Performance Share Agreement - J. Schimkaitis, P. Barbas and M. McMasters


    
      Exhibit
        10.2

    

     

     

    

      PERFORMANCE
        SHARE AGREEMENT

      


      pursuant
        to the

      


      CHESAPEAKE
        UTILITIES CORPORATION

      PERFORMANCE
        INCENTIVE PLAN

      


      


      AGREEMENT
        dated as of December 30, 2005, and entered into, in duplicate, by and between
        Chesapeake Utilities Corporation, a Delaware corporation (the "Company"),
        and
        [name of executive - each of John R. Schimkaitis, Paul M. Barbas and Michael
        P.
        McMasters] (the "Grantee") who resides at [address of executive].

      


      WITNESSETH
        that:

      


      WHEREAS,
        the Chesapeake Utilities Corporation Performance Incentive Plan (the "Plan"),
        to
        be effective January 1, 2006, has been duly adopted by action of the Company's
        Board of Directors (the "Board") on February 24, 2005 and by its shareholders
        on
        May 5, 2005; and

      


      WHEREAS,
        the Committee of the Board of Directors of the Company referred to in the
        Plan
        (the "Committee") has determined that it is in the best interests of the
        Company
        to grant the Performance Share Award described herein pursuant to the Plan;
        and

      


      WHEREAS,
        the shares of the Common Stock of the Company (“Shares”) that are subject to
        this Agreement, when added to the other shares of Common Stock that are subject
        to awards granted under the Plan, do not exceed the total number of shares
        of
        Common Stock with respect to which awards are authorized to be granted under
        the
        Plan;

      


      NOW,
        THEREFORE, it is hereby covenanted and agreed by and between the Company
        and the
        Grantee as follows:

      


      Section
        1. Performance
        Share Award

      


      The
        Company hereby grants to the Grantee a Performance Share Award for the year
        ending December 31, 2006 (the "Award Year"). As more fully described herein,
        the
        Grantee may earn a maximum total of [number of shares - 9,600 for John R.
        Schimkaitis, 6,820 for Paul M. Barbas and 5,120 for Michael P. McMasters]
        Shares
        (the "Contingent Performance Shares") upon the Company's achievement of the
        Performance Goals set forth in Section 2. Alternatively, the Grantee may
        elect
        to receive [number of shares - 2,400 for John R. Schimkaitis, 1,705 for Paul
        M.
        Barbas and 1,280 for Michael P. McMasters] Shares (the "Forfeitable Performance
        Shares"), as detailed in Section 3, in lieu of receiving any Contingent
        Performance Shares. The Forfeitable Performance Shares shall be subject to
        forfeiture conditions, as set forth in Section 3(c).

      


      Section
        2. Contingent
        Performance Shares

      


      	(a)  	
              As
                soon as practicable after the Company’s independent auditors have
                certified the Company’s financial statements for the Award Year, the
                Committee shall determine for purposes of this Agreement the Company’s (1)
                earnings growth (“EG”), (2) achievement of established milestones and
                objectives under the Company’s long-term strategic plan (“SP”), and (3)
                Shareholder Value as of the end of the Award Year. The EG, SP and
                Shareholder Value shall be determined by the Committee in accordance
                with
                the terms of the Plan and this Agreement based on financial results
                reported to shareholders in the Company’s annual reports and shall be
                subject to adjustment by the Committee for extraordinary events
                during
                the Award Year. The Committee shall promptly notify the Grantee of
                its
                determination.

            


      	(b)  	
              The
                Grantee may earn up to [number of shares - 9,600 for John R. Schimkaitis,
                6,820 for Paul M. Barbas and 5,120 for Michael P. McMasters] Contingent
                Performance Shares (the “Maximum Award”) as
                follows:

            


      


      (1) The
        performance measured for Shareholder Value will be the value of $10,000 invested
        in the Company stock compared to a Utility Index. If the Company’s performance
        exceeds the Utility Index, the Grantee will be eligible to earn up to 30%
        of the
        Maximum Award for the Award Year. If the value of $10,000 invested for the
        Award
        Year does not exceed the Utility Index for the Award Year, the Grantee shall
        not
        earn any Contingent Performance Shares under this Paragraph (b)(1).

