Exhibit 10.5
CHESAPEAKE UTILITIES CORPORATION
DEFERRED COMPENSATION PLAN
Amended and Restated as of January 1, 2009

 

 

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Table of Contents

              Page No.  
Section 1. Establishment and Purpose
    1  
 
       
1.01. Establishment
    1  
1.02. Purpose
    1  
1.03. Effective Date
    1  
Section 2. Definitions and Construction
    2  
 
       
2.01. Definitions
    2  
2.02. Construction
    8  
Section 3. Participation
    9  
 
       
3.01. Election of Benefits
    9  
3.02. Election Requirements
    9  
3.03. Form and Time of Payment
    10  
3.04. Termination of Participation
    11  
Section 4. Accounts
    12  
 
       
4.01. Accounts
    12  
4.02. Deferred Cash Subaccount
    12  
4.03. DSU Subaccount
    12  
4.04. Investment Return for Deferred Cash Subaccount
    12  
4.05. Treatment of DSUs
    14  
4.06. Vesting of Accounts
    15  
Section 5. Distributions
    16  
 
       
5.01. Exclusive Entitlement to Payment
    16  
5.02. Payment
    16  
5.03. Death Benefits
    17  
5.04. Distributions Due to Unforeseeable Emergency
    17  
5.05. Disability
    18  
5.06. Change in Control
    18  
5.07. Acceleration of Payment
    18  
5.08. Delay of Payment
    19  
5.09. Assignment and Assumption of Liabilities
    20  

 

 

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Table of Contents

              Page No.  
Section 6. Nature of Participant’s Interest in Plan
    21  
 
       
6.01. No Right to Assets
    21  
6.02. No Right to Transfer Interest
    21  
6.03. No Right to Employment or Service
    21  
6.04. Withholding and Tax Liabilities
    22  
Section 7. Administration
    23  
 
       
7.01. Committee
    23  
7.02. Meetings
    23  
7.03. Quorum
    23  
7.04. Expenses
    23  
7.05. Responsibilities of the Committee
    23  
7.06. Finality of Committee Determinations
    24  
7.07. Benefit Claims Procedure
    25  
7.08. Arbitration of Denied Claims
    25  
Section 8. Amendment, Suspension, and Termination
    26  
 
       
8.01. By the Compensation Committee
    26  
8.02. By the Committee
    27  
Section 9. Miscellaneous
    28  
 
       
9.01. Participation by Affiliate
    28  
9.02. Designation of Beneficiary
    28  
9.03. Incapacity
    29  
9.04. Required Information
    29  
9.05. Inability to Locate Participants and Beneficiaries
    29  
9.06. Headings
    29  
9.07. Severability
    29  
9.08. Governing Law
    30  
9.09. Complete Statement of Plan
    30  
EXHIBIT A
    31  

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 1

SECTION 1. ESTABLISHMENT AND PURPOSE
1.01. Establishment.
Effective September 1, 1998, the Company established for the benefit of certain
Eligible Employees an unfunded plan of deferred compensation known as the
“Chesapeake Utilities Corporation Executive Deferral Program,” as the same has
been amended from time to time. Effective January 1, 2007, the Company amended
and restated the Plan to provide members of the Company’s Board of Directors
deferral opportunities and renamed the Plan the “Chesapeake Utilities
Corporation Deferred Compensation Program”. Effective January 1, 2009, the
Company hereby amends and restates the Plan to comply with the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) and
renames the Plan the “Chesapeake Utilities Corporation Deferred Compensation
Plan”.
1.02. Purpose.
The Plan is an unfunded plan maintained primarily for the purpose of providing
deferred compensation to a select group of management and highly compensated
employees, as well as members of the Company’s Board of Directors. The Plan
permits Eligible Employees and Directors to defer payment of part or all of
certain specified types of compensation until their Separation from Service with
the Company and its Affiliates or until such other date specified in accordance
with the terms of the Plan.
1.03. Effective Date.
The Plan, as hereby amended and restated, is intended to meet the requirements
of Code Section 409A, and is effective with respect to amounts that were not
deferred and vested (within the meaning of Code Section 409A) before January 1,
2005, and any earnings on such amounts. Except as otherwise specifically
provided herein, amounts deferred and vested (within the meaning of Code
Section 409A) before January 1, 2005 (and earnings on such amounts) remain
subject to the terms of the September 1, 1998 Plan restatement, which are set
forth in Appendix A. For recordkeeping purposes, the Company established
separate accounts for each Participant for amounts deferred and vested before
January 1, 2005, and amounts deferred and vested on or after that date.
To the extent inconsistent with Code Section 409A or regulations issued
thereunder, this Plan shall be amended to conform to such requirements within
applicable time limitations established by the Internal Revenue Service.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 2

SECTION 2. DEFINITIONS AND CONSTRUCTION
2.01. Definitions.
The following words and phrases as used in the Plan have the following meanings:

  (a)   “Account” means the bookkeeping account established for each Participant
under Section 4. Each Account shall include a Deferred Cash Subaccount and a
Deferred Stock Unit Subaccount. Additional subaccounts shall be maintained as
necessary for the administration of the Plan.

  (b)   “Affiliate” means any corporation included with Chesapeake Utilities
Corporation in a “controlled group of corporations,” as defined in Code
Section 414(b), or an unincorporated business included with Chesapeake Utilities
Corporation in a group of trades or business under “common control,” as defined
by regulations prescribed by the Secretary of the Treasury under Code
Section 414(c).

  (c)   “Beneficiary” means the person or persons (including a contingent
beneficiary except where the context indicates otherwise) designated by a
Participant pursuant to Section 9.02 to receive death benefits under the Plan.

  (d)   “Board” means the Board of Directors of the Company.

  (e)   “Bonus Compensation” means compensation received under the Bonus Plan or
other compensation designated by the Committee as Bonus Compensation eligible
for deferral under the Plan as Performance Based Compensation.

  (f)   “Bonus Plan” means the “Chesapeake Utilities Corporation Cash Bonus
Incentive Plan,” as in effect and amended from time to time.

  (g)   “Change in Control” means the first of the following events to occur:

  (1)   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 50 percent 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 50 percent 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 persons shall not be considered to cause a Change in Control of the
Company; or

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 3

  (2)   Any one person or group (as described in Section 2.01(g)(1), above)
acquires (or has acquired during the 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-owned subsidiary of the Company) possessing 35 percent 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

  (3)   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 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

  (4)   Any one person or group (as described in 2.01(g)(1), above) acquires (or
has acquired during the 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 40 percent of the total gross 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 under this Section
2.01(g)(4), if the assets are transferred to:

  (A)   a shareholder of the Company (immediately before the asset transfer) in
exchange for or with respect to its stock;

  (B)   an entity, 50 percent 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 more than one person acting as a group (as described in
2.01(g)(1), above), that owns, directly or indirectly, 50 percent or more of the
total value or voting power of all the outstanding stock of the Company; or

  (D)   an entity, at least 50 percent of the total value or voting power of
which is owned directly or indirectly, by a person described in
Section 2.01(g)(4)(C), above.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 4

However, no Change in Control shall be deemed to have occurred with respect to a
Participant by reason of (i) any event involving a transaction in which the
Participant or a group of persons or entities with which the Participant acts in
concert, acquires, directly or indirectly, more than 30 percent of the common
stock or the business or assets of the Company; (ii) 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
(iii) 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 be deemed not to constitute a Change in Control.
The term “Change in Control” is intended to comply with Code Section 409A and
shall be interpreted such that a Change in Control (1) shall occur for purposes
of the Plan in any circumstance that would constitute a “Change in Control
Event” (within the meaning of Treasury Regulations under Code Section 409A) and
(2) shall not occur for purposes of the Plan in any circumstance that would not
constitute such a Change in Control Event.

  (h)   “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

  (i)   “Committee” means the Employee Benefits Committee of the Company or such
other committee as may be appointed by the Board to administer the Plan.

  (j)   “Common Stock” means the common stock, $.4867 par value, of the Company,
including both treasury shares and authorized but unissued shares, or any
security of the Company issued in substitution, exchange, or in lieu thereof.

  (k)   “Company” means Chesapeake Utilities Corporation, a Delaware
corporation, and any Affiliate that may be authorized by the Compensation
Committee and by its own board of directors to participate in the Plan with
respect to its employees.

  (l)   “Compensation Committee” means the Compensation Committee of the Board.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 5

  (m)   “Deferred Cash Subaccount” means the bookkeeping account to which
Deferred Cash Payments of a Participant and interest are credited pursuant to
Section 4.

  (n)   “Deferred Cash Payment” means any Director Compensation, otherwise
payable in cash, or Bonus Compensation that a Participant elects to defer under
the Plan.

  (o)   “Deferred Stock Units” or “DSUs” means hypothetical shares of Common
Stock (including hypothetical fractional shares).

  (p)   “Director” means a member of the Board of Directors of the Company.

  (q)   “Director Compensation” means amounts paid or payable by the Company to
a Director for a Plan Year which are includable in income for federal tax
purposes, including Director’s fees of all types, whether paid in cash or Common
Stock. Notwithstanding the foregoing, non-cash compensation and expense
reimbursements are excluded from Director Compensation.

  (r)   “Disabled” means a medically determinable physical or mental impairment
that can be expected to result in death or last for at least 12 months; and the
impairment either (1) prevents the Participant from engaging in any substantial
gainful activity, or (2) entitles the Participant to receive income replacement
benefits for at least 3 months under an accident or health plan sponsored by the
Company. The Company shall determine whether a Participant is Disabled in its
sole discretion (but in compliance with Code Section 409A) and may require the
Participant to submit to periodic medical examinations at the Participant’s
expense to confirm the existence and continuation of the Participant’s
disability.

  (s)   “DSU Subaccount” means the bookkeeping account to which DSUs of a
Participant and dividend equivalents are credited pursuant to Section 4.

  (t)   “Eligible Employee” means an employee of the Company who is designated
by the Compensation Committee, in its sole discretion, to be eligible to
participate in the Plan.

  (u)   “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

  (v)   “Excessive Benefits” means an amount credited to a Participant’s Account
or paid on a Participant’s behalf in excess of the amount that properly should
have been credited to the Participant’s Account or paid on the Participant’s
behalf.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 6

  (w)   “Fair Market Value” means the average of the high and low sales price of
the Common Stock, as reported on the New York Stock Exchange (or any other
reporting system as shall be selected by the Committee) on the relevant date, or
if no sale of Common Stock is reported for a date, on the date or dates that the
Committee determines, in its sole discretion, to be appropriate for purposes of
valuation.

