EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.5
This Executive Employment Agreement (the “Agreement”) dated this 31st day of
December, 2009, is hereby made by and between Chesapeake Utilities Corporation, a Delaware
corporation (the “Company”), and Xxxxxx Xxxxxxxxx (the “Executive”).
Recitals
WHEREAS, the Company is currently obtaining the benefit of Executive’s services as a full-time
executive employee in the capacity of Vice-President of Unregulated Energy Operations;
WHEREAS, the Company’s Board of Directors (the “Board”) has authorized the Company to provide
for the Executive’s continued employment pursuant to the terms of this Agreement; and
WHEREAS, Executive is willing, in consideration of the covenants and consideration hereinafter
provided, to continue to be employed by the Company in the capacity of Vice-President of
Unregulated Energy Operations and to render services incident to such position during the term of
this Agreement.
Agreement
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 of Unregulated
Energy Operations, with such authority, duties and responsibilities as are customarily assigned to
such position, including such reasonable duties and responsibilities as may be requested of the
Executive by the Board of Directors and which are consistent with the By-laws of the Company as in
effect from time to time including, but not limited to, custody of the corporate funds and
securities and maintenance of accurate accounts of receipts and disbursements in books belonging to
the Company.
2. Term.
(a) Term of Agreement. The term of this Agreement (“Term”) shall be the Current Term
(as defined in Paragraph 2(b), and, if applicable, the Extended Term (as defined in Paragraph
2(c)).
(b) Current Term. Subject to Paragraph 2(c), the Current Term of this Agreement shall
extend for three (3) years commencing on January 1, 2010. The Current Term is subject to extension
in accordance with the provisions of Paragraph 15 of this Agreement.
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(c) Extended Term. Upon the occurrence of a Change in Control (as defined in
Paragraph 2(d)), the Current 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 two
(2) 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 any successor provision thereto (such extended two-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 upon the first of the following events:
(i) any one person, or group of owners of another corporation who acting
together through a merger, consolidation, purchase, acquisition of stock or the like
(a “Group”), acquires ownership of stock of the Company (or a majority-controlled
subsidiary of the Company) that, together with the stock held by such person or
Group, constitutes more than fifty percent (50%) of the total fair market value or
total voting power of the stock of the Company. However, if such person or Group is
considered to own more than fifty percent (50%) of the total fair market value or
total voting power of the stock of the corporation before this transfer of the
Company’s stock, the acquisition of additional stock by the same person or Group
shall not be considered to cause a Change in Control of the Company; or
(ii) any one person or Group acquires (or has acquired during the twelve (12)
month period ending on the date of the most recent acquisition by such person or
persons) ownership of stock of the Company (or a majority-controlled subsidiary of
the Company) possessing thirty-five percent (35%) or more of the total voting power
of the stock of the Company where such person or Group is not merely acquiring
additional control of the Company; or
(iii) a majority of members of the Company’s Board (other than the Board of a
majority-controlled subsidiary of the Company) is replaced during any twelve (12)
month period by directors whose appointment or election is not endorsed by a
majority of the members of the Company’s Board prior to the date of the appointment
or election; or
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(iv) any one person or Group acquires (or has acquired during the twelve (12)
month period ending on the date of the most recent acquisition by such person or
Group) assets from the Company (or a majority-controlled subsidiary of the Company)
that have a total gross fair market value equal to or more than forty percent (40%)
of the total fair market value of all assets of the Company immediately prior to
such acquisition or acquisitions. For this purpose, gross fair market value means
the value of the assets of the Company, or the value of the assets being disposed
of, determined without regard to any liabilities associated with such assets. A
transfer of assets by the Company will not result in a Change
in Control if the assets are transferred to:
(A) a stockholder of the Company (immediately before the asset transfer)
in exchange for or with respect to its stock;
(B) an entity, fifty percent (50%) or more of the total value or voting
power of which is owned, directly or indirectly, by the Company immediately
after the transfer of assets;
(C) a person or Group that owns, directly or indirectly, fifty percent
(50%) or more of the total value or voting power of all the outstanding stock
of the Company; or
(D) an entity, at least fifty percent (50%) of the total value or voting
power of which is owned directly or indirectly, by a person described in
subparagraph (d)(i), above.
