EXHIBIT II
EXECUTION COPY
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CHESAPEAKE UTILITIES CORPORATION
NOTE AGREEMENT
DATED OCTOBER 31, 2002
$30,000,000
6.64% SENIOR NOTES DUE OCTOBER 31, 2017
SECTION 1. Purchase and Sale of Notes 1
Section 1.1 Issue of Notes. 1
Section 1.2 The Closing. 2
Section 1.3 Expenses. 2
Section 1.4 Closing Conditions. 2
SECTION 2. PAYMENTS 4
Section 2.1 Required Payments. 4
Section 2.2 Optional Prepayments. 5
Section 2.3 Partial Payment Pro Rata. 5
SECTION 3. INFORMATION AS TO COMPANY 6
Section 3.1 Financial and Business Information 6
Section 3.2 Officer's Certificates. 7
Section 3.3 Accountants' Certificates. 8
Section 3.4 Inspection. 8
SECTION 4. COMPANY BUSINESS COVENANTS 8
Section 4.1 Payment of Taxes and Claims. 8
Section 4.2 Maintenance of Properties and Corporate Existence. 9
Section 4.3 Payment of Notes and Maintenance of Office. 9
Section 4.4 Fixed Charge Coverage Ratio. 10
Section 4.5 Minimum Consolidated Net Worth. 10
Section 4.6 Incurrence of Indebtedness 10
Section 4.7 Guaranties. 10
Section 4.8 Liens and Encumbrances. 11
Section 4.9 Restricted Payments. 12
Section 4.10 Sale of Property and Subsidiary Stock. 12
Section 4.11 Merger and Consolidation. 13
Section 4.12 Transactions with Affiliates. 14
Section 4.13 Loans, Advances and Investments 14
Section 4.14 Sale-Leaseback 14
Section 4.15 ERISA Compliance 14
Section 4.16 Use of Proceeds 15
SECTION 5. DEFAULT 15
Section 5.1 Nature of Default. 15
Section 5.2 Default Remedies 16
Section 5.3 Other Remedies. 17
SECTION 6. REPRESENTATIONS, COVENANTS AND WARRANTIES 17
Section 6.1 Organization, Etc. 17
Section 6.2 Financial Statements 18
Section 6.3 Actions Pending 18
Section 6.4 Outstanding Indebtedness 18
Section 6.5 Title to Properties 19
Section 6.6 Taxes 19
Section 6.7 Conflicting Agreements and Other Matters 19
Section 6.8 Offering of Notes 19
Section 6.9 ERISA 20
Section 6.10 Governmental Consent. 20
Section 6.11 Environmental Compliance. 20
Section 6.12 Permits and Other Operating Rights. 21
Section 6.13 Disclosure 21
Section 6.14 Regulatory Status of Company; Trust Indenture Act 21
SECTION 7. INTERPRETATION OF THIS AGREEMENT 22
Section 7.1 Terms Defined. 22
Section 7.2 Accounting Principles 29
Section 7.3 Directly or Indirectly. 29
Section 7.4 Governing Law; Consent to Jurisdiction 30
SECTION 8. PURCHASERS' SPECIAL RIGHTS 30
Section 8.1 Note Payment. 30
Section 8.2 Issue Taxes. 30
Section 8.3 Registration of Notes. 30
Section 8.4 Exchange of Notes. 31
Section 8.5 Replacement of Notes. 31
SECTION 9. MISCELLANEOUS 31
Section 9.1 Notices. 31
Section 9.2 Payments Due on Non-Business Days. 32
Section 9.3 Reproduction of Documents. 32
Section 9.4 Purchase for Investment. 32
Section 9.5 Source of Funds. 32
Section 9.6 Successors and Assigns. 33
Section 9.7 Amendment and Waiver; Acquisition of Notes. 33
Section 9.8 Duplicate Originals. 33
EXHIBITS
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Exhibit A Form of Note
Exhibit B-1 Form of Opinion of Company's Counsel
Exhibit B-2 Form of Opinion of Company's Special Delaware Counsel
Exhibit B-3 Form of Opinion of Company's Special Maryland Counsel
Exhibit B-4 Form of Opinion of Company's Special Florida Counsel
Exhibit B-5 Form of Opinion of Company's Special Maryland Counsel
SCHEDULES
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Purchaser Schedule
Schedule 4.6 Existing Indebtedness
Schedule 4.8(a)(v) Existing Liens
Schedule 6.1(a) Subsidiaries
Schedule 6.7 List of Agreements Restricting Debt
Schedule 7.1 Existing Investments
CHESAPEAKE UTILITIES CORPORATION
909 Silver Lake Boulevard
Dover, Delaware 19904
NOTE AGREEMENT
$30,000,000
6.64% Senior Notes due October 31, 2017
As of October 31, 2002
To the Purchasers listed in the
attached Purchaser Schedule
Ladies and Gentlemen:
Chesapeake Utilities Corporation, a Delaware corporation (the "Company"),
hereby agrees with the purchasers listed in the attached Purchaser Schedule
(collectively, the "Purchasers" and, individually, a "Purchaser") as follows:
SECTION 1. PURCHASE AND SALE OF NOTES
Section 1.1 Issue of Notes.
The Company will authorize the issue of $30,000,000 principal amount of its
6.64% Senior Notes due October 31, 2017 (the "Notes"). Each Note will bear
interest on the unpaid principal balance thereof, from the date of the Note or
the most recent date to which interest thereon has been paid, until the same is
due and payable, at an annual rate of 6.64% (computed on the basis of a 360-day
year of twelve 30-day months), payable semi-annually on the last day of April
and October in each year beginning on April 30, 2003. The Notes will be subject
to certain mandatory principal repayments prior to maturity, as provided in
Section 2.1 and will mature on October 31, 2017. Payments of principal, Make
Whole Amount, if any, and, to the extent permitted by law, interest not paid
when due will bear interest from the date such payment was due until paid at a
rate per annum from time to time equal to the greater of (i) 8.64% or (ii) the
rate of interest publicly announced by Morgan Guaranty Trust Company of New York
from time to time in New York City as its Prime Rate. The Notes will be
registered notes in the form set out in Exhibit A.
Section 1.2 The Closing.
The Company agrees to sell to each Purchaser and each Purchaser agrees to
purchase from the Company, in accordance with the provisions of this Agreement,
the principal amount of the Notes indicated for such Purchaser on the Purchaser
Schedule attached hereto at par. The closing of the sale and purchase of the
Notes will be held at 10:00 a.m. on October 31, 2002 (the "Closing Date"), or
such other date as may be mutually agreed, at the offices of Schiff Hardin &
Waite, 6600 Sears Tower, Chicago, Illinois. On the Closing Date, the Company
will deliver to each Purchaser one or more Notes, as specified in the Purchaser
Schedule attached hereto in the aggregate amount of each Purchaser's purchase,
dated the Closing Date and payable to such Purchaser or such Purchaser's
nominee(s), if any, listed in the Purchaser Schedule, against payment in
immediately available funds. Each Purchaser's obligations hereunder are several
and not joint and no Purchaser shall have any obligation or liability to any
Person for the performance or nonperformance by any other Purchaser hereunder.
Section 1.3 Expenses.
Whether or not the Notes are sold, the Company will, upon presentation to
the Company of documentation in reasonable detail, pay the following expenses
relating to this Agreement, including:
(a) the cost of reproducing this Agreement and the Notes;
(b) the reasonable fees and disbursements (including the cost of obtaining
the private placement number) of the Purchasers' special counsel;
(c) the cost of any fees of agents, brokers or dealers or otherwise incurred
in connection with the sale of the Notes pursuant to this Agreement but not with
respect to any subsequent resale;
(d) each Purchaser's reasonable out-of-pocket expenses incurred in
negotiating this Agreement;
(e) the cost of delivering to or from any Purchaser's home office, insured
to any Purchaser's satisfaction, the Notes purchased by any Purchaser, any Note
surrendered by any Purchaser to the Company pursuant to this Agreement and any
Note issued to any Purchaser in substitution or replacement for a surrendered
Note; and
(f) all costs (including reasonable fees and expenses of counsel) related to
proposed or actual modifications of, or proposed or actual consents under, this
Agreement.
The obligations of the Company under this Section 1.3 shall survive the
payment of the Notes and the termination of this Agreement, and shall continue
regardless of whether or not the Closing Date occurs and whether or not any
Purchaser has purchased Notes hereunder.
Section 1.4 Closing Conditions.
Each Purchaser's obligation to purchase and pay for the Notes to be
purchased by such Purchaser hereunder is subject to the satisfaction, on or
before the Closing Date, of the following conditions:
(a) Certain Documents. Such Purchaser shall have received the following
dated the Closing Date:
(i) The Notes to be purchased by such Purchaser.
(ii) Certified copies of the resolutions of the Board of Directors of the
Company approving this Agreement and the Notes, and of all documents evidencing
other necessary corporate action and governmental approvals, if any, with
respect to this Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant Secretary of the
Company certifying the names and true signatures of the officers of the Company
authorized to sign this Agreement and the Notes and the other documents to be
delivered hereunder.
(iv) Certified copies of the Certificate of Incorporation and By-laws of the
Company.
(v) Good standing certificates for the Company from each of the Secretary of
State of Delaware, the Secretary of State of Maryland, and the Secretary of
State of Florida, dated of a recent date.
(b) Opinion of Purchasers' Special Counsel. Such Purchaser shall have
received from Schiff Hardin & Waite, who are acting as special counsel for the
Purchasers in connection with this transaction, a favorable opinion satisfactory
to the Purchasers as to such matters as the Purchasers may request.
(c) Opinion of Company's Special and Local Counsel. Such Purchaser shall
have received from Covington & Burling, who are acting as special counsel for
the Company in connection with this transaction, a favorable opinion
satisfactory to the Purchasers substantially in the form of Exhibit B-1 hereto,
from Parkowski & Guerke, who are acting as Delaware counsel for the Company in
connection with this transaction, a favorable opinion satisfactory to the
Purchasers substantially in the form of Exhibit B-2 hereto, from Piper Rudnick
LLP, who are acting as Maryland counsel for the Company in connection with this
transaction, a favorable opinion satisfactory to the Purchasers substantially in
the form of Exhibit B-3 hereto, from Rose, Sundstrom & Bentley, LLP, who
are acting as Florida counsel for the Company in connection with this
transaction, a favorable opinion satisfactory to the Purchasers substantially in
the form of Exhibit B-4 hereto, and a favorable opinion satisfactory to the
Purchasers substantially in the form of Exhibit B-5 hereto, from Laws &
Robertson, P.A., who are also acting as Maryland counsel for the Company in
connection with this transaction.
(d) Representations and Warranties; No Default. The representations and
warranties contained in Section 6 shall be true on and as of the Closing Date,
except to the extent of changes caused by the transactions herein contemplated;
there shall exist on the date of closing no Event of Default or Default; and the
Company shall have delivered to such Purchaser an Officer's Certificate,
dated the Closing Date, to both such effects.
(e) Purchase Permitted By Applicable Laws. The purchase of and payment for
the Notes to be purchased by such Purchaser on the Closing Date on the terms and
conditions herein provided (including the use of the proceeds of such Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act or Regulation T,
U or X of the Board of Governors of the Federal Reserve System) and shall not
subject such Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and such
Purchaser shall have received such certificates or other evidence as it may
reasonably request to establish compliance with this condition. The orders of
the Delaware and Florida State Commissions referred to in Section 6.10 shall be
satisfactory to such Purchaser and shall be final and in full force and effect
on the Closing Date. No appeal, review or contest of either thereof shall be
pending on the Closing Date, and, as of the Closing Date, the time for appeal or
to seek review or reconsideration of such orders shall have expired. Any
conditions contained in either order shall have been satisfied to such
Purchaser's reasonable satisfaction. Such Purchaser and its special counsel
shall have received copies of such documents and papers (including, without
limitation, a certified or attested copy of such orders) as such Purchaser may
reasonably request in connection therewith or as a basis for the Purchasers'
special counsel's closing opinion, all in form and substance satisfactory to
such Purchaser and the Purchasers' special counsel.
(f) Proceedings. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to such Purchaser,
and such Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
(g) Related Transactions. The Company shall have consummated the sale of
the entire principal amount of the Notes scheduled to be sold on the Closing
Date pursuant to this Agreement.
SECTION 2. PAYMENTS
Section 2.1 Required Payments.
(a) Until the Notes are paid in full, the Company will pay $2,727,272.72 in
aggregate principal amount of the Notes on October 31 in each year beginning on
October 31, 2007 and ending on October 31, 2017, inclusive. The entire
outstanding principal amount and unpaid interest thereon shall be due and
payable on October 31, 2017, the maturity date of the Notes. Prepayments on
each holder's Notes under Section 2.2 shall be applied to mandatory payments on
such Notes in inverse order of maturity and the Company's obligation to make the
payments required by this Section 2.1 shall not be reduced by any payment
pursuant to Section 2.2. Notwithstanding the foregoing, upon any payment of
less than all of the outstanding Notes pursuant to Section 2.1(b) hereof or any
acquisition of any Notes by the Company or any Subsidiary or Affiliate permitted
by Section 9.6(b) hereof, the principal amount of such required prepayment of
the Notes becoming due under this Section 2.1 on or after the day of such
payment or acquisition shall be reduced in the same proportion as the aggregate
unpaid principal amount of the Notes is reduced as a result of such prepayment
or purchase.
