PERFORMANCE SHARE AGREEMENT
PURSUANT TO THE
CHESAPEAKE UTILITIES CORPORATION
PERFORMANCE INCENTIVE PLAN
AGREEMENT
dated as of December
4, 2003, and entered into, in duplicate, by
and between Chesapeake Utilities Corporation, a Delaware corporation (the
"Company"), and [name of officer] (the "Grantee") who
resides at [address of
officer].
WITNESSETH
that:
WHEREAS,
the Chesapeake Utilities Corporation Performance
Incentive Plan
(the "Plan") has been duly adopted by
action of the Company's Board of Directors
(the "Board") as of January 1, 1992; and
WHEREAS, the
Committee of the Board of Directors of the Company referred to
in the Plan (the "Committee") has
determined that it is in the best interests of
the Company to grant the Performance Share Award
described herein pursuant to
the Plan; and
WHEREAS,
the shares of the
Common Stock of the Company that are subject to
this Agreement, when added to the other
shares of Common Stock that are subject
to awards granted under the Plan, do not exceed the
total number of shares of
Common Stock with respect to which awards
are authorized to be granted under the
Plan;
NOW,
THEREFORE,
it is hereby covenanted and agreed by and between the
Company and the Grantee as follows:
Section 1. Performance Share Award
The Company
hereby grants to the Grantee a Performance Share Award for the
year ending December 31, 2004 (the "Award
Year"). As more fully described
herein, the Grantee may earn a maximum
total of [number of shares awarded]
shares (the "Contingent Performance
Shares") upon the Company's achievement of
the Performance Goals set forth in Section
2. Alternatively, the Grantee may
elect to receive [number of shares awarded]
shares (the "Forfeitable Performance
Shares"), as detailed in Section 3, in lieu
of receiving any Contingent
Performance Shares. The Forfeitable
Performance Shares shall be subject to
forfeiture conditions, as set forth in
Section 3(c).
Section 2. Contingent Performance
Shares
(a) As soon as
practicable after the Company's independent auditors have
certified the Company's financial
statements for the Award Year, the Committee
shall determine for purposes of this
Agreement the Company's (1) earnings growth
("EG"), (2) growth in non-regulated
investments ("NRIG") and (3) Shareholder
Value as of the end of the Award Year. The
EG, NRIG and Shareholder Value shall
be determined by the Committee based on
financial results reported to
shareholders in the Company's annual
reports and shall be subject to adjustment
by the Committee for extraordinary events
during the Award Year. The Committee
shall promptly notify the Grantee of its
determination.
(b) The Grantee
may earn up to [number of shares awarded] Contingent
Performance Shares (the "Maximum Award") as
follows:
(1) The performance measured for Shareholder Value will be the
value
of $10,000
invested in the Company stock compared to a Utility Index. If
the Company's
performance exceeds the Utility Index, the Grantee will be
eligible to earn
up to 30% of the Maximum Award for the Award Year. If the
value of $10,000
invested for the Award Year does not exceed the Utility
Index for the
Award Year, the Grantee shall not earn any Contingent
Performance
Shares under this Paragraph (b)(1).
(2) The performance measured for EG will be based upon the
performance
of the Company's regulated natural
gas operations, the Company's Delmarva
propane
distribution operations and the overall corporate results of
operation.
a. The performance measured for EG for the Company's regulated
natural gas operations will be based upon achieving at least 90%
of
the average allowed pre-tax return on investment ("target return
on
investment") in the Award Year. If the Company's regulated
operations
achieve the target return on investment in the Award Year, the
Grantee
will be eligible to earn at least 12.5% of the Maximum Award. If
the
target return on investment is not achieved in the Company's
regulated
natural gas operations, the Grantee shall not earn any
Contingent
Performance Shares under this paragraph (b)(2)(a).
b. The performance measured for EG for the Company's Delmarva
propane distribution operation will be based upon generating at
least
the target level
of earnings, before interest expense and income taxes
("target EBIT"), for the Award Year. If the Delmarva propane
distribution operation achieves the target EBIT, the Grantee will
be
eligible to earn 12.5% of the Maximum Award. If the target EBIT in
the
Company's Delmarva propane distribution operation is not achieved,
the
Grantee will not be eligible to any Contingent Performance
Shares
under this paragraph (b)(2)(b).
c. The performance measured for overall corporate results of
operation will be based upon achieving an earnings per share of
$1.60
or greater for the award year. If the Company achieved the
targeted
earnings per share, the Grantee will be eligible to earn 20% of
the
maximum award. If the targeted earnings per share is not achieved,
the
Grantee will not be eligible to receive any Contingent
Performance
Shares under this paragraph (b)(2)(c).
(3) The performance measured for growth in non-regulated
investments
("NRIG") will be
based upon execution of the Company's long-term strategic
plan, assuming
attainment of pre-authorized milestones and objectives. If
the long-term
strategy is executed, the Grantee will be eligible to earn
25% of the
Maximum Award. If the long-term strategic plan is not executed,
after approval
from the Company's Board of Directors, the Grantee shall not
earn any
Contingent Performance Shares under this paragraph (b)(3).
(c) Contingent
Performance Shares that are earned by the Grantee pursuant
to this Section 2 shall be issued promptly,
without payment of consideration by
the Grantee. The Grantee shall have the
right to vote the Contingent Performance
Shares and to receive the dividends
distributable with respect to such shares on
and after, but not before, the date on
which the Grantee is recorded on the
Company's ledger as holder of record of the
Contingent Performance Shares (the
"Issue Date"). If, however, the Grantee
receives shares of Common Stock as part
of any dividend or other distribution with
respect to the Contingent Performance
Shares, such shares shall be treated as if
they are Contingent Performance
Shares, and such shares shall be subject to
all of the terms and conditions
imposed by this Section 2.
(d) Sale,
transfer, pledge, or hypothecation of the Contingent
Performance
Shares shall be prohibited for a period of
three (3) years after the Issue Date
(the "Limitation Period"), and the
Performance Shares shall bear a restrictive
legend to that effect. Any attempt to
dispose of Contingent Performance Shares
in contravention of this Agreement shall be
ineffective. Upon expiration of the
Limitation Period, the transfer
restrictions imposed by this Section shall
expire, and new certificates representing
the Contingent Performance Shares,
without the restrictive legend described in
this paragraph (d), shall be issued,
subject to the provisions of paragraph (e)
of this Section 2.
(e) The
Performance Shares will be not registered for resale under the
Securities Act of 1933 or the laws of any
state except when and to the extent
determined by the Board pursuant to a
resolution. Until a registration statement
is filed and becomes effective, however,
transfer of the Contingent Performance
Shares after expiration of the Limitation
Period shall require the availability
of an exemption from such registration, and
prior to the issuance of new
certificates, the Company shall be entitled
to take such measures as it deems
appropriate (including but not limited to
obtaining from the Grantee an
investment representation letter and/or
further legending the new certificates)
to ensure that the Contingent Performance
Shares are not transferred in the
absence of such exemption.
(f) In the event
of a Change in Control, as defined in the Plan, during the
Award Year, the Grantee shall earn at least
the Maximum Award of Contingent
Performance Shares set forth in this
Section 2, as if all employment and
performance criteria were satisfied, pro
rated based on the proportion of the
Award Year that has expired as of the date
of such Change in Control.
(g) If, during
the Award Year, the Grantee is separated from employment,
Contingent Performance Shares shall be
deem