However, no Change in Control shall be deemed to have occurred with respect to the Executive by
reason of (1) any event involving a transaction in which the Executive or a group of persons or
entities with which the Executive acts in concert, acquires, directly or indirectly, more than
thirty percent (30%) of the Common Stock of the business or assets of the Company; (2) 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), or an assignment for the benefit of
creditors or an insolvency proceeding under state or local law; or (3) 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 the approval that
the approval shall not be deemed 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 of this Agreement without the prior
written consent of the Company, which consent shall not be unreasonably withheld.
4. Office.
(a) Current Term. During the Current Term, the Executive shall serve as the Company’s
Vice-President of Unregulated Energy Operations and the parties agree that the Company shall elect
the Executive to this office, on an annual basis if necessary, during the Current Term of this
Agreement.
(b) Extended Term. During the Extended Term of this Agreement the 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. Further, 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 sixty (60) working days in any year.
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5. Compensation and Benefits.
(a) Base Compensation; Current Term. The Company shall compensate Executive for his
services hereunder during the Current Term at a rate of $160,000 per annum, or such amount as the
Board may from time to time determine (“Base Compensation”), payable in installments on the
Company’s regular payroll dates for salaried executives. The Base Compensation rate shall be
reviewed annually and may be increased or decreased, from time to time, provided, however, that
Base Compensation shall only be decreased by the Board on a good faith basis and with reasonable
justification for the same, and provided further, that in the event of a Change in Control, Base
Compensation shall not be decreased.
(b) Base Compensation; Extended Term. During the Extended Term, the Company shall
compensate Executive for his services hereunder at a rate per annum, payable in installments on the
Company’s regular payroll dates for salaried executives, equal to his Base Compensation at the time
the Extended Term commences, increased, but not decreased:
(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 the Executive’s compensation and performance.
(c) Incentive Plans. During the Term of this Agreement, Executive shall be entitled
to participate in all bonus, incentive compensation and performance based compensation plans, and
other similar policies, practices, programs and arrangements of the Company, now in effect or as
hereafter amended or established, on a basis that is commensurate with his position and no less
favorable than those generally applicable or made available to other executives of the Company.
The Executive’s participation shall be in accordance with the terms and provisions of such plans
and programs. Participation shall include, but not be limited to:
(i) Chesapeake Utilities Corporation Performance Incentive Plan.
Executive shall be eligible for an incentive compensation award equal to 3,200
shares of the Company’s common stock as granted on an annual basis by the Board
during the Term of this Agreement.
(ii) Chesapeake Utilities Corporation Cash Bonus Incentive Plan.
Executive shall be eligible for a minimum cash bonus award equal to 30 percent (30%)
of Base Compensation as determined on an annual basis by the Board during the Term
of this Agreement.
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(d) Recovery of Compensation. The Executive acknowledges and agrees that all or any
portion of an incentive award under the above described bonus and incentive compensation plans or
any future arrangement established by the Company to provide incentive or bonus compensation,
whether payable in cash, Company common stock or other property, (“Award”) is subject to an
obligation of repayment by the Executive to the Company if the amount of the Award was calculated
based upon the achievement of certain financial results (as reflected in the financial statement of
the Company or otherwise) or other performance metrics that, in either case, were subsequently
found to be materially inaccurate. The amount that shall be repaid by the Executive to the Company
shall be based on the excess amount paid or awarded to the Executive under the Award as compared to
the amount that would have been paid or awarded had the material inaccuracy not occurred. If the
Compensation Committee of the Board of Directors determines that the Executive engaged in
misconduct, malfeasance or gross negligence in the performance of his or her duties that either
caused or significantly contributed to the material inaccuracy in financial statements or other
performance metrics, there shall be no time limit on this right of recovery, which shall apply to
all future Awards as well as to any and all pre-existing Awards that have not yet been determined
and paid as of the date of this Agreement. In all other circumstances, this right of recovery
shall apply to all future Awards as well as to any and all pre-existing Awards that have not yet
been determined and paid as of the date of this agreement for a period not exceeding one year after
the date of payment of each such Award. In addition, the Executive hereby agrees that, if he or
she does not promptly repay the amount recoverable hereunder within thirty (30) days of a demand
therefor, such amount may be withheld from compensation of any type not yet due and payable to the
Executive, including, but not limited to, the cancellation of future Awards, as determined by the
Compensation Committee in its sole discretion. In addition, the Compensation Committee is granted
the discretionary authority to interpret and enforce this provision as it determines to be in the
best interest of the Company and equitable to the parties. Notwithstanding anything herein, this
provision shall not be the Company’s exclusive remedy with respect to such matters.
