Document:

Executive Employment Agreement with Paul Barbas Dated August 4, 2003

Exhibit
10.2

EXECUTIVE
EMPLOYMENT AGREEMENT

AN
EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") dated this 4th day of
August, 2003, by and between Chesapeake Utilities Corporation, a Delaware
corporation (the "Company"), and Paul M. Barbas ("Executive").

WITNESSETH:

WHEREAS,
the Company is currently obtaining the benefit of Executive's services as a
full-time executive employee in the capacity of Vice President;

WHEREAS,
the Company's Board of Directors (the "Board") has authorized the Company to
agree to provide for Executive's continued employment pursuant to the terms of
this Agreement; and

WHEREAS,
Executive is willing, in consideration of the covenants hereinafter provided, to
continue to be employed by the Company in the capacity of Vice President and to
render services incident to such position during the term of this
Agreement.

NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the Company and Executive hereby agree as follows:

1. Employment. The
Company agrees to employ Executive, and Executive agrees to accept employment,
as an executive officer of the Company in the capacity of Vice President, with
such reasonable duties and responsibilities as are consistent with the By-laws
of the Company as of the date hereof, including, but not limited to,
responsibility for formulating financial policy and plans. Responsible for
providing overall direction for the accounting, tax, credit and treasury
functions.

2. Term.

(a) Term
of Agreement. The
term of this Agreement ("Term") shall be the Initial Term (as defined in
Paragraph 2(b) hereof), and, if applicable, the Extended Term (as defined in
Paragraph 2(c) hereof).

(b) Initial
Term. Subject
to Paragraph 2(c) hereof, the Initial Term of this Agreement shall extend for
three (3) years commencing on the date of this Agreement. 

(c) Extended
Term. Upon
the occurrence of a Change in Control (as defined in Paragraph 2(d) hereof), the
Initial Term shall end and the Term of this Agreement shall thereupon
automatically be extended, commencing on the date of such Change in Control, for
the shorter of three (3) years or the period until Executive attains the
earliest age, if any, at which his compulsory retirement is permitted under
section 12(c) of the Age Discrimination in Employment Act of 1967, as amended,
29 U.S.C. § 631(c), or its successor (such extended three-year or shorter
term constituting the "Extended Term").

(d) Change
In Control. For the
purposes of this Agreement, Change in Control shall mean a change in the control
of the Company during the Term of this Agreement, which shall be deemed to have
occurred if:

(i) 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

(ii) any
person or group (within the meaning of Sections 13(d) and 14(d) of the 1934
Act), other than the Company or any of its majority-controlled subsidiaries,
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

(iii) a
tender offer or exchange offer (other than an offer by the Company or a
majority-controlled subsidiary), pursuant to which 30 percent or more of the
combined voting power of the company's then outstanding voting securities was
purchased, expires; or

(iv) 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

(v) 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

(vi)  during
any period of two consecutive years, individuals who, at the beginning of such
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

(vii)  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 by reason of any event
involving a transaction in which Executive, or a group of persons or entities
with which Executive acts in concert, acquires, directly or indirectly, more
than 30 percent of the common stock or the business or assets of the Company;
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 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
such approval that approval shall be deemed not to constitute a Change in
Control.

3. Time.
Executive agrees to devote all reasonable full time and best efforts for the
benefit of the Company and any subsidiary of the Company, and not to serve any
other business enterprise or organization in any capacity during the Term hereof
without the prior written consent of the Company, which consent shall not be
unreasonably with-held.

4. Office.

(a) Initial
Term. During
the Initial Term, the Company shall elect Executive as its Vice
President.

(b) Extended
Term. During
the Extended Term of this Agreement: 

(i) Executive
shall hold and perform an office with the responsibility, importance and scope
within the Company at least equal to that of the office described and
contemplated in Paragraph 1 hereof; and 

(ii) Executive's
office shall be located in Dover, Delaware, and Executive shall not be required,
without his written consent, to change his office location or to be absent
therefrom on business for more than 60 working days in any year.

