SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 0-593
CHESAPEAKE UTILITIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0064146
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
861 Silver Lake Boulevard, Dover, Delaware 19904
(Address of principal executive offices) (Zip Code)
(302) 734-6754
(Registrant's Telephone Number, Including Area Code)
________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Common Stock, par value $.4867 - 3,690,894 shares issued of which 10,219 are
held in treasury, as of March 31, 1995.
<PAGE>
PART I
FINANCIAL INFORMATION
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1995 1994
ASSETS (Unaudited)
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Natural gas distribution $59,454,465 $57,773,632
Natural gas transmission 24,712,918 24,546,916
Propane distribution 18,329,584 18,289,571
Information technology services and other 8,909,468 8,618,014
Gas plant acquisition adjustment 795,004 795,004
------------ ------------
Total property, plant and equipment 112,201,439 110,023,137
Less: Accumulated depreciation and amortization (35,822,253) (34,710,478)
------------ ------------
Net property, plant and equipment 76,379,186 75,312,659
------------ ------------
INVESTMENTS 1,976,988 1,641,851
------------ ------------
CURRENT ASSETS
Cash and cash equivalents 542,855 398,751
Accounts receivable, less allowance for uncollectibles 8,779,084 8,416,293
Materials and supplies, at average cost 860,797 797,147
Propane inventory, at average cost 1,086,394 1,411,384
Storage gas prepayments 1,181,594 3,467,281
Underrecovered purchased gas costs 109,025
Income taxes receivable 836,813
Prepaid expenses 476,248 855,107
Deferred income taxes 1,691,825 1,290,680
------------ ------------
Total current assets 14,618,797 17,582,481
------------ ------------
DEFERRED CHARGES AND OTHER ASSETS
Intangible assets, net of accumulated amortization 1,814,365 1,941,239
Environmental cost 7,457,002 7,462,647
Order 636 transition cost 1,840,452 2,020,732
Other deferred charges 2,092,143 2,309,008
------------ ------------
Total deferred charges and other assets 13,203,962 13,733,626
------------ ------------
TOTAL ASSETS $106,178,933 $108,270,617
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1995 1994
CAPITALIZATION AND LIABILITIES (Unaudited)
------------ ------------
CAPITALIZATION
Stockholders' equity
Common Stock, par value $.4867 per share;
(authorized 12,000,000 shares; issued 3,680,675
and 3,653,182 shares, respectively) $1,796,271 $1,785,514
Additional paid-in capital 17,143,291 16,834,823
Retained earnings 22,310,653 19,480,374
Less: Treasury stock, at cost; (10,219 and
15,609 shares, respectively) (65,378) (99,842)
Unearned compensation - restricted stock awards (748,475) (696,679)
Net unrealized loss on marketable securities (80,680) (241,609)
------------ ------------
Total stockholders' equity 40,355,682 37,062,581
Long-term debt, net of current portion 24,254,639 24,328,988
------------ ------------
Total capitalization 64,610,321 61,391,569
------------ ------------
CURRENT LIABILITIES
Current portion of long-term debt 1,236,349 1,348,080
Short-term borrowings 3,000,000 8,000,000
Accounts payable 5,178,831 7,385,590
Refunds payable to customers 832,335 567,817
Overrecovered purchased gas costs 564,123
Accrued interest 656,423 691,949
Dividends payable 828,152 803,700
Accrued income taxes 1,629,434
Other accrued expenses 2,208,072 2,225,097
------------ ------------
Total current liabilities 16,133,719 21,022,233
------------ ------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 8,673,789 8,700,472
Deferred investment tax credits 977,239 986,062
Environmental liability 6,572,641 6,642,092
Accrued pension costs 2,629,934 2,530,904
Order 636 transition liability 1,840,452 2,020,732
Other liabilities 4,740,838 4,976,553
------------ ------------
Total deferred credits and other liabilities 25,434,893 25,856,815
------------ ------------
TOTAL CAPITALIZATION AND LIABILITIES $106,178,933 $108,270,617
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
FOR THE QUARTER ENDED
MARCH 31,
1995 1994
------------ ------------
OPERATING REVENUES $30,896,798 $36,009,510
------------ ------------
OPERATING EXPENSES
Purchased gas costs 16,972,091 21,650,995
Operations 4,953,206 5,099,215
Maintenance 411,497 427,092
Depreciation & amortization 1,331,274 1,347,164
Other taxes 866,917 849,872
Income taxes 2,030,851 2,312,567
------------ ------------
Total operating expenses 26,565,836 31,686,905
------------ ------------
OPERATING INCOME 4,330,962 4,322,605
OTHER INCOME AND DEDUCTIONS 44,260 64,064
------------ ------------
INCOME BEFORE INTEREST CHARGES 4,375,222 4,386,669
INTEREST CHARGES 716,791 640,582
------------ ------------
NET INCOME $3,658,431 $3,746,087
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 3,671,041 3,598,481
============ ============
EARNINGS PER SHARE OF COMMON STOCK (1):
Net income $1.00 $1.04
============ ============
FULLY DILUTED EARNINGS PER SHARE OF COMMON STOCK (1):
Net income $0.95 $0.98
==========================
The accompanying notes are an integral part of these financial statements.
