PERFORMANCE SHARE AGREEMENT pursuant to the CHESAPEAKE UTILITIES CORPORATION PERFORMANCE INCENTIVE PLAN
Exhibit
10.4
pursuant
to the
CHESAPEAKE
UTILITIES CORPORATION
PERFORMANCE
INCENTIVE PLAN
AGREEMENT
dated as of December 26, 2005, and entered into, in duplicate, by and
between
Chesapeake Utilities Corporation, a Delaware corporation (the "Company"),
and S.
Xxxxxx Xxxx (the "Grantee") who resides at [address of executive].
WITNESSETH
that:
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") and the three years ending
December
31, 2008 (the “Award Period”). As more fully described herein, the Grantee may
earn a maximum total of 9,600 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 2,400 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 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.
|
| (b) |
The
Grantee may earn up to 960 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 6,720 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 2006 and/or 2007, the number of Contingent
Performance Shares awarded at the end of the Award Period shall equal
6,720 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,
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.
(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, without any pro ration 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 Committee determines that the Contingent Performance
Shares shall not be so reduced;
(3) Retirement
of the Grantee at age 65 or as accepted by the Committee shall not affect
the
Contingent Performance Shares, which shall continue to be earned through
the
remainder of the Award Period, as set forth above.
(i) The
Grantee shall be solely responsible for any federal, state and local
taxes of
any kind imposed in connection with the delivery of Contingent Performance
Shares. Prior to the transfer of any Contingent Performance Shares to
the
Grantee, the Grantee shall remit to the Company an amount sufficient
to satisfy
any federal, state, local and other withholding tax requirements. The
Grantee
may elect to have all or part of any withholding tax obligation satisfied
by
having the Company withhold Shares otherwise deliverable to the Grantee
as
Contingent Performance Shares, unless the Committee determines otherwise
by
resolution. If the Grantee fails to make such payments or election, the
Company
and its subsidiaries shall, to the extent permitted by law, have the
right to
deduct from any payments of any kind otherwise due to the Grantee any
taxes
required by law to be withheld with respect to the Contingent Performance
Shares.
Section
3. Forfeitable
Performance Shares
(a) In
lieu
of earning Contingent Performance Shares, the Grantee may elect to receive
2,400
Forfeitable Performance Shares, irrespective of whether the Company meets
any
Performance Goals. For each of the three years of the Award Period, the
Grantee
may elect to receive 800 Forfeitable Performance Shares per year. The
Grantee
must make any such election on or before September 30, of the respective
year,
and the election must be made in writing, in a manner prescribed by the
Committee. Once made, the election is irrevocable. If a Grantee makes
such an
election, he shall not receive any Contingent Performance Shares under
this
Agreement.
(b) Any
Forfeitable Performance Shares received by the Grantee pursuant to this
Section
3 shall be issued as promptly as possible after December 31, of the year
the
respective election is made, without payment of consideration by the
Grantee.
The Grantee shall have the right to vote the Forfeitable 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 Forfeitable Performance Shares (the
"Issue
Date"). If, however, the Grantee receives Shares as part of any dividend
or
distribution with respect to the Forfeitable Performance Shares, such
Shares
shall be treated as if they are Forfeitable Performance Shares, and such
Shares
shall be subject to all of the terms and conditions imposed by this Section
3.
(c) The
Forfeitable Performance Shares shall be subject to the following
restrictions:
(1) Sale,
transfer, pledge or hypothecation of the Forfeitable Performance Shares
shall be
prohibited for a period of three (3) years after the Issue Date (the
"Restriction Period"), and the certificates evidencing the Forfeitable
Performance Shares shall bear an appropriate restrictive legend that
refers to
the terms, conditions, and restrictions set forth in this Agreement.
Any attempt
to dispose of Forfeitable Performance Shares in contravention of this
Agreement
shall be ineffective. Upon expiration of the Restriction Period, the
transfer
restrictions imposed by this Section shall expire, and new certificates
representing the Forfeitable Performance Shares, without the restrictive
legend
described in this paragraph (c)(1), shall be issued, subject to the provisions
of paragraph (f) of this Section 3.
(2) If,
during the Restriction Period, the Grantee separates from employment
for any
reason other than death, normal retirement, total and permanent disability
(as
determined by the Committee), or involuntary termination without cause
(as
determined by the Committee), all Forfeitable Performance Shares shall
be
forfeited immediately.
(d) All
restrictions under paragraph (c) of this Section 3 shall immediately
expire on
the earliest of: (A) the Grantee's separation from employment because
of death,
total and permanent disability (as determined by the Committee), or involuntary
termination without cause (as determined by the Committee), (B) a Change
in
Control, as defined in the Plan, or (C) the end of the Restriction Period.
(e)
If,
after the Grantee has made an election to receive Forfeitable Performance
Shares
pursuant to Section 3(a), a Change in Control, as defined in the Plan,
occurs
during the Award Period, the Grantee shall receive at least the total
number of
Forfeitable Performance Shares due under this Agreement, without any
pro ration
based on the proportion of the Award Period that has expired as of the
date of
such Change in Control. Pursuant to Section 3(d), such Shares shall not
be
subject to any of the restrictions imposed by this Section.
(f) The
Forfeitable Performance Shares shall 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 Forfeitable
Performance
Shares after expiration of the Restriction 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 Forfeitable Performance Shares are not transferred
in the
absence of such exemption.
