Executive Officer Compensation Arrangements


    
      

        Exhibit
          10.5

      

    

    

      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 2005 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 2006, (ii) the determination of the executive’s annual bonus for 2005
        under the Cash
        Bonus Incentive Plan,
        (iii)
        the establishment of the executive’s 2006 target cash bonus (as a percentage of
        salary) under the Cash Bonus Incentive Plan, (iv) determination of the
        executive’s restricted stock award for 2005 under the Performance Incentive Plan
        and (v) the establishment of the executive’s target restricted stock award for a
        performance cycle ending December 31, 2006 under the Performance Incentive
        Plan.

       

      

        
          	
                  Name
                    and Pricipal Position

                	 	
                  2006
                    Base Salary

                	 	
                  2005
                    Cash Bonus

                	 	
                  2006
                    Cash Bonus Target (1)

                	 	
                  2005
                    Restricted Stock Awards (3)

                	 	
                  2006
                    Restricted Stock Awards Target (4)

                	 	 	 
	
                  John
                    R. Schimkaitis, President, CEO and Director

                	 	
                  $

                	
                  360,000

                	 	
                  $

                	
                  134,703

                	 	 	
                  40%

                	
                   

                	 	
                  8,400
                    

                	 	 	
                  9,600
                    

                	 	 	 
	
                  Paul
                    M. Barbas, Executive Vice President and COO

                	 	
                  $

                	
                  290,000

                	 	
                  $

                	
                  81,032

                	 	 	
                  35%

                	
                   

                	 	
                  4,480
                    

                	 	 	
                  6,820
                    

                	 	 	 
	
                  Michael
                    P. McMasters, Sr. Vice President and CFO

                	 	
                  $

                	
                  246,000

                	 	
                  $

                	
                  76,947

                	 	 	
                  30%

                	
                   

                	 	
                  4,480
                    

                	 	 	
                  5,120
                    

                	 	 	 
	
                  Stephen
                    C. Thompson, Sr. Vice President

                	 	
                  $

                	
                  243,000

                	 	
                  $

                	
                  55,202

                	 	 	
                  25%

                	
                   

                	 	
                  7,680
                    

                	 	 	
                  3,200
                    (5)

                	 	 	 
	
                  S.
                    Robert Zola, President, Sharp Energy, Inc.

                	 	
                  $

                	
                  135,000

                	 	
                  $

                	
                  28,456

                	 	 	
                  30%
                    (2)

                	 	 	
                  7,680
                    

                	 	 	
                  3,200
                    (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
                    2005 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, 2006. 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 2006, 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 2,240 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, 2006 to December
                    31,
                    2008. Mr. Zola is also entitled to earn
                    2,240 shares of restricted stock if the Company’s
                    propane
                    distribution income exceeds the income target for the three-year
                    period
                    January 1, 2006 to December 31, 2008.