PERFORMANCE SHARE
AGREEMENT
pursuant to
the
CHESAPEAKE UTILITIES
CORPORATION
PERFORMANCE INCENTIVE
PLAN
AGREEMENT dated as of December 30, 2005, and
entered into, in duplicate, by and between Chesapeake Utilities
Corporation, a Delaware corporation (the "Company"), and [name of
executive - each of John R. Schimkaitis, Paul M. Barbas and Michael
P. McMasters] (the "Grantee") who resides at [address of
executive].
WHEREAS, the Chesapeake Utilities Corporation
Performance Incentive Plan (the "Plan"), to be effective January 1,
2006, has been duly adopted by action of the Company's Board of
Directors (the "Board") on February 24, 2005 and by its
shareholders on May 5, 2005; 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 (“Shares”) 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, 2006 (the
"Award Year"). As more fully described herein, the Grantee may earn
a maximum total of [number of shares - 9,600 for John R.
Schimkaitis, 6,820 for Paul M. Barbas and 5,120 for Michael P.
McMasters] 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 - 2,400 for John R. Schimkaitis, 1,705 for Paul M. Barbas
and 1,280 for Michael P. McMasters] 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
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(a)
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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)
achievement of established milestones and objectives under the
Company’s long-term strategic plan (“SP”), and
(3) Shareholder Value as of the end of the Award Year. The EG, SP
and Shareholder Value shall be determined by the Committee in
accordance with the terms of the Plan and this Agreement 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.
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(b)
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The Grantee may
earn up to [number of shares - 9,600 for John R. Schimkaitis, 6,820
for Paul M. Barbas and 5,120 for Michael P. McMasters] Contingent
Performance Shares (the “Maximum Award”) as
follows:
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(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 achieving a growth in earnings per share of 3% to 5% for the
award year. If the Company earnings per share for 2006 is equal to
or exceeds [pre-determined target 1], the Grantee is eligible to
earn 25% of the maximum award. If the earnings per share is equal
to or greater than [pre-determined target 2], the Grantee is
eligible to earn an additional 15% of the maximum award but in no
event shall the Grantee earn more than 40% of the maximum award
under this paragraph (b) (2). If any of the award under this
paragraph is unearned in the current year, the Grantee is eligible
to earn those shares, if the accumulative earnings per share for
2005 to 2007 equals or exceeds [pre-determined accumulative
target].
(3) The performance measured for SG will be
based upon execution of the Company’s long-term strategic
plan, assuming attainment of pre-authorized milestones and
objectives as established by the Compensation Committee. If the
long-term strategy is executed, the Grantee will be eligible to
earn 30% of the Maximum Award. After approval from the
Company’s Board of Directors, if the long-term strategic plan
is not executed, 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, within 2 ½
months of the end of the Award Year. 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
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, without any pro ration 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
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 cau
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