Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X] |
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Filed by a Party other than
the Registrant [ ] |
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Check the appropriate
box: |
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Preliminary Proxy
Statement |
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Soliciting Material Under Rule
14a-12 |
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Confidential, For Use of
the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy
Statement |
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Definitive Additional
Materials |
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Chesapeake Utilities Corporations |
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(Name of Registrant as
Specified In Its Charter) |
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of Person(s) Filing Proxy Statement, if Other Than the
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
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Table of Contents
Table of Contents
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Notice of Annual
Meeting of Stockholders |
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Wednesday, May
6, 2015 - 9:00 a.m. Eastern Time The Board Room of PNC Bank, NA, 222 Delaware Avenue,
18th Floor, Wilmington, DE
19801 |
March 31, 2015
DEAR
STOCKHOLDER:
You are invited to attend Chesapeake Utilities Corporations (the
Company) 2015 Annual Meeting of Stockholders (the Meeting). You will be
asked to:
1. |
Elect four Class I
directors and one Class III director named in the attached Proxy
Statement; |
2. |
Consider and vote on
the approval of the Companys 2015 Cash Bonus Incentive Plan;
and |
3. |
Cast an advisory vote
to ratify the appointment of the Companys independent registered public
accounting firm. |
Stockholders will also transact any other business that is properly
brought before the Meeting and any adjournment or postponement of the Meeting.
The Board recommends a vote FOR
each of the matters set forth above. For any other business that is properly
brought before the Meeting, the appointed proxies are authorized to vote
pursuant to their discretion.
Your vote is important and
we encourage you to vote as soon as possible even if you plan to attend the
Meeting. You are eligible to vote if you were a stockholder of record at the
close of business on March 17, 2015. Please read the attached Proxy Statement
for additional information on the matters you are being asked to vote on. For
your convenience, you can vote 24/7 by using any of the following methods. You
must have your proxy card available when voting.
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By
Internet Using Your Computer www.investorvote.com/cpk |
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By Internet Using
Your Tablet or Smartphone Scan the QR code with your mobile
device |
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By
Telephone Dial toll-free (800) 652-8683 |
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By
Mail Cast your ballot, sign your proxy card and mail it in the
enclosed envelope |
If you own shares through your bank, broker or other institution or in an
account established under one of the Companys deferred compensation plans, you
will receive separate instructions on how you can vote the shares you own in
those accounts.
Thank you for your investment in Chesapeake and continued support.
Sincerely,
Michael P.
McMasters
President and
Chief Executive Officer
Important Notice
Regarding the Availability of Proxy Materials. This Notice for the Annual Meeting of Stockholders to be held on May 6,
2015, the attached Proxy Statement, our 2014 Annual Report on Form 10-K, and
directions to the Meeting are available at www.chpk.com/proxymaterials.
909 Silver Lake
Boulevard, Dover, DE
19904 ■ www.chpk.com ■ (888)
742-5275 |
Table of Contents
Table of
Contents
Table of Contents
PROXY
SUMMARY
The next several pages
provide you with an overview of the sections within our Proxy Statement and
relevant page numbers. You should consider all of the information available in
the Proxy Statement prior to voting your shares. Additional information on the
Companys performance in 2014 can be found in our 2014 Annual Report to
Shareholders.
2015 Annual Meeting
Information |
Time and Date: 9:00 a.m.
Eastern Time on Wednesday, May 6, 2015
Location: Board Room of
PNC Bank, N.A., 222 Delaware Avenue, 18th Floor, Wilmington, Delaware
19801
Record Date: March 17, 2015
Voting: Stockholders as of
the record date are entitled to vote. Each share of common stock is entitled to
one vote for each director nominee and one vote for each other proposal to be
voted on.
We encourage you to vote by
proxy, even if you plan to attend the 2015 Annual Meeting of Stockholders (the
Meeting). Your vote is important. You can vote your shares using one of the
following methods:
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By
Internet Using Your Computer www.investorvote.com/cpk |
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By Internet Using
Your Tablet or Smartphone Scan the QR code with your mobile
device |
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By
Telephone Dial toll-free (800) 652-8683 |
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By
Mail Cast your ballot, sign your proxy card and mail it in the
enclosed envelope |
If you own shares through
your bank, broker or other institution or in an account established under one of
the Companys deferred compensation plans, you will receive separate
instructions on voting the shares in those accounts.
Proposal Number |
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Description |
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Vote Recommendation |
1 |
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Election of four
Class I Directors to serve three-year terms ending in 2018 and until their
successors are elected and qualified, and the election of a Class III
director to serve a two-year term ending in 2017 and until his successor
is elected and qualified. |
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FOR |
2 |
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Consideration of and
vote on the approval of the Companys 2015 Cash Bonus Incentive Plan.
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FOR |
3 |
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Advisory vote to
ratify the appointment of the Companys independent registered public
accounting firm. |
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FOR |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement i
Table of Contents
Election of Directors
(Proposal 1) |
Chesapeake has 13 directors
currently on its Board of Directors (the Board). The following table provides
summary information about each director nominee standing for re-election to the
Board. Additional information for all of our directors, including the nominees,
may be found beginning on page 4.
Name |
Age |
Director Since |
Principal
Occupation |
Independent |
Committee
Memberships |
Experience and
Skills |
Ronald G.
Forsythe, Jr., Ph.D. |
46 |
2014 |
President and
Chief Operating Officer, Quality Health Strategies |
Yes |
None |
●Information Technology
●Community Engagement and Economic
Development
●Organizational Positioning
●Market Knowledge (Delmarva
Peninsula) |
Eugene H. Bayard |
68 |
2006 |
Law Partner,
Morris James Wilson
Halbrook & Bayard |
Yes |
Corporate
Governance Committee |
●Delaware Legal Community
●Legislative and Regulatory
●Corporate Governance
●Market Knowledge (Delmarva
Peninsula) |
Thomas P. Hill,
Jr. |
66 |
2006 |
Former Vice
President of Finance and Chief Financial Officer, Exelon Energy
Delivery Company |
Yes |
Audit
Committee |
●Energy Industry
●Regulatory
●Leadership
●Financial Expert |
Dennis S. Hudson, III |
59 |
2009 |
Chair and
Chief Executive Officer, Seacoast National Bank and Seacoast Banking Corporation of
Florida |
Yes |
Audit
Committee |
●Banking
●Leadership
●Financial Expert
●Market Knowledge
(Florida) |
Calvert A. Morgan,
Jr. |
67 |
2000 |
Director and
Former Special Advisor,
WSFS Financial Corporation and its principal subsidiary, WSFS
Bank. Vice Chair of
WSFS Bank;
Retired Chair, President
& CEO, PNC Bank
Delaware |
Yes |
Corporate
Governance Committee
Compensation
Committee |
●Banking
●Leadership
●Corporate Governance
●Market Knowledge (Delmarva
Peninsula) |
2015 Cash Bonus Incentive
Plan (Proposal 2) |
We are asking that
stockholders approve the Chesapeake Utilities Corporation Cash Bonus Incentive
Plan (the 2015 Plan) under which certain executive officers and other key
employees will be eligible to receive incentive compensation based on the
achievement of certain performance goals. The Board approved the 2015 Plan which
was effective January 1, 2015. The 2015 Plan replaces the Chesapeake Utilities
Corporation Cash Incentive Plan dated January 1, 2005 and filed as Exhibit 10.3
of our Annual Report on Form 10-K for the year ended December 31, 2004. We are
submitting the plan for stockholder approval at the Meeting so that payments
made to our executive officers and other key employees under the 2015 Plan may
qualify as performance-based compensation that is fully deductible for federal
income tax purposes. A summary of the material features of the 2015 Plan is
provided beginning on page 11 and the full text of the 2015 Plan is attached as
Appendix A.
ii CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy Statement
Table of Contents
Advisory Vote to Ratify the Appointment of
the Independent Registered Public Accounting Firm (Proposal
3) |
We are asking stockholders
to cast a non-binding, advisory vote to ratify the appointment of Baker Tilly
Virchow Krause LLP (Baker Tilly) as our independent external auditor for 2015.
Please refer to page 14 for additional details on the Audit Committees process
used to evaluate Baker Tillys qualifications, performance and independence. On
October 1, 2014, the Company was notified that the audit firm of ParenteBeard
LLC (ParenteBeard) merged with Baker Tilly. The table below provides a summary
of the aggregate fees for professional services billed to the Company and its
subsidiaries by ParenteBeard and Baker Tilly in 2014 and ParenteBeard in
2013.
Types of
Fees |
|
2014 |
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2013 |
Audit Fees |
$ |
730,339 |
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$ |
789,738 |
Audit-Related Fees |
$ |
127,793 |
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$ |
58,504 |
Tax and Other Fees |
$ |
0 |
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$ |
0 |
Corporate Governance
Summary
The Board: |
●is comprised of 92 percent independent
directors
●is comprised of directors with a broad range
of leadership, professional skills, and experience which, when taken as a
whole, complement the nature of our business and support the Companys
long-term strategic focus
●has active Board engagement with each
director participating in 100 percent of the Board meetings held during
his/her service on the Board in 2014
●ensures that the Companys risk management
framework is sufficient given the risks present in the Companys business
activities
●regularly considers and addresses Board
succession planning to ensure Boardroom skills are aligned with
Chesapeakes long-term strategic plan
●adopted a policy that prohibits directors
from serving on more than two public company boards in addition to
Chesapeake
●has access to senior management and
independent advisors
●engages in a comprehensive self-evaluation
process
●approves director compensation arrangements
that are designed to encourage performance that aligns the interests of
directors with those of stockholders |
The Audit,
Compensation, and Corporate Governance Committees: |
●are all comprised entirely of independent
directors, with the Audit Committee comprised of three financial
experts
●annually review their Charters to ensure
that they are continuously aligned with evolving Committee
responsibilities
●engage in a comprehensive self-evaluation
process
●have active Committee member engagement with all
members of such Committees participating in 100 percent of the Committee
meetings in 2014 |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement iii
Table of Contents
Executive Compensation Summary
The Compensation
Committee: |
●is comprised of independent directors who
administer the executive compensation program
●retains an independent compensation
consultant to advise the Committee on the executive compensation program
and other compensation matters
●annually reviews the executive compensation
program which is designed to encourage performance that aligns the
financial interests of the named executed officers with the interests of
stockholders
●uses multiple performance measures in the
cash and equity incentive plans that focus on long-term strategic
development and shareholder return
●considers peer groups and benchmarking data
in its review of the executive compensation program
●does not change the elements of the
executive compensation program significantly from year to
year
●retains discretion in administering awards
and performance goals, and determining performance
achievement
●caps the maximum amount that can be earned
for any performance period for an incentive
award |
The Named Executive
Officers: |
●have compensation that is tied to
performance, thereby aligning a significant portion of executive
compensation payouts with the interests of shareholders
●are evaluated using a variety of
quantitative metrics, including total shareholder return relative to a
peer group, under the long-term incentive plan
●are subject to a compensation recovery
policy
●participate in the same benefits that are
available to other employees
●have a cap on their life insurance benefit
that is provided to employees of the Company
●have no perquisites other than a Company
vehicle that is available for personal use but which is treated as
compensation
●do not receive excise tax gross-up
protections
●do not receive additional compensation or
additional future years of service under the non-qualified benefit plans
●receive dividends on equity incentive awards
only to the extent the awards are earned and in proportion to the shares
actually earned
●may not generally engage in hedging or
pledging of Company stock no executive has hedged or pledged
shares
●are subject to a double-trigger
change-in-control vesting provision under the Companys 2013 Stock and
Incentive Compensation Plan approved by stockholders in
2013 |
iv CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy Statement
Table of Contents
PROXY STATEMENT
The enclosed proxy
materials are being sent at the request of the Board of Directors of Chesapeake
Utilities Corporation to encourage you to vote your shares at the 2015 Annual
Meeting of Stockholders (the Meeting) to be held on May 6, 2015, and any
adjournment or postponement of the Meeting. This Proxy Statement contains
information on matters that will be presented at the Meeting and is provided to
assist you in voting your shares.
VOTING
INFORMATION
Meeting Time, Date and
Location |
The Meeting will be held at
9:00 a.m. Eastern Time on Wednesday, May 6, 2015, in the Board Room of PNC Bank,
N.A., 222 Delaware Avenue, 18th Floor, Wilmington, Delaware 19801.
Holders of Chesapeake stock
at the close of business on March 17, 2015, the record date established by the
Board, are entitled to vote at the Meeting. There were 14,627,989 shares of our
common stock outstanding as of this date. These shares of common stock are our
only outstanding class of voting equity securities. Each share of common stock
is entitled to one vote on each matter submitted to the stockholders for a vote.
The named executive officers and directors of the Company, collectively, have
the power to vote 5.3 percent of these shares.
Proposals Requiring Your
Vote |
The named executive
officers and directors intend to vote their shares of common stock as
follows:
Proposal Number |
|
Description |
|
Vote Recommendation |
1 |
|
Election of four
Class I Directors to serve three-year terms ending in 2018 and until their
successors are elected and qualified, and the election of a Class III
director to serve a two-year term ending in 2017 and until his successor
is elected and qualified. |
|
FOR |
2 |
|
Consideration of and
vote on the approval of the Companys 2015 Cash Bonus Incentive Plan.
|
|
FOR |
3 |
|
Advisory vote to
ratify the appointment of the Companys independent registered public
accounting firm. |
|
FOR |
The appointed proxies will
vote pursuant to their discretion on any other matter that is brought before the
Meeting or at any adjournment or postponement of the Meeting in accordance with
our Bylaws. We are not aware of any other matter to be presented at the
Meeting.
Stockholders of
Record. If you are a
registered stockholder, your proxy card will be voted at the Meeting if it is
properly submitted and not subsequently revoked. If your proxy card is
incomplete or if you do not provide instructions with respect to any of the
proposals, the appointed proxy will vote FOR Proposals 1, 2 and 3 and pursuant
to his discretion for any other business properly brought before the Meeting. If
your proxy card is unclear as to how you intended to vote (e.g., multiple
selections are made for one proposal), your proxy will be voted pursuant to the
discretion of the appointed proxy.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 1
Table of Contents
Beneficial
Ownership. If you held shares
of our common stock through a bank, broker, trustee, nominee, or other
institution (called street name) on March 17, 2015, you are entitled to vote
on the matters described in this Proxy Statement. You will receive this Proxy
Statement, any other solicitation materials, and voting instructions through
your bank, broker, trustee, nominee, or institution. If you do not provide
voting instructions, your shares may constitute broker non-votes on certain
proposals. Generally, broker non-votes occur on a non-routine proposal where a
broker is not permitted to vote on that proposal without instructions from the
beneficial owner. Broker non-votes are counted as present for purposes of
determining whether there is a quorum, but are not counted for purposes of
determining whether a matter has been approved. If you properly submit a proxy
card, but do not provide voting instructions, your institution will be able to
vote your shares on Proposal 3 - advisory vote to ratify the appointment of our
independent registered public accounting firm; however, they will not be permitted
to vote your shares on Proposals 1 and 2 - election of directors, and the
Companys 2015 Cash Bonus Incentive Plan, respectively. As a result, if you do
not provide voting instructions to your institution, your shares will have no
effect on the outcome of the election of directors, and the Companys 2015 Cash
Bonus Incentive Plan. We will reimburse the institution for reasonable expenses
incurred in connection with their solicitation. If you plan to attend the
Meeting, you will need to bring a valid proxy from the institution if you intend
to vote your shares at the Meeting.
Methods Available For
Voting |
Your vote is important and
we encourage you to vote as soon as possible even if you plan to attend the
Meeting. You may attend the Meeting and deliver your proxy card in person before
voting is declared closed at the Meeting. For your convenience, you can vote
24/7 by using any of the following methods. You may vote at the Meeting even if
you submitted your proxy using any of the methods below. You must have your
proxy card available when voting.
@ |
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By Internet Using Your
Computer www.investorvote.com/cpk |
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|
|
By Internet Using Your Tablet or
Smartphone Scan the QR code with
your mobile device |
|
|
By Telephone Dial toll-free (800)
652-8683 |
|
|
|
By
Mail Cast your
ballot, sign your proxy card and mail it in the enclosed
envelope |
If you own shares through
your bank, broker or other institution or in an account established under one of
the Companys deferred compensation plans, you will receive this Proxy
Statement, other solicitation materials, and voting instructions from your
representative on how you can vote the shares you own in those accounts.
Signing the Proxy -
Stockholder Representatives or Joint
Stockholders |
If you are an authorized officer, partner or other agent voting shares on behalf of a corporation, limited
liability company, partnership or other legal entity, you should sign the
accompanying proxy card in the entity name and indicate your name and title. If
you are an agent, attorney, guardian or trustee submitting a proxy card on
behalf of a registered stockholder, you should also indicate your title with
your signature. If you own stock with multiple parties, each party should sign
the proxy card. If stock is registered in the name of a decedent and you are an
executor, or an administrator of the decedents estate, you should sign the
accompanying proxy card, indicate your title following your signature, and
attach legal instruments showing your qualification and authority to act in this
capacity.
2
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
PROPOSAL 1 - ELECTION OF
DIRECTORS
General
Information. As of the date
of this Proxy Statement, the entire Board consists of thirteen directors divided
into three classes. Directors are elected to serve three-year terms. Directors
are elected by a plurality of the votes cast by the holders of the shares
present in person or represented by proxy at the Meeting. You may authorize a
proxy to vote your shares on the election of directors. A proxy that withholds
authority to vote for a particular nominee will not count either for or against
the nominee.
Director Biographies,
Key Attributes, Experience and Skills. Beginning on page 4, an overview is provided for
each of the director nominees as well as each continuing directors principal
occupation and employment, principal business, affiliations, and other business
experience during the past five years.
Overview of Process
for Nominating Directors.
Prior to nominating directors, the Corporate Governance Committee considers each
candidate selected and the criteria described under the Director Nomination Process on page 24. The Corporate Governance Committee
considers each individual candidate in the context of the Board as a whole with
the objective of nominating individuals who the Corporate Governance Committee
believes will contribute to the Companys success as a result of their
education, job experience, industry knowledge, market knowledge and expertise.
The Corporate Governance Committee seeks individuals who demonstrate integrity,
judgment, leadership and decisiveness in their business dealings. The Corporate
Governance Committee also seeks individuals who, with the other directors, will
give the Board a diverse combination of skills and attributes that complement
the nature of our business and support the Companys long-term strategic focus.
Directors should be able to commit the requisite time for preparation and
attendance at Board and Committee meetings, as well as be able to participate in
other matters necessary to ensure good corporate governance. The Board reflects a
broad range of leadership, professional skills and experience; corporate
governance and board service experience; experience in the markets in which we
conduct business; economic and financial expertise; industry experience; public
affairs experience; academia experience; and entrepreneurism.
Director
Nominations. On September 10,
2014, the Board increased the size of the board from twelve to thirteen
directors and appointed Ronald G. Forsythe, Jr., Ph.D. to fill the resulting
vacancy, effective November 1, 2014. On December 2, 2014, the Board approved an
amendment to the Companys Amended and Restated Bylaws to better reflect the
Companys current practice that a director chosen to fill a vacancy holds office
until the next annual meeting of stockholders, at which such director will be
nominated for election and, if such director is so elected, will serve as a
director for the remainder of the term of the class for which such director was
appointed, and until such directors successor is elected and qualified.
Accordingly, the Board, upon recommendation of the Corporate Governance
Committee, nominated Dr. Forsythe for election at the Meeting and if elected,
Dr. Forsythe will serve as a Class III director until the 2017 Annual Meeting of
Stockholders and until his successor is elected and qualified. The Board, upon
recommendation of the Corporate Governance Committee, also nominated four Class
I incumbent directors Eugene H. Bayard, Thomas P. Hill, Jr., Dennis S. Hudson,
III and Calvert A. Morgan, Jr. If elected, these directors will serve as Class I
directors until the 2018 Annual Meeting of Stockholders and until their
successors are elected and qualified. If, prior to the election, any of the
nominees become unable or unwilling to serve as a director of the Company (an
eventuality that we do not anticipate), all proxies will be voted for any
substitute nominee who may be designated by the Board pursuant to the
recommendation of the Corporate Governance Committee.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 3
Table of Contents
Class III Director (Term
Expires in 2017)
|
Ronald G. Forsythe, Jr.,
Ph.D. |
Director Since 2014 Independent Director Age
46 |
Dr. Forsythe is President,
Chief Operating Officer and Interim Chief Information Officer of Quality Health
Strategies (QHS), an organization that provides solutions in the healthcare
industry. Prior to QHS, Dr. Forsythe served as Vice President for Planning,
Assessment, Technology and Commercialization, and Chief Information Officer at
the University of Maryland Eastern Shore (UMES). Currently, Dr. Forsythe
serves on the Regional Advisory Board of Branch Banking and Trust Company, a
U.S. financial services holding company. He also serves on the Board of Directors
of the Peninsula Regional Medical Center Foundation, which focuses on capital
investments, fund raising, support of educational programs, and community health
and wellness initiatives. Dr. Forsythes previous Board affiliations include
serving on the Board of Quality Health Foundation and Horizons® at the Salisbury
School. Dr. Forsythe also served on the Advisory Board for the Worcester County,
Maryland School System STEM Initiative.
Key Attributes,
Experience and Skills: Dr.
Forsythe has served as a senior executive in academia for more than a decade.
During his tenure at UMES, Dr. Forsythe focused on technological advancements,
organizational positioning, and community engagement, which contributed to the
development, growth and expansion of the university. Dr. Forsythe led the
implementation of several projects at UMES that made the Eastern Shore more eco
friendly in its use of energy. In addition, Dr. Forsythe previously provided
consulting services to the eighth largest water and wastewater utility in the
United States where he led an assessment of information technology and
communications infrastructure, security practices, and operating procedures. Dr.
Forsythe has a diverse background in management, operations and healthcare
initiatives as reflected above and as practiced in his current position as
President, Chief Operating Officer and Interim Chief Information Officer of QHS.
Dr. Forsythe has established personal and professional relationships throughout
the Delmarva Peninsula and a solid understanding of the Delmarva Peninsula
market.
Class I Directors (Terms
Expire in 2018)
|
Eugene H.
Bayard |
Director Since 2006 Independent Director Age
68 Corporate Governance Committee
Member |
Mr. Bayard is a partner with the law firm
of Morris James Wilson Halbrook & Bayard in Georgetown, Delaware. He was a
partner with the predecessor law firm of Wilson Halbrook & Bayard where he has
served clients since 1974. Mr. Bayard serves in numerous business and community
board capacities including: Sussex County Advisory Board for Wilmington Savings
Fund Society; Delaware Wild Lands, Inc.; Delaware State Fair, Inc.; Chair of
Harrington Raceway & Casino; Mid-Del Charitable Foundation; Delaware
Volunteer Firefighters Association; O.A. Newton & Son Company; and J.G.
Townsend Jr. and Company. Mr. Bayard previously served on the Southern Delaware
Advisory Committee for the Delaware Community Foundation.
Key Attributes,
Experience and Skills: Mr. Bayard
is well-established in the Delaware legal community where a majority of
corporations are incorporated. He has been instrumental in guiding the Company
on Delaware legislative and regulatory matters, as well as corporate governance
practices. Mr. Bayard has established personal and professional relationships
throughout the Delmarva Peninsula, including his service as a board member of
the organizations listed above, that are beneficial to the growth and development
of the areas within the Companys Delmarva Peninsula operations.
4
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
|
Thomas P. Hill, Jr.
|
Director Since 2006 Independent Director Age
66 Audit Committee Member/Audit
Committee Financial Expert |
Mr. Hill retired in 2002 from Exelon
Corporation where he served as Vice President of Finance and Chief Financial Officer of Exelon Energy Delivery Company. Exelon Corporation is an electric
utility, providing energy generation, power marketing and energy delivery. Prior
to the PECO Energy and Unicom Corporation merger, out of which Exelon
Corporation evolved, Mr. Hill was Vice President and Controller for PECO Energy,
where he had been employed since 1970 in various senior financial and managerial
positions. Mr. Hill serves as a trustee of Magee Rehabilitation Hospital and the
Magee Rehabilitation Foundation, and Chair of the Audit Committee of Magee
Rehabilitation Hospital. He served as a member of the Audit Committee for
Jefferson Health System, Inc., a Pennsylvania non-profit corporation, until
Jefferson Health System, Inc.s corporate restructuring in 2014.
Key Attributes,
Experience and Skills: Mr. Hill
has extensive experience in the energy industry, serving in various senior
financial and managerial positions at PECO Energy and Exelon Corporation. Through
his professional experiences, Mr. Hill has obtained an in-depth knowledge of
regulation and energy delivery which has supplemented his engineering training.
Mr. Hill also gained financial expertise through his previous roles as Chief
Financial Officer of Exelon Energy Delivery Company, and Controller of PECO
Energy. He currently serves as a member and Chair of the Audit Committee of
Magee Rehabilitation Hospital, which has increased his Audit Committee
expertise. With his background in engineering, finance, regulation and utility
operations, Mr. Hill brings broad and in-depth utility knowledge to the Board.
|
Dennis S. Hudson,
III |
Director Since 2009 Independent Director Age
59 Audit Committee Member/Audit
Committee Financial Expert |
Mr. Hudson is the Chair and
Chief Executive Officer of Seacoast National Bank, and Seacoast Banking
Corporation of Florida. He has been a member of both organizations Boards of
Directors since 1983. Mr. Hudson has also held various other positions in these
organizations, including, President and Chief Operating Officer. Mr. Hudson
served on the Florida Public Utilities Companys (FPU) Board of Directors from
2005 until its acquisition by Chesapeake in 2009. He also served as a member of
FPUs Audit Committee. Mr. Hudson is actively involved in the community serving
on the Boards of United Way of Martin County and Visiting Nurses Association of
Florida. He previously served on the Miami Board of Directors of the Federal
Reserve Bank of Atlanta, Board of Helping People Succeed, and as Chair of the
Economic Council of Martin County.
Key Attributes,
Experience and Skills: Mr. Hudson
joined the Board in 2009 in connection with the Companys acquisition of FPU.
Mr. Hudson has extensive public company and leadership experience not only as a
former director of FPU, but also in his current role as Chair and Chief
Executive Officer of Seacoast National Bank, and Seacoast Banking Corporation of
Florida. Mr. Hudson has a strong finance background, having previously served on
the Miami Board of Directors of the Federal Reserve Bank of Atlanta and as Chair
of the Economic Council of Martin County, Florida. Mr. Hudson also has a solid
understanding of the Florida market.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 5
Table of Contents
|
Calvert A. Morgan,
Jr. |
Director Since 2000 Independent
Director Age 67 Corporate
Governance Committee Chair and Compensation Committee
Member |
Mr. Morgan currently serves
as a director of WSFS Financial Corporation and its principal subsidiary, WSFS
Bank. He is also Vice Chair of WSFS Bank. Mr. Morgan served as Special Advisor
to WSFS Financial Corporation from 2004 to 2009. He is the retired Chair of the
Board, President and Chief Executive Officer of PNC Bank, Delaware in Wilmington,
Delaware. Mr. Morgan has served in numerous business and community board
capacities, including as Chair of the Delaware Business Roundtable and trustee
of Christiana Care Corporation. Mr. Morgan is a member of the Delaware Economic
and Financial Advisory Council.
Key Attributes,
Experience and Skills: Mr. Morgan
has an established professional career with over 44 years in the banking
industry. He has public company experience serving as a director and former
Special Advisor to WSFS Financial Corporation. Mr. Morgans previous position as
Chair, President, and Chief Executive Officer of PNC Bank, Delaware provided
in-depth management experience combined with significant knowledge of our
Delmarva market. His management experience and market knowledge, coupled with
serving on another public company board, has provided Mr. Morgan with the
appropriate blend of skills to lead the Corporate Governance Committee. His
membership on the Delaware Economic and Financial Advisory Council, and his
previous leadership role on the Delaware Business Roundtable give him further
insight on issues facing both the current and future business and economic
climate of Delaware.
Class II Directors (Terms
Expire in 2016)
|
Ralph J.
Adkins |
Director Since 1989 Independent
Director Age 72 |
Mr. Adkins was appointed as Chair of the
Board in 1997. He held the position of Chief Executive Officer from 1990 to 1999.
During his tenure with the Company Mr. Adkins also served as President, Chief
Operating Officer, Treasurer and Chief Accountant. Mr. Adkins is a former
director of PNC Bank, Delaware, former Chair of Bayhealth Foundation, and former
Chair of the Board of Trustees of the Delaware Public Employees Retirement
System.
Key Attributes,
Experience and Skills: Mr. Adkins
has served in many positions throughout his career with Chesapeake, securing
significant Company and utility experience that gives him a solid foundation to
lead the Board. His in-depth knowledge of the Companys business operations,
customers, competition, strategic direction and regulatory environment is
valuable to the Company. Mr. Adkins gained additional knowledge on local market
demographics and growth projections that have benefited the Company in
identifying growth opportunities while serving as a director of PNC Bank,
Delaware. Mr. Adkins has also established personal and professional
relationships throughout the Delmarva Peninsula, which encompasses the Companys
Delaware, Maryland and Virginia energy operations.