  (x)   “Participant” means an Eligible Employee or Director who becomes a
participant in the Plan in accordance with Section 3.01 and whose Account has a
positive balance.

  (y)   “Performance Based Compensation” means a bonus or other payment of
compensation for which the amount of the payment or the entitlement thereto is
contingent on the satisfaction of organizational or individual performance
criteria relating to a performance period of at least 12 consecutive months. The
organizational or individual performance criteria shall be established in
writing no later than 90 days after the beginning of the period of service to
which the criteria relate, and the outcome must be substantially uncertain at
the time the criteria are established. Notwithstanding the above, a
performance-based bonus may be based on subjective performance criteria,
provided that:

  (1)   the subjective performance criteria are bona fide and relate to the
performance of the Participant, a group of service providers that includes the
Participant, or a business unit for which the Participant provides services
(which may include the entire organization); and

  (2)   the determination that any subjective performance criteria have been met
is not to be made by the Participant or a family member of the Participant (as
defined in Code Section 267(c)(4) applied as if the family of an individual
includes the spouse of any member of the family), or a person under the
effective control of the Participant or such a family member, and no amount of
the compensation of the person making such determination is effectively
controlled in whole or in part by the Participant or such a family member.

  (z)   “Performance Share Award” means a performance share award granted under
the PIP which qualifies as Performance Based Compensation.

  (aa)   “Performance Shares” means shares of Common Stock awardable under a
Performance Share Award in accordance with the terms of the PIP.

  (bb)   “PIP” means the “Chesapeake Utilities Corporation Performance Incentive
Plan,” as in effect and as amended from time to time.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 7

  (cc)   “Plan” means the “Chesapeake Utilities Corporation Deferred
Compensation Program,” as set forth herein and as amended from time to time.

  (dd)   “Plan Year” means the calendar year.

  (ee)   “Separation from Service” occurs when an Eligible Employee separates
from service with the Company if the Eligible Employee dies, retires or
otherwise has a termination of employment with the Company. Whether a
termination of employment has occurred is determined based on whether the facts
and circumstances indicate that the Company and the Eligible Employee reasonably
anticipated that no further services would be performed after a certain date or
that the level of bona fide services the Eligible Employee would perform after
such date (as an employee or independent contractor) would permanently decrease
to no more than 20 percent of the average level of bona fide services performed
over the immediately preceding 36-month period (or the full period in which the
Eligible Employee provided services to the Company if the Eligible Employee has
been providing services for less than 36 months). An Eligible Employee will not
be deemed to have experienced a Separation from Service if such Eligible
Employee is on military leave, sick leave, or other bona fide leave of absence,
to the extent such leave does not exceed a period of six months or, if longer,
such longer period of time during which a right to re-employment is protected by
either statute or contract. If the period of leave exceeds six months and the
individual does not retain a right to re-employment under an applicable statute
or by contract, the employment relationship is deemed to terminate on the first
date immediately following such six-month period. In the case of a Director, a
separation from service occurs upon the termination of the Director’s service on
the Board, provided, however, that a Director who is also providing services to
the Company as an independent contractor, does not have a Separation from
Service until he has separated from service both as a Director and as an
independent contractor. If an Eligible Employee provides services both as an
employee and as a member of the Board, the services provided as a Director are
generally not taken into account in determining whether the Eligible Employee
has a Separation from Service as an employee for purposes of the Plan, in
accordance with final regulations under Code Section 409A.

  (ff)   “Valuation Date” means the last business day of each calendar month.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 8

2.02. Construction.
For purposes of the Plan, unless the contrary is clearly indicated by the
context,

  (a)   the use of the masculine gender shall also include within its meaning
the feminine and vice versa,

  (b)   the use of the singular shall also include within its meaning the plural
and vice versa, and

  (c)   the word “include” shall mean to include without limitation.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 9

SECTION 3. PARTICIPATION
3.01. Election of Benefits.
An Eligible Employee or Director shall become a Participant in the Plan by
electing to participate in the Plan in accordance with Section 3.02 and
procedures established by the Committee.
3.02. Election Requirements.

  (a)   Election Filing Deadline. Except as provided in subsection (b), below,
an election to defer an amount equal to all or part of an Eligible Employee’s
Bonus Compensation earned with respect to, or Performance Shares awarded during,
a Plan Year shall be filed by the Eligible Employee with the Committee at least
six months before the Plan Year ends (i.e., by June 30th), unless the Bonus
Compensation or Performance Shares do not qualify as Performance-Based
Compensation, in which case an election with respect to such compensation shall
be filed by the Eligible Employee with the Committee before the beginning of the
Plan Year for which the compensation will be earned, or at such other time that
complies with the deferral election requirements of Code Section 409A. Except as
provided in subsection (b) below, a Director shall file an election with the
Committee to defer an amount equal to all or part of his Director Compensation
before the beginning of the Plan Year for which the Director Compensation will
be earned. In all cases, a Participant’s election to defer Bonus Compensation,
Director Compensation or Performance Shares, as applicable, shall be made in
accordance with the deferral election timing requirements of Code Section 409A
and procedures established by the Committee from time to time.

  (b)   Initial Election. A newly hired or otherwise newly Eligible Employee may
file the requisite election to defer Bonus Compensation or Performance Shares
earned thereafter before the expiration of 30 days either from, as applicable,
(1) his initial date of employment (if the Eligible Employee is a new hire) or
(2) his initial date of eligibility (if the Eligible Employee is newly eligible
to participate in the Plan). A newly eligible Director may file the requisite
election to defer Director Compensation earned thereafter before the expiration
of 30 days from the Director’s initial date of eligibility to participate in the
Plan. Initial elections shall apply only to compensation (of whatever kind) to
be earned after the date of the timely initial election.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 10

  (c)   Irrevocable Election. Except as provided in Sections 5.03, 5.04, 5.05
and 5.06, a deferral election described in this Section 3.02, once filed, shall
be irrevocable and shall remain in effect until the end of the Plan Year to
which it pertains. Six months before the end of each subsequent Plan Year (or
prior to the beginning of each subsequent Plan Year if the Bonus Compensation or
Performance Shares do not qualify as Performance-Based Compensation), the
Participant shall file a new election with the Committee in accordance with the
preceding provisions of this Section 3.02. The new election shall apply only to
deferrals for that Plan Year. An Eligible Employee or Director who does not make
a deferral election in one Plan Year may make a deferral election for any
subsequent Plan Year, provided he remains an Eligible Employee or Director, by
making a deferral election in accordance with this Section 3.02.

  (d)   Form and Content of Election. An election to make a deferral hereunder
shall be in writing, in a form acceptable to the Committee, and shall specify
such information as required by the Committee. A deferral election may designate
any whole percentage (from 1% to 100%) of the Bonus Compensation or Performance
Shares awarded to an Eligible Employee, or Director Compensation awarded to a
Director, to be deferred for a calendar year.

  (e)   Treatment of Performance Shares and Common Stock. A Participant who
elects to defer Performance Shares or other compensation payable in the form of
Common Stock shall be credited with DSUs rather than with shares of Common
Stock. Such DSUs shall equal the number of shares of Common Stock that the
Participant otherwise would be entitled to receive as compensation or under the
Performance Share Award (irrespective of any taxes that would have otherwise
been withheld on such compensation or Performance Share Award).

3.03. Form and Time of Payment.

  (a)   General. Except as provided in Sections 5.03, 5.04, 5.05, and 5.06, an
amount deferred under this Section 3 shall be paid in a lump sum as of the
Valuation Date coincident with or next following the date elected by the
Participant. A Participant may elect a different form or time of payment for his
deferrals for each Plan Year, but may not divide his deferrals for a single Plan
Year among different forms or times of payment. If, however, a Participant who
is an Eligible Employee elects to receive payment upon Separation from Service,
no amount shall be distributed earlier than six months after the Valuation Date
coincident with or next following the Participant’s Separation from Service.
Such six month delay shall not apply to a distribution made to a Participant who
is a Director. A Participant may elect to receive his distribution as of the
earlier or later of two dates (including Separation from Service), to the extent
permitted by Code Section 409A.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 11

  (b)   Modification of Time and Form. After making his first election, a
Participant may file an election with the Committee, in a form satisfactory to
the Committee, to modify the payment date with respect to a deferral election or
to irrevocably specify that the amount credited to his Account is to be paid in
the form of five or ten annual installments; provided, however, that, to the
extent required by Code Section 409A, such election:

  (1)   is filed with the Committee at least twelve months prior to the date of
the first scheduled payment;

  (2)   is not effective until at least twelve months after the date on which
the election is made;

  (3)   defers the lump sum payment or the first installment payment with
respect to which such election is made for a period of not less than five years
from the date such payment would otherwise have been made;

  (4)   does not accelerate payment of the deferred amount; and     (5)   does
not request other than five or ten annual installments.

For purposes of the Plan, an election to receive benefits as five or ten annual
installments shall be treated as the entitlement to a single payment as further
described in Treas. Reg. Section 1.409A-2(b)(iii).
3.04. Termination of Participation.
Once an Eligible Employee or Director becomes a Participant, such individual
shall continue to be a Participant until such individual (a) ceases to be
described as an Eligible Employee or Director, as applicable, and (b) ceases to
have any vested interest in the Plan (as a result of distributions made to such
Participant or his Beneficiary, if applicable, or otherwise).

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 12

SECTION 4. ACCOUNTS
4.01. Accounts.
The Company shall maintain for bookkeeping purposes an Account in the name of
each Participant. Each Account shall have a Deferred Cash Subaccount and a DSU
Subaccount, as applicable, to which shall be credited amounts deferred under
Section 3.
4.02. Deferred Cash Subaccount.
The Company shall maintain a Deferred Cash Subaccount in the name of each
Participant. During each Plan Year, each Deferred Cash Subaccount shall be
credited with the Participant’s Bonus Compensation or Director Compensation,
otherwise payable in cash, as applicable, deferred under Section 3.
4.03. DSU Subaccount.
The Company shall maintain a DSU Subaccount in the name of each Participant.
During each Plan Year, each DSU Subaccount shall be credited with the
Participant’s Performance Shares or Common Stock, as applicable, deferred under
Section 3.
4.04. Investment Return for Deferred Cash Subaccount.