(1) See Exhibit 11 - Computation of Primary and Fully Diluted
Earnings Per Share
<PAGE>
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE QUARTER ENDED
MARCH 31,
1995 1994
------------ ------------
OPERATING ACTIVITIES
Net Income $3,658,431 $3,746,087
Adjustments to reconcile net income to net operating cash
Depreciation and amortization 1,408,387 1,427,995
Deferred income taxes, net (440,967) (601,425)
Investment tax credit adjustments (8,823) (13,704)
Employee benefits 99,030 411,218
Employee compensation from lapsing stock restrictions 103,508 91,707
Reserve for refund 219,611 195,000
Other (646,012) (383,283)
Changes in assets and liabilities:
Accounts receivable (362,791) (1,619,833)
Inventory, materials, supplies and storage gas 2,547,027 2,805,242
Prepaid expenses 378,859 196,319
Other deferred charges 257,759 (117,717)
Accounts payable (2,206,759) (1,290,386)
Refunds payable to customers 264,518 457,127
Overrecovered purchased gas costs 673,148 1,488,450
Other current liabilities 2,405,044 3,072,326
------------ ------------
Net cash provided by operating activities 8,349,970 9,865,123
INVESTING ACTIVITIES
Property, plant and equipment expenditures, net (2,348,040) (1,822,634)
Purchases of investments, net (38,826)
------------ ------------
Net cash used by investing activities (2,386,866) (1,822,634)
FINANCING ACTIVITIES
Common stock dividends net of amounts reinvested of
$100,937 and $96,806, respectively (702,763) (671,834)
Net repayments under line of credit agreements (5,000,000) (7,900,000)
Proceeds from issuance of treasury stock 69,843 61,157
Repayments of long-term debt (186,080) (128,946)
Payments under capital lease obligations (27,616)
Converted debenture bonds 4,984
------------ ------------
Net cash used by financing activities (5,819,000) (8,662,255)
NET INCREASE (DECREASE) IN CASH 144,104 (619,766)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 398,751 1,162,797
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $542,855 $543,031
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Quarterly Financial Data
The financial information included herein is unaudited. However, the
financial information reflects normal recurring adjustments, which are, in
the opinion of management, necessary for a fair presentation of the Company's
interim results. Due to the seasonal nature of the Company's business, there
are substantial variations in the results of operations reported on a
quarterly basis. Certain amounts in 1994 have been reclassified to conform
with the 1995 presentation.
2. Investments - Accounting Standard Adopted
The investment balances at March 31, 1995 and December 31, 1994 consist
primarily of an investment in the common stock of Florida Public Utilities
Company ("FPU"). The Company's ownership at March 31, 1995 and December 31,
1994, represents a 7.09% and 6.84% interest, respectively.
The Company has classified its investment in FPU as an "available for sale"
security, which requires that all unrealized gains and losses be excluded
from earnings and be reported as a separate component of stockholders'
equity, net of income taxes. At March 31, 1995 the market price per share,
cost basis per share and the unrealized loss on the investment in FPU were
$18.75, $20.05 and $133,680, respectively. In management's opinion, the
decline in the value of the stock is temporary. At December 31, 1994 the
market price per share, cost basis per share and the unrealized loss were
$16.125, $20.20 and $401,609, respectively.
