EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.2
AN
EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") dated this 4th day of
August, 2003, by and between Chesapeake Utilities Corporation, a Delaware
corporation (the "Company"), and Xxxx X. Xxxxxx ("Executive").
WITNESSETH:
WHEREAS,
the Company is currently obtaining the benefit of Executive's services as a
full-time executive employee in the capacity of Vice President;
WHEREAS,
the Company's Board of Directors (the "Board") has authorized the Company to
agree to provide for Executive's continued employment pursuant to the terms of
this Agreement; and
WHEREAS,
Executive is willing, in consideration of the covenants hereinafter provided, to
continue to be employed by the Company in the capacity of Vice President and to
render services incident to such position during the term of this
Agreement.
NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the Company and Executive hereby agree as follows:
1. Employment. The
Company agrees to employ Executive, and Executive agrees to accept employment,
as an executive officer of the Company in the capacity of Vice President, with
such reasonable duties and responsibilities as are consistent with the By-laws
of the Company as of the date hereof, including, but not limited to,
responsibility for formulating financial policy and plans. Responsible for
providing overall direction for the accounting, tax, credit and treasury
functions.
2. Term.
(a) Term
of Agreement. The
term of this Agreement ("Term") shall be the Initial Term (as defined in
Paragraph 2(b) hereof), and, if applicable, the Extended Term (as defined in
Paragraph 2(c) hereof).
(b) Initial
Term. Subject
to Paragraph 2(c) hereof, the Initial Term of this Agreement shall extend for
three (3) years commencing on the date of this Agreement.
(c) Extended
Term. Upon
the occurrence of a Change in Control (as defined in Paragraph 2(d) hereof), the
Initial Term shall end and the Term of this Agreement shall thereupon
automatically be extended, commencing on the date of such Change in Control, for
the shorter of three (3) years or the period until Executive attains the
earliest age, if any, at which his compulsory retirement is permitted under
section 12(c) of the Age Discrimination in Employment Act of 1967, as amended,
29 U.S.C. § 631(c), or its successor (such extended three-year or shorter
term constituting the "Extended Term").
(d) Change
In Control. For the
purposes of this Agreement, Change in Control shall mean a change in the control
of the Company during the Term of this Agreement, which shall be deemed to have
occurred if:
(i) The
registration of the Company's voting securities under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), terminates or the Company shall have
fewer than 300 stockholders of record; or
(ii) any
person or group (within the meaning of Sections 13(d) and 14(d) of the 1934
Act), other than the Company or any of its majority-controlled subsidiaries,
becomes the beneficial owner (within the meaning of Rule 13d-3 under the 0000
Xxx) of 30 percent or more of the combined voting power of the Company's then
outstanding voting securities; or
(iii) a
tender offer or exchange offer (other than an offer by the Company or a
majority-controlled subsidiary), pursuant to which 30 percent or more of the
combined voting power of the company's then outstanding voting securities was
purchased, expires; or
(iv) the
stockholders of the Company approve an agreement to merge or consolidate with
another corporation (other than a majority-controlled subsidiary of the Company)
unless the stockholders of the Company immediately before the merger or
consolidation are to own more than 70 percent of the combined voting power of
the resulting entity's voting securities; or
(v) the
Company's stockholders approve an agreement (including, without limitation, a
plan of liquidation) to sell or otherwise dispose of all or substantially all of
the business or assets of the Company; or
(vi) during
any period of two consecutive years, individuals who, at the beginning of such
period, constituted the Board cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by the
Company's stockholders of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or
(vii) the
acquisition of direct or indirect beneficial ownership of more than 15 percent
of the Company's then outstanding voting securities by any person or group is
approved over the formal objection of the Company by the Securities and Exchange
Commission pursuant to Section 9 of the Public Utility Holding Company Act of
1935, as amended.
