CHESAPEAKE UTILITIES
CORPORATION
DEFERRED COMPENSATION
PLAN
Amended and Restated as of
January 1, 2009
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Page No.
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Section 1. Establishment and
Purpose
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1
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1
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1
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1
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Section 2. Definitions and
Construction
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2
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2
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8
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9
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3.01. Election of Benefits
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9
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3.02. Election Requirements
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9
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3.03. Form and Time of Payment
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10
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3.04. Termination of Participation
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11
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12
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12
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4.02. Deferred Cash Subaccount
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12
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12
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4.04. Investment Return for Deferred Cash
Subaccount
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12
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14
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4.06. Vesting of Accounts
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15
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16
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5.01. Exclusive Entitlement to
Payment
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16
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16
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17
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5.04. Distributions Due to Unforeseeable
Emergency
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17
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18
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18
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5.07. Acceleration of Payment
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18
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19
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5.09. Assignment and Assumption of
Liabilities
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20
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Page No.
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Section 6. Nature of Participant’s
Interest in Plan
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21
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21
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6.02. No Right to Transfer Interest
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21
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6.03. No Right to Employment or
Service
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21
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6.04. Withholding and Tax Liabilities
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22
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Section 7. Administration
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23
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23
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23
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23
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23
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7.05. Responsibilities of the
Committee
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23
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7.06. Finality of Committee
Determinations
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24
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7.07. Benefit Claims Procedure
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25
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7.08. Arbitration of Denied Claims
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25
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Section 8. Amendment, Suspension, and
Termination
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26
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8.01. By the Compensation Committee
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26
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27
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28
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9.01. Participation by Affiliate
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28
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9.02. Designation of Beneficiary
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28
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29
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9.04. Required Information
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29
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9.05. Inability to Locate Participants and
Beneficiaries
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29
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29
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29
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30
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9.09. Complete Statement of Plan
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30
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31
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 1
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SECTION 1. ESTABLISHMENT AND
PURPOSE
Effective
September 1, 1998, the Company established for the benefit of
certain Eligible Employees an unfunded plan of deferred
compensation known as the “Chesapeake Utilities Corporation
Executive Deferral Program,” as the same has been amended
from time to time. Effective January 1, 2007, the Company
amended and restated the Plan to provide members of the
Company’s Board of Directors deferral opportunities and
renamed the Plan the “Chesapeake Utilities Corporation
Deferred Compensation Program”. Effective January 1,
2009, the Company hereby amends and restates the Plan to comply
with the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended, (the “Code”) and renames the
Plan the “Chesapeake Utilities Corporation Deferred
Compensation Plan”.
The Plan is an
unfunded plan maintained primarily for the purpose of providing
deferred compensation to a select group of management and highly
compensated employees, as well as members of the Company’s
Board of Directors. The Plan permits Eligible Employees and
Directors to defer payment of part or all of certain specified
types of compensation until their Separation from Service with the
Company and its Affiliates or until such other date specified in
accordance with the terms of the Plan.
The Plan, as
hereby amended and restated, is intended to meet the requirements
of Code Section 409A, and is effective with respect to amounts
that were not deferred and vested (within the meaning of Code
Section 409A) before January 1, 2005, and any earnings on
such amounts. Except as otherwise specifically provided herein,
amounts deferred and vested (within the meaning of Code
Section 409A) before January 1, 2005 (and earnings on
such amounts) remain subject to the terms of the September 1,
1998 Plan restatement, which are set forth in Appendix A. For
recordkeeping purposes, the Company established separate accounts
for each Participant for amounts deferred and vested before
January 1, 2005, and amounts deferred and vested on or after
that date.
To the extent
inconsistent with Code Section 409A or regulations issued
thereunder, this Plan shall be amended to conform to such
requirements within applicable time limitations established by the
Internal Revenue Service.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 2
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SECTION 2. DEFINITIONS AND
CONSTRUCTION
The following
words and phrases as used in the Plan have the following
meanings:
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(a)
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“Account”
means the bookkeeping
account established for each Participant under Section 4. Each
Account shall include a Deferred Cash Subaccount and a Deferred
Stock Unit Subaccount. Additional subaccounts shall be maintained
as necessary for the administration of the Plan.