      


      (2) The
        performance measured for EG will be based upon achieving a growth in earnings
        per share of 3% to 5% for the award year. If the Company earnings per share
        for
        2006 is equal to or exceeds [pre-determined target 1], the Grantee is eligible
        to earn 25% of the maximum award. If the earnings per share is equal to or
        greater than [pre-determined target 2], the Grantee is eligible to earn an
        additional 15% of the maximum award but in no event shall the Grantee earn
        more
        than 40% of the maximum award under this paragraph (b) (2). If any of the
        award
        under this paragraph is unearned in the current year, the Grantee is eligible
        to
        earn those shares, if the accumulative earnings per share for 2005 to 2007
        equals or exceeds [pre-determined accumulative target].

      


      (3)
        The
        performance measured for SG will be based upon execution of the Company’s
        long-term strategic plan, assuming attainment of pre-authorized milestones
        and
        objectives as established by the Compensation Committee. If the long-term
        strategy is executed, the Grantee will be eligible to earn 30% of the Maximum
        Award. After approval from the Company’s Board of Directors, if the long-term
        strategic plan is not executed, the Grantee shall not earn any Contingent
        Performance Shares under this paragraph (b)(3).

      


      (c) Contingent
        Performance Shares that are earned by the Grantee pursuant to this Section
        2
        shall be issued promptly, without payment of consideration by the Grantee,
        within 2 1⁄2 months of the end of the Award Year. The Grantee shall have the right
        to vote the Contingent Performance Shares and to receive the dividends
        distributable with respect to such Shares on and after, but not before, the
        date
        on which the Grantee is recorded on the Company's ledger as holder of record
        of
        the Contingent Performance Shares (the "Issue Date"). If, however, the Grantee
        receives Shares as part of any dividend or other distribution with respect
        to
        the Contingent Performance Shares, such Shares shall be treated as if they
        are
        Contingent Performance Shares, and such Shares shall be subject to all of
        the
        terms and conditions imposed by this Section 2. 

      


      (d) Sale,
        transfer, pledge, or hypothecation of the Contingent Performance Shares shall
        be
        prohibited for a period of three (3) years after the Issue Date (the "Limitation
        Period"), and the Performance Shares shall bear a restrictive legend to that
        effect. Any attempt to dispose of Contingent Performance Shares in contravention
        of this Agreement shall be ineffective. Upon expiration of the Limitation
        Period, the transfer restrictions imposed by this Section shall expire, and
        new
        certificates representing the Contingent Performance Shares, without the
        restrictive legend described in this paragraph (d), shall be issued, subject
        to
        the provisions of paragraph (e) of this Section 2.

      


      (e) The
        Performance Shares will be not registered for resale under the Securities
        Act of
        1933 or the laws of any state except when and to the extent determined by
        the
        Board pursuant to a resolution. Until a registration statement is filed and
        becomes effective, however, transfer of the Contingent Performance Shares
        after
        expiration of the Limitation Period shall require the availability of an
        exemption from such registration, and prior to the issuance of new certificates,
        the Company shall be entitled to take such measures as it deems appropriate
        (including but not limited to obtaining from the Grantee an investment
        representation letter and/or further legending the new certificates) to ensure
        that the Contingent Performance Shares are not transferred in the absence
        of
        such exemption.

      


      (f) 
        In the
        event of a Change in Control, as defined in the Plan, during the Award Year,
        the
        Grantee shall earn at least the Maximum Award of Contingent Performance Shares
        set forth in this Section 2, as if all employment and performance criteria
        were
        satisfied, without any pro ration based on the proportion of the Award Year
        that
        has expired as of the date of such Change in Control.