(b) If, at any time, the aggregate net book value of all assets that are
used in the regulated utilities business segments of the Company and its
Subsidiaries is less than 50% of Consolidated Total Assets (a "Diversification
Event"), any holder of any of the Notes then outstanding may elect, at its
option, by notice to the Company, to declare the outstanding Notes held by such
holder to be due and payable on the next business day after the 30th day
following such notice (the "Required Payment Date"). Upon such election by any
holder of the Notes, the Company will pay the aggregate principal amount of such
holder's Notes on the Required Payment Date, together with interest accrued to
the Required Payment Date on such principal amount, and a premium equal to the
Make Whole Amount, if any, applicable to such payment. Upon the occurrence of a
Diversification Event, the Company shall deliver to each holder of the
outstanding Notes a notice that such event has occurred and the reason or
reasons for such occurrence.
Section 2.2 Optional Prepayments.
(a) At a Premium. The Company may prepay the Notes in whole or part, at any
time and from time to time, in multiples of $1,000,000, by payment of 100%
of the principal amount then being prepaid, together with interest accrued to
the date of prepayment on the principal amount being prepaid and a premium equal
to the Make Whole Amount, if any, applicable to such prepayment; provided that
no partial prepayment shall be in an amount less than (i) $1,000,000 or (ii) the
aggregate principal amount remaining outstanding, whichever is less.
(b) Notice of Optional Prepayment. The Company will give written notice of
any optional prepayment of the Notes to each holder of Notes at least 15 but not
more than 45 days before the date fixed for prepayment, specifying (1) such date
(the "Prepayment Date"), and (2) the amount of principal and interest with
respect to the Notes and such holder's Notes to be prepaid on such date. Any
such notice of prepayment will be irrevocable. Upon the giving of such notice
by the Company, the principal amount of the Notes specified in the notice,
together with interest accrued to the Prepayment Date on such principal amount,
and a premium equal to the Make Whole Amount, if any, applicable to such
payment, shall be due and payable on the Prepayment Date, and the Company shall
pay such amount on the Prepayment Date. The Company shall, on or before the day
on which it gives written notice of any prepayment pursuant to Section 2.2(a),
give telephonic notice of the principal amounts of the Note to be prepaid and
the prepayment date to each Purchaser which shall have designated a recipient of
such notices in the Purchaser Schedule attached hereto or by notice in writing
to the Company.
Section 2.3 Partial Payment Pro Rata.
If there is more than one Note outstanding, the principal amount of each
required or optional partial payment of the Notes, other than a prepayment
pursuant to Section 2.1(b), will be allocated among the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective
outstanding principal amounts of the Notes.
SECTION 3. INFORMATION AS TO COMPANY
Section 3.1 Financial and Business Information.
The Company will deliver in duplicate to each Purchaser, if at the time
such Purchaser or such Purchaser's nominee holds any Notes (or if such Purchaser
is obligated to purchase any Notes), and to each other Institutional Holder of
outstanding Notes:
(a) Quarterly Statements--as soon as practicable and in any event within
sixty (60) days after the end of each of the first three quarterly fiscal
periods in each fiscal year of the Company:
(i) a consolidated balance sheet of the Company and its Subsidiaries as at
the end of such quarter and as at the end of the corresponding quarter in the
most recently completed fiscal year and a consolidating balance sheet of the
Company and its Subsidiaries as of the end of such quarter, and
(ii) consolidated statements of income, retained earnings and cash flows of
the Company and its Subsidiaries for that quarter and for the portion of the
fiscal year ending with such quarter, and for the corresponding periods in the
prior fiscal year and consolidating statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for such quarter and for the
portion of the fiscal year ending with such quarter,
setting forth in the statements of income for each fiscal
period, the specific dollar amounts of depreciation charged, lease rental
expense and interest expense on Indebtedness, accompanied by a certificate
signed by a principal financial officer of the Company stating that such
financial statements present fairly the financial condition of the companies
being reported upon and have been prepared in accordance with generally accepted
accounting principles consistently applied, with such adjustments as may be
required to present fairly the financial statements therein contained;
(b) Annual Statements--as soon as practicable and in any event within one
hundred twenty (120) days after the end of each fiscal year of the Company:
(i) a consolidated and consolidating balance sheet of the Company and its
Subsidiaries, as at the end of that fiscal year, and
(ii) consolidated and consolidating statements of income, retained earnings
and cash flows of the Company and its Subsidiaries, for that year,
setting forth in the case of such consolidated financial statements, the figures
for the previous fiscal year in comparative form, and setting forth in such
statements of income, the specific dollar amounts of depreciation charged, lease
rental expense, and interest expense on Indebtedness, and accompanied in the
case of such consolidated financial statements by an opinion of a firm of
independent certified public accountants of recognized national standing stating
that such financial statements present fairly the results of the operations and
financial condition of the companies being reported upon and have been prepared
in accordance with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur);
(c) Audit Reports--promptly upon receipt thereof, one copy of each other
report submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the books
of the Company or any Subsidiary;
(d) SEC and Other Reports--promptly upon their becoming available, copies of
each periodic report (including Form 8-K, 10-K, and 10-Q, proxy statement and
registration statement or prospectus relating to Securities of the Company filed
with or delivered to any securities exchange, the Securities and Exchange
Commission or any successor agency, and promptly upon transmission thereof,
copies of such other financial statements, notices and reports, if any, as the
Company or any Subsidiary shall send to its public stockholders;
(e) Annual Regulatory Reports--promptly upon their becoming available,
copies of each annual report required to be filed by the Company or any
Subsidiary with any of the State Commissions or with the FERC;
(f) Notice of Default or Event of Default-- immediately upon becoming aware
of the existence of any Default or Event of Default, a notice describing in
reasonable detail its nature and what action the affected Company or Subsidiary
is taking or proposes to take with respect thereto;
(g) Notice of Claimed Default--immediately upon becoming aware that the
holder of any Note or of any other evidence of indebtedness or other Security of
the Company or any Subsidiary has given notice (or taken any other action) with
respect to a claimed default, breach, Default or Event of Default, a notice
describing in reasonable detail the notice given (or action taken) and in
reasonable detail the nature of the claimed default, breach, Default or Event of
Default and what action the affected Company or Subsidiary is taking or proposes
to take with respect thereto;
(h) Report on Proceedings--promptly upon the Company's making public
information with respect to (1) any proposed or pending investigation of it or
any Subsidiary by any governmental authority or agency, or (2) any court or
administrative proceeding, which in either case involves the possibility of
materially and adversely affecting the Properties, business, prospects, profits
or financial condition of the Company and its Subsidiaries, a notice specifying
its nature and the action the Company is taking with respect thereto; and
(i) Requested Information--with reasonable promptness, any other data and
information which may be reasonably requested from time to time, including
without limitation any information required to be made available at any time to
any prospective transferee of any Notes in order to satisfy the requirements of
Rule 144A under the Securities Act of 1933, as amended.
Section 3.2 Officer's Certificates.
With each set of financial statements delivered pursuant to Section 3.1(a)
or 3.1(b), the Company will deliver to each Purchaser a certificate signed by
its Chief Financial Officer and setting forth:
(a) Covenant Compliance--the information required in order to establish
compliance with Section 4 during the period covered by the financial statements
then being furnished; and
(b) Default or Event of Default--that the signer has reviewed the relevant
terms of this Agreement and has made, or caused to be made, under the signer's
supervision, a review of the transactions and condition of the Company and its
Subsidiaries from the beginning of the period covered by the financial
statements then being furnished and that the review has not disclosed the
existence of any Default or Event of Default or, if a Default or Event of
Default exists, describing its nature.
Section 3.3 Accountants' Certificates.
Each set of annual financial statements delivered pursuant to Section
3.1(b) will be accompanied by a certificate of the accountants who certify such
financial statements, stating that, in making the audit necessary to the
certification of such financial statements, they have reviewed this Agreement
and obtained no knowledge of any Event of Default or Default, or, if they have
obtained knowledge of any Event of Default or Default, specifying the nature and
period of existence thereof.
Section 3.4 Inspection.
The Company will permit each Purchaser's representatives, while such
Purchaser or such Purchaser's nominee holds any Note, and the representatives of
any other Institutional Holder of the Notes to visit and inspect any of the
Properties of the Company or any Subsidiary, to examine and make copies and
extracts of all their books of account, records, reports and other papers, and
to discuss their respective affairs, finances and accounts with their respective
officers, employees with management duties and independent public accountants
(and by this provision the Company authorizes said accountants to so discuss the
finances and affairs of the Company and its Subsidiaries), all upon reasonable
notice, at reasonable times and as often as may be reasonably requested. Any
holder making any visit or inspection pursuant to this Section 3.4 shall pay its
own costs and expenses thereof unless, at the time of such visit or inspection,
there shall exist a Default or Event of Default, in which event the Company
shall bear the costs and expenses thereof.
SECTION 4. COMPANY BUSINESS COVENANTS
The Company covenants that on and after the date of this Agreement until
the Notes are paid in full:
Section 4.1 Payment of Taxes and Claims.
The Company shall, and shall cause each Subsidiary to, pay, before they
become delinquent,
(a) all taxes, assessments and governmental charges or levies imposed upon
it or its Property, and
(b) all claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons which, if unpaid, might result in the creation
of a Lien upon its Property,
provided that items of the foregoing description need not be paid while being
contested in good faith and by appropriate proceedings and provided further that
adequate book reserves have been established with respect thereto and provided
further that the owning company's title to, and its right to use, its Property
is not materially adversely affected thereby.
Section 4.2 Maintenance of Properties and Corporate Existence.
The Company shall, and shall cause each Subsidiary to:
(a) Property--maintain its Property in good condition and make all necessary
renewals, replacements, additions, betterments and improvements thereto;
(b) Insurance--maintain, with financially sound and reputable insurers,
insurance with respect to its Properties and business against such casualties
and contingencies, of such types (including public liability, larceny,
embezzlement or other criminal misappropriation insurance) and in such amounts
as is customary in the case of corporations of established reputations engaged
in the same or a similar business and similarly situated;
(c) Financial Records--keep true books of records and accounts in which full
and correct entries will be made of all its business transactions, and will
reflect in its financial statements adequate accruals and appropriations to
reserves, all in accordance with generally accepted accounting principles;
(d) Corporate Existence and Rights--do or cause to be done all things
necessary (a) to preserve and keep in full force and effect its existence,
rights and franchises and (b) except as provided in Section 4.10 or 4.11, to
maintain each Subsidiary as a Subsidiary; and
(e) Compliance with Law--comply with all laws (including but not limited to
environmental laws), ordinances, or governmental rules and regulations
(including, without limitation, federal, state and local environmental laws,
rules and regulations) to which it is subject and maintain any licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its Properties or to the conduct of its business, if the failure to
so comply or the failure to so maintain might materially adversely affect the
Properties, business, prospects, profits or condition (financial or otherwise)
of the Company and its Subsidiaries or the ability of the Company to perform its
obligations set forth in this Agreement and in the Notes.
Section 4.3 Payment of Notes and Maintenance of Office.
The Company will punctually pay or cause to be paid the principal and
interest (and premium, if any) to become due in respect of the Notes according
to the terms thereof and will maintain an office at the address of the Company
set forth in Section 9.1 where notices, presentations and demands in respect of
this Agreement or the Notes may be made upon it. Such office shall be
maintained at such address until such time as the Company shall notify the
holders of the Notes of a change of location of such office within such State.
Section 4.4 Fixed Charge Coverage Ratio.
The Company will, for each fiscal year of the Company, maintain
Consolidated Net Earnings Available for Fixed Charges at not less than 120% of
Consolidated Fixed Charges.
Section 4.5 Minimum Consolidated Net Worth.
The Company will at all times maintain Consolidated Net Worth at not less
than $50,000,000.
Section 4.6 Incurrence of Indebtedness.
The Company will not, nor will it permit any of its Subsidiaries to,
create, incur, assume, become liable for, or guaranty, or permit any of its
Property to become subject to, any Funded Indebtedness (and in the case of a
Subsidiary, Current Indebtedness) other than:
(i) Funded Indebtedness represented by the Notes and the outstanding
Indebtedness set forth in Schedule 4.6;
(ii) Unsecured Funded Indebtedness of the Company, if after giving effect
thereto and to any concurrent transactions, the aggregate principal amount of
outstanding secured and unsecured Funded Indebtedness of the Company (including,
but not limited to, the Funded Indebtedness represented by the Bonds) and
secured and unsecured Current and Funded Indebtedness of the Subsidiaries
(excluding Indebtedness owed by a Subsidiary to the Company or a Wholly-Owned
Subsidiary) does not exceed 65% of Total Capitalization; and
(iii) Purchase Money Indebtedness of the Company or a Subsidiary and
unsecured Current or Funded Indebtedness of a Subsidiary, if after giving effect
thereto and to any concurrent transactions, (a) the conditions set forth in
Section 4.6(ii) are satisfied, and (b) the aggregate principal amount of
outstanding Purchase Money Indebtedness of the Company and its Subsidiaries and
the unsecured Current and Funded Indebtedness of the Subsidiaries, excluding
Current or Funded Indebtedness owed by a Subsidiary to the Company or a
Wholly-Owned Subsidiary, does not exceed 20% of Consolidated Tangible Net Worth.
Section 4.7 Guaranties.
