EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the "Agreement") dated this 29 ^th day of December, 2006, is hereby made by and between Chesapeake Utilities Corporation, a Delaware corporation (the "Company"), and Michael P. McMasters (the "Executive").

WHEREAS, the Company is currently obtaining the benefit of Executive's services as a full-time executive employee in the capacity of Senior Vice President and Chief Financial Officer;

WHEREAS, the Company's Board of Directors (the "Board") has authorized the Company to provide for the Executive's con-tinued employment pursuant to the terms of this Agreement; and

WHEREAS, Executive is willing, in consideration of the covenants and consideration hereinafter provided, to continue to be employed by the Company in the capacity of Senior Vice President and Chief Financial Officer and to render services incident to such position during the term of this Agreement.

Agreement

In consideration of the mutual promises and covenants contained herein, the Company and Executive hereby agree as follows:

1.    Employment . The Company agrees to employ Executive, and Executive agrees to accept employment, as an executive officer of the Company in the capacity of Senior Vice President and Chief Financial Officer, with such authority, duties and responsibilities as are customarily assigned to such position, including such reasonable duties and responsibilities as may be requested of the Executive by the Board of Directors and which are consistent with the By-laws of the Company as in effect from time to time including, but not limited to, responsibility for formulating financial policy and plans, as well as providing overall direction for the accounting, tax, credit and treasury functions.

2.   Term .

(a)   Term of Agreement . The term of this Agree-ment ("Term") shall be the Current Term (as defined in Paragraph 2(b), and, if applicable, the Extended Term (as defined in Paragraph 2(c)).

(b)   Current Term . Subject to Paragraph 2(c), the Current Term of this Agreement shall extend for three (3) years commencing on January 1, 2007. The Current Term is subject to extension in accordance with the provisions of Paragraph 15 of this Agreement.

(c)   Extended Term . Upon the occurrence of a Change in Control (as defined in Paragraph 2(d)), the Current Term shall end and the Term of this Agreement shall thereupon automatically be extended, commencing on the date of such Change in Control, for the shorter of four (4) years or the period until Executive attains the earliest age, if any, at which his compulsory retirement is permitted under Section 12(c) of the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 631(c), or any successor provision thereto (such extended four-year or shorter term constituting the "Extended Term").

(d)   Change In Control . For the purposes of this Agreement, "Change in Control" shall mean a change in the control of the Company during the Term of this Agreement, which shall be deemed to have occurred upon the first of the following events:

(i)   any one person, or group of owners of another corporation who acting together through a merger, consolidation, purchase, acquisition of stock or the like (a "Group"), acquires ownership of stock of the Company (or a majority-controlled subsidiary of the Company) that, together with the stock held by such person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company. However, if such person or Group is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the corporation before this transfer of the Company's stock, the acquisition of additional stock by the same person or Group shall not be considered to cause a Change in Control of the Company; or

(ii)   any one person or Group acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company (or a majority-controlled subsidiary of the Company) possessing thirty-five percent (35%) or more of the total voting power of the stock of the Company where such person or Group is not merely acquiring additional control of the Company; or

(iii)   a majority of members of the Company's Board (other than the Board of a majority-controlled subsidiary of the Company) is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Company's Board prior to the date of the appointment or election; or

(iv)   any one person or Group acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or Group) assets from the Company (or a majority-controlled subsidiary of the Company) that have a total gross fair market value equal to or more than forty percent (40%) of the total fair market value of all assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. A transfer of assets by the Company will not result in a Change in Control if the assets are transferred to:

(A)   a stockholder of the Company (immediately before the asset   transfer) in exchange for or with respect to its stock;

(B)   an entity, fifty percent (50%) or more of the total value or voting   power of which is owned, directly or indirectly, by the Company immediately   after the transfer of assets;

(C)   a person or Group that owns, directly or indirectly, fifty   percent (50%) or more of the total value or voting power of all the outstanding   stock of the Company; or

(D)   an entity, at least fifty percent (50%) of the total value or voting   power of which is owned directly or indirectly, by a person described in   subparagraph (d)(i), above.