(e) Retirement Plans. During the Term of this Agreement, Executive shall be entitled
to participate in all profit-sharing, savings and retirement benefit plans, plans that are
supplemental to any tax-qualified savings and retirement plans, and other similar policies,
practices, programs and arrangements of the Company, now in effect or as hereafter amended or
established, on a basis that is commensurate with his position and no less favorable than those
generally applicable or made available to other executives of the Company. The Executive’s
participation shall be in accordance with the terms and provisions of such plans and programs.
(f) Welfare Benefits. During the Term of this Agreement, Executive, and his family,
as applicable, shall be entitled to participate in all insurance, medical, health and welfare, and
similar plans and arrangements, as well as all vacation and other employee fringe benefit plans,
perquisite plans, and other policies, practices, programs and arrangements of the Company, now in
effect or as hereafter amended or established, on a basis that is commensurate with his position
and no less favorable than those generally applicable or made available to other executives of the
Company. The Executive’s participation shall be in accordance with the terms and provisions of
such plans.
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(g) Other Benefits. During the Term of this Agreement, 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 (3) years, of a
kind and model appropriate to his position with the Company.
(h) 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 properly substantiated expenses for travel,
meals, lodging, entertainment and related expenses that are for the benefit of the Company. All
expense reimbursements shall comply with applicable rules or guidelines of the Company in effect at
the time the expense is incurred.
If any reimbursements under this provision are taxable to the Executive, such reimbursements
shall be paid on or before the end of the calendar year following the calendar year in which the
reimbursable expense was incurred, and the Company shall not be obligated to pay any such
reimbursement amount for which Executive fails to submit an invoice or other documented
reimbursement request at least 10 business days before the end of the calendar year next following
the calendar year in which the expense was incurred. Such expenses shall be reimbursable only to
the extent they were incurred during the term of the Agreement. In addition, the amount of such
reimbursements that the Company is obligated to pay in any given calendar year shall not affect the
amount the Company is obligated to pay in any other calendar year. In addition, Executive may not
liquidate or exchange the right to reimbursement of such expenses for any other benefits.
(i) 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 5(a) through 5(c) and 5(e) through 5(h) 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 nevertheless pay or provide such benefits or perquisites to Executive, either
directly or through alternative arrangements.
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6. Termination.
(a) Payment Upon Termination During Current Term. In the event that the Company
terminates this Agreement during the Current Term, or elects pursuant to Paragraph 15 not to renew
this Agreement at the end of the Current Term for any reason other than Cause, as defined below, or
the 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),
at the rate in effect immediately prior to the date of such termination
(“Termination Date”), for a period of one (1) year following the Termination Date. In
addition, and notwithstanding the foregoing provisions of this Paragraph 6(a), to the extent
required in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), cash amounts that would otherwise be payable under this Paragraph 6(a) during the
six-month period immediately following the Termination Date shall instead be paid, with interest on
any delayed payment at the applicable federal rate under Code Section 7872(f)(2)(A), on the first
business day after the date that is six (6) months following the Executive’s “separation from
service” within the meaning of Code Section 409A.
(b) 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. Termination of the
Executive’s employment shall be deemed to have been “for Cause” only if it shall have been the
result of:
(i) Executive’s conviction of a felony under the laws of the United States or a
state in which Executive works or resides;
(ii) a willful or deliberate act or acts of dishonesty by Executive 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 (except by reason of
incapacity due to illness or accident) to comply with the provisions of Paragraph 1,
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 (30)
days after notice from the Corporate Secretary of the Company demanding that the
Executive remedy such breach; or
(iv) 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.
