1
EXHIBIT - 10.2
PERFORMANCE SHARE AGREEMENT
PURSUANT TO THE
CHESAPEAKE UTILITIES CORPORATION
PERFORMANCE INCENTIVE PLAN
AGREEMENT dated as of January 1, 2001, 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] (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, 2001 (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
(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 net income ("NRNI"), and (3)
share price relative to book value ("Price/Book Value") as of the end of the
Award Year. The EG, NRNI and Price/Book 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
2
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 EG for the Award Year exceeds the median
five-year weighted average growth for companies included in the C.A. Xxxxxx
database (natural gas distribution companies and integrated natural gas
distribution companies), the Grantee may earn up to fifty percent (50%) of the
Maximum Award, as follows:
(i) If the EG is in the fourth quartile of companies
in the C.A. Xxxxxx database, the Grantee shall
earn fifty percent (50%) of the Maximum Award,
or
(ii) If the EG falls between the median and the
fourth quartile, the Grantee shall earn a
portion of the fifty percent (50%) available
under this paragraph that is pro-rated to
reflect the position of the Company's earnings
growth within the third quartile, or
(iii) If the EG is at or below the median, the Grantee
shall not earn any Contingent Performance Shares
under this paragraph (1);
(2) If the temperature-adjusted NRNI for the Award Year
exceeds the temperature-adjusted NRNI for the prior calendar year by fifteen
percent (15%) or more, the Grantee shall earn thirty percent (30%) of the
Maximum Award. If the temperature-adjusted NRNI for the Award Year does not
exceed the temperature-adjusted NRNI for the prior calendar year by at least
fifteen percent (15%), the Grantee shall not earn any Contingent Performance
Shares under this paragraph (2); and
(3) If the Price/Book Value for the Award Year is equal to
or greater than the average Price/Book Value for the Award Year of companies in
the third quartile of the C.A. Xxxxxx database (natural gas distribution
companies and integrated natural gas distribution companies), the Grantee shall
earn twenty percent (20%) of the Maximum Award. If the Price/Book Value for the
Award Year does not equal or exceed the average Price/Book Value for the Award
Year of companies in the third quartile of the C.A. Xxxxxx database, the Grantee
shall not earn any Contingent Performance Shares under this paragraph (3). If
one or more of the companies in the C.A. Xxxxxx database is at any time during
the Award Year the subject of an announced acquisition, its stock shall not be
considered for purposes of 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"),
-2-
3
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
-3-
4
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, 2001, 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, 2001, 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, 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
-4-
5
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. Effect on Prior Agreements
Pursuant to an Agreement dated January 1, 1998, between the Company and
the Grantee (the "1998 Agreement"), awards may vest as of the end of each of
1998, 1999, and 2000. This Agreement hereby modifies the 1998 Agreement to
provide that no awards shall vest for years after December 31, 1999. This
Agreement does not affect the awards that vest as of the end of 1998 or 1999,
and the terms of the 1998 Agreement shall continue in effect with respect to
those awards.
Section 5. 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
-5-
6
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 6. 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 7. 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 8. 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 9. 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.
- 6 -
7
Section 10. 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 11. 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 12 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
-7-