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(b)
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“Affiliate”
means any corporation
included with Chesapeake Utilities Corporation in a
“controlled group of corporations,” as defined in Code
Section 414(b), or an unincorporated business included with
Chesapeake Utilities Corporation in a group of trades or business
under “common control,” as defined by regulations
prescribed by the Secretary of the Treasury under Code
Section 414(c).
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(c)
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“Beneficiary”
means the person or
persons (including a contingent beneficiary except where the
context indicates otherwise) designated by a Participant pursuant
to Section 9.02 to receive death benefits under the
Plan.
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(d)
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“Board”
means the Board of
Directors of the Company.
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(e)
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“Bonus
Compensation” means compensation received under
the Bonus Plan or other compensation designated by the Committee as
Bonus Compensation eligible for deferral under the Plan as
Performance Based Compensation.
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(f)
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“Bonus Plan”
means the
“Chesapeake Utilities Corporation Cash Bonus Incentive
Plan,” as in effect and amended from time to time.
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(g)
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“Change in
Control” means the first of the following
events to occur:
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(1)
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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 50 percent 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
50 percent 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 persons shall not be considered to cause a Change in
Control of the Company; or
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 3
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(2)
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Any
one person or group (as described in Section 2.01(g)(1),
above) acquires (or has acquired during the 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-owned
subsidiary of the Company) possessing 35 percent 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
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(3)
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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 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
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(4)
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Any
one person or group (as described in 2.01(g)(1), above) acquires
(or has acquired during the 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
40 percent of the total gross 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 under this Section
2.01(g)(4), if the assets are transferred to:
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(A)
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a
shareholder of the Company (immediately before the asset transfer)
in exchange for or with respect to its stock;
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(B)
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an
entity, 50 percent 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;
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(C)
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a
person, or more than one person acting as a group (as described in
2.01(g)(1), above), that owns, directly or indirectly,
50 percent or more of the total value or voting power of all
the outstanding stock of the Company; or
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(D)
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an
entity, at least 50 percent of the total value or voting power
of which is owned directly or indirectly, by a person described in
Section 2.01(g)(4)(C), above.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 4
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However, no
Change in Control shall be deemed to have occurred with respect to
a Participant by reason of (i) any event involving a
transaction in which the Participant or a group of persons or
entities with which the Participant acts in concert, acquires,
directly or indirectly, more than 30 percent of the common
stock or the business or assets of the Company; (ii) 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), an assignment for the benefit of creditors or an
insolvency proceeding under state or local law; or (iii) 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 be
deemed not to constitute a Change in Control.
The term
“Change in Control” is intended to comply with Code
Section 409A and shall be interpreted such that a Change in
Control (1) shall occur for purposes of the Plan in any
circumstance that would constitute a “Change in Control
Event” (within the meaning of Treasury Regulations under Code
Section 409A) and (2) shall not occur for purposes of the
Plan in any circumstance that would not constitute such a Change in
Control Event.
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(h)
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“Code”
means the Internal
Revenue Code of 1986, as amended from time to time.
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(i)
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“Committee”
means the Employee
Benefits Committee of the Company or such other committee as may be
appointed by the Board to administer the Plan.
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(j)
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“Common
Stock” means the common stock, $.4867 par
value, of the Company, including both treasury shares and
authorized but unissued shares, or any security of the Company
issued in substitution, exchange, or in lieu thereof.
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(k)
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“Company”
means Chesapeake
Utilities Corporation, a Delaware corporation, and any Affiliate
that may be authorized by the Compensation Committee and by its own
board of directors to participate in the Plan with respect to its
employees.
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(l)
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“Compensation
Committee” means the Compensation Committee of
the Board.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 5
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(m)
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“Deferred Cash
Subaccount” means the bookkeeping account to
which Deferred Cash Payments of a Participant and interest are
credited pursuant to Section 4.
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(n)
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“Deferred Cash
Payment” means any Director Compensation,
otherwise payable in cash, or Bonus Compensation that a Participant
elects to defer under the Plan.
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(o)
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“Deferred Stock
Units” or “DSUs” means
hypothetical shares of Common Stock (including hypothetical
fractional shares).