(c) Payment Upon Termination During Extended Term. In the event of a Termination
Without Cause, as defined below, during the Extended Term, the Company shall 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 “Extended Termination Date”) the sum of
all accrued but unpaid salary, bonus, vacation pay, expense reimbursements and any other amounts
due, plus the following:
(i) an amount equal to the product of multiplying the monthly rate of Base
Compensation to which Executive was entitled under Paragraph 5(a) on the day
immediately prior to the Extended Termination Date by twenty-four (24) months
(“Covered Period”);
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(ii) an amount equal to the present value of the additional benefits that
would have been paid to 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) an amount equal to the aggregate of the Company’s contributions to the
Company’s savings plan (including, but not limited to, the Chesapeake Utilities
Corporation Retirement Savings Plan, and any related excess benefit plans) in
respect of Executive that were not vested on the day immediately prior to the
Extended 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; and
(iv) an amount equal to the product of multiplying the average of the annual
aggregate benefits awarded to the Executive under all bonus, incentive compensation
or performance based compensation program(s) of the Company in which the Executive
was a participant, whether annual, short or long term, in each of the three (3)
calendar years immediately preceding the calendar year in which the Extended
Termination Date occurs by two (2) years.
For purposes of calculating the present value specified in Paragraph 6(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 Extended
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. In addition, the Company
shall continue to provide medical, prescription drug, vision, dental and other Company welfare
benefits to the Executive and his eligible dependents during the Covered Period as if the Executive
remained an active employee of the Company.
In addition, and notwithstanding the foregoing provisions of this Paragraph 6(c), if the
Extended Termination Date occurs more than two (2) years after the occurrence of a Change in
Control, then the amount payable in cash under this provision shall be payable in substantially
equal installments over the one (1) year period following the Executive’s “separation from service”
within the meaning of Code Section 409A. The number of substantially equal installments shall be
equal to the number of regular payroll periods during said one (1) year period, with one
installment payable on each such payroll period. In addition, to the extent required in order to
comply with Code Section 409A, cash amounts that would otherwise be payable under this Paragraph
6(c) during the six-month period immediately following the Extended Termination Date (and which are
not eligible for the exception applicable to payments due to involuntary separation under Treas.
Reg. Section 1.409A-1(b)(9)(iii)) shall instead be paid, with interest on any delayed payment at
the applicable federal rate under Code Section 7872(f)(2)(A), on the first business day after the
date that is six (6) months following the Executive’s “separation from service” within the meaning
of Code Section 409A. Further, any taxable welfare benefits provided to Executive pursuant to this
Paragraph 6(c) that are not “disability pay” or “death benefits” within the meaning of Treas. Reg.
Section 1.409A-1(a)(5) (collectively, the “Applicable Benefits”) shall be subject to the following
requirements in order to comply with Code Section 409A. The amount of any Applicable Benefits
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provided during one taxable year shall not affect the amount of the Applicable
Benefits provided in any other taxable year, except that with respect to any Applicable Benefits
that consist of the reimbursement of expenses referred to in Code Section 105(b), a limitation may
be imposed on the amount of such reimbursements over some or all of the Covered Period, as
described in Treas. Reg. Section 1.409A-3(i)(1)iv)(B). To the extent that any Applicable Benefits
consist of the reimbursement of eligible expenses, such reimbursement must be made on or before the
last day of the calendar year following the calendar year in which the expense was incurred. No
Applicable Benefits may be liquidated or exchanged for another benefit. During the period of six
(6) months immediately following Executive’s separation from service (within the meaning of Code
Section 409A), Executive shall be obligated to pay the Company the full cost for any Applicable
Benefits that do not constitute health benefits of the type required to be provided under the
health continuation coverage requirements of Code Section 4980B, and the Company shall reimburse
Executive for any such payments on the first business day that is more than six (6) months after
Executive’s separation from service, together with interest on such amount from the date of
separation from service through the date of payment at the applicable federal rate under Code
Section 7872(f)(2)(A).
