tri-County shall deliver to Chesapeake a
letter identifying all persons who may be deemed, as of the
date of this Agreement, "affiliates" of Tri-County for
purposes of Rule 145 under the Securities Act. Tri-County
shall cause each person named in such letter to deliver a
written agreement substantially in the form attached hereto as
Exhibit 5.8.
SECTION 5.9 PUHCA. Each Shareholder covenants that
he will take no action at any time that will cause the
Shareholders to be deemed a "holding company" with respect to
Chesapeake as that term is defined in Section 2(a)(7) of the
1935 Act. With respect to Chesapeake, each Shareholder will
act as an individual and on his own behalf, and not in concert
with or as a group with the other Shareholder or any other
person. Notwithstanding Section 9.1 of this Agreement, the
covenants contained in this Section 5.9 will continue with
respect to a Shareholder as long as he remains an owner of
five percent or more of the outstanding voting securities of
Chesapeake.
ARTICLE VI
COVENANTS OF CHESAPEAKE
SECTION 6.1 Employment Matters. It is Chesapeake's
present intention to integrate, following the Effective Time,
certain employee benefit plans currently maintained by
Chesapeake and its subsidiaries and Tri-County, respectively.
To the extent that Tri-County employees become participants in
any such plans of Chesapeake and its subsidiaries ("Chesapeake
Plans") following the Effective Time, Tri-County employees
shall be credited under the Chesapeake Plans (other than
Chesapeake's pension plan, except for eligibility purposes)
for prior years of service with Tri-County to the extent such
service was recognized by Tri-County under any similar
employee benefit plan, except that with respect to the
Chesapeake 401(k) Plan, employees will not be entitled to
retroactive matching contributions for years of service prior
to the Effective Time.
<PAGE>
SECTION 6.2 Release of Personal Guarantees. At the
Effective Time, Chesapeake shall contribute to Tri-County
funds sufficient to pay all indebtedness of Tri-County that
has been reasonably incurred in connection with its business
and is guaranteed or co-signed by a Shareholder, and Tri-
County will immediately use these funds to repay such
indebtedness. Section 6.2 of the Tri-County Disclosure
Schedule includes a complete schedule of all such indebtedness
currently outstanding.
SECTION 6.3 Dividends. Prior to the Effective
Time, Chesapeake will not pay any dividends to its
stockholders with a record date prior to March 7, 1997.
SECTION 6.4 Conduct of Business Pending the Merger.
Except as otherwise specifically provided in this Agreement or
as otherwise consented to in writing by Tri-County, from the
date of this Agreement to the Effective Time, Chesapeake will
conduct its operations only in the ordinary and usual course
of business and consistent with past practices, or as may be
required in connection with Chesapeake's ongoing acquisition
activities. Without limiting the generality of the foregoing,
and except as otherwise specifically provided above or
elsewhere in this Agreement or as set forth in Section 6.4 of
the Chesapeake Disclosure Schedule, Chesapeake will not
directly or indirectly, from the date of this Agreement to the
Effective Time, without the prior written consent of Tri-
County:
(a) adopt any amendment to or otherwise change
its Certificate of Incorporation or By-laws or other
organizational documents;
(b) authorize for issuance, sale, pledge,
disposition or encumbrance, or issue, sell, pledge, dispose of
or encumber (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to
purchase, convertible securities or otherwise), any capital
stock of any class of any other securities of, or any other
ownership interest in, Chesapeake or amend any of the terms of
any such securities or agreements outstanding on the date
<PAGE>
hereof, other than as disclosed in Section 4.3 of this
Agreement or in connection with employee benefit or
compensation plans.
(c) redeem, purchase or otherwise acquire, or
propose or offer to redeem, purchase or otherwise acquire, any
outstanding shares of Chesapeake Common Stock or other
securities of Chesapeake;
SECTION 6.5 ESRE Merger. Chesapeake will enter into the
ESRE Merger Agreement.
SECTION 6.6 Reporting.
(a) Chesapeake will not report or disclose any
potential environmental problem relating to the Real Property,
as defined in Section 3.24 of this Agreement, without the
consent of one of the Shareholders (which consent shall not
unreasonably be withheld) unless required by law or in
accordance with Securities and Exchange Commission or New York
Stock Exchange reporting practices. If Chesapeake violates
this Section 6.6(a), the indemnification under Section 9.2(b)
shall not apply to the costs, damages and liabilities caused
by such violation.
(b) Chesapeake will not initiate remediation
of any environmental condition relating to the Real Property,
unless required by law, without the consent of one of the
Shareholders (which consent shall not unreasonably be
withheld). If, in such case, consent is not given, either
party may submit the proposal to binding arbitration, for a
determination whether a prudent businessman would consider the
remediation proposal commercially reasonable, the arbiter to
be selected mutually by the parties. If the arbiter
determines that a prudent businessman would not consider the
remediation proposal commercially reasonable, Chesapeake's
determination to proceed with the proposal will be at its own
expense, not subject to the indemnification provided by
Section 9.2(b)(ii).
<PAGE>
(c) This Section 6.6 will not be subject to
the survival limitations in Section 9.1. The restrictions in
Section 6.6(a) will terminate with respect to a particular
environmental matter on the later of (i) the tenth anniversary
of the Effective Time or (ii) the termination of the
Shareholders' indemnification obligations under Section
9.2(b)(ii) of this Agreement with respect to that matter. The
restrictions in Section 6.6(b) will terminate with respect to
a particular environmental matter simultaneously with the
termination of the Shareholders' indemnification obligations
under Section 9.2(b)(ii) with respect to that matter.
ARTICLE VII
MUTUAL COVENANTS
SECTION 7.1 Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties
hereto agrees to use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to assure that all
conditions to Closing set forth in Article VIII of this
Agreement are satisfied as expeditiously as possible
including, without limitation, the preparation and filing of
all forms, registrations and notices required to be filed to
consummate the transactions contemplated hereby and the taking
of such actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions, waivers by any public
or private third party. Each party shall promptly consult
with the other with respect to, provide any necessary
information with respect to and provide the other (or its
counsel) copies of, all filings made by such party with any
Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 7.2 Brokers or Finders. Each of Tri-
County, the Shareholders and Chesapeake represents, as to
itself, its subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or
person is or will be entitled to any brokers' or finder's fee
or any other commission or similar fee in connection with any
of the transactions contemplated by this Agreement. Each of
<PAGE>
Tri-County, the Shareholders and Chesapeake agrees to
indemnify and hold the other harmless from and against any and
all claims, liabilities or obligations with respect to any
other fees, commissions or expenses asserted by any person on
the basis of any act or statement alleged to have been made by
or on behalf of such party.