      


      (g) If,
        during the Award Year, the Grantee is separated from employment, Contingent
        Performance Shares shall be deemed earned or forfeited as follows:

      


      (1) Upon
        voluntary termination by the Grantee (other than for retirement at age 65
        or as
        accepted by the Committee) or termination by the Company for failure of job
        performance or other just cause as determined by the Committee, all unearned
        Contingent Performance Shares shall be forfeited immediately;

      


      (2) If
        the
        Grantee separates from employment by reason of death or total and permanent
        disability (as determined by the Committee), the number of Contingent
        Performance Shares that would otherwise have been earned at the end of the
        Award
        Year shall be reduced by pro rating such Contingent Performance Shares based
        on
        the proportion of the Award Year during which the Grantee was employed by
        the
        Company, unless the Committee determines that the Contingent Performance
        Shares
        shall not be so reduced;

      


      (3) Retirement
        of the Grantee at age 65 or as accepted by the Committee shall not affect
        the
        Contingent Performance Shares, which shall continue to be earned through
        the
        remainder of the Award Year, as set forth above.

      


      (h) The
        Grantee shall be solely responsible for any federal, state and local taxes
        of
        any kind imposed in connection with the delivery of Contingent Performance
        Shares. Prior to the transfer of any Contingent Performance Shares to the
        Grantee, the Grantee shall remit to the Company an amount sufficient to satisfy
        any federal, state, local and other withholding tax requirements. The Grantee
        may elect to have all or part of any withholding tax obligation satisfied
        by
        having the Company withhold Shares otherwise deliverable to the Grantee as
        Contingent Performance Shares, unless the Committee determines otherwise
        by
        resolution. If the Grantee fails to make such payments or election, the Company
        and its subsidiaries shall, to the extent permitted by law, have the right
        to
        deduct from any payments of any kind otherwise due to the Grantee any taxes
        required by law to be withheld with respect to the Contingent Performance
        Shares.

      


      Section
        3. Forfeitable
        Performance Shares

      


      (a) In
        lieu
        of earning Contingent Performance Shares, the Grantee may elect to receive
        [number of shares - 2,400 for John R. Schimkaitis, 1,705 for Paul M.
        Barbas
        and
        1,280 for Michael P. McMasters]
        Forfeitable Performance Shares, irrespective of whether the Company meets
        any
        Performance Goals. The Grantee must make any such election on or before
        September 30, 2006, and the election must be made in writing, in a manner
        prescribed by the Committee. Once made, the election is irrevocable. If a
        Grantee makes such an election, he shall not receive any Contingent Performance
        Shares under this Agreement. 

      


      (b) Any
        Forfeitable Performance Shares received by the Grantee pursuant to this Section
        3 shall be issued as promptly as possible after December 31, 2006, without
        payment of consideration by the Grantee. The Grantee shall have the right
        to
        vote the Forfeitable Performance Shares and to receive the dividends
        distributable with respect to such Shares on and after, but not before, the
        date
        on which the Grantee is recorded on the Company's ledger as holder of record
        of
        the Forfeitable Performance Shares (the "Issue Date"). If, however, the Grantee
        receives Shares as part of any dividend or distribution with respect to the
        Forfeitable Performance Shares, such Shares shall be treated as if they are
        Forfeitable Performance Shares, and such Shares shall be subject to all of
        the
        terms and conditions imposed by this Section 3.

      


      (c) The
        Forfeitable Performance Shares shall be subject to the following
        restrictions:

      


      (1) Sale,
        transfer, pledge or hypothecation of the Forfeitable Performance Shares shall
        be
        prohibited for a period of three (3) years after the Issue Date (the
        "Restriction Period"), and the certificates evidencing the Forfeitable
        Performance Shares shall bear an appropriate restrictive legend that refers
        to
        the terms, conditions, and restrictions set forth in this Agreement. Any
        attempt
        to dispose of Forfeitable Performance Shares in contravention of this Agreement
        shall be ineffective. Upon expiration of the Restriction Period, the transfer
        restrictions imposed by this Section shall expire, and new certificates
        representing the Forfeitable Performance Shares, without the restrictive
        legend
        described in this paragraph (c)(1), shall be issued, subject to the provisions
        of paragraph (f) of this Section 3.

