cpkofficercomp.htm
Securities
and Exchange
Commission
Washington,
D.C.
20549
_______________________________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of
Report (Date of earliest event reported): January 24, 2008
Chesapeake
Utilities Corporation
(Exact
name of registrant as specified in its charter)
|
Delaware
|
001-11590
|
51-0064146
|
|
(State
or other jurisdiction of
|
(Commission
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
File
Number)
|
Identification
No.)
|
909
Silver Lake Boulevard,
Dover, Delaware 19904
(Address
of principal executive offices, including Zip Code)
(302)
734-6799
(Registrant's
Telephone Number, including Area Code)
_______________________________________________________________
(Former
name, former address and former fiscal year, if changed since last
report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Section
5 --- Corporate Governance
and Management
Item 5.02
Compensatory Arrangements of Certain Officers
On
January 23, 2008, the Compensation Committee (the “Committee”) of the Board of
Directors of Chesapeake Utilities Corporation (the “Company”) approved the
following compensation arrangements for certain executive officers of the
Company.
Performance
Incentive Awards
Pursuant
to its authority under the Company’s Performance Incentive Plan, the Committee
approved equity-based awards to John R. Schimkaitis, President and Chief
Executive Officer; Michael P. McMasters, Senior Vice President and Chief
Financial Officer; Stephen C. Thompson, Senior Vice President; Beth W. Cooper,
Vice President, Treasurer and Corporate Secretary; and S. Robert Zola, President
of the Company’s propane subsidiary, Sharp Energy, Inc.
The
Committee, at the end of 2007, upon the advice of its independent compensation
consultant, Buck Compensation, approved a change in the measurement period
for
future equity-based awards. Accordingly, the Company is transitioning
from predominant use of a one-year award period to a three-year award
period. As part of this transition, the Committee approved two
equity-based award grants to each above-named executive officer. As part of
this
transition, the first equity-based award grant will cover a two-year
award period, January 1, 2008-December 31, 2009 (“2009 Performance Period”), and
will include twice the normal award level of shares. The second
equity-based award grant will cover a three-year award period, January 1,
2008-December 31, 2010 (“2010 Performance Period”).
The
Committee established the following target equity-based awards, respectively,
for the 2009 Performance Period: Mr. Schimkaitis – 19,200 shares; Mr.
McMasters – 10,240 shares; Mr. Thompson – 8,000 shares; Mr. Zola – 6,400 shares;
and Ms. Cooper – 6,400 shares. For the 2010 Performance Period, the
Committee set the following target equity-based awards: Mr.
Schimkaitis – 9,600 shares; Mr. McMasters – 5,120 shares; Mr. Thompson - 4,000
shares; Mr. Zola – 3,200 shares; and Ms. Cooper – 3,200 shares. The
Committee set as the threshold and maximum equity-based awards for each
executive officer, 50% and 125% of the target equity-based awards,
respectively.
According
to the terms of the 2008-2009 awards, each executive officer has the opportunity
to earn shares of the Company’s common stock (“Contingent Performance Shares”),
including a portion of the target award, depending on the extent to which
pre-established performance goals (the “Performance Goals”) are achieved by the
Company during the 24 months ended December 31, 2009. Likewise,
according to the terms of the 2008-2010 awards, each executive officer has
the
opportunity to earn Contingent Performance Shares, including a portion of the
target award, depending on the extent to which Performance Goals are achieved
by
the Company during the 36 months ended December 31, 2010.
To
earn
these equity-based awards, the Company’s performance is evaluated against three
pre-established performance metrics. These metrics consider: (1) total
shareholder return, defined as the cumulative total return to shareholders
for
the respective performance period (“Shareholder Value”), (2) growth in long-term
earnings, defined as the growth in total capital expenditures as a percentage
of
total capitalization for the respective performance period (“Growth”) and (3)
earnings performance, defined as average return on equity (“RoE”) for the
respective performance period. Both the Shareholder Value and the
Growth performance metrics will be compared to the same metrics of the peer
group consisting of gas utility companies listed in the Edward Jones Natural
Gas
Distribution Group for the respective performance period and awards will be
determined according to the Company’s ranking among these peers. The
potential payout ranges from 50-125 percent for each of these performance
metrics, after achieving threshold performance. For the average RoE
performance metric, the Company’s performance will be compared to pre-determined
RoE thresholds established by the Committee, with the payout ranging from 50-125
percent, upon achieving the threshold RoE, based upon the actual average
RoE.
If,
during the 2009 Performance Period or the 2010 Performance Period, a named
executive officer is separated from employment, due to voluntary termination,
termination by the Company for just cause, or retirement, all unearned
equity-based awards shall be forfeited immediately. If a named
executive officer separates from employment by reason of death or total and
permanent disability, the equity-based awards that would otherwise have been
earned at the end of the respective performance periods shall be reduced by
pro
rating such equity-based awards based on the proportion of the performance
periods during which the named executive officer was employed by the Company,
subject to the Committee’s discretion to award a larger number of
shares.
In
the
event of a Change in Control during the 2009 Performance Period or 2010
Performance Period, in accordance with the Performance Incentive Plan, the
named
executive officer may earn the maximum equity-based awards, as if all
performance criteria were satisfied, without any pro ration.
2008
Short-Term Bonus Awards
Under
the
Company’s Cash Bonus Incentive Plan, the Committee approved performance targets
and target cash bonus awards, measured as a percentage of base salary, for
each
of Messrs. Schimkaitis, McMasters, Thompson and Zola, as well as Ms. Cooper.
The
approved performance targets, which vary according to the applicable executive
officer, are based on the following performance criteria: (i) earnings per
share, (ii) pre-tax 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. The amount of each executive
officer’s cash bonus for 2008 will vary depending on the extent to which the
applicable performance targets are achieved.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this Report to be signed on its behalf by the undersigned hereunto
duly authorized.
Chesapeake
Utilities Corporation
/s/
Michael P. McMasters
—————————————
Michael
P. McMasters
Senior
Vice President and Chief Financial Officer