SECTION 7.3 Notification of Certain Matters. Tri-
County and the Shareholders shall give prompt notice to
Chesapeake and CPK Sub-A, and Chesapeake and CPK Sub-A shall
give prompt notice to Tri-County and the Shareholders, of the
occurrence (or non-occurrence) of any event of which Tri-
County, Shareholders, Chesapeake or CPK Sub-A has knowledge,
respectively, the occurrence (or non-occurrence) of which
would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any
respect (including as of the Effective Time) and of any
failure of either party to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that delivery of
any notice pursuant to this Section 7.3 shall not limit or
otherwise affect the remedies available to either party
hereunder.
SECTION 7.4 Fees and Expenses. Whether or not the
Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses in the normal course of business. Costs and expenses
incurred by Tri-County and/or the Shareholders shall be
allocated among them on an equitable basis.
SECTION 7.5 Further Assurances. After the Closing,
Chesapeake and the Shareholders shall from time to time, at
the request of the other party and without further cost or
expense to the requesting party, execute and deliver such
other instruments of conveyance and transfer and take such
other actions as such other party may reasonably request in
order more effectively to carry out this Agreement.
<PAGE>
ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation
to Effect the Merger. The respective obligations of each
party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the
following conditions:
(a) No statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court or
Governmental Entity of competent jurisdiction that prohibits
the consummation of the Merger and shall be in effect.
(b) Coopers & Lybrand shall have confirmed in
writing the draft letter of Coopers & Lybrand to Chesapeake of
even date herewith that the transaction contemplated by this
Agreement will qualify as a pooling-of-interests transaction
under Opinion No. 16 of the Accounting Principles Board;
provided, however, that the failure to satisfy this condition
shall not relieve Chesapeake of its obligation to effect the
Merger if such failure (i) is the result of any willful act or
omission by Chesapeake that makes the representations,
warranties or covenants of Chesapeake set forth in the draft
letter from Chesapeake to Coopers & Lybrand, dated as of the
date of this Agreement, untrue or incorrect in any material
respect and (ii) but for the willful act or omission referred
to in clause (i), Coopers & Lybrand would have confirmed in
writing that the transaction contemplated by this Agreement
would have qualified as a pooling-of-interests transaction
under Opinion No. 16 of the Accounting Principles Board.
(c) The Closing shall have taken place no
later than March 31, 1997.
(d) The ESRE Merger Agreement shall have been
entered into by all necessary parties; the Closing of the ESRE
Merger Agreement shall take place simultaneously with the
closing of this Agreement; and the effective time under the
<PAGE>
ESRE Merger Agreement shall occur simultaneously with the
Effective Time under this Agreement.
SECTION 8.2 Conditions of Obligations of Tri-County
and Shareholders. The obligation of Tri-County and
Shareholders to effect the Merger is further subject to the
satisfaction at or prior to the Effective Time of the
following conditions, unless waived by Tri-County and
Shareholders:
(a) The representations and warranties of
Chesapeake set forth in this Agreement shall be true and
correct in all material respects as of the date of this
Agreement and as of the Effective Time, as if made as of such
time.
(b) Chesapeake shall have performed and
complied, in all material respects, with all obligations and
covenants required to be performed or complied with by it
under this Agreement at or prior to the Effective Time.
(c) Chesapeake shall have obtained all
consents, approvals, authorizations and permits required from
third parties and any Governmental Entity (applicable to
Chesapeake and its subsidiaries) necessary for the
consummation by Chesapeake of the transactions contemplated by
this Agreement.
(d) Shareholders shall have received from
Chesapeake an officer's certificate substantially in the form
of Exhibit 8.2(d) attached hereto.
(e) The Chesapeake Shares to be issued
pursuant to this Agreement shall have been listed on the NYSE.
(f) Chesapeake shall have executed, and
delivered to the persons and entities named therein a
Registration Rights Agreement substantially in the form of
Annex A attached hereto, and Employment Agreements
substantially in the form of Annex B attached hereto.
<PAGE>
(g) Tri-County and the Shareholders shall have
received from legal counsel for Chesapeake an opinion
substantially in the form of Exhibit 8.2(g) attached hereto.
(h) From the date of this Agreement through
the Effective Time, Chesapeake shall not have suffered a
Material Adverse Change.
(i) If this Agreement is signed by all parties
on or before January 10, 1997, (i) the Board of Directors
shall have designated a date not earlier than March 7, 1997 as
the record date for the dividend next payable after the date
hereof to holders of Chesapeake common stock and (ii) the
approval of the Delaware Public Service Commission described
in Schedule 4.4 shall have been obtained or the time period
for disapproval shall have expired without adverse notice by
the Delaware Public Service Commission in time to result in an
Effective Time on or prior to that record date.
(j) Tri-County shall not believe that its or
the Shareholders' or BJ Limited Partnership's potential
liability relating to environmental matters is reasonably
likely to exceed $1,000,000.
SECTION 8.3 Conditions of Obligations of
Chesapeake. The obligation of Chesapeake to effect the Merger
is further subject to the satisfaction at or prior to the
Effective Time of the following conditions, unless waived by
Chesapeake:
(a) The representations and warranties of Tri-
County and Shareholders set forth in this Agreement shall be
true and correct in all material respects as of the date of
this Agreement and as of the Effective Time, as if made as of
such time.
(b) Tri-County and Shareholders shall have
performed and complied with, in all material respects, all
obligations and covenants required to be performed or complied
with by it under this Agreement at or prior to the Effective
Time.
<PAGE>
(c) Tri-County and Shareholders shall have
obtained all consents, approvals, authorizations and permits
required from third parties and any Governmental Entity
(applicable to Tri-County) necessary for the consummation by
Tri-County and Shareholders of the transactions contemplated
by this Agreement.
(d) Tri-County shall have waived its right of
first refusal to purchase the Shareholders' shares of Tri-
County Common Stock pursuant to the Shareholders Agreement,
dated April 3, 1986, which shall have been terminated in
writing in accordance with the terms thereof.
(e) Chesapeake shall have received from Tri-
County an officer's certificate substantially in the form of
Exhibit 8.3(e) attached hereto.