The Company will not, and will not permit any Subsidiary to, become liable
for or permit any of its Property to become subject to any Guaranty except
Guaranties under which the maximum aggregate amount of Indebtedness, dividend or
other obligation being guaranteed can be mathematically determined at the time
of issuance. Each Guaranty permitted by this Section 4.7 must comply with the
applicable requirements of Section 4.6 above.
Section 4.8 Liens and Encumbrances.
(a) The Company will not, and will not permit any Subsidiary to, cause or
permit or agree or consent to cause or permit in the future (upon the happening
of a contingency or otherwise), any of its Property, whether now owned or
subsequently acquired, to be subject to a Lien except:
(i) Liens securing the payment of taxes, assessments or governmental charges
or levies or the demands of suppliers, mechanics, carriers, warehousers,
landlords and other like Persons, provided that payment thereof is not at the
time required by Section 4.1;
(ii) Liens incurred or deposits made in the ordinary course of business (A)
in connection with worker's compensation, unemployment insurance, social
security and other like laws, or (B) to secure the performance of letters of
credit, bids, tenders, sales contracts, leases, statutory obligations, surety,
appeal and performance bonds and other similar obligations, in each case not
incurred in connection with the borrowing of money, the obtaining of advances or
the payment of the deferred purchase price of Property;
(iii) attachment, judgment and other similar Liens arising in connection
with court proceedings, provided that (A) execution and other enforcement are
effectively stayed, (B) all claims which the Liens secure are being actively
contested in good faith and by appropriate proceedings, (C) adequate book
reserves have been established with respect thereto, and (D) the owning
company's right to use, its Property is not materially adversely affected
thereby;
(iv) Liens on Property of a Subsidiary, provided that they secure only
obligations owing to the Company or a Wholly-Owned Subsidiary;
(v) the Liens existing at the date of this Agreement which are set forth in
Schedule 4.8(a)(v);
(vi) Liens securing Purchase Money Indebtedness of the Company or a
Subsidiary, provided (x) the incurrence of such Purchase Money Indebtedness is
then permitted by Section 4.6, and (y) after giving effect to the incurrence of
such Purchase Money Indebtedness and to any concurrent transactions, the
aggregate amount of outstanding Purchase Money Indebtedness of the Company and
its Subsidiaries and the unsecured Current and Funded Indebtedness of the
Subsidiaries (excluding Indebtedness owed by a Subsidiary to the Company or a
Wholly-Owned Subsidiary) does not exceed 20% of Consolidated Tangible Net Worth;
and provided further that no such Lien shall extend to or cover any Property not
originally subject thereto, other than improvements to the Property originally
subject thereto; and
(vii) other Liens securing obligations that in the aggregate do not exceed
$100,000.
(b) The Company will not issue or permit to be issued any additional Bonds
under the First Mortgage Indenture, except in the case of the exchange or
transfer of Bonds or the replacement of lost, stolen, destroyed or mutilated
Bonds, in each case in accordance with the terms of the First Mortgage
Indenture.
Section 4.9 Restricted Payments.
Except as provided in this Section 4.9, the Company will not, and the
Company will not permit any Subsidiary to,
(a) declare or pay any dividends, either in cash or property, on any shares
of capital stock of the Company (except dividends payable solely in shares of
capital stock of the Company);
(b) directly or indirectly, purchase, redeem or retire any share of capital
stock of the Company or any warrants, rights or options to purchase or acquire
any shares of capital stock of the Company (other than shares of capital stock
or warrants, rights or options to purchase or acquire shares of capital stock
issued to employees, directors or agents of the Company pursuant to a benefit or
compensation plan or agreement of the Company); or
(c) make any other payment or distribution, either directly or indirectly,
in respect of capital stock of the Company (such declarations, payments,
redemptions or retirements being called "Restricted Payments"),
if at the time of any such Restricted Payment and after giving effect thereto,
the aggregate amount of all Restricted Payments made, paid or declared since the
Closing Date would exceed the sum of (x) $10,000,000 plus (y) 100% of
Consolidated Net Income for the period beginning on January 1, 2003 and ending
on the date of the proposed Restricted Payment, computed on a cumulative basis
(or if Consolidated Net Income is a deficit figure for the period, then minus
100% of such deficit).
Section 4.10 Sale of Property and Subsidiary Stock.
(a) The Company will not, and will not permit any Subsidiary to, except in
the ordinary course of business, sell, lease, transfer or otherwise dispose of
any of its assets (not including Excluded Assets); provided that the foregoing
restriction does not apply to the sale of assets for a cash consideration to a
Person other than an Affiliate, if all of the following conditions are met:
(i) the amount of such assets (valued at net book value), together with all
other assets of the Company and Subsidiaries previously disposed of (other than
in the ordinary course of business) as permitted by this Section 4.10(a) and the
assets of any Subsidiary disposed of as permitted by Section 4.10(a)(ii)
during the current fiscal year does not exceed 10% of Consolidated Total Assets
as of the end of the fiscal year then most recently ended; provided that assets,
as so valued, may be sold in excess of 10% of Consolidated Total Assets in any
fiscal year if either (1) within one year of such sale, the proceeds from the
sale of such assets are used, or committed by the Company's Board of Directors
to be used, to acquire other assets of at least equivalent value and earning
power, or (2) with the written consent of the holders of the Notes, the proceeds
from sale of such assets are used immediately upon receipt to prepay first any
Bonds outstanding and, if no Bonds are outstanding, to prepay pro rata the Notes
under Section 2.2(a) hereof and other senior Funded Indebtedness of the Company;
and
(ii) in the opinion of the Company's Board of Directors, the sale is for
fair value and is in the best interest of the Company; and
(iii) immediately after the consummation of the sale, and after giving
effect thereto, no Default or Event of Default would exist.
(b) The Company will not, and will not permit any Subsidiary to, dispose of
its investment in any Subsidiary, and the Company will not, and will not permit
any Subsidiary to, issue or transfer any shares of a Subsidiary's capital stock
or any other Securities exchangeable or convertible into its stock (such stock
and other Securities being called "Subsidiary Stock"), if the effect would be to
reduce the direct or indirect proportionate interest of the Company in the
outstanding Subsidiary Stock of the Subsidiary whose shares are the subject of
the transaction, provided that these restrictions do not apply to (x) the issue
of directors' qualifying shares or (y) the sale for a cash consideration to a
Person other than an Affiliate of the entire investment of the Company and its
other Subsidiaries (i) in any Excluded Assets or (ii) in any other Subsidiary
provided the Company would be permitted to dispose of all of the assets of such
other Subsidiary at the time in compliance with the conditions specified in
paragraphs (i), (ii) and (iii) of Section 4.10(a).
Section 4.11 Merger and Consolidation.
The Company will not, and will not permit any Subsidiary to, be a party to
any merger or consolidation or sell, lease or otherwise transfer all or
substantially all of its Property, provided that the Company may merge or
consolidate with, or sell substantially all of its assets to, another
corporation if all of the following conditions are met:
(i) the surviving or acquiring corporation is organized under the laws of
the United States or a jurisdiction thereof,
(ii) the surviving or acquiring corporation, if not the Company, expressly
and unconditionally assumes in writing the covenants and obligations to be
performed by the Company under the Notes and this Agreement, such assumption to
be in a form acceptable to the holder or holders of not less than 66-2/3% in
principal amount of all Notes at the time outstanding, and
(iii) the surviving or acquiring corporation could, immediately after giving
effect to the transaction, incur at least $1.00 of additional Funded
Indebtedness pursuant to Section 4.6(ii), and at the time of such transaction
and immediately after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing; and
provided, further, that any Subsidiary may merge or consolidate with or into the
Company or any other subsidiary so long as (x) the condition specified in
paragraph (iii) above is satisfied, and (y) in any merger or consolidation
involving the Company, the Company shall be the surviving or continuing
corporation.
Section 4.12 Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to, enter into any
transaction (including the purchase, sale or exchange of Property or the
rendering of any service) with any Affiliate except in the ordinary course of
and pursuant to the reasonable requirements of such Company's or Subsidiary's
business and upon fair and reasonable terms which are at least as favorable to
the Company or the subsidiary as would be obtained in a comparable arm's-length
transaction with a non-Affiliate.
Section 4.13 Loans, Advances and Investments.
The Company will not, and will not permit any Subsidiary to, make or permit
to remain outstanding any investment in any Property or own, purchase or acquire
any stock, obligations or securities of, or any other interest in, or make any
capital contribution to, or make or permit to remain outstanding any loan or
advance to, any Person, (herein collectively referred to as "Investments")
except that the Company or a Subsidiary may make or permit to remain outstanding
Permitted Investments.
Section 4.14 Sale-Leaseback.
Without the written consent of the holder or holders of not less than
66-2/3% in principal amount of all Notes at the time outstanding, neither the
Company nor any Subsidiary will sell and lease back (whether or not under a
Financing Lease) any Property.
Section 4.15 ERISA Compliance.
(a) The Company will not permit the present value of all employee benefits
vested under all Pension Plans maintained by the Company and its Subsidiaries to
exceed the present value of the assets allocable to such vested benefits;
(b) All assumptions and methods used to determine the actuarial valuation of
vested employee benefits under Pension Plans and the present value of assets of
Pension Plans shall be reasonable in the good faith judgment of the Company and
shall comply with all requirements of law, provided, however, that for purposes
of the foregoing the Company shall be entitled to rely upon the independent
actuaries for its pension plans; and
(c) The Company will not permit at any time, and will not permit any
Subsidiary at any time to permit, any Pension Plan maintained by it to:
(i) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Internal Revenue Code of 1986, as amended, or described in
Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA, whether or not waived; or
(iii) terminate under circumstances which could result in the imposition of
a Lien on the Property of the Company or any Subsidiary pursuant to Section 4068
of ERISA.
Section 4.16 Use of Proceeds.
Neither the Company nor any Subsidiary owns or has any present intention of
acquiring any "margin stock" as defined in Regulation U (12 CFR Part 221) of the
Board of Governors of the Federal Reserve System (herein called "margin stock").
The proceeds of sale of the Notes will be used to refinance outstanding
short-term debt previously used to fund capital expenditures and for general
corporate purposes, including to fund capital expenditures. None of such
proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any margin stock or
for the purpose of maintaining, reducing or retir-ing any Indebtedness which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. Neither the Company
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes to violate Regulation T, Regula-tion U or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the Exchange Act, in each case as in effect now or as the same may
hereafter be in effect.
SECTION 5. DEFAULT
Section 5.1 Nature of Default.
An "Event of Default" shall exist if any of the following occurs and is
continuing:
(a) Principal, Premium or Interest Payments--failure to pay principal or
Make Whole Amount on any Note on or before the date the payment is due, or
failure to pay interest on any Note on or before the fifth day after the payment
is due;
(b) Breach of Particular Covenants--failure to comply with any covenant
contained in Sections 4.4 through 4.11 and Sections 4.14 and 4.15;
(c) Other Breaches--failure to comply with any other provision of this
Agreement, which continues for more than 30 days after it first becomes known to
the chief executive officer, president, chief financial officer or treasurer of
the Company;
(d) Default on Indebtedness or Other Security-- failure by the Company or
any Subsidiary to make one or more payments due on aggregate indebtedness
exceeding $1,000,000; or any event, other than the giving of a notice of
voluntary prepayment, shall occur or any condition shall exist, the effect of
which event or condition is to cause (or permit one or more Persons to cause)
more than $1,000,000 of aggregate indebtedness or other Securities of the
Company or any Subsidiary to become due before its (or their) stated maturity or
before its (or their) regularly scheduled dates of payment;
(e) Involuntary Bankruptcy Proceedings, Etc.--a custodian, receiver,
liquidator or trustee of the Company or any Subsidiary, or of any of the
Property of either, is appointed or takes possession and such appointment or
possession remains in effect for more than 60 days; or the Company or any
Subsidiary generally fails to pay its debts as they become due; or the Company
or any Subsidiary is adjudicated bankrupt or insolvent; or an order for relief
is entered under the Federal Bankruptcy Code against the Company or any
Subsidiary; or any of the Property of either is sequestered by court order and
the order remains in effect for more than 60 days; or a petition is filed
against the Company or any Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or subsequently in effect, and is not dismissed
within 60 days after filing;
(f) Voluntary Bankruptcy Proceedings, Etc.--the Company or any Subsidiary
files a voluntary petition in bankruptcy or seeking relief under any provision
of any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now or
subsequently in effect; or consents to the filing of any petition against it
under any such law; or consents to the appointment of or taking possession by a
custodian, receiver, trustee or liquidator of the Company, or a Subsidiary, or
of all or any part of the Property of either; or makes an assignment for the
benefit of its creditors;
(g) Warranties or Representations--any warranty, representation or other
statement by or on behalf of the Company contained in this Agreement or in any
document, certificate or instrument furnished in compliance with or in reference
to this Agreement shall prove to have been false or misleading in any material
respect on the date as of which it was made; or
(h) Undischarged Final Judgments--a final judgment for the payment of money
is outstanding against one or more of the Company and its Subsidiaries and has
been outstanding for more than 60 days from the date of its entry and has not
been discharged in full or effectively stayed.
Section 5.2 Default Remedies.