5. Compensation.

(a)
Initial
Term. The
Company shall compensate Executive for his services hereunder during the Initial
Term at a rate of $255,000 per annum, payable in equal semi-monthly
installments, or such greater or lesser amount as the Board may determine ("Base
Compensation"). The Base Compensation rate shall be reviewed annually and may be
increased or decreased from time to time.

(b) Extended
Term. During
the Extended Term, the Company shall compensate Executive for his services
hereun-der at a rate per annum, payable in equal semi-monthly installments,
equal to his Base Compensation at the time the Extended Term commences,
increased:

(i)
effective on each anniversary of the date of this Agreement during the Extended
Term by an amount equal to the product of such Base Compensation times the
increase in the preceding calendar year of the Consumer Price Index for Urban
Wage Earners and Clerical Workers for the Philadelphia metropolitan region as
reported by the U.S. Department of Labor (or, if such index is no longer
reported, the corresponding increase in a comparable index); and

(ii) by such
additional amounts as the Board may determine from time to time based, in part,
on an annual review of Executive's compensation. 

6. Expenses. During
the Term of this Agreement, the Company shall pay all necessary and reasonable
business expenses incurred by Executive on behalf of the Company in the course
of his employment hereunder, including, without limitation, expenses incurred in
the conduct of the Company's business while away from his domicile and expenses
for travel, meals, lodging, entertainment and related expenses that are for the
benefit of the Company.

7. Other
Benefits.

(a) Executive
shall be entitled to participate in all profit-sharing, insurance, medical and
retirement benefit plans, together with vacation and other employee benefits of
the Company, now in effect or as hereafter amended or established, in which the
Company executive employees are permitted to participate. The Executive’s
participation shall be in accordance with the terms and provisions of such
plans.

(b) The
Company shall furnish Executive with a suitable office, necessary administrative
support and customary furniture and furnishings for such office. The Company
further agrees that Executive shall have the use of a Company-owned or
Company-leased and Company-maintained automobile, new every three years, of a
kind and model appropriate to his position with the Company.

(c) Nothing
in this Agreement shall preclude the Company from amending or terminating any
employee benefit plan or practice, but, it being the intent of the parties that
the Executive shall continue to be entitled during the Extended Term to benefits
and perquisites as set forth in Paragraphs 7(a) and 7(b) hereof at least equal
to those attached to his position on the date of this Agreement, nothing in this
Agreement shall operate as, or be construed to authorize, a reduction during the
Extended Term without Executive's written consent in the level of such benefits
or perquisites as in effect on the date of a Change in Control. If and to the
extent that such benefits or perquisites are not payable or provided to
Executive under any such plan or practice by reason of an amendment thereto or
termination thereof during the Extended Term, the Company shall pay or provide
such benefits or perquisites to Executive.

8. Termination.

(a)
Termination
for Cause. This
Agreement and Executive's employment hereunder may be terminated by the Company
at any time for Cause. In the event of termination for Cause, the Executive
shall not be entitled to any severance benefits under this agreement. During the
Initial Term, Cause shall be as the Board may reasonably determine. During the
Extended Term, termination of this Agreement and the Executive's employment
shall be deemed to have been for Cause only if it shall have been the result
of:

(i)
conduct by Executive that constitutes a felony under the laws of the United
States or a state in which Executive works or resides;

(ii) an
act or acts of dishonesty by Execu-tive resulting or intended to result directly
or indirectly in material gain to or personal enrichment of Executive at the
Company's expense;

(iii) a
deliberate and intentional refusal by Executive during the Extended Term (except
by reason of incapacity due to illness or accident) to comply with the
provisions of Paragraph 1 hereof, provided that such breach shall have resulted
in demonstrably material injury to the Company and the Executive shall have
failed to remedy such breach within thirty days after notice from the Secretary
of the Company demanding that the Executive remedy such breach; or

(iv) the
engagement in conduct by Executive that is materially injurious to the Company
if such conduct was undertaken without good faith and the reasonable belief that
such conduct was in the best interest of the Company. 