(f) Chesapeake shall have received from each
Shareholder a certificate substantially in the form of
Exhibit 8.3(f) attached hereto.
(g) Chesapeake shall have received from
counsel to the Shareholders and to Tri-County an opinion
substantially in the form of Exhibit 8.3(g) attached hereto.
(h) From the date of this Agreement through
the Effective Time, Tri-County shall not have suffered a
Material Adverse Change.
(i) All necessary approvals from the Delaware
Public Service Commission regarding the issuance of the shares
of Chesapeake Common Stock shall have been granted by final
order.
(j) Chesapeake shall have received from each
Shareholder an investment letter, substantially in the form of
Exhibit 8(j) attached hereto.
(k) Chesapeake shall not believe that its or
the Shareholders' or BJ Limited Partnership's potential
<PAGE>
liability relating to environmental matters is reasonably
likely to exceed $2,000,000.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.1 Survival of Representations and
Warranties. All statements, certifications, representations,
warranties, covenants, agreements and obligations provided for
herein relating to environmental matters ("Environmental
Representations"), if made by the Shareholders, shall survive
beyond the Effective Time and continue at all times thereafter
(and shall not in any manner be affected or impaired by the
consummation of the transactions contemplated by this
Agreement) until the fifth anniversary of the Effective Time
or until the termination of this Agreement pursuant to Section
10.1. All other statements, certifications, representations,
warranties, covenants, agreements and obligations provided for
herein ("Non-Environmental Representations") and all
Environmental Representations of Chesapeake shall survive
beyond the Effective Time and continue at all times thereafter
(and shall not in any manner be affected or impaired by the
consummation of the transactions contemplated by this
Agreement) until the second anniversary of the Effective Time
or until the termination of this Agreement pursuant to
Section 10.1.
SECTION 9.2 Indemnification.
(a) Indemnity by Chesapeake. Chesapeake shall
indemnify and defend and hold the Shareholders harmless from
and against all claims, liabilities, damages, losses and
expenses (including reasonable attorneys' fees) of every kind
and character (exclusive however of any amounts covered by
Section 9.2(b)) resulting from or relating to or arising out
of the inaccuracy, nonfulfillment, nonperformance or breach of
any representation, warranty, covenant, agreement or
obligation of Chesapeake contained herein. Neither
Shareholder shall have any claim for indemnification hereunder
unless such claim is asserted not later than two years
following the Effective Time, but if such claim is asserted
<PAGE>
within the two year time period, notwithstanding Section 9.1
of this Agreement, such Shareholder's right to indemnification
for such matters shall continue until such liability is
finally determined by written settlement between the parties
involved or by a final judgment ordered by a court of
competent jurisdiction. No indemnification shall be payable
to a Shareholder unless the total of all claims for
indemnification by both Shareholders shall exceed $500,000 in
the aggregate, whereupon the excess of the amount of such
claims over $500,000 shall be recoverable in accordance with
the terms herein. No indemnification shall be payable to
either Shareholder in excess of $1,000,000 in the aggregate
(not including the first $500,000 of claims referred to
above), exclusive of amounts payable as a result of a knowing,
fraudulent, or intentional breach by Chesapeake.
(b) Indemnity by the Shareholders.
(i) Nonenvironmental Indemnity. Each
Shareholder shall indemnify and defend and hold Chesapeake and
its affiliates harmless from and against all claims,
liabilities, damages, losses and expenses (including
reasonable attorneys' fees) of every kind and character
(exclusive however of any amounts covered by Section 9.2(a))
resulting from or relating to or arising out of the
inaccuracy, nonfulfillment, nonperformance or breach of any
Nonenvironmental Representation by either Shareholder or
Tri-County.
(ii) Environmental Indemnity. Each
Shareholder shall indemnify and defend and hold Chesapeake and
its affiliates harmless from and against all claims,
liabilities, damages, losses and expenses (including
reasonable attorneys' fees) of every kind and character
(exclusive however of amounts covered by Section 9.2(a))
resulting from or relating to or arising out of (x) the
inaccuracy, nonfulfillment, nonperformance or breach of any
Environmental Representation by either Shareholder or
Tri-County or (y) any environmental condition with respect to
operations of Tri-County or BJ Limited Partnership prior to
the Effective Time, or with respect to any of the Real
<PAGE>
Property listed in Section 3.24 of the Tri-County Disclosure
Schedule which existed prior to the Effective Time.
(iii) Limitations. Chesapeake shall have
no claim for indemnification hereunder unless such claim is
asserted not later than two years following the Effective Time
with respect to a Nonenvironmental Indemnity or five years
following the Effective Time with respect to an Environmental
Indemnity, but if such claim is asserted within the applicable
time period, notwithstanding Section 9.1 of this Agreement,
Chesapeake's right to indemnity for such matters shall
continue until such liability is finally determined by written
settlement between the parties involved or by a final judgment
ordered by a court of competent jurisdiction. No
indemnification shall be payable to Chesapeake by a
Shareholder unless the total of all claims for indemnification
by Chesapeake under this Section 9.2(b) shall exceed $500,000
in the aggregate with respect to a Nonenvironmental Indemnity
or $100,000 in the aggregate with respect to an Environmental
Indemnity, whereupon the excess of the amount of such claims
over such applicable amount shall be recoverable in accordance
with the terms hereof. The maximum amount payable to
Chesapeake by each Shareholder pursuant to this Section 9.2
shall be 50% of such excess up to $1,000,000, such maximum not
to exclude amounts payable as a result of a knowing,
fraudulent or intentional breach by either Shareholder.