(d) Termination Without Cause. For purposes of Paragraph 6(c) above, “Termination
Without Cause” shall mean:
(i) Termination by the Company of Executive’s employment without Cause (as
“Cause” is defined in Paragraph 6(b) above); or
(ii) Termination by Executive of his employment following the occurrence of any
of the following events:
(A) failure to elect or re-elect Executive to, or removal of Executive
from, the office or offices set forth in Paragraph 1, 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 or a reduction in his compensation or in the benefits
available to the Executive and his family, as provided in Paragraph 5, which
change or reduction is not remedied within thirty (30) days after notice to
the Company by the Executive;
(C) any other breach by the Company of any provision of this Agreement
(including, without limitation, relocation of the Executive in violation of
Paragraph 4(b)), which breach is not remedied within thirty (30) 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.
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In order to effect a Termination Without Cause in any event set forth in this
Paragraph 6(d)(ii), Executive must elect to terminate his employment under this
Agreement upon not less than forty (40) days and not more than ninety (90) days’
written notice to the Board, attention of the Corporate Secretary, given, except in
the case of a continuing breach, within three (3) 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. Further, the
death of the Executive during the Extended Term but prior to a Termination Without
Cause, as defined, shall not constitute Cause or be deemed to be a Termination
Without Cause.
7. Maximum Payment Upon Termination.
(a) Determination. Notwithstanding any other provision of this Agreement, if any
payment or distribution (a “Payment”) by the Company or any other person or entity to or for the
benefit of the Executive is determined to be an “excess parachute payment” (within the meaning of
Code Section 280G(b)(1) or any successor provision of similar effect), whether paid or payable or
distributed or distributable pursuant to Paragraph 6(c) of this Agreement or otherwise, then the
Executive’s benefits under this Agreement shall be reduced by the amount necessary so that the
Executive’s total “parachute payment” as defined in Code Section 280G(b)(2)(A) under this and all
other agreements will be $1.00 less than the amount that would be a “parachute payment”. The
determination concerning the application of the reduction shall be made by a nationally-recognized
firm of independent accountants (together with legal counsel of its choosing) selected by the
Company after consultation with the Executive (which may be the Company’s independent auditors),
whose determination shall be conclusive and binding on all parties. Any fees and expenses of such
independent accountants and counsel (including counsel for the Executive) shall be borne by the
Company.
(b) Notices. If it is determined that the benefits under this Agreement must be
reduced under this Paragraph, within 10 days of the date of such determination, the Company will
apprise the Executive of the amount of the reduction (“Notice of Reduction”). Within 10 days of
receiving that information, the Executive may specify how (and against which benefit or payment
source) the reduction is to be applied (“Notice of Application”). The Company will be required to
implement these directions within 10 days of receiving the Notice of Application. If the Company
has not received a Notice of Application from the Executive within 10 days of the date of the
Notice of Reduction, the Company will apply this Paragraph proportionately based on the amounts
otherwise payable under Paragraph 6(c). If the Company receives a Notice of Application that
does not fully implement the requirements of this Paragraph, the Company will apply this
Paragraph proportionately on the basis of the reductions specified in the Notice of Application
first, then to any remaining reduction based on the amounts otherwise payable under Paragraph 6(c).
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Notwithstanding the foregoing, if the exercise of discretion reserved to the Executive in
determining the Notice of Application would violate Code Section 409A, then such discretion shall
be eliminated and the amounts payable under Paragraph 6(c) shall be reduced proportionately.
8. 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 or Extended
Termination Date, as applicable.