(a) Acceleration--If an Event of Default of the type described in Sections
5.1(e) or 5.1(f) shall occur, the, entire outstanding principal amount of the
Notes shall automatically become due and payable, without the taking of any
action on the part of any holder of the Notes or any other Person and without
the giving of any notice with respect thereto. If an Event of Default of the
type described in Section 5.1(a) exists, any holder of Notes may, at its option,
exercise any right, power or remedy permitted by law, including the right,
by notice to the Company, to declare the Notes held by such holder to be
immediately due and payable. If any other Event of Default exists, the holder
or holders of at least 66-2/3% in outstanding principal amount of the Notes
(exclusive of Notes owned by the Company, Subsidiaries and Affiliates) may, at
its or their option, exercise any right, power or remedy permitted by law,
including the right, by notice to the Company, to declare all the outstanding
Notes to be immediately due and payable. Upon each such acceleration, the
principal of the Notes declared due or automatically becoming due shall be
immediately payable, together with all accrued interest and the Make Whole
Amount, if any, applicable thereto, and the Company will immediately make
payment, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived.
No course of dealing or delay or failure to exercise any right on the part
of any holder of the Notes shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers or remedies. The Company will pay or
reimburse the holders of the Notes for all costs and expenses (including
reasonable attorneys' fees) incurred by them in collecting any sums due on the
Notes or in otherwise enforcing any of their rights.
(b) Annulment of Acceleration--In the event of each declaration or automatic
acceleration pursuant to Section 5.2(a), the holder or holders of at least
75% of the outstanding principal amount of the Notes (exclusive of Notes owned
by the Company, Subsidiaries and Affiliates) may annul such declaration or
automatic acceleration and its consequences if no judgment or decree has been
entered for the payment of any amount due pursuant to such declaration or
automatic acceleration and if all sums payable under the Notes and under this
Agreement (except any principal or interest on the Notes which has become
payable solely by reason of such declaration or automatic acceleration) shall
have been duly paid.
Section 5.3 Other Remedies.
If any Event of Default or Default shall occur and be continuing, the
holder of any Note may proceed to protect and enforce its rights under this
Agreement and such Note by exercising such remedies as are available to such
holder in respect thereof under applicable law, either by suit in equity or by
action at law, or both, whether for specific performance of any covenant or
other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon any
Purchaser or any other holder of any Note is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
SECTION 6. REPRESENTATIONS, COVENANTS AND WARRANTIES
The Company represents, covenants and warrants as follows:
Section 6.1 Organization, Etc.
(a) Due Organization, Foreign Qualifications, Stock Ownership. The Company
is a corporation duly organized and existing in good standing under the laws of
the State of Delaware, and is qualified to do business and is in good standing
in the States of Florida and Maryland, which are the only jurisdictions where
the ownership by it of property or the nature of the business conducted by it
makes such qualification necessary. Each Subsidiary of the Company is duly
organized and existing in good standing under the laws of the jurisdictions in
which it is incorporated. Neither the ownership by any Subsidiary of property
or the nature of the business conducted by any Subsidiary requires any
Subsidiary to be qualified to do business in any jurisdiction in which it is not
already qualified to do business. The names of the Subsidiaries of the
Company and the jurisdiction of incorporation of such is listed on Schedule
6.1(a) hereto.
(b) Power and Authority. The Company and each of its Subsidiaries has all
requisite corporate power to conduct their respective businesses as currently
conducted and as currently proposed to be conducted. The Company has all
requisite corporate power to execute, deliver and perform its obligations under
this Agreement and the Notes. The execution, delivery and performance of the
obligations of the Company under this Agreement and the Notes have been duly
authorized by all requisite corporate action on the part of the Company. The
Company has duly executed and delivered this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms subject, as to enforceability,
to applicable laws relating to bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting creditor's rights generally and
subject to general principles of equity. As of the Closing Date, the Company
shall have duly executed and delivered the Notes being issued on such Closing
Date, and such Notes shall be the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms subject,
as to enforceability, to applicable laws relating to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditor's rights
generally and subject to general principles of equity.
Section 6.2 Financial Statements.
The Company has furnished each Purchaser with the following financial
statements, identified by a principal financial officer of the Company: (i) a
consolidated balance sheet of the Company and its Subsidiaries as at December 31
in each of the years 1996 to 2001, inclusive, and consolidated statements of
income, stockholders' equity and cash flows of the Company and its Subsidiaries
for each such year, all certified on by PriceWaterhouseCoopers, L.L.P.; and (ii)
a consolidated balance sheet of the Company and its Subsidi-aries as at June 30,
2002 and consolidated statements of income, stockholders' equity and cash flows
for the six-month period ended on such date, prepared by the Company. Such
financial statements (including any related schedules and/or notes) are true and
correct in all material respects (sub-ject, as to interim statements, to changes
resulting from audits and year-end adjust-ments), have been prepared in
accordance with generally accept-ed ac-counting principles consistently followed
through-out the periods involved and show all liabili-ties, direct and
contin-gent, of the Company and its Subsidi-aries required to be shown in
accordance with such principles. The balance sheets fairly present the
condition of the Company and its Subsidiar-ies as at the dates thereof, and the
statements of income, stockholders' equity and cash flows fairly present the
results of the operations of the Company and its Subsidiaries and their cash
flows for the periods indicated. There has been no material adverse change in
the business, condition (financial or otherwise) or operations of the Company
and its Subsidiaries taken as a whole since December 31, 2001.
Section 6.3 Actions Pending.
Except as disclosed in the Company's Form 10-K, 10-Q and 8-K Reports most
recently filed with the Securities and Exchange Commission, there is no action,
suit, investigation or pro-ceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or any properties or
rights of the Company or any of its Subsidiaries, by or before any court,
arbitrator or administrative or governmental body not covered by insurance which
could reasonably be expected to result in any material adverse change in the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole.
Section 6.4 Outstanding Indebtedness.
As of the Closing Date, neither the Company nor any of its Subsidiaries has
outstanding any Indebtedness except as permitted by Section 4.6. As of the
Closing Date, there exists no default under the provisions of any instrument
evidencing such Debt or of any agree-ment relating thereto.
Section 6.5 Title to Properties.
The Company has and each of its Subsidiar-ies has good and marketable title
to its respective real properties (other than properties which it leases) and
good title to all of its other respective properties and assets, including the
properties and assets reflected in the balance sheet as of December 31, 2001
referred to in Section 6.2 (other than properties and assets disposed of in the
ordinary course of business), subject to no Lien of any kind except Liens
permitted by Section 4.8. All leases necessary in any material respect for the
conduct of the respective businesses of the Company and its Subsidiaries are
valid and subsisting and are in full force and effect.
Section 6.6 Taxes.
The Company has and each of its Subsidiaries has filed all federal, state
and other income tax returns which, to the knowledge of the officers of the
Company, are required to be filed, and each has paid all taxes as shown on such
returns and on all assess-ments received by it to the extent that such taxes
have become due, except such taxes as are being con-tested in good faith by
appropriate proceedings for which adequate reserves have been established in
accor-dance with generally accepted accounting princi-ples.
Section 6.7 Conflicting Agreements and Other Matters.
Neither the execution nor deliv-ery of this Agreement or the Notes, nor the
offering, issuance and sale of the Notes, nor fulfillment of nor compliance with
the terms and provisions hereof and of the Notes will conflict with, or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries
pursuant to, the charter or by-laws of the Company or any of its Subsidiaries,
any award of any arbitrator or any agree-ment (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries is subject. Neither
the Company nor any of its Subsidiaries is a party to, or otherwise subject to
any provision contained in, any instrument evidencing Indebt-edness of the
Company or such Subsidiary, any agreement relating thereto or any other contract
or agreement (including its charter) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Company of the type to be
evidenced by the Notes except as set forth in the agreements listed in Schedule
6.7 attached hereto.
Section 6.8 Offering of Notes.
Neither the Company nor any agent acting on its behalf has, directly or
indirectly, offered the Notes or any similar security of the Company for sale
to, or solicited any offers to buy the Notes or any similar security of the
Company from, or otherwise approached or negotiated with respect thereto with,
any Person other than institutional investors, and neither the Company nor any
agent acting on its behalf has taken or will take any action which would subject
the issuance or sale of the Notes to the provisions of Section 5 of the
Securities Act or to the provisions of any securities or Blue Sky law of any
applicable jurisdiction.
Section 6.9 ERISA.
No accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any
Pension Plan (other than a Multiemployer Plan). No liability to the Pension
Benefit Guaranty Corporation has been or is expected by the Company or any ERISA
Affiliate to be incurred with respect to any Pension Plan (other than a
Multiemployer Plan) by the Company, any Subsidiary or any ERISA Affiliate which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole.
Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred or
presently expects to incur any with-drawal liability under Title IV of ERISA
with respect to any Multiemployer Plan which is or would be materially adverse
to the business, condition (financial or otherwise) or operations of the Company
and its Subsidi-aries taken as a whole. The execution and delivery of this
Agreement and the issuance and sale of the Notes will be exempt from, or will
not involve any transaction which is subject to, the prohibitions of section 406
of ERISA and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code. The representation by the Company in the
next preceding sentence is made in reliance upon and subject to the accuracy of
each Purchaser's representation in Section 9.5.
Section 6.10 Governmental Consent.
Neither the nature of the Company or of any Subsidiary, nor any of their
respective businesses or properties, nor any relationship between the Company or
any Subsidiary and any other Person, nor any circumstance in connection with the
offering, issuance, sale or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body, including, without
limitation, the Maryland State Commission, (other than routine filings after
the date of closing with the Securities and Exchange Commission and/or state
Blue Sky authorities) in connection with the execution and delivery of this
Agreement, the offering, issuance, sale or delivery of the Notes or fulfillment
of or compliance with the terms and provisions hereof or of the Notes, other
than (a) Order No. 5989 of the Public Service Commission of the State of
Delaware entered in PSC Docket No. 02-186 dated July 9, 2002, (b) Order No.
PSC-01-2274-FOF-GU of the Florida Public Service Commission issued in Docket No.
011345-GU on November 19, 2001, (c) Order No. PSC-01-2274A-FOF-GU of the Florida
Public Service Commission issued in Docket No. 011345-GU on December 5, 2001,
and (d) Order No. PSC-02-1102-FOF-GU of the Florida Public Service Commission
issued in Docket No. 011345-GU on August 12, 2002, each of which orders have
been duly issued, are final and in full force and effect, no appeal, review or
contest of either thereof is pending and the time for appeal or to seek review
or reconsideration of either thereof has expired. The Company has delivered to
each Purchaser true and complete copies of such orders.
Section 6.11 Environmental Compliance.
Except as disclosed in the Company's Form 10-K, 10-Q and 8-K Reports most
recently filed with the SEC, the Company and its Subsidiaries and all of their
respective properties and facilities have complied at all times and in all
respects with all federal, state, local and regional statutes, laws, ordinanc-es
and judicial or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such case, where
failure to comply would not reasonably be expected to result in a material
adverse effect on the business, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole.
Section 6.12 Permits and Other Operating Rights.
The Company and each of its Subsidiaries has all such valid and sufficient
franchises, licenses, permits, operating rights, certificates of convenience and
necessity, other authorizations from federal, state, regional, municipal and
other local regulatory bodies or administrative agencies or other governmental
bodies having jurisdiction over the Company or any of its Subsidiaries or any of
its respective properties, easements and rights-of-way as are necessary for the
ownership, operation and maintenance of its respective businesses and respective
properties, subject to minor exceptions and deficiencies which do not materially
affect its business and operations considered as a whole or any material part
thereof, and neither the Company nor any of its Subsidiaries is in violation of
any thereof in any material respect.
Section 6.13 Disclosure.
Neither this Agreement nor any other document, certifi-cate or statement
furnished to any Purchaser by or on behalf of the Company in connec-tion
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the state-ments contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which materially adversely affects or in the future may (so far as
the Company can now foresee) materially adversely affect the business, property
or assets, or financial condition of the Company or any of its Subsidiaries and
which has not been set forth in this Agreement or in the other docu-ments,
certificates and statements furnished to each Purchaser by or on behalf of the
Company prior to the date hereof in connection with the transac-tions
contemplated hereby. The information concerning the effect of the potential
application of Federal Energy Regulatory Commission Order 636 to the Company and
its Subsidiaries provided to each Purchaser by the Company is reasonable based
on the assumptions stated therein and the best information available to the
officers of the Company.
Section 6.14 Regulatory Status of Company; Trust Indenture Act.
The Company is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended. The Company is not a "holding company" or a "subsidiary company" or
an "affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, and is not a "public utility" within
the meaning of the Federal Power Act, as amended. By purchasing the Notes, no
Purchaser will be (a) a "public utility company," a "holding company" or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, (b) a "transmitting utility" within the meaning of the Federal Power
Act, as amended, (c) a "public utility" or an "electric utility" under Delaware
law, Florida law, Maryland law or the law of any other state or (d) subject to
the jurisdiction of the Federal Energy Regulatory Commission, the Public Service
Commission of the State of Delaware, the Public Service Commission of the State
of Florida or any other commission or person in any other state.
SECTION 7. INTERPRETATION OF THIS AGREEMENT
Section 7.1 Terms Defined.
As used in this Agreement (including Exhibits and Schedules), the following
terms have the respective meanings set forth below or in the Section indicated.
Unless the context otherwise requires, (a) words denoting the singular number
only shall include the plural and vice versa and (b) references to a gender
shall include all genders.