3. Statement of Financial Accounting Standards No. 121
In March 1995, the Financial Accounting Standards Board issued Statement of
Accounting Standards ("SFAS") No. 121 regarding accounting for asset
impairments. This statement, which must be adopted by the Company by January
1, 1996, requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Additionally, the standard requires rate-
regulated companies to write-off regulatory assets to earnings whenever those
assets no longer meet the criteria for recognition of a regulatory asset as
defined by SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation. Adoption of SFAS No. 121 is not expected to have a material
impact on the Company's financial statements.
4. Commitments and Contingencies
FERC Order No. 636
The Company is served by three direct natural gas pipelines: Columbia Gas
Transmission ("Columbia"), Transcontinental Gas Pipe Line Corporation
("Transco") and Florida Gas Transmission Company ("FGT"). Columbia and
Transco serve the Company's natural gas transmission subsidiary, Eastern
Shore, which in turn serves the Company's local distribution companies
("LDC") located in Delaware and Maryland. FGT serves the Company's LDC in
Central Florida. In connection with the issuance of Order No. 636 ("Order")
by the FERC in April 1992, pipelines will incur transition costs in
implementing the unbundled service requirement of the Order. In order to
recover prudently incurred transition costs from its customers, each pipeline
is required to file for, and obtain, FERC approval. Eastern Shore, based on
FERC proceedings involving the recovery of gas purchased and related costs,
believes that transition costs passed on from pipelines will be similarly
recoverable through the Eastern Shore PGA mechanism for their FERC regulated
sales. Eastern Shore also has direct sales customers whose rates are
currently not regulated. All transition costs allocated to these non-
regulated sales would be required to be expensed when known and measurable.
The Company is unable to estimate Eastern Shore's portion of any future
transition costs that may be assigned by Transco and Columbia until FERC
approves their request for recovery. In the opinion of management, it is not
possible to determine the effect, if any, that any transition costs incurred
in the future would have on Eastern Shore's financial position or results of
operations. FGT has incurred transition costs, which were subsequently
approved by FERC, for invoicing over a five-year period starting on November
1, 1993. Consequently, the Company recorded a liability and an equivalent
regulatory asset, since the Company expected, and did receive in 1994,
approval to recover the cost through the PGA. The regulatory asset and
equivalent liability balances at March 31, 1995 and December 31, 1994 are
$1,983,000 and $1,840,000, respectively.
FERC PGA
On May 19, 1994, the FERC issued an Order directing Eastern Shore to refund,
with interest, what the FERC characterized as overcharges from November 1,
1992 to the current billing month. The Order also directed Eastern Shore to
file a report showing how the refund was calculated, and to revise tariff
language clarifying the PGA provisions of its tariff.
Eastern Shore filed a request for rehearing of the Order on June 20, 1994
based on what Eastern Shore believes is the FERC's erroneous interpretation
of Eastern Shore's tariff. It is Eastern Shore's position that the FERC's
Order essentially requires a retroactive change to the FERC approved PGA
procedures which Eastern Shore has consistently applied over the last six
years.
On June 21, 1994, in compliance with the FERC's Order, Eastern Shore filed:
(1) revised tariff sheets clarifying its PGA methodology and (2) two
alternative refund calculations based on the FERC's Order. The two
alternatives were filed due to what Eastern Shore believes to be an
inconsistency or contradiction with respect to the FERC's language in its
Order. On July 18, 1994 the FERC issued an "Order Granting Rehearing Solely
for the Purpose of Further Consideration." Such Order was issued only to
afford the FERC additional time for consideration of the issues raised in
Eastern Shore's request for rehearing. As of the date of this report, the
FERC has not approved either of the alternative refund calculations submitted
by Eastern Shore and has not made a final determination as to Eastern Shore's
request for rehearing. The Company is currently negotiating with the FERC to
resolve the issue. The total accrued liability at March 31, 1995 and
December 31, 1994 are $1,494,000 and $1,239,000, respectively.
Other Commitments and Contingencies
The Company and its subsidiaries are involved in certain legal actions and
claims arising in the normal course of business. The Company is also
involved in certain legal and administrative proceedings before various
governmental agencies concerning rates. In the opinion of management,
ultimate disposition of these proceedings will not have a material effect on
the consolidated financial position of the Company.