      


      (2) If,
        during the Restriction Period, the Grantee separates from employment for
        any
        reason other than death, normal retirement, total and permanent disability
        (as
        determined by the Committee), or involuntary termination without cause (as
        determined by the Committee), all Forfeitable Performance Shares shall be
        forfeited immediately.

      


      (d) All
        restrictions under paragraph (c) of this Section 3 shall immediately expire
        on
        the earliest of: (A) the Grantee's separation from employment because of
        death,
        total and permanent disability (as determined by the Committee), or involuntary
        termination without cause (as determined by the Committee), (B) a Change
        in
        Control, as defined in the Plan, or (C) the end of the Restriction Period.
        

      


      (e) 
        If,
        after the Grantee has made an election to receive Forfeitable Performance
        Shares
        pursuant to Section 3(a), a Change in Control, as defined in the Plan, occurs
        during the Award Year, the Grantee shall receive at least the total number
        of
        Forfeitable Performance Shares due under this Agreement, without any pro
        ration
        based on the proportion of the Award Year that has expired as of the date
        of
        such Change in Control. Pursuant to Section 3(d), such Shares shall not be
        subject to any of the restrictions imposed by this Section.

      


      (f) The
        Forfeitable Performance Shares shall be not registered for resale under the
        Securities Act of 1933 or the laws of any state except when and to the extent
        determined by the Board pursuant to a resolution. Until a registration statement
        is filed and becomes effective, however, transfer of the Forfeitable Performance
        Shares after expiration of the Restriction Period shall require the availability
        of an exemption from such registration, and prior to the issuance of new
        certificates, the Company shall be entitled to take such measures as it deems
        appropriate (including but not limited to obtaining from the Grantee an
        investment representation letter and/or further legending the new certificates)
        to ensure that the Forfeitable Performance Shares are not transferred in
        the
        absence of such exemption.

      


      (g) The
        Grantee shall be solely responsible for any federal, state and local taxes
        of
        any kind imposed in connection with receipt of the Forfeitable Performance
        Shares:

      


      (1) The
        Grantee agrees that, no later than the date that the restrictions set forth
        in
        Section 3(c) lapse, he shall remit to the Company an amount sufficient to
        satisfy any federal, state, local and other withholding tax requirements.
        

      


      (2) The
        Grantee may elect to have all or part of any withholding tax obligation
        satisfied by having the Company withhold Shares otherwise deliverable to
        the
        Grantee in connection with the Award of Restricted Stock, unless the Committee
        determines otherwise by resolution.

      


      (3) If
        the
        Grantee properly elects, within 30 days of the Issue Date, to include in
        gross
        income for federal income tax purposes an amount equal to the fair market
        value
        of the Forfeitable Performance Shares, he shall make arrangements satisfactory
        to the Committee to remit in the year of issue an amount sufficient to satisfy
        any federal, state, local and other withholding tax requirements with respect
        to
        such Forfeitable Performance Shares. 

      


      (4) If
        the
        Grantee fails to make satisfactory arrangements to meet all withholding tax
        obligations, the Company and its subsidiaries shall, to the extent permitted
        by
        law, have the right to deduct from any payments of any kind otherwise due
        to the
        Grantee any taxes required by law to be withheld with respect to the Forfeitable
        Performance Shares.

      


      Section
        4. Additional
        Conditions to Issuance of Shares

      


      Each
        transfer of Contingent Performance Shares or Forfeitable Performance Shares
        (together, the "Award Shares") shall be subject to the condition that if
        at any
        time the Committee shall determine, in its sole discretion, that it is necessary
        or desirable as a condition of, or in connection with, transfer of Award
        Shares
        (i) to satisfy withholding tax or other withholding liabilities, (ii) to
        effect
        the listing, registration or qualification on any securities exchange or
        under
        any state or federal law of any Shares deliverable in connection with such
        exercise, or (iii) to obtain the consent or approval of any regulatory body,
        then in any such event such transfer shall not be effective unless such
        withholding, listing, registration, qualification, consent or approval shall
        have been effected or obtained free of any conditions not acceptable to the
        Company.