However,
no Change in Control shall be deemed to have occurred by reason of any event
involving a transaction in which Executive, or a group of persons or entities
with which Executive acts in concert, acquires, directly or indirectly, more
than 30 percent of the common stock or the business or assets of the Company;
any event involving or arising out of a proceeding under Title 11 of the United
States Code (or the provisions of any future United States bankruptcy law), an
assignment for the benefit of creditors or an insolvency proceeding under state
or local law; or any event constituting approval by the Company's stockholders
of a merger or consolidation if a majority of the group consisting of the
President and Vice Presidents of the Company who are parties to agreements
conferring rights upon a Change in Control shall have agreed in writing prior to
such approval that approval shall be deemed not to constitute a Change in
Control.
3. Time.
Executive agrees to devote all reasonable full time and best efforts for the
benefit of the Company and any subsidiary of the Company, and not to serve any
other business enterprise or organization in any capacity during the Term hereof
without the prior written consent of the Company, which consent shall not be
unreasonably with-held.
4. Office.
(a) Initial
Term. During
the Initial Term, the Company shall elect Executive as its Vice
President.
(b) Extended
Term. During
the Extended Term of this Agreement:
(i) Executive
shall hold and perform an office with the responsibility, importance and scope
within the Company at least equal to that of the office described and
contemplated in Paragraph 1 hereof; and
(ii) Executive's
office shall be located in Dover, Delaware, and Executive shall not be required,
without his written consent, to change his office location or to be absent
therefrom on business for more than 60 working days in any year.
5. Compensation.
(a)
Initial
Term. The
Company shall compensate Executive for his services hereunder during the Initial
Term at a rate of $255,000 per annum, payable in equal semi-monthly
installments, or such greater or lesser amount as the Board may determine ("Base
Compensation"). The Base Compensation rate shall be reviewed annually and may be
increased or decreased from time to time.
(b) Extended
Term. During
the Extended Term, the Company shall compensate Executive for his services
hereun-der at a rate per annum, payable in equal semi-monthly installments,
equal to his Base Compensation at the time the Extended Term commences,
increased:
(i)
effective on each anniversary of the date of this Agreement during the Extended
Term by an amount equal to the product of such Base Compensation times the
increase in the preceding calendar year of the Consumer Price Index for Urban
Wage Earners and Clerical Workers for the Philadelphia metropolitan region as
reported by the U.S. Department of Labor (or, if such index is no longer
reported, the corresponding increase in a comparable index); and
(ii) by such
additional amounts as the Board may determine from time to time based, in part,
on an annual review of Executive's compensation.
6. Expenses. During
the Term of this Agreement, the Company shall pay all necessary and reasonable
business expenses incurred by Executive on behalf of the Company in the course
of his employment hereunder, including, without limitation, expenses incurred in
the conduct of the Company's business while away from his domicile and expenses
for travel, meals, lodging, entertainment and related expenses that are for the
benefit of the Company.
7. Other
Benefits.
(a) Executive
shall be entitled to participate in all profit-sharing, insurance, medical and
retirement benefit plans, together with vacation and other employee benefits of
the Company, now in effect or as hereafter amended or established, in which the
Company executive employees are permitted to participate. The Executive’s
participation shall be in accordance with the terms and provisions of such
plans.
(b) The
Company shall furnish Executive with a suitable office, necessary administrative
support and customary furniture and furnishings for such office. The Company
further agrees that Executive shall have the use of a Company-owned or
Company-leased and Company-maintained automobile, new every three years, of a
kind and model appropriate to his position with the Company.
(c) Nothing
in this Agreement shall preclude the Company from amending or terminating any
employee benefit plan or practice, but, it being the intent of the parties that
the Executive shall continue to be entitled during the Extended Term to benefits
and perquisites as set forth in Paragraphs 7(a) and 7(b) hereof at least equal
to those attached to his position on the date of this Agreement, nothing in this
Agreement shall operate as, or be construed to authorize, a reduction during the
Extended Term without Executive's written consent in the level of such benefits
or perquisites as in effect on the date of a Change in Control. If and to the
extent that such benefits or perquisites are not payable or provided to
Executive under any such plan or practice by reason of an amendment thereto or
termination thereof during the Extended Term, the Company shall pay or provide
such benefits or perquisites to Executive.