Affiliate--means a Person (other than a Subsidiary) (1) which directly or
indirectly controls, or is controlled by, or is under common control with, the
Company, (2) which owns 5% or more of the Voting Stock of the Company or (3) 5%
or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is owned by the Company
or a Subsidiary. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock, by contract
or otherwise.
Agreement--means this Note Agreement dated as of October 31, 2002 between the
Company and each Purchaser (including Exhibits and Schedules), as amended or
modified from time to time.
Bonds--has the meaning specified in the First Mortgage Indenture.
Business Day--means any day other than a Saturday, a Sunday or a day on which
commercial banks in New York City are required or authorized to be closed.
Called Principal--means, with respect to any Note, the principal of such Note
that is to be prepaid pursuant to Section 2.2(a) or is declared to be due and
payable pursuant to Section 2.1(b) or 5.2(a), as the context requires.
Closing Date--Section 1.2.
Code--shall mean the Internal Revenue Code of 1986, as amended.
Company--Preamble.
Consolidated Fixed Charges--for any period, means the net amount deducted, in
determining Consolidated Net Income for such period, for interest on
Indebtedness and lease rental expense of the Company and its Subsidiaries.
Consolidated Net Earnings Available for Fixed Charges--for any period, means
Consolidated Net Income for such period plus the net amount deducted in the
determination thereof for (i) interest on Indebtedness, (ii) lease rental
expense and (iii) income taxes.
Consolidated Net Income--for any period, means the gross revenue of the Company
and its Subsidiaries determined on a consolidated basis minus all proper
expenses (including income taxes) determined on a consolidated basis for such
period, but in any event excluding:
(1) any gain or loss on the sale of Investments or fixed assets, and any
taxes on such excluded gain or loss;
(2) any proceeds from life insurance;
(3) any portion of the net earnings of any Subsidiary which for any reason
is unavailable to pay dividends to the Company or any other Subsidiary;
(4) any gain arising from any write-up or reappraisal of assets;
(5) any deferred or other credit representing the excess of equity of an
acquired Person over the amount invested by the Company and its Subsidiaries in
such Person;
(6) any gain arising from the acquisition of any Securities of the Company
or any Subsidiary;
(7) net earnings of any Person (other than a Subsidiary) in which the
Company or any Subsidiary has an ownership interest unless those net earnings
have actually been received by the Company or the Subsidiary in the form of cash
distributions or, to the extent of their fair market value, in the form of any
other freely transferable Property; and
(8) earnings of any Person accrued prior to the date it becomes a Subsidiary
or its assets are acquired by the Company or a Subsidiary.
Consolidated Net Worth--means as of any date, the sum of the amounts that
would be shown on a consolidated balance sheet of the Company and its
Subsidiaries at such date for (i) capital stock, (ii) capital surplus and (iii)
retained earnings.
Consolidated Tangible Net Worth--means as of any date Consolidated Net Worth at
such date minus the amount at which any assets other than Tangible Assets would
be shown on a consolidated balance sheet of the Company and its Subsidiaries at
such date.
Consolidated Total Assets--means as of any date the aggregate amount at which
the assets of the Company and its Subsidiaries would be shown on a consolidated
balance sheet at such date.
Current Indebtedness--with respect to any Person, means all liabilities for
borrowed money and all liabilities secured by any Lien existing on Property
owned by that Person (whether or not those liabilities have been assumed) which,
in either case, are payable on demand or within one year from their creation,
plus the aggregate amount of Guaranties by that Person of all such liabilities
of other Persons, except:
(1) any liabilities which are renewable or extendible at the option of the
debtor to a date more than one year from the date of creation thereof; and
(2) any liabilities which, although payable within one year, constitute
principal payments on indebtedness expressed to mature more than one year from
the date of its creation.
Default--means an event or condition which will, with the lapse of time or
the giving of notice or both, become an Event of Default.
Discounted Value--means, with respect to the Called Principal of any Note, the
amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
Diversification Event--Section 2.1(b).
ERISA--means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate-- shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of Section
414(b) of the Code, or any trade or business which is under common control with
the Company within the meaning of Section 414(b) of the Code.
Event of Default--Section 5.1.
Excluded Assets-- means (i) each of the following Subsidiaries or the assets of
any of the following Subsidiaries: Sharp Water, Inc.; Carroll Water Systems,
Inc.; EcoWater Systems of Michigan, Inc.; Sam Shannahan Well Co., Inc.; Absolute
Water Care, Inc.; Sharp Water of Florida, Inc.; Sharp Water of Minnesota, Inc.;
Sharp Water of Idaho, Inc.; BravePoint, Inc.; Skipjack, Inc.; Eastern Shore Real
Estate, Inc.; aQuality Company, Inc.; aquality solutions of Western Maryland,
LLC; or aquality solutions of Delmarva, LLC, and (ii) any Subsidiary that the
Company may create or acquire after the date hereof which is not (x) a "public
utility company," a "holding company" or an "affiliate" of a "holding company"
or a "subsidiary company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or (y) a "transmitting
utility" within the meaning of the Federal Power Act, as amended.
FERC--means the Federal Energy Regulatory Commission or a successor thereto.
Financing Lease--means any lease which is shown or is required to be shown in
accordance with generally accepted accounting principles as a liability on a
balance sheet of the lessee thereunder.
Financing Lease Obligation--means the obligation of the lessee under a Financing
Lease. The amount of a Financing Lease Obligation at any date is the amount at
which the lessee's liability under the Lease would be required to be shown on
its balance sheet at such date.
First Mortgage Indenture--means the Indenture dated as of December l, 1959,
between Chesapeake Utilities Corporation and Fidelity-Baltimore National Bank,
Trustee, as amended and supplemented.
Funded Indebtedness--with respect to any Person, means without duplication:
(1) its liabilities for borrowed money, other than Current Indebtedness;
(2) liabilities secured by any Lien existing on Property owned by the Person
(whether or not those liabilities have been assumed);
(3) the aggregate amount of Guaranties by the Person, other than Guaranties
which constitute Current Indebtedness; and
(4) its Financing Lease Obligations.
Guaranty--with respect to any Person, means all guaranties of, and all
other obligations which in effect guaranty, any indebtedness, dividend or other
obligation of any other Person (the "primary obligor") in any manner (except any
indebtedness or other obligation of any Subsidiary or any Funded Indebtedness of
the Company), including obligations incurred through an agreement, contingent or
otherwise, by such Person:
(1) to purchase such indebtedness or obligation or any Property constituting
security therefor;
(2) to advance or supply funds
(A) for the purchase or payment of such indebtedness or obligation, or
(B) to maintain working capital or any balance sheet or income statement
condition;
(C) to lease Property, or to purchase Securities or other Property or
services, primarily for the purpose of assuring the owner of such indebtedness
or obligation of the ability of the primary obligor to make payment of the
indebtedness or obligation; or
(D) otherwise to assure the owner of such indebtedness or obligation, or the
primary obligor, against loss;
but excluding endorsements in the ordinary course of business of negotiable
instruments for deposit or collection.
The amount of any Guaranty shall be deemed to be the maximum amount for
which such Person may be liable, upon the occurrence of any contingency or
otherwise, under or by virtue of the Guaranty.
Indebtedness--means Current Indebtedness and Funded Indebtedness.
Institutional Holder--means a "qualified institutional buyer" as defined in
Regulation 230.144A issued pursuant to the Securities Act of 1933, as amended.
Investments--Section 4.13.
Lien--means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether the interest is based
on common law, statute or contract (including the security interest lien arising
from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes). The term "Lien" shall
not include minor reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions and other minor title
exceptions affecting Property, provided that they do not constitute security for
a monetary obligation. For the purposes of this Agreement, the Company or a
Subsidiary shall be deemed to be the owner of any Property which it has acquired
or holds subject to a Financing Lease or a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes, and such retention or vesting
shall be deemed to be a Lien.
Make Whole Amount--means, with respect to any Note, an amount equal to the
excess, if any, of the Discounted Value of the Called Principal of such Note
over the sum of (i) such Called Principal plus (ii) interest accrued thereon as
of (including interest due on) the Settlement Date with respect to such Called
Principal. The Make Whole Amount shall in no event be less than zero.
Notes--Section 1.1.
Pension Plan--means any "employee pension benefit plan" (as such term is defined
in Section 3 of ERISA) maintained by the Company and its Related Persons, or in
which employees of the Company or any Related Person are entitled to
participate, as from time to time in effect.
Permitted Investments--means:
(1) Investments in any Person outstanding on the Closing Date, which are set
forth in Schedule 7.1 hereto;
(2) Investments in any Person which is or would immediately thereafter
become a Subsidiary or a division of the Company or a Subsidiary, whether by
acquisition of stock, indebtedness, other obligation or Security, or by loan,
Guaranty, advance, capital contribution, or otherwise;
(3) Investments in cash equivalent short-term investments maturing within
one year of acquisition;
(4) Investments in mutual funds which invest only in either money market
securities or direct obligations of the United States of America or any of its
agencies, or obligations fully guaranteed by the United States of America, which
mature within three years from the date acquired;
(5) Investments in related industries;
(6) Direct obligations of the United States of America or any of its
agencies, or obligations fully guaranteed by the United States of America,
provided that such obligations mature within one year from the date acquired;
(7) Negotiable certificates of deposit maturing within one year from the
date acquired and issued by a bank or trust company organized under the laws of
the United States or any of its states, and having capital, surplus and
undivided profits aggregating at least $100,000,000;
(8) commercial paper rated A-1 or better by Standard & Poor's Corporation
on the date of acquisition and maturing not more than 270 days from the date of
creation thereof; and
(9) other investments in an aggregate amount not in excess of 20% of
Consolidated Net Worth at any one time.
Person--means an individual, partnership, corporation, limited liability
company, trust or unincorporated organization, and a government or a
governmental agency or political subdivision.
Prepayment Date--Section 2.2(b).
Process Agent--Section 7.4.
Property--means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
PTCE--Section 9.5.
Purchaser--Preamble.
Purchase Money Indebtedness--means Indebtedness of the Company which is secured
by a Lien on Property of the Company which either existed at the time of the
original acquisition of the Property by the Company or was granted or retained
in connection with the acquisition or improvement of the Property by the Company
in order to facilitate the financing of such acquisition or improvement.
Reinvestment Yield--means, with respect to the Called Principal of any Note,
..50% plus the yield to maturity implied by (i) the yields reported, as of 10:00
a.m. (New York City time) on the Business Day next preceding the Settlement Date
with respect to such Called Principal, on the display designated as "Page 678"
on the Bridge Telerate Service (or such other display as may replace Page 678 on
the Bridge Telerate Service) for actively traded U.S. Treasury securities having
a maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or if such yields shall not be reported as of such time or
the yields reported as of such time shall not be ascertainable, (ii) the
Treasury Constant Maturity Series yields reported, for the latest day for which
such yields shall have been so reported as of the Business Day next preceding
the Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date.
Such implied yield shall be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between yields reported for
various maturities.
Related Person--means any Person (whether or not incorporated) which is under
common control with the Company within the meaning of Section 414(c) of the
Internal Revenue Code of 1986, as amended, or of Section 4001(b) of ERISA.
Remaining Average Life--means, with respect to the Called Principal of any Note,
the number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) each Remaining Scheduled Payment of such Called Principal (but
not of interest thereon) by (b) the number of years (calculated to the nearest
one-twelfth year) which will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
Remaining Scheduled Payments--means, with respect to the Called Principal of any
Note, all payments of such Called Principal and interest thereon that would be
due on or after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date.
Required Payment Date--Section 2.1(b).
Restricted Payments--Section 4.9.
Security--shall have the same meaning as in Section 2(1) of the Securities Act
of 1933, as amended.
Settlement Date--means, with respect to the Called Principal of any Note, the
date on which such Called Principal is to be prepaid pursuant to Section 2.2(a)
or is declared to be due and payable pursuant to Section 2.1(b) or 5.2(a), as
the context requires.
Source--Section 9.5.
State Commissions--means the Delaware, Florida and Maryland public utilities
commissions or other bodies which regulate the rates of the Company or its
Subsidiaries as a natural gas distribution company or otherwise.
Subsidiary--means any corporation organized under the laws of any State of the
United States of America, which conducts the major portion of its business in
and makes the major portion of its sales to Persons located in the United States
of America, and not less than 80% of the total combined voting power of all
classes of Voting Stock, and 80% of all other equity securities, of which shall,
at the time as of which any determination is being made, be owned by the Company
either directly or through Subsidiaries.
Subsidiary Stock--Section 4.10.
Tangible Assets--means all assets except:
(1) deferred assets, other than prepaid insurance and prepaid taxes;
(2) patents, copyrights, trademarks, trade names, franchises, good will,
experimental expense and other similar intangibles;
(3) treasury stock;
(4) unamortized debt discount and expense; and
(5) assets located and notes and receivables due from obligors domiciled
outside the United States of America or Canada.
Total Capitalization--means at any date, the aggregate amount at that date,
as determined on a consolidated basis, of the Funded Indebtedness of the Company
and its Subsidiaries, plus Consolidated Net Worth.
Voting Stock--means Securities, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect the corporate directors (or Persons
performing similar functions).
Wholly-Owned Subsidiary--means any Subsidiary whose financial results are
consolidated with the financial results of the Company, and all of the equity
Securities of which (except director's qualifying shares) are owned by the
Company and/or one or more Wholly-Owned Consolidated Subsidiaries of the
Company.