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(p)
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“Director”
means a member of the
Board of Directors of the Company.
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(q)
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“Director
Compensation” means amounts paid or payable by the
Company to a Director for a Plan Year which are includable in
income for federal tax purposes, including Director’s fees of
all types, whether paid in cash or Common Stock. Notwithstanding
the foregoing, non-cash compensation and expense reimbursements are
excluded from Director Compensation.
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(r)
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“Disabled”
means a medically
determinable physical or mental impairment that can be expected to
result in death or last for at least 12 months; and the
impairment either (1) prevents the Participant from engaging
in any substantial gainful activity, or (2) entitles the
Participant to receive income replacement benefits for at least 3
months under an accident or health plan sponsored by the Company.
The Company shall determine whether a Participant is Disabled in
its sole discretion (but in compliance with Code Section 409A)
and may require the Participant to submit to periodic medical
examinations at the Participant’s expense to confirm the
existence and continuation of the Participant’s
disability.
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(s)
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“DSU
Subaccount” means the bookkeeping account to
which DSUs of a Participant and dividend equivalents are credited
pursuant to Section 4.
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(t)
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“Eligible
Employee” means an employee of the Company who
is designated by the Compensation Committee, in its sole
discretion, to be eligible to participate in the Plan.
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(u)
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“ERISA”
means the Employee
Retirement Income Security Act of 1974, as amended.
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(v)
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“Excessive
Benefits” means an amount credited to a
Participant’s Account or paid on a Participant’s behalf
in excess of the amount that properly should have been credited to
the Participant’s Account or paid on the Participant’s
behalf.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
|
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Page 6
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(w)
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“Fair Market
Value” means the average of the high and
low sales price of the Common Stock, as reported on the New York
Stock Exchange (or any other reporting system as shall be selected
by the Committee) on the relevant date, or if no sale of Common
Stock is reported for a date, on the date or dates that the
Committee determines, in its sole discretion, to be appropriate for
purposes of valuation.
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(x)
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“Participant”
means an Eligible
Employee or Director who becomes a participant in the Plan in
accordance with Section 3.01 and whose Account has a positive
balance.
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(y)
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“Performance Based
Compensation” means a bonus or other payment of
compensation for which the amount of the payment or the entitlement
thereto is contingent on the satisfaction of organizational or
individual performance criteria relating to a performance period of
at least 12 consecutive months. The organizational or individual
performance criteria shall be established in writing no later than
90 days after the beginning of the period of service to which
the criteria relate, and the outcome must be substantially
uncertain at the time the criteria are established. Notwithstanding
the above, a performance-based bonus may be based on subjective
performance criteria, provided that:
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(1)
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the
subjective performance criteria are bona fide and relate to the
performance of the Participant, a group of service providers that
includes the Participant, or a business unit for which the
Participant provides services (which may include the entire
organization); and
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(2)
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the
determination that any subjective performance criteria have been
met is not to be made by the Participant or a family member of the
Participant (as defined in Code Section 267(c)(4) applied as
if the family of an individual includes the spouse of any member of
the family), or a person under the effective control of the
Participant or such a family member, and no amount of the
compensation of the person making such determination is effectively
controlled in whole or in part by the Participant or such a family
member.
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(z)
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“Performance Share
Award” means a performance share award
granted under the PIP which qualifies as Performance Based
Compensation.
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(aa)
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“Performance
Shares” means shares of Common Stock
awardable under a Performance Share Award in accordance with the
terms of the PIP.
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(bb)
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“PIP”
means the
“Chesapeake Utilities Corporation Performance Incentive
Plan,” as in effect and as amended from time to
time.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
|
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Page 7
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(cc)
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“Plan”
means the
“Chesapeake Utilities Corporation Deferred Compensation
Program,” as set forth herein and as amended from time to
time.
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(dd)
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“Plan Year”
means the calendar
year.