Environmental Matters
Dover Gas Light Company Site
In 1984, the State of Delaware notified the Company that a parcel of land it
purchased in 1949 from Dover Gas Light Company, a predecessor gas company,
contains hazardous substances. The State also asserted that the Company is
responsible for any clean-up and prospective environmental monitoring of the
site. The Delaware Department of Natural Resources and Environmental Control
("DNREC") investigated the site and surroundings, finding coal tar residue
and some ground-water contamination.
In October 1989, the Environmental Protection Agency Region III ("EPA")
listed the Dover Site on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA" or
"Superfund"). Under CERCLA, the State of Delaware and the Company are
potentially responsible parties ("PRP") for clean-up of the site. In July
1990, the Company entered into an agreement with EPA and DNREC to perform a
Remedial Investigation/Feasibility Study under the supervision of EPA and
DNREC to study the site and surroundings to determine any environmental
impacts. Pursuant to the agreement, the Company agreed to pay for the study
and 80% of the EPA's oversight costs. The Company submitted its reports on
the Remedial Investigation ("RI") and Feasibility Study ("FS") to EPA and
DNREC on January 25, 1993 and February 15, 1993, respectively. The Company
received extensive comments from EPA and DNREC on the RI and FS reports. The
Company submitted to the EPA and DNREC its revised RI and FS reports on May
14, 1993 and June 25, 1993, respectively. In the FS Report, Chesapeake
proposed a remedy, which involved capping the site and monitoring ground-
water quality in the surrounding area. Chesapeake's consultant estimated
that it would cost approximately $700,000 to execute this plan of
remediation.
After further discussions with the regulatory authorities, Chesapeake agreed
to undertake an additional phase study, the Ground Water Evaluation Study -
Phase III, which focused on delineating the area of maximum ground-water
impact from the site. The results of that study were submitted to EPA and
DNREC in September 1993. On February 1, 1994, EPA issued its proposed plan
of action (the "Plan"). The Plan adopted many findings of the Phase III
Study, acknowledging that the Dover Site has only impacted ground-water in a
limited area.
The Plan presented and discussed a number of remedial alternatives, including
the remedial strategy proposed by the Company in the FS. The EPA Plan
proposed a more extensive remediation strategy that involved removal of
contaminated soils from the site and drilling a series of twenty (20) wells.
EPA estimated that execution of its Plan would cost $4.9 million. The Plan
was submitted by the EPA for public comment. The 30-day public comment
period ended on April 4, 1994. During this period, the EPA received public
comments, including those submitted by the Company.
The EPA issued the site Record of Decision ("ROD") dated August 16, 1994.
The remedial action selected by the EPA in the ROD differed significantly
from the Plan. The EPA selected a remediation addressing the ground-water
contamination with a combination of hydraulic containment and natural
attenuation. Remediation selected for the soil at the site is to meet
stringent clean-up standards for the first two feet of soil and less
stringent standards for the soil below two feet. These selected levels of
remediation were not alternatives listed in the Plan, but utilized elements
proposed. In addition, the ROD incorporated many of the public comments that
were received. The ROD estimates the costs of selected remediation of
ground-water and soil at $2.7 million and $3.3 million, respectively. The
remediation selected in the ROD is substantially more limited than had been
suggested in the Plan. In the ROD, the EPA indicated that its previous $4.9
million estimate was incorrect.
On November 18, 1994, EPA issued a "Special Notice Letter" (the "Letter") to
Chesapeake and three other PRPs. The Letter included, inter alia, (1) a
demand for payment by the PRPs of EPA's past costs (currently estimated to be
approximately $300,000) and future costs incurred overseeing site work; (2)
notice of EPA's commencement of a 60-day moratorium on certain EPA response
activities at the Site; (3) a request by EPA that Chesapeake and the other
PRPs submit a "good faith proposal" to conduct or finance the work identified
in the ROD and (4) proposed consent orders by which Chesapeake and other
parties may agree to perform the good faith proposal.