  (a)   Rate of Return Indices. The Compensation Committee shall select and
maintain one or more rate of return indices as specified on Exhibit A attached
hereto as amended from time to time. A Deferred Cash Payment shall be allocated
among one or more of the rate of return indices and shall be credited with the
applicable investment return (or loss) that such Deferred Cash Payment would
have achieved if it were invested in the specified index or indices. Allocations
to one or more of the rate of return indices may be modified during the Plan
Year to the extent permitted by the Committee, in its sole discretion. Amounts
in the Deferred Cash Subaccount that were deferred and vested as of January 1,
2005, may be allocated among one or more of the rate of return indices on
Exhibit A attached hereto to the extent the Committee so provides and to the
extent such provision is not a material modification (within the meaning of Code
Section 409A and Treasury Regulations issued thereunder) to the terms of the
September 1, 1998 Plan restatement, which are set forth in Appendix A.

(b) Election of Rate of Return Indices.

  (1)   Each Participant shall specify in writing, at the time he completes his
election to participate under Section 3, and in a form acceptable to the
Committee, how any Deferred Cash Payment shall be allocated among the indices
specified on Exhibit A attached hereto.

  (2)   The Committee may, in its discretion and from time to time, permit a
Participant to change any election previously made with respect to the
allocation of any Deferred Cash Payment, subject to such conditions and such
limitations as the Committee may prescribe. Any such change in election shall be
in writing and in a form acceptable to the Committee.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 13

  (3)   The Committee may, in its discretion and from time to time, permit a
Participant to elect to reallocate the amounts in such Participant’s Deferred
Cash Subaccount from one rate of return index to another, subject to such
conditions and such limitations as the Committee may prescribe; provided that a
Participant shall be permitted, at least once per calendar month, to reallocate
amounts previously allocated. Any such reallocation election shall be in writing
and in a form acceptable to the Committee.

  (4)   The Committee may require that any election under this Section 4.04
apply to the entire amount to which it pertains (e.g., 100% of the Participant’s
future contributions) or to such percentage or percentages of that amount as the
Committee may specify (e.g., increments of 5%).

  (5)   If a Participant fails to specify a rate of return index with respect to
his Deferred Cash Payments, the Participant shall be presumed to have specified
that his entire Deferred Cash Subaccount be allocated to the index determined by
the Committee to represent the lowest risk of principal loss.

  (c)   Crediting of Investment Return. The balance credited to the
Participant’s Deferred Cash Subaccount as of the last day of the prior month
shall be credited with the applicable investment return (or loss) as of the last
day of the month of crediting. All references herein to Deferred Cash Payments
shall be deemed to include such Deferred Cash Payments plus any investment
return (or loss) credited pursuant to this Section 4.04.

 

 

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4.05. Treatment of DSUs.

  (a)   Deemed Reinvestment of Dividends on DSUs. The DSUs credited to a
Participant’s DSU Subaccount pursuant to Section 3.02 shall be increased on each
date that a dividend is paid on Common Stock. The number of additional DSUs
credited to a Participant’s DSU Subaccount as a result of such increase shall be
determined first by multiplying the number of DSUs credited to the Participant’s
DSU Subaccount on the dividend record date by the amount of the dividend
declared per share of Common Stock on the dividend declaration date, and then by
dividing the product so determined by the Fair Market Value of the Common Stock
on the dividend payment date.

  (b)   Conversion Out of DSUs. Amounts credited to the DSU Subaccount generally
will be paid in the corresponding number of shares of Common Stock. In the
event, however, that it becomes necessary to determine the dollar value of DSUs
credited to a Participant’s DSU Subaccount as of any date, the dollar value
shall be determined by multiplying the number of DSUs on that date by the Fair
Market Value of the Common Stock on that date.

  (c)   Effect of Recapitalization. In the event of a transaction or event
described in this Section 4.05(c), the number of DSUs credited to a
Participant’s DSU Subaccount shall be adjusted in such manner as the Committee,
in its sole discretion, deems equitable. A transaction or event is described in
this Section 4.05(c), if and only if:

  (1)   it is a dividend or other distribution (whether in the form of cash,
shares, other securities, or other property), extraordinary cash distribution,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
shares or other securities, the issuance of warrants or other rights to purchase
shares or other securities, or other similar corporate transaction or event; and

  (2)   the Committee determines that such transaction or event affects the
Common Stock such that an adjustment pursuant to this Section 4.05(c) is
appropriate to prevent dilution or enlargement of the benefits made available
under the Plan.

 

 

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4.06. Vesting of Accounts.

  (a)   Deferred Cash Subaccount. A Participant shall at all times have a 100%
vested and nonforfeitable interest in the balance in his Deferred Cash
Subaccount.

  (b)   DSU Subaccount. Any Performance Share in a Participant’s DSU Subaccount
shall vest and become nonforfeitable only to the extent such Performance Share
would have vested and become nonforfeitable under the terms of the PIP had it
not been deferred. Any Common Stock in a Director’s DSU Subaccount shall be 100%
vested at all times.

  (c)   Dividend DSUs. A Participant shall have a vested and nonforfeitable
interest in any dividend DSUs only to the extent the Participant has a vested
and nonforfeitable interest in the underlying Performance Share or Common Stock
to which the dividend DSU relates.

Notwithstanding the foregoing, a Participant’s Account shall be subject to the
claims of the Company’s creditors as provided in Section 6.

 

 

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SECTION 5. DISTRIBUTIONS
5.01. Exclusive Entitlement to Payment
A Participant’s deferral election pursuant to Section 3 shall constitute a
waiver of his right to receive the amount deferred and an agreement to receive
in lieu thereof the amounts payable to him at the times and in the methods
specified in this Section 5. No other amounts shall be due under the Plan or
otherwise as a result of a Participant’s deferral election under Section 3.
5.02. Payment.

  (a)   Time of Payment. Subject to Sections 5.03, 5.04, 5.05, and 5.06, the
Participant shall receive an amount equal to the sum of the balances in his
Account at the time(s) and in the manner specified or elected by him in
accordance with Section 3.03. If the deferred amounts are subject to more than
one distribution election made in accordance with Section 3.03, then the portion
of the Participant’s Account that is subject to each election shall be
distributed in accordance with the applicable election. The Participant’s
Account shall be debited to reflect each distribution pursuant to this
Section 5.

  (b)   Payment Medium. All amounts credited to the Deferred Cash Subaccount
shall be paid in cash. All amounts credited to the DSU Subaccount shall be paid
solely in shares of Common Stock, except that cash shall be paid in lieu of
fractional shares. Any reference in the Plan to a payment of DSUs shall refer to
a distribution of shares of Common Stock equal to the number of DSUs, except
that it shall refer to a payment of cash in lieu of a fractional share. For this
purpose, the cash value of a fractional share shall be determined in accordance
with Section 4.05(b).

  (c)   Installment Payments. If the Participant receives installments, the
amount of the first installment shall be equal to the value of the Participant’s
Deferred Cash Subaccount plus the value of the Participant’s DSU Subaccount
(determined in accordance with Section 4.05(b)) determined as of the Valuation
Date as of which the installments commence (the “applicable Valuation Date”)
pursuant to Section 5.02(a), divided by five (if five installments are elected)
or ten (if ten installments are elected). The amount of each succeeding
installment shall be equal to the value of the Participant’s Deferred Cash
Subaccount and the value of the Participant’s DSU Subaccount (determined in
accordance with Section 4.05(b)) on the next succeeding anniversary of the
applicable Valuation Date, divided by the remaining number of installments to be
paid. The form of each installment payment shall be determined in accordance
with Section 5.02(b).

 

 

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  (d)   Effect of Deferral on Restriction or Vesting Period. If a share of
Common Stock would have been subject to any restriction or vesting period upon
transfer to a Participant under a Performance Share Award in the absence of a
deferral election, such share shall be subject to such restriction or vesting
period upon payment from the Plan; provided however, that any period of deferral
under the Plan shall be credited toward the satisfaction of any such restriction
or vesting period.

5.03. Death Benefits.

  (a)   Amount and Form of Death Benefit. Any amount credited to a Participant’s
Account that is unpaid at the time of the Participant’s death shall be paid in a
single lump sum to the Beneficiary (or the contingent Beneficiary if the
Beneficiary predeceases the Participant) designated by the Participant pursuant
to Section 9.02.

  (b)   Time of Payment. A distribution pursuant to this Section 5.03 shall be
paid to the Participant’s Beneficiary within 30 days after the Valuation Date
that is coincident with or next follows the date of the Participant’s death,
together with any additional information or documentation that the Committee
determines to be necessary or appropriate before it makes the distribution.

5.04. Distributions Due to Unforeseeable Emergency.
Notwithstanding Sections 3.02 and 3.03, upon the occurrence of an unforeseeable
emergency, a Participant shall be eligible to receive payment of the amount
necessary to satisfy such emergency plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, after taking into
account the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant’s assets (to the extent such liquidation would not itself cause
severe financial hardship), or by cessation of deferrals under the Plan. The
amount determined to be properly distributable under this Section and applicable
regulations under Code Section 409A shall be payable in a single lump sum only.
For the purposes of this Section, the term “unforeseeable emergency” means a
severe financial hardship to the Participant resulting from an illness or
accident of the Participant, the Participant’s spouse, or a dependent of the
Participant (as defined in Code Section 152, without regard to
Sections 152(b)(1), (b)(2) and (d)(1)(B)); loss of the Participant’s property
due to casualty, including the need to rebuild a home following damage not
otherwise covered by insurance, for example, not as a result of a natural
disaster; or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Participant, including imminent
foreclosure of or eviction from the Participant’s primary residence, the need to
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deductibles, the cost of prescription drugs, and the need to pay for funeral
expenses of a spouse, Beneficiary, or dependent. It shall be the responsibility
of the Participant seeking to make a withdrawal under this Section to
demonstrate to the Committee that an unforeseeable emergency has occurred and to
document the amount properly distributable hereunder. After a distribution on
account of an unforeseeable emergency, a Participant’s deferral elections shall
cease and such Participant will not be permitted to participate in the Plan or
elect additional deferrals until the next enrollment following one full year
from the date of the distribution on account of an unforeseeable emergency. Such
future deferral elections following a distribution on account of an
unforeseeable emergency will be treated as an initial deferral election and
subject to the rules applicable thereto under the Plan and Code Section 409A.
5.05. Disability.
Notwithstanding any election made pursuant to Sections 3.02 and 3.03, upon the
written application of the Participant in accordance with the requirements of
Section 3, the Committee shall accelerate and pay in a lump sum to the
Participant all of the balance of the Participant’s Account, if the Committee
finds that such person has become Disabled (within the meaning of Code
Section 409A).
5.06. Change in Control.
Notwithstanding any election made pursuant to Sections 3.02 and 3.03, upon a
Change in Control, the Participant shall receive amounts credited to his Account
in the form of a lump sum payment. Such payment shall be made within 90 days
after the date the Change in Control occurred.
5.07. Acceleration of Payment.
The acceleration of the time and/or form of any payment determined in accordance
with the provisions of this Section 5 shall not be made except due to
unforeseeable emergency, as described above, or as set forth below and otherwise
permitted by Code Section 409A and the Treasury Regulations and other guidance
issued thereunder:

  (a)   Domestic Relations Order. A payment of all or part of the Participant’s
Account may be made to a spouse, former spouse or other dependent under the
terms of a domestic relations order (as defined in Code Section 414(p)(1)(B)).
The Administrative Committee shall determine whether a payment should be made
pursuant to the terms of a domestic relations order and the time and form of
such payment.