6
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
|
Richard
Bernstein |
Director Since 1994 Independent
Director Age 72 Compensation
Committee Chair |
Mr. Bernstein is President and Chief
Executive Officer of LWRC International, LLC, a developer and manufacturer of rifles and carbines. He was owner, President and Chief Executive Officer of BAI
Aerosystems, Inc. prior to it being acquired in 2004. Mr. Bernstein is active in
the oversight of several private businesses in which he is a major stockholder,
including: REB Holdings, Inc., a technology consulting company; Salisbury Inc.,
a manufacturer of pewter and silver; and MaTech, Inc., a machining company. He
is also a partner in the Waterside Village development in Easton, Maryland. Mr.
Bernstein was appointed to Marylands Economic Development Commission by
Governor OMalley in 2009. He previously served on the Baltimore Board of
Directors of the Federal Reserve Bank of Richmond. He has also served on boards
for several colleges and universities. He currently serves on the advisory board
of M&T Bank.
Key Attributes,
Experience and Skills: Mr.
Bernstein is an established entrepreneur and oversees several private
businesses. Over the course of his career, he has initiated and successfully
sold several start-up businesses. Mr. Bernsteins experience has provided him
with in-depth knowledge of product design and development, manufacturing
techniques, technology, marketing and sales. These attributes have been valuable
as the Company has invested in new business opportunities or considered new
sales and marketing programs to promote its products and services. In starting
new businesses, Mr. Bernstein has been responsible for attracting and
incentivizing new management. As Chair of the Compensation Committee, he is
responsible for leading the development and implementation of compensation pay
practices and programs for the Companys executive management.
|
Paul L. Maddock,
Jr. |
Director Since 2009 Independent
Director Age 65 Audit Committee Member |
Mr. Maddock is a Trustee and President of
The Maddock Companies, a diversified real estate company with operations in Palm
Beach and Martin Counties, Florida. Mr. Maddock currently serves on the Board
and Corporate Governance and Compensation Committees of the W.C. & A.N.
Miller Company. Mr. Maddock served on the FPU Board of Directors from 1998 until
its acquisition by Chesapeake in 2009. He served as a member of FPUs Audit,
Compensation, and Executive Committees. Mr. Maddock has served on the Board of
Lydian Bank and Trust since 2003 and was past Chair of the Audit Committee and a
past member of the Executive Committee. He has also served on the Boards of PRB
Energy, Inc.; Wachovia Bank of Florida; 1st United Bank and Trust;
and Island National Bank and Trust. Within the community, Mr. Maddock serves as
President of THRIFT, Inc., a Palm Beach charity organization, and is a former
director of Good Samaritan Hospital.
Key Attributes,
Experience and Skills: Mr.
Maddock joined the Board in 2009 in connection with the Companys acquisition of
FPU. Mr. Maddocks professional experience with real estate development
companies has provided him with in-depth knowledge of the Florida economy. Mr.
Maddock has gained additional knowledge of the Florida economy though his
service as a director of Lydian Bank and Trust, as well as his involvement
within the Florida community. Mr. Maddock has extensive public company and
utility experience not only as a former director of FPU, but also as a former
director of PRB Energy, Inc., a natural gas exploration and distribution
company.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 7
Table of Contents
|
Michael P.
McMasters |
Director Since 2010 Director Age
56
|
Mr. McMasters is President
and Chief Executive Officer of Chesapeake. He was appointed Chief Executive Officer effective January 1, 2011. He was appointed as President in March 2010. Mr.
McMasters is responsible for execution of the Companys strategic plan and
providing leadership and oversight of the Companys businesses. Mr. McMasters
previously served as Executive Vice President and Chief Operating Officer of the
Company from 2008 to 2010. Mr. McMasters joined the Company in 1980. During his
tenure with the Company he has also served as Chief Financial Officer, Senior
Vice President, Vice President, Treasurer, Director of Accounting and Rates, and
Controller. He serves on the Board of Directors of the American Gas Association.
Mr. McMasters is also a member of the Delaware Business Roundtable.
Key Attributes,
Experience and Skills: Mr.
McMasters has served in numerous capacities in his thirty-four years of
experience with the Company, most recently as Chief Executive Officer. Mr.
McMasters experience, leadership skills and vision have been significant in the
execution of the Companys strategic plan and implementation of key corporate
policies. His strategic foresight has guided the Companys continued growth both
organically and through acquisitions. Under Mr. McMasters leadership, the
Company has continued to generate strong earnings growth. Mr. McMasters
thirty-six years of experience in the utilities industry has provided him with
in-depth financial and regulatory experience which has driven the Companys
financial discipline and execution of its strategic plan.
Class III Directors (Terms
Expire in 2017)
|
Thomas J.
Bresnan |
Director Since 2001 Independent
Director Age 62 Audit
Committee Chair/Audit Committee Financial
Expert
|
Mr. Bresnan is owner and President of the
Accounting & Business School of the Rockies, a post-secondary vocational
school specializing in Accounting, Business and Computer Proficiency Certificate
Programs. He is also owner and President of Denver Accounting Services, a small
business accounting firm. Mr. Bresnan currently serves as a director of Global LT,
which provides language training services. From 2008 to 2012 he served as a
majority shareholder, President and Chief Executive Officer of Schneider Sales
Management, LLC, a provider of sales consulting and skills assessment services,
and a publisher of proprietary sales training materials. From 1999 to 2006, Mr.
Bresnan was Chief Executive Officer of New Horizons Worldwide, Inc. (New
Horizons), an information technology training company. At New Horizons he also
served as President and was on the Board of Directors from 1993 to 2006. Prior
to his employment with New Horizons, he was President of Capitol American Life
Insurance. Mr. Bresnan began his professional career at Arthur Andersen &
Co.
Key Attributes,
Experience and Skills: Mr.
Bresnan has extensive executive management experience. He continues to build on
his management experience in his current role as owner and President of the
Accounting & Business School of the Rockies and Denver Accounting Services.
He gained experience in various sales skills and marketing techniques in his
role as head of Schneider Sales Management. In addition, Mr. Bresnan gained
in-depth knowledge of the technology industry during his tenure as Chief
Executive Officer of New Horizons Worldwide, Inc. He also gained experience in
consummating acquisitions and facilitating the post-acquisition integration
process. Mr. Bresnan served as a manager with a former public accounting firm and
Chief Financial Officer at Capitol American Finance. His experience in these
roles has been a valuable asset both on the Board and as the Chair of the Audit
Committee. These positions, coupled with his leadership roles, have given him
the experience needed to lead the Audit Committee in its oversight role
regarding the reporting of the Companys results of operations, the
effectiveness of its internal controls, risk management, and compliance with
regulations.
8
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
|
Joseph E.
Moore |
Director Since 2001 Independent
Director Age 72 Corporate
Governance Committee Member and Compensation Committee
Member
|
Mr. Moore is a partner with the law firm of
Williams, Moore, Shockley and Harrison, LLP. He serves as a director of Calvin
B. Taylor Banking Co. and Chair of the Board of Zoning Appeals for the Town of
Berlin, Maryland. Mr. Moore is a member of the Board of Trustees of the
Worcester Preparatory School, and a member of the Board of Trustees of the
Maryland Historical Society. He is also a director of the Ocean City Museum
Society, Inc. Mr. Moore previously served in numerous business and community
capacities in the State of Maryland, including: States Attorney for Worcester
County; Attorney for Worcester County Board of Zoning Appeals; Attorney for the
Town of Berlin; and as a member of the Board of Governors of the State of
Maryland Bar Association. He has been appointed by the Maryland Court of Appeals
as Co-Chair of the First Appellate Circuit Character Committee of the Maryland
State Board of Law Examiners. Mr. Moore is a Fellow of the American College of
Trial Lawyers.
Key Attributes, Experience and
Skills: Mr. Moore is
well-established in the Maryland legal community and has been instrumental in
guiding the Company on Maryland legislative and regulatory matters, as well as
corporate governance practices. He has served in numerous business and community
capacities in our Delmarva operating territory, including as States Attorney
for Worcester County and the Board of Governors of the State of Maryland Bar
Association. As a director of Calvin B. Taylor Banking Co., he has gained
additional knowledge on market demographics and growth projections for the
southern portion of the Delmarva Peninsula. He also has significant market
knowledge regarding the Eastern Shore of Maryland, including the local political
environment.
|
Dianna F.
Morgan |
Director Since
2008 Independent Director Age 63 Compensation Committee
Member
|
Ms. Morgan retired in 2001 from Walt Disney World
Company where she served as Senior Vice President of Public Affairs and Human
Resources. During her tenure at Walt Disney World Company, she oversaw the
Disney Institute a recognized leader in experiential training, leadership
development, benchmarking and cultural change for business professionals around
the world. Ms. Morgan is the past Chair of the Board of Trustees for the
University of Florida. She currently serves on the Board of Directors of CNL
Bancshares, Inc., Marriott Vacations Worldwide Corporation and the Board of
Trustees for Hersha Hospitality Trust. Ms. Morgan is also a member of the Board
of Directors of Orlando Health and served as past Chair of the national board
for the Childrens Miracle Network.
Key Attributes,
Experience and Skills: Ms. Morgan
has extensive experience serving as a board member of both private and public
companies. Ms. Morgans previous experience overseeing the Disney Institute,
which provides leading professional development programs, and serving as Senior
Vice President of Human Resources for Walt Disney World Company have provided
extensive knowledge of leadership development programs and organizational
culture. In addition, Ms. Morgans experience as Senior Vice President of Public
Affairs for Walt Disney World Company has provided her with a solid foundation
in media relations and government relations. As an accomplished senior manager
at Walt Disney World Company in these areas, Ms. Morgan brings best practice
expertise in human capital and the customer experience.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 9
Table of Contents
|
John R. Schimkaitis |
Director Since
1996 Independent Director Age
67 |
Mr. Schimkaitis was
appointed Vice Chair of the Board in March 2010. He held the position of Chief
Executive Officer of Chesapeake from January 1999 until his retirement in
January 2011. Mr. Schimkaitis served as President of the Company from 1997 until
2010. During his tenure with the Company Mr. Schimkaitis also served as Chief
Operating Officer, Chief Financial Officer, Executive Vice President, Senior
Vice President, Vice President, Treasurer, Assistant Treasurer, and Assistant
Corporate Secretary.
Key Attributes,
Experience and Skills: Mr.
Schimkaitis has forty years of experience in the utilities industry, twenty-five
years of which were spent in key management roles within the Company. Mr.
Schimkaitis leadership of the Company from 1999 to 2011 was a period of growth
and diversification. In 2009, Mr. Schimkaitis successfully led the Company
through the FPU acquisition, the largest transaction in the Companys history.
Mr. Schimkaitis knowledge of the utility industry, the Delmarva and Florida
markets, as well as his leadership skills have been invaluable to the success of
the Company, driving the growth of the Company from a $95 million market
capitalization company in 1999 to approximately $395 million at the end of 2010.
Throughout his tenure, Mr. Schimkaitis business acumen and skills have
contributed to the Companys continued growth.
BOARD RECOMMENDATION: THE
BOARD RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES. |
(remainder of page left
intentionally blank)
10
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
PROPOSAL 2 - 2015 CASH BONUS INCENTIVE
PLAN
We are asking that
stockholders approve the Chesapeake Utilities Corporation Cash Bonus Incentive
Plan (the 2015 Plan) under which certain executive officers and other key
employees will be eligible to receive incentive compensation based on the
achievement of certain performance goals. The Board approved the 2015 Plan,
which was effective January 1, 2015. The 2015 Plan replaces the Chesapeake
Utilities Corporation Cash Incentive Plan dated January 1, 2005 (the 2005 Cash
Incentive Plan) and filed as Exhibit 10.3 to our Annual Report on Form 10-K for
the year ended December 31, 2004.
We have structured the 2015 Plan in a manner
that is intended to allow the Compensation Committee (the Committee) to grant
performance-based compensation that is exempt from the $1 million deduction
limitation under Section 162(m) of the Internal Revenue Code. The Compensation
Committee meets the composition requirements under Section 162(m) of the
Internal Revenue Code. We are submitting the 2015 Plan for stockholder approval
at the meeting so that payments made to our executive officers and other key
employees under the 2015 Plan may qualify as performance-based compensation that
is fully deductible for federal income tax purposes. If the 2015 Plan is not
approved by our stockholders, the 2015 Plan will continue to be utilized. In
such event, however, the awards granted under the 2015 Plan will not be exempt
from the $1 million deduction limitation under Section 162(m) of the Internal
Revenue Code.
This summary of the
material features of the 2015 Plan is qualified in its entirety by reference to
the full text of the 2015 Plan, which is attached as Appendix A.
The purposes of the 2015
Plan are: (i) to further the Companys long-term growth and earnings by
providing incentives and rewards to those executive officers and other key
employees of the Company or its subsidiaries in which the Company has a direct
or indirect ownership or other proprietary interest of at least fifty percent
(50%) (Related Companies) who are in positions in which they can contribute
significantly to the achievement of that growth; (ii) to encourage those
employees to remain as employees of the Company and its Related Companies; and
(iii) to assist the Company and its Related Companies in recruiting able
management personnel.
The 2015 Plan was effective
as of January 1, 2015 and remains in effect until terminated by the Board of
Directors or the Compensation Committee in accordance with the terms of the 2015
Plan.
The Compensation Committee
of the Companys Board will administer the 2015 Plan. The Compensation Committee
will periodically determine, in its sole discretion, the individuals that will
participate in the 2015 Plan and the amounts and other terms and conditions of
awards to be granted under the 2015 Plan. All questions of interpretation and
administration with respect to the 2015 Plan and awards granted will be
determined by the Compensation Committee in its sole and absolute discretion. In
addition, the Compensation Committee will have complete authority to adopt,
amend, rescind and enforce rules and regulations pertaining to the
administration of the 2015 Plan; to correct administrative errors; to make all
other determinations necessary or advisable for its administration; to designate
officers of the Company to execute on behalf of the Company all agreements and
documents approved by the Compensation Committee under the 2015 Plan; except to
the extent prohibited by applicable law, to delegate to one or more individuals
the day-to-day administration of the 2015 Plan; and to employ persons to render
advice with respect to any of its responsibilities under the 2015
Plan.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 11
Table of Contents
Any of our named executive
officers or other key employees designated by the Compensation Committee, or
otherwise meeting the criteria set forth by the Compensation Committee, are
eligible to participate in the 2015 Plan. Currently, we expect that
approximately twenty of our employees are eligible to participate in the 2015
Plan for the 2015 performance period.
As determined by the
Compensation Committee, awards will be made subject to the achievement of
performance goals of the Company (and/or one or more Related Companies or
operating groups of the Company, as applicable), either individually,
alternatively or in any combination, applied to the Company as a whole or to a
Related Company, business unit, or business segment, either individually,
alternatively or in any combination, and measured over the performance period,
on an absolute basis or relative to a pre-established target, to previous years
results or to a designated comparison group, in each case as specified by the
Compensation Committee:
●basic or diluted earnings per
share
●cash flow or free cash flow or net cash from
operating activity
●earnings (including gross margin, earnings
before or after interest and taxes, earnings before taxes, and net
earnings)
●growth in earnings or earnings per
share
●stock price or change in stock
price
●return on equity or average shareholders
equity
●total shareholder return
●return on capital or change in working
capital
● on assets or operating assets
●pre-tax or post-tax return on
investments
●revenue or gross profits
●revenue growth |
|
●earnings before interest, taxes,
depreciation and amortization
●net income or net income growth
●pretax income before allocation of corporate
overhead and bonus
●operating income or net operating income or
operating income growth
●operating profit or net operating profit
(whether before or after taxes)
●operating margin or operating margin
growth
●return on operating revenue
●working capital or net working
capital
●any other Generally Accepted Accounting
Principles financial measures
●market share
●capital expenditures
●capital expenditures as a percentage of
total capitalization |
|
●overhead or other expense or cost
reduction
●growth in shareholder value relative to the
moving average of a peer group or equity market index
●credit rating
●asset quality
●cost saving levels
●core non-interest income
●strategic plan development and
implementation
●improvement in workforce
diversity
●customer satisfaction
●employee satisfaction
●management succession plan development and
implementation
●employee or customer
retention |
The performance criteria
may vary for different performance periods and do not need to be the same for
each participant eligible for an award during a particular performance period.
Once established, the performance criteria cannot be changed during the
performance period. Subject to the requirements of Section 162(m) of the
Internal Revenue Code with respect to covered employees (as that term is
defined in the 2015 Plan), at the time an award is made and performance criteria
are established, the Compensation Committee is permitted to determine the manner
in which the performance criteria will be calculated or measured to take into
account certain factors over which participants have no or limited control,
including, but not limited to, cumulative effects of tax or accounting changes
in accordance with U.S. generally accepted accounting principles or
extraordinary charges to income.
For each performance
period, the Compensation Committee may grant to eligible employees participating
in the 2015 Plan, a Target Bonus Award (as that term is defined in the 2015
Plan) which is contingent on the achievement of established performance criteria
during the performance period, or with respect to employees not qualifying as
covered employees, the occurrence of another specified event as determined by
the Compensation Committee in accordance with the terms of the 2015 Plan.
Performance criteria and Target Bonus Awards must be established prior to the
beginning of each performance period or as soon as practicable thereafter. If an
employee commences participation after the beginning of a performance period,
unless otherwise determined by the Compensation Committee within 90 days of the
date the employee became a participant, the performance criteria in effect for
the employees position will apply for the remaining balance of the performance
period. In all cases where the participant is a covered employee, the
performance criteria and Target Bonus Award will be established in no event
later than 90 days following the first day of the performance period or after
twenty-five percent (25%) of the performance period has elapsed, if earlier, and
the outcome relative to the attainment of the performance criteria cannot be
substantially certain at the time the performance criteria and Target Bonus
Award are established.
12
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
After the end of each
performance period, the Compensation Committee will certify in writing the
extent to which the performance criteria have been achieved. For a covered
employee, if the performance criteria are met, such covered employee is entitled
to the payment of the award subject to the Compensation Committees exercise of
negative discretion to reduce any final amount payable to such covered employee
based on business objectives established for that covered employee or other
factors as determined by the Compensation Committee in its sole discretion. With
respect to participants who are not covered employees, the Compensation
Committee will determine the final amount payable for a performance period based
on the performance criteria and other business objectives.
The 2015 Plan will cover
each of our fiscal years beginning with 2015.
All awards under the 2015
Plan will be paid in cash, in one lump sum, subject to applicable tax and other
authorized withholdings, on the last business day occurring on or before the
15th day of the third month after the end of each performance period,
which will generally be on or before March 15th.
Termination of
Employment |
The 2015 Plan generally
requires that a participant be actively employed at the end of an applicable
performance period to receive payment for that particular performance period. If
a participants employment ends during a performance period due to retirement,
death or disability the final bonus amount will be reduced to reflect
participation prior to termination and will be paid as soon as practicable and
reasonable following the end of the performance period in which the termination
of employment occurred. If a participants employment terminates for a reason
other than due to retirement, death or disability, all of the participants
rights to any final bonus amount will be forfeited unless otherwise determined
by the Compensation Committee in its sole discretion.
Amendment and Termination
of 2015 Plan |
The Compensation Committee
may, in its sole discretion, modify, amend, suspend or terminate the 2015 Plan
from time to time; provided, however, that no such modification, amendment,
suspension or termination may, without the consent of a participant, materially
reduce the right of a participant to a payment or distribution pursuant to the
2015 Plan to which such participant has already become entitled. An amendment
will be subject to the approval of our stockholders only if such approval is
required by applicable law.
Upon a change in control,
the Compensation Committee, except in limited circumstances, cannot directly or
indirectly modify, amend, suspend, terminate or discontinue the 2015 Plan,
establish or modify rules, regulations or procedures under the 2015 Plan,
interpret the 2015 Plan or make a determination under the 2015 Plan, or exercise
its authority or discretion under any provision of the 2015 Plan.
Upon and after
the occurrence of a change in control, (i) all rights of all participants,
former participants and beneficiaries under the 2015 Plan will be contractual
rights enforceable against the Company and any successor to all or substantially
all of the Companys business or assets and (ii) any award (a) will be deemed
earned at the maximum annual target amount, regardless of whether the specified
performance criteria have been satisfied and (b) is payable immediately upon the
change in control.
Federal Income Tax
Consequences |
All cash payments made
under the 2015 Plan are taxable to the participant when received. Generally, the
Company will be entitled to a corresponding deduction. While we intend that
payments made under the 2015 Plan to be fully deductible when paid, there are
certain requirements that must be met in order to qualify for the
performance-based exception pursuant to Section 162(m) of the Internal Revenue
Code, and there is no guarantee that amounts will in fact be
deductible.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 13
Table of Contents
2015 Target Bonus Award
Opportunities |
The following table sets
forth the Target Bonus Award opportunities for the 2015 performance
period:
|
|
2015 Target Cash Incentive |
|
Weighting for the |
|
Maximum Achievement of |
|
|
Award Opportunity |
|
Performance
Targets |
|
Performance
Targets |
|
|
|
|
|
Bonus |
|
Target Cash |
|
|
|
|
|
Non-Financial |
|
Financial |
|
|
Base Salary |
|
Opportunity |
|
Incentive |
|
Non-Financial |
|
Financial |
|
Targets |
|
Targets |
Named Executive Officer1 |
|
(as of March 3, 2015) |
|
(% of Base Salary) |
|
Award at 100% |
|
Targets |
|
Targets |
|
150% |
|
200% |
Michael P.
McMasters |
|
$ |
550,000 |
|
60% |
|
$ |
330,000 |
|
20% |
|
80% |
|
$ |
99,000 |
|
$ |
528,000 |
Stephen C.
Thompson |
|
$ |
335,000 |
|
30% |
|
$ |
100,500 |
|
20% |
|
80% |
|
$ |
30,150 |
|
$ |
160,800 |
Beth W.
Cooper |
|
$ |
302,000 |
|
30% |
|
$ |
90,600 |
|
20% |
|
80% |
|
$ |
27,180 |
|
$ |
144,960 |
Elaine B.
Bittner |
|
$ |
275,000 |
|
30% |
|
$ |
82,500 |
|
20% |
|
80% |
|
$ |
24,750 |
|
$ |
132,000 |
Jeffry M.
Householder |
|
$ |
295,000 |
|
30% |
|
$ |
88,500 |
|
20% |
|
80% |
|
$ |
26,550 |
|
$ |
141,600 |
Executive Officers as a Group |
|
|
n/a |
|
n/a |
|
$ |
692,100 |
|
n/a |
|
n/a |
|
$ |
207,630 |
|
$ |
1,107,360 |
(1) |
In accordance with
the 2015 Plan, the Compensation Committee designated Messrs. McMasters,
Thompson, and Householder and Mmes. Cooper and Bittner as the only
participants in the 2015 Plan for the 2015 performance period. There are
no non-executive employees who currently participate in the 2015
Plan. |
BOARD
RECOMMENDATION: THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPANYS 2015 CASH BONUS
INCENTIVE PLAN. |
PROPOSAL 3 - NON-BINDING ADVISORY VOTE TO RATIFY THE APPOINTMENT
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Appointment of External
Audit Firm |
The Audit Committee is
solely responsible for the appointment, retention, termination and oversight of
the work of the Companys independent registered public accounting firm (also
referred to in this Proxy Statement as external audit firm), including the
approval of all engagement fees, terms, and the annual audit plan. On November
4, 2013, the Audit Committee approved the reappointment of ParenteBeard LLC
(ParenteBeard) to serve as our external audit firm for 2014. ParenteBeard has
served as the Companys external audit firm since 2007. In determining whether
to reappoint ParenteBeard as the Companys external audit firm, the Audit
Committee took into consideration several factors, including an assessment of
the professional qualifications and past performance of the Lead Audit Partner
and the ParenteBeard team, the quality and level of transparency of the Audit
Committees relationship and communications with ParenteBeard and the length of
time the firm has been engaged. The Audit Committee considered, among other
things, ParenteBeards expanding utility practice and the knowledge and skills
of ParenteBeards auditing experts that would be providing services to the
Company.
No Adverse Opinions,
Disagreements, or Reportable Events |
The Report of Independent
Registered Public Accounting Firm of ParenteBeard regarding the Companys
financial statements for the fiscal years ended December 31, 2013 and 2012 did
not contain any adverse opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principles.
During the years ended
December 31, 2013 and 2012, and during the interim period from the end of the
most recently completed fiscal year through October 1, 2014, the date of
resignation, there were no (a) disagreements, as described under Item
304(a)(1)(iv) of Regulation S-K, with ParenteBeard on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures, which disagreements, if not resolved to the satisfaction of
ParenteBeard would have caused it to make reference to such disagreement in its
reports, or (b) reportable events, as described under Item 304(a)(1)(v) of
Regulation S-K.
14
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
Evaluation of External
Audit Firm |
The Audit Committee
previously established criteria and procedures used to evaluate the quality of
the audit services. The evaluation focuses on the qualifications and performance
of ParenteBeard; the quality and candor of the external auditor firms
communications with the Audit Committee and the Company; and the external
auditor firms independence and objectivity. In 2014, each member of the Audit
Committee, as well as members of management and the Director of Internal Audit
completed an evaluation of the quality of the audit services rendered in 2013.
The questions were specifically developed for the individual given his or her
relationship with the external audit firm. The Audit Committee analyzed the
results of the assessment, which provided the Audit Committee with additional
insight into the effectiveness and objectivity of the Companys external audit
firm. The Chair of the Audit Committee and the Chief Financial Officer
communicated the results of the evaluation process to ParenteBeards Lead Audit
Partner.
The Audit Committee takes
additional measures to ensure the audit team is independent and has the
experience that creates an audit of the highest quality. These measures include,
but are not limited to: (i) independently meeting with the external audit firm
to discuss communications and other appropriate matters, (ii) pre-approving the
audit and non-audit services performed by the external audit firm in order to
assure that they do not impair the auditors independence, (iii) overseeing the
process for the rotation of the Lead Audit Partner to ensure the Lead Audit
Partner has the know-how, experience and quality to sustain the integrity of the
Companys audits and the requisite knowledge in the Companys business and
expected areas of future growth, and (iv) periodically overseeing the process to
solicit proposals from external audit firms to review, among other things, the
experience, qualifications, technical abilities, and audit fees in the industry
prior to reappointment of the external audit firm.
Combined Firm
ParenteBeard and Baker Tilly |
On October 1, 2014, the
Company was notified that the audit firm of ParenteBeard LLC had merged with
Baker Tilly Virchow Krause LLP (Baker Tilly) in a transaction pursuant to
which ParenteBeard combined its operations with Baker Tilly and certain of the
professional staff and partners of ParenteBeard joined Baker Tilly. On October
1, 2014, as a result of the merger, ParenteBeard ceased conducting business and
resigned as the external audit firm of the Company. On October 1, 2014, the
Audit Committee of the Companys Board of Directors, after review and
consideration of the impact on the Company, approved the engagement of Baker
Tilly to serve as its external audit firm for the remainder of 2014 and 2015.
Prior to engaging Baker
Tilly as its external audit firm, the Company had not consulted with Baker Tilly
regarding (a) the application of accounting principles to a specific completed
or contemplated transaction or regarding the type of audit opinions that might
be rendered by Baker Tilly on the Companys financial statements, and Baker
Tilly did not provide any written or oral advice that was an important factor
considered by the Company in reaching a decision as to any such accounting,
auditing or financial reporting issue, or (b) a disagreement or reportable event
as described under Item 304(a)(2)(ii) of Regulation S-K.
Advisory Vote to Ratify
the External Audit Firm |
Although the New York Stock
Exchange (NYSE) listing standards require that the Audit Committee be directly
responsible for selecting and retaining the external audit firm, we are
providing you with the means to express your view on this matter. While this
vote is not binding, in the event that stockholders fail to ratify the
appointment of Baker Tilly, the Audit Committee will reconsider this
appointment. Even if the appointment is ratified, the Audit Committee, in its
discretion may direct the appointment of a different external audit firm at any
time during the year if the Audit Committee determines that such a change would
be in the best interests of the Company and its stockholders.
A representative from Baker
Tilly will be present at the Annual Meeting and available to respond to
appropriate questions. A formal statement will not be made.
BOARD RECOMMENDATION: THE BOARD RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF BAKER TILLY VIRCHOW KRAUSE LLP AS
THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2015. |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 15
Table of Contents
AUDIT COMMITTEE REPORT
This Audit Committee Report
is provided by the Audit Committee of the Board of Directors and pertains to the
Companys audited financial statements for the year ended December 31, 2014.
Prior to the issuance of the Companys unaudited quarterly financial statements
and annual audited financial statements, we reviewed and discussed the earnings
press releases, consolidated financial statements and disclosures under
Managements Discussion and Analysis of Financial Condition and Results of
Operations (including significant accounting policies and judgments) with
management, Chesapeakes internal auditors, and the independent external
auditors. We also reviewed Chesapeakes policies and practices with respect to
financial risk assessment, as well as its processes and practices with respect
to enterprise risk assessment and management. We discussed with the Companys
external audit firm, Baker Tilly, the matters required to be discussed by
applicable audit standards adopted by the Public Company Accounting Oversight
Board, including Auditing Standard No. 16, Communication with Audit
Committees.