(g) The
Grantee shall be solely responsible for any federal, state and local
taxes of
any kind imposed in connection with receipt of the Forfeitable Performance
Shares:
(1) The
Grantee agrees that, no later than the date that the restrictions set
forth in
Section 3(c) lapse, he shall remit to the Company an amount sufficient
to
satisfy any federal, state, local and other withholding tax requirements.
(2) The
Grantee may elect to have all or part of any withholding tax obligation
satisfied by having the Company withhold Shares otherwise deliverable
to the
Grantee in connection with the Award of Restricted Stock, unless the
Committee
determines otherwise by resolution.
(3) If
the
Grantee properly elects, within 30 days of the Issue Date, to include
in gross
income for federal income tax purposes an amount equal to the fair market
value
of the Forfeitable Performance Shares, he shall make arrangements satisfactory
to the Committee to remit in the year of issue an amount sufficient to
satisfy
any federal, state, local and other withholding tax requirements with
respect to
such Forfeitable Performance Shares.
(4) If
the
Grantee fails to make satisfactory arrangements to meet all withholding
tax
obligations, the Company and its subsidiaries shall, to the extent permitted
by
law, have the right to deduct from any payments of any kind otherwise
due to the
Grantee any taxes required by law to be withheld with respect to the
Forfeitable
Performance Shares.
Section
4. Additional
Conditions to Issuance of Shares
Each
transfer of Contingent Performance Shares or Forfeitable Performance
Shares
(together, the "Award Shares") shall be subject to the condition that
if at any
time the Committee shall determine, in its sole discretion, that it is
necessary
or desirable as a condition of, or in connection with, transfer of Award
Shares
(i) to satisfy withholding tax or other withholding liabilities, (ii)
to effect
the listing, registration or qualification on any securities exchange
or under
any state or federal law of any Shares deliverable in connection with
such
exercise, or (iii) to obtain the consent or approval of any regulatory
body,
then in any such event such transfer shall not be effective unless such
withholding, listing, registration, qualification, consent or approval
shall
have been effected or obtained free of any conditions not acceptable
to the
Company.
Section
5. Adjustment
of Shares
(a) If
the
Company shall become involved in a merger, consolidation or other
reorganization, whether or not the Company is the surviving corporation,
any
right to earn Contingent Performance Shares or to elect to receive Forfeitable
Performance Shares shall be deemed a right to earn or to elect to receive
the
consideration into which the Shares represented by the Contingent Performance
Shares or by the Forfeitable Performance Shares would have been converted
under
the terms of the merger, consolidation or other reorganization. If the
Company
is not the surviving corporation, the surviving corporation (the "Successor")
shall succeed to the rights and obligations of the Company under this
Agreement.
(b) If
any
subdivision or combination of Shares or any stock dividend, capital
reorganization or recapitalization occurs after the adoption of the Plan,
the
Committee shall make such proportionate adjustments as are appropriate
to the
number of Contingent Performance Shares to be earned and/or to the number
of
Forfeitable Performance Shares to be received in order to prevent the
dilution
or enlargement of the rights of the Grantee.
Section
6. No
Right to Employment
Nothing
contained in this Agreement shall be deemed by implication or otherwise
to
confer upon the Grantee any right to continued employment by the Company
or any
affiliate of the Company.
Section
7. Notice
Any
notice to be given hereunder by the Grantee shall be sent by mail addressed
to
Chesapeake Utilities Corporation, 000 Xxxxxx Xxxx Xxxxxxxxx, Xxxxx, Xxxxxxxx
00000, for the attention of the Committee, c/o the Secretary, and any
notice by
the Company to the Grantee shall be sent by mail addressed to the Grantee
at the
address of the Grantee shown on the first page hereof. Either party may,
by
notice given to the other in accordance with the provisions of this Section,
change the address to which subsequent notices shall be sent.
Section
8. Assumption
of Risk
It
is
expressly understood and agreed that the Grantee assumes all risks incident
to
any change hereafter in the applicable laws or regulations or incident
to any
change in the market value of the Award Shares.
Section
9. Terms
of Plan
This
Agreement is entered into pursuant to the Plan (a copy of which has been
delivered to the Grantee). This Agreement is subject to all of the terms
and
provisions of the Plan, which are incorporated into this Agreement by
reference,
and the actions taken by the Committee pursuant to the Plan. In the event
of a
conflict between this Agreement and the Plan, the provisions of the Plan
shall
govern. All determinations by the Committee shall be in its sole discretion
and
shall be binding on the Company and the Grantee.
Section
10. Governing
Law; Amendment
This
Agreement shall be governed by, and shall be construed and administered
in
accordance with, the laws of the State of Delaware (without regard to
its choice
of law rules) and the requirements of any applicable federal law. This
Agreement
may be modified or amended only by a writing signed by the parties
hereto.
Section
11. Terms
of Agreement
This
Agreement shall remain in full force and effect and shall be binding
on the
parties hereto for so long as any Award Shares issued to the Grantee
under this
Agreement continue to be held by the Grantee.
IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed
in its
corporate name, and the Grantee has executed the same in evidence of
the
Grantee's acceptance
hereof, upon the terms and conditions herein set forth, as of the day
and year
first above written.
CHESAPEAKE
UTILITIES CORPORATION
By: ___________________________________
___________________________________
S.
Xxxxxx
Xxxx, Grantee