Section 7.2 Accounting Principles.
The character or amount of any asset or liability or item of income or
expense required to be determined under this Agreement and each consolidation or
other accounting computation required to be made under this Agreement, shall be
determined or made in accordance with generally accepted accounting principles
at the time in effect, to the extent applicable, except where such principles
are inconsistent with the requirements of this Agreement.
Section 7.3 Directly or Indirectly.
Where any provision in this Agreement refers to any action which any Person
is prohibited from taking, the provision shall be applicable whether the action
is taken directly or indirectly by such Person, including actions taken by, or
on behalf of, any partnership in which such Person is a general partner and all
liabilities of such partnerships shall be considered liabilities of such Person
under this Agreement.
Section 7.4 Governing Law; Consent to Jurisdiction.
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York.
The Company irrevocably agrees that any legal action or proceeding with respect
to this Agreement or the Notes may be brought in the courts of the State of New
York or any court of the United States of America located in the State of New
York, and, by execution and delivery of this Agreement, the Company accepts for
itself, generally and unconditionally, and agrees to submit to the jurisdiction
of each of the above-mentioned courts and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or later have based on
venue or forum non conveniens with respect to any action instituted therein.
The Company hereby irrevocably appoints Corporation Service Company (the
"Process Agent"), with an office on the date hereof at 80 State Street, 6th
Floor, Albany, New York 12207-2543, United States, as its agent to receive, on
the Company's behalf and on behalf of the Company's property, service of copies
of the summons and complaint and any other process which may be served in any
such action or proceeding. Such service may be made by mailing or delivering a
copy of such process to the Company in care of the Process Agent at the Process
Agent's above address, and the Company hereby irrevocably authorizes and directs
the Process Agent to accept such service on its behalf.
SECTION 8. PURCHASERS' SPECIAL RIGHTS
Section 8.1 Note Payment.
The Company agrees that, so long as any Purchaser shall hold any Note, it
will make payments of principal of, interest on and any Make Whole Amount
payable with respect to such Note, which comply with the terms of this
Agreement, by wire transfer of immediately available funds for credit (not later
than 12:00 noon, New York City time, on the date due) to the account or accounts
as specified in the Purchaser Schedule attached hereto or such other account or
accounts in the United States as any Purchaser may designate in writing,
notwithstanding any contrary provision herein or in any Note with respect to the
place of payment. Each Purchaser agrees that, before disposing of any Note,
such Purchaser will make a notation thereon (or on a schedule attached thereto)
of all principal payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to afford the benefits of
this paragraph 8.1 to any transferee of any Note which shall have made the same
agreement as made in this paragraph 8.1.
Section 8.2 Issue Taxes.
The Company will pay all issuance, stamp and similar taxes in connection
with the issuance and sale of the Notes and in connection with any modification
of the Notes and will save each Purchaser harmless against any and all
liabilities relating to such taxes. The obligations of the Company under this
Section 8.2 shall survive the payment of the Notes and the termination of this
Agreement.
Section 8.3 Registration of Notes.
The Company will cause to be kept a register for the registration and
transfer of the Notes. The names and addresses of the holders of the Notes, and
all transfers of and the names and addresses of the transferees of any of the
Notes, will be registered in the register. The Person in whose name any Note is
registered shall be deemed and treated as the owner thereof for all purposes of
this Agreement, and the Company shall not be affected by any notice or knowledge
to the contrary.
Section 8.4 Exchange of Notes.
Upon surrender of any Note to the Company, the Company, upon request, will
execute and deliver at its expense (except as provided below), new Notes, in
denominations of at least $1,000,000 (or, if less, the outstanding principal
amount of the surrendered Note), in an aggregate principal amount equal to the
outstanding principal amount of the surrendered Note. Each new Note (a) shall
be payable to any Person as the surrendering holder may request and (b) shall be
dated and bear interest from the date to which interest has been paid on the
surrendered Note or dated the date of the surrendered Note if no interest has
been paid thereon. The Company may require payment of a sum sufficient to cover
any stamp tax or governmental charge imposed in respect of any transfer.
Section 8.5 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it
(provided that if the holder of the Note is an Institutional Holder, its own
certification shall be deemed to be satisfactory evidence) of the ownership of
and the loss, theft, destruction or mutilation of any Note and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of the Note is an Institutional
Holder, its own agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation of the Note,
the Company at its expense will execute and deliver a new Note, dated and
bearing interest from the date to which interest has been paid on the lost,
stolen, destroyed or mutilated Note or dated the date of the lost, stolen,
destroyed or mutilated Note if no interest has been paid thereon.
SECTION 9. MISCELLANEOUS
Section 9.1 Notices.
(a) All notices, requests, demands or other communications under this
Agreement or under the Notes will be in writing and will be given by telecopy,
telex, first class registered or certified mail (postage prepaid) or personal
delivery:
(i) if to any holder of any Note, in the manner provided in the Purchaser
Schedule or in any other manner as such holder may have most recently advised
the Company in writing, or
(ii) if to the Company, at its address shown at the beginning of this
Agreement, or at any other address as it may have most recently furnished in
writing to each Purchaser and to all other holders of the Notes.
(b) Notice shall be deemed to be given upon the receipt thereof at the
notice address specified.
Section 9.2 Payments Due on Non-Business Days.
Anything in this Agreement or the Note to the contrary notwithstanding, any
payment of principal of or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day.
Section 9.3 Reproduction of Documents.
This Agreement and all related documents, including (a) consents, waivers
and modifications which may subsequently be executed, (b) documents received by
each Purchaser at the closing of each Purchaser's purchase of the Notes (except
the Notes themselves), and (c) financial statements, certificates and other
information previously or subsequently furnished to any Purchaser, may be
reproduced by any Purchaser by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process and any Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction shall, to the extent permitted by
applicable law, be admissible in evidence as the original itself in any judicial
or administrative proceeding (whether or not the original is in existence and
whether or not the reproduction was made by any Purchaser in the regular course
of business) and that any enlargement, facsimile or further reproduction of the
reproduction shall likewise be admissible in evidence.
Section 9.4 Purchase for Investment.
Each Purchaser represents to the Company that such Purchaser is purchasing
the Notes for its own account for investment or for resale under Rule 144A under
the Securities Act of 1933, as amended, and with no present intention of
distributing or reselling any of the Notes, but without prejudice to such
Purchaser's right at all times to sell or otherwise dispose of all or part of
the Notes under an effective registration statement under the Securities Act of
1933, as amended, or under a registration exemption available under that Act.
Section 9.5 Source of Funds.
Each Purchaser represents to the Company that at least one of the following
statements is an accurate representation as to each source of funds (a "Source")
to be used by such Purchaser to pay the purchase price of the Notes to be
purchased by it hereunder: (i) the Source is the "insurance company general
account" of such Purchaser (as such term is defined under Section V of the
United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Notes such Purchaser
satisfies all of the applicable requirements for relief under Sections I and IV
of PTCE 95-60; (ii) the Source is a separate account maintained by such
Purchaser in which no employee benefit plan, other than employee benefit plans
identified on a list which has been furnished by such Purchaser to the Company,
participates to the extent of 10% or more; (iii) the Source is one or more
employee benefit plans, or a separate account or trust fund comprised of one or
more employee benefit plans, each of which has been identified to the Company in
writing pursuant to this clause (iii); or (iv) the Source does not include
assets of any employee benefit plan, other than a plan exempt from the coverage
of ERISA. For the purpose of this Section 9.5, the terms "separate account" and
"employee benefit plan" shall have the respective meanings specified in Section
3 of ERISA.
Section 9.6 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties except that each Purchaser's
obligations to purchase the Notes (as provided in Section 1.2) shall be a right
which is personal to the Company and such right shall not be transferable or
assignable by the Company to any other Person (including successors at law)
whether voluntarily or involuntarily. The provisions of this Agreement are
intended to be for the benefit of all holders, from time to time, of the Notes,
and shall be enforceable by any holder, whether or not an express assignment of
rights under this Agreement has been made by any Purchaser or any Purchaser's
successor or assign.
Section 9.7 Amendment and Waiver; Acquisition of Notes.
(a) Amendment and Waiver. This Agreement may be amended, and the observance
of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the holders of at least 66-2/3% of the
outstanding principal amount of the Notes (exclusive of Notes then owned by the
Company, Subsidiaries and Affiliates), provided that no amendment or waiver of
any of the provisions of Sections 1, 6 and 8 shall be effective as to any holder
of the Notes unless consented to by such holder in writing, and provided
further, that no amendment or waiver shall, without the written consent of the
holders of all the outstanding Notes, (1) subject to Section 5.2(b), change the
amount or time of any prepayment, payment of principal or premium or the rate or
time of payment of interest, (2) amend Section 5, or (3) amend this Section
9.7(a). Executed or complete and correct copies of any amendment or waiver
effected pursuant to the provisions of this Section 9.7(a) shall be delivered by
the Company to each holder of outstanding Notes promptly following the date on
which the same shall become effective.
(b) Acquisition of Notes. Neither the Company nor any Subsidiary, nor any
Affiliate will, directly or indirectly, acquire or make any offer to acquire any
Notes unless the Company or such Subsidiary or Affiliate shall contemporaneously
offer to acquire Notes, pro rata, from all holders of the Notes and upon the
same terms. Any Notes acquired by the Company, any Subsidiary or any Affiliate
shall not be considered outstanding for any purpose under this Agreement.
Section 9.8 Duplicate Originals.
Two or more duplicate originals of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
If this Agreement is satisfactory to each Purchaser, please so indicate by
signing the acceptance at the foot of a counterpart of this Agreement and return
a counterpart to the Company, whereupon this Agreement will become binding
between us in accordance with its terms.
Very truly yours,
CHESAPEAKE UTILITIES CORPORATION
By: ________________________
Name: ________________________
Title: _______________________
Accepted:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: David L. Babson & Company Inc., as Investment Advisor
By: ________________________
Name: ________________________
Title: ________________________
C.M. LIFE INSURANCE COMPANY
By: David L. Babson & Company Inc., as Investment Advisor
By:_ _______________________
Name: ________________________
Title: ________________________
AMERICAN UNITED LIFE INSURANCE COMPANY
By: ________________________
Name: ________________________
Title: ________________________
PIONEER MUTUAL LIFE INSURANCE COMPANY
By: ________________________
Name: ________________________
Title: ________________________
THE STATE LIFE INSURANCE COMPANY
By: ________________________
Name: ________________________
Title: ________________________
PURCHASER SCHEDULE
Aggregate
Principal Amount
MASSACHUSETTS MUTUAL LIFE of Notes to be Note
INSURANCE COMPANY Purchased Denomination(s)
(1) All payments on account of Notes. . . . . . . . . . . . $ 8,300,000 $ 8,300,000
held by such purchaser shall be made
by crediting in the form of bank wire
transfer of Federal or other
immediately available funds,
(identifying each payment as "6.64%
Senior Notes due October 31, 2017,
PPN 165303 D* 6", interest and
principal), to: interest and principal),
to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA # 021000089
For MassMutual Long-Term Pool
Account No. 4067-3488
Re: Description of security, principal and interest split
With telephone advice of payment to
the Securities Custody and Collection
Department of David L. Babson &
Company Inc. at (413)226-1889 or
(413)226-1803
(2) Address for all notices relating to payments:
Massachusetts Mutual Life Insurance Company
C/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attention: Securities Custody and Collection Department
(3) Address for all other communications and notices:
Massachusetts Mutual Life Insurance Company
C/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attn: Securities Investment Division
(4) Tax Id. No.: 04-1590850
PURCHASER SCHEDULE
Aggregate
Principal Amount
MASSACHUSETTS MUTUAL LIFE of Notes to be Note
INSURANCE COMPANY Purchased Denomination(s)
(1) All payments on account of Notes shall be. . . . . . . $ 4,600,000 $ 4,600,000
made by crediting in the form of bank wire
transfer of Federal or other immediately
available funds, (identifying each payment as
"6.64% Senior Notes due October 31, 2017,
PPN 165303 D* 6", interest and principal), to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA # 021000089
For MassMutual Spot Priced Contract
Account No. 3890-4953
Re: Description of security, principal and interest split
With telephone advice of payment to
the Securities Custody and Collection
Department of David L. Babson &
Company Inc. at (413)226-1807 or
(413)226-1839
(2) Address for all notices relating to payments:
Massachusetts Mutual Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attention: Securities Custody and Collection Department
(3) Address for all other communications and notices:
Massachusetts Mutual Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attn: Securities Investment Division
(4) Tax Id. No.: 04-1590850
PURCHASER SCHEDULE
Aggregate
Principal Amount
MASSACHUSETTS MUTUAL LIFE of Notes to be Note
INSURANCE COMPANY Purchased Denomination(s)
(1) All payments on account of Notes shall be. . . . . . . $ 4,400,000 $ 4,400,000
made by crediting in the form of bank wire
transfer of Federal or other immediately
available funds, (identifying each payment as
"6.64% Senior Notes due October 31, 2017,
PPN 165303 D* 6", interest and principal), to:
JPMorgan Chase Bank
4 Chase Metro Tech Center
New York, NY 10081
ABA # 021000021
For MassMutual Pension Management
Acct # 910-2594018
Re: Description of security, principal and interest split
With telephone advice of payment to
the Securities Custody and Collection
Department of David L. Babson &
Company Inc. at (413)226-1803 or
(413)226-1839
(2) Address for all notices relating to payments:
Massachusetts Mutual Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attention: Securities Custody and Collection Department
(3) Address for all other communications and notices:
Massachusetts Mutual Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attn: Securities Investment Division
(4) Tax Id. No.: 04-1590850
PURCHASER SCHEDULE
Aggregate
Principal Amount
MASSACHUSETTS MUTUAL LIFE of Notes to be Note
INSURANCE COMPANY Purchased Denomination(s)
(1) All payments on account of Notes shall be. . . . . . . $ 1,300,000 $ 1,300,000
made by crediting in the form of bank wire
transfer of Federal or other immediately
available funds, (identifying each payment as
"6.64% Senior Notes due October 31, 2017,
PPN 165303 D* 6", interest and principal), to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA # 021000089
For MassMutual Structured Settlement Fund
Acct # 4065-5423
Re: Description of security, principal and interest split
With telephone advice of payment to
the Securities Custody and Collection
Department of David L. Babson &
Company Inc. at (413)226-1807 or
(413)226-1839
(2) Address for all notices relating to payments:
Massachusetts Mutual Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attention: Securities Custody and Collection Department
(3) Address for all other communications and notices:
Massachusetts Mutual Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attn: Securities Investment Division
(4) Tax Id. No.: 04-1590850
PURCHASER SCHEDULE
Aggregate
Principal Amount
of Notes to be Note
C.M. LIFE INSURANCE COMPANY Purchased Denomination(s)
(1) All payments on account of Notes shall be. . . . . . . $ 3,400,000 $ 3,400,000
made by crediting in the form of bank wire
transfer of Federal or other immediately
available funds, (identifying each payment as
"6.64% Senior Notes due October 31, 2017,
PPN 165303 D* 6", interest and principal), to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA # 021000089
For Segment 43 - Universal Life
Acct # 4068-6561
Re: Description of security, principal and interest split
With telephone advice of payment to
the Securities Custody and Collection
Department of David L. Babson &
Company Inc. at (413)226-1839 or
(413)226-1803
(2) Address for all notices relating to payments:
C.M. Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attention: Securities Custody and Collection Department
(3) Address for all other communications and notices:
C.M. Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, MA 01115
Attn: Securities Investment Division
(4) Tax Id. No.: 06-1041383
PURCHASER SCHEDULE
Aggregate
Principal Amount
of Notes to be Note
AMERICAN UNITED LIFE INSURANCE COMPANY Purchased Denomination(s)
(1) All payments on account of Notes held by such . . $ 7,000,000 $ 7,000,000
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Bank of New York
One Wall Street, 3rd Floor
Window A
New York, New York 10286
Attn: P&I Department
ABA # 021000018
BNF: IOC566
Each such wire transfer shall set forth the name
of the Company, a reference to "6.64% Senior
Notes due October 31, 2017, PPN 165303 D*
6", and the due date and application (as among
principal, interest and Make Whole Amount) of
the payment being made.