9. Covenants.
(a) Introduction. The parties acknowledge that the provisions and covenants contained
in this Paragraph 9 are ancillary and material to this Agreement and that the limitations contained
herein are reasonable in geographic and temporal scope and do not impose a greater restriction or
restraint than is necessary to protect the goodwill and other legitimate business interests of the
Company. The parties also acknowledge and agree that the provisions of this Paragraph 9 do not
adversely affect Executive’s ability to earn a living in any capacity that does not violate the
covenants contained herein. The parties further acknowledge and agree that the provisions of
Paragraph 19 below are accurate and necessary because (i) Delaware is the headquarters state of the
Company, which has operations in multiple states and a compelling interest in having its employees
treated uniformly, (ii) the use of Delaware law provides certainty to the parties in any covenant
litigation in the United States, and (iii) enforcement of the provisions of this Paragraph 9 would
not violate any fundamental public policy of Delaware or any other jurisdiction.
(b) Confidential Information. Executive shall hold in a fiduciary capacity for the
benefit of the Company, all secret or confidential information, knowledge or data relating to the
Company and its businesses (including, but not limited to, any proprietary and not publicly
available information concerning any processes, methods, trade secrets, costs, names of users or
purchasers of the Company’s products or services, business methods, financial affairs, operating
procedures or programs or methods of promotion and sale) that Executive has obtained or obtains
during Executive’s employment by the Company and that is not public knowledge (other than as a
result of Executive’s violation of this Paragraph 9(b)) (“Confidential Information”). For purposes
of this Paragraph 9(b), information shall not be deemed to be publicly available merely because it
is embraced by general disclosures or because individual features or combinations thereof are
publicly available. Executive shall not communicate, divulge or disseminate Confidential
Information at any time during or after Executive’s employment with the Company except:
(i) to employees or agents of the Company that need the Confidential
Information to perform their duties on behalf of the Company;
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(ii) in the performance of Executive’s duties to the Company;
(iii) as a necessary (and only to the extent necessary) part of any undertaking
by Executive to enforce Executive’s rights under this Agreement; or
(iv) as otherwise required by law or legal process.
All confidential records, files, memoranda, reports, customer lists, drawings, plans, documents and
the like that Executive uses, prepares or comes into contact with during the course of Executive’s
employment shall remain the sole property of the Company and shall be turned over to the Company
upon termination of Executive’s employment.
(c) Non-solicitation of Company Employees. Executive shall not, at any time during
the Restricted Period (as defined below), without the prior written consent of the Company, engage
in the following conduct (a “Solicitation”):
(i) directly or indirectly, contact, solicit, recruit or employ (whether as an
employee, officer, director, agent, consultant or independent contractor) any person
who was or is at any time during the previous six months an employee,
representative, officer or director of the Company; or
(ii) take any action to encourage or induce any employee, representative,
officer or director of the Company to cease his or her relationship with the Company
for any reason. A “Solicitation” does not include any recruitment of employees for
the Company.
The “Restricted Period” means the period including Executive’s employment with the Company and one
(1) year following the Termination Date or Extended Termination Date, as applicable, and, if the
Executive has given a notice pursuant to Paragraph 6(d)(ii), for a period of fifteen (15) months
following the giving of such notice.
(d) Non-solicitation of Third Parties. During the Restricted Period, the Executive
shall not (either directly or indirectly or as an officer, agent, employee, partner or director of
any other company or entity) solicit, service, recruit, induce, influence, or accept on behalf of
any competitor of the Company the business of:
(i) any customer of the Company at the time of Executive’s employment or
Termination Date or Extended Termination Date, as applicable; or
(ii) any potential customer of the Company which Executive knew to be an
identified, prospective purchaser of services or products of the Company.
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(e) Non-competition. During the Restricted Period, Executive shall not, directly or
indirectly, accept employment with, act as a consultant to, or otherwise perform
services that are substantially the same or similar to those for which Executive was compensated by
the Company (such comparison to be based on job-related functions and responsibilities and not job
title) for any business that directly competes with any portion of the Company. This restriction
applies to any parent, division, affiliate, newly formed or purchased business(es) and/or successor
of a business that competes with the Company. Further, during the Restricted Period, Executive
shall not assist any individual or entity other than the Company in acquiring any entity with
respect to which a proposal to acquire such entity was presented to the Board during the one (1)
year period beginning prior to Executive’s Termination Date, Extended Termination Date or notice
given by Executive pursuant to Paragraph 6(d)(ii), as applicable.
