PERFORMANCE SHARE AGREEMENT
PURSUANT TO THE
CHESAPEAKE UTILITIES CORPORATION
PERFORMANCE INCENTIVE PLAN
AGREEMENT
dated as of January 1, 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, 2003 (the "Award
Year") and the three years ending
December 31, 2005 (the "Award Period"). 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) Shareholder
Value and (2) earnings growth ("EG") as of
the end of the Award Year. The
Shareholder Value and EG 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 for each Award Year (the
"Annual Award") of the Award Period,
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 for the
Annual Award. If the value of $10,000 invested for each
Award Year does
not exceed the Utility Index for the respective Award Year,
the Grantee
shall not earn any Contingent Performance Shares under this
Paragraph
(b)(1).
(c) The Grantee
may earn up to [number of shares awarded] Contingent
Performance Shares at the end of the Award
Period (the "Three-Year Award"), as
follows, subject to the restrictions
specified in Section 3(a), and further
described in Section 2(c)(2) below:
(1) The performance measured for earnings growth will be based
upon
the Company's
Delmarva propane distribution operation generating at least
the target level
of earnings, before interest expense and income taxes
("target EBIT"),
over the Award Period. If the Delmarva propane
distribution operation achieves
the target EBIT, the Grantee will be
eligible for the
Three-Year Award. If the target EBIT in the Company's
Delmarva propane
distribution operation is not achieved for the Award
Period, the
Grantee will not be eligible to any Contingent Performance
Shares under
this Paragraph (c)(1).
(2) If the Grantee is eligible to receive the Three-Year Award,
but
has received
Forfeitable Performance Shares for 2003 and/or 2004, the
number of
Contingent Performance Shares awarded at the end of the Award
Period shall
equal [number of shares awarded] less any Forfeitable
Performance
Shares received.
(d) 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.
(e) 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.
(f) 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.
(g) In the event
of a Change in Control, as defined in the Plan, during the
Award Period, 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 Period that has expired as of the
date of such Change in Control.
(h) If, during
the Award Period, the Grantee is separated from employment,
Contingent Performance Shares shall be
deemed earned or forfeited as follows:
(1) Upon voluntary termination by the Grantee (other than for
retirement at
age 65 or as accepted by the Committee) or termination by the
Company for
failure of job performance or other just cause as determined by
the Committee,
all unearned Contingent Performance Shares shall be
forfeited immediately;
(2) If the Grantee separates from employment by reason of death
or
total and
permanent disability (as determined by the Committee), the
number
of Contingent
Performance Shares that would otherwise have been earned at
the end of the
Award Period shall be reduced by pro rating such Contingent
Performance
Shares based on the proportion of the Award Period during which
the Grantee was
employed by the Company, unless the Commi