(c) Third Party Claims. The obligations and
liabilities of any of the parties to this Agreement under this
Section 9.2 with respect to proceedings initiated by third
parties (the "Third Party Claims") will be subject to the
following terms and conditions: (i) upon receipt of written
notice of any Third Party Claim asserted against, resulting
to, imposed upon or incurred by Chesapeake and its affiliates
or the Shareholders, as the case may be (the "Indemnified
Party"), the party from whom indemnification is sought (the
"Indemnifying Party") may, at its own expense, participate in
and, upon notice to the Indemnified Party undertake the
defense thereof by counsel of its own choosing, which counsel
shall be reasonably satisfactory to the Indemnified Party,
provided that, if representation of both the Indemnified Party
<PAGE>
and the Indemnifying Party by the same counsel with respect to
such Third Party Claim would be inappropriate under applicable
standards of professional conduct, such Indemnified Party
shall be entitled to select counsel of its own choosing (with
the fees and costs of such counsel being at the Indemnifying
Party's sole cost and expense); (ii) if within a reasonable
time after written notice to the Indemnifying Party of its
intention to undertake the defense of any Third Party Claim,
the Indemnifying Party fails to defend the Indemnified Party
against whom such Third Party Claim has been asserted, the
Indemnified Party will have the right to undertake the
defense, compromise or settlement of such Third Party Claim on
behalf of and for the account and at the risk of the
Indemnifying Party; (iii) anything in this Section 9.2(c) to
the contrary notwithstanding, if there is a reasonable
probability in the Indemnified Party's judgment that a claim
may materially and adversely affect the Indemnified Party,
other than as a result of money damages or other money
payments, the Indemnified Party will have the right to defend,
co-defend, compromise or settle such Third Party Claim (with
full disclosure of the proposed settlement terms being given
to the Indemnifying Party prior to settlement thereof) by
selecting counsel of its own choosing (with the fees and costs
of such counsel being the Indemnified Party's sole cost and
expense); (iv) the Indemnified Party shall cooperate fully in
all respects with the Indemnifying Party in any such defense,
compromise or settlement including, without limitation, by
making available to the Indemnifying Party all pertinent
information and all books and records under the control of the
Indemnified Party; (v) the Indemnifying Party shall not
compromise or settle any such action, suit, proceeding, claim
or demand without the prior written approval of the
Indemnified Party; provided that, if such prior written
approval is withheld by the Indemnified Party, the liability
of the Indemnifying Party with respect to such action, suit,
proceeding, claim or demand shall be limited to the amount of
the settlement recommended by the Indemnifying Party and not
approved by the Indemnified Party.
(d) The Shareholders' rights to
indemnification hereunder may not be transferred or assigned,
<PAGE>
except in accordance with the laws of descent and
distribution.
ARTICLE X
TERMINATION AND AMENDMENT
SECTION 10.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time:
(a) by mutual consent of Chesapeake, Tri-
County and the Shareholders;
(b) by either Chesapeake or the Shareholders,
if the Closing shall not have been consummated on or before
March 31, 1997 (unless the failure to consummate the Merger by
such date shall be due to the action or failure to act of the
party seeking to terminate); or
(c) by either Chesapeake, Tri-County or the
Shareholders, if any permanent injunction or other order of a
court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable.
SECTION 10.2 Effect of Termination. In the event
of the termination and abandonment of this Agreement pursuant
to Section 10.1 hereof, this Agreement shall forthwith become
void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or
stockholders. Notwithstanding the foregoing, nothing
contained in this Section 10.2 shall relieve any party from
liability for any material breach of any covenant of this
Agreement or any material breach or misrepresentation of the
representations or warranties contained herein.
SECTION 10.3 Amendment. This Agreement may be
amended by the parties hereto at any time prior to the
Effective Time. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the
parties hereto.
<PAGE>
SECTION 10.4 Extension; Waiver. At any time prior
to the Effective Time, the parties may, to the extent legally
allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties
of the other parties hereto contained herein or in any
document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein by
the other parties hereto. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of
such party.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Notices. All notices and other
communications hereunder shall be in writing, and shall be
deemed given upon receipt if delivered personally, sent by
facsimile transmission (receipt of which is confirmed) or by
certified or registered mail, return receipt requested, or by
a nationally recognized private overnight courier to the
parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to the Shareholders, to:
William P. Schneider
c/o Tri-County Gas Co., Inc.
1820 North Salisbury Boulevard
Salisbury, MD 21801
and
James R. Schneider
5518 Woodbine Lane
Salisbury, MD 21801
with a copy to:
<PAGE>
James L. Otway, Esquire
Anthenelli & Otway
108 The Plaza
P.O. Box 4096
Salisbury, MD 21801
(b) if to Tri-County, to
William P. Schneider
James R. Schneider
Tri-County Gas Co., Inc.
1820 North Salisbury Boulevard
Salisbury, MD 21801
with a copy to:
James L. Otway, Esquire
Anthenelli & Otway
108 The Plaza
P.O. Box 4096
Salisbury, MD 21801
and
(c) if to Chesapeake, to:
Chesapeake Utilities Corporation
909 Silver Lake Boulevard
Dover, Delaware 19904
Attention: John R. Schimkaitis
with a copy to:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Ruth S. Epstein
SECTION 11.2 Descriptive Headings. The descriptive
headings herein are inserted for convenience only and are not
<PAGE>
intended to be part of or to affect the meaning or
interpretation of this Agreement.
SECTION 11.3 Counterparts. This Agreement may be
executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become
effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same
counterpart.
SECTION 11.4 Entire Agreement; Successors and
Assign.
(a) This Agreement constitutes the entire
agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(b) This Agreement shall be binding upon, and
inure to the benefit of the parties hereto and their heirs,
successors, and permitted assigns. As used herein, the
successors of a party shall include, but not be limited to,
any successor by way of merger, consolidation, sale or
transfer of all or substantially all of its assets (pursuant
to liquidation or otherwise), or similar reorganization. In
no event may either Shareholder assign any rights or duties
under this Agreement, except with Chesapeake's written
consent.
SECTION 11.5 Governing Law. This Agreement shall
be governed and construed in accordance with the laws of the
State of Delaware without regard to any applicable principles
of conflicts of law.
SECTION 11.6 Specific Performance. The parties
hereto agree that if any of the provisions of this Agreement
were not performed in accordance with their specific terms or
were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled
<PAGE>
to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
SECTION 11.7 Publicity. Chesapeake may issue or
cause the publication of any press release or other public
announcement or make any filing with the SEC with respect to
the transactions contemplated by this Agreement as it deems
appropriate. Neither Tri-County nor the Shareholders shall
issue or cause the publication of any press release or other
public announcement with respect to the transactions
contemplated by this Agreement without the prior approval of
Chesapeake.
SECTION 11.8 Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of each
party hereto and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person
or persons any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 11.9 Confidentiality Agreements. At the
Effective Time, the Confidentiality Agreements dated January
2, 1997 between Chesapeake and Tri-County and the Shareholders
will terminate and have no further force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be signed (where applicable by their
respective officers thereunto duly authorized), as of the date
first written above.