  (b)   Employment Taxes. A payment of all or part of the Participant’s Account
may be made to the extent necessary to pay the Federal Insurance Contributions
Act (“FICA”) tax imposed under Code Sections 3101, 3121(a), and 3121(v)(2) on
amounts deferred under the Plan (the “FICA Amount”), income tax at source on
wages imposed under Code Section 3401 or the corresponding withholding
provisions of applicable state, local, or foreign tax laws as a result of the
payment of the FICA Amount, and to pay the additional income tax at source on
wages attributable to the pyramiding Code Section 3401 wages and taxes. The
total payment under this Section shall not exceed the aggregate of the FICA
Amount and the income tax withholding related to such FICA Amount.

 

 

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  (c)   Payment of State, Local or Foreign Taxes. Payment may be made to reflect
payment of state, local or foreign tax obligations arising from participation in
the Plan that apply to an amount deferred under the Plan before the amount is
paid or made available to the Participant, plus the income tax at source on
wages imposed under Code Section 3401 as a result of such payment; provided,
however, that the amount of the payment may not exceed the amount of the taxes
due, and the income tax withholding related to such state, local and foreign tax
amount.

  (d)   Income Inclusion under Code Section 409A. Payment may be made at any
time the Plan fails to meet the requirements of Code Section 409A and the
Treasury Regulations issued thereunder; provided, however, that payment cannot
exceed the amount required to be included in income as a result of the failure
to comply.

  (e)   Certain Offsets. Payment may be made as satisfaction of a debt of the
Participant to the Company where: (1) the debt is incurred in the ordinary
course of the employment relationship; (2) the entire amount of the offset in
any of the Participant’s taxable years does not exceed $5,000; and (3) the
reduction is made at the same time and in the same amount as the debt otherwise
would have been due and collected from the Participant.

5.08. Delay of Payment.
A Participant who is a “specified employee” (as defined in Code Section 409A and
the regulations thereunder) and is entitled to a distribution due to a
Separation from Service may not receive a distribution under the Plan until a
date that is at least six months after the date of the Separation from Service.
In addition, the Company may in its discretion delay any payment due under the
Plan to the extent permitted by Code Section 409A and the regulations
thereunder.

 

 

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5.09. Assignment and Assumption of Liabilities.
In the discretion of the Company, upon the cessation of participation in the
Plan by any Participant solely due to the employer of that Participant no longer
qualifying as a member of the controlled group of Chesapeake Utilities
Corporation within the meaning of Code Sections 414(b) and (c), all liabilities
associated with the Account of such Participant may be transferred to and
assumed by the Participant’s employer under a deferred compensation plan
established by such employer that is substantially identical to this Plan and
that preserves the deferral and payment elections in effect for the Participant
under this Plan to the extent required by Code Section 409A. Any such
Participant shall not be deemed to have incurred a Separation from Service for
purposes of the Plan by virtue of his employer’s ceasing to be a member of the
controlled group of Chesapeake Utilities Corporation The foregoing provision
shall be interpreted and administered in compliance with the requirements of
Code Section 409A.

 

 

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SECTION 6. NATURE OF PARTICIPANT’S INTEREST IN PLAN
6.01. No Right to Assets.
Participation in this Plan shall not create, in favor of any Participant or
Beneficiary, any interest in or lien against any of the assets of the Company.
All payments hereunder shall be paid from the general funds of the Company, and
no special or separate fund shall be established and no other segregation of
assets shall be made to assure the payments of benefits hereunder; provided,
however, that in order to provide a source of payment for its obligations under
the Plan, the Company may establish a grantor trust commonly known as a “Rabbi”
trust. Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and a Participant or any other
person, and the promise of the Company to pay benefits hereunder shall, at all
times, remain unfunded as to the Participant or Beneficiary, whose rights
hereunder shall be limited to those of a general and unsecured creditor of the
Company.
6.02. No Right to Transfer Interest.
A Participant’s or Beneficiary’s rights to benefits payable under the Plan are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, or encumbrance. However, the Committee may permit a
Participant or Beneficiary to enter into a revocable arrangement to pay all or
part of his benefits under the Plan to a revocable grantor trust (a so-called
“living trust”). In addition, the Committee may recognize the right of an
alternate payee named in a domestic relations order to receive all or part of a
Participant’s benefits under the Plan, but only if (a) the domestic relations
order would be a “qualified domestic relations order” (within the meaning of
Code Section 414(p) (if Code Section 414(p) applied to the Plan)), (b) the
domestic relations order does not attempt to give the alternate payee any right
to any asset of the Company, (c) the domestic relations order does not attempt
to give the alternate payee any right to receive payments under the Plan at a
time or in an amount that the Participant could not receive under the Plan to
the extent such a payment would violate Code Section 409A, and (d) the amount of
the Participant’s benefits under the Plan are reduced to reflect any payments
made or due the alternate payee.
6.03. No Right to Employment or Service.
No provisions of the Plan and no action taken by the Company, the Board, the
Compensation Committee, or the Committee will give any person any right to be
retained in the employ of the Company or as a member of the Board. The Company
specifically reserves the right and power to dismiss or discharge any Eligible
Employee.

 

 

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6.04. Withholding and Tax Liabilities.
The amount of any withholdings required to be made by any government or
government agency will be deducted from benefits paid under the Plan to the
extent deemed necessary by the Committee. In addition, the Participant or
Beneficiary (as the case may be) will bear the cost of any taxes not withheld on
benefits provided under the Plan, regardless of whether withholding is required.
The income tax consequences to Participants of compensation reductions under the
Plan shall be determined under applicable federal, state and local tax laws and
regulations and neither the Company, the Committee, the Board, nor any officer
or employee of the Company makes any representations as to the tax consequences
of participation in the Plan.
In accordance with Code Section 409A and the regulations issued thereunder, the
Plan shall permit the withholding and payment of any amounts necessary to
(a) satisfy federal and applicable state or city employment tax withholding
obligations that arise under the Plan prior to the date that payment may
otherwise be made under the Plan and/or (b) satisfy the excise tax or
underpayment penalties owed under Code Section 409A in the event of a violation
of Code Section 409A under the Plan.

 

 

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SECTION 7. ADMINISTRATION
7.01. Committee.
The Plan shall be administered by the Committee that shall serve at the pleasure
of the Board. The Committee may allocate its responsibilities for the
administration of the Plan among its members or among any subcommittee(s) it may
appoint and may designate persons other than its members to carry out its
responsibilities under the Plan.
7.02. Meetings.
The Committee shall hold meetings upon such notice, at such place or places, and
at such intervals as are required to carry out its functions.
7.03. Quorum.
A majority of the members of the Committee at any time in office shall
constitute a quorum for the transaction of business. All resolutions or other
actions taken by the Committee shall be by vote of a majority of members present
at a meeting of the Committee; or without a meeting by an instrument in writing
signed by all the members of the Committee at such time in office.
7.04. Expenses.
The expenses incident to the operation of the Plan, including the compensation
of attorneys, advisors, actuaries, and such other persons providing technical
and clerical assistance as may be required, shall be paid directly by the
Company.
7.05. Responsibilities of the Committee.
In addition to any implied authority and duties that may be needed to carry out
the provisions of the Plan, the Committee shall have the following specific
discretionary powers and duties:

  (a)   to make and enforce such rules and regulations as it shall deem
necessary or proper for the efficient administration of the Plan;

  (b)   to interpret the Plan and to decide any and all matters arising
hereunder, including the right to remedy possible ambiguities, inconsistencies,
or omissions; provided that all such interpretations and decisions shall be
applied in a uniform and non-discriminatory manner to all persons similarly
situated;

  (c)   to compute the amount of benefits that shall be payable to any
Participant or Beneficiary in accordance with the provisions of the Plan, and in
the event that the Committee determines that Excessive Benefits have been paid
to any person, the Committee may suspend payment of future benefits to such
person or his Beneficiary or reduce the amount of such future benefits until the
Excessive Benefits and any interest thereon determined by the Committee have
been recovered;

 

 

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  (d)   to appoint other persons to carry out any ministerial responsibilities
under the Plan as it may determine consistent with applicable law;

  (e)   to employ one or more persons to render advice with respect to any of
its responsibilities under the Plan; and

  (f)   to amend the Plan from time to time by written resolution for the
limited purpose of meeting the requirements of Code Section 409A.

The members of the Committee and the Company and its officers and Directors
shall be entitled to rely upon all valuations, certificates and reports
furnished by any funding agent or service provider, upon all certificates and
reports made by an accountant, and upon all opinions given by any legal counsel
selected or approved by the Committee (who may be counsel to the Company) and
the members of the Committee and the Company and its officers and Directors
shall, except as otherwise provided by law, be fully protected with respect to
any action taken or suffered by them in good faith in reliance upon any such
valuations, certificates, reports, opinions or other advice of a funding agent,
service provider, accountant or counsel.
7.06. Finality of Committee Determinations.
Subject to the provisions of Section 7.08, determinations by the Committee and
any interpretation, rule, or decision adopted by the Committee under the Plan or
in carrying out or administering the Plan shall be final and binding for all
purposes and upon all interested persons, their heirs, and their personal
representatives.

 

 

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7.07. Benefit Claims Procedure.
A claim for a benefit under the Plan by any person shall be filed in the manner
and governed by the procedures set forth below:
Upon Separation from Service, death, or any and all types of claims regarding
benefits under the Plan, the Participant or his representative may make
application to the Committee requesting payment of benefits due. If no
application for benefits is made, the Committee shall automatically pay any
benefit due pursuant to Section 5. If an application for benefits is made, the
Committee shall accept, deny, or modify such request and shall notify the
Participant in writing setting forth the Committee’s response and in the case of
a denial or modification, the Committee shall:

  (a)   state the specific reason or reasons for the denial,

  (b)   provide specific reference to pertinent Plan provisions on which the
denial or modification is based,

  (c)   provide a description of any additional material or information
necessary for the Participant or his representative to perfect the claim and an
explanation of why such material or information is necessary, and

  (d)   explain the Plan’s claim review procedure as contained in this Plan.