In January 1995, Chesapeake submitted to the EPA a good faith proposal to
perform a substantial portion of the work set forth in the ROD, which was
subsequently rejected. It is unknown whether other PRPs will submit good
faith proposals, what such proposals might include and whether EPA would
accept such proposals. Under CERCLA, the EPA may reject any of the
proposals, and seek an administrative or order to require any or all of the
PRPs to implement the work. EPA may also do the work itself and seek
recovery of its costs in court.
The Company and the EPA are each attempting to secure voluntary performance
of part of the remediation by other parties. These parties include the State
of Delaware, which is the owner of the property and was identified in the ROD
as a PRP, and a business identified in the ROD as a PRP for having
contributed to ground-water contamination. On March 6, 1995, in order to
protect its interests, the Company filed suit in U.S. District Court for the
District of Delaware for a determination that the State of Delaware is a
liable party and for recovery from the State of costs of complying with the
ROD. The Company is also considering suit against other PRPs. In addition,
EPA has stated that it will take steps to secure prompt commencement of the
remedial design phase needed to implement the ROD. The Company therefore
anticipates further negotiations to resolve these matters among the parties
and with the government. Management is evaluating the ROD to determine the
most economic approach to implementation of the remedies selected in the ROD.
In the third quarter of 1994, the Company increased its accrued liability
recorded with respect to the Dover Site to $6.0 million from $700,000. This
amount reflects the EPA's present estimate, as stated in the ROD, for
remediation of the site according to the ROD. Future developments in the
matters discussed above would be accompanied by appropriate reductions to the
liability recorded as they occur. The Company also increased the
corresponding regulatory asset to $6.0 million. If the Company incurs
expenses of that amount in connection with undertaking the remedies selected
in the ROD, management's belief is that the Company will be equitably
entitled to contribution from other responsible parties for the greater part
of these expenses. Management also believes that any amounts not so
contributed will be recoverable in the Company's rates.
As of March 31, 1995, the Company has incurred approximately $3,177,000 in
costs relating to environmental testing and remedial action studies. In
1990, the Company entered into settlement agreements with a number of
insurance companies resulting in proceeds to fund a portion of actual
environmental costs incurred over a five to seven-year period beginning in
1990. The final insurance proceeds were requested and received in 1994. On
February 23, 1993, the Delaware Public Service Commission, consistent with
prior base rate proceedings, authorized the Company to amortize an additional
$749,971 in environmental expenses for ratemaking purposes over a seven-year
period. At March 31, 1995 the unamortized balance is approximately $527,000.
Of the $3,177,000 in costs reported above, approximately $305,000 has not
been recovered through insurance proceeds or received ratemaking treatment.
It is management's opinion that these costs incurred will be recoverable in
rates.
Salisbury Town Gas Light Site
In cooperation with the Maryland Department of the Environment ("MDE"), the
Company has completed an assessment of the Salisbury manufactured gas plant
site. The assessment determined that there was localized contamination of
ground-water. A remedial design report was submitted to MDE in November 1990
and included a proposal to monitor, pump and treat any contaminated ground-
water on-site. The Company has proposed to MDE to proceed with these
activities over a maximum period of five years, after which time any residual
environmental impacts from the site will be reevaluated. The remedial design
was approved by MDE by a letter dated July 20, 1992, subject to certain
conditions stated in that letter. The Company responded by a letter dated
August 6, 1992, objecting to certain conditions imposed by MDE. In January
1993, after negotiations between the Company and MDE, the monitoring portion
of the remedial design was revised. MDE has approved additional revisions to
the remedial action workplan, resulting in a substantial reduction in the
overall cost of this project. The MDE has approved the final remediation
processes called Air Sparging and Soil-Vapor Extraction for treating the
ground-water at the site.
The cost of remediation is estimated to be approximately $250,000 in capital
costs with yearly operating expenses of approximately $125,000. Based on
these estimated costs, the Company recorded both a liability and a deferred
regulatory asset of $642,092 on December 31, 1994 to cover the Company's
projected remediation costs for this site. The liability payout for this
site is expected to be over a five-year period. As of March 31, 1995, the
Company has incurred approximately $1,799,000 for remedial actions and
environmental studies and has charged such costs to accumulated depreciation.