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(ee)
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“Separation from
Service” occurs when an Eligible Employee
separates from service with the Company if the Eligible Employee
dies, retires or otherwise has a termination of employment with the
Company. Whether a termination of employment has occurred is
determined based on whether the facts and circumstances indicate
that the Company and the Eligible Employee reasonably anticipated
that no further services would be performed after a certain date or
that the level of bona fide services the Eligible Employee would
perform after such date (as an employee or independent contractor)
would permanently decrease to no more than 20 percent of the
average level of bona fide services performed over the immediately
preceding 36-month period (or the full period in which the Eligible
Employee provided services to the Company if the Eligible Employee
has been providing services for less than 36 months). An
Eligible Employee will not be deemed to have experienced a
Separation from Service if such Eligible Employee is on military
leave, sick leave, or other bona fide leave of absence, to the
extent such leave does not exceed a period of six months or, if
longer, such longer period of time during which a right to
re-employment is protected by either statute or contract. If the
period of leave exceeds six months and the individual does not
retain a right to re-employment under an applicable statute or by
contract, the employment relationship is deemed to terminate on the
first date immediately following such six-month period. In the case
of a Director, a separation from service occurs upon the
termination of the Director’s service on the Board, provided,
however, that a Director who is also providing services to the
Company as an independent contractor, does not have a Separation
from Service until he has separated from service both as a Director
and as an independent contractor. If an Eligible Employee provides
services both as an employee and as a member of the Board, the
services provided as a Director are generally not taken into
account in determining whether the Eligible Employee has a
Separation from Service as an employee for purposes of the Plan, in
accordance with final regulations under Code
Section 409A.
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(ff)
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“Valuation
Date” means the last business day of each
calendar month.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
|
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Page 8
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For purposes of
the Plan, unless the contrary is clearly indicated by the
context,
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(a)
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the
use of the masculine gender shall also include within its meaning
the feminine and vice versa,
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(b)
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the
use of the singular shall also include within its meaning the
plural and vice versa, and
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(c)
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the
word “include” shall mean to include without
limitation.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
|
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Page 9
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3.01.
Election of Benefits.
An Eligible
Employee or Director shall become a Participant in the Plan by
electing to participate in the Plan in accordance with
Section 3.02 and procedures established by the
Committee.
3.02.
Election Requirements.
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(a)
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Election Filing Deadline
. Except as provided in
subsection (b), below, an election to defer an amount equal to all
or part of an Eligible Employee’s Bonus Compensation earned
with respect to, or Performance Shares awarded during, a Plan Year
shall be filed by the Eligible Employee with the Committee at least
six months before the Plan Year ends ( i.e. , by
June 30th), unless the Bonus Compensation or Performance
Shares do not qualify as Performance-Based Compensation, in which
case an election with respect to such compensation shall be filed
by the Eligible Employee with the Committee before the beginning of
the Plan Year for which the compensation will be earned, or at such
other time that complies with the deferral election requirements of
Code Section 409A. Except as provided in subsection (b) below,
a Director shall file an election with the Committee to defer an
amount equal to all or part of his Director Compensation before the
beginning of the Plan Year for which the Director Compensation will
be earned. In all cases, a Participant’s election to defer
Bonus Compensation, Director Compensation or Performance Shares, as
applicable, shall be made in accordance with the deferral election
timing requirements of Code Section 409A and procedures
established by the Committee from time to time.
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(b)
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Initial Election
. A newly hired or
otherwise newly Eligible Employee may file the requisite election
to defer Bonus Compensation or Performance Shares earned thereafter
before the expiration of 30 days either from, as applicable,
(1) his initial date of employment (if the Eligible Employee
is a new hire) or (2) his initial date of eligibility (if the
Eligible Employee is newly eligible to participate in the Plan). A
newly eligible Director may file the requisite election to defer
Director Compensation earned thereafter before the expiration of
30 days from the Director’s initial date of eligibility
to participate in the Plan. Initial elections shall apply only to
compensation (of whatever kind) to be earned after the date of the
timely initial election.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
|
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Page 10
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(c)
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Irrevocable Election
. Except as provided in
Sections 5.03, 5.04, 5.05 and 5.06, a deferral election
described in this Section 3.02, once filed, shall be
irrevocable and shall remain in effect until the end of the Plan
Year to which it pertains. Six months before the end of each
subsequent Plan Year (or prior to the beginning of each subsequent
Plan Year if the Bonus Compensation or Performance Shares do not
qualify as Performance-Based Compensation), the Participant shall
file a new election with the Committee in accordance with the
preceding provisions of this Section 3.02. The new election
shall apply only to deferrals for that Plan Year. An Eligible
Employee or Director who does not make a deferral election in one
Plan Year may make a deferral election for any subsequent Plan
Year, provided he remains an Eligible Employee or Director, by
making a deferral election in accordance with this
Section 3.02.