(2) Address for all notices relating to payments:
American United Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attention: Christopher D. Pahlke, Securities
Department
Phone: 317-285-1485
Fax: 317-285-7580
(3) Address for all other communications and notices:
American United Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attention: Christopher D. Pahlke, Securities
Department
Phone: 317-285-1485
Fax: 317-285-7580
(4) Tax Id. No.: 35-0145825
PURCHASER SCHEDULE
Aggregate
Principal Amount
PIONEER MUTUAL LIFE INSURANCE of Notes to be Note
COMPANY Purchased Denomination(s)
(1) All payments on account of Notes held by such . . $ 500,000 $ 500,000
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Bank of New York
One Wall Street, 3rd Floor
Window A
New York, New York 10286
Attn: P&I Department
ABA # 021000018
BNF: IOC566
Pioneer Mutual Life, c/o American United Life
Each such wire transfer shall set forth the name
of the Company, a reference to "6.64% Senior
Notes due October 31, 2017, PPN 165303 D*
6", and the due date and application (as among
principal, interest and Make Whole Amount) of
the payment being made.
(2) Address for all notices relating to payments:
Pioneer Mutual Life Insurance Company
c/o American United Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attention: Christopher D. Pahlke, Securities
Department
Phone: 317-285-1485
Fax: 317-285-7580
(3) Address for all other communications and notices:
Pioneer Mutual Life Insurance Company
c/o American United Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attention: Christopher D. Pahlke, Securities
Department
Phone: 317-285-1485
Fax: 317-285-7580
(4) Tax Id. No.: 45-0220640
PURCHASER SCHEDULE
Aggregate
Principal Amount
of Notes to be Note
THE STATE LIFE INSURANCE COMPANY Purchased Denomination(s)
(1) All payments on account of Notes held by such . . $ 500,000 $ 500,000
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Bank of New York
One Wall Street, 3rd Floor
Window A
New York, New York 10286
Attn: P&I Department
ABA # 021000018
BNF: IOC566
State Life, c/o American United Life
Each such wire transfer shall set forth the name
of the Company, a reference to "6.64% Senior
Notes due October 31, 2017, PPN 165303 D*
6", and the due date and application (as among
principal, interest and Make Whole Amount) of
the payment being made.
(2) Address for all notices relating to payments:
The State Life Insurance Company
c/o American United Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attention: Christopher D. Pahlke, Securities
Department
Phone: 317-285-1485
Fax: 317-285-7580
(3) Address for all other communications and notices:
The State Life Insurance Company
c/o American United Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attention: Christopher D. Pahlke, Securities
Department
Phone: 317-285-1485
Fax: 317-285-7580
(4) Tax Id. No.: 35-0684263
EXHIBIT A
[FORM OF NOTE]
CHESAPEAKE UTILITIES CORPORATION
6.64% Senior Note due October 31, 2017
No. R-____ PPN 165303 D* 6
$__________ [Date]
CHESAPEAKE UTILITIES CORPORATION, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to ______________
or registered assigns the principal sum of __________ Dollars ($ )
on October 31, 2017; and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal balance hereof from the date of this Note at the rate of
6.64% per annum, semi-annually on the last day of April and October in each
year, commencing on April 30, 2003 until the principal amount hereof shall
become due and payable; and to pay on demand interest on any overdue principal
(including any overdue prepayment of principal) and premium, if any, and (to the
extent permitted by applicable law) on any overdue payment of interest, at a
rate per annum from time to time equal to the greater of (i) 8.64% or (ii) the
rate of interest publicly announced by Morgan Guaranty Trust Company of New York
from time to time in New York City as its Prime Rate.
Payments of principal, premium, if any, and interest shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts by check mailed and addressed
to the registered holder hereof at the address shown in the register maintained
by the Company for such purpose, or, at the option of the holder hereof, in such
manner and at such other place in the United States of America as the holder
hereof shall have designated to the Company in writing.
This Note is one of an issue of Notes of the Company issued in an aggregate
principal amount limited to $30,000,000 pursuant to the Company's Note Agreement
dated as of October 31, 2002 between the Company and the respective Purchasers
named therein and is entitled to the benefits thereof. As provided in such
Agreement, this Note is subject to prepayment, in whole or in part, with a
premium as specified in said Agreement. The Company agrees to make required
payments on account of said Notes in accordance with the provisions of said
Agreement.
This Note is a registered Note and is transferable only by surrender hereof at
the principal office of the Company in Dover, Delaware, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of this Note or his attorney duly authorized in writing.
Under certain circumstances, as specified in said Agreement, the principal of
this Note may be declared due and payable in the manner and with the effect
provided in said Agreement.
This Note and said Agreement are governed by and construed in accordance with
New York law.
CHESAPEAKE UTILITIES CORPORATION
(CORPORATE SEAL) By: ________________________
Name: ________________________
Title: ________________________
EXHIBIT B-1
-----------
[COVINGTON & BURLING]
October 31, 2002
Massachusetts Mutual Life Insurance Company
C.M. Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, Massachusetts 01115
Attn: Securities Investment Division
American United Life Insurance Company
The State Life Insurance Company
Pioneer Mutual Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attn: Christopher D. Pahlke, Securities Department
Ladies and Gentlemen:
We have acted as special counsel for Chesapeake Utilities Corporation (the
"Company") in connection with the Note Agreement, dated as of October 31, 2002,
between the Company and each of you (the "Note Agreement"), pursuant to which
the Company has issued to each of you today 6.64% Senior Notes due October 31,
2017 of the Company in the aggregate principal amount of $30,000,000. All terms
used herein that are defined in the Note Agreement have the respective meanings
specified in the Note Agreement. This letter is being delivered to each of you
in satisfaction of the condition set forth in Section 1.4(c) of the Note
Agreement and with the understanding that each of you is purchasing the Notes in
reliance on the opinions expressed herein.
In rendering our opinion, we have relied, to the extent that we deem necessary
and proper, as to factual matters only, on the warranties and representations
contained in the Note Agreement and a certificate of an officer of the Company
indicating that the Company has complied with certain financial ratios mandated
by the agreements listed in Schedule 6.7 to the Note Agreement. We have also
examined and relied upon such other certificates of officers of the Company,
certificates of public officials, and copies certified to our satisfaction of
corporate documents and records of the Company and of other papers, and have
made such other investigations, as we have deemed relevant and necessary as a
basis for our opinion hereinafter set forth. With respect to the opinion
expressed in paragraph c below, we have also relied upon the representation made
by each of you in Section 9.4 of the Note Agreement. We have assumed the
genuineness of all signatures (except those of the Company) and conformity to
original documents of all documents furnished to us as originals or photostatic
copies. We have also assumed the power and authority of, the due execution and
delivery by, and the enforceability of the Note Agreement against, each party to
the Note Agreement other than the Company. As to certain matters of Delaware
law, including the corporate power of the Company, we have relied upon the
opinion letter of even date herewith given to each of you by Parkowski & Guerke.
Our factual inquiry has been limited to the actions and inquiries expressly
described in this paragraph, and we have not conducted any independent inquiry,
beyond that identified above, to verify such matters.
We are attorneys licensed to practice in the District of Columbia and the
Federal courts and agencies of the United States of America. We express no
opinion as to the laws of any jurisdiction other than the federal laws of the
United States of America, the laws of the District of Columbia and the General
Corporation Law of the State of Delaware. Without limitation of the foregoing,
we note that the Note Agreement is governed by the laws of the State of New
York, and with the consent of each of you, we have assumed for purposes of this
opinion that those laws do not differ in any material respect from the laws of
the District of Columbia.
Based on the foregoing, it is our opinion that:
a. The Company is a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware. The Company has the corporate
power and authority to execute, deliver and perform its obligations under
the Note Agreement and the Notes and to carry on the business as now being
conducted. The Company is qualified to do business and is in good standing
under the laws of the States of Maryland and Florida, which are the only
jurisdictions where the ownership of property or the nature of the business
conducted by it makes such qualification necessary.
b. The Note Agreement and the Notes have been duly authorized by all
requisite corporate action and duly executed and delivered by authorized
officers of the Company and constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms
except as enforcement of such terms may be limited by laws governing bankruptcy,
reorganization, moratorium, or insolvency or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
c. It is not necessary in connection with the offering, issuance, sale and
delivery of the Notes under the circumstances contemplated by the Agreement to
register the Notes under the Securities Act or to qualify an indenture in
respect of the Notes under the Trust Indenture Act of 1939, as amended.
d. The extension, arranging and obtaining of the credit represented by the
Notes do not result in any violation of Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
e. The execution and delivery of the Note Agreement and the Notes, the
offering, issuance and sale of the Notes and fulfillment of and compliance with
the respective provisions of the Note Agreement and the Notes do not conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company
pursuant to, or require any authorization, consent, approval, exemption or other
action by or notice to or filing with any court, administrative or governmental
body (other than the Delaware and Florida State Commissions and routine filings
after the date hereof with the Securities and Exchange Commission and/or State
Blue Sky authorities) or other Person pursuant to, the charter or by-laws of the
Company, any applicable law (including any securities or Blue Sky law), statute,
rule or regulation or (insofar as is known to us after having made due inquiry
with respect thereto) order, judgment or decree to which the Company is subject,
or any of the agreements listed on Schedule 6.7 to the Note Agreement or the
terms of the 8.25% Convertible Debentures due March 1, 2014.
Our opinions may not be relied upon by any person or entity other than each
of you, transferees of each of you, prospective transferees (other than pursuant
to a public offering) and Schiff Hardin & Waite your special counsel in
connection with the matters referred to herein, and except with respect to
regulatory authorities exercising jurisdiction over any of you (which shall be
deemed to include the National Association of Insurance Commissioners), this
opinion may not be disclosed to any other person without our prior written
consent.
Very truly yours,
COVINGTON & BURLING
EXHIBIT B-2
-----------
[PARKOWSKI & GUERKE]
October 31, 2002
Massachusetts Mutual Life Insurance Company
C.M. Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, Massachusetts 01115
Attn: Securities Investment Division
American United Life Insurance Company
The State Life Insurance Company
Pioneer Mutual Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attn: Christopher D. Pahlke, Securities Department
Ladies and Gentlemen:
We have acted as special Delaware counsel for Chesapeake Utilities
Corporation (the "Company") in connection with the Note Agreement, dated as of
October 31, 2002, between the Company and each of you (the "Note Agreement"),
pursuant to which the Company has issued to each of you today 6.64% Senior Notes
due October 31, 2017 of the Company in the aggregate principal amount of
$30,000,000. All terms used herein that are defined in the Note Agreement have
the respective meanings specified in the Note Agreement. This letter is being
delivered to each of you in satisfaction of the condition set forth in Section
1.4(c) of the Note Agreement and with the understanding that each of you is
purchasing the Notes in reliance on the opinions expressed herein.
