Item
5.02. Compensatory Arrangements of Certain Officers.
On
December 29, 2006, Chesapeake Utilities Corporation (the “Company”) entered into
new employment agreements (each individually an “Agreement” and collectively,
the “Agreements”) with the following executive officers: John R. Schimkaitis,
Michael P. McMasters, Stephen C. Thompson, and S. Robert Zola. The Company’s
Board of Directors, at the recommendation of the Compensation Committee,
approved these Agreements at its December 7, 2006 Meeting. These Agreements
supersede former employment agreements in place with each of the named executive
officers.
Copies
of
the Agreements are being filed as Exhibits 10.1 through 10.4 to this report
and
are incorporated by reference into this Item 5.02. The description of the
Agreements below is a summary and does not purport to be complete and is
qualified in its entirety by reference to the Agreements.
John
R. Schimkaitis
The
Agreement between Mr. Schimkaitis and the Company stipulates that he will
serve
in the capacity of President and Chief Executive Officer of the Company.
The
initial term of the Agreement is for three (3) years, which automatically
extends upon a “change-in-control,” as specifically defined in the Agreement,
for a period of four (4) years from the date of such change-in-control. The
Agreement also automatically renews for successive one-year terms if a successor
Agreement has not been executed.
Mr.
Schimkaitis will be paid $360,000 per year as base compensation, which may
be
increased or decreased from time to time provided that any decreases may
be
permitted only on a good faith basis and with reasonable justification. Upon
a
change-in-control, Mr. Schimkaitis’s base compensation will be increased on an
annual basis to an amount no less than his then-current base compensation
multiplied by the increase in the preceding calendar year of the CPI, but
in no
event can his base compensation be decreased upon a change-in-control.
In
addition to base compensation, the Agreement provides that Mr. Schimkaitis
shall
be entitled to participate in all bonus, incentive compensation and
performance-based compensation plans; all profit-sharing, savings and retirement
benefit plans; all insurance, medical, health and welfare plans; all vacation
and other employee fringe benefit plans; and other similar policies, plans
or
arrangements of the Company; all 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. Such participation specifically includes
that Mr. Schimkaitis shall be eligible for an incentive compensation award
equal
to 10,800 shares of the Company’s common stock under the Company’s Performance
Incentive Plan, and for a minimum cash bonus award equal to forty percent
(40%)
of his base compensation as determined on an annual basis by the Company’s Board
of Directors under the Company’s Cash Bonus Incentive Plan.
During
the employment period, the Agreement stipulates that upon a termination without
cause or a determination not to renew the Agreement at the end of the initial
term, in the absence of a change-in-control, Mr. Schimkaitis is entitled
to a
severance payment representing twelve (12) months of base compensation.
Alternatively, as a result of a termination without cause or a resignation
for
reasons related to certain acts of the Company, upon a change-in-control,
he is
entitled to a severance payment comprised of: (i) his then-current monthly
base
compensation, multiplied by thirty-six (36) months, (ii) his average short-term
and long-term incentive awards paid to him over the prior three (3) years,
multiplied by three (3) years , and (iii) a payment equal to the value of
the
benefits foregone over thirty-six (36) months as a result of the termination.
The severance payment is capped so that no excise tax would be levied to
Mr.
Schimkaitis nor would there be any loss of tax deductibility to the Company
as a
result of paying the severance payment.
Michael
P. McMasters
The
Agreement between Mr. McMasters and the Company stipulates that he will serve
in
the capacity of Senior Vice President and Chief Financial Officer of the
Company. The initial term of the Agreement is for three (3) years, which
automatically extends upon a “change-in-control,” as specifically defined in the
Agreement, for a period of four (4) years from the date of such
change-in-control. The Agreement also automatically renews for successive
one-year terms if a successor Agreement has not been executed.
Mr.
McMasters will be paid $246,000 per year as base compensation, which may
be
increased or decreased from time to time provided that any decreases may
be
permitted only on a good faith basis and with reasonable justification. Upon
a
change-in-control, Mr. McMasters’s base compensation will be increased on an
annual basis to an amount no less than his then-current base compensation
multiplied by the increase in the preceding calendar year of the CPI, but
in no
event can his base compensation be decreased upon a change-in-control.
In
addition to base compensation, the Agreement provides that Mr. McMasters
shall
be entitled to participate in all bonus, incentive compensation and
performance-based compensation plans; all profit-sharing, savings and retirement
benefit plans; all insurance, medical, health and welfare plans; all vacation
and other employee fringe benefit plans; and other similar policies, plans
or
arrangements of the Company; all 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. Such participation specifically includes
that Mr. McMasters shall be eligible for an incentive compensation award
equal
to 5,760 shares of the Company’s common stock under the Company’s Performance
Incentive Plan, and for a minimum cash bonus award equal to thirty percent
(30%)
of his base compensation as determined on an annual basis by the Company’s Board
of Directors under the Company’s Cash Bonus Incentive Plan.
During
the employment period, the Agreement stipulates that upon a termination without
cause or a determination not to renew the Agreement at the end of the initial
term, in the absence of a change-in-control, Mr. McMasters is entitled to
a
severance payment representing twelve (12) months of base compensation.
Alternatively, as a result of a termination without cause or a resignation
for
reasons related to certain acts of the Company, upon a change-in-control,
he is
entitled to a severance payment comprised of: (i) his then-current monthly
base
compensation, multiplied by thirty-six (36) months, (ii) his average short-term
and long-term incentive awards paid to him over the prior three (3) years,
multiplied by three (3) years , and (iii) a payment equal to the value of
the
benefits foregone over thirty-six (36) months as a result of the termination.
The severance payment is capped so that no excise tax would be levied to
Mr.