(b) Termination
During Extended Term. During
the

Extended
Term of this Agreement, the term "Termination" shall mean:

(i)
Termination by the Company of Executive's employment; or

(ii)
Termination by Executive of his employment following the occurrence of any of
the following events:

(A)
Failure to elect or reelect Executive to, or removal of Executive from, the
office or offices set forth in Paragraph 1 hereof, or the Board if Executive
shall have been a member of the Board immediately prior to a Change in Control
of the Company;

(B)
Executive's good-faith determination that there has been a significant change in
the nature or scope of his authorities, powers, functions, duties or
responsibilities attached to the positions contemplated in Paragraph 1 hereof or
a reduction in his compensation as provided in Paragraph 5 hereof or his
benefits as provided in Paragraph 7, which change or reduction is not remedied
within thirty days after notice to the Company by Executive;

(C) Any
other breach by the Company of any provision of this Agreement (including,
without limitation, relocation of Executive in violation of Paragraph 4(b)
hereof), which breach is not remedied within thirty days after notice to the
Company by Executive; or

(D) The
liquidation, dissolution, consolidation or merger of the Company or transfer of
all or a significant portion of its assets unless a successor or successors (by
merger, consolidation or otherwise) to which all or a significant portion of its
assets has been transferred shall have assumed all duties and obligations of the
Company under this Agreement;

provided
that in any event set forth in this Paragraph 8(b)(ii), Executive shall have
elected to terminate his employment under this Agreement upon not less than
forty (40) and not more than ninety (90) days' notice to the Board, attention of
the Secretary, given, except in the case of a continuing breach, within three
calendar months after (1) failure to be so elected or reelected, or such
removal, (2) expiration of the 30-day cure period with respect to such event, or
(3) the closing date of such liquidation, dissolution, consolidation, merger or
transfer of assets. 

An
election by Executive to terminate his employment under the provisions of this
Paragraph shall not be deemed a voluntary termination of employment by Executive
for the purpose of this Agreement or any plan or practice of the
Company.

(c) Payment
Upon Termination During Extended Term. In the
event of a Termination of this Agreement during the Extended Term hereof for any
reason other than Cause or Executive's death, the Company shall, subject to
Paragraph 9 hereof, pay to Executive (or, in the event of his death following
the Termination, his legal representative) in cash within thirty (30) days after
the date of such Termination (the "Termination Date"):

(i) An
amount equal to the product of multiplying the monthly rate of Base Compensation
to which Executive was entitled under Paragraph 5(b) hereof on the day
immediately prior to the Termination Date by the lesser of (A) twenty-four (24)
months or (B) the number of months remaining in the Term of this Agreement (the
shorter of such periods constituting the "Covered Period"); 

(ii) An
amount equal to the present value of the additional benefits that would have
been paid Executive under the Company's retirement plans if he had continued to
be employed pursuant to this Agreement during the Covered Period and the
retirement plans had continued during such period without change from the date
of the Change in Control;

(iii) For
each share of Company stock subject to a stock option that was awarded to
Executive under a Company stock option plan, was held by Executive on the day
immediately prior to his Termination Date, was not exercisable on that date but
would have become exercisable during the Covered Period if Executive's
employment with the Company had continued during that period, an amount equal to
the excess of (A) the daily average closing price for a share of the Company's
stock on the New York Stock Exchange, or such other national securities exchange
on which such stock may be listed, during the 30-day period ending upon the date
of the Change in Control, or, if higher, during the 30-day period ending upon
the Termination Date (adjusted as appropriate for any changes in the capital
structure of the Company) over (B) the option price for a share of the Company's
stock subject to the option; and

(iv) An amount
equal to the aggregate of the Company's contributions to the Company's savings
plan in respect of Executive that were not vested on the day immediately prior
to the Termination Date but that would have been vested at the end of the
Covered Period if Executive had remained employed by the Company for the
duration of that period.

For
purposes of calculating the present value specified in Paragraph 8(c)(ii), the
discount rate shall equal the PBGC interest rate for immediate annuities, as
provided in 29 C.F.R. Part 4044, Appendix B, Table II or its successor, in
effect for a valuation date coinciding with the Termination Date. If that rate
should no longer be published, the discount rate shall be such closely
comparable interest rate as the Company may reasonably determine.