8. Termination.
(a)
Termination
for Cause. This
Agreement and Executive's employment hereunder may be terminated by the Company
at any time for Cause. In the event of termination for Cause, the Executive
shall not be entitled to any severance benefits under this agreement. During the
Initial Term, Cause shall be as the Board may reasonably determine. During the
Extended Term, termination of this Agreement and the Executive's employment
shall be deemed to have been for Cause only if it shall have been the result
of:
(i)
conduct by Executive that constitutes a felony under the laws of the United
States or a state in which Executive works or resides;
(ii) an
act or acts of dishonesty by Execu-tive resulting or intended to result directly
or indirectly in material gain to or personal enrichment of Executive at the
Company's expense;
(iii) a
deliberate and intentional refusal by Executive during the Extended Term (except
by reason of incapacity due to illness or accident) to comply with the
provisions of Paragraph 1 hereof, provided that such breach shall have resulted
in demonstrably material injury to the Company and the Executive shall have
failed to remedy such breach within thirty days after notice from the Secretary
of the Company demanding that the Executive remedy such breach; or
(iv) the
engagement in conduct by Executive that is materially injurious to the Company
if such conduct was undertaken without good faith and the reasonable belief that
such conduct was in the best interest of the Company.
(b) Termination
During Extended Term. During
the
Extended
Term of this Agreement, the term "Termination" shall mean:
(i)
Termination by the Company of Executive's employment; or
(ii)
Termination by Executive of his employment following the occurrence of any of
the following events:
(A)
Failure to elect or reelect Executive to, or removal of Executive from, the
office or offices set forth in Paragraph 1 hereof, or the Board if Executive
shall have been a member of the Board immediately prior to a Change in Control
of the Company;
(B)
Executive's good-faith determination that there has been a significant change in
the nature or scope of his authorities, powers, functions, duties or
responsibilities attached to the positions contemplated in Paragraph 1 hereof or
a reduction in his compensation as provided in Paragraph 5 hereof or his
benefits as provided in Paragraph 7, which change or reduction is not remedied
within thirty days after notice to the Company by Executive;
(C) Any
other breach by the Company of any provision of this Agreement (including,
without limitation, relocation of Executive in violation of Paragraph 4(b)
hereof), which breach is not remedied within thirty days after notice to the
Company by Executive; or
(D) The
liquidation, dissolution, consolidation or merger of the Company or transfer of
all or a significant portion of its assets unless a successor or successors (by
merger, consolidation or otherwise) to which all or a significant portion of its
assets has been transferred shall have assumed all duties and obligations of the
Company under this Agreement;
provided
that in any event set forth in this Paragraph 8(b)(ii), Executive shall have
elected to terminate his employment under this Agreement upon not less than
forty (40) and not more than ninety (90) days' notice to the Board, attention of
the Secretary, given, except in the case of a continuing breach, within three
calendar months after (1) failure to be so elected or reelected, or such
removal, (2) expiration of the 30-day cure period with respect to such event, or
(3) the closing date of such liquidation, dissolution, consolidation, merger or
transfer of assets.
An
election by Executive to terminate his employment under the provisions of this
Paragraph shall not be deemed a voluntary termination of employment by Executive
for the purpose of this Agreement or any plan or practice of the
Company.