CHESAPEAKE UTILITIES CORPORATION
By: /S/ RALPH J. ADKINS Date: January 10, 1997
Name: Ralph J. Adkins
Title: Chief Executive Officer
CPK SUB-A, INC.
By: /S/ RALPH J. ADKINS Date: January 10, 1997
Name: Ralph J. Adkins
Title: President
TRI-COUNTY
By: /S/ WILLIAM P. SCHNEIDER Date: January 10, 1997
Name: William P. Schneider
Title: President
<PAGE>
SHAREHOLDERS
/S/ JAMES R. SCHNEIDER Date: January 10, 1997
James R. Schneider
/S/ WILLIAM P. SCHNEIDER Date: January 10, 1997
William P. Schneider
10
EXHIBIT 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of February 3 ,
1997, by and between BJ LIMITED PARTNERSHIP, a Maryland
partnership ("BJ"); JAMES R. SCHNEIDER and WILLIAM P. SCHNEIDER,
the sole partners of BJ ("Partners," each a "Partner"); EASTERN
SHORE REAL ESTATE, INC., a Delaware corporation (the
"Purchaser"); and CHESAPEAKE UTILITIES CORPORATION, a Delaware
corporation ("Chesapeake"),
W I T N E S S:
WHEREAS, pursuant to the terms and subject to the
conditions set forth in this Agreement, BJ desires to transfer
certain real properties and assets to Purchaser; and
WHEREAS, Chesapeake and the Partners are parties to a
certain Agreement and Plan of Merger dated January 10, 1997, by
and among Chesapeake, the Partners,
Tri-County Gas Company, Inc. ("Tri-County"), and CPK Sub-A, Inc.
(the "Merger Agreement");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter set forth, the parties hereby agree as
follows:
1. PURCHASE AND SALE
1.1 Purchase and Sale of Purchased Assets. Subject to
the terms and conditions hereof, BJ hereby agrees to sell, assign
and deliver to Purchaser and Purchaser hereby agrees to purchase
from BJ certain real properties and assets, which are hereinafter
defined as the "Purchased Assets", and described further in
Exhibits 1.1(A), 1.1(B) and 1.1(C). The Purchased Assets shall
mean any and all right, title and interest of BJ and the Partners
to the following properties and assets:
(i) cash funds as of the Closing (as defined
in Section 2.1);
<PAGE>
(ii) those real properties described in
Exhibit 1.1(A) hereto;
(iii) those buildings and fixtures
described in Exhibit 1.1(B) hereto;
(v) the two (2) vehicles described in
Exhibit 1.1(C) hereto;
(vi) any real or personal property acquired
by BJ from December 31, 1996 until the Closing.
1.2 Assumption of Liabilities. Subject to the terms
and conditions hereof, BJ hereby agrees to assign to Purchaser
and Purchaser hereby agrees to assume from BJ certain
liabilities, which are hereinafter defined as the "Assumed
Liabilities".
(a) Assumed Liabilities. The Assumed Liabilities
shall mean the three (3) Mortgages Payable, two (2) Loans
Payable, and one (1) Note Payable, all as described in Exhibit
1.2 hereto and all accrued interest thereon through and including
the date of Closing.
(b) Excluded Liabilities. Any liability not
specifically listed on Exhibit 1.2 hereto shall remain the
responsibility of BJ, and shall not be assumed by Purchaser under
this Agreement.
2. CLOSING
2.1 Closing. The closing of the transactions
contemplated by this Agreement ("Closing") shall be simultaneous
with the Effective Time of the Merger Agreement ("Effective
Time").
2.2 BJ's Obligations at Closing. At Closing, BJ shall
deliver or cause to be delivered to Purchaser (a) a duly executed
bill of sale for all the Purchased Assets; (b) Deeds of Title to
the real property and vehicles included in the Purchased Assets,
which shall include customary warranties of good title; (c)
executed copies of all required third-party consents and
<PAGE>
approvals; (d) all such other instruments as are necessary to
transfer to Purchaser good and marketable title to the Purchased
Assets at Closing; and (e) all previously undelivered documents
required pursuant to Section 6 of this Agreement, including
certificates of Partners, to be delivered by BJ to Purchaser at
or prior to Closing.
2.3 Purchaser's Obligations at Closing. At Closing,
Purchaser shall deliver or cause to be delivered in accordance
with the terms of this Agreement (a) the consideration specified
in Section 2.4 hereof; (b) executed documents assuming the
liabilities specified in section 1.2 and 2.4(b) of this
Agreement; (c) all previously undelivered documents required
pursuant to Section 6 of this Agreement, including certificates
of officers, to be delivered by Purchaser to BJ at or prior to
Closing.
2.4 Payment of Shares.
(a) At the Closing, Purchaser shall deliver or
cause to be delivered to each Partner five hundred (500) shares
(for a total of 1,000 shares) of Chesapeake Utilities Corporation
common stock. Purchaser may elect to deliver all or any portion
of such sum to a settlement agent pending the Effective Time.
(b) As of Closing, Purchaser also shall assume
all utility charges; transfer, personal property, ad valorem and
other state and local taxes and similar charges and costs and all
annual or other periodic fees, charges, or amounts paid and owed,
if any, pertaining to the Purchased Assets.
2.5 Further Assurances. After the Closing, BJ from
time to time, at the request of Purchaser and without further
cost or expense to Purchaser, will take such other actions as
Purchaser may reasonably request and are necessary in order to
consummate more effectively the transactions contemplated hereby.
2.6 Allocation of Purchase Price. The purchase price
shall be allocated by mutual agreement of BJ, the Partners, and
Purchaser at or prior to the Closing among the Purchased Assets
and the Assumed Liabilities, which allocation shall be attached
hereto as Schedule 2.6. BJ, the Partners and Purchaser agree to
<PAGE>
report the sale and purchase of the Purchased Assets in
accordance with the allocations set forth on Schedule 2.6 for all
federal, state and local income tax purposes. BJ, the Partners
and Purchaser each also agree that, in the event any audit,
proceeding, suit, action or otherwise is brought against any of
the others, before the Internal Revenue Service ("IRS") or any
state or local counterpart, the United States Tax Court, any
state tax court, or any federal or state court of competent
jurisdiction, each will at all times maintain and reasonably
defend the reporting positions agreed on in this Agreement. Each
shall keep the others fully informed at all stages of such
proceedings and the others shall be allowed to participate at
their own cost and expense in such proceedings.