McMasters nor would there be any loss of tax deductibility to the Company
as a
result of paying the severance payment.
Stephen
C. Thompson
The
Agreement between Mr. Thompson and the Company stipulates that he will serve
in
the capacity of Senior Vice President of the Company. The initial term of
the
Agreement is for three (3) years, which automatically extends upon a
“change-in-control,” as specifically defined in the Agreement, for a period of
four (4) years from the date of such change-in-control. The Agreement also
automatically renews for successive one-year terms if a successor Agreement
has
not been executed.
Mr.
Thompson will be paid $243,000 per year as base compensation, which may be
increased or decreased from time to time provided that any decreases may
be
permitted only on a good faith basis and with reasonable justification. Upon
a
change-in-control, Mr. Thompson’s base compensation will be increased on an
annual basis to an amount no less than his then-current base compensation
multiplied by the increase in the preceding calendar year of the CPI, but
in no
event can his base compensation be decreased upon a change-in-control.
In
addition to base compensation, the Agreement provides that Mr. Thompson shall
be
entitled to participate in all bonus, incentive compensation and
performance-based compensation plans; all profit-sharing, savings and retirement
benefit plans; all insurance, medical, health and welfare plans; all vacation
and other employee fringe benefit plans; and other similar policies, plans
or
arrangements of the Company; all 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. Such participation specifically includes
that Mr. Thompson shall be eligible for an incentive compensation award equal
to
4,000 shares of the Company’s common stock under the Company’s Performance
Incentive Plan, and for a minimum cash bonus award equal to twenty-five percent
(25%) of his base compensation as determined on an annual basis by the Company’s
Board of Directors under the Company’s Cash Bonus Incentive Plan.
During
the employment period, the Agreement stipulates that upon a termination without
cause or a determination not to renew the Agreement at the end of the initial
term, in the absence of a change-in-control, Mr. Thompson is entitled to
a
severance payment representing twelve (12) months of base compensation.
Alternatively, as a result of a termination without cause or a resignation for
reasons related to certain acts of the Company, upon a change-in-control,
he is
entitled to a severance payment comprised of: (i) his then-current monthly
base
compensation, multiplied by thirty-six (36) months, (ii) his average short-term
and long-term incentive awards paid to him over the prior three (3) years,
multiplied by three (3) years , and (iii) a payment equal to the value of
the
benefits foregone over thirty-six (36) months as a result of the termination.
The severance payment is capped so that no excise tax would be levied to
Mr.
Thompson nor would there be any loss of tax deductibility to the Company
as a
result of paying the severance payment.
S.
Robert Zola
The
Agreement between Mr. Zola and the Company stipulates that he will serve
in the
capacity of President of Sharp Energy, Inc., a subsidiary of the Company
(“Sharp
Energy”). The initial term of the Agreement is for three (3) years, which
automatically extends upon a “change-in-control,” as specifically defined in the
Agreement, for a period of three (3) years from the date of such
change-in-control. The Agreement also automatically renews for successive
one-year terms if a successor Agreement has not been executed.
Mr.
Zola
will be paid $135,000 per year as base compensation, which may be increased
or
decreased from time to time provided that any decreases may be permitted
only on
a good faith basis and with reasonable justification. Upon a change-in-control,
Mr. Zola’s base compensation will be increased on an annual basis to an amount
no less than his then-current base compensation multiplied by the increase
in
the preceding calendar year of the CPI, but in no event can his base
compensation be decreased upon a change-in-control.
In
addition to base compensation, the Agreement provides that Mr. Zola shall
be
entitled to participate in all bonus, incentive compensation and
performance-based compensation plans; all profit-sharing, savings and retirement
benefit plans; all insurance, medical, health and welfare plans; all vacation
and other employee fringe benefit plans; and other similar policies, plans
or
arrangements of the Company; all 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. Such participation specifically includes
that Mr. Zola shall be eligible for an incentive compensation award equal
to
3,200 shares of the Company’s common stock under the Company’s Performance
Incentive Plan, and for a minimum cash bonus award equal to thirty percent
(30%)
of his base compensation as determined on an annual basis by the Company’s Board
of Directors under the Company’s Cash Bonus Incentive Plan. Mr. Zola is also
eligible for an additional cash bonus award equal to ten percent (10%) of
the
excess of Sharp Energy’s EBIT for the respective year over the upper EBIT target
for the same year.
During
the employment period, the Agreement stipulates that upon a termination without
cause or a determination not to renew the Agreement at the end of the initial
term, in the absence of a change-in-control, Mr. Zola is entitled to a severance
payment representing twelve (12) months of base compensation. Alternatively,
as
a result of a termination without cause or a resignation for reasons related
to
certain acts of the Company, upon a change-in-control, he is entitled to
a
severance payment comprised of: (i) his then-current monthly base compensation,
multiplied by twenty-four (24) months, (ii) his average short-term and long-term
incentive awards paid to him over the prior three (3) years, multiplied by
two
(2) years, and (iii) a payment equal to the value of the benefits foregone
over
twenty-four (24) months as a result of the termination. The severance payment
is
capped so that no excise tax would be levied to Mr. Zola nor would there
be any
loss of tax deductibility to the Company as a result of paying the severance
payment.
All
Agreements
All
of
the Agreements also include covenants effective during the course of employment
and upon the termination of the Agreement, providing for compliance in regards
to confidentiality of information; non-solicitation of employees;
non-solicitation of third parties; non-competition; post-termination
cooperation; and non-disparagement. The non-solicitation and non-competition
covenants shall remain effective for one (1) year following termination of
employment, or if the respective named executive officer resigns for reasons
related to certain acts of the Company, after a change-in-control, for fifteen
(15) months thereafter.
Item
9.01. Exhibits.