In the event the request is rejected or modified, the Participant or his
representative may within 60 days following receipt by the Participant or
representative of such rejection or modification, submit a written request for
review by the Committee of its initial decision. Within 60 days following such
request for review (120 days if extraordinary circumstances exist), the
Committee shall render its final decision in writing to the Participant or
representative stating specific reasons for such decision. If the Participant or
representative is not satisfied with the Committee’s final decision, the
Participant or representative can institute an action in a Federal court of
competent jurisdiction; for this purpose, process would be served on the
Company.
7.08. Arbitration of Denied Claims.
Any controversy or claim arising out of or relating to a final decision, upon
review pursuant to the procedures set forth in Section 7.07, that denies a claim
for benefits under the Plan may be settled by arbitration under three
arbitrators in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. Any such arbitration
shall be subject to the statute of limitations that would apply if the claim on
which the arbitration is based were brought as a suit in a United States
district court under ERISA. The site of any such arbitration shall be Delaware.

 

 

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SECTION 8. AMENDMENT, SUSPENSION, AND TERMINATION
8.01. By the Compensation Committee.

  (a)   Authority to Amend. The Compensation Committee of the Board may modify,
amend, suspend, or terminate the Plan at any time; provided that no such
modification, amendment, suspension, or termination shall reduce a Participant’s
accrued benefits under the Plan as of the date of such modification, amendment,
suspension, or termination, except to the extent that the affected Participants
consent in writing to the modification, amendment, suspension, or termination;
and provided further that the Plan may be amended at any time and without the
consent of the Participants to provide that DSUs shall be paid in cash rather
than in shares of Common Stock; and provided further that no such modification,
amendment, suspension, or termination shall eliminate, restrict, or modify any
of the following provisions of the Plan, except to the extent that the affected
Participants consent in writing to the modification, amendment, suspension, or
termination:

  (1)   the provision in Section 2.01(g) that defines “Change in Control”;

  (2)   the provision in Section 5.06 that provides for a lump sum payment
following a Change in Control;

  (3)   the provision in Section 7.08 that permits submission of denied claims
for benefits to arbitration; and

  (4)   the provisions of this Section 8 that protect accrued benefits and limit
modification, amendment, suspension, or termination of the Plan.

Except as provided in the preceding sentence, any modification, amendment,
suspension, or termination of the Plan may reduce or eliminate a benefit under
the Plan. Although the Plan is not subject to ERISA Section 204(g), the accrued
benefits that are protected by this Section 8 shall include those accrued
benefits that would be protected by ERISA Section 204(g) if the Plan were
subject to said Section 204(g) and the rights specified in items (1) through
(4), above.

  (b)   Authority to Delegate. The Board may, in its sole discretion, delegate
to any person or persons all or part of its authority and responsibility under
the Plan, including, without limitation, the authority to amend the Plan.

 

 

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8.02. By the Committee.
The Committee shall have the right by written resolution to amend the Plan from
time to time, for the limited purpose of meeting the requirements of Code
Section 409A.

 

 

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SECTION 9. MISCELLANEOUS
9.01. Participation by Affiliate.
Subject to the consent of the Compensation Committee, an Affiliate may
participate in the Plan by delivering to the Compensation Committee a resolution
of its board of directors approving such action. Such Affiliate shall begin
participating in the Plan as of an effective date approved by the Compensation
Committee and shall be subject to the provisions of the Plan.
9.02. Designation of Beneficiary.

  (a)   Each Participant may designate a Beneficiary. Such designation shall be
in writing, shall be made in the form and manner prescribed by the Committee,
and shall be effective only if filed with the Committee prior to the
Participant’s death. A Participant may, at any time prior to his death, and
without the consent of his Beneficiary, change his designation of Beneficiary by
filing a written notice of such change with the Committee in the form and manner
prescribed by the Committee. In the absence of a designated Beneficiary, or if
the designated Beneficiary and any designated contingent Beneficiary predecease
the Participant, the Beneficiary shall be the Participant’s surviving spouse, or
if the Participant has no surviving spouse, the Participant’s estate.

  (b)   If a Participant designates his spouse as his Beneficiary, that
designation shall not be revoked or otherwise altered or affected by any:

  (1)   change in the marital status of the Participant and such spouse,

  (2)   agreement between the Participant and such spouse, or

  (3)   judicial decree (such as a divorce decree) affecting any rights that the
Participant and such spouse might have as a result of their marriage separation,
or divorce,

until and unless the Participant revokes and designates a Beneficiary in
accordance with this Section 9.02, it being the intent of the Plan that any
change in the designation of a Beneficiary under the Plan may be made by the
Participant only in accordance with the provision of this Section 9.02.

 

 

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9.03. Incapacity.
If the Committee determines that any person entitled to benefits under the Plan
is unable to care for his affairs because of illness or accident, any payment
due (unless a duly qualified guardian or other legal representative has been
appointed) may be paid for the benefit of such person to his spouse, parent,
brother, sister, or other party deemed by the Committee to have incurred
expenses for such person. Any such payment or application of benefits made in
good faith in accordance with the provisions of this Section shall be a complete
discharge of any liability of the Committee and the Company with respect to such
payment or application of benefits.
9.04. Required Information.
Any person eligible to receive benefits under the Plan shall furnish to the
Committee any information or proof requested by the Committee and reasonably
required for the proper administration of the Plan. Failure on the part of any
person to comply with any such request within a reasonable period of time shall
be sufficient grounds for delay in the payment of any benefits that may be due
under the Plan until such information or proof is received by the Committee. If
any person claiming benefits under the Plan makes a false statement that is
material to such person’s claim for benefits, the Committee may offset against
future payments any amount paid to such person to which such person was not
entitled under the provisions of the Plan.
9.05. Inability to Locate Participants and Beneficiaries.
Each Participant and each Beneficiary entitled to receive a benefit under the
Plan shall keep the Committee advised of his current address. If the Committee
is unable to locate a Participant or Beneficiary to whom a benefit is payable
under the Plan for a period of 36 months, commencing with the first day of the
month as of which such benefit becomes payable, the total amount payable to such
Participant or Beneficiary shall be forfeited, subject to being restored
(without any intervening investment gains) only if the Participant and
Beneficiary provide evidence sufficient to satisfy the Committee that the
Participant or Beneficiary is entitled to such forfeited amount.
9.06. Headings.
Any headings used in this document are for convenience of reference only and may
not be given any weight in interpreting any provision of the Plan.
9.07. Severability.
If any provision of the Plan shall be held illegal or invalid for any reason,
such illegality or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if such illegal or invalid
provision had never been included in the Plan. In addition, if any provision of
the Plan shall be found to violate Code Section 409A or otherwise result in any
portion of a Participant’s or Beneficiary’s benefits under the Plan being
subject to income tax prior to distribution, such provision shall be void and
unenforceable, and the Plan shall be administered without regard to such
provision.

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 30

9.08. Governing Law.
The Plan shall be construed, administered, and regulated in accordance with the
laws of the State of Delaware (not including its conflict of law rules), except
to the extent that such laws are preempted by Federal law.
9.09. Complete Statement of Plan.
This Plan contains a complete statement of its terms. The Plan may be amended,
suspended, or terminated only in writing and then only as provided in Section 8.
A Participant’s right to any benefit of a type provided under the Plan will be
determined solely in accordance with the terms of the Plan. No other evidence,
whether written or oral, will be taken into account in interpreting the
provisions of the Plan.

            CHESAPEAKE UTILITIES CORPORATION
      By:           Its:          Date:       

 

 

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Chesapeake Utilities Corporation
Deferred Compensation Plan   Page 31

EXHIBIT A
Rate of Return Indices
Effective January 1, 2009

1.   The Fidelity Spartan U.S. Equity Index Fund   2.   The BlackRock Total
Return II Portfolio   3.   The BlackRock Money Market Portfolio

 

 

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APPENDIX A
GRANDFATHERED PROVISIONS
TO THE
CHESAPEAKE UTILITIES CORPORATION
DEFERRED COMPENSATION PROGRAM

 

 

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APPENDIX A
The following Plan provisions apply only to amounts deferred and vested (within
the meaning of Code Section 409A) before January 1, 2005, and any earnings on
such amounts, to the full extent permitted by Code Section 409A. Amounts
deferred or vested after December 31, 2004, and any earnings thereon, are
subject to the provisions of the Plan as amended and restated, effective
January 1, 2005, or any subsequent amendment and restatement of the Plan.
Section 1. Establishment and Purpose
1.1 Establishment.
Effective September 1, 1998, the Company established the Chesapeake Utilities
Corporation Executive Deferral Program (the “Plan”) for the benefit of the
Participants.
1.2 Purpose.
The Plan is an unfunded plan maintained primarily for the purpose of providing
deferred compensation to a select group of management and highly compensated
employees. The Plan permits Participants to elect to defer payment of part or
all of certain specified types of compensation until their termination of
employment with the Company or until such other date specified in accordance
with the terms of the Plan.
Section 2. Definitions
2.1 Gender and Number.
In order to shorten and to improve the understandability of the Plan document by
eliminating the repeated usage of such phrases as “his or her” and “Executive or
Executives,” any masculine terminology herein shall also include the feminine
and neuter, and the definition of any term herein in the singular shall also
include the plural, except when otherwise indicated by the context.
2.2 Definitions.
The following words and phrases as used in the Plan have the following meanings:
“Account” means the bookkeeping account established for each Participant under
Section 5.1 hereof. Each Account shall include a Deferred Cash Subaccount and a
DSU Subaccount. Additional subaccounts shall be maintained as necessary for the
administration of the Plan.