3. REPRESENTATIONS AND WARRANTIES OF BJ AND PARTNERS
BJ and each of the Partners, severally and not jointly,
represents and warrants to Purchaser and Chesapeake as follows:
SECTION 3.1 Authority Relative to this Agreement;
Binding Effect.
(a) BJ has full power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized and approved by the
Partners and no other actions on the part of BJ are necessary to
authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed
and delivered by BJ and constitutes a legal, valid and binding
agreement of BJ, enforceable against BJ in accordance with its
terms.
(b) This Agreement has been duly and validly
executed and delivered by each Partner and constitutes a legal,
valid and binding agreement of each Partner, enforceable against
each Partner in accordance with its terms.
SECTION 3.2 Consents and Approvals; No Violations.
Except as set forth in Exhibit 3.2 to this Agreement, no filing
with or notification to, and no permit, authorization, consent,
waiver or approval of, any government, executive official
<PAGE>
thereof, governmental or regulatory authority, agency or
commission, including courts of competent jurisdiction, domestic
or foreign (a "Governmental Entity"), is necessary for the
consummation by BJ and the Partners of the transactions
contemplated by this Agreement, excluding, however, filings,
permits, authorizations, consents, or approvals of any kind
required by the Federal Energy Regulatory Commission ("FERC") or
the Public Utility Commission or similar utility regulatory body
of the States of Florida, Maryland or Delaware. Except as set
forth in Section 3.2 of BJ Disclosure Schedule, neither the
execution and delivery of this Agreement by BJ and the Partners
nor the consummation by BJ and the Partners of the transactions
contemplated hereby nor compliance by BJ and the Partners with
any of the provisions hereof will (i) conflict with or result in
any breach of any provision of the Partnership Agreement of BJ,
(ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration or
result in the creation of any mortgage, pledge, charge, security
interest, claim or encumbrance of any kind (collectively, a
"Lien")) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, contract, agreement or
other instrument or obligation to which BJ or a Partner is a
party or by which they or any of their properties or assets may
be bound, or (iii) violate any order, writ, injunction, decree,
or statute applicable to BJ or a Partner or any of their
properties or assets, or (iv) result in a violation of any rule
or regulation applicable to BJ or a Partner or any of their
properties or assets, unless, in the case of this subsection (iv)
only, such violation would not result in a material adverse
effect on BJ or the Purchased Assets.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND CHESAPEAKE
Purchaser and Chesapeake represent and warrant to BJ and the
Partners as follows:
SECTION 4.1 Authority Relative to this Agreement.
Each of Purchaser and Chesapeake has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and
approved by the Boards of Directors of Purchaser and Chesapeake
<PAGE>
and by Chesapeake as the sole stockholder of Purchaser, and no
other corporate proceedings on the part of Purchaser or
Chesapeake are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by each of Purchaser
and Chesapeake and constitutes a legal, valid and binding
agreement of each of Purchaser and Chesapeake, enforceable
against each of Purchaser and Chesapeake in accordance with its
terms.
SECTION 4.2 Consents and Approvals; No Violations.
Except as set forth in Section 4.4 of the Chesapeake Disclosure
Schedule delivered in connection with the Merger Agreement, no
filing with or notification to, and no permit, authorization,
consent, waiver or approval of, any Governmental Entity, is
necessary for the consummation by Purchaser or Chesapeake of the
transactions contemplated by this Agreement. Except as set forth
in Section 4.4 of the Chesapeake Disclosure Schedule, neither the
execution and delivery of this Agreement by Purchaser or
Chesapeake nor the consummation by Purchaser and Chesapeake of
the transactions contemplated hereby nor compliance by Purchaser
or Chesapeake with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the Certificate
of Incorporation or By-laws of Purchaser or Chesapeake or any of
Chesapeake's subsidiaries, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
cancellation or acceleration or result in the creation of any
Lien) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, contract, agreement or
other instrument or obligation to which Chesapeake or any of its
subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate any
order, writ, injunction, decree, or statute applicable to
Purchaser or Chesapeake or any of their properties or assets, or
(iv) result in a violation of any rule or regulation applicable
to Purchaser or Chesapeake or any of their properties or assets,
unless, in the case of this subsection (iv) only, such violation
would not result in a material adverse effect on Purchaser or
Chesapeake or the Agreement.
<PAGE>
5. COVENANTS
SECTION 5.1 Amendment of Merger Agreement. Prior to
Closing, the Partners shall agree to enter into, and shall cause
Tri-County to enter into; and Chesapeake shall enter into, and
cause CPK Sub-A, Inc. to enter into, an Amendment to the Merger
Agreement substantially as follows:
Deletions. Sections 5.4, 6.5, and 8.1(d) of
the Agreement and Plan of Merger dated January
10, 1997, are hereby deleted from said
Agreement and Plan of Merger.
Additions. New Sections 5.4, 6.5 and 8.1(d)
are hereby added to the Agreement and Plan of
Merger and shall read as indicated below:
(i) SECTION 5.4 Asset Purchase
Agreement. Prior to the Closing, the
Shareholders will enter into an asset
purchase agreement by and among
Chesapeake, its wholly-owned
subsidiary Eastern Shore Real Estate,
Inc. ("ESRE"), and the Shareholders
(the "Asset Purchase Agreement"),
pursuant to which ESRE will acquire
all of the Real Property held by BJ
Limited Partnership or by either
Shareholder as of the date hereof
(the "BJ Real Property") and assume
certain liabilities and the
Shareholders will receive 1,000
shares of Chesapeake Common Stock.
The Asset Purchase Agreement will
provide that ESRE will hold good and
marketable title to the BJ Real
Property and to the structures and
fixtures attached or appurtenant to
the BJ Real Property, free and clear
of all Liens, except (i) Liens as set
forth in Section 3.24 of the
Tri-County Disclosure Schedule or
<PAGE>
(ii) Permitted Liens as defined
in Section 3.5(c) of this Agreement.
(ii) SECTION 6.5 Asset Purchase Agreement. Chesapeake
will enter and will cause ESRE to enter into the Asset
Purchase Agreement.
(iii) (d) The Asset Purchase Agreement shall have been
entered into by all necessary parties; the Closing of
the Asset Purchase Agreement shall take place
simultaneously with the closing of this Agreement; and
the effective time under the Asset Purchase Agreement
shall occur simultaneously with the Effective Time
under this Agreement.