(d) Payment
Upon Termination During Initial Term. In the
event that the Company terminates this Agreement during, or elects pursuant to
Paragraph 17 hereof not to renew this Agreement at the end of, the Initial Term
hereof for any reason other than Cause or Executive’s death, the Company shall
continue to pay to Executive (or in the event of his death following such
termination, his legal representative) his Base Compensation under Paragraph
5(a) hereof, at the semi-monthly rate in effect immediately prior to the date of
such termination (“Termination Date”), for a period of six months following the
Termination Date.

9. Maximum
Payment Upon Termination.
Notwithstanding any other provision of this Agreement, if the Company should
determine, in consultation with tax advisors satisfactory to Executive, that any
amount payable to Executive pursuant to Paragraph 8 of this Agreement during the
Extended Term, either alone or in conjunction with any payments or benefits to
or on behalf of Executive pursuant to this Agreement or otherwise, would not be
deductible by the Company, in whole or in part, for federal income tax purposes
by reason of section 280G of the Internal Revenue Code or its successor, then
the aggregate amount payable to Executive pursuant to Paragraph 8 shall be
reduced to the largest amount that, in the opinion of such tax advisors, the
Company could pay Executive under Para-graph 8 without any part of that amount
being nondeductible by the Company as a result of Section 280G or its successor.

10. Mitigation.
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement either by seeking other employment or otherwise. The
amount of any payment provided for herein shall not be reduced by any
remuneration that Executive may earn from employment with another employer or
otherwise following his Termination Date.

11. Noncompetition
Covenant. For a
period of one year following the Termination Date and, if Executive has given a
notice pursuant to Paragraph 8(b)(ii) hereof, for a period of 15 months
following the giving of such notice, Executive shall assist no individual or
entity other than the Company to acquire any entity with respect to which a
proposal to acquire was presented to the Board prior to the beginning of the
period.

12. Indemnification. The
Company shall indemnify Executive to the fullest extent permitted by applicable
Delaware law (as may be amended from time to time), including the advance of
expenses permitted therein.

13. Performance. The
failure of either party to this Agreement to insist upon strict performance of
any provision hereof shall not constitute a waiver of its rights subsequently to
insist upon strict performance of such provision or any other provision of this
Agreement.

14. Non-Assignability. Neither
party shall have the right to assign this Agreement or any rights or obligations
hereunder without the consent of the other party.

15. Invalidity. If any
provisions of this Agreement shall be found to be invalid by any court of
competent jurisdiction, such finding shall not affect the remaining provisions
of this Agreement, all of the which shall remain in full force and
effect.

16. Arbitration
and Legal Fees. In the
event of any dispute regarding a refusal or failure by the Company to make
payments or provide benefits hereunder for any reason, Executive shall have the
right, in addition to all other rights and remedies provided by law, to
arbitration of such dispute under the rules of the American Arbitration
Asso-ciation, which right shall be invoked by serving upon the Company a notice
to arbitrate, stating the place of arbitration, within ninety (90) days of
receipt of notice in any form (including, without limitation, failure by the
Company to respond to a notice from Executive within thirty (30) days) that the
Company is withholding or proposes to withhold payments or provisions of
benefits. In the event of any such dis-pute, whether or not Executive exercises
his right to arbitration, if it shall ultimately be determined that the
Company's refusal or failure to make payments or provide benefits hereunder was
wrongful or otherwise inconsistent with the terms of this Agreement, the Company
shall indemni-fy and hold harmless Executive from and against any and all
expenses incurred in connection with such determination, including legal and
other fees and expenses. Without limitation of or by the foregoing, the Company
shall, within ten (10) days after notice from Executive, provide Executive with
an irrevocable letter of credit in the amount of $100,000 from a bank
satisfactory to Executive against which Executive may draw to pay legal fees and
other fees and expenses in connection with any attempt by Executive to enforce
any of his rights under this Agreement during the Extended Term. Said letter of
credit shall not expire before ten (10) years following the date of this
Agreement.