(f) Post-Termination Cooperation. Executive agrees that during and after employment
with the Company and without additional compensation (other than reimbursement for reasonable
associated expenses) to cooperate with the Company in the following areas:
(i) Cooperation with the Company. Executive agrees to:
(A) be reasonably available to answer questions for the Company’s
officers regarding any matter, project, initiative or effort for which
Executive was responsible while employed by the Company; and
(B) cooperate with the Company during the course of all third-party
proceedings arising out of the Company’s business about which Executive has
knowledge or information.
For purposes of this Agreement, “proceeding” includes internal investigations,
administrative investigations or proceedings and lawsuits (including pre-trial
discovery and trial testimony) and “cooperation” includes (1) Executive being
reasonably available for interviews, meetings, depositions, hearings and/or trials
without the need for a subpoena or assurances by the Company, (2) providing any and
all documents in Executive’s possession that relate to the proceeding, and (3)
providing assistance in locating any and all relevant notes and/or documents.
(ii) Cooperation with Third Parties. Unless compelled to do so by
lawfully-served subpoena or court order, Executive agrees not to communicate with,
or give statements or testimony to, any attorney representing an interest opposed to
the Company’s interest (“Opposing Attorney”), Opposing Attorney’s representative
(including a private investigator) or current or former employee relating to any
matter (including pending or threatened lawsuits or administrative investigations)
about which Executive has knowledge or information as a result of employment with
the Company. Executive also agrees to notify the Company immediately after being
contacted by a third party or receiving a subpoena or court order to appear and
testify with respect to any matter that may include a claim opposed to the Company’s
interest. However, this Paragraph 9(f)(ii) shall not apply to any effort undertaken
by Executive to enforce Executive’s rights under this Agreement, but only to the
extent necessary for that purpose.
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(iii) Cooperation with the Media. Executive agrees not to communicate
with, or give statements to, any member of the media (including print, television,
electronic or radio media) relating to any matter (including pending or threatened
lawsuits or administrative investigations) about which Executive has knowledge or
information as a result of employment with the Company. Executive also agrees to
notify the Company immediately after being contacted by any member of the media with
respect to any matter affected by this Paragraph.
(g) Non-Disparagement. Executive and Company shall at all times refrain from taking
actions or making statements, written or verbal, that:
(i) denigrate, disparage or defame the goodwill or reputation of Executive or
the Company, as the case may be, or any of its trustees, officers, security holders,
partners, agents or former or current employees and directors, or
(ii) are intended to, or may be reasonably expected to, adversely affect the
morale of the employees of the Company.
Executive further agrees not to make any negative statements to third parties relating to
Executive’s employment or any aspect of the business of the Company and not to make any statements
to third parties about the circumstances of the termination of Executive’s employment, or about the
Company or its trustees, directors, officers, security holders, partners, agents or former or
current employees and directors, except as may be required by a court or governmental body.
(h) Enforcement. The Executive acknowledges and agrees that: (i) the purpose of the
foregoing covenants, including, without limitation, the nonsolicitation and noncompetition
covenants of Paragraphs 9(d) and (e), is to protect the goodwill, trade secrets and other
Confidential Information of the Company; (ii) because of the nature of the business in which the
Company is engaged and because of the nature of the Confidential Information to which the Executive
has access, the Company would suffer irreparable harm and it would be impractical and excessively
difficult to determine the actual damages of the Company in the event the Executive breached any of
the covenants of this Paragraph 9; and (iii) remedies at law (such as monetary damages) for any
breach of the Executive’s obligations under this Paragraph 9 would be inadequate. The Executive
therefore agrees and consents that if the Executive commits any breach of a covenant under this
Paragraph 9, or threatens to commit any such breach, the Company shall have the right (in addition
to, and not in lieu of, any other right or remedy that may be available to it) to temporary and
permanent injunctive relief from a court of competent jurisdiction, without posting any bond or
other security and without the necessity of proof of actual damage, and that the arbitration
provisions of Paragraph 14 shall not apply.
10. 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 herein.