In a previous rate proceeding, the Company requested and received recovery
for all costs incurred as of November 30, 1988 through base rates, including
both a ten-year amortization of these costs and rate base treatment for the
unamortized balance. As of March 31, 1995, the unamortized balance was
approximately $190,000 and will be fully amortized by May 31, 1999. In
January 1990, the Company entered into settlement agreements with a number of
insurance companies resulting in proceeds to fund a portion of actual
environmental costs incurred over a three to five-year period beginning in
1990. The final insurance proceeds were requested and received in 1992. Of
the $1,799,000 in costs reported above, approximately $841,000 has not been
recovered through insurance proceeds or received ratemaking treatment. It is
management's opinion that these costs incurred and future costs incurred, if
any, will be recoverable in rates.
Winter Haven Coal Gas Site
The Company is currently conducting investigations of a site in Winter Haven,
Florida, where the Company's predecessors manufactured coal gas earlier this
century. A Contamination Assessment Report ("CAR") was submitted to the
Florida Department of Environmental Protection ("FDEP") on July 11, 1990.
The CAR contained the results of additional investigations of conditions at
the site. These investigations confirmed limited soil and ground-water
impacts to the site. By letter dated March 26, 1991, FDEP directed the
Company to conduct additional investigations on-site to fully delineate the
vertical and horizontal extent of soil and ground-water impacts.
Additional contamination assessment activities were conducted at the site in
late 1992 and early 1993. On March 25, 1993, a Contamination Assessment
Report Addendum ("CAR Addendum") was delivered to FDEP. The CAR Addendum
concluded that soil and ground-water impacts have been adequately delineated
as a result of the additional field work. The FDEP approved the CAR and CAR
Addendum in March of 1994. The next step is a Risk Assessment ("RA") and a
Feasibility Study ("FS") on the site. The RA and FS are expected to be filed
with the FDEP during the second quarter of 1995 at an estimated cost of
$54,000. Until the RA and FS are completed and accepted as final by the
FDEP, it is not possible to determine whether remedial action will be
required by FDEP and, if so, the cost of such remediation.
The Company has spent approximately $600,000, as of March 31, 1995, on these
investigations, and expects to recover these expenses, as well as any future
expenses, through base rates. These costs have been accounted for as charges
to accumulated depreciation. The Company requested and received from the
Florida Public Service Commission ("FPSC") approval to amortize through base
rates $359,659 of clean-up and removal costs incurred as of December 31,
1986. As of December 31, 1992, these costs were fully amortized. In January
1993, the Company received approval to recover through base rates
approximately $217,000 in additional costs related to the former manufactured
gas plant. This amount represents recovery of $173,000 of costs incurred
from January 1987 through December 1992, as well as prospective recovery of
estimated future costs, which had not yet been incurred at that time. The
FPSC has allowed for amortization of these costs over a three-year period and
provided for rate base treatment for the unamortized balance. In a separate
docket before the FPSC, the Company has requested and received approval to
apply a refund of 1991 overearnings of approximately $118,000 against the
balance of unamortized environmental charges incurred as of December 31,
1992. As a result, these environmental charges were fully amortized as of
June 1994. Of the $600,000 in costs reported above, all costs have received
ratemaking treatment. The FPSC has allowed the Company to continue to accrue
for future environmental costs. At March 31, 1995, the Company has $40,000
accrued. It is management's opinion that future costs above the amount
accrued, if any, will be recoverable in rates.
Smyrna Coal Gas Site
On August 29, 1989 and August 4, 1993, representatives of DNREC conducted
sampling on property owned by the Company in Smyrna, Delaware. This property
is believed to be the location of a former manufactured gas plant. Analysis
of the samples taken by DNREC show a limited area of soil contamination.
On November 2, 1993, DNREC advised the Company that it would require a
remediation of the soil contamination under the state's Hazardous Substance
Cleanup Act and submitted a draft Consent Decree to the Company for its
review. The Company met with DNREC personnel in December 1993 to discuss the
scope of any remediation of the site and, on January 3, 1994, submitted a
proposed workplan, together with comments on the draft Consent Decree.
Initial comments from DNREC on the Work Plan were received on March 2, 1994,
appropriated revisions were prepared and the Work Plan was resubmitted.