17. Renewal. If the
Initial Term of this Agreement expires without there having been a Change in
Control, this Agreement shall be renewed, as of the day following such
expiration, unless, during the period beginning 90 days prior and ending 30 days
prior to such day, either the Company or Executive shall have given notice to
the other that this Agreement will not be renewed. If this Agreement is renewed
as provided under this Paragraph, the new Agreement shall be identical to this
Agreement (except insofar as the Company and Executive may otherwise agree in
writing) except that the date of the new Agreement shall be as of the day
following the expiration of the Initial Term of this Agreement.

18. Successors. This
Agreement shall be binding upon and inure to the benefit of the Executive (and
his personal representative), the Company and any successor organization or
organizations that shall succeed to substantially all of the business and
property of the Company, whether by means of merger, consolidation, acquisition
of substantially all of the assets of the Company or otherwise, including by
operation of law.

19. Set-off. The
Company shall have no right of set-off or counterclaim in respect of any claim,
debt or obligation against any payments or benefits provided for in this
Agreement.

20. Amendments. No
Amendment to this Agreement shall be effective unless in writing and signed by
both the Company and Executive.

21. Governing
Law. This
Agreement shall be interpret-ed and enforced in accordance with the laws of the
State of Delaware.

22. Notices. Unless
otherwise stated herein, all notices hereunder shall be in writing and shall be
deemed to be given when personally delivered or mailed by United States
registered or certified mail, postage prepaid, to, if to the Company, 909 Silver
Lake Boulevard, Dover, Delaware 19904, and, if to Executive, the last address
therefore shown on the records of the Company. Either the Company or Executive
may, by notice to the other, designate an address other than the foregoing for
the receipt of subsequent notices.

23. Withholding. The
Company may withhold from any amounts payable to Executive hereunder all
federal, state, city or other taxes that the Company may reasonably determine
are required to be withheld pursuant to any applicable law or
regulation.

24. Nature
of Payments Upon Termination. All
payments to Executive pursuant to Paragraphs 8 and 9 of this Agreement shall be
considered as liquidated damages or, in the case of certain payments pursuant to
Paragraph 8(d), as severance payments in consideration of Executive's past
services to the Company, and no such payment shall be regarded as a penalty to
the Company.

25. Acknowledgment. The
parties hereto each acknowledge that each has read this Agreement and
understands the same and that each enters into this Agreement freely and
voluntarily.

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.

CHESAPEAKE
UTILITIES CORPORATION

[CORPORATE
SEAL]   By: _______________________________

Title:

ATTEST:

__________________________

Secretary     EXECUTIVE

____________________________________Cash Bonus Incentive Plan Dated January 1, 2005

Exhibit
10.3

CHESAPEAKE
UTILITIES CORPORATION

CASH
BONUS INCENTIVE PLAN

Effective
January 1, 2005

 

SECTION
1.  
INTRODUCTION

 

	1.01  	
      Purposes
      of the Plan.

 

The
purposes of the Chesapeake Utilities Corporation Cash Bonus Incentive Plan (the
“Plan”) are (a) to further the long-term growth and earnings of Chesapeake
Utilities Corporation (the “Company”) by providing incentives and rewards to
those executive officers and other key employees of the Company and its
subsidiaries who are in positions in which they can contribute significantly to
the achievement of that growth; (b) to encourage those employees to remain as
employees of the Company and its subsidiaries; and (c) to assist the Company and
its subsidiaries in recruiting able management personnel. To accomplish these
objectives, the Plan authorizes the grant of Awards, as further described
herein. 

 

	1.02  	
      Term
      of the Plan.

 

The Plan
shall be effective as of January 1, 2005. Unless the Plan is terminated earlier
in accordance with Section
8, the
Plan shall remain in full force and effect until the close of business on
December 31, 2014, at which time the Plan shall terminate and no further Awards
shall be granted under the Plan. Any Award granted before the termination of the
Plan shall continue to be governed thereafter by the terms of the Plan and its
terms as in effect on December 31, 2014.