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(d)
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Form and Content of
Election . An
election to make a deferral hereunder shall be in writing, in a
form acceptable to the Committee, and shall specify such
information as required by the Committee. A deferral election may
designate any whole percentage (from 1% to 100%) of the Bonus
Compensation or Performance Shares awarded to an Eligible Employee,
or Director Compensation awarded to a Director, to be deferred for
a calendar year.
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(e)
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Treatment of Performance Shares and
Common Stock . A Participant who elects to defer
Performance Shares or other compensation payable in the form of
Common Stock shall be credited with DSUs rather than with shares of
Common Stock. Such DSUs shall equal the number of shares of Common
Stock that the Participant otherwise would be entitled to receive
as compensation or under the Performance Share Award (irrespective
of any taxes that would have otherwise been withheld on such
compensation or Performance Share Award).
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3.03. Form
and Time of Payment.
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(a)
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General . Except as provided in
Sections 5.03, 5.04, 5.05, and 5.06, an amount deferred under
this Section 3 shall be paid in a lump sum as of the Valuation
Date coincident with or next following the date elected by the
Participant. A Participant may elect a different form or time of
payment for his deferrals for each Plan Year, but may not divide
his deferrals for a single Plan Year among different forms or times
of payment. If, however, a Participant who is an Eligible Employee
elects to receive payment upon Separation from Service, no amount
shall be distributed earlier than six months after the Valuation
Date coincident with or next following the Participant’s
Separation from Service. Such six month delay shall not apply to a
distribution made to a Participant who is a Director. A Participant
may elect to receive his distribution as of the earlier or later of
two dates (including Separation from Service), to the extent
permitted by Code Section 409A.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 11
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(b)
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Modification of Time and
Form . After
making his first election, a Participant may file an election with
the Committee, in a form satisfactory to the Committee, to modify
the payment date with respect to a deferral election or to
irrevocably specify that the amount credited to his Account is to
be paid in the form of five or ten annual installments; provided,
however, that, to the extent required by Code Section 409A,
such election:
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(1)
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is
filed with the Committee at least twelve months prior to the date
of the first scheduled payment;
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(2)
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is
not effective until at least twelve months after the date on which
the election is made;
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(3)
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defers the lump sum payment or the
first installment payment with respect to which such election is
made for a period of not less than five years from the date such
payment would otherwise have been made;
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(4)
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does not accelerate payment of the
deferred amount; and
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(5)
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does not request other than five or
ten annual installments.
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For purposes of
the Plan, an election to receive benefits as five or ten annual
installments shall be treated as the entitlement to a single
payment as further described in Treas. Reg.
Section 1.409A-2(b)(iii).
3.04.
Termination of Participation.
Once an
Eligible Employee or Director becomes a Participant, such
individual shall continue to be a Participant until such individual
(a) ceases to be described as an Eligible Employee or
Director, as applicable, and (b) ceases to have any vested
interest in the Plan (as a result of distributions made to such
Participant or his Beneficiary, if applicable, or
otherwise).
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 12
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The Company
shall maintain for bookkeeping purposes an Account in the name of
each Participant. Each Account shall have a Deferred Cash
Subaccount and a DSU Subaccount, as applicable, to which shall be
credited amounts deferred under Section 3.
4.02.
Deferred Cash Subaccount.
The Company
shall maintain a Deferred Cash Subaccount in the name of each
Participant. During each Plan Year, each Deferred Cash Subaccount
shall be credited with the Participant’s Bonus Compensation
or Director Compensation, otherwise payable in cash, as applicable,
deferred under Section 3.
The Company
shall maintain a DSU Subaccount in the name of each Participant.
During each Plan Year, each DSU Subaccount shall be credited with
the Participant’s Performance Shares or Common Stock, as
applicable, deferred under Section 3.
4.04.