We discussed with Baker
Tilly the overall scope and plan for their audit and approved the terms of their
engagement letter. We also reviewed Chesapeakes internal audit plan. We met
with Baker Tilly and with Chesapeakes internal auditor, in each case, with and
without other members of management present, to discuss the results of their
respective examinations, the evaluation of Chesapeakes internal controls and
the overall quality and integrity of Chesapeakes financial reporting. The
Committee has received the written disclosures and the letter from Baker Tilly
required by applicable requirements of the Public Company Accounting Oversight
Board regarding Baker Tillys communications with the Committee concerning
independence, and has discussed with Baker Tilly its independence. Based on the
Committees review and the discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Companys Annual Report on Form 10-K for the year ended December
31, 2014 for filing with the Securities and Exchange Commission
(SEC).
The information in this
Audit Committee Report shall not be considered to be soliciting material or be
filed with the SEC, nor shall this information be incorporated by reference
into any previous or future filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company incorporated it by specific reference.
THE AUDIT
COMMITTEE
|
|
|
|
|
|
|
Thomas J.
Bresnan, Chair |
|
Thomas P.
Hill, Jr. |
|
Dennis S.
Hudson, III |
|
Paul L.
Maddock, Jr. |
(remainder of page left
intentionally blank)
16
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
FEES AND SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Effective October 1, 2014,
the audit firm of ParenteBeard merged with Baker Tilly in a transaction pursuant
to which ParenteBeard combined its operations with Baker Tilly. The following
provides fees for professional services rendered by ParenteBeard and Baker Tilly
(collectively referred to in this section as Baker Tilly) for the year ended
December 31, 2014 and services rendered by ParenteBeard for the year ended
December 31, 2013.
The aggregate fees billed
to the Company and its subsidiaries by Baker Tilly in 2014 and ParenteBeard in
2013 totaled $730,339 and $789,738, respectively. These fees were for services
rendered in conjunction with the audits of the financial statements included in
our Annual Report on Form 10-K; the reviews of the financial statements included
in our Quarterly Reports on Form 10-Q; the audits of certain of our subsidiaries
or operations typically performed for statutory and regulatory filings or
engagements; the audits of internal control over financial reporting as required
by Section 404 of the Sarbanes-Oxley Act of 2002; and the issuance of their
consents associated with our registration statements that were filed with the
SEC during those two years.
Audit-Related Fees, Tax
and Other Fees |
During 2014 and 2013, Baker
Tilly and ParenteBeard performed annual audits on our benefit plans for the plan
years ended December 31, 2013 and 2012, respectively. During 2014, Baker Tilly
assisted us with the due diligence process relating to our transaction with
Gatherco, Inc. Additionally, ParenteBeard performed other attest services not
required by statute or regulation in 2013. The aggregate fees billed for
audit-related services were $127,793 and $58,504 for 2014 and 2013,
respectively. The Company did not engage Baker Tilly or ParenteBeard to provide
any tax services or any services other than those described above.
Audit and Non-Audit
Services Pre-Approval Policies and
Procedures |
The Audit Committee
pre-approves the audit and non-audit services performed by the Companys
external audit firm in order to assure that they do not impair the external
audit firms independence. The Audit Committee may also pre-approve tax services
provided by the external audit firm, if any. In November 2014, the Audit
Committee reviewed its Audit and Non-Audit Services Pre-Approval Policy and made
changes to the policy that included legal and best practice developments. Under
the Policy, the Audit Committee may pre-approve specific services in advance or
may pre-approve one or more categories of audit and non-audit services. For all
proposed services, the Audit Committee will, among other things, consider
whether the external auditor firm is the best positioned to provide the proposed
services most effectively and efficiently based on its familiarity with the
Companys business, people, culture, accounting systems, risk profile and other
factors, and whether the services are likely to enhance the Companys ability to
manage or control risk or improve audit quality. The Audit Committee may
establish ceilings on the level of fees and costs of generally pre-approved
services that may be performed. The Audit Committee has delegated to the Chair
of the Audit Committee (and may delegate authority to any other member of the
Audit Committee) authority to pre-approve up to $40,000 in audit and non-audit
services, which authority may be exercised when the Audit Committee is not in
session. At least annually, the external audit firm is required to report to the
Audit Committee on the specific services provided and the amounts that have been
paid to the external audit firm. The Chief Financial Officer is required to
report to the Audit Committee on the specific services provided and the amounts
paid by the Company. The Director of Internal Audit is responsible for
monitoring and reporting on the performance of all services provided by the
external audit firm and to determine whether these services are in compliance
with the Audit Committees policy. In 2014 and 2013, the Audit Committee
approved 100 percent of all audit and non-audit services provided to the Company
by Baker Tilly and ParenteBeard, respectively.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 17
Table of Contents
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board reflects a broad
range of leadership, professional skills and experience; corporate governance
and board service; experience in the markets in which we conduct business;
economic and financial expertise; industry experience; public affairs
experience; academia experience; and entrepreneurism which complements the Board
as a whole. A majority of our Board currently serves or has served as chief
executive officers of public and non-profit organizations. Collectively, the
Board has a strong background and experience in the utility and energy industry.
The Board, management and employees have been committed to continued earnings
growth and increased shareholder value.
2014 Strategic
Accomplishments
●Continued natural gas distribution and
transmission growth, including service to a new, state-of-the-art electric
generating facility located in Delaware
●Implementation of the strategy for several new
business opportunities, such as alternative fueled vehicles and combined heat
and power projects
●Entry into a merger agreement with Gatherco, Inc.
that provides a new unregulated midstream energy opportunity that has the
potential to yield higher than traditional regulated returns
●Execution of the Companys three-for-two stock
split which is a result of the shareholder value creation over the short and
long-term
Financial
Results
●Eighth consecutive year of record
earnings
●Diluted Earnings Per Share increased by 9.3% over
2013
●Chesapeake increased the dividend by 5.2% in 2014
●In comparison to our peers, we have consistently
achieved top quartile performance in total shareholder return in the short-term
as well as the long-term (1, 3, 5, 10 and 20 years)
●We have invested more than $375 million in capital
expenditures over the last 5 years
Chesapeakes Board of Directors
|
Director Independence |
|
|
An independent Board |
|
All 12
external |
ensures that the Board |
|
directors are |
is acting in the best |
|
independent. |
interests of stockholders. |
|
|
|
Board
Experience |
|
|
The Board has a broad |
|
7 former and
current |
range of leadership |
|
CEOs currently
serve |
and experience that |
|
on the Board. |
have been invaluable |
|
|
as the Company has |
|
|
continued to grow. |
|
|
|
Board
Involvement |
|
|
We stay connected with |
|
A majority of
directors |
employees, customers, |
|
have
professional |
stockholders, and the |
|
experience in
our |
communities we serve. |
|
service
areas. |
|
Boardroom Culture |
|
|
There is a strong |
|
100 percent |
boardroom culture with |
|
attendance at
Board |
active participation by |
|
and Committee |
all Board members. |
|
meetings in
2014. |
The Board met 8 times |
|
|
in 2014. |
|
|
|
|
|
Tenure on the Board |
|
|
|
|
Directors have a
mix of skills and attributes that complement the Board as a
whole. |
18
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy Statement
Table of Contents
The independent directors
bring expertise and a diversity of perspectives to the Board. The culture of the
Board enables directors to openly express their opinions in the boardroom and
engage in open dialogue. The NYSE rules governing independence require that a
majority of the members of the Board be independent as defined by the NYSE.
Members of the Board are independent if it is determined that the director has
no material relationship with the Company except in his or her capacity as a
director. To assist in making the determination of independence for each
director, the Board previously adopted Corporate Governance Guidelines on
Director Independence (the Independence Guidelines), which are more stringent
than the NYSE rules.
In accordance with the
Independence Guidelines, on March 4, 2015, the Board conducted its annual review
of director independence. During this review, the Board examined all direct and
indirect transactions or relationships between the Company or any of its
subsidiaries and each director and any immediate family member of the director
and determined that no material relationships with the Company existed during
2014. On the basis of this review, the Board determined that twelve members of
our Board (or 92 percent) are independent. Each of the following directors
qualifies as an independent director as defined by the NYSE listing standards
and in accordance with the standards set forth in the Independence Guidelines:
Ralph J. Adkins, Eugene H. Bayard, Richard Bernstein, Thomas J. Bresnan, Ronald
G. Forsythe, Jr., Thomas P. Hill, Jr., Dennis S. Hudson, III, Paul L. Maddock,
Jr., Joseph E. Moore, Calvert A. Morgan, Jr., Dianna F. Morgan, and John R.
Schimkaitis. Mr. McMasters, our President and Chief Executive Officer, is the
only non-independent director.
The Board is elected by
Chesapeakes stockholders to oversee the direction and strategy of the business
and ensure that it continues to operate in the best interests of all
stakeholders. The Board works diligently to fulfill its fiduciary duties to
protect the Companys assets and stockholders investment. The Board of
Directors is led by the Chair of the Board, who is elected annually by the
Board. At its meeting on May 6, 2014, the Board elected Ralph J. Adkins to serve
as our non-executive, independent Chair. Mr. Adkins has served as our Chair
since 1997 and has performed the responsibilities prescribed to him by the Board
and those detailed in the Corporate Governance Guidelines, including
establishing the agenda for and leading Board meetings, and facilitating
communications among Board members and communications between the Board and the
Chief Executive Officer outside of Board meetings. Mr. Adkins has more than 50
years of experience in the utility industry, including 42 years as an employee
of the Company as well as more than 10 years of service as the non-employee
Chair of the Board. This utility experience has given him explicit knowledge
about the Company and its businesses which has been advantageous in leading the
Board in the performance of its duties. At its meeting on May 6, 2014, the Board
appointed John R. Schimkaitis to serve as our non-executive, independent Vice
Chair of the Board. He has served as our Vice Chair since 2010. In this role,
Mr. Schimkaitis assists the Chair of the Board and performs other duties as
prescribed to him by the Board. The Corporate Governance Committee regularly
engages in discussion on Board composition and succession planning as further
discussed on page 24. The Board may, at a future date, combine the Chair and
Chief Executive Officer roles if the Board determines that such a leadership
structure would be appropriate.
Boards Role in Risk
Oversight |
The Board maintains an
oversight role with respect to risk management and is ultimately responsible for
ensuring that the Companys risk management framework is sufficient given the
Companys business activities. Risks are considered in virtually every business
decision and process, including the Companys strategic planning process. We
recognize that it is neither possible nor prudent to eliminate all risk. In
fact, purposeful and appropriate risk taking is essential for the Company to
continue to grow and execute its strategic plan.
The Companys risk
management framework includes the following components: risk identification,
risk assessment, risk management and monitoring and communication. During the
risk identification process, risk heat maps are developed. The risk heat maps
reflect a variety of risks that the Company faces, including strategic,
operational, compliance and financial risks that may affect the operations
and/or financial performance of our businesses. During the risk management
process, appropriate actions are identified to manage the specific risk, and
processes are established to continually monitor identified risks.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy Statement 19
Table of Contents
Senior management is
involved in the decision-making process, is aware of the known risks and is
intimately involved in the monitoring and mitigation of the identified risks. As
part of its responsibilities, senior management updates the Board or Audit
Committee, as appropriate, on the monitoring and mitigation of identified risks
and the Board and/or Audit Committee provides direction to management as it
deems appropriate. The Companys executive officers report to the Board
regularly regarding financial and investment decisions, strategic plan
initiatives, and other activities that may involve material risks that the
Company may face. Board members remain informed on industry trends, Company-wide
strategic initiatives, key financial barometers and other matters relevant to
the Company and its businesses. This provides the Board members with a
comprehensive understanding of our initiatives, and allows the Board to
effectively consider and evaluate the various risks associated with the Company,
its businesses and its strategic initiatives.
In addition to the Boards
general oversight role, the Audit, Compensation and Corporate Governance
Committees focus on specific risks. The Audit Committee reviews and discusses
with management the Companys guidelines and policies that govern the process by
which risk assessment and risk management activities are undertaken. The Audit
Committee also reviews with management the Companys major risk exposures and
the steps management has taken to monitor and control such exposures. The Audit
Committee approved the Companys formal Global Risk Management Policy which
outlines the Companys risk management framework and serves to guide the
Companys overall risk management process. The Audit Committee receives updates
and documents on this plan, including the Companys short-term and long-term
risk assessments and risk heat maps that reflect the Companys most significant
risks as discussed above. Formal risk identification, evaluation and monitoring
steps are completed by the Company and reviewed with the Audit Committee, prior
to finalizing the risk assessment and risk heat maps. The Audit Committee also
reviews the Companys insurance program and various coverages, which serve to
mitigate some of the Companys key risks.
The Compensation Committee
focuses on our compensation program and ensures the program appropriately
incentivizes short-term and long-term financial and operational performance,
without encouraging unnecessary risk. The Compensation Committee also considers
risks related to organizational development, executive recruitment, retention
and succession planning. The Corporate Governance Committee focuses on risks
that arise in connection with the Companys governance structure and processes,
including Board structure and composition, director independence, and related
governance practices.
In addition,
management-level implementation committees have been established to assist in
identifying, assessing and managing risks, including a Global Risk Management
Committee. The Company also has internal resources that provide support,
oversight and direction for the Companys risk management program. In 2014, our
Global Risk Management program was aligned with the Companys other risk
management functions under our Internal Audit team to provide a broader approach
to identifying, assessing, managing and monitoring risk. Also in 2014, the
Company engaged an independent third-party to conduct a more formalized
cybersecurity and physical security program assessment across our technology
environments and key facilities.
Overall, the Company
maintains both top down and bottom up approaches in regards to risk
identification, awareness, management and monitoring.
20
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy Statement
Table of Contents
Standing Committees of
the Board |
The standing committees of
the Board are the Audit Committee, Compensation Committee, and Corporate
Governance Committee. Each of the Committees is comprised solely of independent
directors. Each Committee member attended 100 percent of the applicable
Committee meetings.
Audit Committee |
|
|
|
|
|
|
|
In 2014, the Audit Committee continued to review and
provide insight on enhancements to the Companys risk management process,
including increased areas of focus, such as cybersecurity. The Committee
also reviewed emerging trends, including revenue recognition and
convergents to the international accounting standards, as well as several
complex accounting judgments and assessed their impact on the
Company.
Thomas J. Bresnan Audit Committee
Chair
|
|
Independent
Members: 4 Financially Literate: 4 Financial Experts: 3 Meetings
Held in 2014: 5
Committee
Members: Thomas J.
Bresnan, Chair Thomas P. Hill, Jr. Dennis S. Hudson, III Paul L.
Maddock, Jr. |
Messrs. Bresnan, Hill and Hudson each qualify as
an audit committee financial expert based on his experience and knowledge in
accordance with the SEC rules. Biographical information on each Committee member
can be reviewed beginning on page 5 of this Proxy Statement. Each Committee
member participated in an annual training session given by the Companys
external audit firm on accounting trends, changes to the accounting standards,
and their potential impact on the Company. None of the members of the Audit
Committee currently serve on audit committees of other public companies.
Summary of Committee
Responsibilities:
●Appointment, retention, termination, compensation
and oversight of the independent external auditor
●Discuss with management the adequacy and
effectiveness of the Companys internal accounting and disclosure
controls
●Review with management and the independent
external auditor the Companys financial statements and Managements Discussion
and Analysis
●Review the effect of regulatory and accounting
initiatives on the Companys financial statements
●Review and discuss with management the Companys
risk assessment and risk management process
●Review with management the Companys major
financial risk exposures and related internal controls
●Review and discuss with management any related
party transactions
●Provide oversight of the Companys internal audit
function
●Review and assess compliance with the Companys
Business Code of Ethics and Conduct, and Code of Ethics for Financial
Officers
●Review the Companys procedures for complaints
received by the Company regarding accounting, internal accounting controls or
audit matters, including submissions by whistle-blowers, if any
You can review the Committees Charter at
www.chpk.com/Our Company/Corporate Governance/Board and Board
Committees/Audit Committee Charter for additional details on the Committees
responsibilities.
Summary of Significant
Activities in 2014:
●Reviewed the Companys enhanced risk management
process, including an enhanced risk assessment for Sarbanes-Oxley
compliance
●Reviewed current practices and trends with regards
to emerging risk, and new accounting and reporting standards
●Reviewed and discussed with management complex
accounting judgments and estimates for several transactions
●Approved the engagement of Baker Tilly, the
Companys independent registered public accounting firm, successor firm to
ParenteBeard
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy Statement 21
Table of Contents
Compensation
Committee |
|
|
|
|
|
|
|
In 2014 the Committee conducted one-on-one interviews
with each named executive officer and continued to discuss the Companys
organizational development that will support the Companys growth. The
Committee also reviewed and discussed with its independent compensation
consultant the appropriateness of the peer group used to benchmark the
Companys director and executive compensation.
Richard Bernstein Compensation Committee
Chair
|
|
Independent
Members: 4 Meetings Held in 2014: 5
Committee
Members: Richard
Bernstein, Chair Joseph E. Moore Calvert A. Morgan, Jr. Dianna F.
Morgan
|
The Compensation Committee
is directly responsible for the appointment, compensation and oversight of the
work of any consultant or other advisor it retains. The Committee may, in its
sole discretion, engage a consultant or other advisor to assist in the
evaluation of executive and director compensation. In 2014, the Committee
retained Frederic W. Cook & Co. (Cook & Co.) for this purpose. In
January 2014, the Compensation Committee reviewed the independence of Cook &
Co. After consideration of the various factors, including the specific factors
described in the SEC rules and those provided under the NYSEs Listing
Standards, the Compensation Committee determined that Cook & Co. is
independent and no conflicts of interest exist with respect to Cook & Co.
Summary of Committee
Responsibilities:
●Appointment, compensation and oversight of the
work of any consultant or other advisor retained by the Committee
●Design and administer all of the policies and
practices related to executive compensation
●Administer the Companys plans under which cash
and equity incentive awards are granted
●Evaluate the Companys director compensation
arrangements
●Review, in conjunction with the Chief Executive
Officer, management succession plans
●Review and discuss with management the
Compensation Discussion & Analysis in the Proxy Statement
●Review the results of stockholder advisory votes
on the frequency that stockholders will vote on executive officer
compensation
●Review the results of stockholder advisory votes
on executive compensation
You can
review the Committees Charter at www.chpk.com/Our Company/Corporate
Governance/Board and Board Committees/Compensation Committee Charter for
additional details on the Committees responsibilities.
Summary of Significant
Activities in 2014:
●Evaluated and approved the 2015 Cash Bonus
Incentive Plan that stockholders will vote on at this Meeting
●Conducted one-on-one interviews with each named
executive officer and discussed organizational development that will support the
Companys growth
●Reviewed and discussed with Cook & Co. the
appropriateness of the Companys peer group used to benchmark director and
executive compensation
●Considered a market analysis prepared by Cook
& Co. that compared the Companys executive compensation against market data
for the Companys peer group, as well as from industry published survey
data
22
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy Statement
Table of Contents
Corporate Governance
Committee |
|
|
|
|
|
|
|
The Committee continued to focus on Board succession
planning to ensure Boardroom skills are aligned with the Companys
long-term strategic plan, including nominating Dr. Forsythe to serve as a
director on the Board. The Corporate Governance Committee has also
continued to assess corporate governance trends and their impact on the
Company while ensuring the appropriate governance framework is in place
under which the Company operates.
Calvert A. Morgan, Jr. Corporate Governance Committee
Chair |
|
Independent
Members: 3 Meetings Held in 2014: 5
Committee
Members: Committee
Members: Calvert A.
Morgan, Jr., Chair Eugene H. Bayard Joseph E.
Moore |
The Corporate Governance
Committee, with the consent of the Board, may retain consultants or other
advisors to assist it in fulfilling its responsibilities. In 2014, the Committee
received information from legal counsel and other consultants on certain
matters, including emerging trends and regulatory and legislative developments
and their impact on the Company. The Committee also reviewed internally prepared
information on governance trends and best practices.
Summary of Committee
Responsibilities:
●Review and assess the Companys Corporate
Governance Guidelines
●Evaluate the size and composition of the Board and
each standing Committee, in consultation with the Chair of the
Board
●Review eligibility guidelines for directors to
ensure compliance with legal requirements
●Evaluate director candidates and make appropriate
recommendations to the Board
●Evaluate, and discuss with the Board, the quality
of the performance of the Board
●Develop and recommend criteria and procedures to
the Board to be utilized by the Board in evaluating the performance of each
standing Committee
●Evaluate and make a recommendation to the Board on
stockholder proposals
●Approve the service of Board members on the Board
of any other public company
●Review director and executive stock ownership
guidelines and monitor progress toward meeting the
guidelines
You can review the
Committees Charter at www.chpk.com/Our Company/Corporate Governance/Board
and Board Committee/Corporate Governance Committee Charter for additional
details on the Committees responsibilities.
Summary of Significant
Activities in 2014:
●Reviewed current practices and trends with regards
to board composition and director qualifications
●Continued Board succession planning to ensure
Boardroom skills are aligned with Chesapeakes long-term strategic plan,
including nominating Dr. Forsythe to serve as a director on the
Board
●Recommended to the Board an amendment to the
Companys Bylaws to better reflect the Companys current practice that a
director appointed to fill a vacancy will stand for election at the next Annual
Meeting of Stockholders
●Approved amendments to the director stock
ownership and retention guidelines that increase the stock ownership
requirements in order to maintain the same relative requirements on a post stock
split basis
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy Statement 23
Table of Contents
CORPORATE
GOVERNANCE
Director Nomination
Process |
The Corporate Governance
Committee identifies potential director nominees through contacts in the
business, civic and legal communities and a variety of other sources. The
Committee may retain a search firm or utilize third-party database search tools
to identify director nominees. Stockholders may nominate candidates for election
as directors by submitting a written submission to the Corporate Secretary at
the Companys principal offices not less than 90 days nor more than 120 days
prior to the annual meeting at which directors are to be elected. The written
submission must comply with the provisions of the Companys Bylaws and the
Corporate Governance Committees Charter. The Corporate Governance Committee
will consider all candidates recommended by stockholders who comply with these
provisions and satisfy the Director Eligibility Guidelines.
The Corporate Governance
Committee will consider several factors prior to nominating a candidate.
Generally, the Committee will consider the existing size and composition of the
Board, evaluate biographical information and other background material, and
interview each candidate selected. The Committee will apply any director
selection criteria adopted by the Corporate Governance Committee based on the
circumstances at the time and the criteria set forth in the Companys Corporate
Governance Guidelines. In addition to the personal characteristics and core
competencies provided in our Director Eligibility Guidelines described below,
the Corporate Governance Committee reviews other criteria such as: a candidates
judgment; knowledge of our industry; business and service areas; community
involvement; availability and commitment to carry out the responsibilities as a
director of the Company (directors may not be directors of more than two public
companies in addition to the Company); and the candidates independence under
applicable regulations and listing standards.
Director
Eligibility Guidelines |
●Leadership in a particular field of
expertise
●Education or experience that enables the
exercise of sound business judgment
●Integrity and the highest ethical
character
●Personal and professional reputations that
are consistent with the Companys image and reputation
●Background or experience that enables
differing points of view
●Willingness to listen and work in a
collegial manner |
|
●Knowledge, experience and skills that
enhance the mix of the Boards core competencies
●Professional achievement generally through
service as a principal executive of a major company; distinguished member
of academia; partner in a law firm or accounting firm; successful
entrepreneur; or similar position of significant
responsibility |
|
●Absence of any real or perceived conflict of
interest that would impair the directors ability to generally represent
the interest of the Companys stockholders
●Individual contribution in terms of
knowledge, experience and skills that enhances the Boards mix of core
competencies and further maximize stockholder
value |
The Corporate Governance
Committee regularly engages in discussion on Board composition and succession
planning. The Committee reviews director attributes, skills and experience
represented on the Board and identifies additional qualifications that may be
desired on the Board. In 2014, the Corporate Governance Committee engaged in a
comprehensive director nomination process prior to recommending that the Board
appoint a new director. The Committee considered a number of candidates
submitted by directors, members of management, third-party search firms and
others. Throughout this process, the Committee conducted an assessment of the
desired skills and attributes that would complement the Board in their oversight
of the execution of the Companys strategic plan, discussed the Companys
strategy and expanding business operations, considered, among other things, the
background of each potential candidate and whether the candidate possessed the
time, knowledge and ability to work with colleagues in carrying out their
responsibilities. The Committee also considered the existence of any potential
conflicts of interest and the independence of the candidate. The Committee
worked closely with the Chair of the Board and the Chief Executive Officer to
narrow the director candidate list, conduct interviews of potential candidates
and complete the due diligence process on selected candidates. After a rigorous
process, the Corporate Governance Committee nominated and recommended that the
Board of Directors appoint Ronald G. Forsythe, Jr. to serve as a director on the
Board effective November 1, 2014. Beyond his strong relationships across the
Delmarva Peninsula in which the Company operates, Dr. Forsythe brings expertise
in many different areas, including strategic and tactical planning, information
technology, engineering, renewable energy, healthcare, community engagement and
economic development, all of which are beneficial as the Company continues to
execute its strategic plan.
24
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy Statement
Table of Contents
|
Committee
Considerations |
|
Identification of
Candidates |
|
Selection Process |
|
Director
Nomination |
|
Director
Orientation |
|
Stockholder
Vote |
|
|
|
|
|
|
|
●The Corporate Governance Committee considers
appropriate factors such as the existing size and composition of the
Board, Board diversity and attributes that would complement the Board as a
whole and position the Company for the future. |
●The Corporate Governance Committee considers a number of
director candidates submitted by members of management, Board members,
independent third-party firms and others. The Committee vets these
potential candidates and considers appropriate factors. |
●The Chair of the
Board, Corporate Governance Committee Chair, and CEO conducts interviews
of potential candidates. Topics covered during the interview include:
depth of experience, business acumen, technical expertise, commitments and
cultural fit. |
●The Corporate Governance Committee discusses each candidate in
light of the Director Eligibility Guidelines, the results of the interview
and due diligence process. If appropriate, the Committee nominates and
recommends a candidate to the Board of Directors. |
●If appointed by the Board, a new director
participates in a Director Orientation process held at one of the
Companys facilities. The orientation covers, among other things, our
strategy, business structure, financial performance, and competitive
landscape. |
●In accordance with our Bylaws, a director
appointed to fill a vacancy on the Board will be nominated for election at
the Companys next Annual
Meeting. |
Governance Trends and
Director Education |
The Board and its
Committees proactively monitor legislative and regulatory initiatives, market
trends, as well as other corporate governance trends and their potential impact
on the Company. Each director has access to publications and other resources
that cover these matters. In 2014, the Board received a presentation from one of
our long-term institutional investors, which provided additional information on
management roles and processes associated with their investment decisions, as
well as the firms views on the Companys performance, industry dynamics, and
valuation. In previous years, professionals in the financial community presented
on various aspects of the utility industry, including the current macro economic
outlook, market trends, utility industry fundamentals, downstream utility focus,
current valuations, investor perception, industry framework, and current
industry topics. Experts in the areas of corporate governance, proxy advisory
services and investor relations have also spoken to the Board on regulatory
actions, governance trends and various other corporate governance topics. The
Board has also received corporate governance updates from a Chancellor from the
Delaware Court of Chancery, a Chief Justice of the Delaware Supreme Court, and
established members of the academic, governance, investor relations, legal and
financial communities who are experienced in the utilities industry and the
broader market. Directors participated in continuing education sessions to
remain informed on recent trends applicable to their Committee duties. Certain
directors also participate in continuing legal education. Newly elected
directors participate in a comprehensive director orientation program that
covers, among other things, our strategy, business structure, financial
performance, and competitive landscape. As part of this program, directors are
invited to participate in a tour of selected facilities of the Company. Most of
our Board meetings are held in various locations throughout our service
territories. This provides directors the opportunity to become more familiar
with our operations and the communities we serve. During these visits, the Board
also has the opportunity to engage with our employees in the applicable service
areas. Industry experts have also spoken to the Board on such topics as energy
trends, market factors and competition, growth opportunities, key customer
growth expectations, and future outlook.
The Committees actively
engage with senior management and other parties when necessary to further assess
the current environment or respond to governance related matters. Cook & Co.
has routinely provided the Compensation Committee with updates on the status of
compensation-related initiatives under the Dodd-Frank Act and has discussed
several challenges that compensation committees may encounter in the future. The
Corporate Governance Committee and Audit Committee each routinely receive
updates on matters applicable to their responsibilities from legal counsel and
independent consultants. The Committees also receive regulatory and legislative
updates at their respective meetings.
Corporate Governance
Practices |
Governance
Transparency and Accountability. The Board and Corporate Governance Committee annually review our
corporate governance documents and practices to ensure that they provide the
appropriate framework under which the Company operates. Our corporate governance
documents can be viewed on our website at
http://www.chpk.com/our-company/corporate-governance. These documents include
the Charters for each standing Board Committee Audit Committee, Compensation
Committee, and Corporate Governance Committee; Corporate Governance Guidelines;
Business Code of Ethics and Conduct; Code of Ethics for Financial Officers;
Corporate Governance Guidelines on Director Independence; and Communications
with the Board. Additional information in the Corporate Governance section of
our website includes the composition of our Board and Committees and
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy Statement 25
Table of Contents
a summary of our Ethics and
Compliance Program. Under the Investors section of our website,
http://investor.chpk.com, we provide links to our filings with the SEC,
including our Annual Report on Form 10-K and equity ownership reports for our
named executive officers. Under the News section of our website,
http://www.chpk.com/news, we provide press releases on financial, corporate and
community activities. In this section on our website, you can also read more
about the Company being selected as a top workplace in Delaware, receiving
several safety achievement awards from the American Gas Association, and being
honored with two awards recognizing the efforts and accomplishments of our
corporate governance team.