However, no Change in Control shall be deemed to have occur-red with respect to the Executive by reason of (1) any event involving a transaction in which the Executive or a group of persons or entities with which the Executive acts in concert, acquires, directly or indirectly, more than thirty percent (30%) of the Common Stock of the business or assets of the Company; (2) any event involving or arising out of a proceeding under Title 11 of the United States Code (or the provisions of any future United States bankruptcy law), or an assignment for the benefit of creditors or an insolvency proceeding under state or local law; or (3) any event constituting approval by the Company's stockholders of a merger or consolidation if a majority of the group consisting of the president and vice-presidents of the Company who are parties to agreements conferring rights upon a Change in Control shall have agreed in writing prior to the approval that the approval shall not be deemed to constitute a Change in Control.

3.   Time . Executive agrees to devote all reasonable full time and best efforts for the benefit of the Company and any subsidiary of the Company, and not to serve any other business enterprise or organization in any capacity during the Term of this Agreement without the prior written consent of the Company, which consent shall not be unreasonably with-held.

4.   Office .

(a)   Current Term . During the Current Term, the Executive shall serve as the Company's Senior Vice President and Chief Financial Officer and the parties agree that the Company shall elect the Executive to these offices, on an annual basis if necessary, during the Current Term of this Agreement.

(b)   Extended Term . During the Extended Term of this Agreement the Executive shall hold and perform an office with the responsibility, importance and scope within the Company at least equal to that of the office described and contemplated in Paragraph 1. Further, Executive's office shall be located in Dover, Delaware, and Executive shall not be required, without his written consent, to change his office location or to be absent therefrom on business for more than sixty (60) working days in any year.

5.   Compensation and Benefits .

(a)   Base Compensation; Current Term . The Company shall compensate Executive for his services hereunder during the Current Term at a rate of $246,000 per annum, or such amount as the Board may from time to time determine ("Base Compensation"), payable in installments on the Company’s regular payroll dates for salaried executives. The Base Compensation rate shall be reviewed annually and may be increased or decreased, from time to time, provided, however, that Base Compensation shall only be decreased by the Board on a good faith basis and with reasonable justification for the same, and provided further, that in the event of a Change in Control, Base Compensation shall not be decreased.

(b)   Base Compensation; Extended Term . During the Extended Term, the Company shall compensate Executive for his services hereun-der at a rate per annum, payable in installments on the Company’s regular payroll dates for salaried executives, equal to his Base Compensation at the time the Extended Term commences, increased, but not decreased:

(i)   effective on each anniversary of the date of this Agreement during the Extended Term by an amount equal to the product of such Base Compensation times the increase in the preceding calendar year of the Consumer Price Index for Urban Wage Earners and Clerical Workers for the Philadelphia metropolitan region as reported by the U.S. Department of Labor (or, if such index is no longer reported, the corresponding increase in a comparable index); and

(ii)   by such additional amounts as the Board may determine from time to time based, in part, on an annual review of the Executive's compensation and performance.

(c)   Incentive Plans . During the Term of this Agreement, Executive shall be entitled to participate in all bonus, incentive compensation and performance based compensation plans, and other similar policies, practices, programs and arrangements of the Company, now in effect or as hereafter amended or established, on a basis that is commensurate with his position and no less favorable than those generally applicable or made available to other executives of the Company. The Executive's participation shall be in accordance with the terms and provisions of such plans and programs. Participation shall include, but not be limited to:

(i)   Chesapeake Utilities Corporation Performance Incentive Plan . Executive shall be eligible for an incentive compensation award equal to 5,760 shares of the Company’s common stock as granted on an annual basis by the Board during the Term of this Agreement.

(ii)   Chesapeake Utilities Corporation Cash Bonus Incentive Plan . Executive shall be eligible for a minimum cash bonus award equal to 30 percent (30%) of Base Compensation as determined on an annual basis by the Board during the Term of this Agreement.

(d)   Retirement Plans . During the Term of this Agreement, Executive shall be entitled to participate in all profit-sharing, savings and retirement benefit plans, plans that are supplemental to any tax-qualified savings and retirement plans, and other similar policies, practices, programs and arrangements of the Company, now in effect or as hereafter amended or established, on a basis that is commensurate with his position and no less favorable than those generally applicable or made available to other executives of the Company. The Executive's participation shall be in accordance with the terms and provisions of such plans and programs.

(e)   Welfare Benefits . During the Term of this Agreement, Executive, and his family, as applicable, shall be entitled to participate in all insurance, medical, health and welfare, and similar plans and arrangements, as well as all vacation and other employee fringe benefit plans, perquisite plans, and other policies, practices, programs and arrangements of the Company, now in effect or as hereafter amended or established, on a basis that is commensurate with his position and no less favorable than those generally applicable or made available to other executives of the Company. The Executive’s participation shall be in accordance with the terms and provisions of such plans.

