SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: January 10, 1997
CHESAPEAKE UTILITIES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-593 51-0064146
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(State of other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
909 Silver Lake Boulevard, Dover, Delaware 19904
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(Address of principal executive offices) (Zip Code)
(302) 734-6799
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report.)
<PAGE>
Item 5. Other Events
Chesapeake Utilities Corporation ("Chesapeake") has agreed to purchase
all of the outstanding shares of Tri-County Gas Company, Inc. ("Tri-
County"), a propane distribution business headquartered in Salisbury,
Maryland. In the transaction, the Tri-County shareholders will receive
639,000 shares of Chesapeake stock for all the outstanding common stock of
Tri-County and its affiliated companies. After the purchase of Tri-
County's stock, the total number of Chesapeake outstanding shares will be
approximately 4,439,000.
The purchase, which is subject to regulatory and other required
approvals and other customary conditions of closing, is expected to close
by March 31, 1997. Attached herein as Exhibits I and II, respectively,
are copies of the executed Agreement and Plan of Merger and the press
release relating thereto.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
CHESAPEAKE UTILITIES CORPORATION
By:/s/ Ralph J. Adkins
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Ralph J. Adkins
President and Chief Executive Officer
Dated: January 13, 1997
Exhibit I.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and
entered into this tenth 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 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.
(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 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 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, 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 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");
(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, 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 (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
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 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.
(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.
(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 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 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 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 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 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.
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:
(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, 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 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.
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-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.
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 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 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.
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 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 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 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 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 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 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.
(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 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.
(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:
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 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 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, 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 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
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.
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.
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 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).
(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 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.
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 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.
(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.
(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 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 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 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 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, 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.
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:
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 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 ASSIGNS
(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 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.
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: ____________________________
Name:
Title:
CPK SUB-A, INC.
By: ____________________________
Name:
Title:
TRI-COUNTY
By: ____________________________
Name:
Title:
SHAREHOLDERS
________________________________
James R. Schneider
________________________________
William P. Schneider
Exhibit II.
FOR IMMEDIATE RELEASE Contact: Michael P. McMasters
January 10, 1997 Vice President, Treasurer & CFO
NYSE Symbol: CPK (302) 734-6799
CHESAPEAKE UTILITIES CORPORATION
ENTERS AGREEMENT TO PURCHASE THE STOCK
OF TRI-COUNTY GAS COMPANY, INC.
Chesapeake Utilities Corporation ("Chesapeake") announced today that
its Board of Directors has approved an agreement to purchase all of the
outstanding shares of Tri-County Gas Company, Inc. ("Tri-County"), a
family-owned and operated propane distribution business headquartered in
Salisbury, Maryland, to be operated as a subsidiary of Chesapeake. In the
transaction, which would be accounted for as a pooling of interests, Tri-
County shareholders will receive 639,000 shares of Chesapeake common stock
for all the outstanding common stock of Tri-County and its affiliated
companies. After the purchase of Tri-County s stock, the total number of
Chesapeake outstanding shares will be approximately 4,439,000. The Tri-
County owners have agreed to stay on as officers of Tri-County.
Excluding one time merger costs, this transaction is expected to have
an immediate positive effect on earnings per share. The purchase, which is
subject to regulatory and other required approvals and customary conditions
of closing, is expected to close by March 31, 1997. The combined
operations of the two companies served approximately 32,000 propane
customers on the Delmarva Peninsula and delivered approximately 30 million
retail and wholesale gallons of propane during 1996. Chesapeake also
provides natural gas to approximately 35,000 customers in certain sections
of Delaware, Maryland and Florida.
This press release includes forward looking information relating to the
proposed business combination, including its anticipated impact on earnings
per share. This forward looking information involves risks and
uncertainties that could cause actual results to differ materially,
including without limitation, whether or not the proposed acquisition
actually occurs, actual performance for the periods indicated, the actual
costs of the acquisition, and the ability of the combined company to
execute the anticipated integration and realize the expected synergies.
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