Corporate Governance
Guidelines. The Board has
adopted Corporate Governance Guidelines, which consist of a series of policies
and principles that are adhered to when overseeing the corporate governance of
the Company. The Corporate Governance Guidelines focus on board composition and
director qualifications, Board meetings, Board committees, Board access to
management and advisors, Board relationship to senior management, director
compensation, and annual review of Board and committee effectiveness.
Code of
Ethics. The Board has adopted
a Business Code of Ethics and Conduct (Code of Ethics) that reflects our
commitment to continuously promote professional conduct throughout the
organization, and to ensure that representatives of the Company demonstrate good
ethical business practices. Directors are required to disclose any conflict of
interest to the Companys non-management, independent Chair of the Board and to
refrain from voting on any matter(s) in which they have a conflict. In
considering whether an actual conflict of interest exists, factors to be
considered include, but are not limited to, the benefit to the Company and the
aggregate value of the transaction.
The Board has also adopted
a Code of Ethics for Financial Officers which provides a framework for honest
and ethical conduct by our financial officers as they perform their financial
management responsibilities. The Code of Ethics for Financial Officers is
applicable to the Chief Executive Officer, President, Chief Financial Officer,
Treasurer, Corporate Controller, and others who are responsible for ensuring
accurate and timely disclosures of financial information within our filings with
the SEC. Other senior managers with accounting and financial reporting oversight
must annually confirm compliance with the Code of Ethics for Financial Officers.
Related Persons
Transactions. We review
relationships and transactions in which the Company, or any of its subsidiaries,
and our executive officers, directors, director nominees, 5% or greater
stockholders or their immediate family members are participants to determine
whether such related persons have a direct or indirect material interest. A
related person transaction would include, but is not limited to, any financial
transaction, arrangement or relationship, any indebtedness or guarantee of
indebtedness and any series of similar transactions, arrangements or
relationships. In determining whether to approve or ratify a related person
transaction, the disinterested members of the Audit Committee, as part of an
annual review or as required, will consider the relationship of the individual
to the Company, the materiality of the transaction to the Company and the
individual, and the business purpose and reasonableness of the transaction. The
Audit Committee may approve or disapprove the transaction and direct the
officers of the Company to take appropriate action. The Audit Committee may also
refer the matter to the full Board with a recommendation. If it is determined
that a related person transaction is directly or indirectly material to the
Company or a related person, the transaction will be disclosed in the Companys
proxy statement.
The Company has established
procedures in order to identify material transactions and determine, based on
the relevant facts and circumstances, whether the Company or a related person
has a direct or indirect material interest in the transaction. This includes
discussions with the Companys Board, as well as dissemination of a
questionnaire that directors and executive officers are required to complete
annually. Director nominees, including those nominated by stockholders, are also
required to complete a questionnaire in a form similar to that completed
annually by directors and executive officers.
The Companys Code of
Ethics requires that individuals provide prompt and full disclosure of all
potential conflicts of interest (including related person transactions) to the
appropriate person. These conflicts of interest may be specific to the
individual or may extend to his or her family members. Any officer who has a
conflict of interest with respect to any matter is required to disclose the
matter to the Chief Executive Officer, or if the Chief Executive Officer has a
conflict of interest, the Chief Executive Officer would disclose the matter to
the Audit Committee. All other employees are required to disclose any conflict
of interest to the Director of Internal Audit. Directors are required to
disclose any conflict of interest to the Chair of the Board and to refrain from
voting on any matter(s) in which they have a conflict. In addition, directors,
executive officers and designated employees disclose to the Company, in an
annual ethics questionnaire, any current or proposed conflict of interest
(including related person transactions).
All employees and executive
officers are encouraged to avoid relationships that have the potential for
creating an actual conflict of interest or a perception of a conflict of
interest. The Companys Code of Ethics provides specific examples that could
represent a conflict of interest, including, but not limited to, the receipt of
any payment, services, loan, guarantee or any other personal benefits
26 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy
Statement
Table of Contents
from a third party
in anticipation of or as a result of any transaction or business relationship
between the Company and the third party. No employee or executive officer is
permitted to participate in any matter in which he or she has a conflict of
interest unless authorized by an appropriate Company official and under
circumstances that are designed to protect the interests of the Company and its
stockholders and to avoid any appearance of impropriety.
For the period beginning
January 1, 2014 and ending March 17, 2015, there were no transactions, or
currently proposed transactions, in which the Company was or is to be a
participant and the amount involved exceeds $120,000, and in which any related
person had or will have a direct or indirect material interest.
Anti-Hedging Policy
and Pledges of Securities.
Directors, executive officers and employees of the Company may not engage in
hedging transactions related to Chesapeake stock or pledge Chesapeake stock as
collateral for a loan. The Chief Financial Officer may grant an exception to an
individual who desires to pledge Chesapeake stock as collateral for a loan
(excluding margin debt) if such individual clearly demonstrates the financial
capacity to repay the loan without resort to the pledged securities.
Executive
Sessions. The Chair of the
Board, Mr. Adkins, presides over executive sessions of the non-management
directors. The Companys Corporate Governance Guidelines ensure the integrity of
these meetings by providing that the Chair of the Corporate Governance Committee
would preside over these meetings in the event that the Chair of the Board was a
management director. The Corporate Governance Guidelines also provide that if
the non-management directors included any director who did not qualify as
independent under the NYSE Listing Standards, the independent directors would
meet at least annually without the non-independent director(s).
Board and Committee
Self-Evaluations |
Annually, the Corporate
Governance Committee reviews and establishes the criteria that is used by the
Board and each standing Committee prior to conducting self-evaluations for
performance during the preceding year. The Board and its Committees conduct
Self-Evaluations to, among other things, assess the qualifications, attributes,
skills and experience represented on the Board and its Committees; ensure that
appropriate resources are available to the Board and its Committees; and ensure
the Board and its Committees are functioning effectively. The Chair of the
Corporate Governance Committee receives a report of the results of the Board and
Corporate Governance Committee Self-Evaluations. The Chairs of the Audit
Committee and Compensation Committee receive a report of the results of their
respective Committee Self-Evaluations. The Committee Self-Evaluation results are
discussed at Committee meetings and reported to the Board at the next Board
meeting. The Chair of the Corporate Governance Committee reports the results of
the Board Self-Evaluation at the next Board meeting.
Communications with the
Board, Stockholders and the Financial Community |
Communications with
the Board. Stockholders and
other parties interested in communicating directly with the Board, a committee
of the Board, any individual director, the director who presides at executive
sessions of the non-management or independent directors, or the non-management
or independent directors, in each case, as a group, may do so by sending a
written communication to the attention of the intended recipient(s) in care of
the Corporate Secretary at Chesapeake Utilities Corporation, 909 Silver Lake
Boulevard, Dover, Delaware 19904. All communications must be accompanied by the
following information: (i) if the person submitting the communication is a
shareholder, a statement of the type and amount of securities of the Company
that the person holds; (ii) if the person submitting the communication is not a
shareholder and is submitting the communication to the non-management or
independent directors as an interested party, the nature of the persons
interest in the Company; (iii) any special interest of the person in the subject
matter of the communication; and (iv) the address, telephone number and email
address, if any, of the person submitting the communication.
The Corporate Secretary
will forward all appropriate communications to the intended recipient(s).
Communications relating to accounting, internal controls or auditing matters are
handled in accordance with procedures established by the Audit Committee with
respect to such matters. These communications procedures have been unanimously
approved by the independent directors.
Communications with
Stockholders and the Financial Community. In addition to the above, we present on the
Company at the American Gas Associations Annual Financial Forum, where we have
the opportunity to communicate with security analysts, portfolio managers,
investors, rating agencies and investment bankers. Those attending the
presentation have an opportunity to ask questions and interact with the
management team. Annually, we conduct road shows where current and potential
investors, as
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 27
Table of Contents
well as other members of
the financial community, receive information about the Company, and we also hold
quarterly conference calls to discuss our financial results with stockholders
and the financial community. In addition, a presentation is given to investors
immediately following our Annual Meeting of Stockholders. In 2014, all of the
directors were in attendance at the Annual Meeting of Stockholders. In December
2014, the Board invited one of our institutional investors to meet with the
Board. The institutional investor presented to the Board on their investment
process, investment in the Company and its performance, and the gas industry.
Information about
Chesapeake Utilities Corporation and the Chesapeake family of businesses is
available at http://www.chpk.com or through our IR App. The IR App can be
downloaded for free through the App Store on an iPhone or iPad, or Google Play
on an Android mobile device by searching for Chesapeake Utilities Corporation.
STOCK SPLIT
On
September 8, 2014, the Company effectuated a three-for-two stock split in the
form of a stock dividend. The stock split highlights the shareholder value
creation over the long-term as well as the
short-term.
(remainder of page left
intentionally blank)
28 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy
Statement
Table of Contents
OWNERSHIP OF
OUR STOCK
Security Ownership of
Certain Beneficial Owners and Management |
The table below provides
the number of shares of our common stock beneficially owned as of March 16, 2015
by each director and director nominee, by each named executive officer named in
the Summary Compensation Table, as well as the number of shares beneficially
owned by all of the directors, director nominees and named executive officers as
a group. No shares of our common stock have been pledged as security by a
director or named executive officer. The table also provides information for
each other person known to us to beneficially own five percent or more of our
common stock.
Name of Beneficial
Owner |
|
Qualified
401(k) Retirement Savings Plan |
|
Non-Qualified Deferred Compensation
Plan(1) |
|
Total
Shares Owned Beneficially(2)(3) |
|
Percent
of Class |
Ralph J. Adkins |
|
|
|
|
|
82,870 |
|
* |
Eugene H. Bayard |
|
|
|
|
|
26,608 |
|
* |
Richard Bernstein |
|
|
|
|
|
68,615 |
|
* |
Elaine B. Bittner |
|
7,252 |
|
703 |
|
23,242 |
|
* |
Thomas J. Bresnan |
|
|
|
7,584 |
|
17,117 |
|
* |
Beth
W. Cooper |
|
10,923 |
|
8,725 |
|
53,546 |
|
* |
Ronald G. Forsythe, Jr. |
|
|
|
530 |
|
530 |
|
* |
Thomas P. Hill, Jr. |
|
|
|
4,032 |
|
23,223 |
|
* |
Jeffry M. Householder |
|
|
|
|
|
3,393 |
|
* |
Dennis S. Hudson, III |
|
|
|
|
|
14,959 |
|
* |
Paul
L. Maddock, Jr. |
|
|
|
|
|
43,783 |
|
* |
Michael P. McMasters |
|
19,008 |
|
41,984 |
|
120,846 |
|
* |
Joseph E. Moore |
|
|
|
3,567 |
|
24,529 |
|
* |
Calvert A. Morgan, Jr. |
|
|
|
|
|
41,194 |
|
* |
Dianna F. Morgan |
|
|
|
|
|
9,031 |
|
* |
John
R. Schimkaitis(4) |
|
|
|
|
|
146,439 |
|
1.0% |
Stephen C. Thompson |
|
20,987 |
|
|
|
81,748 |
|
* |
Executive Officers and Directors as a
Group |
|
58,170 |
|
67,124 |
|
781,683 |
|
5.3% |
* Less than one percent. |
|
|
|
|
|
|
|
|
|
Name of Investment
Advisor |
|
|
|
|
|
|
|
|
T.
Rowe Price Associates, Inc.(5) |
|
|
|
|
|
1,115,785 |
|
7.6% |
100
E. Pratt Street |
|
|
|
|
|
|
|
|
Baltimore, MD 20202 |
|
|
|
|
|
|
|
|
BlackRock, Inc.(6) |
|
|
|
|
|
910,239 |
|
6.2% |
55
East 52nd Street |
|
|
|
|
|
|
|
|
New York, NY 10022 |
|
|
|
|
|
|
|
|
(1) |
The Non-Qualified Deferred Plan enables
non-employee directors to defer all or a portion of their meeting fees and
annual retainers on a pre-tax basis. The named executive officers can also
defer base salary, cash incentive awards and equity incentive awards on a
pre-tax basis under the Non-Qualified Deferred Plan. See the description
of the Non-Qualified Deferred Plan on page 51. |
(2) |
Unless otherwise indicated in a footnote,
each beneficial owner possesses sole voting and sole investment power with
respect to his or her shares shown in the table. |
(3) |
Voting rights are shared with spouses and
other trustees in certain accounts for Ralph J. Adkins (7,505), Thomas J.
Bresnan (9,534 shares), Beth W. Cooper (1,873 shares), Jeffry M.
Householder (342 shares), Paul L. Maddock, Jr. (18,000 shares), Joseph E.
Moore (16,266) and Calvert A. Morgan, Jr. (16,670 shares). Independent
accounts are held by the spouses of Ralph J. Adkins (5,161 shares), Thomas
P. Hill, Jr. (11,345 shares), Michael P. McMasters (52 shares) and John R.
Schimkaitis (300 shares). |
(4) |
In January 2011, Mr. Schimkaitis retired as
Chief Executive Officer of the Company and received a reduced early
retirement payment under the Pension Plan. Mr. Schimkaitis received his
distribution in the form of a lump sum after providing property equal to
125 percent of the restricted portion of the lump sum in accordance with
the Internal Revenue Codes tax requirements. Currently, Mr. Schimkaitis
has deposited 18,000 shares in escrow to satisfy the requirement. This
property was placed in escrow, with oversight by a third party escrow
agent. Until the Pension Plan is fully funded, as defined under the
Internal Revenue Code, each year, shares equal to the value of payments
that would have been paid to Mr. Schimkaitis if he had elected the life
annuity form of distribution will become unrestricted and returned to Mr.
Schimkaitis, subject to the remaining property retaining a minimum market
value. |
(5) |
According to their report on Schedule 13G/A,
filed on February 13, 2015, T. Rowe Price Associates, Inc. (T. Rowe
Price) was deemed to beneficially own 1,115,785, or 7.6 percent, of our
common stock as of December 31, 2014. According to the Schedule 13G/A, T.
Rowe Price had sole power to vote 158,705 shares and to dispose of
1,115,785 shares. T. Rowe Prices Schedule 13G, as filed with the
Securities and Exchange Commission, certified that it acquired the shares
of our common stock in the ordinary course of business and not for the
purpose of changing or influencing the control of the
Company. |
(6) |
According to their
report on Schedule 13G/A, filed on January 30, 2015, BlackRock, Inc.
(BlackRock) was deemed to beneficially own 910,239 shares, or 6.2
percent, of our common stock as of December 31, 2014. According to the
Schedule 13G/A, BlackRock had sole power to vote 877,391 shares and to
dispose of 910,239 shares. BlackRocks Schedule 13G/A, as filed with the
Securities and Exchange Commission, certified that it acquired the shares
of our common stock in the ordinary course of business and not for the
purpose of changing or influencing the control of the
Company. |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 29
Table of Contents
Section 16(A) Beneficial
Ownership Reporting Compliance |
Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires each of the Companys
directors and executive officers, and any beneficial owner of more than 10
percent of our common stock, to file reports with the SEC. These include initial
reports and reports of changes in the individuals beneficial ownership of the
Companys common stock. Such persons are also required by SEC regulations to
furnish the Company with copies of such reports. To our knowledge, based solely
on the review of such reports furnished to the Company and on the written
representations made by such persons that no other reports were required, the
Company believes that during the year ended December 31, 2014 all directors and
executive officers filed on a timely basis the reports required by Section
16(a). We are not aware of any person or entity that beneficially owns more than
ten percent of the Companys common stock.
DIRECTOR
COMPENSATION
The Compensation Committee, which consists solely of independent
directors, reviews director compensation annually to ensure the appropriate
compensation arrangements are in place for non-employee directors. The Committee
subsequently reports its findings and any recommendations to the Board. The
Board approves all director compensation arrangements. A director who is an
employee of the Company receives no additional compensation for his or her
service as a director.
Non-employee Director
Compensation |
Each non-employee director
receives cash and equity compensation for his or her service on the Board as
provided in the table below. Directors may not elect to receive their cash
compensation in stock. Directors are also reimbursed for business expenses
incurred in connection with attending meetings and performing other
Board-related services, including external director education.
|
2014 Annual
Meeting until the 2015 Annual Meeting |
|
2013 Annual
Meeting until the 2014 Annual Meeting |
Cash Compensation -
Retainers |
|
|
|
|
|
Board Member Retainer |
$ |
50,000 |
|
$ |
45,000 |
Board Chair Retainer |
$ |
80,000 |
|
$ |
80,000 |
Committee Chair Retainer |
|
|
|
|
|
Audit
Committee |
$ |
12,000 |
|
$ |
10,000 |
Compensation
Committee |
$ |
10,000 |
|
$ |
7,000 |
Corporate Governance
Committee |
$ |
8,000 |
|
$ |
7,000 |
Cash Compensation - Meeting
Fees |
|
|
|
|
|
Board Meeting Fee |
$ |
1,200 |
|
$ |
1,200 |
Committee Meeting Fee |
$ |
1,000 |
|
$ |
1,000 |
Committee Meeting Fee When A Director
Attends A Board or |
|
|
|
|
|
Committee
Meeting on the Same Day |
$ |
750 |
|
$ |
750 |
Equity Compensation |
|
|
|
|
|
Board Member
Retainer |
$ |
50,000* |
|
$ |
45,000* |
* Fractional shares are rounded down to the
nearest whole number |
|
|
|
|
|
2013 Stock and Incentive
Compensation Plan |
In 2013, stockholders
approved the Companys 2013 Stock and Incentive Compensation Plan (the Equity
Incentive Plan) under which non-employee directors are eligible to receive
shares of our common stock. The full text of the plan can be reviewed on page 55
of our proxy statement that was filed with the SEC on April 2, 2013. The Equity
Incentive Plan enhances stockholder value by ensuring that directors have a
proprietary interest in our growth and financial success. The Board has the
authority to determine the number and type of equity or stock awards to be
granted to non-employee directors under the Equity Incentive Plan.
30 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy
Statement
Table of Contents
Each director has the right
to vote the shares awarded under the Equity Incentive Plan and to receive
dividends on the shares. Each director is individually responsible for any tax
obligations in connection with these shares.
Non-Qualified Deferred
Compensation Plan |
Directors may defer all or
a portion of their meeting fees and annual retainers in accordance with the
Chesapeake Utilities Corporation Non-Qualified Deferred Compensation Plan (the
Non-Qualified Deferred Plan) which is described in detail on page 51 in this
Proxy Statement. Deferrals made under the Non-Qualified Deferred Plan are on a
pre-tax basis until their separation from service with the Company and its
affiliates or another specified date. At all times, directors have a 100 percent
vested interest in the amount of cash or stock that is deferred.
In 2014, prior to the
Companys three-for-two stock split, all non-management directors were required
to own at least 6,000 shares of our common stock while serving as a director of
the Company. Following the stock split, the Board increased the amount of shares
directors are required to own from 6,000 shares to 9,000 shares, which maintains
the same relative ownership requirement post stock split.
According to the Companys
Corporate Governance Guidelines, directors who were members of the Board on
December 6, 2011 had until December 31, 2014 to meet the stock ownership
requirement. Chesapeakes trading window was closed for an extended period of
time as a result of the Company pursuing the acquisition of Gatherco, Inc. The
Board extended the date for the stock ownership requirement to be met from
December 31, 2014 to June 30, 2015. Directors may acquire their ownership
through several means, including making purchases on the open market, making
optional cash investments through our Dividend Reinvestment and Direct Stock
Purchase Plan, and receiving a share award under the Equity Incentive Plan.
Deferred stock units are applied toward achieving this ownership requirement.
Each deferred stock unit is equivalent to one share of the Companys common
stock.
Independent Compensation
Consultants Report |
In May 2014, the
Compensation Committee received a Non-Employee Director Compensation
presentation (the Analysis) prepared by Cook & Co. The Analysis compared
our then current director compensation arrangements against the Companys peer
group and a broader utility industry. The peer group used for the purposes of
this Analysis is the same group of companies used to evaluate the Companys
executive compensation program. The Analysis reviewed various pay elements,
including annual cash and equity retainers, meeting fees, committee compensation
and other items such as Chair compensation. Cook & Co. determined that the
Companys director compensation program was competitive in form and structure
given the Companys size relative to its peers. The analysis concluded that the
Companys director compensation levels were either below or at the median of its
peer group for the annual Board equity retainer, Board cash retainer, and the
Committee Chair retainers. To remain competitive and more closely align the
Companys director compensation practices with those of its peer group, Cook
& Co. recommended a $5,000 increase to the Board cash retainer, a $5,000
increase to the Board equity retainer, a $3,000 increase to the Compensation
Committee Chair retainer, a $2,000 increase to the Audit Committee Chair
retainer and a $1,000 increase to the Corporate Governance Committee Chair
retainer. The Compensation Committee discussed the analysis with Cook & Co.
and recommended that the Board adopt these changes. The Board approved these
changes at the May 2014 Board meeting. In the future, the Board may modify
director compensation as it deems appropriate.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 31
Table of Contents
2014 Director
Compensation |
The following table
reflects compensation paid to non-employee directors for services performed
during 2014:
|
|
2014 Director
Compensation |
Name |
|
Fees Earned
or Paid in Cash ($) |
|
Stock Awards(1) ($) |
|
All
Other Compensation ($) |
|
Total(2) ($) |
Ralph J. Adkins(3) |
|
141,600 |
|
49,972 |
|
0 |
|
191,572 |
Eugene H. Bayard |
|
65,600 |
|
49,972 |
|
0 |
|
115,572 |
Richard Bernstein |
|
74,600 |
|
49,972 |
|
0 |
|
124,572 |
Thomas J. Bresnan(3) (4) |
|
78,600 |
|
49,972 |
|
0 |
|
128,572 |
Ronald G. Forsythe, Jr.(4) (5) |
|
28,016 |
|
25,571 |
|
0 |
|
53,587 |
Thomas P. Hill, Jr.(3) (4) |
|
64,600 |
|
49,972 |
|
0 |
|
114,572 |
Dennis S. Hudson, III |
|
64,600 |
|
49,972 |
|
0 |
|
114,572 |
Paul
L. Maddock, Jr. |
|
64,600 |
|
49,972 |
|
0 |
|
114,572 |
Joseph E. Moore |
|
69,850 |
|
49,972 |
|
0 |
|
119,822 |
Calvert A. Morgan, Jr.(3) |
|
79,850 |
|
49,972 |
|
0 |
|
129,822 |
Dianna F. Morgan |
|
64,600 |
|
49,972 |
|
0 |
|
114,572 |
John R. Schimkaitis(3) (6) |
|
61,600 |
|
49,972 |
|
60,000 |
|
171,572 |
(1) |
The Stock Awards column reflects the grant
date fair value on May 6, 2014 of $49,972 (806 shares based upon a price
per share of $62.00, the closing price on May 2, 2014). On September 8,
2014, the Company effectuated a three-for-two stock split in the form of a
stock dividend. Post split, the fair value of these awards does not
change. The grant date fair value of these awards on December 31, 2014 is
$49,972 (1,209 shares based upon the post split price per share of
$41.333). The stock awards and all prior stock awards are fully vested in
that they are not subject to forfeiture. Dr. Forsythe joined the Board
effective November 1, 2014. See footnote 5 below for more information on
the stock award that he received. |
(2) |
There is no compensation that needs to be
included in Option Awards, Non-equity Incentive Plan Compensation, or
Change in Pension Value and Non-Qualified Deferred Compensation Earnings
columns. Dividends on deferred stock units in the Non-Qualified Deferred
Plan (which are settled on a one for one basis in shares of common stock)
are the same as dividends paid on the Companys outstanding shares of
common stock. Additionally, for 2014, cash meeting fees and retainers
deferred under the Non-Qualified Deferred Plan have investment crediting
options that are the same as investment options available to all employees
under the Companys Retirement Savings Plan (a qualified 401(k) Plan). As
a result, the directors participating in the Non-Qualified Deferred Plan
do not receive preferential earnings on their investments. Directors do
have the ability to purchase propane at the same discounted rate that we
offer to our employees, the value of which, when combined with all other
perquisites and personal benefits, does not exceed $10,000 in the
aggregate. |
(3) |
The M&A Committee was established in
June 2011 to assist the Board in carrying out its responsibilities to
evaluate potential opportunities. Messrs. Adkins, Bresnan, Hill, Morgan
and Schimkaitis served as members of the ad-hoc M&A Committee in 2014
and received $1,000 for their attendance at the meetings. |
(4) |
Mr. Bresnan deferred his annual stock
retainer ($49,972). Mr. Hill deferred his annual cash retainer ($50,000),
meeting fees ($14,600), and annual stock retainer ($49,972). Dr. Forsythe
deferred his prorated annual stock retainer ($25,571). All deferrals were
made in accordance with the terms of the Non-Qualified Deferred
Plan. |
(5) |
Dr. Forsythe joined the Board effective
November 1, 2014. He received a prorated cash retainer of $25,616 and a
prorated equity retainer for services to be performed from November 1,
2014 through May 6, 2015. The Stock Award column reflects a grant date
fair value of $25,571 (528 shares based upon a price per share of $48.43,
the closing price on November 1, 2014). The stock award is fully vested in
that it is not subject to forfeiture. |
(6) |
The All Other
Compensation column reflects compensation received by Mr. Schimkaitis for
consulting services to the Company as described
below. |
In January 2013, the
Compensation Committee approved the Company entering into a Consulting Agreement
with Mr. Schimkaitis, our non-executive Vice Chair of the Board, to provide
consulting services as reasonably requested from time to time by the Board or a
designated representative of the Board. Mr. Schimkaitis has forty years of
experience in the utility industry, twenty-five of which were spent in key
management roles within the Company. His knowledge of the utility industry and
our service territories, as well as his leadership skills has been invaluable to
the success of the Company. The Agreement has terms similar to those previously
approved by the Compensation Committee and entered into with Mr. Schimkaitis in
2011. The original term of the Agreement was for a period of twelve months,
which can be extended by the Company, with Mr. Schimkaitis consent, for
additional one year terms. In 2014, the parties elected to extend the Agreement
for a one-year term. Under the agreement, Mr. Schimkaitis may provide the
Company up to 400 consulting hours per year. He may not, at any time, exceed
twenty percent of the average time he spent during his service as President and
Chief Executive Officer of the Company during the thirty-six month period prior
to his retirement. For his services, Mr. Schimkaitis will receive a $5,000
consulting fee per month for his services as well as reimbursement for
reasonable out-of-pocket expenses. In addition, Mr. Schimkaitis is entitled to
receive $300 for each hour worked in excess of 200 hours. Mr. Schimkaitis is not
entitled to payment of any consulting fee for any month during the term of the
Agreement for which no services are provided. He is responsible for the payment
of any taxes owed on compensation paid to him under the Agreement. The Agreement
includes automatic termination for engagement in willful misconduct with respect
to the obligations under the Agreement, or conduct which violates the Companys
Code of Ethics.
32 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy
Statement
Table of Contents
REPORT OF THE
COMPENSATION COMMITTEE ON COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee
has reviewed and discussed the Compensation Discussion and Analysis with Chesapeakes management. The Compensation
Committee, based on its review and discussions, has recommended to the Board the
following Compensation Discussion
and Analysis be included in this
Proxy Statement and filed with the SEC.
The information in this
Report shall not be considered soliciting material, or to be filed with the
SEC nor shall this information be incorporated by reference into any previous or
future filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
incorporated it by specific reference.
THE COMPENSATION
COMMITTEE
|
|
|
|
Richard Bernstein, Chair |
Joseph E. Moore |
Calvert A Morgan, Jr. |
Dianna F. Morgan |
(remainder of page left
intentionally blank)
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 33
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
We are committed to
pursuing growth opportunities in a manner that generates future value for our
stockholders. In 2014, we generated record earnings for the eighth consecutive
year. Our net income was $36.1 million, or $2.47 per share (diluted), in 2014,
compared to $32.8 million, or $2.26 per share (diluted), in 2013. This
represents an increase in diluted earnings per share of $0.21, or 9.3
percent.
Diluted Earnings Per
Share
The continued efforts of
our employees to transform opportunities into profitable growth enabled us to
meet key 2014 objectives in our strategic plan and advance several projects,
such as the announcement of the development and construction of a combined heat
and power plant in Nassau County, Florida and our interstate pipelines new
services on the Delmarva Peninsula. We also recently entered into a merger
agreement that provides a new unregulated midstream energy opportunity that has
the potential to yield higher than traditional regulated returns. All of these
efforts position our Company for continued growth in the future. In 2014, our
results translated into a 12.2 percent return on equity (ROE), which
represents performance exceeding regulated utility returns. Over the past five
years, we have consistently generated ROEs between 11.6 percent and 12.2
percent.