      


      Section
        5. Adjustment
        of Shares

      


      (a) If
        the
        Company shall become involved in a merger, consolidation or other
        reorganization, whether or not the Company is the surviving corporation,
        any
        right to earn Contingent Performance Shares or to elect to receive Forfeitable
        Performance Shares shall be deemed a right to earn or to elect to receive
        the
        consideration into which the Shares represented by the Contingent Performance
        Shares or by the Forfeitable Performance Shares would have been converted
        under
        the terms of the merger, consolidation or other reorganization. If the Company
        is not the surviving corporation, the surviving corporation (the "Successor")
        shall succeed to the rights and obligations of the Company under this
        Agreement.

      


      (b) If
        any
        subdivision or combination of Shares or any stock dividend, capital
        reorganization or recapitalization occurs after the adoption of the Plan,
        the
        Committee shall make such proportionate adjustments as are appropriate to
        the
        number of Contingent Performance Shares to be earned and/or to the number
        of
        Forfeitable Performance Shares to be received in order to prevent the dilution
        or enlargement of the rights of the Grantee.

      


      Section
        6. No
        Right to Employment

      


      Nothing
        contained in this Agreement shall be deemed by implication or otherwise to
        confer upon the Grantee any right to continued employment by the Company
        or any
        affiliate of the Company.

      


      Section
        7. Notice

      


      Any
        notice to be given hereunder by the Grantee shall be sent by mail addressed
        to
        Chesapeake Utilities Corporation, 909 Silver Lake Boulevard, Dover, Delaware
        19904, for the attention of the Committee, c/o the Secretary, and any notice
        by
        the Company to the Grantee shall be sent by mail addressed to the Grantee
        at the
        address of the Grantee shown on the first page hereof. Either party may,
        by
        notice given to the other in accordance with the provisions of this Section,
        change the address to which subsequent notices shall be sent.

      


      Section
        8. Assumption
        of Risk

      


      It
        is
        expressly understood and agreed that the Grantee assumes all risks incident
        to
        any change hereafter in the applicable laws or regulations or incident to
        any
        change in the market value of the Award Shares.

      


      Section
        9. Terms
        of Plan

      


      This
        Agreement is entered into pursuant to the Plan (a copy of which has been
        delivered to the Grantee). This Agreement is subject to all of the terms
        and
        provisions of the Plan, which are incorporated into this Agreement by reference,
        and the actions taken by the Committee pursuant to the Plan. In the event
        of a
        conflict between this Agreement and the Plan, the provisions of the Plan
        shall
        govern. All determinations by the Committee shall be in its sole discretion
        and
        shall be binding on the Company and the Grantee.

      


      Section
        10. Governing
        Law; Amendment

      


      This
        Agreement shall be governed by, and shall be construed and administered in
        accordance with, the laws of the State of Delaware (without regard to its
        choice
        of law rules) and the requirements of any applicable federal law. This Agreement
        may be modified or amended only by a writing signed by the parties
        hereto.

      


      Section
        11. Terms
        of Agreement

      


      This
        Agreement shall remain in full force and effect and shall be binding on the
        parties hereto for so long as any Award Shares issued to the Grantee under
        this
        Agreement continue to be held by the Grantee.

      


      IN
        WITNESS WHEREOF, the Company has caused this Agreement to be executed in
        its
        corporate name, and the Grantee has executed the same in evidence of the
        Grantee's acceptance
        hereof, upon the terms and conditions herein set forth, as of the day and
        year
        first above written.

      


      CHESAPEAKE
        UTILITIES CORPORATION

      


      


      By: ___________________________________

      


      


      ___________________________________

      [name
        of
        executive], Grantee