PERFORMANCE SHARE AGREEMENT
PURSUANT TO THE
CHESAPEAKE UTILITIES CORPORATION
PERFORMANCE INCENTIVE PLAN
AGREEMENT dated as of January 1, 2002, and entered into, in duplicate, by
and between Chesapeake Utilities Corporation, a Delaware corporation (the
"Company"), and [Xxxxx X. Xxxxxx / Xxxx X. Xxxxxxxxxxx / Xxxxxxx X. XxXxxxxxx /
Xxxxxxx X. Xxxxxxxx / Xxxxxxx Xxxxxx] (the "Grantee") who resides at [ADDRESS].
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, 2002 (the "Award Year"). As more fully described
herein, the Grantee may earn a maximum total of [XXXX] 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 [XXXX]
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) 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, including, but
not limited to, temperature fluctuation during the Award Year. The Committee
shall promptly notify the Grantee of its determination.
(b) The Grantee may earn up to [XXXX] Contingent Performance Shares
(the "Maximum Award"), as follows:
(1) If the Grantee for the Award Year exceeds the Earning's Growth
measured as a return on equity or alternatively, an income target in excess of
budgets for the Award Year, the Grantee will be eligible to earn up to 35% of
the maximum award. If the Earnings Growth is at or below the target, the
Grantee shall not earn any Contingent Performance Shares under this paragraph
(1).
(2) If the Non-Regulated Investment increased from 23% to 28% of the
Company's total capitalization in the Award Year, or alternatively the
non-regulated investment growth may be stated as a dollar amount, the Grantee
shall earn 30% of the maximum award. If the Non-Regulated Investment does not
hit the target of 28% of total capitalization of the Company or the investment
growth dollar target, the Grantee shall not earn any Contingent Performance
Shares under is paragraph (2); and
(3) 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. If the value of $10,000 invested for the
Award Year does not exceed the Industry Index for the Award Year, the Grantee
shall not earn any Contingent Performance Shares under this paragraph (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 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 Year shall be reduced by pro rating such Contingent Performance
Shares based on the proportion of the Award Year 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 Year, as set forth above.
(h) The Grantee shall be solely responsible for any federal, state and
local income taxes 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 [XXXX] Forfeitable Performance Shares, irrespective of whether
the Company meets any Performance Goals. The Grantee must make any such
election on or before September 30, 2002, 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,
2002, 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 of Common Stock 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 Year, the Grantee shall receive at least the
total number of Forfeitable Performance Shares due under this Agreement, pro
rated based on the proportion of the Award Year 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 income taxes 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 of Common Stock 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 of Common Stock 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: ___________________________________
___________________________________
Grantee