Investment Return for Deferred Cash Subaccount.
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(a)
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Rate of Return Indices
. The Compensation
Committee shall select and maintain one or more rate of return
indices as specified on Exhibit A attached hereto as amended
from time to time. A Deferred Cash Payment shall be allocated among
one or more of the rate of return indices and shall be credited
with the applicable investment return (or loss) that such Deferred
Cash Payment would have achieved if it were invested in the
specified index or indices. Allocations to one or more of the rate
of return indices may be modified during the Plan Year to the
extent permitted by the Committee, in its sole discretion. Amounts
in the Deferred Cash Subaccount that were deferred and vested as of
January 1, 2005, may be allocated among one or more of the
rate of return indices on Exhibit A attached hereto to the
extent the Committee so provides and to the extent such provision
is not a material modification (within the meaning of Code
Section 409A and Treasury Regulations issued thereunder) to
the terms of the September 1, 1998 Plan restatement, which are
set forth in Appendix A.
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(b) Election
of Rate of Return Indices .
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(1)
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Each Participant shall specify in
writing, at the time he completes his election to participate under
Section 3, and in a form acceptable to the Committee, how any
Deferred Cash Payment shall be allocated among the indices
specified on Exhibit A attached hereto.
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(2)
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The
Committee may, in its discretion and from time to time, permit a
Participant to change any election previously made with respect to
the allocation of any Deferred Cash Payment, subject to such
conditions and such limitations as the Committee may prescribe. Any
such change in election shall be in writing and in a form
acceptable to the Committee.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 13
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(3)
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The
Committee may, in its discretion and from time to time, permit a
Participant to elect to reallocate the amounts in such
Participant’s Deferred Cash Subaccount from one rate of
return index to another, subject to such conditions and such
limitations as the Committee may prescribe; provided that a
Participant shall be permitted, at least once per calendar month,
to reallocate amounts previously allocated. Any such reallocation
election shall be in writing and in a form acceptable to the
Committee.
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(4)
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The
Committee may require that any election under this Section 4.04
apply to the entire amount to which it pertains ( e.g. ,
100% of the Participant’s future contributions) or to such
percentage or percentages of that amount as the Committee may
specify ( e.g. , increments of 5%).
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(5)
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If
a Participant fails to specify a rate of return index with respect
to his Deferred Cash Payments, the Participant shall be presumed to
have specified that his entire Deferred Cash Subaccount be
allocated to the index determined by the Committee to represent the
lowest risk of principal loss.
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(c)
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Crediting of Investment
Return . The
balance credited to the Participant’s Deferred Cash
Subaccount as of the last day of the prior month shall be credited
with the applicable investment return (or loss) as of the last day
of the month of crediting. All references herein to Deferred Cash
Payments shall be deemed to include such Deferred Cash Payments
plus any investment return (or loss) credited pursuant to this
Section 4.04.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 14
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(a)
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Deemed Reinvestment of Dividends on
DSUs . The
DSUs credited to a Participant’s DSU Subaccount pursuant to
Section 3.02 shall be increased on each date that a dividend
is paid on Common Stock. The number of additional DSUs credited to
a Participant’s DSU Subaccount as a result of such increase
shall be determined first by multiplying the number of DSUs
credited to the Participant’s DSU Subaccount on the dividend
record date by the amount of the dividend declared per share of
Common Stock on the dividend declaration date, and then by dividing
the product so determined by the Fair Market Value of the Common
Stock on the dividend payment date.
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(b)
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Conversion Out of DSUs
. Amounts credited to
the DSU Subaccount generally will be paid in the corresponding
number of shares of Common Stock. In the event, however, that it
becomes necessary to determine the dollar value of DSUs credited to
a Participant’s DSU Subaccount as of any date, the dollar
value shall be determined by multiplying the number of DSUs on that
date by the Fair Market Value of the Common Stock on that
date.