 

 

 

SECTION
2.  
DEFINITIONS

 

	2.01  	
      Definitions.

 

Except
where otherwise indicated, the following terms shall have the definitions set
forth below for purposes of the Plan:

 

	(a)  	
      “Award”
      means a Contingent Cash Bonus Award granted under Section
      5 or
      a Cash Bonus Award granted under Section
      6.
      

 

	(b)  	
      “Beneficiary”
      means the person or persons entitled, in accordance with Section
      9.02,
      to receive any benefit payable because of the Participant’s
      death.

 

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

 

	(d)  	
      “Cash
      Bonus Award”
      means the dollar amount granted by the Committee and payable to a
      Participant in accordance with Section 6.01.

 

	(e)  	
      “Change
      in Control”
      means the first of the following events
occurs:

 

	(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 person shall not be
      considered to cause a Change in Control of the Company;
  or

 

	(2)  	
      Any
      one person or group (as described in subsection (e)(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 subsection (e)(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 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 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
      subsection (e)(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 subsection (e)(1),
      above.

 

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.

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

 

	(g)  	
      “Committee”
      means a committee of three or more persons appointed by the Board of
      Directors to administer the Plan, each member of whom shall be (1) an
      “independent director” as defined by the rules of the New York Stock
      Exchange, (2) a “non-employee director” within the meaning of Rule 16b-3
      and (3) an “outside director” within the meaning of section 162(m) of the
      Code and the regulations thereunder.

 

	(h)  	
      “Company”
      means Chesapeake Utilities Corporation or a Related
    Company.

 

	(i)  	
      “Contingent
      Cash Bonus Award”
      means a potential cash award that may be designated for a Participant in
      accordance with Section 5.01.

 

	(j)  	
      “Disability”
      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.

 

	(k)  	
      “Participant”
      means any person who has received an Award.

 

	(l)  	
      “Performance
      Goal”
      means a criterion established by the Committee with respect to a Plan Year
      in accordance with Section 5.02.

 

	(m)  	
      “Person”
      means any individual, firm, corporation, partnership, joint venture,
      association, trust, or other entity.

 

	(n)  	
      “Plan”
      means the Chesapeake Utilities Corporation Cash Bonus Incentive Plan, as
      set forth herein and as amended from time to
time.

 

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

 

	(p)  	
      “Related
      Company”
      means a corporation, partnership, joint venture, or other entity in which
      the Company has a direct or indirect ownership or other proprietary
      interest of at least fifty percent.

 

	(q)  	
      “Rule
      16b-3”
      means Rule 16b-3 under the Securities Exchange Act of 1934, as amended
      from time to time, or any successor
thereto.

 

 

SECTION
3.  
ADMINISTRATION

 

	3.01  	
      The
      Committee.

 

The Plan
shall be administered by the Committee. The Committee shall periodically
determine, in its sole discretion, the individuals who shall participate in the
Plan and the amounts and other terms and conditions of Awards to be granted to
such individuals under the Plan. The Committee shall administer the Plan in
accordance with applicable legal requirements. All questions of interpreta-tion
and administration with respect to the Plan shall be determined by the Committee
in its sole and absolute discretion. All determinations by the Committee shall
be final and conclusive upon all parties. The Committee shall act by vote or
written consent of a majority of its members and its actions shall be recorded
in the minutes of the Committee.

 

	3.02  	
      Additional
      Powers of the Committee.

 

In
addition to any implied powers and duties that are needed to carry out the
provisions of the Plan, the Committee shall have the following specific powers
and duties:

 

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

 

	(b)  	
      to
      designate one or more officers of the Company to execute on behalf of the
      Company all agreements and other documents approved by the Committee under
      the Plan;

 

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

 

	(d)  	
      to
      employ one or more persons to render advice with respect to any of its
      responsibilities under the Plan.

 

 

SECTION
4.  
PARTICIPATION

 

	4.01  	
      Participation.

 

The
Committee may select to receive Awards under the Plan any key employees of the
Company (including officers or employees who are members of the Board, but
excluding directors who are not officers or employees) who the Committee
determines are in positions from which they can contribute significantly to the
achievement to the long-term growth, development, and financial success of the
Company or its subsidiaries. An individual who is not an employee of the Company
shall not be eligible to participate in the Plan. Because all Awards are granted
in the discretion of the Committee, no officer or employee of the Company shall
have any right to receive an Award under the Plan.