 

 

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“Beneficiary” means the person designated by a Participant to receive benefits
under the Plan after the Participant’s death. Such a designation shall be in
writing in a form acceptable to the Committee, and shall be effective as of the
date the form is filed with the Committee. If a Participant dies before
receiving the entire amount due to him under the Plan, and he has failed to
designate a Beneficiary or his designated Beneficiary fails to survive him, his
Beneficiary will be the person to whom he is married at the time of his death,
or if he is not married at that time, his Beneficiary will be the executor of
his will or the administrator of his estate. A Participant may revoke a prior
designation of a Beneficiary at any time before the Participant’s death by
filing a new form with the Committee.
“Blackout Period” means the period prescribed by Section 3.3(b) hereof following
a deferral election during which an Option or SAR subject to the deferral
election may not be exercised.
“Board” means the Board of Directors of the Company.
“Bonus Compensation” means compensation received under the Bonus Plan.
“Bonus Plan” means the “Chesapeake Utilities Corporation Cash Bonus Incentive
Plan,” as in effect and amended from time to time.
“Change in Control” means the first of the following events occurs:
(a) 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
(b) any person or group (within the meaning of Sections 13(d) and 14(d) of the
1934 Act), other than the Company, becomes the beneficial owner (within the
meaning of Rule 13d-3 under the 1934 Act) of 30 percent or more of the combined
voting power of the Company’s then outstanding voting securities; or
(c) a tender offer or exchange offer, other than an offer by the Company,
pursuant to which 30 percent or more of the combined voting power of the
Company’s then outstanding voting securities was purchased, expires; or
(d) 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

 

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(e) 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
(f) during any period of two consecutive years, individuals who, at the
beginning of the 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
(g) 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 with respect to a
Participant by reason of any event involving a transaction in which (i) the
Participant or a group of persons or entities with which the Participant acts in
concert, acquires, directly or indirectly, more than 30 percent of the common
stock or the business or assets of the Company; (ii) 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
(iii) any event constituting approval by the Company’s stockholders of a merger
or consolidation if a majority of the group consisting of the present 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 be deemed not to constitute a Change in Control.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means the committee appointed by the Board to administer the Plan.
“Common Stock” means the common stock, $.4867 par value, of the Company,
including both treasury shares and authorized but unissued shares, or any
security of the Company issued in substitution, exchange, or in lieu thereof.
“Company” means Chesapeake Utilities Corporation or a Related Company.
“Compensation Committee” means the Compensation Committee of the Board.
“Deferred Cash Subaccount” means the subaccount within the Participant’s Account
to which amounts deferred under Section 3 hereof are credited as described in
Section 5.1 hereof.

 

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“Deferred Cash Payment” means an any Bonus Compensation or SAR Spread payable in
cash that a Participant elects to defer under the Plan.
“Deferred Stock Units” or “DSUs” means hypothetical shares of Common Stock
(including hypothetical fractional shares).
“Disability” means total and permanent disability as determined by the Committee
in its sole discretion.
“DSU Subaccount” means the subaccount within the Participant’s Account to which
amounts deferred under Section 3 hereof are credited as described in Section 5.3
hereof.
“Effective Date” means September 1, 1998.
“Eligible Executive” means an employee of the Company who is eligible to
participate in the Bonus Plan or the PIP and who is designated by the
Compensation Committee in its sole discretion; provided that, on and after a
Change in Control, each employee of the Company who was an Eligible Executive
immediately before the Change in Control shall remain an Eligible Executive as
long as the employee is employed by the Company or any successor thereto.
“Fair Market Value” means the average of the high and low sales price of the
Common Stock, as reported on the New York Stock Exchange (or any other reporting
system as shall be selected by the Committee) on the relevant date, or if no
sale of Common Stock is reported for a date, on the date or dates that the
Committee determines, in its sole discretion, to be appropriate for purposes of
valuation.
“Option” means a stock option granted under the PIP, other than an incentive
stock option under Section 422 of the Code or such other stock option as the
Committee may exclude from the Plan.
“Option Shares” means shares of Common Stock issuable upon exercise of an Option
in accordance with the terms of the Option.
“Participant” means an Eligible Executive who becomes a participant in the Plan
in accordance with Section 3.1 hereof and whose Account hereunder has a positive
balance.
“Performance Share Award” means a performance share award granted under the PIP.
“Performance Shares” means shares of Common Stock awardable under a Performance
Share Award in accordance with the terms of the Performance Share Award.

 

4

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“PIP” means the “Chesapeake Utilities Corporation Performance Incentive Plan,”
as in effect and as amended from time to time.
“Plan” means the “Chesapeake Utilities Corporation Executive Deferral Program,”
as set forth herein and as amended from time to time.
“Related Company” means a corporation, partnership, joint venture, or other
entity in which Chesapeake Utilities Corporation has a direct or indirect
ownership or other proprietary interest of at least fifty percent.
“Retirement” means termination of employment with the Company at or after
attaining age 65, or at such earlier age as accepted by the Committee in its
sole discretion.
“SAR” means an award of stock appreciation rights granted under the PIP.
“SAR Spread” means the cash or shares of Common Stock payable to an Eligible
Executive or Beneficiary upon exercise of stock appreciation rights in
accordance with the terms of the applicable stock appreciation rights agreement,
disregarding any withholding taxes due with respect to said exercise.

 

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Section 3. Participation by Eligible Executives
3.1 Election of Benefits.
An Eligible Executive may become a Participant in the Plan by electing to defer
Bonus Compensation, Performance Shares, SAR Spread, or Option Shares in
accordance with this Section 3.2 or 3.3, as applicable.
3.2 Election Requirements for Bonus Compensation and Performance Shares.
(a) Election Filing Deadline. Except as provided in subsection (b), below, an
election to defer receipt of Bonus Compensation or Performance Shares earned
with respect to a calendar year shall be filed with the Committee before the
calendar year begins.
(b) Initial Elections. An Eligible Executive may file the requisite deferral
elections before the expiration of 30 days from the initial effective date of
the Plan, and a newly hired or otherwise newly eligible Eligible Executive may
file the requisite elections before the expiration of 30 days from either
(i) his initial date of employment, if the Eligible Executive is a new hire, or
(ii) his initial date of eligibility, if the Eligible Executive is newly
eligible to participate in the Plan.
(c) Irrevocable Election. Except as provided in Section 6.4 hereof, a deferral
election described in this Section 3.2, once filed, shall be irrevocable and
shall remain in effect until the end of the calendar year to which it pertains.
Elections under this Section 3.2 shall automatically apply to each subsequent
calendar year unless the Participant, before the beginning of the calendar year,
revokes his prior election, and in that event, he may file a new election with
the Committee before the beginning of the calendar year in accordance with this
Section 3. An Eligible Executive who does not make deferral elections in one
calendar year may make deferral elections for any subsequent calendar year,
provided he remains an Eligible Executive, by making a deferral election in
accordance with this Section 3.
(d) Form and Content of Election. An election to make a deferral hereunder shall
be in writing, in a form acceptable to the Committee, and shall specify such
information as required by the Committee. A deferral election with respect to
Bonus Compensation may specify any whole percentage of the Bonus Compensation
(from 1% to 100%). A deferral election with respect to Performance Shares must
specify 100% of the Performance Shares awarded for a calendar year.
(e) Treatment of Performance Shares. A Participant who elects to defer
Performance Shares shall be credited with DSUs rather than with shares of Common
Stock. Such DSUs shall be equal in number to the shares of Common Stock that the
Participant otherwise would be entitled to receive under the Performance Share
Award without taking into account any applicable withholding taxes that
otherwise would have been due with respect to the performance Share Award.

 

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3.3 Election Requirements for Option Shares and for SAR Spread
(a) Election Filing Deadline. An election to defer receipt of Option Shares or
of the SAR Spread that would be received upon the exercise of an Option or an
SAR may be made only within the thirty-six (36) months immediately preceding the
scheduled expiration date of the Option or SAR and must be filed with the
Committee at least twelve (12) months before the exercise of the Option or the
SAR.
(b) Form and Content of Election. An election to make a deferral hereunder shall
be in writing, in a form acceptable to the Committee, and shall specify such
information as required by the Committee. A deferral election with respect to an
Option may be made only with respect to 100% of the shares covered by the Option
on the date the deferral election is made. A deferral election with respect to
an SAR may be made only with respect to 100% of the shares on which the SAR
gives stock appreciation rights on the date the deferral election is made. A
deferral election with respect to an Option or SAR shall not have the effect of
permitting the exercise of an Option or SAR that is not otherwise exercisable
under the terms of the PIP and the applicable stock option or stock appreciation
rights agreement. Except as provided in Sections 3.3(c), (d) and (e) hereof, an
Option or SAR subject to a deferral election shall not be exercisable during the
12 months immediately following the date on which the deferral election is made
(the “Blackout Period”).
(c) Hardship.
(i) A Participant who has made a deferral election with respect to an Option or
SAR may request that the Committee allow him to revoke all of his outstanding
Option and/or SAR deferral elections. The Committee may grant such request in
its discretion only if the Committee makes the determination specified in
Section 3.3(c)(ii) hereof.
(ii) If the Committee determines that a Participant who has made a deferral
election with respect to one or more Options and/or SARs has incurred or will
incur a severe financial hardship resulting from an accident or illness with
respect to the Participant, his spouse, or his dependent (as defined in section
152 of the Code), or other event beyond the Participant’s control, the Committee
may grant the Participant’s request to revoke all of his outstanding Option
and/or SAR deferral elections.
(iii) If the Committee grants a Participant’s request to revoke his outstanding
Option and/or SAR deferral elections, all of the participant’s then outstanding
Option and/or SAR deferral elections shall be revoked, and the Options and/or
SARs to which such deferral elections applied shall be thereafter governed by
the applicable terms of the Options and/or SARs without regard to the deferral
elections.

 

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(d) Termination of Employment.
(i) If the Participant makes a deferral election with respect to an Option or
SAR, and the Participant’s employment with the Company is terminated before the
Option or SAR governed by the deferral elections have been exercised in full,
such Option or SAR shall be subject to the provisions of this Section 3.3(d).
(ii) If the Participant terminates employment with the Company by reason of
voluntary termination (for a reason other than Retirement), Disability or death,
the Participant’s deferral election shall be automatically revoked and the
Option or SAR to which the deferral election applied shall thereafter be
governed by the applicable terms of the Option or SAR, determined without regard
to the deferral election.
(iii) If the Participant terminates employment with the Company by reason of
Retirement, any Blackout Period then in effect shall be immediately terminated
and the Participant’s deferral election thereupon become effective.
Notwithstanding the previous sentence, after giving notice to the Company of his
intention to retire, a Participant may request that the Committee allow him to
revoke all of his then outstanding Option or SAR deferral elections. The
Committee may grant any such request in its discretion. If such a request is
made and granted, the Participant’s Options and/or SARs subject to deferral
elections shall not be exercisable during the 60-day period beginning on the
date of the request, and such Options and/or SARs shall become exercisable after
the end of the 60-day period in accordance with the applicable terms of the
Options and/or SARs, determined without regard to the Participant’s deferral
elections. If the Participant’s request is not granted, the Participant’s
deferral elections shall remain in effect, and any Blackout period shall
terminate upon the Participant’s Retirement.
(iv) If the Participant’s employment with the Company is involuntarily
terminated by the Company, any Blackout Period then in effect shall be
immediately terminated, and the deferral elections shall thereupon become
effective. Notwithstanding the preceding sentence, after receiving notice from
the Company that his employment will be terminated, a Participant may request
that the Committee allow him to revoke all of his then outstanding Option and/or
SAR deferral elections. The Committee may grant any such request in its
discretion. If such a request is made and granted, the Participant’s Options
and/or SARs subject to the deferral elections shall not be exercisable during
the 60-day period beginning on the date of the request, and such Options and/or
SARs shall become exercisable after the end of the 60-day period in accordance
with the applicable terms of the Options and/or SARs, determined without regard
to the Participant’s deferral elections. If the Participant’s request is not
granted, the Participant’s deferral elections shall remain in effect, and any
Blackout period shall terminate upon the termination of the Participant’s
employment.