ROE Track Record
34
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
In 2014, the Board of
Directors increased the dividend paid to our stockholders on an annualized basis
by $0.0533 per share, or 5.2 percent (adjusted to reflect the three-for-two
stock split, effected in the form of a stock dividend, on September 8, 2014).
This resulted in an annualized dividend per share of $1.08. Chesapeake has paid
a dividend to its stockholders for 54 consecutive years. The growth in our
dividend reflects the financial strength of the Company. The Company is
positioned to have sustainable dividend growth and is committed to dividend
growth that is supported by earnings growth.
Dividend Track
Record
The combination of stock
price appreciation and dividends for the year produced a total return to
stockholders of 27 percent. Over each period considered (one, three, five, ten
or twenty years), stockholders have achieved average annual returns in excess of
14%. We have achieved top quartile performance relative to our peers over all
periods presented.
Total Shareholder
Return
(For the periods
ending December 31, 2014)
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 35
Table of Contents
Our strong performance in
2014 is a result of our steadfast commitment to pursuing growth opportunities
with discipline, determination and drive. Our results in 2014 are a culmination
of the growth efforts that we initiated several years ago. Our earnings growth,
because of the significance of our regulated operations, is driven by the
additional capital investments we make. To sustain or increase our earnings
growth rate, we invest in additional capital expenditures that generate equal to
or greater than their respective target returns. We continued to expend high
levels of capital in 2014, as measured by the ratio of capital expenditures to
total capitalization.
Investing For Future
Growth
(Capital
Expenditures / Total Capitalization)
The Compensation
Committees approach to executive compensation encompasses practices that ensure
that the executive compensation program remains fair, reasonable and competitive
while also aligning total compensation to our business objectives and
performance. These practices include, but are not limited to:
● |
The Compensation Committee retains discretion
in administering all awards and performance goals, and determining
performance achievement. |
● |
Each incentive award features a cap on the
maximum amount that can be earned for any performance period. |
● |
Dividends on the equity incentive awards accrue
in the form of dividend equivalents during the performance period and are
only paid to the named executive officers if the awards are earned and
then only in proportion to the actual shares earned. |
● |
Stock ownership guidelines are in place for the
named executive officers, with a specified timeframe to attain the
ownership threshold. |
● |
Each named executive officer is subject to a
compensation recovery policy that requires the repayment by the executive
if an incentive award was calculated based upon the achievement of certain
financial results or other performance metrics that, in either case, were
subsequently found to be materially inaccurate. |
● |
The Company does not provide excise tax
gross-up protections. |
● |
Named executive officers generally may not
engage in hedging transactions or pledge Chesapeake stock as collateral
for a loan. |
● |
The supplemental pension and 401(k) plans are
traditional plans that cover compensation not included in the qualified
plans as a result of IRS compensation limitations. These plans do not
provide additional benefits to the named executive officers or additional
future years of service. |
● |
With the exception of Company vehicles that are
available for personal use, but which are treated as compensation to the
named executive officers, there are no perquisites. Named executive
officers participate in the same benefits that are available to other
employees of the Company. |
● |
The life insurance benefit provided to
employees of the Company is capped at $500,000 which limits the benefit to
highly compensated individuals. |
The Compensation Committee
promotes a pay-for-performance culture to further align the executive officers
interests with the interests of stockholders. Our Compensation Committee focuses
on aligning total compensation with our performance and business objectives
thereby increasing stockholder value. Our executive compensation program
consists of three components base salary, performance-based cash incentive
awards (cash incentive awards) granted pursuant to our Cash Bonus Incentive
36
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
Plan (the Cash Incentive
Plan), and performance-based equity incentive awards (equity incentive
awards) granted pursuant to the Equity Incentive Plan. The Compensation
Committee believes that these three components of our compensation program drive
performance that aligns the financial interests of the executive officers with
the interests of stockholders.
Key Compensation Committee Actions
Relating to Compensation Received by Named Executive Officers in
2014 |
The Compensation Committee
sets base salaries at competitive levels to ensure that we are attracting,
recruiting, and retaining executive officers that have the knowledge and skills
necessary to achieve the Companys established goals. For 2014, the Compensation
Committee considered the following prior to adjusting base salaries: results of
the study provided by Cook & Co., functional role of the position, scope of
the individuals responsibilities, prior years performance, and competitive
nature of our business. Mr. Householders base salary was adjusted by the Chief
Executive Officer. Effective April 1, 2014, base salaries for the corporate
named executive officers increased from 3.1 to 10.6 percent.
Each named executive
officer received performance-based incentive awards that comprised approximately
50 percent or more of their total direct compensation for 2014. For 2014, cash
incentive awards for each named executive officer were based on achieving
pre-established financial and non-financial targets, with the financial
component representing between 55 and 80 percent of the payout opportunity. As a
result of the Companys earnings and the achievement of individual performance
goals, the cash incentive award payout for 2014 performance ranged from 25 to 73
percent of base salary as reported in the Summary Compensation Table for each
named executive officer.
The larger piece of
incentive compensation focuses on long-term performance. The Compensation
Committee established three performance components on which Messrs. McMasters
and Thompson and Mmes. Cooper and Bittners awards were based Shareholder Return, Growth in Long-Term
Earnings, and Earnings Performance. Each named executive officer received an equity
incentive award based upon an evaluation of the Companys performance relative
to the performance of a peer group and a return on equity (ROE) pre-established
scale over the 2012 to 2014 performance period. For the first component,
Shareholder
Return, the Companys total
shareholder returns for the 2012 to 2014 performance period exceeded the peer
group companies. For the second component, Growth in Long-Term Earnings, the Companys total capital expenditures as a
percent of total capitalization for the 2012 to 2014 performance period was in
the 70th percentile of the peer group. For the third component,
Earnings
Performance, the Companys
average return on equity for the three years ended December 31, 2014 was 12.02
percent. Based upon these results, the percentage earned for each performance
component was 150 percent of the target. Dividends on the equity incentive
awards accrue in the form of dividend equivalents during the performance period
and are paid to the respective named executive officer in proportion to the
actual shares earned. Accordingly, the named executive officers received
dividends on the maximum equity award.
Mr. Householder received a
long-term incentive award based on achievement of targets related to performance
components established by the Companys Chief Executive Officer
Shareholder Return, Growth in
Long-Term Earnings, and Earnings Performance. The Shareholder Return
component was identical to that applicable to the other named executive officers
in terms of performance metrics and outcome. For purposes of determining the
actual bonus awards under the Growth in Long-Term Earnings and Earnings
Performance components for Mr.
Householder, the combined investment levels and financial results for several
regulated and unregulated businesses in Florida were included. For the first
component, Shareholder
Return, the Companys total
shareholder returns for the 2012 to 2014 exceeded the peer companies. For the
second component, Growth in
Long-Term Earnings, total capital
expenditures as a percent of total capitalization for several of the Companys
Florida operations for the 2012 to 2014 performance period was in the
90th percentile of the peer group. For the third component,
Earnings
Performance, average return on
equity for the three years ended December 31, 2014 for several of the Companys
Florida operations was 8.98 percent. Based upon these results, the percentage
earned for the Shareholder
Return and Growth in Long-Term Earnings components was 150 percent. Based on the
financial results for several regulated and unregulated businesses in Florida,
the Earnings
Performance component payout was
zero. Mr. Householder received dividends on the maximum equity awards for the
Shareholder Return and Growth in Long-Term Earnings components.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 37
Table of Contents
At the 2014 Annual Meeting,
stockholders voted, on a non-binding, advisory basis, on the executive
compensation of our named executive officers. Approximately 93.9 percent of the
votes cast by stockholders were voted to approve the compensation of our named
executive officers. The Compensation Committee acknowledged stockholders
widespread support for the Compensation Committees executive compensation
decisions, program and policies as reflected in the voting results. The
Compensation Committee will consider advisory stockholder votes in the future
when determining executive compensation. The next Say-on-Pay advisory vote will
occur at the 2017 Annual Meeting. The next advisory vote on the frequency of the
Say-on-Pay advisory vote will also be at the 2017 Annual Meeting.
We refer you to our
narrative and related tables in the Compensation Discussion and Analysis, Executive Compensation,
and other relevant sections within this
Proxy Statement for a more detailed discussion on the information provided
above, as well as information on other practices utilized by the Compensation
Committee, including executive stock ownership requirements, the compensation
recovery policy, and executive employment agreements.
Executive Compensation
Design |
Our executive compensation
program is designed to focus executive officers on both short-term and long-term
financial and operational performance, without encouraging unnecessary risk. The
following provides details on the components of our executive compensation
program.
Total Direct
Compensation for The Named Executive Officers |
Base
Salary |
● |
Base salaries are set at
competitive levels to ensure we are attracting and retaining executive
officers that have the knowledge and skills necessary to achieve the
Companys established goals |
● |
The Compensation
Committees independent consultant concluded that base salaries for the
corporate named executive officers are within a competitive range of
market median for the Companys peer group |
● |
The Compensation Committee
considered the following when setting 2014 base salaries for the corporate
named executive officers: scope of the executives responsibilities, prior
years performance, and the competitive nature of our
business |
Short-Term
Incentive Compensation
1-year Performance Based
Award |
● |
Stockholders will vote at this
meeting on the approval of the 2015 Cash Bonus Incentive Plan |
● |
Cash incentive awards were granted
by the Compensation Committee in January 2014 for the performance period
January 1, 2014 through December 31, 2014 for the corporate named
executive officers |
● |
Evaluation of performance is based
on achieving financial and non-financial targets |
● |
Awards are subject to a cap of
150% or 200% of target on the maximum amount that can be earned during any
performance period |
Long-Term
Incentive Compensation
3-year Performance Based Award |
● |
2013 Stock and Incentive
Compensation Plan, under which equity awards may be granted, was approved
by stockholders in May 2013 |
● |
Equity incentive awards for
the 2014-2016 performance period were approved by the Compensation
Committee in January 2014 for the corporate named executive
officers |
● |
Awards are issued based on
achievement of the following performance metrics: total shareholder
return, growth in long-term earnings, and earnings
performance |
● |
Features a cap of 150% of target on the maximum
amount that can be earned during any performance
period |
38
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
Benefit Plans
and Perquisites Available to Certain Employees, Including Named Executive
Officers |
Pension Plan |
● |
The Pension Plan and
benefits thereunder have been frozen |
● |
Provides retirement income
for three named executive officers based on years of service and highest
average earnings as of December 31, 2004, when the Pension Plan was
frozen |
Pension SERP |
● |
The Pension SERP and benefits
thereunder have been frozen as of January 1, 2005 |
● |
Provides retirement income under
the same terms as the Pension Plan to two named executive officers for
compensation in excess of tax code limitations |
401(k) Retirement Savings Plan |
● |
Provides participants with
the opportunity to defer a portion of their compensation and receive
Company matching contributions of up to 6 percent of eligible cash
compensation up to the applicable statutory limit |
● |
Supplemental Company
contributions may be made to employees, including the named executive
officers, under the Plan |
● |
The plan is currently
available to all eligible employees of the Company and its
subsidiaries |
Non-Qualified Deferred
Plan |
● |
Extends the 401(k) Retirement
Savings Plan, on a non-qualified basis, for deferral of compensation in
excess of the tax code limitations, as well as Company matching and
supplemental contributions under the same terms as the 401(k) Retirement
Savings Plan |
● |
Additionally, equity incentive
awards can be deferred (these awards are not eligible for matching or
supplemental contributions) |
Perquisites |
● |
With
the exception of Company vehicles that are available for personal use, but
which are treated as compensation to the named executive officers, there
are no perquisites |
In March 2014, the
Compensation Committee reviewed base salaries for the Chief Executive Officer
and the three other corporate named executive officers for the ensuing year. In
March 2014, the Committee reviewed and discussed the market analysis that was
prepared by Cook & Co. and related factors to assess the competitiveness of
base salary levels. Cook & Co.s market assessment compared the Companys
base salaries for the corporate named executive officers against market data for
the Companys peer group, as well as from industry published survey data. Cook
& Co. concluded that base salaries for the named executive officers are
within a competitive range of the market median for the Companys peer group.
The table below provides information on the Companys peer group that is used by
the Compensation Committee to benchmark compensation practices. This peer group
is in a comparable industry and relative in terms of the Companys revenues and
market capitalization which is presented as of December 31, 2014.
Peer Company |
|
Market Capitalization (millions) |
|
Revenues (millions) |
Delta Natural Gas Company, Inc.* |
|
$ |
139 |
|
$ |
96 |
Empire District Electric Company |
|
$ |
1,293 |
|
$ |
652 |
The
Laclede Group, Inc. |
|
$ |
2,003 |
|
$ |
1,627 |
MGE
Energy, Inc. |
|
$ |
1,581 |
|
$ |
620 |
Northwest Natural Gas Company |
|
$ |
1,361 |
|
$ |
754 |
RGC
Resources, Inc. |
|
$ |
94 |
|
$ |
75 |
South Jersey Industries, Inc. |
|
$ |
2,013 |
|
$ |
887 |
Suburban Propane Partners LP |
|
$ |
2,697 |
|
$ |
1,938 |
Unitil Corp |
|
$ |
510 |
|
$ |
426 |
*As of September 30,
2014.
The Compensation Committee
considered the following: results of the market assessment performed by Cook
& Co.; functional role of the position; scope of the individuals
responsibilities; prior years performance; and competitive nature of our
business. Mr. Householders base salary was adjusted by the Chief Executive
Officer based upon similar considerations. Effective April 1, 2014, base
salaries for the named executive officers increased from 3.1 to 10.6 percent.
These increases further align the named executive officers base salaries with
market practices.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 39
Table of Contents
2014 Cash Incentive
Award |
For 2014, the Compensation
Committee was authorized to grant cash incentive awards to each named executive
officer under the 2005 Cash Incentive Plan approved by the Board in 2005.
Generally, the target cash incentive awards for each named executive officer are
set at an amount that approximates the median prevailing practices of the
industry peer group and broader utility industry for comparable positions. The
actual award earned for all named executive officers can range from 0 to 150
percent of the target cash incentive award for the non-financial component and
from 0 to 200 percent of the target cash incentive award for the financial
component, depending on actual performance at the end of the performance period
as compared to the performance targets. The Compensation Committee may use its
discretion to adjust a participants bonus opportunity or payout amount upward
or downward based on unanticipated and/or extraordinary events.
In January 2014, the
Compensation Committee established financial and non-financial performance
targets under the 2005 Cash Incentive Plan for Messrs. McMasters, Thompson and
Mmes. Cooper and Bittner. These corporate named executive officers were
evaluated on an earnings per share financial target of $2.287 (on a stock split
adjusted basis). Each corporate named executive officer also had established
individual goals that are evaluated by the Compensation Committee in connection
with determining the extent to which the individual met his or her non-financial
targets. These goals are grouped into the following categories: (i) Leadership,
(ii) Employee Engagement, and (iii) Service Excellence. The named executive
officers may earn a cash incentive award upon achieving his or her
pre-established financial and non-financial targets based on the Compensation
Committees evaluation. The Compensation Committee reserves the right to
consider additional performance criteria for the Chief Executive Officer related
to pursuing strategic or operational opportunities.
Mr. Householders 2014 cash
incentive award was established by the Chief Executive Officer. Mr. Householder
was evaluated on an earnings per share financial target of $2.287 and an
aggregate pre-established operating income of $24.8 million for several
regulated and unregulated businesses in Florida. Mr. Householder also had
established individual goals that are evaluated by the Chief Executive Officer
in connection with determining the extent to which he met his non-financial
targets. These goals are grouped into the following categories: (i) Florida
Business Unit Performance, (ii) Customer Engagement Initiatives, and (iii)
Pipeline Initiatives.
The following table shows
each named executive officers target cash incentive award, based on such named
executive officers base salary as of December 31, 2014 and weighting for the
financial and non-financial performance targets. In March 2015, the Compensation
Committee reviewed the performance of each named executive officer and, based on
that review, authorized the payment of cash incentive awards as reflected in the
table below.
|
|
|
2014 Target Cash
Incentive Award Opportunity |
|
|
Weighting for
the Performance Targets |
|
|
Actual Achievement
of Performance Targets |
|
|
Actual Payout
Based on Achievement of Performance Targets |
|
|
|
|
|
Named
Executive Officer |
Base
Salary (as of December 31, 2014) |
Bonus Opportunity (% of
Base Salary) |
Target Cash Incentive Award at 100% |
|
|
Non- Financial |
Financial |
|
|
Non-
Financial |
Financial |
|
|
Non-
Financial |
Financial |
|
|
Payout
as reflected in the Summary Compensation Table |
|
|
Michael P. McMasters |
|
$ |
475,000 |
50% |
$ |
237,500 |
|
|
20% |
80% |
|
|
146.00% |
142.31% |
|
|
$ |
69,350 |
$ |
270,389 |
|
|
$ |
339,739 |
|
|
Stephen C. Thompson |
|
$ |
330,000 |
30% |
$ |
99,000 |
|
|
20% |
80% |
|
|
120.00% |
142.31% |
|
|
$ |
23,760 |
$ |
112,710 |
|
|
$ |
136,470 |
|
|
Beth
W. Cooper |
|
$ |
296,500 |
30% |
$ |
88,950 |
|
|
20% |
80% |
|
|
145.00% |
142.31% |
|
|
$ |
25,795 |
$ |
101,267 |
|
|
$ |
127,062 |
|
|
Elaine B. Bittner |
|
$ |
260,000 |
30% |
$ |
78,000 |
|
|
35% |
65% |
|
|
150.00% |
142.31% |
|
|
$ |
40,950 |
$ |
72,151 |
|
|
$ |
113,101 |
|
|
Jeffry M.
Householder(1) |
|
$ |
282,000 |
30% |
$ |
84,600 |
|
|
45% |
55% |
|
|
150.00% |
26.00% |
|
|
$ |
57,105 |
$ |
12,039 |
|
|
$ |
69,144 |
|
(1) |
In addition to
receiving a cash incentive award, Mr. Householder received a discretionary
bonus. More information on the bonus is available in the Summary
Compensation Table. |
Equity Incentive Awards
Granted in 2014 |
The Compensation Committee
is authorized to grant equity incentive awards to each named executive officer
under the Equity Incentive Plan approved by the Companys stockholders in 2013.
Our long-term incentive program is 100 percent performance-based, featuring
annual grants of shares that are awarded if pre-established targets are achieved
at the end of the three-year performance period. The equity incentive awards are
designed to reward executives for improving stockholder value by achieving
growth in earnings while investing in the future growth of both our regulated
and unregulated businesses. The actual award earned for all named executive
officers can range from 0 to 150 percent of the target equity incentive award,
depending on
40
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
actual performance at the
end of the performance period as compared to the performance targets. The awards
granted for the performance periods are pursuant and subject to the terms of
Performance Share Agreements, including vesting periods, entered into by the
Company and each of the named executive officers. The Compensation Committee has
granted equity incentive awards to Messrs. McMasters and Thompson and Mmes.
Cooper and Bittner for the January 1, 2014 through December 31, 2016 performance
period. The equity incentive award for Mr. Householder for the January 1, 2014
through December 31, 2016 performance period was established by the Chief
Executive Officer in April 2014, and is similar to those granted to each of the
other named executive officers. All future equity incentive awards granted to
Mr. Householder will be at the discretion of the Compensation Committee.
A summary of features
pertaining to these awards is provided below.
● |
The
Compensation Committee granted performance shares to the corporate named
executive officers in January 2014. Mr. Householders award was
established by the Chief Executive Officer in April 2014. |
● |
Payout
opportunity is 0% (minimum), 50% (threshold), 100% (target), and 150%
(maximum) of the target equity award for each named executive
officer. |
● |
The Compensation Committee granted equity
awards to the corporate named executive officers, and the Chief Executive
Officer granted an equity award to Mr. Householder, as
follows: |
|
Equity Incentive
Award Opportunity for the 2014-2016 Performance Period |
|
|
Value of Each
Performance Component at Target |
|
Named Executive
Officer |
Base
Salary (as of January 7, 2014) |
|
Bonus Opportunity (% of
Base Salary) |
|
Target Equity Value |
Average Closing
Stock Price Per Share from 11/1/2013- 12/31/2013 |
|
Target Equity Shares |
|
|
Shareholder Return (30% Weighting) |
|
Growth
in Long-Term Earnings (35% Weighting) |
|
Earnings Performance (35% Weighting) |
|
Michael P.
McMasters |
$ |
440,000 |
|
75% |
|
$ |
330,000 |
$ |
38.22 |
|
8,634 |
|
|
$ |
99,000 |
|
$ |
115,500 |
|
$ |
115,500 |
|
Stephen C.
Thompson |
$ |
320,000 |
|
50% |
|
$ |
160,000 |
$ |
38.22 |
|
4,186 |
|
|
$ |
48,000 |
|
$ |
56,000 |
|
$ |
56,000 |
|
Beth W.
Cooper |
$ |
285,000 |
|
50% |
|
$ |
142,500 |
$ |
38.22 |
|
3,728 |
|
|
$ |
42,750 |
|
$ |
49,875 |
|
$ |
49,875 |
|
Elaine B.
Bittner |
$ |
235,000 |
|
50% |
|
$ |
117,500 |
$ |
38.22 |
|
3,074 |
|
|
$ |
35,250 |
|
$ |
41,125 |
|
$ |
41,125 |
|
Jeffry M. Householder |
$ |
273,500 |
|
50% |
|
$ |
136,750 |
$ |
38.22 |
|
3,578 |
|
|
$ |
41,024 |
|
$ |
47,863 |
|
$ |
47,863 |
|
● |
The
Compensation Committee approved performance components set forth below for
the equity awards granted to the corporate named executive officers. |
Performance
Component |
Benchmark |
Description of
Benchmark |
Percent Target
Award |
Shareholder Return |
Total shareholder return compared to the total
stockholder returns of companies included in the peer group for the
performance period |
Shareholder Return incentivizes executives to
generate additional value for our stockholders |
30% |
Growth in Long-Term Earnings |
Total capital expenditures as a percent of
total capitalization as compared to companies in the peer group for the
performance period |
In
the long-term, the Companys growth is dependent upon continuous
investment of capital at levels sufficient to drive growth |
35% |
Earnings
Performance |
Average return on equity
compared to pre-determined return on equity targets |
Return on equity measures
the Companys ability to generate current income using equity investors
capital |
35% |
● |
For
Mr. Householder, the Shareholder
Return component is
identical to that applicable to the corporate named executive officers.
The Growth in Long-Term
Earnings and
Earnings
Performance components for
Mr. Householder include the combined investment levels and financial
results for several regulated and unregulated businesses in
Florida. |
● |
The Compensation Committee evaluates
achievement of the Shareholder
Return and Growth in Long-Term Earnings performance components for the corporate
named executive officers based upon evaluating the Companys performance
relative to the performance of a peer group over the applicable thirty-six
month performance period. The Companys performance is ranked against the
performance of the peer group. The payout opportunity is based on the
Companys percentile ranking against the peer companies in the peer group
for each of these two performance components as shown in the table
below. |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 41
Table of Contents
|
Equity Award
Thresholds |
|
Percentile Ranking as
Compared To Companies in the Peer Group |
Percentage of Payout of
Target Equity Incentive Award |
|
40th - 49th percentile |
50% |
|
50th - 54th
percentile |
75% |
|
55th - 60th percentile |
100% |
|
61st - 65th
percentile |
125% |
|
Greater than 65th
percentile |
150% |
|
For Mr. Householder,
the Shareholder
Return component is
identical to that applicable to the corporate named executive officers.
The Growth in Long-Term
Earnings performance
component for Mr. Householder is similar to that applicable to the
corporate named executive officers; however, it is based upon evaluating
the performance of several of the Companys regulated and unregulated
businesses in Florida relative to the performance of the peer group over
the applicable thirty-six month performance period. |
● |
The Compensation
Committee evaluates achievement of the Earnings Performance component upon evaluating the Companys
average return on equity over the three-year performance period as
compared to pre-determined return on equity thresholds of 10.25% to
greater than 11.50%. Mr. Householders Earnings Performance component is similar to that applicable to
the other named executive officers; however, it is based upon evaluating
the average return on equity for several of the Companys regulated and
unregulated businesses in Florida over the three-year performance period.
|
● |
The table below
provides information on a composite group of selected gas distribution
utilities. This peer group is used to evaluate the named executive
officers performance against the Shareholder Return
and Growth in Long-Term
Earnings performance
targets in connection with determining the achievement of equity incentive
awards. This peer group is in a comparable industry and relative in terms
of the Companys revenues and market capitalization, which are presented
as of December 31, 2014. |
Peer
Company |
Market Capitalization (millions) |
|
Revenues (millions) |
AGL Resources, Inc. |
$ |
6,522 |
|
$ |
5,385 |
Atmos Energy Corporation |
$ |
4,789 |
|
$ |
4,941 |
Delta Natural Gas Company,
Inc.* |
$ |
139 |
|
$ |
96 |
The
Laclede Group, Inc. |
$ |
2,003 |
|
$ |
1,627 |
New Jersey Resources
Corp. |
$ |
2,130 |
|
$ |
3,738 |
Northwest Natural Gas Company |
$ |
1,361 |
|
$ |
754 |
Piedmont Natural Gas Company,
Inc. |
$ |
2,985 |
|
$ |
1,470 |
RGC
Resources, Inc. |
$ |
94 |
|
$ |
75 |
South Jersey Industries,
Inc. |
$ |
2,013 |
|
$ |
887 |
WGL Holdings, Inc. |
$ |
2,134 |
|
$ |
2,781 |
*As of September 30, 2014. |
●Internal Audit performs a review of the equity
incentive awards and reports on the accuracy of the
calculations.
Equity Incentive Award
for the 2013-2015 Performance Period |
In January 2013, the
Compensation Committee established equity incentive awards for Messrs. McMasters
and Thompson and Mmes. Cooper and Bittner for the 2013-2015 performance period.
The target equity incentive awards were as follows: Mr. McMasters (10,007), Mr.
Thompson (5,171), Ms. Cooper (4,575) and Ms. Bittner (3,738). The features of
these awards are similar to those provided above for the equity incentive awards
relating to the 2014-2016 performance period. The Chief Executive Officer
established a target equity incentive target award for Mr. Householder of 4,428
shares. The features of Mr. Householders equity incentive award are similar to
those provided above for his award applicable to the 2014-2016 performance
period. Each named executive officer is entitled to earn the performance shares
at the end of the performance period depending on the extent to which
performance targets are achieved.
42 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy Statement
Table of Contents
Equity Incentive Award
for the 2012-2014 Performance Period |
In January 2012, the
Compensation Committee established equity incentive awards for Messrs. McMasters
and Thompson and Mmes. Cooper and Bittner for the 2012-2014 performance period.
The target equity incentive awards were as follows: Mr. McMasters (9,306), Mr.
Thompson (6,000), Ms. Cooper (6,000) and Ms. Bittner (4,800). The features of
these awards are similar to those provided above for the equity incentive awards
relating to the 2014-2016 performance period. Each named executive officer is
entitled to earn the performance shares at the end of the performance period
depending on the extent to which performance targets are achieved. The
Compensation Committee met in March 2015 to review the extent to which the
corporate named executive officers achieved the performance targets established
for the 2012-2014 performance period as summarized in the following table.
As a
result of this performance, the named executive officers received the following
shares for the 2012-2014 performance period.
|
|
|
|
Achievement of
Performance Components at 150% |
Named Executive Officer(1) |
|
Total Equity Target Shares for the
2012-2014 Performance Period |
|
Shareholder Return (30%
Weighting) |
|
Growth (35% Weighting) |
|
Earnings Performance (35%
Weighting) |
|
Actual Payout for
the 2012-2014 Performance Period |
Michael P. McMasters |
|
9,306 |
|
4,188 |
|
4,886 |
|
4,886 |
|
13,959 |
Stephen C. Thompson |
|
6,000 |
|
2,700 |
|
3,150 |
|
3,150 |
|
9,000 |
Beth
W. Cooper |
|
6,000 |
|
2,700 |
|
3,150 |
|
3,150 |
|
9,000 |
Elaine B. Bittner |
|
4,800 |
|
2,160 |
|
2,520 |
|
2,520 |
|
7,200 |
(1) |
Mr. Householder
received a long-term incentive award for the 2012-2014 performance period
based on achievement of targets related to performance components
established by the Companys Chief Executive Officer. Mr. Householders
target long-term bonus was 4,800 shares. Based upon the achievement of his
performance components, the percentage earned for the Shareholder Return and Growth in Long-Term Earnings components was 150 percent. Based on the financial results
for several regulated and unregulated businesses in Florida, the Earnings
Performance component payout was zero. Actual payout for the 2012-2014
performance period for Mr. Householder was 4,680
shares. |
The table below shows the
stock vested in 2014.
|
Stock Vested During
2014 |
Named Executive
Officer(1) |
Number of
Shares Acquired on Vesting(2) (#) |
|
Value Realized on
Vesting(3) ($) |
Michael P. McMasters |
13,959 |
|
654,258 |
Stephen C. Thompson |
9,000 |
|
421,830 |
Beth
W. Cooper |
9,000 |
|
421,830 |
Elaine B. Bittner |
7,200 |
|
337,464 |
Jeffry M. Householder |
4,680 |
|
219,352 |
(1) |
Mr. Householders incentive award for the
2012-2014 performance period was established by the Chief Executive
Officer. His target long-term bonus was 4,800 shares, multiplied by $46.87
per share. Based on the achievement of the performance targets, Mr.