 

 

SECTION
5.   CONTINGENT
CASH BONUS AWARDS

 

	5.01  	
      Grant
      of Contingent Cash Bonus Awards.

 

The
Committee may, from time to time, grant to persons eligible to participate in
the Plan, as the Committee shall determine in its sole discretion, a Cash Bonus
Award the vesting of which is contingent on the achievement of established
Performance Goals or the occurrence of another specified event as determined by
the Committee in accordance with the terms of the Plan. In determining whether
to grant an Award and the nature and amount of the Award, the Committee shall
consider, among other factors, the eligible employee’s responsibility level,
performance, and potential cash compensation level. Designation of a Contingent
Cash Bonus Award will not create any right of the Participant to the Cash Bonus
Award, even if the Participant meets the Performance Goals.

 

	5.02  	
      Establishment
      of Performance Goals.

 

In
selecting the Performance Goals for the vesting of an Award the Committee may
choose from among any one or more of the following, in any case as measured in
absolute terms or relative to the performance of any group of companies or index
selected by the Committee: 

 

	(a)  	
      earnings
      per share or earnings per share growth, 

 

	(b)  	
      operating
      income or operating income growth, 

 

	(c)  	
      operating
      margin or operating margin growth, 

 

	(d)  	
      net
      income or net income growth,

 

	(e)  	
      revenue
      or revenue growth, 

 

	(f)  	
      return
      on equity, 

 

	(g)  	
      pre-tax
      return on investment,

 

	(h)  	
      total
      shareholder return, 

 

	(i)  	
      cash
      flow, 

 

	(j)  	
      earnings
      before interest, taxes, depreciation, and amortization,

 

	(k)  	
      one
      or more strategic goals for the Company; any segment of its business;
      and/or any company or group of companies or

 

	(l)  	
      any
      other criteria or event selected by the
Committee.

 

If during
a Plan Year there are significant changes in economic conditions that the
Committee did not foresee when it established the Performance Goals for that
Plan Year and that, in the Committee’s sole judgment, have or are expected to
have a substantial effect on the performance of the Company during the Plan
Year, the Committee may revise the Performance Goals in any manner that the
Committee may deem appropriate.

 

	5.03  	
      Payment
      of Contingent Cash Bonus Awards.

 

Contingent
Cash Bonus Awards as determined by the Committee shall be paid in cash on or
before March 15 of the Plan Year following the Plan Year for which the
Contingent Cash Bonus Awards were granted.

 

 

 

SECTION
6.   CASH
BONUS AWARDS

 

	6.01  	
      Additional
      Cash Bonus Awards.

 

The
Committee may also grant and pay Cash Bonus Awards at any other time during a
Plan Year as the Committee, in its discretion, determines to be
appropriate.

 

	6.02  	
      Payment
      of Cash Bonus Awards.

 

After the
Company’s financial results for a Plan Year become available, the Committee may,
but shall not be required to, grant Cash Bonus Awards to one or more
Participants, including but not limited to a Participant as to whom Contingent
Cash Bonus Awards have been designated pursuant to Section 5.01. Cash
Bonus Awards as determined by the Committee shall be paid in cash on or before
March 15 of the Plan Year following the Plan Year for which the Cash Bonus Award
was granted.

 

 

 

SECTION
7.   PAYMENTS
OF AWARDS

 

	7.01  	
      Awards
      Solely from General Assets.

 

The
Awards under the Plan shall be paid solely from the general assets of the
Company. Nothing herein shall be construed to require the Company or the Board
to maintain any fund or to segregate any amount for the benefit of any
Participant, and no Participant or other person shall have any right against,
right to, or security or other interest in, any fund, account, or asset of the
Company from which the payment pursuant to the Plan may be made.

 

	7.02  	
      Plan
      Expenses.

 

All
reasonable expenses of administering the Plan shall be paid by the
Company.