 

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(e) Change in Control. If a Change in Control occurs during a Blackout period,
the Blackout Period shall immediately terminate and the Participant’s deferral
election shall thereupon become effective. No elections to defer Option Shares
or SAR Spreads under this Section 3.3 may be made following a Change in Control.
3.4 Form and Time of Payment.
(a) General. An amount deferred under this Section 3 shall be paid in a lump sum
as of the date elected by the Participant. An election of the time of payment
hereunder shall be in writing in a form acceptable to the Committee, and shall
be effective as of the date the form is filed with the Committee, and, subject
to Sections 3.3, 3.4(b) and 6.4 hereof, shall be irrevocable.
(b) Modification of Time . A Participant may submit a request at any time to the
Committee to modify the payment date with respect to a deferral election subject
to the following requirements:
(i) Only one such request may be made in any Plan Year.
(ii) A request must be made before any payment is made with respect to the
deferral election (except a hardship payment under Section 6.4 hereof).
(iii) The Committee may grant or deny the request in its sole discretion.
(iv) A request to accelerate payment may not have an accelerated payment date
that is less than one year from the date the request is submitted.
(v) A request to delay payment must be made at least 60 days before the start of
the calendar year in which payment otherwise would have been made.

 

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Section 4. Exercise of Options and SARs Subject to Deferral Elections
4.1 General.
If, after a deferral election is made with respect to an Option or SAR and the
resulting Blackout Period terminates, the Participant exercises an Option or SAR
to which the deferral election applies, the exercise shall be governed by the
provisions of this Section 4.
4.2 Exercise of Option.
(a) General. When he exercises an Option, the Participant shall pay the exercise
price either by paying cash or by surrendering shares of previously owned Common
Stock which shares have been owned by the Participant for at least six months
(including a surrender that is effected by attestation).
(b) Payment in Shares. If the Participant pays the exercise price by
surrendering previously-owned shares of Common Stock, the Participant shall
receive in return shares of Common Stock equal in number to the shares of Common
Stock he surrendered.
(c) Crediting with DSUs. Except for any shares the Participant receives in
accordance with Section 4.2(b) hereof, the Participant shall be credited with
DSUs rather than with shares of Common Stock. Such DSUs shall be equal in number
to the shares of Common Stock that the Participant otherwise would be entitled
to receive upon the exercise of the Option, less any shares described in
Section 4.2(b) hereof, and without taking into account any applicable
withholding taxes that otherwise would have been due with respect to said
exercise.
4.3 Exercise of SAR.
(a) General. When a Participant exercises an SAR, the SAR Spread shall not be
paid to him. Instead, the SAR Spread shall be credited to the Participant’s
Account as provided in Section 4.3(b) or 4.3(c) hereof.
(b) Crediting of Deferred Cash Subaccount. If the applicable stock appreciation
rights agreement provides that the SAR Spread is due the Participant in cash,
the SAR Spread shall be credited to the Participant’s Deferred Cash Subaccount.
(c) Crediting of DSU Subaccount. If the applicable stock appreciation rights
agreement provides that the SAR Spread is due the Participant in shares of
Common Stock, the Participant’s DSU Subaccount shall be credited with DSUs equal
in number to the shares of Common Stock that the Participant would otherwise be
entitled to receive upon exercise of the SAR.

 

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Section 5. Accounts
5.1 Accounts.
(a) General. The Company shall maintain for bookkeeping purposes an Account in
the name of each Participant. Each Account shall have a Deferred Cash Subaccount
and a DSU Subaccount, as applicable, to which shall be credited amounts deferred
under Section 3 hereof.
(b) Deferred Cash Payments. All amounts of Bonus Compensation and SAR Spread due
in cash (as described in Section 4.3(b) hereof) deferred under the Plan shall be
credited to the Participant’s Deferred Cash Subaccount, as shall be any amounts
provided under Section 5.2 hereof.
(c) DSUs. All DSUs with which a Participant is credited pursuant to Sections
3.2, 4.2, and 4.3(c) hereof shall be credited to the Participant’s DSU
Subaccount, as shall any amounts provided under Section 5.3 hereof.
5.2 Investment Return for Deferred Cash Subaccount.
(a) Rate of Return Indices. The Committee shall select and maintain one or more
rate of return indices as specified on Exhibit A attached hereto as amended from
time to time. A Deferred Cash Payment shall be allocated to one or more of the
rate of return indices and shall be credited with the applicable investment
return (or loss) that such Deferred Cash Payment would have achieved if it were
invested in the specified index or indices.
(b) Election of Rate of Return Indices.
(i) Each Participant shall specify in writing, at the time he completes his
election to participate under Section 3 hereof, and in a form acceptable to the
Committee, how any Deferred Cash Payment shall be allocated among the indices
specified on Exhibit A attached hereto.
(ii) The Committee may, in its discretion and from time to time, permit a
Participant to change any election previously made with respect to the
allocation of any Deferred Cash Payment, subject to such conditions and such
limitations as the Committee may prescribe. Any such change in election shall be
in writing and in a form acceptable to the Committee.
(iii) The Committee may, in its discretion and from time to time, permit a
Participant to elect to reallocate the amounts in such Participant’s Deferred
Cash Subaccount from one rate of return index to another, subject to such
conditions and such limitations as the Committee may prescribe; provided that a
Participant shall be permitted, at least once per calendar month, to reallocate
amounts previously allocated. Any such reallocation election shall be in writing
and in a form acceptable to the Committee.

 

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(iv) The Committee may require that any election under this Section 5.2 apply to
the entire amount to which it pertains (e.g., 100% of the Participant’s future
contributions) or to such percentage or percentages of that amount as the
Committee may specify (e.g., increments of 5%).
(v) If a Participant fails to specify a rate of return index with respect to his
Deferred Cash Payments, the Participant shall be presumed to have specified that
his entire Deferred Cash Subaccount be allocated to the index determined by the
Committee to represent the lowest risk of principal loss.
(c) Crediting of Investment Return. The balance credited to the Participant’s
Deferred Cash Subaccount as of the last day of the prior month shall be credited
with the applicable investment return (or loss) as of the last day of the month
of crediting. All references herein to Deferred Cash Payments shall be deemed to
include such Deferred Cash Payments plus any investment return (or loss)
credited pursuant to this Section 5.2.
5.3 Treatment of DSUs.
(a) Deemed Reinvestment of Dividends on DSUs. The DSUs credited to a
Participant’s DSU Subaccount pursuant to Sections 3.2, 4.2, and 4.3(c) hereof
shall be increased on each date that a dividend is paid on Common Stock. The
number of additional DSUs credited to a Participant’s DSU Subaccount as a result
of such increase shall be determined first by multiplying the number of DSUs
credited to the Participant’s DSU Subaccount on the dividend record date by the
amount of the dividend declared per share of Common Stock on the dividend
declaration date, and then by dividing the product so determined by the Fair
Market Value of the Common Stock on the dividend declaration date.
(b) Conversion Out of DSUs. Amounts credited to the DSU Subaccount generally
will be paid in the corresponding number of shares of Common Stock. In the
event, however, that it becomes necessary to determine the dollar value of DSUs
credited to a Participant’s DSU Subaccount as of any date, the dollar value
shall be determined by multiplying the number of DSUs on that date by the Fair
Market Value of the Common Stock on that date.

 

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(c) Effect of Recapitalization. In the event of a transaction or event described
in this Section 5.3 (c), the number of DSUs credited to a Participant’s DSU
Subaccount shall be adjusted in such manner as the Committee, in its sole
discretion, deems equitable. A transaction or event is described in this
Section 5.3 (c), if and only if
(i) it is a dividend or other distribution (whether in the form of cash, shares,
other securities, or other property), extraordinary cash distribution,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
shares or other securities, the issuance of warrants or other rights to purchase
shares or other securities, or other similar corporate transaction or event; and
(ii) the Committee determines that such transaction or event affects the Common
Stock such that an adjustment pursuant to this Section 5.3(c) is appropriate to
prevent dilution or enlargement of the benefits made available under the Plan
5.4 Vesting of Accounts.
Subject to the limitations of Section 7 hereof, balances credited to
Participants’ Accounts shall be nonforfeitable.

 

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Section 6. Distributions
6.1 Exclusive Entitlement to Payment.
A Participant’s deferral election pursuant to Section 3 hereof shall constitute
a waiver of his right to receive the amount deferred and an agreement to receive
in lieu thereof the amounts payable to him at the times and in the methods
specified in this Section 6. No other amounts shall be due under the Plan or
otherwise as a result of a Participant’s deferral election under Section 3
hereof.
6.2 Payment.
(a) Time of Payment. The amount credited to a Participant’s Account pursuant to
Section 5 hereof shall be paid at the time(s) specified by the Participant. If
the deferred amounts are subject to more than one distribution election made in
accordance with Section 3.4 hereof, then the portion of the Account that is
subject to each election shall be distributed in accordance with the applicable
election.
(b) Form of Payment. All amounts credited to the Deferred Cash Subaccount shall
be paid in cash. All amounts credited to the DSU Subaccount shall be paid solely
in shares of Common Stock, except that cash shall be paid in lieu of fractional
shares. Any reference in the Plan to a payment of DSUs shall refer to a
distribution of shares of Common Stock equal to the number of DSUs, except that
it shall refer to a payment of cash in lieu of a fractional share. For this
purpose, the cash value of a fractional share shall be determined in accordance
with Section 5.3(b) hereof.
(c) Effect of Deferral on Restriction or Vesting Period. If a share of Common
Stock would have been subject to any restriction or vesting period upon transfer
to a Participant under an Option or Performance Share Award in the absence of a
deferral election, such share shall be subject to such restriction or vesting
period upon payment from the Plan; provided however, that any period of deferral
under the Plan shall be credited toward the satisfaction of any such restriction
or vesting period.
6.3 Death of Participant.
(a) Amount of Death Benefit. Any amount credited to a Participant’s Account
hereunder that is unpaid at the time of the Participant’s death shall be paid in
a single lump sum to the Beneficiary designated by the Participant.
(b) Payment of Death Benefits. A distribution pursuant to this Section 6.3 shall
be made to the Participant’s Beneficiary within 90 days after the Committee
receives written notification of the Participant’s death, together with any
additional information or documentation that the Committee determines to be
necessary or appropriate before it makes the distribution.