(f)   Other Benefits . During the Term of this Agreement, the Company shall furnish Executive with a suitable office, necessary administrative support and customary furniture and furnishings for such office. The Company further agrees that Executive shall have the use of a Company-owned or Company-leased and Company-maintained automobile, new every three (3) years, of a kind and model appropriate to his position with the Company.

(g)   Expenses . During the Term of this Agreement, the Company shall pay all necessary and reasonable business expenses incurred by Executive on behalf of the Company in the course of his employment hereunder, including, without limitation, expenses incurred in the conduct of the Company's business while away from his domicile and properly substantiated expenses for travel, meals, lodging, entertainment and related expenses that are for the benefit of the Company. All expense reimbursements shall comply with applicable rules or guidelines of the Company in effect at the time the expense is incurred.

(h)   Nothing in this Agreement shall preclude the Company from amending or terminating any employee benefit plan or practice, but, it being the intent of the parties that the Executive shall continue to be entitled during the Extended Term to benefits and perquisites as set forth in Paragraphs 5(a) through 5(g) at least equal to those attached to his position on the date of this Agreement, nothing in this Agreement shall operate as, or be construed to authorize, a reduction during the Extended Term without Executive's written consent in the level of such benefits or perquisites as in effect on the date of a Change in Control. If and to the extent that such benefits or perquisites are not payable or provided to Executive under any such plan or practice by reason of an amendment thereto or termination thereof during the Extended Term, the Company shall nevertheless pay or provide such benefits or perquisites to Executive, either directly or through alternative arrangements.

6.   Termination .

(a)   Payment Upon Termination During Current Term . In the event that the Company terminates this Agreement during the Current Term, or elects pursuant to Paragraph 15 not to renew this Agreement at the end of the Current Term for any reason other than Cause, as defined below, or the Executive’s death, the Company shall continue to pay to Executive (or in the event of his death following such termination, his legal representative) his Base Compensation under Paragraph 5(a), at the rate in effect immediately prior to the date of such termination ("Termination Date"), for a period of one (1) year following the Termination Date. In addition, and notwithstanding the foregoing provisions of this Paragraph 6(a), to the extent required in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), cash amounts that would otherwise be payable under this Paragraph 6(a) during the six-month period immediately following the Termination Date shall instead be paid, with interest on any delayed payment at the applicable federal rate under Code Section 7872(f)(2)(A), on the first business day after the date that is six (6) months following the Executive’s "separation from service" within the meaning of Code Section 409A.

(b)   Termination for Cause . This Agreement and Executive's employment hereunder may be terminated by the Company at any time for Cause. In the event of termination for Cause, the Executive shall not be entitled to any severance benefits under this Agreement. Termination of the Executive's employment shall be deemed to have been "for Cause" only if it shall have been the result of:

(i)   Executive’s conviction of a felony under the laws of the United States or a state in which Executive works or resides;

(ii)   a willful or deliberate act or acts of dishonesty by Execu-tive resulting or intended to result directly or indirectly in material gain to or personal enrichment of Executive at the Company's expense;

(iii)   a deliberate and intentional refusal by Executive (except by reason of incapacity due to illness or accident) to comply with the provisions of Paragraph 1, provided that such breach shall have resulted in demonstrably material injury to the Company and the Executive shall have failed to remedy such breach within thirty (30) days after notice from the Secretary of the Company demanding that the Executive remedy such breach; or

(iv)   conduct by Executive that is materially injurious to the Company if such conduct was undertaken without good faith and the reasonable belief that such conduct was in the best interest of the Company.

(c)   Payment Upon Termination During Extended Term . In the event of a Termination Without Cause, as defined below, during the Extended Term, the Company shall pay to Executive (or, in the event of his death following the termination, his legal representative) in cash, within thirty (30) days after the date of such termination (the "Extended Termination Date") the sum of all accrued but unpaid salary, bonus, vacation pay, expense reimbursements and any other amounts due, plus the following:

(i)   an amount equal to the product of multiplying the monthly rate of Base Compensation to which Executive was entitled under Paragraph 5(a) on the day immediately prior to the Extended Termination Date by thirty-six (36)