(c) Payment
Upon Termination During Extended Term. In the
event of a Termination of this Agreement during the Extended Term hereof for any
reason other than Cause or Executive's death, the Company shall, subject to
Paragraph 9 hereof, pay to Executive (or, in the event of his death following
the Termination, his legal representative) in cash within thirty (30) days after
the date of such Termination (the "Termination Date"):
(i) An
amount equal to the product of multiplying the monthly rate of Base Compensation
to which Executive was entitled under Paragraph 5(b) hereof on the day
immediately prior to the Termination Date by the lesser of (A) twenty-four (24)
months or (B) the number of months remaining in the Term of this Agreement (the
shorter of such periods constituting the "Covered Period");
(ii) An
amount equal to the present value of the additional benefits that would have
been paid Executive under the Company's retirement plans if he had continued to
be employed pursuant to this Agreement during the Covered Period and the
retirement plans had continued during such period without change from the date
of the Change in Control;
(iii) For
each share of Company stock subject to a stock option that was awarded to
Executive under a Company stock option plan, was held by Executive on the day
immediately prior to his Termination Date, was not exercisable on that date but
would have become exercisable during the Covered Period if Executive's
employment with the Company had continued during that period, an amount equal to
the excess of (A) the daily average closing price for a share of the Company's
stock on the New York Stock Exchange, or such other national securities exchange
on which such stock may be listed, during the 30-day period ending upon the date
of the Change in Control, or, if higher, during the 30-day period ending upon
the Termination Date (adjusted as appropriate for any changes in the capital
structure of the Company) over (B) the option price for a share of the Company's
stock subject to the option; and
(iv) An amount
equal to the aggregate of the Company's contributions to the Company's savings
plan in respect of Executive that were not vested on the day immediately prior
to the Termination Date but that would have been vested at the end of the
Covered Period if Executive had remained employed by the Company for the
duration of that period.
For
purposes of calculating the present value specified in Paragraph 8(c)(ii), the
discount rate shall equal the PBGC interest rate for immediate annuities, as
provided in 29 C.F.R. Part 4044, Appendix B, Table II or its successor, in
effect for a valuation date coinciding with the Termination Date. If that rate
should no longer be published, the discount rate shall be such closely
comparable interest rate as the Company may reasonably determine.
(d) Payment
Upon Termination During Initial Term. In the
event that the Company terminates this Agreement during, or elects pursuant to
Paragraph 17 hereof not to renew this Agreement at the end of, the Initial Term
hereof for any reason other than Cause or Executive’s death, the Company shall
continue to pay to Executive (or in the event of his death following such
termination, his legal representative) his Base Compensation under Paragraph
5(a) hereof, at the semi-monthly rate in effect immediately prior to the date of
such termination (“Termination Date”), for a period of six months following the
Termination Date.
9. Maximum
Payment Upon Termination.
Notwithstanding any other provision of this Agreement, if the Company should
determine, in consultation with tax advisors satisfactory to Executive, that any
amount payable to Executive pursuant to Paragraph 8 of this Agreement during the
Extended Term, either alone or in conjunction with any payments or benefits to
or on behalf of Executive pursuant to this Agreement or otherwise, would not be
deductible by the Company, in whole or in part, for federal income tax purposes
by reason of section 280G of the Internal Revenue Code or its successor, then
the aggregate amount payable to Executive pursuant to Paragraph 8 shall be
reduced to the largest amount that, in the opinion of such tax advisors, the
Company could pay Executive under Para-graph 8 without any part of that amount
being nondeductible by the Company as a result of Section 280G or its successor.
10. Mitigation.
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement either by seeking other employment or otherwise. The
amount of any payment provided for herein shall not be reduced by any
remuneration that Executive may earn from employment with another employer or
otherwise following his Termination Date.
11. Noncompetition
Covenant. For a
period of one year following the Termination Date and, if Executive has given a
notice pursuant to Paragraph 8(b)(ii) hereof, for a period of 15 months
following the giving of such notice, Executive shall assist no individual or
entity other than the Company to acquire any entity with respect to which a
proposal to acquire was presented to the Board prior to the beginning of the
period.
12. Indemnification. The
Company shall indemnify Executive to the fullest extent permitted by applicable
Delaware law (as may be amended from time to time), including the advance of
expenses permitted therein.
13. Performance. The
failure of either party to this Agreement to insist upon strict performance of
any provision hereof shall not constitute a waiver of its rights subsequently to
insist upon strict performance of such provision or any other provision of this
Agreement.
14. Non-Assignability. Neither
party shall have the right to assign this Agreement or any rights or obligations
hereunder without the consent of the other party.
15. Invalidity. If any
provisions of this Agreement shall be found to be invalid by any court of
competent jurisdiction, such finding shall not affect the remaining provisions
of this Agreement, all of the which shall remain in full force and
effect.