Householder received 4,680 shares. The value realized for Mr. Householder
of $219,352 represents the shares vested multiplied by $46.87, the closing
stock price on March 3, 2015. |
(2) |
The shares awarded and corresponding value
realized, reflect shares received in March 2015 by each named executive
officer for the three-year performance period ended December 31,
2014. |
(3) |
The value realized
represents the shares vested multiplied by $46.87, the closing stock price
on March 3, 2015, the date the shares were awarded by the Compensation
Committee. |
Outstanding Equity
Awards |
In January 2013 and January
2014, the Compensation Committee granted performance shares to Messrs. McMasters
and Thompson and Mmes. Cooper and Bittner for the 2013-2015 and 2014-2016
performance periods, respectively. The value of the 2013-2015 equity award is
reflected in the Stock
Award column for 2013 in the
Summary Compensation Table. The value of the 2014-2016 equity award is reflected
in the Stock Award column for 2014 in the Summary Compensation
Table. The grant date fair value of the 2014-2016 target equity awards are
reflected in the Grant Date Fair
Value of Stock Awards column in
the Grants of Plan-Based Awards Table. The Chief Executive Officer granted
performance shares to Mr. Householder for the 2013-2015 and 2014-2016
performance periods. Please refer to pages 40 and 42 in this Proxy Statement for
additional details on these awards.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 43
Table of Contents
In addition to the primary components of the executive compensation
program, we offer certain other benefits to the named executive officers. The
aggregate value of these benefits for each named executive officer is more than
$10,000 and is reflected in the All Other Compensation
column of the Summary Compensation Table.
●During 2014, the Company provided each named
executive officer with a Company-owned vehicle that is available for personal
use, but which is treated as compensation to the named executive officers. Each
named executive officers Form W-2 that is filed with the IRS includes imputed
income for the personal use of the Company-owned vehicle. This imputed income
has no effect on the Companys revenues or expenses. Each named executive
officer is responsible for the payroll taxes associated with personal
usage.
●On behalf of each employee, including the named
executive officers, we also pay an annual premium in connection with term life
insurance. The life insurance benefit of two times base salary is capped at
$500,000, which limits the benefit to highly compensated employees of the
Company such as the named executive officers.
●Named executive officers also have the ability to
purchase propane at the same discounted rate that we offer to our
employees.
●For 2014, each named executive officer who
participated in the qualified 401(k) Retirement Savings Plan received matching
contributions of 100 percent of up to 6 percent of eligible cash compensation
deferred in the plan up to the applicable statutory compensation limit. This was
the same benefit available to other employees of the Company. The IRS limits the
amount of pre-tax contributions that a participant may make to his or her
qualified 401(k) Retirement Savings Plan. The Companys Non-Qualified Deferred
Plan enables named executive officers to make pre-tax deferrals of compensation
over that limit. We match contributions in the same manner as the qualified
401(k) Retirement Savings Plan on compensation that exceeds the applicable
statutory limit.
●In addition, employees of the Company and its
subsidiaries, as applicable, including the named executive officers, are
eligible to receive an additional supplemental employer contribution at the
discretion of the Company. We also make a supplemental employer contribution to
the Non-Qualified Deferred Plan if such a contribution would have been made in
the qualified plan, absent the compensation limit.
Compliance with Internal
Revenue Code Section 162(m) |
Internal Revenue Code
Section 162(m) prohibits any public corporation from taking a deduction on its
annual federal income tax return for certain compensation that exceeds $1
million. In determining whether a deduction may be taken, the Company considers
compensation paid in any taxable year to its Chief Executive Officer or to any
one of its three most highly compensated executive officers (in addition to the
Chief Financial Officer) and whether such compensation would be considered
performance-based as defined under Section 162(m). Compensation qualifying as
performance-based compensation within the meaning of Section 162(m) is exempt
from the deduction limit. Awards under our Equity Incentive Plan are considered
performance-based compensation and would be exempt from the Section 162(m)
deduction limit; awards under our 2005 Cash Incentive Plan would not be
considered performance-based compensation and would be considered in
determining the ability to take this deduction. We do not anticipate that
compensation paid to any of the executive officers in 2014 will exceed the $1
million deduction limit. The proposed 2015 Cash Plan has been drafted to comply
with Section 162(m) guidelines.
Stock Ownership and
Retention Guidelines |
The Corporate Governance Committee is responsible for the development,
oversight and monitoring of executive officer stock ownership guidelines. These
guidelines ensure that executive officers that are subject to the ownership
guidelines are committed to the long-term profitability of the Company and align
managements interests with those of stockholders. In November 2014, the Board
amended the ownership guidelines upon the recommendation of the Corporate
Governance Committee, replacing those guidelines adopted by the Board in 2006.
The ownership guidelines include recommendations made by Cook & Co. Each
positions required stock ownership is a multiple of base salary, with the Chief
Executive Officer at five times base salary; and the four other named executive
officers at three times base salary.
Named executive officers
may acquire equity interests that will count toward satisfaction of the required
ownership by obtaining equity incentive awards that have been awarded to the
named executive officer upon completion of the performance period or through other means as specified in the
ownership guidelines. Once a named executive officer attains his or her
ownership
44 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy Statement
Table of Contents
requirement, he or she will
remain in compliance with the ownership guidelines despite future changes in the
stock price and base salary, as long as the named executive officer continues to
own shares equal to the number of shares owned at the time the ownership
requirement is met.
Role of the Compensation
Committee |
The Compensation Committee is solely responsible for the oversight and
administration of our executive compensation program. The Committee designs,
recommends to the Board for adoption as appropriate, and administers all of the
policies and practices related to executive compensation. The Committee believes
that the most effective compensation program is one that is designed to ensure
that total compensation is fair, reasonable and competitive. The primary
objectives in creating an effective compensation program are to:
●Develop an appropriate mix of compensation to
drive performance that aligns the financial interests of the executive officers
with the interests of our stockholders;
●Structure the program to attract high-quality
executive talent that will incentivize performance that focuses on achieving our
short and long-term goals; and
●Ensure effective development of talent through
internal processes such as performance evaluations, succession planning, and
leadership development.
The Compensation Committee annually reviews the
executive compensation program to ensure (i) the program aligns with the
Companys objectives; (ii) the mix provides competitive compensation levels for
each element of compensation; and (iii) the compensation remains competitive
relative to the compensation earned by executive officers in comparable
positions at peer companies.
The Chief Executive Officer participates in the establishment of the
compensation targets and payout levels for the other named executive officers.
He assesses the performance for all named executive officers and recommends to
the Compensation Committee the overall levels of achievement and the extent to
which performance targets were attained. Upon request, named executive officers
will provide supplemental material to the Compensation Committee to assist in
making its determinations in regards to the overall levels of achievement. The
Chief Executive Officer is not involved in any part of the setting of any
component of his compensation. The Chief Executive Officer and other members of
senior management attend Compensation Committee meetings at the invitation of
the Compensation Committee.
Role of Independent
Consultant |
The Compensation Committee has engaged an independent compensation
consultant to assist in reviewing the Companys executive compensation program.
Cook & Co. currently advises the Committee on executive compensation and
non-employee director compensation matters. Cook & Co. does not provide any
other services to the Company.
There are controls in place
that discourage unnecessary risk-taking. The named executive officers
simultaneously participate in the 2005 Cash Incentive Plan and the Equity
Incentive Plan, which provide the Compensation Committee with the ability to
utilize multiple performance criteria at any given time. The Compensation
Committee also has discretion and the ability to reduce awards based on the
named executive officers individual performance. Mr. Householder was designated
as a named executive officer in 2014. During 2014, his short-term and long-term
incentives and associated performance criteria were established by the Chief
Executive Officer. All future cash incentive and equity incentive award grants
will be at the discretion of the Compensation Committee.
Several other features of
the cash incentive award process further mitigate risk-taking and exposure,
including the following: (i) financial results for the respective award period
are reviewed by the Audit Committee prior to the issuance of any cash incentive award; (ii) the target for the cash
incentive award is set at an amount that approximates the median cash incentive
award of an industry
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 45
Table of Contents
peer group; and (iii) each
cash incentive award features a cap (maximum of 150% of the target for the
non-financial component and 200% of the target for the financial component) on
the maximum amount that can be earned for any performance period.
The equity incentive awards
compensate named executive officers for improving stockholder value by achieving
growth in total shareholder return as well as growth in earnings while investing
for future long-term earnings growth. The Compensation Committee believes that
these awards do not encourage unnecessary risk-taking since part of the ultimate
value of the award is tied to the Companys stock price and awards are staggered
and cover a multi-year performance period. Additionally, several other features
of the equity incentive award process further minimize potential risk: (i)
financial results for the respective award year are reviewed by the Audit
Committee prior to the issuance of any equity incentive award; (ii) the total
shareholder return and growth in long-term earnings over the relevant
performance periods are benchmarked against the same measures for a peer group
of natural gas distribution companies, and the average return on equity
performance component is compared to pre-determined return on equity thresholds
that are established by the Compensation Committee; and (iii) each equity
incentive award features a cap (a maximum of 150% of the target) on the maximum
amount that can be earned in any year. The Compensation Committee believes that
the 2005 Cash Incentive Plan, 2015 Plan, and the Equity Incentive Plan
appropriately balance risk and the desire to focus on areas considered critical
to the short-term and long-term growth and success of the Company.
The Compensation Committee
has adopted additional practices to ensure diligent and prudent decision-making
and review processes. The practices that are in place to manage and control risk
include:
●Although awards under the 2005 Cash Incentive
Plan, 2015 Plan, and the Equity Incentive Plans are primarily determined using
targeted financial and non-financial goals, they also include components which
are tied to the Companys capital budget and strategic plan that are reviewed
and approved by the Board;
●During its goal-setting process, the Compensation
Committee considers prior years performance relative to future expected
performance to assess the reasonableness of the goals;
●The 2005 Cash Incentive Plan, 2015 Plan, and the
Equity Incentive Plan include both performance and profitability measures, thus
balancing growth with value creation;
●The Compensation Committee retains discretion in
administering all awards and performance goals, and in determining performance
achievement;
●Each named executive officer is subject to stock
ownership guidelines commensurate with his or her position and equity awards
could lose significant value over time if the Company was exposed to
inappropriate, unnecessary risks which could affect our stock price;
and
●Each named executive officer is subject to a
compensation recovery policy that requires the repayment by the executive
officer if an incentive award was calculated based upon the achievement of
certain financial results or other performance metrics that, in either case,
were subsequently found to be materially inaccurate.
In December 2014, Cook
& Co. provided the Compensation Committee with a market analysis that
compared the Companys executive compensation against market data for the
Companys peer group, as well as from industry survey data. Cook & Co.s
assessment concluded that the Companys target total direct compensation is
competitive with market practices. The Company reviewed its compensation
programs applicable to all employees in conjunction with the risks that have
been identified and included in the Companys Annual Report on Form 10-K and
determined that these programs do not create risk that could result in a
material adverse effect on the Company.
46 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy Statement
Table of Contents
EXECUTIVE COMPENSATION
Summary Compensation
Table |
The following table
provides information on compensation earned for the years ended December 31,
2014, 2013 and 2012 by the Chief Executive Officer, Chief Financial Officer, and
three additional most highly compensated executive officers employed by the
Company at year-end (collectively, the named executive officers). In
determining the individuals to be included in this table, we considered the
roles and responsibilities for individuals serving at the Company and its
subsidiaries, as well as total compensation (reduced by the change in pension
value and nonqualified deferred compensation earnings), for all officers of the
Company for the year ended December 31, 2014.
2014 Summary
Compensation Table |
Name and Principal
Position |
|
Year |
|
Salary ($) |
|
Stock Awards ($)(1) |
|
Bonus ($)(2) |
|
Non-Equity Incentive
Plan Compensation ($)(3) |
|
Change in Pension
Value and Nonqualified Deferred Compensation Earnings ($)(4)(5) |
|
All
Other Compensation ($)(6) |
|
Total ($) |
Michael P.
McMasters(7) Chief Executive Officer, President,
and Director |
|
2014 |
|
466,250 |
|
443,867 |
|
|
|
339,739 |
|
107,742 |
|
67,724 |
|
1,425,321 |
|
2013 |
|
430,000 |
|
394,506 |
|
|
|
360,360 |
|
0 |
|
69,420 |
|
1,254,286 |
|
2012 |
|
387,500 |
|
344,614 |
|
|
|
233,600 |
|
107,296 |
|
96,444 |
|
1,169,454 |
Stephen C.
Thompson Senior Vice President |
|
2014 |
|
327,500 |
|
215,208 |
|
|
|
136,470 |
|
145,742 |
|
44,723 |
|
869,643 |
|
2013 |
|
317,500 |
|
203,847 |
|
|
|
174,720 |
|
0 |
|
46,411 |
|
742,478 |
|
2012 |
|
306,250 |
|
222,188 |
|
|
|
113,538 |
|
104,083 |
|
63,623 |
|
809,682 |
Beth W.
Cooper Senior Vice President
and Chief Financial Officer |
|
2014 |
|
293,625 |
|
191,670 |
|
|
|
127,062 |
|
31,620 |
|
34,561 |
|
678,538 |
|
2013 |
|
282,325 |
|
180,369 |
|
|
|
155,610 |
|
0 |
|
42,531 |
|
660,835 |
|
2012 |
|
256,250 |
|
222,188 |
|
|
|
94,900 |
|
31,386 |
|
61,038 |
|
665,762 |
Elaine B.
Bittner Senior Vice President |
|
2014 |
|
253,750 |
|
158,043 |
|
|
|
113,101 |
|
0 |
|
30,632 |
|
555,526 |
|
2013 |
|
232,275 |
|
147,371 |
|
|
|
116,325 |
|
0 |
|
28,395 |
|
524,366 |
|
2012 |
|
210,000 |
|
177,750 |
|
|
|
79,281 |
|
10,571 |
|
43,154 |
|
520,756 |
Jeffry M.
Householder President of Florida
Public Utilities Company |
|
2014 |
|
279,711 |
|
183,936 |
|
30,000 |
|
69,144 |
|
0 |
|
38,055 |
|
600,846 |
|
2013 |
|
271,346 |
|
174,574 |
|
|
|
75,177 |
|
0 |
|
25,496 |
|
546,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
For Messrs.
McMasters, Thompson and Householder and Mmes. Cooper and Bittner, the
Company calculated the aggregate grant date fair value of the performance-based equity incentive awards for each performance period based on the
estimated compensation costs on the grant date. We estimate the percent of
which the Growth in Long-Term Earnings component and the Earnings
Performance component are likely to be earned. The equity incentive awards
have been recorded at the grant date fair value which is based on the
closing price on the grant date. The Company also evaluated the likelihood
of earning the Shareholder Return component for the respective performance
periods. We first determined the aggregate fair value of the award using a
Black-Scholes model. The Companys total shareholder return was then
compared to the companies in the peer group using a Monte Carlo stock
simulation. The Monte Carlo stock simulation estimated a percentile
ranking for the Shareholder Return component which is used to determine
the payout percentage. The performance share fair value for the
Shareholder Return component was generated from the Black-Scholes model
and used to calculate the aggregate grant date fair value of this
component of the award. The number of actual performance shares earned
will range from 0 to 150 percent of the target performance shares
depending on the actual performance for the applicable performance period
as compared to the performance goals. The following table sets forth the
factors associated with the estimated compensation costs for each
performance period. |
|
|
|
|
|
Grant
Date |
|
Estimated Payout
for Performance-Based Equity Incentive Awards |
|
Fair Value Per
Share |
|
Estimated Payout
for Market-Based Equity Incentive Awards |
|
Monte
Carlo Estimated Percentile Ranking |
|
Fair
Value Per Share |
|
Year |
Performance Period |
|
|
Growth
in Long-Term Earnings |
|
Earnings Performance |
|
|
|
|
Shareholder Return |
|
|
|
|
|
|
|
|
2014 |
2014-2016 |
1/7/2014 |
|
150% |
|
100% |
|
$ |
39.97 |
|
150% |
|
65% |
|
|
$ |
36.53 |
|
|
2013 |
2013-2015 |
1/8/2013 |
|
150% |
|
100% |
|
$ |
31.00 |
|
150% |
|
65% |
|
|
$ |
27.33 |
|
|
2012 |
2012-2014 |
1/5/2012 |
|
150% |
|
100% |
|
$ |
28.83 |
|
150% |
|
65% |
|
|
$ |
26.24 |
|
|
If the named
executive officers were to achieve the maximum award for the 2014-2016
performance period, each award would be valued as follows: Mr. McMasters
$504,256; Mr. Thompson $244,488; Ms. Cooper $217,747; Ms. Bittner
$179,546; and Mr. Householder $208,961. If the named executive officers
were to achieve the maximum award for the 2013-2015 performance period,
each award would be valued as follows: Mr. McMasters $448,792; Mr.
Thompson $231,897; Ms. Cooper $205,189; Ms. Bittner $167,649; and Mr.
Householder $198,596. |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 47
Table of Contents
(2) |
Given the future earnings and the effort
expended to finalize the combined heat and power project in Nassau County,
Florida, the Compensation Committee approved an incremental, discretionary
cash bonus of $30,000 for Mr. Householder. |
(3) |
Payment for performance was made in March
2015, 2014, and 2013, respectively, under the 2005 Cash Incentive Plan. In
2014 and 2013, Mr. Householders cash incentive award was based on a
determination made by the Chief Executive Officer based on his achievement
of pre-established financial and non-financial targets. |
(4) |
The two defined benefit pension plans (a
qualified plan, the Chesapeake Utilities Corporation Pension Plan, or the
Pension Plan and a non-qualified plan, the Chesapeake Utilities
Corporation Supplemental Executive Retirement Plan, or the Pension SERP)
that include named executive officers were frozen as of January 1, 2005.
The amount of monthly pension payments each participant is entitled to
receive has not changed since that date; however, the net present value of
those payments varies each year depending primarily on the assumptions
made for the discount rate, mortality rates and expected return on plan
assets (for the Pension Plan). The present value of the accrued pension
benefits has been calculated in accordance with Accounting Standards
Codification Topic 715 Compensation - Retirement Benefits (see Note 16
Employee Benefit Plans in our Annual Report on Form 10-K and the Pension
Plan section on page 51 of this Proxy Statement for further details). The
discount rates at December 31, 2014, December 31, 2013 and December 31,
2012 were 3.50%, 4.25% and 3.50%, respectively. When the discount rate
decreases, it generates an increase in the present value of the pension
benefits and vice versa. In 2014, a new mortality table was used that
takes into consideration greater longevity, which also caused the present
value to increase in 2014. In 2014, the present value of the accumulated
benefits in the Pension Plan increased by $103,820, $96,939 and $31,620
for Mr. McMasters, Mr. Thompson and Ms. Cooper, respectively. The
participants experienced decreases to their present values in 2013 due to
the increase in the discount rate and increases in the present values in
2012 due to the discount rate decrease. Ms. Bittner and Mr. Householder do
not participate in the Pension Plan. |
|
The assumptions used to calculate the
present value of the Pension SERP are the same as those used for the
Pension Plan, except that there is no assumed return on assets because the
Pension SERP is unfunded. Variances from year to year have the same causes
as the Pension Plan. Additionally, Mr. McMasters has elected to receive
his Pension SERP benefit in a lump sum payment upon retirement and Mr.
Thompson elected to receive his Pension SERP benefit in annuity payments
upon retirement. These elections also impact the present value calculation
due to assumptions regarding the IRS lump sum interest rates. In 2014, the
present value of Mr. McMasters and Mr. Thompsons Pension SERP increased
by $3,922 and $48,803, respectively. In 2013, Mr. McMasters experienced an
increase and Mr. Thompson experienced a decrease in present value. In
2012, both participants experienced an increase in present value. Ms.
Cooper, Ms. Bittner and Mr. Householder do not participate in the Pension
SERP. |
(5) |
Dividends on deferred stock units (which are
settled on a one-for-one basis in shares of common stock) are the same as
dividends paid on the Companys outstanding shares of common stock. For
2014 and 2013, compensation deferred under the Non-Qualified Deferred Plan
earned the same returns as funds available for the Companys qualified
401(k) Plan. |
|
For 2012, each named executive officer
earned the following above-market earnings based on a calculation that
compared our deferred compensation returns to a debt return that the IRS
publishes: Mr. McMasters $15,960; Mr. Thompson $26,629; Ms. Cooper
$14,536; and Ms. Bittner $10,570. The above-market earnings can vary based
upon the dollars under investment, the fund mix, and the funds results.
For 2013 and 2014, the Company considered that investment options under
our 401(k) SERP are the same choices available to all salaried employees
under the Companys savings plan. As a result, the named executive
officers do not receive preferential earnings on their
investments. |
(6) |
The following table includes payments that
were made by the Company on behalf of the named executive officers in
2012, 2013 and 2014. |
|
|
Qualified
and Nonqualified 401(k) Plan Matching
and Supplemental Contributions ($) |
|
Term Life
Insurance Premiums ($) |
|
Vehicle
Allowance ($) |
|
Dividends on shares earned for
the 2012-2014 Performance Period ($) |
|
Named Executive
Officer |
2012 |
|
2013 |
|
2014 |
|
2012 |
|
2013 |
|
2014 |
|
2012 |
|
2013 |
|
2014 |
|
2012 |
|
Michael P. McMasters |
42,844 |
|
57,991 |
|
56,960 |
|
480 |
|
480 |
|
480 |
|
10,684 |
|
10,949 |
|
10,283 |
|
42,435 |
|
Stephen C. Thompson |
31,378 |
|
40,214 |
|
37,376 |
|
480 |
|
480 |
|
480 |
|
4,405 |
|
5,717 |
|
6,867 |
|
27,360 |
|
Beth
W. Cooper |
25,349 |
|
32,847 |
|
24,833 |
|
478 |
|
480 |
|
480 |
|
7,851 |
|
9,204 |
|
9,248 |
|
27,360 |
|
Elaine B. Bittner |
20,863 |
|
25,447 |
|
26,520 |
|
403 |
|
446 |
|
472 |
|
0 |
|
2,502 |
|
3,640 |
|
21,888 |
|
Jeffry M. Householder |
n/a |
|
24,351 |
|
36,918 |
|
n/a |
|
480 |
|
480 |
|
n/a |
|
665 |
|
657 |
|
14,227 |
|
During 2014, the Company provided each named
executive officer with a Company-owned vehicle that is available for
personal use, but which is treated as compensation to the named executive
officers. Each named executive officers Form W-2 that is filed with the
IRS includes imputed income for the personal use of the Company-owned
vehicle. |
|
The cash dividend amounts paid to Messrs.
McMasters, Thompson and Householder and Mmes. Cooper and Bittner in 2015
for the 2012-2014 performance period are reflected in the 2012 row in the
Summary Compensation Table, the year the share awards (on which the
dividends were based) were granted by the Compensation Committee.
Dividends were accrued on the same basis as dividends declared by the
Board each calendar quarter during the applicable years and paid on the
Companys common stock. The actual cash dividend received by each named
executive officer was determined based upon the number of shares of common
stock earned and issued to the executive for such performance
periods. |
|
Named executive officers also have the
ability to purchase propane at the same discounted rate that we offer to
our employees. |
(7) |
Mr. McMasters has served as President of the
Company since March 1, 2010. He was appointed Chief Executive Officer of
the Company effective January 1, 2011. Mr. McMasters has also served as a
director of the Company since March 1, 2010. He received no additional
compensation for serving as a director of the
Company. |
48 CHESAPEAKE UTILITIES CORPORATION - 2015 Proxy Statement
Table of Contents
Grants of Plan-Based
Awards |
The following table
reflects, for each named executive officer, the range of payouts for 2014
performance under the 2005 Cash Incentive Plan, and reflects the number of
equity incentive awards established by the Compensation Committee on January 7,
2014 for the 2014-2016 performance period. For each named executive officer, the
Compensation Committee established a target equity award with a dollar value (as
a percent of base salary) to be paid in the Companys common stock, if earned,
based on the grant date fair value of the common stock. The threshold (minimum
amount payable for a certain level of performance), target (amount payable if
the targets are reached), and maximum (maximum payout possible) award levels are
provided for each award. Additional information on these awards can be found
under the Cash Incentive
Award and Equity Incentive Award sections in our Compensation Discussion and
Analysis section in this Proxy
Statement.
|
Grants of
Plan-Based Awards |
|
Plan |
Grant
Date/Date of Compensation
Committee Action |
Grant
Date/Date
Other
Than Compensation Committee Action |
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under
Equity Incentive Plan Awards |
Grant
Date Fair Value
of Stock
Awards(1) |
Name |
|
|
|
Threshold at 50% ($) |
Target at 100% ($) |
Maximum at 150% or 200% ($)(2) |
Threshold at 50% (#) |
Target
at 100% (#) |
Maximum at 150% (#) |
($) |
Michael P. McMasters |
2014 Cash Incentive Plan 2014-2016 Equity Incentive Plan |
1/7/2014 |
n/a |
118,750 |
237,500 |
451,250 |
|
|
|
|
1/7/2014 |
n/a |
|
|
|
4,317 |
8,634 |
12,951 |
$443,867 |
Stephen
C. Thompson |
2014 Cash
Incentive Plan 2014-2016
Equity Incentive
Plan |
1/7/2014 |
n/a |
49,500 |
99,000 |
188,100 |
|
|
|
|
1/7/2014 |
n/a |
|
|
|
2,093 |
4,186 |
6,279 |
$215,208 |
Beth W. Cooper |
2014 Cash Incentive Plan 2014-2016 Equity Incentive Plan |
1/7/2014 |
n/a |
44,475 |
88,950 |
169,005 |
|
|
|
|
1/7/2014 |
n/a |
|
|
|
1,864 |
3,728 |
5,593 |
$191,670 |
Elaine B.
Bittner |
2014 Cash
Incentive Plan 2014-2016
Equity Incentive
Plan |
1/7/2014 |
n/a |
39,000 |
78,000 |
142,350 |
|
|
|
|
1/7/2014 |
n/a |
|
|
|
1,537 |
3,074 |
4,611 |
$158,043 |
Jeffry M. Householder |
2014 Cash Incentive Plan 2014-2016 Equity Incentive Plan |
n/a |
4/2/2014 |
42,300 |
84,600 |
131,130 |
|
|
|
|
n/a |
4/2/2014 |
|
|
|
1,789 |
3,578 |
5,367 |
$183,936 |
(1) |
For the 2014-2016 performance period, the
Company calculated the aggregate grant date fair value of the
performance-based equity incentive awards based on the estimated
compensation costs on the grant date. We estimated that 150 percent of the
Growth in Long-Term Earnings component and 100 percent of the Earnings
Performance component are likely to be earned. These equity incentive
awards have been recorded at the grant date fair value of $39.97 per
share, which is based on the closing price on January 7, 2014, the grant
date. The Company also evaluated the likelihood of earning the Shareholder
Return component for this performance period. We first determined the
aggregate fair value of the award using a Black-Scholes model. The
Companys total shareholder return was then compared to its peers using a
Monte Carlo stock simulation. The Monte Carlo stock simulation estimated a
percentile ranking for the Shareholder Return component of greater than 65
percent, representing a 150 percent payout. For the 2013-2015 performance
period, the performance share fair value of $36.53 was generated from the
Black-Scholes model and used to calculate the aggregate grant date value
of this component of the award. The number of actual performance shares
earned will range from 0 to 150 percent of the target performance shares
depending on actual performance as compared to the performance
goals. |
(2) |
For the 2014 cash
incentive award, Messrs. McMasters, Thompson and Householder and Mmes.
Cooper and Bittner had the opportunity to earn a maximum of 150% of the
target for the non-financial component and 200% of the target for the
financial component. |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 49
Table of Contents
Outstanding Equity
Incentive Awards |
In January 2013 and January
2014, the Compensation Committee granted performance shares to Messrs. McMasters
and Thompson and Mmes. Cooper and Bittner for the 2013-2015 and 2014-2016
performance periods, respectively. These shares were outstanding at December 31,
2014. No awards have been transferred. Please refer to the Equity Incentive Awards and Outstanding Equity Awards
(in the Compensation Discussion
and Analysis) section in this
Proxy Statement for details on these awards. The Chief Executive Officer granted
performance shares to Mr. Householder for the 2013-2015 and 2014-2016
performance periods as described in the Equity Incentive Award
section above.
The following table shows
outstanding equity awards for each named executive officer at December 31,
2014.
|
Outstanding Equity Awards
at Fiscal Year-End 2014 |
Named Executive
Officer |
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights That Have
Not Vested(1) (#) |
|
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units, or Other
Rights That Have not Vested(2) ($) |
Michael P. McMasters |
27,961 |
|
1,388,543 |
Stephen C. Thompson |
14,035 |
|
696,978 |
Beth W. Cooper |
12,454 |
|
618,466 |
Elaine B. Bittner |
10,218 |
|
507,426 |
Jeffry M.