 

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6.4 Hardship Distributions.
At any time, upon the written application of the Participant, the Committee may
(i) reduce or eliminate the Participant’s future deferrals of Bonus Compensation
or Performance Shares hereunder, (ii) revoke all of the Participant’s
outstanding deferral elections with respect to Options and/or SARs in accordance
with Section 3.3(c) hereof, or (iii) accelerate and pay in a lump sum to the
Participant all or part of the balance of the Participant’s Account hereunder,
or all of the above, if the Committee finds, in its sole discretion, that the
Participant has incurred or will incur a severe financial hardship resulting
from an accident or illness with respect to the Participant, his spouse, or his
dependent (as defined in Section 152 of the Code), or other event beyond the
Participant’s control. In such circumstances, the Committee shall reduce or
eliminate the future deferrals, revoke all Option and/or SAR deferral elections
and/or accelerate the payment only to the extent reasonably necessary to
eliminate or to avoid the severe financial hardship.

 

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Section 7. Nature of Participant’s Interest in Plan
7.1 No Right to Assets.
Participation in the Plan does not create, in favor of any Participant or
Beneficiary, any right or lien in or against any asset of the Company. Nothing
contained in the Plan, and no action taken under its provisions, will create or
be construed to create a trust of any kind, or a fiduciary relationship, between
the Company and a Participant or any other person. Each account and investment
established under the Plan shall be hypothetical in nature and shall be
maintained for bookkeeping purposes only. The accounts established under the
Plan shall hold no actual funds or assets. The Company’s promise to pay benefits
under the Plan will, at all times remain unfunded as to each Participant and
Beneficiary, whose rights under the Plan are limited to those of a general and
unsecured creditor of the Company.
7.2 No Right to Transfer Interest.
Rights to benefits payable under the Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, or encumbrance.
However, the Committee may permit a Participant or Beneficiary to enter into a
revocable arrangement to pay all or part of his benefits under the Plan to a
revocable grantor trust (a so-called “living trust”) In addition, the Committee
may recognize the right of an alternate payee named in a domestic relations
order to receive all or part of a Participant’s benefits under the Plan, but
only if (a) the domestic relations order would be a “qualified domestic
relations order”) within the meaning of Section 414(p) of the Code (if Section
414(p) applied to the Plan), (b) the domestic relations order does not attempt
to give the alternate payee any right to any asset of the Company, (c) the
domestic relations order does not attempt to give the alternate payee any right
to receive payments under the Plan at a time or in an amount that the
Participant could not receive under the Plan, and (d) the amount of the
Participant’s benefits under the Plan are reduced to reflect any payments made
or due the alternate payee.
7.3 No Employment Rights.
No provisions of the Plan and no action taken by the Company, the Board, the
Compensation Committee, or the Committee will give any person any right to be
retained in the employ of the Company, and the Company specifically reserves the
right and power to dismiss or discharge any Participant.
7.4 Withholding and Tax Liabilities.
The amount of any withholdings required to be made by any government or
government agency will be deducted from benefits paid under the Plan to the
extent deemed necessary by the Committee. In addition, the Participant or
Beneficiary (as the case may be) will bear the cost of any taxes not withheld on
benefits provided under the Plan, regardless of whether withholding is required.

 

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Section 8. Administration, Interpretation, and Modification of Plan
8.1 Plan Administrator.
The Committee will administer the Plan.
8.2 Powers of Committee.
The Committee’s powers include, but are not limited to, the power to adopt rules
consistent with the Plan; the power to decide all questions relating to the
interpretation of the terms and provisions of the Plan; the power to determine
the number and nature of the rate of return indices specified on Exhibit A
attached hereto; the power to compute the amount of benefits that shall be
payable to any Participant or Beneficiary in accordance with the provisions of
the Plan, and in the event that the Committee determines that excessive benefits
have been paid to any person, the Committee may suspend payment of future
benefits to such person or his Beneficiary or reduce the amount of such future
benefits until the excessive benefits and any interest thereon determined by the
Committee have been recovered; and the power to resolve all other questions
arising under the Plan (including, without limitation, the power to remedy
possible ambiguities, inconsistencies, or omissions by a general rule or
particular decision). The Committee has discretionary authority to exercise each
of the foregoing powers.
8.3 Finality of Committee Determinations.
Determinations by the Committee and any interpretation, rule, or decision
adopted by the Committee under the Plan or in carrying out or administering the
Plan will be final and binding for all purposes and upon all interested persons,
their heirs, and their personal representatives.
8.4 Required Information.
Any person eligible to receive benefits hereunder shall furnish to the Committee
any information or proof requested by the Committee and reasonably required for
the proper administration of the Plan. Failure on the part of any person to
comply with any such request within a reasonable period of time shall be
sufficient grounds for delay in the payment of any benefits that may be due
under the Plan until such information or proof is received by the Committee. If
any person claiming benefits under the Plan makes a false statement that is
material to such person’s claim for benefits, the Committee may offset against
future payments any amount paid to such person to which such person was not
entitled under the provisions of the Plan.
8.5 Incapacity.
If the Committee determines that any person entitled to benefits under the Plan
is unable to care for his affairs because of illness or accident, any payment
due (unless a duly qualified guardian or other legal representative has been
appointed) may be paid for the benefit of such person to his spouse, parent,
brother, sister, or other party deemed by the Committee to have incurred
expenses for such person.

 

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8.6 Amendment, Suspension, and Termination.
(a) Board. The Board has the right by written resolution to amend, suspend, or
terminate the Plan at any time provided that no such amendment, suspension, or
termination of the Plan shall divest any Participant of the balance credited to
his Account as of the effective date of such amendment, suspension, or
termination, except to the extent that an affected Participant consents in
writing to the amendment, suspension, or termination, and provided further,
however, that the Plan may be amended at any time and without the consent of the
Participants to provide that DSUs shall be paid in cash rather than in shares of
Common Stock.
(b) Committee. The Board delegates to the Committee the right by written
resolution to amend the Plan for the limited purpose of amending Exhibit A of
the Plan.
8.7 Change in Control.
Notwithstanding Section 8.6 hereof, on or after the occurrence of a Change in
Control, no direct or indirect alteration, amendment, suspension, termination or
discontinuance of the Plan, no establishment or modification of rules,
regulations or procedures under the Plan, no interpretation of the Plan or
determination under the Plan, and no exercise of authority or discretion vested
in the Committee under any provision of the Plan (collectively or individually,
a “Change”) shall be made if the Change (i) is not required by applicable law or
necessary to meet the requirements of Rule 16b-3, and (ii) would have the effect
of:
(a) eliminating, reducing or otherwise adversely affecting a Participant’s,
former Participant’s or beneficiary’s rights with respect to any deferred
amounts,
(b) altering the meaning or operation of the definition of “Change in Control”
in Section 2 hereof (and of the definition of all the defined terms that appear
in the definition of “Change in Control”), the provisions of Section 8.6 hereof
or this Section 8.7, or any rule, regulation, procedure, provision or
determination made or adopted prior to the Change in Control pursuant to
Section 8.6 hereof or any provision in any rule, regulation, procedure,
provision or determination made or adopted pursuant to the Plan that becomes
effective upon the occurrence of a Change in Control (collectively, the “Change
in Control Provisions”), or
(c) Undermining or frustrating the intent of the Change in Control Provisions to
secure for Participants, former Participants and beneficiaries the maximum
rights and benefits that can be provided under the Plan.

 

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Upon and after the occurrence of a Change in Control, all rights of all
Participants, former Participants and Beneficiaries under the Plan (including,
without limitation, any rules, regulation or procedures promulgated under the
Plan) shall be contractual rights enforceable against the Company and any
successor to all or substantially all of the Company’s business or assets. The
Change in Control Provisions may be altered, amended or suspended at any time
before the date on which a Change in Control occurs provided that any
alteration, amendment or suspension of the Change in Control Provisions that is
made before the date on which a Change in Control occurs, and at the request of
a person who effectuates the Change in Control, shall be treated as though it
occurred after the Change in Control and shall be subject to the restrictions
and limitations imposed by the preceding provisions of the immediately preceding
paragraph.
8.8 Power to Delegate Authority.
(a) Board. The Board may, in its sole discretion, delegate to any person or
persons all or part of its authority and responsibility under the Plan,
including, without limitation, the authority to amend the Plan.
(b) Administrative. The Committee may, in its sole discretion, delegate to any
person or persons all or part of its authority and responsibility under the
Plan.
8.9 Inability to Locate Participants and Beneficiaries.
Each Participant or Beneficiary entitled to receive payment under the Plan shall
keep the Committee advised of his current address. If the Committee is unable
for a period of thirty-six (36) months to locate a Participant or Beneficiary to
whom a payment is due, the total amount payable shall be forfeited. Should the
Participant or Beneficiary request payment thereafter, the Committee shall, upon
satisfaction of its requests for any corroborating documentation, restore and
pay the forfeited amount in a lump sum, the value of which shall not be adjusted
for any earnings or gains during the period of forfeiture.
8.10 Headings.
The headings used in this document are for convenience of reference only and may
not be given any weight in interpreting any provision of the Plan.
8.11 Severability.
If any provision of the Plan is held illegal or invalid for any reason, the
illegality or invalidity of that provision will not affect the remaining
provisions of the Plan, and the Plan will be construed and enforced as if the
illegal or invalid provision had never been included in the Plan.

 

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8.12 Governing Law.
The Plan will be construed, administered, and regulated in accordance with the
laws of the State of Delaware, except to the extent that those laws are
preempted by federal law.
8.13 Complete Statement of Plan.
This Plan contains a complete statement of its terms. This Plan and elections
made pursuant to this Plan supersede any conflicting terms of the Bonus Plan,
the PIP, or any agreement executed pursuant to the Bonus Plan or the PIP. The
Plan may be amended, suspended, or terminated only in writing and then only as
provided in Section 8.6 hereof. A Participant’s right to any benefit of a type
provided under the Plan will be determined solely in accordance with the terms
of the Plan. No other evidence, whether written or oral, will be taken into
account in interpreting the provisions of the Plan.

 

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