 

 

 

SECTION
8.   AMENDMENT
AND TERMINATION

 

	8.01  	
      Amendment
      of Plan.

 

Except as
otherwise provided in Section 8.02, the
Board may, at any time and from time to time, alter, amend, suspend or terminate
the Plan as it shall deem advisable.

 

	8.02  	
      Change
      in Control.

 

Notwithstanding
Section 8.01, above,
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 or section 409A of the Code 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 Award granted
      prior to the Change in Control,

 

	(b)  	
      altering
      the meaning or operation of the definition of “Change in Control” in
      Section 2.01(e)
      (and of the definition of all the defined terms that appear in the
      definition of “Change in Control”), the provisions of this Section
      8,
      or any rule, regulation, procedure, provision or determination made or
      adopted prior to the Change in Control pursuant to this Section
      8 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.

 

 

Upon and
after the occurrence of a Change in Control, (i) all rights of all Participants,
former Participants and beneficiaries under the Plan (including without
limitation any rules, regulations or procedures promulgated under the Plan)
shall be contractual rights enforceable against Chesapeake and any successor to
all or substantially all of Chesapeake’s business or assets and (ii) any
Contingent Cash Bonus Award (1) shall be deemed to have been earned at the
maximum annual target amount, regardless of whether the specified performance
criteria have been satisfied and (2) shall be payable immediately following the
Change in Control. 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. 

 

	8.03  	
      Other
      Plans.

 

Nothing
herein shall preclude the Committee from authorizing or approving other plans or
forms of incentive compensation. The Committee shall have the right to determine
the extent to which any Participant shall participate in this Plan in addition
to any other plan or plans of the Company in which he shall
participate.

 

 

SECTION
9.  
MISCELLANEOUS

 

	9.01  	
      No
      Right To Employment.

 

The
receipt of an Award under the Plan shall not give any employee any right to
continued employment by the Company, and the right to dismiss any employee is
specifically reserved to the Company. The receipt of an Award shall not give an
employee the right to receive any subsequent Award.

 

	9.02  	
      Designation
      of Beneficiary.

 

Each
Participant may designate a Beneficiary to receive the Participant’s awards in
the event of the Participant’s death. The 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.

 

	9.03  	
      Recipient
      of Payment.

 

	(a)  	
      Except
      as otherwise provided in paragraph (b), below, any Award under the Plan
      shall be paid to the Participant, or to the Beneficiary of a deceased
      Participant.

 

	(b)  	
      If
      the Committee determines that a Participant or Beneficiary is not
      competent, the Committee may pay any amount otherwise due to the
      Participant or Beneficiary to the court-appointed legal guardian of the
      Participant or Beneficiary, to an individual who has become the legal
      guardian of the Participant or Beneficiary by operation of state law, or
      to another individual whom the Committee determines to be entitled to
      receive the payment on behalf of the Participant or
      Beneficiary.

 

	(c)  	
      If
      a payment is made under the Plan to a third party pursuant to paragraph
      (b), above, the Plan, the Committee, and the Company shall be relieved, to
      the fullest extent permitted by law, of any obligation to make a duplicate
      payment to or on behalf of the Participant or
  Beneficiary.

 

	9.04  	
      Taxes.

 

The
Committee may make any appropriate arrangements to deduct from amounts otherwise
payable to a Participant any taxes that the Committee believes to be required to
be withheld by any government or governmental agency in respect of an Award. The
Participant and/or his Beneficiary shall bear all taxes on amounts paid under
the Plan to the extent that no taxes are withheld, irrespective of whether
withholding is required.

 

	9.05  	
      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.

 

	9.06  	
      Severability.

 

If any
provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision
had never been inserted herein. In addition, if any provision of the Plan
inadvertently causes an Award granted under the Plan to be “nonqualified
deferred compensation” within the meaning of section 409A of the Code, then such
Award shall be construed and enforced as if the provision had never been
inserted therein.

 

	9.07  	
      Governing
      Law.

 

The Plan
shall be construed, administered, and regulated in accordance with the laws of
the State of Delaware (excluding the choice of law provisions thereof) and any
applicable requirements of federal law.

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