SECTION 5.2 Distributions. Up to and including the Effective
Time, BJ will not make any distributions other than as expressly
permitted by Section 5.2 of the Merger Agreement.
6. CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation to Effect
the Agreement. The respective obligation of each party to effect
the Agreement shall be subject to the following conditions:
(a) The representations and warranties of the other party be true
and correct in all material respects as of the date of this
Agreement and as of Closing, as if made as of such time.
(b) The Effective Time shall take place simultaneously with the
Closing.
SECTION 6.2 Conditions of Obligations of BJ and Partners. The
obligation of BJ and Partners to effect the Agreement is further
subject to the satisfaction at or prior to the Closing of the
following conditions, unless waived by BJ and Partners:
(a) The representations and warranties of Purchaser set
forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing,
as if made as of such time.
<PAGE>
(b) Purchaser shall have obtained all consents,
approvals, authorizations and permits required from third parties
and any Governmental Entity (applicable to Purchaser and its
subsidiaries) necessary for the consummation by Purchaser of the
transactions contemplated by this Agreement.
(c) Partners shall have received from Chesapeake an
officer's certificate substantially in the form of Exhibit 6.2(c)
attached hereto.
SECTION 6.3 Conditions of Obligations of Purchaser. The
obligation of Purchaser to effect the Agreement is further
subject to the satisfaction at or prior to the Closing of the
following conditions, unless waived by Purchaser:
(a) The representations and warranties of BJ and Partners
set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the
Effective Time, as if made as of such time.
(b) BJ and Partners shall have obtained all consents,
approvals, authorizations and permits required from third parties
and any Governmental Entity (applicable to BJ) necessary for the
consummation by BJ and Partners of the transactions contemplated
by this Agreement.
(c) Purchaser shall have received from each Partner a
certificate, an investment letter and an affiliate letter
substantially in the forms set forth in Exhibit 6.3(c) attached
hereto.
7. TERMINATION
SECTION 7.1 Termination. This Agreement will terminate upon
termination of the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed (where applicable by their respective
officers thereunto duly authorized), as of the date first written
above.
EASTERN SHORE REAL ESTATE, INC.
By: /S/ RALPH J. ADKINS
Name: Ralph J. Adkins
Title: President
CHESAPEAKE UTILITIES CORPORATION
By: /S/ RALPH J. ADKINS
Name: Ralph J. Adkins
Title: President
BJ LIMITED PARTNERSHIP
By: /S/ WILLIAM P. SCHNEIDER
Name: William P. Schneider
Title: Partner
PARTNERS
/S/ JAMES R. SCHNEIDER
James R. Schneider
/S/ WILLIAM P. SCHNEIDER
William P. Schneider
G:\CDH\SHARE\CPK\REGRGHTB.AGR March 10, 1997 12:06PM
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement")
is made and entered into as of March 6, 1997, by and between
Chesapeake Utilities Corporation, a Delaware corporation (the
"Company") and William P. Schneider ("Shareholder").
This Agreement is made as contemplated by that
certain Agreement and Plan of Merger dated as of January 10,
1997, by and among the Company, CPK Sub-A, Inc., a Delaware
corporation and wholly owned subsidiary of the Company ("CPK
Sub-A"), Tri-County Gas Co., Incorporated, a Maryland
corporation ("Tri-County"), Shareholder and James R. Schneider
(the "Merger Agreement"), which provides for the merger of CPK
Sub-A with and into Tri-County (the "Merger"). Whereas the
securities to be delivered to Shareholder pursuant to the
Merger Agreement are restricted securities, as defined in
Rule 144 under the Securities Act of 1933, in order to induce
Tri-County and Shareholder to enter into the Merger Agreement,
the Company has agreed to provide the registration rights set
forth in this Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
1. Securities Subject to this Agreement. The
securities entitled to the benefits of this Agreement are the
shares of common stock, par value $.4867 per share, of the
Company (the "Common Stock") issued to Shareholder in
accordance with the terms of the Merger Agreement (the
"Registrable Securities").
2. Registration.
(a) Within 60 days following the time at which
results covering at least 30 days of post-Merger combined
operations of the Company have been filed with the Securities
and Exchange Commission (the "Commission"), sent to
stockholders of the Company or otherwise publicly issued, the
Company will, subject to the terms of this Agreement, and
<PAGE>
subject to the full cooperation of Shareholder, at its
expense, file with the Commission a registration statement
(the "Registration Statement") covering the sale by
Shareholder of the Registrable Securities. The Company will
use its reasonable best efforts to cause the Registration
Statement to become effective as promptly as practicable and
to maintain the effectiveness of the Registration Statement
for a period of three (3) years from the Effective Time, as
that term is defined in the Merger Agreement, or such shorter
time as may be required by Rule 144(k) under the Securities
Act of 1933, as amended (the "Securities Act"), or any
successor provision. The Company may postpone for a
reasonable period of time, not to exceed 60 days, the filing
or effectiveness of the Registration Statement, or the
undertaking of any work by the Company with respect to the
preparation of the Registration Statement, if the Board of
Directors of the Company in good faith determines that such
filing or registration would reasonably be expected to have a
material adverse effect on any plan or proposal by the Company
with respect to any financing, acquisition, recapitalization,
reorganization or other material transaction.
(b) Before filing with the Commission the
Registration Statement or any amendments or supplements
thereto, the Company will furnish to Shareholder for review
copies of all documents proposed to be filed.
(c) The Company shall furnish to Shareholder
such number of copies of the Registration Statement and of
each amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus
included in such Registration Statement (including each
preliminary prospectus and summary prospectus), and such other
documents as Shareholder may reasonably request in order to
facilitate the disposition of the Registrable Securities by
Shareholder.
(d) The Company shall use its best efforts to
register or qualify the Registrable Securities covered by the
Registration Statement under such other securities or blue sky
laws of such jurisdictions as Shareholder may reasonably
<PAGE>
request, provided that the Company shall not for any such
purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for the
requirements of this Section 2(d), it would not be obligated
to be so qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in
any such jurisdiction (a general service of process would not
include a consent on Form U-2 or its substantial equivalent).
(e) The Company may require Shareholder to
furnish the Company with such information regarding
Shareholder and pertinent to the disclosure requirements
relating to the registration and the distribution of the
Registrable Securities as the Company may from time to time
reasonably request.