16. Arbitration
and Legal Fees. In the
event of any dispute regarding a refusal or failure by the Company to make
payments or provide benefits hereunder for any reason, Executive shall have the
right, in addition to all other rights and remedies provided by law, to
arbitration of such dispute under the rules of the American Arbitration
Asso-ciation, which right shall be invoked by serving upon the Company a notice
to arbitrate, stating the place of arbitration, within ninety (90) days of
receipt of notice in any form (including, without limitation, failure by the
Company to respond to a notice from Executive within thirty (30) days) that the
Company is withholding or proposes to withhold payments or provisions of
benefits. In the event of any such dis-pute, whether or not Executive exercises
his right to arbitration, if it shall ultimately be determined that the
Company's refusal or failure to make payments or provide benefits hereunder was
wrongful or otherwise inconsistent with the terms of this Agreement, the Company
shall indemni-fy and hold harmless Executive from and against any and all
expenses incurred in connection with such determination, including legal and
other fees and expenses. Without limitation of or by the foregoing, the Company
shall, within ten (10) days after notice from Executive, provide Executive with
an irrevocable letter of credit in the amount of $100,000 from a bank
satisfactory to Executive against which Executive may draw to pay legal fees and
other fees and expenses in connection with any attempt by Executive to enforce
any of his rights under this Agreement during the Extended Term. Said letter of
credit shall not expire before ten (10) years following the date of this
Agreement.
17. Renewal. If the
Initial Term of this Agreement expires without there having been a Change in
Control, this Agreement shall be renewed, as of the day following such
expiration, unless, during the period beginning 90 days prior and ending 30 days
prior to such day, either the Company or Executive shall have given notice to
the other that this Agreement will not be renewed. If this Agreement is renewed
as provided under this Paragraph, the new Agreement shall be identical to this
Agreement (except insofar as the Company and Executive may otherwise agree in
writing) except that the date of the new Agreement shall be as of the day
following the expiration of the Initial Term of this Agreement.
18. Successors. This
Agreement shall be binding upon and inure to the benefit of the Executive (and
his personal representative), the Company and any successor organization or
organizations that shall succeed to substantially all of the business and
property of the Company, whether by means of merger, consolidation, acquisition
of substantially all of the assets of the Company or otherwise, including by
operation of law.
19. Set-off. The
Company shall have no right of set-off or counterclaim in respect of any claim,
debt or obligation against any payments or benefits provided for in this
Agreement.
20. Amendments. No
Amendment to this Agreement shall be effective unless in writing and signed by
both the Company and Executive.
21. Governing
Law. This
Agreement shall be interpret-ed and enforced in accordance with the laws of the
State of Delaware.
22. Notices. Unless
otherwise stated herein, all notices hereunder shall be in writing and shall be
deemed to be given when personally delivered or mailed by United States
registered or certified mail, postage prepaid, to, if to the Company, 000 Xxxxxx
Xxxx Xxxxxxxxx, Xxxxx, Xxxxxxxx 00000, and, if to Executive, the last address
therefore shown on the records of the Company. Either the Company or Executive
may, by notice to the other, designate an address other than the foregoing for
the receipt of subsequent notices.
23. Withholding. The
Company may withhold from any amounts payable to Executive hereunder all
federal, state, city or other taxes that the Company may reasonably determine
are required to be withheld pursuant to any applicable law or
regulation.
24. Nature
of Payments Upon Termination. All
payments to Executive pursuant to Paragraphs 8 and 9 of this Agreement shall be
considered as liquidated damages or, in the case of certain payments pursuant to
Paragraph 8(d), as severance payments in consideration of Executive's past
services to the Company, and no such payment shall be regarded as a penalty to
the Company.
25. Acknowledgment. The
parties hereto each acknowledge that each has read this Agreement and
understands the same and that each enters into this Agreement freely and
voluntarily.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
CHESAPEAKE
UTILITIES CORPORATION
[CORPORATE
SEAL] By: _______________________________
Title:
ATTEST:
__________________________
Secretary EXECUTIVE
____________________________________
