Executive Officer Compensation Arrangements





Exhibit
10.4





EXECUTIVE
OFFICER COMPENSATION ARRANGEMENTS




The
following table sets forth for each named executive officer of Chesapeake
Utilities Corporation (“Chesapeake”) (which officers were determined by
reference to Item 402(a)(3) of SEC Regulation S-K based on 2004 compensation)
information concerning determinations made with respect to the compensation paid
or payable for services in all capacities to Chesapeake and its subsidiaries,
which compensation decisions may be deemed the entry into or the amendment of a
material contract within the meaning of Item 601(b)(10) of SEC Regulation S-K.
These decisions consisting of (i) the establishment of the executive’s base
salary for 2005, (ii) the determination of the executive’s annual bonus for 2004
under the Cash
Bonus Incentive Plan, (iii)
the establishment of the executive’s 2005 target cash bonus (as a percentage of
salary) under the Cash Bonus Incentive Plan, (iv) determination of the
executive’s restricted stock award for 2004 under the Performance Incentive Plan
and (v) the establishment of the executive’s target restricted stock award for a
performance cycle ending December 31, 2005 under the Performance Incentive
Plan.

 




	
      Name
      and Pricipal Position
	 	
      2004
      Base Salary
	 	
      2004
      Cash Bonus
	 	
      2005
      Cash Bonus Target (1)
	 	
      2004
      Restricted Stock Awards (3)
	 	
      2005
      Restricted Stock Awards Target (4)
	 	 
	
      John
      R. Schimkaitis, President, CEO and Director
	 	
      $
	
      330,000
	 	
      $
	
      107,539
	 	 	
      30
	
      %
	 	 	 	
      6,720
      
	 	 	
      9,600
      
	 	 
	
      Paul
      M. Barbas, Executive Vice President
	 	
      $
	
      265,000
	 	
      $
	
      72,875
	 	 	
      25
	
      %
	 	 	 	
      3,584
      
	 	 	
      5,120
      
	 	 
	
      Michael
      P. McMasters, Sr. Vice President and CFO
	 	
      $
	
      230,000
	 	
      $
	
      61,669
	 	 	
      25
	
      %
	 	 	 	
      3,584
      
	 	 	
      5,120
      
	 	 
	
      Stephen
      C. Thompson, Sr. Vice President
	 	
      $
	
      227,000
	 	
      $
	
      55,626
	 	 	
      25
	
      %
	 	 	 	
      -
      
	 	 	
      7,680
      
	 	
      (5)

	
      S.
      Robert Zola, President, Sharp Energy, Inc.
	 	
      $
	
      126,500
	 	
      $
	
      41,417
	 	 	
      30
	
      %
	
      (2
	
      )
	 	
      -
      
	 	 	
      7,680
      
	 	
      (5)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
      (1) Up
      to 150% of this cash bonus target can be earned to the extent certain
      performance targets are achieved. The performance targets are based upon
      the following performance criteria: (i) earnings per share, (ii) pretax
      return on average investment of the Company's regulated
      natural gas operations and (iii) earnings before interest and taxes of the
      Company's Delmarva propane distribution operations.
	 	 
	
      (2)
      Mr. Zola has an additional cash bonus arrangement under which he can earn
      a cash bonus equal to 10% of actual propane distribution net income in
      excess of the upper end of a target income range.
	 	 
	
      (3)
      Represents the shares of Chesapeake stock awarded to each executive for
      2004 under the Performance Incentive Plan.
	 	 
	
      (4)
      Represents a target restricted share award granted to each executive under
      the Performance Incentive Plan for the performance period ending December
      31, 2005. Messrs. Schimkaitis, Barbas and McMasters can earn up to 100% of
      the target restricted stock award to the extent the following performance
      criteria are attained: (i) earnings growth based on the achievement of
      targeted measures of earnings for the Company's regulated natural gas
      operations, Delmarva propane distribution operations, and overall
      corporate results, (ii) growth in non-regulated investments based upon the
      achievement of established milestones and objectives under the Company’s
      long-term strategic plan, and (iii) shareholder value as measured by the
      performance of the Company’s stock price (including the reinvestment of
      dividends), in relationship to an index of industry peers.
	 	 
	
      (5)
      For 2005, Messrs. Thompson and Zola can earn up to 960 shares of
      restricted stock , contingent upon Chesapeake achieving specified
      performance goals relative to the Industry Peer Group relating to
      stockholder value performance.
      Mr. Thompson is also entitled to earn 6,720 shares of restricted stock if
      the Company's natural gas segment achieves at least 90% of the target
      pre-tax return on investment over the three-year period January 1, 2003 to
      December 31, 2005. Mr. Zola is also entitled to earn
      6,720 shares of restricted stock if the Company's propane distribution
      income exceeds the income target for the three-year period January 1, 2003
      to December 31, 2005.