In this connection, we have examined such certificates of public officials,
certificates of officers of the Company and copies certified to our satisfaction
of corporate documents and records of the Company and of other papers, and have
made such other investigations, as we have deemed relevant and necessary as a
basis for our opinion hereinafter set forth. We have relied upon such
certificates of public officials and of officers of the Company with respect to
the accuracy of material factual matters contained therein which were not
independently established. With respect to the opinion expressed in paragraph 3
below, we have also relied upon the representations made by each of you in
Sections 9.4 and 9.5 of the Note Agreement.
Based on the foregoing, it is our opinion that:
a. The Company is a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware. The Company has the corporate
power and authority to execute, deliver and perform its obligations under
the Note Agreement and the Notes and to carry on the business as now being
conducted.
b. The Note Agreement and the Notes have been fully authorized by all
requisite corporate action.
c. The execution and delivery of the Note Agreement and the Notes, the
offering, issuance and sale of the Notes and fulfillment of and compliance with
the respective provisions of the Note Agreement and the Notes will not require
any authorization, consent, approval, exemption or other action by or notice to
or filing with any court, administrative or governmental body (other than the
State of Delaware Public Service Commission and routine filings after the date
hereof with the Securities and Exchange Commission and/or State Blue Sky
authorities) pursuant to, any applicable law (including any securities or Blue
Sky law), statute, rule or regulation of the State of Delaware. The Public
Service Commission of the State of Delaware has duly entered Order No. 5989 in
PSC Docket No. 02-186 dated July 9, 2002, such Order is final and in full force
and effect, no appeal, review or contest thereof is pending, and no further
action by the Public Service Commission of the State of Delaware is a
requirement to execution and delivery of the Note Agreement or the Notes or the
offering, issuance or sale of the Notes or the fulfillment of compliance with
the requisite provisions of the Note Agreement and the Notes.
Our opinions may not be relied upon by any person or entity other than each
of you, transferees of each of you and Schiff Hardin & Waite, your special
counsel, in connection with the matters referred to herein.
Our opinions are limited to the laws of the State of Delaware.
Sincerely yours,
PARKOWSKI & GUERKE
BY: ________________________
William A. Denman, Esq.
EXHIBIT B-3
-----------
[PIPER RUDNICK LLP]
October 31, 2002
Massachusetts Mutual Life Insurance Company
C.M. Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, Massachusetts 01115
Attn: Securities Investment Division
American United Life Insurance Company
The State Life Insurance Company
Pioneer Mutual Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attn: Christopher D. Pahlke, Securities Department
Ladies and Gentlemen:
We have acted as special Maryland regulatory counsel for Chesapeake
Utilities Corporation (the "Company") in connection with the Note Agreement,
dated as of October 31, 2002, between the Company and each of you (the "Note
Agreement"), pursuant to which the Company has issued to each of you today 6.64%
Senior Notes due October 31, 2017 of the Company in the aggregate principal
amount of $30,000,000. All terms used herein that are defined in the Note
Agreement have the respective meanings specified in the Note Agreement. This
letter is being delivered to each of you with the understanding that each of you
is purchasing the Notes in reliance on the opinions expressed herein.
Based on the foregoing and assuming approval of the subject transaction by the
Delaware Public Service Commission in PSC Docket No. 02-186, it is our opinion
that:
The execution and delivery of the Note Agreement and the Notes, the offering,
issuance and sale of the Notes and fulfillment of and compliance with the
respective provisions of the Note Agreement and the Notes do not require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any Maryland state administrative or governmental body, including,
without limitation, the Public Service Commission of Maryland, pursuant to any
applicable law (including any securities or Blue Sky law), statute, rule,
regulation or other requirement of the State of Maryland.
Our opinion may not be relied upon by any person or entity other than each of
you, transferees of each of you and Schiff Hardin & Waite your special counsel
in connection with the matters referred to herein.
Very truly yours,
EXHIBIT B-4
-----------
[ROSE, SUNDSTROM & BENTLEY, LLP]
October 31, 2002
Massachusetts Mutual Life Insurance Company
C.M. Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, Massachusetts 01115
Attn: Securities Investment Division
American United Life Insurance Company
The State Life Insurance Company
Pioneer Mutual Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attn: Christopher D. Pahlke, Securities Department
Ladies and Gentlemen:
We have acted as special Florida counsel for Chesapeake Utilities
Corporation (the "Company") in connection with the Note Agreement, dated as of
October 31, 2002, between the Company and each of you (the "Note Agreement"),
pursuant to which the Company has issued to each of you today 6.64% Senior Notes
due October 31, 2017 of the Company in the aggregate principal amount of
$30,000,000. All terms used herein that are defined in the Note Agreement have
the respective meanings specified in the Note Agreement. This letter is being
delivered to each of you in satisfaction of the condition set forth in Section
1.4(c) of the Note Agreement and with the understanding that each of you is
purchasing the Notes in reliance on the opinions expressed herein.
In this connection, we have examined such certificates of public officials,
certificates of officers of the Company and copies certified to our satisfaction
of corporate documents and records of the Company and of other papers, and have
made such other investigations, as we have deemed relevant and necessary as a
basis for our opinion hereinafter set forth. We have relied upon such
certificates of public officials and of officers of the Company with respect to
the accuracy of material factual matters contained therein which were not
independently established.
Based on the foregoing, it is our opinion that:
a. The Company is qualified to do business and is in good standing under the
laws of the State of Florida.
b. The execution and delivery of the Note Agreement and the Notes, the
issuance and sale of the Notes and fulfillment of and compliance with the
respective provisions of the Note Agreement and the Notes will not require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court, administrative or governmental body (other than the
Public Service Commission of the State of Florida) pursuant to any applicable
law, statute, rule or regulation of the State of Florida. The Public Service
Commission of the State of Florida has duly entered Order Nos.
PSC-01-2274-FOF-GU, PSC-01-2274A-FOF-GU and PSC-02-1102-FOF-GU in Docket No.
011345-GU dated November 19, 2001, December 5, 2001, and August 12, 2002,
respectively, which orders are final and in full force and effect, no appeal,
review or contest thereof is pending and the time for appeal or to seek review
or reconsideration thereof has expired and no further action by the Public
Service Commission of the State of Florida is a requirement to execution and
delivery of the Note Agreement or the Notes or the issuance or sale of the Notes
or the fulfillment of compliance with the requisite provisions of the Note
Agreement and the Notes.
Our opinion may not be relied upon by any person or entity other than each
of you, transferees of each of you and Schiff Hardin & Waite your special
counsel in connection with the matters referred to herein.
Our opinion is limited to the laws of the State of Florida.
Sincerely,
EXHIBIT B-5
-----------
[LAWS & ROBERTSON, P.A.]
October 31, 2002
Massachusetts Mutual Life Insurance Company
C.M. Life Insurance Company
c/o David L. Babson & Company Inc.
1500 Main Street, Suite 800
Springfield, Massachusetts 01115
Attn: Securities Investment Division
American United Life Insurance Company
The State Life Insurance Company
Pioneer Mutual Life Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46204
Attn: Christopher D. Pahlke, Securities Department
Ladies and Gentlemen:
We have acted as special Maryland counsel for Chesapeake Utilities
Corporation (the "Company") in connection with the Note Agreement, dated as of
October 31, 2002, between the Company and each of you (the "Note Agreement"),
pursuant to which the Company has issued to each of you today 6.64% Senior Notes
due October 31, 2017, of the Company in the aggregate principal amount of
$30,000,000. All terms used herein that are defined in the Note Agreement have
the respective meanings specified in the Note Agreement. This letter is being
delivered to each of you in satisfaction of the condition set forth in Section
1.4(c) of the Note Agreement and with the understanding that each of you is
purchasing the Notes in reliance on the opinions expressed herein.
In this connection, we have examined such certificates of public officials,
certificates of officers of the Company and copies certified to our satisfaction
of corporate documents and records of the Company and of other papers, and have
made such other investigations, as we have deemed relevant and necessary as a
basis for our opinion hereinafter set forth. We have relied upon such
certificates of public officials and of officers of the Company with respect to
the accuracy of material factual matters contained therein which were not
independently established.
Based on the foregoing, it is our opinion that:
a. The Company is qualified to do business and is in good standing in the
State of Maryland.
b. The execution and delivery of the Note Agreement and the Notes, the
offering, issuance and sale of the Notes and fulfillment of and compliance with
the respective provisions of the Note Agreement and the Notes will not require
any authorization, consent, approval, exemption or other action by or notice to
or filing with any court, administrative or governmental body (other than
routine filings after the date hereof with the Securities and Exchange
Commission and/or State Blue Sky authorities) pursuant to any applicable law
(including any securities or Blue Sky law), statute, rule or regulation of the
State of Maryland, except that this opinion expresses no opinion about any
authorization, consent, approval, exemption or other action by or notice to or
filing with the Maryland Public Service Commission, a matter about which we
understand that the Company's counsel for Public Service Commission matters,
Piper Rudnick LLP, will express a separate opinion.
Our opinions may not be relied upon by any person or entity other than each
of you, transferees of each of you and Schiff Hardin & Waite, your special
counsel in connection with the matters referred to herein.
Our opinions are limited to the laws of the State of Maryland.
Very truly yours,
LAWS & ROBERTSON, P.A.
By: ________________________
SCHEDULE 4.6
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EXISTING INDEBTEDNESS
The Existing Indebtedness of the Company and Subsidiaries as of October 31,
2002 is as follows:
Funded Debt:
$ 1,890,000 9.37% First Mortgage Sinking Fund Bonds Series I
$ 3,310,000 8.25% Convertible Debentures, Due March 1, 2014
$ 6,000,000 7.97% Senior Unsecured Note, due February 1, 2008
$ 8,181,818 6.91% Senior Unsecured Note, due October 1, 2010
$10,000,000 6.85% Senior Unsecured Note, due January 1,2012
$20,000,000 7.83% Senior Unsecured Note, due January 1, 2015
$ 271,300 8.50% Mortgage (Skipjack, Inc.)
$ 45,511 0.00% Auto Loans (Sharp Water of Idaho, Inc.)
Current Debt:
$35,000,000 Short-term borrowing under line of credit agreements with Bank
of America
$ 500,000 Short-term borrowing under line of credit agreement with PNC
Bank
SCHEDULE 4.8(A)(V)
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EXISTING LIENS
The Liens of Property of the Company and Subsidiaries as of October 31,
2002 (other than Liens of the types described in clauses (i) through (iv) of
Section 4.8(a)) and the obligations secured thereby are as follows:
a. Lien arising from the First Mortgage Indenture
to the extent securing
bonds outstanding thereunder as of the date hereof.
b. Mortgage on real estate owned by Skipjack, Inc.
c. Automobile loans purchased by Sharp Water of Idaho, Inc.
SCHEDULE 6.1(A)
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SUBSIDIARIES
SUBSIDIARY JURISDICTION OF INCORPORATION
- ---------- -------------------------------
Chesapeake Utilities Corporation Delaware
Eastern Shore Natural Gas Company Delaware
Dover Exploration Company Delaware
Skipjack, Inc. Delaware
Sharpgas, Inc. Delaware
BravePoint, Inc. Georgia
Sharpoil, Inc. Delaware
Sharp Energy, Inc. Delaware
Chesapeake Investment Company Delaware
Capital Data Systems, Inc. North Carolina
Currin and Associates, Inc. North Carolina
Chesapeake Service Company Delaware
Tri-County Gas Co., Inc. Maryland
Eastern Shore Real Estate, Inc. Maryland
Sam Shannahan Well Co., Inc. Maryland
Xeron, Inc. Mississippi
Sharp Water, Inc. Delaware
Sharp Living, Inc. Delaware
Eco Water Systems of Michigan, Inc. Michigan
Carroll Water Systems, Inc. Maryland
Absolute Water Care, Inc. Florida
Sharp Water of Florida, Inc. Delaware
Sharp Water of Minnesota, Inc. Delaware
Sharp Water of Idaho, Inc. Delaware
aQuality Company, Inc. Delaware
aquality soulutions of
Western Maryland, LLC Delaware
aquality soulutions of Delmarva, LLC Delaware
SCHEDULE 6.7
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LIST OF AGREEMENTS RESTRICTING DEBT
The contracts or agreements of the Company or a Subsidiary which restrict
the right of ability of the Company to issue the Notes or to perform its
obligation under the Agreement are as follows:
a. Tenth Supplemental Indenture, dated as of December 15, 1989, by and
between Chesapeake Utilities Corporation, Maryland National Bank, and Barnett
Banks and Trust Company, N.A.
b. Eighth Supplemental Indenture, dated as of April 1, 1986, by and between
Chesapeake Utilities Corporation, Maryland National Bank, and Barnett Banks
Trust Company, N.A.
c. Guaranty Agreement, dated as of December 15, 1985, by and between
Chesapeake Utilities Corporation and First Union National Bank.
SCHEDULE 7.1
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EXISTING INVESTMENTS
The outstanding Investments of the Company and Subsidiaries as of October
31, 2002, are as follows:
Rabbi Trust Investment of $500,000 associated with the acquisition of
Xeron, Inc.
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