Householder |
12,009 |
|
596,367 |
(1) |
The share amount shown represents the
maximum award levels. The number of actual performance shares to be earned
will depend on the actual performance for the applicable performance
period. |
(2) |
The market value
represents the unearned shares multiplied by $49.66, the closing market
price per share of the Companys common stock on December 31, 2014. These
shares will be earned to the extent that certain performance targets are
achieved for the award periods January 1, 2013 through December 31, 2015
and January 1, 2014 through December 31, 2016. Award levels for the
2014-2016 performance period are shown in the Grants of Plan-Based Awards
Table. |
We maintain two defined
benefit pension plans that include named executive officers. Both plans were
frozen effective January 1, 2005. On that date all benefits became fully vested
and no further benefit accruals have occurred. The plans are:
(i) |
The Pension Plan is a tax qualified plan
that was formerly available to all eligible employees and provides
benefits based on a formula that yields a monthly amount payable over the
participants life. Benefits from the Pension Plan are paid from the
Pension Plans trust, which is funded solely by the Company. Messrs.
McMasters and Thompson and Ms. Cooper have vested benefits in the Pension
Plan. |
(ii) |
The Pension SERP
provides benefits based on the Pension Plan formula applied to
compensation and benefits in excess of IRS limits. The Pension SERP is
unfunded, but is required to be funded in the event of a change in control
of the Company. Messrs. McMasters and Thompson have vested benefits in the
Pension SERP. |
The following table shows
the present value of accumulated benefits that named executive officers are
entitled to under the Pension Plan and Pension SERP:
Name |
Plan
Name |
Number of
Years Credited Service(1) (#) |
Present Value
of Accumulated Benefits(2) ($) |
Payments During
the Last Fiscal Year ($) |
Michael P. McMasters(3) |
Pension Plan |
25 |
698,533 |
0 |
|
Pension SERP |
25 |
185,033 |
0 |
Stephen C. Thompson(4) |
Pension Plan |
24 |
594,470 |
0 |
|
Pension SERP |
24 |
178,403 |
0 |
Beth W.
Cooper(4) |
Pension Plan |
17 |
132,450 |
0 |
(1) |
Number of years of
service equals total service from date of employment. Additionally, on
January 1, 2005, in conjunction with the freezing of the Pension Plan and
the Pension SERP, each employee participating in the Plans was credited
with an additional two years of service. Since the Plans are now frozen,
service and compensation on or after January 1, 2005 will not affect the
benefits available to any participant. Due to the additional two years of
credited service, the monthly accrued benefit payable at normal retirement
age from the Pension Plan increased as follows: Mr. McMasters, $522; Mr.
Thompson, $520; and Ms. Cooper, $236. The monthly accrued benefits at
normal retirement age under the Pension SERP increased as follows: Mr.
McMasters, $130 and Mr. Thompson, $117. |
50
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement
Table of Contents
(2) |
Actuarial present value is based on
assumptions and methods used to calculate the benefit obligation under
standards established by the Financial Accounting Standards Board (see
Note 16 Employee Benefit Plans in our 2014 Annual Report on Form 10-K
for further details), including: |
|
●Discount rate equal to 3.50% as of
December 31, 2014;
●Mortality rates based on the RP-2014
White Collar Mortality Table with MP-2014 Mortality Improvement
Scale;
●Long-term rate of return on Pension Plan
assets equal to 6.0%;
●Annuity at normal retirement (age 65)
except for Mr. McMasters Pension SERP which assumes a lump sum payment at
age 65; and
●Final Average Earnings equal the average of Adjusted W-2 Earnings
during the highest 60 consecutive months taken from the last 120 months
before December 31, 2004, when the Plans were frozen. Adjusted W-2
Earnings are comprised of W-2 compensation, less performance-based share
awards, plus salary deferrals, less fringe benefits. The Internal Revenue
Code places limits on annual benefit amounts and annual compensation that
can be considered under the Pension Plan; the Pension SERP provides the
executive with a benefit as if the limits did not exist. Final Average
Earnings used to compute the benefit amounts were as follows: Mr.
McMasters $293,565; Mr. Thompson $273,815; and Ms. Cooper $116,342. The
annual benefits that may be paid and the amount of annual compensation
that will be considered in connection with the Pension SERP are based on
IRS limitations for 2004 which are $165,000 and $205,000,
respectively. |
(3) |
Eligible for early retirement under both
plans. His early retirement benefits under the Pension Plan and Pension
SERP would be $3,610.07 and $895.70 per month,
respectively. |
(4) |
Not eligible for
early retirement under either plan. |
Under the Pension Plan and
Pension SERP, participants are entitled to receive benefits at the normal
retirement age of 65, based upon Final Average Earnings (defined in Note 2
above) and credited years of service (described in Note 1 above). The Pension
Plan provides a benefit up to the IRS limits and the Pension SERP provides a
benefit for amounts that would have been earned if the IRS limits did not exist.
The accrued monthly benefit for each named executive officer is determined by
calculating one-twelfth of the annual amount of (i) plus (ii), multiplied by
(iii):
(i) |
1.3 percent of the
Final Average Earnings |
(ii) |
0.625 percent of the
Final Average Earnings in excess of Covered Compensation, as defined by
the IRS |
(iii) |
Credited years of
service (but not more than 35
years) |
A participant may elect to
receive a reduced early retirement benefit beginning at age 55. The early
retirement benefit equals the normal retirement benefit reduced by one-fifteenth
for each of the first five years, and one-thirtieth for each of the next five
years by which the annuity start date precedes the normal retirement
date.
For the Pension Plan, the
normal form of benefit for a married employee is a joint and survivor annuity.
The normal form of benefit for a single employee is a life annuity. Other forms
of benefits may be elected, including a lump sum payment. Benefits under the
qualified Pension Plan and Pension SERP are not subject to any deduction for
Social Security or other offset amounts. The Pension Plan and Pension SERP also
include provisions for benefits that the participants beneficiary or spouse
would be entitled to in the event of death or disability.
Non-Qualified Deferred
Compensation |
Effective January 1, 2014,
we merged two plans (the Deferred Compensation Plan and the Chesapeake Utilities
Corporation Supplemental Executive Retirement Savings Plan) into the
Non-Qualified Deferred Plan. Prior to January 1, 2014, the plans were informally
funded in separate Rabbi Trusts. Upon the merger of the plans, the assets were
combined in the same Rabbi Trust. The Non-Qualified Deferred Plan
allows:
(i) |
The named executive
officers to defer any percentage of their performance-based stock awards.
Additionally, non-executive board members could elect to defer any
percentage of their stock retainers. Participants are entitled to deferred
stock units on the deferred performance-based shares and stock retainers.
Dividends are paid on the deferred stock units in the same proportion and
amount as dividends on the Companys common stock. These dividends are
then reinvested into additional deferred stock units. When distributed to
participants, the deferred stock units will be settled on a one-for-one
basis in shares of the Companys common stock. Deferrals of performance
based stock awards are not eligible for Company matching
contributions. |
(ii) |
The named executive officers to
defer a specified percentage (up to 80%) of their eligible cash
compensation to the Non- Qualified Deferred Plan and non-executive board
members to defer any percentage of their cash retainer and cash meeting
fees. The Company matches named
executive officer deferrals (up to 6% of eligible compensation) provided
there is no duplication of matching in the qualified 401(k) Retirement
Savings Plan. The Company also makes discretionary contributions to the
named executive officers depending upon the business unit or function the
named executive officer oversees. Discretionary contributions are made to
the applicable named executive officer during the years a discretionary
contribution was made to the qualified 401(k) Retirement Savings Plan, for
compensation that exceeds the IRS limits applicable to the qualified plan.
Participants may allocate their deferrals and the Companys contributions
among the same mutual fund choices available to all employees under the
Companys qualified 401(k) Retirement Savings Plan. The deferred
compensation will earn the applicable investment return(s) or loss(es)
that they would have earned if the dollars had actually been invested in
the funds. |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 51
Table of Contents
The Non-Qualified Deferred
Plan is required to comply with Internal Revenue Code Section 409A and
procedures established by the Compensation Committee. The requirements include
advance elections of deferral amounts. Additionally, participants must select a
distribution date and form of distribution at the time of the deferral election.
Distributions can be made in a single payment or in annual installments over 2 -
15 years (prior to 2014 installments were allowed over 5 years or 10 years). The
named executive officers will not be entitled to receive any payments until six
months after his or her date of separation, except under certain circumstances.
Payments to the participant may be accelerated in the event of death,
disability, change in control, or an unforeseeable emergency. Participants will
be individually responsible for any tax obligations related to deferring
compensation under the Non-Qualified Deferred Plan. Distributions of deferrals
of cash compensation will be paid in cash, while distributions of deferred stock
units will be paid in common stock.
All of the named executive
officers participated in the Non-Qualified Deferred Plan. The following table
reflects the aggregate balance of non-qualified deferred compensation for each
named executive officer.
|
|
Non-qualified
Deferred Compensation for the 2014 Fiscal Year |
|
|
Executive Deferrals in 2014 ($) |
|
Registrant Contributions in
2014(1) ($) |
|
Aggregate
Earnings in 2014(2)(3) ($) |
|
Aggregate Withdrawals/ Distributions in
2014 ($) |
|
Aggregate Balance
at December 31, 2014 ($) |
Michael P. McMasters |
|
67,172 |
|
32,291 |
|
492,804 |
|
0 |
|
2,649,343 |
Stephen C. Thompson |
|
36,972 |
|
14,687 |
|
34,841 |
|
0 |
|
549,673 |
Beth
W. Cooper |
|
138,299 |
|
2,674 |
|
36,476 |
|
0 |
|
444,893 |
Elaine B. Bittner |
|
43,400 |
|
4,419 |
|
18,079 |
|
0 |
|
246,445 |
Jeffry M. Householder |
|
102,159 |
|
13,627 |
|
26,430 |
|
0 |
|
366,905 |
(1) |
The Registrant Contributions in 2014 column
represents the Companys matching and supplemental contributions
associated with the Non-Qualified Deferred Plan. These dollars are
included in the All Other Compensation column of the Summary Compensation
Table. |
(2) |
As of January 1, 2014, the investment
options available under the Non-Qualified Deferred Plan are the same
choices available to all employees under the qualified 401(k) Retirement
Savings Plan. Accordingly, these amounts are not considered above-market
or preferential earnings for purposes of, and are not included in, the
2014 Summary Compensation Table. |
(3) |
Dividends on
deferred stock units in the Non-Qualified Deferred Plan are paid at the
same rate as dividends on shares of the Companys common
stock. |
Those amounts, as well as
similar awards reported in the Summary Compensation Tables in prior years and
matching contributions into the Companys Non-Qualified Deferred Plan previously
reported in the Summary Compensation Tables in prior years under All Other
Compensation, are included in the
Aggregate Balance at December 31,
2014 column and quantified below:
Name |
|
Amount included in both
Nonqualified Deferred Compensation Table and Summary Compensation
Table ($) |
|
Amount included in both
Nonqualified Deferred Compensation Table and previously reported in
Prior Years Summary Compensation Tables ($) |
Michael P. McMasters |
|
99,463 |
|
859,464 |
Stephen C. Thompson |
|
51,659 |
|
271,947 |
Beth W. Cooper |
|
140,973 |
|
246,777 |
Elaine B. Bittner |
|
47,819 |
|
93,594 |
Jeffry M.
Householder |
|
115,786 |
|
144,702 |
The Company entered into an
employment agreement with Mr. McMasters, which became effective on January 1,
2011. On January 8, 2014, the Company entered into an amendment to the
employment agreement with Mr. McMasters which became effective on January 1,
2014. The amendment extended the term of the employment agreement with Mr.
McMasters through December 31, 2015 and updated certain provisions to reflect
Mr. McMasters current compensation arrangement. The Company also entered into
new employment agreements with Mr. Thompson and Mmes. Cooper and Bittner,
effective January 1, 2013, for a three-year term. These new employment
agreements supersede and replace the previous employment agreements and
amendments. Mr. Householder was appointed as President of FPU in June 2010. The
Company and Mr. Householder entered into an employment agreement effective June
1, 2010 (the 2010 employment agreement), which was replaced with a new
agreement effective January 1, 2015 (the 2015 employment agreement), and which
is substantially the same as the employment agreements of the other named
executive officers. All of the employment agreements provide for certain
benefits if a named executive officers employment with us is voluntarily or
involuntarily terminated. The Compensation Committee has the option to renew
each of
52
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
the named executive
officers employment agreement for successive one-year terms. Each employment
agreement automatically extends upon a change in control, as specifically
defined in the employment agreement for two years from the date of a change in
control, or in the case of Mr. Householders 2010 contract, three years.
Each of the named executive
officers employment agreement contains a clawback provision. Under the clawback
provision, all or any portion of an incentive award under the 2005 Cash
Incentive Plan, 2015 Plan, and Equity Incentive Plan or any future arrangement
established by the Company is subject to repayment by the named executive
officer, if the award was calculated based upon the achievement of certain
financial results or other performance metrics that, in either case, were
subsequently found to be materially inaccurate. If the Compensation Committee
determines that the named executive officer engaged in misconduct, malfeasance
or gross negligence in the performance of his or her duties that either caused
or significantly contributed to the material inaccuracy in financial statements
or other performance metrics, there is no time limit on this right of recovery.
In all other circumstances, the right of recovery is limited to one year after
the date of payment of each award. The right of recovery of payments
automatically terminates upon a change in control except with respect to any
right of recovery that has been asserted prior to such change in
control.
Under the employment
agreements, the named executive officers are entitled to participate in all
bonus, incentive compensation and performance-based compensation plans; all
profit-sharing, savings and retirement benefit plans; all insurance, medical,
health and welfare plans; all vacation and other employee fringe benefit plans;
and other similar policies, plans or arrangements of the Company, all on a basis
that is commensurate with his or her position and no less favorable than those
generally applicable or made available to the other named executive officers.
Under the Equity Incentive Plan, each named executive officer is eligible for a
target long-term equity-based incentive award as determined on an annual basis
by the Board or Compensation Committee, as applicable, in its discretion and in
accordance with and subject to the terms of the Equity Incentive Plan. Under the
Cash Incentive Plan each named executive officer is eligible for a target
short-term cash incentive award, as determined on an annual basis by the Board
or Compensation Committee, as applicable, in its discretion and in accordance
with and subject to the terms of the 2005 Cash Incentive Plan and 2015 Plan.
All of the employment
agreements include covenants that protect our goodwill. These covenants are
effective during the time that the named executive officer is employed with us
and after termination of the agreement. These covenants relate to
confidentiality of information; non-solicitation of employees; non-solicitation
of third parties; non-competition; post-termination cooperation; and
non-disparagement. The non-solicitation and non-competition covenants remain
effective for one year after an executive officer terminates employment with us.
If the named executive officer resigns for reasons related to certain acts of
the Company after a change in control, these covenants would remain effective
for fifteen months after the resignation. For the other named executive
officers, payments upon termination (described below) are subject to compliance
with these provisions and the execution and delivery (and non-revocation) of a
release of claims against the Company and its officers, directors, employees and
affiliates. In the event that these named executive officers do not comply with
the provisions or do not deliver a release of claims, then payments upon
termination would cease and any unpaid amounts are forfeited.
Potential Payments
Upon Termination.
If the Company terminates or
elects to not renew a named executive officers employment agreement at the end
of the term of the agreement for any reason other than for cause, as
specifically defined in the employment agreements, or the named executive
officers death, then the named executive officer is entitled to receive, as
severance compensation, his or her then monthly base compensation for one year
after the termination date. The named executive officers compensation may be
decreased provided that the decrease is made on a good faith basis and with
reasonable justification. Termination for any reason other than for cause can
also be referred to as termination without cause and can be initiated by
either the named executive officer or the Company. Generally, termination
without cause can occur when the Company, acting in good faith, decreases a
named executive officers position, compensation or benefits at which time the
named executive officer may terminate his or her employment for good reason.
The reduction in compensation or benefits may not be related to a company-wide
reduction. Termination without cause can also occur if the Company terminates
the named executive officer for reasons not related to a crime involving moral
turpitude, theft from the Company, violation of non-competition or
confidentiality obligations, or, following a cure period, gross negligence in
fulfilling his or her responsibilities. Based upon a hypothetical termination
date of December 31, 2014, and assuming the termination is without cause the
named executive officers (or his or her estate) would have received a severance
benefit, as described above, as follows: Michael P. McMasters $475,000; Stephen
C. Thompson $330,000; Beth W. Cooper $296,500; Elaine B. Bittner $260,000; and
Jeffry M. Householder $282,000.
Potential Payments
Upon a Change-in-Control. The
employment agreements include provisions that are designed to help retain the
named executive officers in the event of a change in control of the Company. The
Board believes that these provisions are appropriate to address the
uncertainties and potential distractions resulting from any threatened or actual
change in control. In accordance with the agreements, a change in control occurs
upon one of several events involving the replacement of a majority of the members of our
Board, the acquisition of ownership of our stock, or the acquisition of
significant assets of the Company.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 53
Table of Contents
Under each named executive officers
employment agreements that were in effect on December 31, 2014, if a named
executive officers employment was terminated, after a change in control, by the
named executive officer for good reason or by the Company without cause, as
specifically defined in the employment agreement and as described in this
section Termination Provisions,
he or she would be
entitled to receive, in addition to the sum of all accrued but unpaid amounts
due, a single lump sum payment (provided such termination occurs within two
years of a change in control, or in the case of Mr. Householder, the shorter of
three years or the attainment of his earliest age at which compulsory retirement
is permitted under the Age Discrimination in Employment Act of 1967) in cash
based on the sum of the following:
●Current monthly base compensation multiplied by 24 (multiplied by 36 for
Mr. McMasters). For Mr. Householder, base compensation is increased annually by
the Consumer Price Index. This increase would be no less than his current base
compensation multiplied by the increase in the preceding calendar year of the
Consumer Price Index, an index published by the U.S. Bureau of Labor
Statistics.
●Average of the cash incentive awards paid over the prior three calendar
years, multiplied by two (multiplied by three for Mr. McMasters).
Upon a change in control,
each named executive officers monthly base compensation may increase by such
amounts as the Board may determine from time to time based, in part, on an
annual review of the named executive officers compensation and performance. In
no event would a named executive officers base compensation be decreased. Each
named executive officer would continue to receive health and other insurance
benefits for the remainder of the term of his or her employment agreement. If
the named executive officer is terminated, all unearned equity compensation is
also immediately earned at the maximum level. In addition, each named executive
officer would receive any benefits that he or she otherwise would have been
entitled to receive under our 401(k) Retirement Savings Plan and Non-Qualified
Deferred Plan, as of the date of termination, although these benefits are not
increased.
Under each named executive
officers performance share agreements, in the event of a change in control, the
executive earns the maximum award of performance shares available under the 2013
to 2015 agreement and the target award of performance shares available under the
2014 to 2016 agreement.
The total severance amount
payable to a named executive officer following a change in control is capped at
one dollar less than the amount that would be subject to Internal Revenue Code
Section 280G. As a result, no excise tax would be levied nor would there be any
loss of tax deductibility to the Company as a result of making the severance
payment. If the severance as computed exceeds this limitation, the amount
payable will be unilaterally reduced to the amount necessary to avoid exceeding
the limitations under Internal Revenue Code Section 280G.
Based upon a hypothetical
termination date of December 31, 2014, under the terms and conditions of the
employment agreements, estimated payments or benefits in connection with a
change in control, using $49.66, the closing market price per share of our
common stock on December 31, 2014, would have been as follows:
|
|
Michael
P. McMasters |
|
Stephen
C. Thompson |
|
Beth
W. Cooper |
|
Elaine B.
Bittner |
|
Jeffry
M. Householder |
Base
Salary (based upon severance
multiple) |
|
$
|
1,425,000 |
|
|
$
|
660,000 |
|
$
|
593,000 |
|
$
|
520,000 |
|
$
|
564,000 |
Annual Cash Bonus (based upon severance multiple)(1) |
|
$ |
799,760 |
|
|
$ |
265,923 |
|
$ |
227,154 |
|
$ |
176,717 |
|
$ |
158,634 |
Healthcare and Other Insurance
Benefits(2) |
|
$ |
54,397 |
|
|
$ |
35,884 |
|
$ |
35,855 |
|
$ |
14,222 |
|
$ |
25,048 |
Unpaid Equity Incentive
Compensation(3) |
|
$ |
782,766 |
|
|
$ |
395,368 |
|
$ |
350,649 |
|
$ |
287,432 |
|
$ |
338,334 |
Total |
|
$ |
3,061,923 |
|
|
$ |
1,357,175 |
|
$ |
1,206,658 |
|
$ |
998,371 |
|
$ |
1,086,016 |
Reduced to Not Exceed the IRC 280G
Limit(4) |
|
$ |
(278,113 |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Net Amount Payable to
Executive |
|
$ |
2,783,810 |
|
|
$ |
1,357,175 |
|
$ |
1,206,658 |
|
$ |
998,371 |
|
$ |
1,086,016 |
(1) |
The average of the cash incentive awards
under the 2005 Cash Incentive Plan for the years 2011, 2012, and 2013,
multiplied by the respective severance multiple. In addition, each named
executive officer is entitled to receive his or her applicable annual cash
incentive award that was earned in 2014 as set forth in the Non-Equity
Incentive Plan Compensation column of the Summary Compensation Table. This
table reflects Mr. Householders 2015 employment agreement. His 2010
employment agreement, specified that all of his incentive plans, whether
they are long-term or short-term, should be included. Under the 2010
employment agreement, the net amount payable to Mr. Householder would have
been $1,133,060 at December 31, 2014. |
(2) |
Based upon the expected healthcare cost per
employee for 2014, as provided by the Companys third-party administrator,
as well as the term life insurance paid by the Company, and continued
coverage for life, accidental death and dismemberment, and long-term
disability insurance. |
(3) |
This represents the maximum awards under the
2013-2015 performance period and the target awards under the 2014-2016
performance periods. The awards are valued at $49.66, the year-end closing
price. |
(4) |
The total
severance amount payable to a named executive officer following a change
in control is capped at one dollar less than the amount that would be
subject to Internal Revenue Code Section 280G. Pursuant to Section 280G,
this amount is calculated by multiplying three times the five-year average
of the executive officers W-2 compensation (or the period employed, if
less). |
54
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
Upon a change in control,
each named executive officer would be entitled to receive the amounts deferred
under the Non-Qualified Deferred Plan, in the form of a lump sum
payment.
In accordance with the
Treasury Regulations issued under Section 409A of the Internal Revenue Code,
each named executive officers employment agreement provides that if a
separation from service occurs: (i) within two years of a change in control,
benefits will be paid in a lump sum, or (ii) more than two years after the
change in control, the benefits will be paid in equal installments over a one
year period. In addition, each employment agreement provides that benefits paid
upon a separation from service will be subject to a six-month delay in the
commencement of payment if required by Section 409A of the Internal Revenue
Code. The named executive officer will pay the full amount for benefits extended
during the six-month delay period (to be reimbursed by the Company with
interest) if this delay provision applies.
EQUITY COMPENSATION PLAN
INFORMATION
As of December 31, 2014,
there were 621,176 shares authorized for issuance under the Equity Incentive
Plan. The Equity Incentive Plan was approved by the Companys stockholders in
2013.
COMPENSATION COMMITTEE
INTERLOCKS AND
INSIDER PARTICIPATION
Richard Bernstein, Chair,
Joseph E. Moore, Calvert A. Morgan, Jr. and Dianna F. Morgan serve as members of
the Compensation Committee of the Board. Each member of the Compensation
Committee is independent as required by the NYSE listing standards. No member of
the Compensation Committee, at any time, has been employed by the Company, or
been a participant in a related person transaction with the Company. There were
no Compensation Committee interlocks or insider (employee) participation during
2014.
OTHER RELEVANT
INFORMATION
A quorum must be present in
order for business to be conducted at the Annual Meeting. A quorum consists of a
majority of the shares of common stock outstanding on our record date. Shares
represented at the Meeting in person or by proxy will be counted in determining
whether a quorum exists. If you abstain or withhold your vote, your shares will
be treated as present and entitled to vote in determining the presence of a
quorum. Broker non-votes will be counted as present at the Meeting for quorum
purposes, but not voted. The Companys Inspector of Elections will tabulate the
votes and determine whether a quorum is present.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 55
Table of Contents
The following votes are
required for each proposal: (i) Election of Directors - directors are elected by
a plurality of the votes cast by the holders of the shares present in person or
represented by proxy at the Meeting. Withhold votes, abstentions, or broker
non-votes will have no effect on the outcome; (ii) Consideration of and vote on
the approval of the Companys 2015 Cash Bonus Incentive Plan Approval of the
2015 Cash Bonus Incentive Plan requires the affirmative vote of the holders of a
majority of the outstanding shares of common stock of the Company present in
person or represented by proxy and entitled to vote at the meeting. Broker
non-votes will have no effect on the outcome. Abstentions have the same effect
as a vote cast against this proposal; and (iii) Non-binding Advisory Vote to
ratify the appointment of the Companys Independent Registered Public Accounting
Firm This is a non-binding advisory vote that the Board considers when
ratifying the appointment of its independent registered public accounting firm.
Abstentions will have the same effect as a vote cast against this
proposal.
The Company will pay all
costs relating to the solicitation of proxies. We have hired Georgeson, a proxy
solicitation firm, to assist us in soliciting proxies for a fee of $9,000 plus
reasonable expenses. Proxies may be solicited by our directors, officers and
employees by personal interview, mail, telephone or e-mail. In addition, we may
engage other consultants at our expense to solicit proxies. The Notice of Annual
Meeting of Stockholders, this Proxy Statement, and the enclosed proxy card are
being furnished to our stockholders on or about March 31, 2015.
You may revoke your proxy
at any time before voting is declared closed at the Meeting by: (i) voting at
the Meeting in person; (ii) executing and delivering a subsequent proxy; (iii)
submitting another timely and later dated proxy by telephone or the internet; or
(iv) delivering a written statement to the Corporate Secretary of the Company
revoking the proxy.
Stockholders of record who
have the same last name and address and who request paper copies of the proxy
materials or Annual Report will receive only one copy of the proxy materials.
Brokers and banks that hold our stock on your behalf may provide you with one
copy of the proxy materials and Annual Report if the bank or broker is aware
that more than one stockholder at your address have the same last name or they
reasonably believe that the stockholders are members of the same family. If you
receive a notice from your broker or bank stating that they intend to send only
one copy of the proxy materials to your address, and members of your household
do not object, then you will have consented to this arrangement. Stockholders of
record that received one copy of the proxy statement or Annual Report as a
result of householding may request to receive separate copies of these materials
by contacting the Corporate Secretary at Chesapeake Utilities Corporation, 909
Silver Lake Boulevard, Dover, Delaware 19904 or (888) 742-5275. If your shares
are held through a broker or bank, you should contact the broker or bank
directly to request multiple copies of the proxy statement and Annual
Report.
To be considered for
inclusion in our proxy statement mailed in 2016, stockholder proposals must be
received in writing at our principal executive offices on or before December 1,
2015. Stockholder proposals should be directed to the Corporate Secretary at
Chesapeake Utilities Corporation, 909 Silver Lake Boulevard, Dover, Delaware
19904. A stockholder wishing to bring business before stockholders at the 2016
Annual Meeting must provide written notice to the Corporate Secretary. The
notice must be received by the Company at its principal executive offices not
earlier than the close of business on the 120th day and not later
than the close of business on the 90th day prior to the first
anniversary of the 2015 Meeting. In the event that our annual meeting is more
than 30 days before or more than 60 days after such anniversary date, you should
refer to our Bylaws for specific requirements. In accordance with our Bylaws, a
stockholders notice must include, among other things, a description of the
business to be brought before the meeting, Ownership
56
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
and Rights Information (as
defined in our Bylaws), and any other information that would be required to be
made in connection with the solicitation of proxies. A stockholders notice must
also include a representation as to the accuracy of the information that is
being provided. We have provided additional information on page 24 on the
submission of stockholder proposals for director nominees.
Annual Report on Form
10-K |
At your request, the
Company will provide, without charge, a copy of our 2014 Annual Report to
Shareholders which contains our Annual Report on Form 10-K for the year ended
December 31, 2014. The Annual Report provides financial information to our
stockholders. The Annual Report is not, and shall not be considered, soliciting
material, or be filed with the SEC nor shall this information be subject to
the liabilities of Section 18 of the Securities Exchange Act of 1934, as
amended. Please direct all written requests to the Corporate Secretary,
Chesapeake Utilities Corporation, 909 Silver Lake Boulevard, Dover, Delaware
19904.
Information about
Chesapeake |
Information about
Chesapeake Utilities Corporation and the Chesapeake family of businesses is
available at http://www.chpk.com or through our IR App. The IR App can be
downloaded for free through the App Store on an iPhone or iPad, or Google Play
on an Android mobile device by searching for Chesapeake Utilities Corporation.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 57
Table of Contents
Appendix A
CHESAPEAKE UTILITIES
CORPORATION
CASH BONUS INCENTIVE
PLAN
Effective January 1,
2015
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 Related Companies 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 Related Companies; and (c) to assist the Company and its Related
Companies in recruiting able management personnel. To accomplish these
objectives, the Plan authorizes the grant of Awards, as further described
herein. The Plan is intended, in part, to provide for performance based
compensation which is not subject to the deduction limitation rules under
Section 162(m) of the Code as in effect from time to time.