11. Performance. The failure of either party to this Agreement to insist upon
strict performance of any provision of this Agreement shall not constitute a waiver of its
rights subsequently to insist upon strict performance of such provision or any other provision of
this Agreement.
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12. 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.
13. 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 which shall remain in full force and effect.
14. 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 Association, 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 any payments or the provision of any benefits the Executive, in
good faith, believes are called for hereunder. In the event of any such dispute, 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 indemnify and hold
harmless Executive from and against any and all expenses incurred in connection with such
determination, including reasonable legal and other fees and expenses.
15. Renewal. If the Current Term of this Agreement expires without there having been
a Change in Control, this Agreement shall be renewed for successive one-year terms, as of the day
following such expiration, unless, during the period beginning ninety (90) days prior and ending
thirty (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 Current Term of this Agreement or any subsequent
one-year term. Notwithstanding any other provision of this Agreement, the termination of this
Agreement for any reason shall not result in the termination of the rights and obligations of the
parties under the provisions of Sections 5(d), 6, 7, 9, 10, 14 and 16 hereof, which shall survive
any such termination. The right of recovery provisions of Section 5(d) shall cease to apply during
the Extended Term and shall be automatically terminated upon a Change in Control of the Company (as
defined in Paragraph 2(d)) except with respect to any right of recovery that has been asserted
prior to such Change in Control.
16. 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
and assume the Company’s obligations hereunder, whether by means of merger, consolidation,
acquisition of substantially all of the assets of the Company, or operation of law. The
Company shall require any successor organization or organizations to agree to assume the
obligations of this Agreement.
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17. 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
except as otherwise provided herein.
18. Amendments. No Amendment to this Agreement shall be effective unless in writing
and signed by both the Company and Executive. Notwithstanding the foregoing, if any compensation
or benefits provided by this Agreement may result in the application of Code Section 409A, the
Company shall, in consultation with the Executive, modify the Agreement in the least restrictive
manner necessary in order to exclude such compensation from the definition of “deferred
compensation” within the meaning of Code Section 409A or in order to comply with the provisions of
Code Section 409A, other applicable provisions of the Code and/or any rules, regulations or other
regulatory guidance issued under such statutory provisions, and without any diminution in the value
of the payments to the Executive.
19. Governing Law. This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Delaware. The parties hereto irrevocably agree to submit to the
jurisdiction and venue of the courts of the State of Delaware in any action or proceeding brought
with respect to or in connection with this Agreement except for an action described in Paragraph
14.
20. Code Section 409A. Notwithstanding any provision of Paragraph 10 or 14 of the
Employment Agreement to the contrary, any legal fees and expenses to be paid by the Company
pursuant to Paragraph 10 or 14 shall be subject to the following requirements in order to comply
with Code Section 409A. Such legal fees and expenses shall be paid by the Company only to the
extent incurred during the Term of the Agreement or for a period of ten (10) years after the
Executive’s “separation from service” (as defined in Code Section 409A). The Company shall pay
such legal fees and expenses no later than the end of the calendar year next following the calendar
year in which such fees and expenses were incurred, and the Company shall not be obligated to pay
any such fees and expenses for which the Executive fails to submit an invoice at least ten (10)
business days before the end of the calendar year next following the calendar year in which such
fees and expenses were incurred. The amount of such legal fees and expenses that the Company is
obligated to pay in any given calendar year shall not affect the legal fees and expenses that the
Company is obligated to pay in any other calendar year, and the Executive’s right to have the
Company pay such legal fees and expenses may not be liquidated or exchanged for any other benefit.
21. 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 therefor 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.
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22. 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.
23. Nature of Payments Upon Termination. All payments to Executive pursuant to
Paragraph 6 of this Agreement shall be considered as liquidated damages or, in the case of certain
payments pursuant to Paragraph 6(c), 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.
24. Prior Agreement. The parties acknowledge and agree that the terms of this
Agreement constitute the entire agreement of the parties with respect to the subject matter and
supersede all prior agreements and amendments with respect thereto, including, without limitation,
any prior oral arrangements.
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: |
||||||
| Chesapeake Officer | EXECUTIVE: | |||||
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