(f) If Shareholder determines to distribute
the Registrable Securities in an underwritten offering, all
costs, fees, and disbursements of underwriters and all
underwriting discounts, commissions and transfer taxes
relating to such distribution will be the sole responsibility
of Shareholder.
(g) Shareholder agrees that upon notice from
the Company he will suspend from time to time all sales of the
Registrable Securities for such period of time as is required
to permit the Company to complete any future financing
transaction involving an underwritten offering by the Company
of its Common Stock. Shareholder will not be required to
suspend sales of the Registrable Securities (pursuant to this
Section 2(g)) for more than three months in any 12-month
period.
(h) Shareholder agrees that, upon receipt of
any notice from the Company that the Company has become aware
that the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing,
Shareholder will forthwith discontinue disposition of
<PAGE>
Registrable Securities pursuant to the Registration Statement
until Shareholder's receipt of copies of a properly
supplemented or amended prospectus and, if so directed by the
Company, Shareholder will deliver to the Company all copies,
other than permanent file copies then in Shareholder's
possession, of the prospectus covering Registrable Securities
current at the time of receipt of such notice.
3. Indemnification.
(a) Indemnification by the Company. The
Company will indemnify and hold harmless, to the extent
permitted by law, Shareholder against any and all losses,
claims, damages or liabilities, joint or several, to which
Shareholder may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any
preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and subject to the
provisions of Section 3(c), the Company will reimburse
Shareholder for any legal or any other expenses reasonably
incurred by it in connection with investigating or defending
any such loss, claim, liability, action or proceeding;
provided, however, that the Company shall not be liable to
Shareholder in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement thereto in reliance upon and in
conformity with information furnished to the Company by
Shareholder for use in the preparation thereof; and provided
further that the Company shall not be liable under this
Section 3(a) to Shareholder to the extent that any such loss,
<PAGE>
claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of Shareholder's failure to
send or give a copy of the final prospectus, as the same may
be then supplemented or amended, to the person asserting an
untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of
the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of
Shareholder and shall survive the transfer of such securities
by Shareholder.
(b) Indemnification by Shareholder.
Shareholder will indemnify and hold harmless (in the same
manner and to the same extent as set forth in subdivision (a)
of this Section 3) the Company, each director of the Company
and each officer of the Company with respect to any statement
or alleged statement in or omission or alleged omission from
the Registration Statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance
upon and in conformity with information furnished to the
Company by Shareholder for use in the preparation of the
Registration Statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement
thereto. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf
of the Company, any director of the Company or any officer of
the Company and shall survive the transfer of such securities
by Shareholder.
(c) Notices of Claims, etc. Promptly after
receipt by an indemnified party of notice of the commencement
of any action or proceeding or threat of claim involving a
claim referred to in the preceding subdivisions of this
Section 3, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such
action or threat of claim, provided that the failure of any
<PAGE>
indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 3, except to the extent
that the indemnifying party is prejudiced by such failure to
give notice. In case any such action is brought against an
indemnified party, unless and except to the extent that in the
reasonable judgment of the indemnified party, based on advice
of counsel, a conflict of interest between such indemnified
and indemnifying parties exists in respect of such claim, the
indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable
costs of investigation. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any such
action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying
party.
(d) Indemnification Payments. The
indemnification required by this Section 3 shall be made by
periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred subject to
the receipt of such documentary support therefor as the
indemnifying party may reasonably request.
(e) Contribution. If the indemnification
provided for in this Section 3 shall for any reason be
unavailable to an indemnified party in respect of any loss,
claim, damage or liability, or any action in respect thereof,
referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect
thereof, in such proportion as shall be appropriate to reflect
the relative fault of the indemnifying party on the one hand
and the indemnified party on the other with respect to the
statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative
fault shall be determined by reference to whether the untrue
or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to
information supplied by the indemnifying party on the one hand
or the indemnified party on the other, the intent of the
parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or
omission, but not by reference to an indemnified party's stock
ownership in the Company. The amount paid or payable by an
indemnified party as a result of the loss, claim damage or
liability, or action in respect thereof, referred to above in
this paragraph shall be deemed to include, for purposes of
this paragraph, any legal or other expenses reasonably
incurred by such indemnified party in connection with
investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 12(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
4. Restriction on Transfer.
(a) Shareholder covenants and agrees that in
any calendar quarter he will not offer to sell, sell or
otherwise dispose of any amount of Registrable Securities in
excess of one percent (1%) of the total number of shares of
Common Stock then issued and outstanding.
(b) Notwithstanding the provisions of
Section 4(a) of this Agreement, in the event that a
Shareholder becomes liable for a payment obligation under the
indemnification provisions of the Merger Agreement,
Shareholder may, at his option, sell or pledge in accordance
with the Registration Statement as then in effect or pursuant
to an applicable exemption from registration, such number of
<PAGE>
shares of the Registrable Securities sufficient to generate
net funds in the amount of that payment obligation.
5. Notices. Any notices or other communications
required or permitted hereunder shall be in writing and shall
be deemed duly given upon (a) confirmed delivery by a standard
overnight carrier or when delivered by hand or (b) the
expiration of five business days after the day when mailed by
certified or registered mail, postage prepaid, addressed at
the following addresses (or at such other address as the
parties hereto shall specify by like notice):
(x) If to the Company, to:
Chesapeake Utilities Corporation
909 Silver Lake Boulevard
Dover, Delaware 19904
Attention: John R. Schimkaitis
with a copy to:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Post Office Box 7566
Washington, D.C. 20044
Attention: Ruth S. Epstein
(y) If to Shareholder, to the most recent address
given by Shareholder to the Company, which address
initially appears on Schedule I attached hereto.
6. Miscellaneous. This Agreement and any term
hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination
is sought or by Shareholder and the Company. This Agreement
shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware. The section
headings in this Agreement are for purposes of convenience
only and shall not constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the Company and Shareholder have
caused this Agreement to be duly executed as of the date first
above written.
CHESAPEAKE
UTILITIES CORPORATION
By: /S/ JOHN R. SCHIMKAITIS
John R. Schimkaitis
Chief Operating Officer and
Executive Vice President
SHAREHOLDER
/S/ WILLIAM P. SCHNEIDER
William P. Schneider
<PAGE>
SCHEDULE I
Mr. William P. Schneider
c/o James L. Otway, Esq.
Anthenelli & Otway
108 The Plaza
P.O. Box 4096
Salisbury, Maryland 21801