1.02 Term of the
Plan.
The Plan shall be effective
as of January 1, 2015, and shall remain in effect until terminated by the Board
or the Committee in accordance with Section 8. 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 the termination date.
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) |
Applicable Law means the requirements of Code Section
162(m) applicable to performance based compensation. |
|
(b) |
Award means a Performance Bonus Award granted
under Section 5 or a Cash Bonus Award granted under Section
6. |
|
(c) |
Beneficiary means the person or persons entitled, in
accordance with Section 9.03, to receive any benefit payable because of
the Participants death. |
|
(d) |
Board means the Board of Directors of the
Company. |
|
(e) |
Cash Bonus Award means the dollar amount granted by the
Committee and payable to a Participant in accordance with Section
6. |
|
(f) |
Change in Control means one of the following events shall have
taken place after January 1,
2015: |
|
(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 other voting
securities of the Company then outstanding) that, together with the
Company stock (or other voting securities of the Company then outstanding)
held by such person or Group, constitutes more than fifty percent (50%) of
the total fair market value or total voting power of the stock of the
Company (or other voting securities of the Company then outstanding).
However, if such person or Group is considered to own more than fifty
percent (50%) of the total fair market value or total voting power of the
stock of the Company (or other voting securities of the Company then
outstanding), the acquisition of additional Company stock (or other voting
securities of the Company then outstanding) by the same person or Group
shall not be considered to cause a Change in Control of the
Company; |
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CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
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|
|
(2) |
any one person or Group acquires (or has
acquired during the twelve (12) month period ending on the date of the
most recent acquisition by such person or persons) ownership of stock of
the Company (or other voting securities of the Company then outstanding)
possessing thirty-five percent (35%) or more of the total voting power of
the stock of the Company (or other voting securities of the Company then
outstanding) where such person or Group is not merely acquiring additional
control of the Company; |
|
|
(3) |
a majority of the members of the Board is
replaced during any twelve (12) month period by directors whose
appointment or election is not endorsed by a majority of the members of
the Board prior to the date of the appointment or election (the Incumbent
Board), but excluding, for purposes of determining whether a majority of
the Incumbent Board has endorsed any candidate for election to the Board,
any individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a person or Group other than the Board;
or |
|
|
(4) |
any one person or Group acquires (or has
acquired during the twelve (12) month period ending on the date of the
most recent acquisition by such person or Group) assets from the Company
that have a total gross fair market value equal to or more than forty
percent (40%) 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 of Control if the assets are
transferred to: |
|
|
|
(i) |
a stockholder of the Company (immediately
before the asset transfer) in exchange for or with respect to its
stock; |
|
|
|
(ii) |
an entity, fifty
percent (50%) 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; |
|
|
|
(iii) |
a person or Group that owns, directly or
indirectly, fifty percent (50%) or more of the total value or voting power
of all the outstanding stock of the Company; or |
|
|
|
(iv) |
an entity, at least fifty percent (50%) of
the total value or voting power of which is owned directly or indirectly,
by a person described in subparagraph (f)(1), above; or |
|
|
(5) |
Shareholders of the Company approve a plan
of complete liquidation or dissolution of the Company. |
|
|
|
However, no Change of 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 thirty percent (30%) of the common stock
or the business or assets of the Company; or (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. |
|
|
|
Notwithstanding the foregoing, if any
payment or distribution event applicable to an Award is subject to the
requirements of Section 409A(a)(2)(A) of the Code, the determination of
the occurrence of a Change of Control shall be governed by applicable
provisions of Section 409A(a)(2)(A) of the Code and regulations and
rulings issued thereunder for purposes of determining whether such payment
or distribution may then occur. |
|
(g) |
Code means the United States Internal Revenue
Code of 1986, as amended, and the regulations and rulings of general
applicability issued thereunder, as in effect from time to
time. |
|
(h)
|
Committee
means a committee of three
or more persons appointed by the Board 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. |
|
(i) |
Company
means Chesapeake Utilities
Corporation or any successor thereto. |
|
(j) |
Covered Employee
means an Employee who is,
or who is determined by the Committee to be likely to become, a covered
employee within the meaning of Code Section 162(m). |
|
(k) |
Disability
shall have the meaning
ascribed to such term in the long term disability plan maintained by the
Participants employer at the time that the determination regarding
Disability is made hereunder. Notwithstanding the foregoing, if a payment
under this Plan is subject to Code Section 409A, Disability has the
meaning ascribed to such term under that Code section. |
|
(l) |
Employee
means a regular, active
employee of the Company or a Related Company. Directors who are not
employed by the Company shall not be considered Employees under the Plan,
nor shall independent contractors, leased employees, consultants or anyone
else designated as not eligible to participate in the Plan by the
Committee. |
|
(m) |
Final
Bonus means the actual
Performance Bonus Award earned during a Performance Period by a
Participant, as determined by the
Committee. |
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 59
Table of Contents
|
(n) |
Participant
means an Employee who meets
the eligibility requirements of Section 4 with respect to one or more
Performance Periods. |
|
(o) |
Performance
Bonus means an Award
granted by the Committee and payable to a Participant in accordance with
Section 5. |
|
(p) |
Performance
Criteria shall have the
meaning set forth in Section 5. |
|
(q) |
Performance
Period means the twelve
month period beginning on each January 1st and ending on the next succeeding December
31st during the term
of the Plan, or such other time period established by the Committee from
time to time with respect to which the attainment of Performance Criteria
will be determined. |
|
(r) |
Plan
means the Chesapeake
Utilities Corporation Cash Bonus Incentive Plan, as set forth herein and
as amended from time to time. |
|
(s) |
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. |
|
(t) |
Retirement
means a voluntary
Termination of Employment by a Participant (other than by reason of death
or Disability and other than in the event of Termination for Cause) from
the Company and its Related Companies (i) after attaining age sixty-five
(65), or (ii) after attaining age sixty (60) and having at least ten (10)
years of continuous service with the Company and its Related Companies,
including service with a Related Company of the Company prior to the time
that such Related Company became a Related Company of the Company. For
purposes of this age and/or service requirement, the Committee may, in its
discretion, credit a Participant with additional years of age and/or
service. |
|
(u) |
Rule 16b-3
means Rule 16b-3 under the
Securities Exchange Act of 1934, as amended from time to time, or any
successor thereto. |
|
(v) |
Target Bonus
Award means the potential
Performance Bonus Award designated for a Participant in accordance with
Section 5 that would be payable to the Participant for a Performance
Period if the Performance Criteria for the Performance Period were fully
(100%) achieved and no negative discretion was exercised by the Committee
in regard to that Award. |
|
(w) |
Termination of
Employment means, for
purposes of this Plan, unless otherwise determined by the Committee,
ceasing to be an Employee (as determined in accordance with Section
3401(c) of the Code and the regulations promulgated thereunder) of the
Company and any of its Related Companies. Unless otherwise determined by
the Committee, if a Participants employment with the Company and its
Related Companies terminates but such Participant continues to provide
services to the Company in a non-employee director capacity, such change
in status shall not be deemed a Termination of Employment within the
Performance Period during which it occurs. A Participant employed by, or
performing services for, a Related Company or a division of the Company
shall be deemed to incur a Termination of Employment if, as a result of a
disaffiliation, such Related Company or division ceases to be a Related
Company or division, as the case may be, and the Participant does not
immediately thereafter become an Employee of the Company or another
Related Company. Temporary absences from employment because of illness,
vacation or leave of absence and transfers among the Company and its
Related Companies shall not be considered Terminations of Employment. In
addition, Termination of Employment shall mean a separation from service
as defined in regulations issued under Code Section 409A whenever
necessary to ensure compliance therewith for any payment of an Award
conferred under this Plan that is subject to such Code section, and, for
such purposes, shall be determined based upon a reduction in the bona fide
level of services performed to a level equal to twenty percent (20%) or
less of the average level of services performed by the Employee during the
immediately preceding 36-month period. |
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 interpretation
and administration with respect to the Plan and Awards made hereunder shall be
determined by the Committee in its sole and absolute discretion. All
determinations by the Committee shall be final and conclusive upon all persons.
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.
Notwithstanding any other provision of the Plan, the Committee shall not have
any discretion or authority to make changes to any Award that is intended to
qualify as performance-based compensation under Code Section 162(m) to the
extent that the existence of such discretion or authority would cause such Award
not to so qualify.
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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, amend, rescind and enforce any
rules and regulations it shall deem necessary or proper for the efficient
administration of the Plan; |
|
(b) |
to correct administrative
errors; |
|
(c) |
to determine the terms and provisions for
making or modifying Awards; |
|
(d) |
to make all other determinations necessary
or advisable for the administration of the Plan; |
|
(e) |
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; |
|
(f) |
except to the extent prohibited by
Applicable Law, to delegate to one or more individuals the day-to-day
administration of the Plan and any of the functions assigned to it in this
Plan, including the power to approve Awards to Employees who are not
Covered Employees; provided, however, that such delegation may be revoked
at any time and all determinations and decisions of any delegate as to any
disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive
upon all persons; and |
|
(g) |
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 shall
designate, or determine the methodology and criteria for the designation of, the
Employees who are eligible to receive an Award under the Plan. In general, only
key 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 Related Companies may
be designated. An individual who is not an Employee shall not be eligible to
participate in the Plan. Only the Committee may determine the eligibility of
Employees who are Covered Employees.
4.02 Partial Performance
Period Participation.
An Employee who becomes
eligible after the beginning of a Performance Period may participate in the Plan
for that Performance Period on a ratable basis. Such situations may include, but
are not limited to (a) new hires; or (b) when an Employee is promoted from a
position which did not previously meet the eligibility criteria. The Committee,
in its sole discretion, retains the right to prohibit or allow participation in
the initial Performance Period of eligibility for any of the aforementioned
Employees. If an Employee participates for only a portion of a Performance
Period for any reason, the Performance Criteria previously established under the
Plan for that Performance Period shall apply to any Employees who become
eligible after the beginning of the Performance Period, but his or her Award
will be prorated. Such proration shall be based on the number of days the
Employee performed services during the Performance Period while a Participant in
the Plan over the total days in the Performance Period, or some similar method
adopted by the Committee that results in a ratable reduction of the Award based
on the partial Performance Period applicable to the Employee. In addition, in
the event a Participant changes job levels during a Performance Period, the
Participants Award may be adjusted to reflect the amount of time at each job
level during the Performance Period. Notwithstanding anything in this Section
4.02 or in the Plan to the contrary, the participation in the Plan for a Covered
Employee who becomes eligible after the beginning of the Performance Period
shall comply with the provisions of Code Section 162(m), as set forth in Section
5.
4.03 No Right to
Participate.
No Participant or other
Employee shall at any time have a right to be selected for participation in the
Plan for any Performance Period, whether or not he or she previously
participated in the Plan.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 61
Table of Contents
SECTION 5. PERFORMANCE BONUS
AWARDS
5.01 Establishment of
Performance Criteria.
For each Performance
Period, the Committee will establish in writing Performance Criteria based on
one or more of the following performance measures of the Company (and/or one or
more Related Companies or operating groups of the Company, as applicable),
either individually, alternatively or in any combination, applied to either the
Company as a whole or to a Related Company, business unit, or business segment,
either individually, alternatively or in any combination, and measured over the
Performance Period, on an absolute basis or relative to a pre-established
target, to previous years results or to a designated comparison group, in each
case as specified by the Committee in the Award or by duly adopted resolution:
(i) basic or diluted earnings per share; (ii) cash flow or free cash flow or net
cash from operating activity; (iii) earnings (including gross margin, earnings
before or after interest and taxes, earnings before taxes, and net earnings);
(iv) growth in earnings or earnings per share; (v) stock price or change in
stock price; (vi) return on equity or average shareholders equity; (vii) total
shareholder return; (viii) return on capital or change in working capital; (ix)
return on assets or operating assets; (x) pre-tax or post-tax return on
investments; (xi) revenue or gross profits; (xii) revenue growth; (xiii)
earnings before interest, taxes, depreciation and amortization; (xiv) net income
or net income growth; (xv) pretax income before allocation of corporate overhead
and bonus; (xvi) operating income or net operating income or operating income
growth; (xvii) operating profit or net operating profit (whether before or after
taxes); (xviii) operating margin or operating margin growth; (xix) return on
operating revenue; (xx) working capital or net working capital; (xxi) any other
Generally Accepted Accounting Principles (GAAP) financial measures; (xxii)
market share; (xxiii) capital expenditures; (xxiv) capital expenditures as a
percentage of total capitalization; (xxv) overhead or other expense or cost
reduction; (xxvi) growth in shareholder value relative to the moving average of
a peer group or equity market index; (xxvii) credit rating; (xxviii) asset
quality; (xxix) cost saving levels; (xxx) core non-interest income; (xxxi)
strategic plan development and implementation; (xxxii) improvement in workforce
diversity; (xxxiii) customer satisfaction; (xxxiv) employee satisfaction; (xxxv)
management succession plan development and implementation; (xxxvi) employee or
customer retention; (xxxvii) system reliability; and (xxxviii) safety. Except as
otherwise provided herein, the extent to which the Performance Criteria are
satisfied will determine the amount, if any, of the Final Bonus that will be
earned by each Participant (subject to Section 5.04). The Performance Criteria
may vary for different Performance Periods and need not be the same for each
Participant eligible for a Performance Bonus Award for a Performance Period.
5.02 Adjustment of
Performance Criteria.
Once established, the
Performance Criteria shall not be changed during the Performance Period. Subject
to the requirements of Code Section 162(m) with respect to Covered Employees, at
the time a Performance Bonus Award is made and Performance Criteria are
established, the Committee is authorized to determine the manner in which the
Performance Criteria will be calculated or measured to take into account certain
factors over which Participants have no or limited control, including, but not
limited to, cumulative effects of tax or accounting changes in accordance with
U.S. generally accepted accounting principles or extraordinary charges to
income.
5.03 Grant of
Performance Bonus Awards.
For each Performance
Period, the Committee may grant to Employees eligible to participate in the
Plan, as the Committee shall determine in its sole discretion, a Target Bonus
Award which is contingent on the achievement of established Performance Criteria
during the Performance Period or, with respect to Employees who are not Covered
Employees, the occurrence of another specified event as determined by the
Committee in accordance with the terms of the Plan. In determining whether to
grant a Performance Bonus Award and the nature and amount of the Target Bonus
Award, the Committee shall consider, among other factors, the eligible
Employees responsibility level, performance, and potential cash compensation
level. In no event shall the maximum Award that may be paid to any single
Participant for any single Performance Period exceed $3,000,000 such maximum
Award amount to be pro-rated if the Performance period is less than a full
fiscal year of the Company.
Performance Criteria and
Target Bonus Awards shall be established prior to the beginning of each
Performance Period or as soon as practicable thereafter. If a Participant
commences participation after the beginning of a Performance Period, Performance
Criteria in effect for the Participants position shall apply for the remaining
balance of the Performance Period, unless otherwise determined by the Committee
within 90 days of the date the Employee became a Participant. In all cases where
the Participant is a Covered Employee, the Performance Criteria and Target Bonus
Award shall be established in no event later than 90 days following the first
day of the Performance Period or after twenty-five percent (25%) of the
Performance Period has elapsed, if earlier, and the outcome relative to the
attainment of the Performance Criteria shall not be substantially certain at the
time the Performance
62
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- 2015 Proxy
Statement
Table of Contents
Criteria and Target Bonus
Award are established. This Section 5.03 is intended to ensure compliance with
the exception from Code Section 162(m) for qualified performance-based
compensation, and shall be construed, applied and administered accordingly with
respect to any Participant who is a Covered Employee.
5.04 Final Bonus
Determinations.
At the end of each
Performance Period, the Committee shall certify in writing the extent to which
the Performance Criteria were met during the Performance Period for any
Performance Bonus Awards for Covered Employees. If the Performance Criteria for
the Performance Period are met, Covered Employees shall be entitled to the
payment of the Performance Bonus Awards, subject to the Committees exercise of
negative discretion to reduce any Final Bonus payable to a Covered Employee
based on business objectives established for that Covered Employee or other
factors as determined by the Committee in its sole discretion. With respect to
Participants who are not Covered Employees, the Committee will determine the
Final Bonus for a Performance Period based on the Performance Criteria and other
business objectives. The Committee may adjust (up or down) any Final Bonus for
Participants who are not Covered Employees on the basis of such further
considerations as the Committee shall determine in its sole discretion.
5.05 Termination of
Employment.
|
(a) |
Termination of
Employment Due to Retirement, Death or Disability. In the event of a
Participants Termination of Employment by reason of Retirement, death or
Disability during the applicable Performance Period, the Final Bonus
determined in accordance with Section 5.04 herein shall be reduced to
reflect participation prior to termination only. The Final Bonus, if any,
shall be prorated based upon the length of time that the Participant was
employed by the Company during the Performance Period. In the case of a
Participants Disability, the employment termination shall be deemed to
have occurred as of the date that the Committee determines was the date on
which the definition of Disability was satisfied. The Final Bonus thus
determined shall be paid as soon as practicable and reasonable following
the end of the Performance Period in which Termination of Employment
occurs, and shall be made at the same time payments are made to
Participants who did not incur a Termination of Employment during the
applicable Performance Period. |
|
(b) |
Termination of
Employment for Other Reasons. In the event of a Participants
Termination of Employment before the end of the Performance Period for a
reason other than due to Retirement, death, or Disability, all of the
Participants rights to any Final Bonus for that Performance Period shall
be forfeited unless otherwise determined by the Committee in its sole
discretion. If a Participant incurs a Termination of Employment for any
other reason prior to the date the Final Bonus, if any, is paid, all of
the Participants rights to any Final Bonus for that Performance Period
shall be forfeited unless otherwise determined by the Committee in its
sole discretion. Except as provided in Section 5.05(a), only Participants
who are, as of the date the Final Bonus, if any, is paid, either current,
active Employees or current Employees who are on a leave of absence
authorized by the Company shall be entitled to any Final Bonus earned for
the Performance Period. Payment of the Final Bonus shall be made at the
same time payments are made to Participants who did not have a Termination
of Employment during the applicable Performance Period. |
|
(c) |
Other Forfeiture
Events. The Committee may, in its discretion, require that all or any
portion of a Final Bonus is subject to an obligation of repayment to the
Company upon the violation of a non-competition and confidentiality
covenant applicable to the Participant. The Committee may, in its
discretion, also require repayment to the Company of all or any portion of
a Final Bonus if the amount of the Final Bonus was calculated based upon
the achievement of certain financial results that were subsequently the
subject of a financial statement restatement, the Participant engaged in
misconduct that caused or contributed to the need for the financial
statement restatement, or if the amount of the Final Bonus would have been
lower than the amount actually awarded to the Participant had the
financial results been properly reported, and the Committee shall require
repayment to the Company of any Final Bonus to the extent such repayment
is required by law. This Section 5.05(c) shall not be the Companys
exclusive remedy with respect to such matters. This Section 5.05(c) shall
not apply after a Change in Control except if required by
law. |
5.06 Payment of
Performance Bonus Awards.
Each Participants Final
Bonus, as determined by the Committee, shall be paid in cash, in one lump sum,
subject to applicable tax and other authorized withholdings, on the last
business day occurring on or before the 15th day of the third month
after the end of each Performance Period. If payment is delayed due to an
unforeseeable event or other administrative delays, payment shall in no event be
made later than the 15th day of the third month after the end of the
taxable year of the Participant in which the Final Bonus was earned. Other
withholdings may include, but not be limited to, amounts previously elected to
be deferred to a tax-qualified or non-qualified retirement or deferred
compensation plan.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 63
Table of Contents
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 as the Committee, in its
discretion, determines to be appropriate in order to reward an Employee for
exemplary performance results, as determined by the Committee in its sole
discretion. Any such Cash Bonus Awards are not intended to qualify as
performance-based compensation within the meaning of Code Section
162(m).
6.02 Payment of Cash
Bonus Awards.
After the Companys
financial results for a fiscal 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 Performance Bonus Awards
have been designated pursuant to Section 5 of the Plan. A Cash Bonus Award as
determined by the Committee shall be paid in cash, in one lump sum, subject to
applicable tax and other authorized withholdings, on the last business day
occurring on or before the 15th day of the third month after the end
of the Performance Period for which the Cash Bonus Award was granted. If payment
is delayed due to an unforeseeable event or other administrative delays, payment
shall in no event be made later than the 15th day of the third month
after the end of the taxable year of the Participant in which the Cash Bonus
Awards was earned. Other withholdings may include, but not be limited to,
amounts previously elected to be deferred to a tax-qualified or non-qualified
retirement or deferred compensation plan.
SECTION 7. PAYMENT 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 party claiming an interest in amounts earned under the Plan shall have
any right against, right to, or security or other interest in, any fund,
account, or asset of the Company or any of its Related Companies from which the
payment pursuant to the Plan may be made. The Plan is intended to constitute an
unfunded plan for incentive compensation. To the extent that any party acquires
a right to receive a payment under the Plan, such right shall be equivalent to
that of an unsecured general creditor of the Company.
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 Committee, without notice, at any time and from
time to time, may modify or amend, in whole or in part, any or all of the
provisions of the Plan, or suspend or terminate it entirely; provided, however,
that no such modification, amendment, suspension, or termination may, without
the consent of a Participant, materially reduce the right of a Participant to a
payment or distribution hereunder to which he or she has already become
entitled, as determined under Sections 5 and 6 hereof. Shareholder approval of
any amendment will be required only as required by Applicable Law. No new Award
may be granted during any period of suspension of the Plan or after termination
of the Plan.
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 (a) is not required by applicable law or necessary to meet the
requirements of Rule 16b-3, Section 162(m) of the Code or Section 409A of the
Code and (b) would have the effect of:
64
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
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(a) |
eliminating, reducing
or otherwise adversely affecting a Participants, former Participants or
beneficiarys rights with respect to any Award granted prior to the Change
in Control; |
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(b) |
altering the meaning
or operation of the definition of Change in Control in Section 2.01(f)
(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 |
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(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, (1) 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 the Company and any successor to all or
substantially all of the Companys business or assets and (2) any Performance
Bonus Award (i) shall be deemed to have been earned at the maximum annual target
amount, regardless of whether the specified Performance Criteria have been
satisfied and (ii) shall be payable immediately following the Change in Control.
These Change in Control Provisions may be altered, amended or suspended at any
time before the date on which a Change in Control occurs; provided, however,
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 or any of its Related Companies, nor shall it limit or interfere in
any way with the right of the Company or any Related Company to terminate the
employment of any Participant at any time or to increase or decrease the
compensation of any Participant. There is no obligation for uniformity of
treatment of Participants under this Plan or otherwise. No person shall have any
claim or right to be granted an Award under this Plan and the receipt of an
Award shall not give an Employee the right to receive any subsequent
Award.
9.02
Nontransferability.
No right or interest of any
Participant in the Plan shall be assignable or transferable, other than by will
or pursuant to the laws of descent and distribution, or subject to any lien,
directly, by operation of law or otherwise, including, but not limited to, by
execution, levy, garnishment, attachment, pledge, or bankruptcy, and any attempt
to take any such action shall be null and void.
9.03 Designation of
Beneficiary.
The right of the
Participant to receive any payment under this Plan will pass to the
Participants Beneficiary in the event of the Participants death. Each
Participant may designate a Beneficiary to receive the Participants Award(s) in
the event of the Participants 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 Participants 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 Participants surviving spouse, or if
the Participant has no surviving spouse, the Participants estate.
CHESAPEAKE UTILITIES
CORPORATION - 2015 Proxy
Statement 65
Table of Contents
9.04 Recipient of
Payment.
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(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. |
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(b) |
If the Committee
deems any person entitled to receive any amount under the provisions of
the Plan to be incapable of receiving or disbursing the same by reason of
minority, illness or infirmity, mental incompetence, or incapacity of any
kind, the Committee may, in its sole discretion, (1) apply such amount
directly for the comfort, support and maintenance of such person; (2)
reimburse any person for any such support theretofore supplied to the
person entitled to receive any such payment; (3) pay such amount to any
person selected by the Committee to disburse it for such comfort, support
and maintenance, including without limitation, any relative who has
undertaken, wholly or partially, the expense of such persons comfort,
care and maintenance, or any institution in whose care or custody the
person entitled to the amount may be; or (4) with respect to any amount
due to a minor, deposit such amount to his or her credit in any savings or
commercial bank of the Committees choice, direct that such distribution
be paid to the legal guardian, or if none, to a parent of such person or a
responsible adult with whom the minor maintains his or her residence, or
to the custodian for such person under the Uniform Gift to Minors Act or
Gift to Minors Act, if such payment is permitted by the laws of the state
in which the minor resides. |
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(c) |
If a payment is made
under the Plan to a third party pursuant to Section 9.04(b), above, the
Plan, the Board, 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. |
9.05
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.
9.06
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.
9.07
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.
9.08 Governing
Law.
The Plan and all agreements
hereunder shall be construed, administered, and regulated in accordance with the
laws of the State of Delaware (excluding the choice of law provisions thereof),
except as to matters pre-empted or governed by federal law.
9.09 Gender and Number.
Except where otherwise
indicated by the context, any masculine term used herein also shall include the
feminine; the plural shall include the singular, and the singular shall include
the plural.
9.10
Successors.
All obligations of the
Company under the Plan shall be binding upon and inure to the benefit of any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
66
CHESAPEAKE UTILITIES CORPORATION
- 2015 Proxy
Statement
Table of Contents
Table of Contents
Using a black ink pen, mark your votes with an
X as shown in this example. Please do not
write outside the designated areas. |
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Electronic Voting
Instructions |
Available 24 hours a
day, 7 days a week! |
Instead of mailing your
proxy, you may choose one of the voting methods outlined below to vote
your proxy. |
VALIDATION DETAILS ARE
LOCATED BELOW IN THE TITLE BAR. |
Proxies submitted by
the Internet or telephone must be received by 11:59 p.m., Eastern Daylight
Time, on May 5, 2015. |
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Vote by
Internet |
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Go to www.investorvote.com/cpk |
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Or scan the QR code to the left with your
smartphone |
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Follow the steps outlined on the secure
website |
Vote by
telephone |
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Call toll free
1-800-652-VOTE (8683) within the USA, US territories & Canada on a
touch tone telephone |
● |
Follow the instructions
provided by the recorded message |
Annual Meeting Proxy Card |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD
ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE. |
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A |
Proposals The Board recommends a vote FOR all
nominees and FOR Proposals 2 and 3. |
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Election of Directors: |
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Withhold |
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Withhold |
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01 -
Ronald G. Forsythe, Jr. |
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02 -
Eugene H. Bayard |
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03 -
Thomas P. Hill, Jr. |
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04 -
Dennis S. Hudson, III |
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05 -
Calvert A. Morgan, Jr. |
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2. |
Consider and vote on the adoption of the Companys 2015 Cash Bonus Incentive Plan. |
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3. |
Cast an advisory vote to ratify
the appointment of the Company's independent registered public accounting
firm, Baker Tilly Virchow Krause LLP. |
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Change of Address
Please print new address
below. |
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C |
Authorized
Signatures This section must be completed for your vote to be counted.
Date and Sign Below |
Please sign exactly as name(s) appears
hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, corporate officer, trustee, guardian, or custodian, please
give full title. |
Date
(mm/dd/yyyy) Please print date below. |
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Signature 1 Please keep signature within the box. |
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Signature 2 Please keep signature within the box. |
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Dear
Stockholder: |
March 30,
2015 |
You are cordially invited
to attend the Annual Meeting of Stockholders of Chesapeake Utilities Corporation
to be held at 9:00 a.m. Eastern Time on Wednesday, May 6, 2015, in the Board
Room, PNC Bank, N.A., 222 Delaware Avenue, Wilmington, Delaware. The Board of
Directors looks forward to personally greeting those stockholders who are able
to attend. The formal Notice of Annual Meeting of Stockholders and the Proxy
Statement appear on the enclosed pages and describe the matters that will be
submitted to a vote of stockholders at the meeting.
Whether or not you plan to
attend the Meeting, it is important that your shares be represented at the
Meeting. Accordingly, you are requested to promptly sign, date and mail the
attached proxy in the envelope provided.
Thank you for your
consideration and continued support.
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Sincerely, |
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RALPH J.
ADKINS |
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Chairman of the Board |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE. |
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Proxy Chesapeake Utilities
Corporation |
909 SILVER LAKE
BOULEVARD
DOVER, DELAWARE 19904
SOLICITED BY THE BOARD
OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MAY 6, 2015 AT 9:00 AM
(EASTERN TIME) IN THE BOARD ROOM
PNC BANK, N.A.
222 DELAWARE AVENUE
WILMINGTON, DELAWARE 19801
The undersigned stockholder
hereby appoints Ralph J. Adkins and Michael P. McMasters and each one of them,
with power of substitution and revocation, the proxies of the undersigned to
vote all shares in the name of the undersigned on all matters set forth in the
proxy statement and such other matters as may properly come before the Annual
Meeting and at any adjourned meeting.
THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3.
The Board of Directors
recommends a vote FOR Proposals 1, 2 AND 3.
PLEASE MARK, DATE, SIGN
AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE
SIGNED ON REVERSE SIDE
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