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(c)
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Effect of
Recapitalization . In the event of a transaction or
event described in this Section 4.05(c), the number of DSUs
credited to a Participant’s DSU Subaccount shall be adjusted
in such manner as the Committee, in its sole discretion, deems
equitable. A transaction or event is described in this
Section 4.05(c), if and only if:
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(1)
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it
is a dividend or other distribution (whether in the form of cash,
shares, other securities, or other property), extraordinary cash
distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares or other securities,
the issuance of warrants or other rights to purchase shares or
other securities, or other similar corporate transaction or event;
and
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(2)
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the
Committee determines that such transaction or event affects the
Common Stock such that an adjustment pursuant to this
Section 4.05(c) is appropriate to prevent dilution or
enlargement of the benefits made available under the
Plan.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 15
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4.06.
Vesting of Accounts.
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(a)
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Deferred Cash Subaccount
. A Participant shall at
all times have a 100% vested and nonforfeitable interest in the
balance in his Deferred Cash Subaccount.
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(b)
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DSU Subaccount
. Any Performance Share
in a Participant’s DSU Subaccount shall vest and become
nonforfeitable only to the extent such Performance Share would have
vested and become nonforfeitable under the terms of the PIP had it
not been deferred. Any Common Stock in a Director’s DSU
Subaccount shall be 100% vested at all times.
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(c)
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Dividend DSUs
. A Participant shall
have a vested and nonforfeitable interest in any dividend DSUs only
to the extent the Participant has a vested and nonforfeitable
interest in the underlying Performance Share or Common Stock to
which the dividend DSU relates.
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Notwithstanding
the foregoing, a Participant’s Account shall be subject to
the claims of the Company’s creditors as provided in
Section 6.
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 16
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5.01.
Exclusive Entitlement to Payment
A
Participant’s deferral election pursuant to Section 3
shall constitute a waiver of his right to receive the amount
deferred and an agreement to receive in lieu thereof the amounts
payable to him at the times and in the methods specified in this
Section 5. No other amounts shall be due under the Plan or
otherwise as a result of a Participant’s deferral election
under Section 3.
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(a)
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Time of Payment
. Subject to
Sections 5.03, 5.04, 5.05, and 5.06, the Participant shall
receive an amount equal to the sum of the balances in his Account
at the time(s) and in the manner specified or elected by him in
accordance with Section 3.03. If the deferred amounts are subject
to more than one distribution election made in accordance with
Section 3.03, then the portion of the Participant’s
Account that is subject to each election shall be distributed in
accordance with the applicable election. The Participant’s
Account shall be debited to reflect each distribution pursuant to
this Section 5.
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(b)
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Payment Medium
. All amounts credited
to the Deferred Cash Subaccount shall be paid in cash. All amounts
credited to the DSU Subaccount shall be paid solely in shares of
Common Stock, except that cash shall be paid in lieu of fractional
shares. Any reference in the Plan to a payment of DSUs shall refer
to a distribution of shares of Common Stock equal to the number of
DSUs, except that it shall refer to a payment of cash in lieu of a
fractional share. For this purpose, the cash value of a fractional
share shall be determined in accordance with
Section 4.05(b).
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(c)
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Installment Payments
. If the Participant
receives installments, the amount of the first installment shall be
equal to the value of the Participant’s Deferred Cash
Subaccount plus the value of the Participant’s DSU Subaccount
(determined in accordance with Section 4.05(b)) determined as
of the Valuation Date as of which the installments commence (the
“applicable Valuation Date”) pursuant to
Section 5.02(a), divided by five (if five installments are
elected) or ten (if ten installments are elected). The amount of
each succeeding installment shall be equal to the value of the
Participant’s Deferred Cash Subaccount and the value of the
Participant’s DSU Subaccount (determined in accordance with
Section 4.05(b)) on the next succeeding anniversary of the
applicable Valuation Date, divided by the remaining number of
installments to be paid. The form of each installment payment shall
be determined in accordance with Section 5.02(b).
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 17
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(d)
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Effect of Deferral on Restriction or
Vesting Period . If a share of Common Stock would
have been subject to any restriction or vesting period upon
transfer to a Participant under a Performance Share Award in the
absence of a deferral election, such share shall be subject to such
restriction or vesting period upon payment from the Plan; provided
however, that any period of deferral under the Plan shall be
credited toward the satisfaction of any such restriction or vesting
period.
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(a)
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Amount and Form of Death
Benefit . Any
amount credited to a Participant’s Account that is unpaid at
the time of the Participant’s death shall be paid in a single
lump sum to the Beneficiary (or the contingent Beneficiary if the
Beneficiary predeceases the Participant) designated by the
Participant pursuant to Section 9.02.
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(b)
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Time of Payment
. A distribution
pursuant to this Section 5.03 shall be paid to the
Participant’s Beneficiary within 30 days after the
Valuation Date that is coincident with or next follows the date of
the Participant’s death, together with any additional
information or documentation that the Committee determines to be
necessary or appropriate before it makes the
distribution.
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5.04.
Distributions Due to Unforeseeable Emergency.
Notwithstanding
Sections 3.02 and 3.03, upon the occurrence of an
unforeseeable emergency, a Participant shall be eligible to receive
payment of the amount necessary to satisfy such emergency plus
amounts necessary to pay taxes reasonably anticipated as a result
of the distribution, after taking into account the extent to which
such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the
Participant’s assets (to the extent such liquidation would
not itself cause severe financial hardship), or by cessation of
deferrals under the Plan. The amount determined to be properly
distributable under this Section and applicable regulations under
Code Section 409A shall be payable in a single lump sum only. For
the purposes of this Section, the term “unforeseeable
emergency” means a severe financial hardship to the
Participant resulting from an illness or accident of the
Participant, the Participant’s spouse, or a dependent of the
Participant (as defined in Code Section 152, without regard to
Sections 152(b)(1), (b)(2) and (d)(1)(B)); loss of the
Participant’s property due to casualty, including the need to
rebuild a home following damage not otherwise covered by insurance,
for example, not as a result of a natural disaster; or other
similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, including
imminent foreclosure of or eviction from the Participant’s
primary residence, the need to pay for medical expenses, including
non-refundable
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Chesapeake
Utilities Corporation
Deferred Compensation Plan
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Page 18
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deductibles,
the cost of prescription drugs, and the need to pay for funeral
expenses of a spouse, Beneficiary, or dependent. It shall be the
responsibility of the Participant seeking to make a withdrawal
under this Section to demonstrate to the Committee that an
unforeseeable emergency has occurred and to document the amount
properly distributable hereunder. After a distribution on account
of an unforeseeable emergency, a Participant’s deferral
elections shall cease and such Participant will not be permitted to
participate in the Plan or elect additional deferrals until the
next enrollment following one full year from the date of the
distribution on account of an unforeseeable emergency. Such future
deferral elections following a distribution on account of an
unforeseeable emergency will be treated as an initial deferral
election and subject to the rules applicable thereto under the Plan
and Code Section 409A.
Notwithstanding
any election made pursuant to Sections 3.02 and 3.03, upon the
written application of the Participant in accordance with the
requirements of Section 3, the Committee shall accelerate and
pay in a lump sum to the Participant all of the balance of the
Participant’s Account, if the Committee finds that such
person has become Disabled (within the meaning of Code
Section 409A).
Notwithstanding
any election made pursuant to Sections 3.02 and 3.03, upon a
Change in Control, the Participant shall receive amounts credited
to his Account in the form of a lump sum payment. Such payment
shall be made within 90 days after the date the Change in
Control occurred.
5.07.
Acceleration of Payment.
The
acceleration of the time and/or form of any payment determined in
accordance with the provisions of this Section 5 shall not be
made except due to unforeseeable emergency, as described above, or
as set forth below and otherwise permitted by Code
Section 409A and the Treasury Regulations and other guidance
issued thereunder:
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(a)
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Domestic Relations Order
. A payment of all or
part of the Participant’s Account may be made to a spouse,
former spouse or other dependent under the terms of a domestic
relations order (as defined in Code Section 414(p)(1)(B)). The
Administrative Committee shall determine whether a payment should
be made pursuant to the terms of a domestic relations order and the
time and form of such payment.
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(b)
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Employment Taxes
. A payment of all or
part of the Participant’s Account may be made to the extent
necessary to pay the Federal Insurance Contributions Act
(“FICA”) tax imposed under Code Sections 3101,
3121(a), and 3121(v)(2) on amounts deferred under the Plan (the
“FICA Amount”), income tax at source on wages imposed
under Code Section 3401 or
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