Several additional sets of comments on the Work Plan were received from DNREC
and the final Work Plan was submitted on September 27, 1994. DNREC has
approved the Work Plan and the Consent Decree. Remediation based on the Work
Plan, is scheduled to begin in 1995, at a cost of approximately $75,000. It
is management's opinion that these and any other costs will be recoverable in
rates.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE
QUARTER ENDED MARCH 31, 1994
The Company recognized net income of $3,658,431 for the three months ended March
31, 1995, representing a decrease in net income of $87,656 as compared to the
corresponding period in 1994. As indicated in the table below, the decrease in
earnings before interest and taxes ("EBIT") is due to lower earnings by the
natural gas and propane distribution segments partially offset by higher
earnings from the natural gas transmission and the information technology
services segments.
FOR THE QUARTER ENDED MARCH 31,
1995 1994 Change
Earnings Before Interest and Taxes
Natural Gas Distribution $3,292,063 $3,336,505 $(44,442)
Natural Gas Transmission 848,008 724,601 123,407
Propane Distribution 2,005,087 2,784,988 (779,901)
Information Technology Services
and Other 290,301 (13,616) 303,917
Eliminations (73,646) (197,306) 123,660
--------- --------- -------
Total EBIT 6,361,813 6,635,172 (273,359)
Operating Income Taxes 2,030,851 2,312,567 (281,716)
Interest 716,791 640,582 76,209
Non-Operating Income, Net 44,260 64,064 (19,804)
--------- --------- -------
Net Income $3,658,431 $3,746,087 $(87,656)
========= ========= =======
Natural Gas Distribution
The natural gas distribution segment reported EBIT of $3,292,063 for the first
quarter of 1995 as compared to $3,336,505 for the corresponding period last
year, a decrease of $44,442. The decrease in EBIT is due to a decrease in gross
margin in our northern service territories being partially offset by an increase
in gross margin and operating expenses in our Florida service territory.
FOR THE QUARTER ENDED MARCH 31,
1995 1994 Change
Revenue $17,728,656 $20,816,188 $(3,087,532)
Cost of Gas 11,187,655 14,237,170 (3,049,515)
---------- ---------- ---------
Gross Margin 6,541,001 6,579,018 (38,017)
Operations & Maintenance 2,095,538 2,154,035 (58,497)
Depreciation & Amortization 596,368 530,894 65,474
Other Taxes 557,032 557,584 (552)
---------- ---------- ---------
EBIT $3,292,063 $3,336,505 $(44,442)
========== ========== ==========
The decrease in revenue and cost of gas is primarily due to a decrease in firm
sales in our northern service territories due to temperatures which were 10%
warmer in the first quarter of 1995 when compared to the corresponding period in
1994. Partially offsetting this decrease was an increase in our Florida service
territory's deliveries to phosphate customers as well as transportation sales to
two co-generation facilities that began operations in April and July of 1994.
The decrease in operations and maintenance expenses of $58,497 is due to a
decrease in employee pensions and benefits. This was partially offset by an
increase in legal fees and less administrative expenses being capitalized as
part of utility plant. Depreciation and amortization expenses increased $65,474
due to plant placed in service during the past year.
Natural Gas Transmission
The natural gas transmission segment reported EBIT of $848,008 for the first
quarter of 1995 compared to $724,601 for the corresponding period last year, an
increase of $123,407. The increase in EBIT is due to an increase in gross
margin and a decrease in operating expenses.
FOR THE QUARTER ENDED MARCH 31,
1995 1994 Change
Revenue $9,722,685 $11,958,622 $(2,235,937)
Cost of Gas 7,992,312 10,309,195 (2,316,883)
--------- ---------- ---------
Gross Margin 1,730,373 1,649,427 80,946
Operations & Maintenance 607,611 662,904 (55,293)
Depreciation & Amortization 174,239 174,445 (206)
Other Taxes 100,515 87,477 13,038
--------- ---------- ---------
EBIT $848,008 $724,601 $123,407
========= ========== =========
The decrease in revenue and cost of gas is primarily due to a 27% decrease in
the commodity cost of gas, which is passed on to our customers. The increase in
gross margin is primarily due to a 6% increase in industrial interruptible sales
volumes, as natural gas competed favorably with alternative fuels. This was
partially offset by a reduction in sales to the methanol plant, a large
industrial interruptible customer. Sales volumes and margins for this customer
were down 20% and 42%, respectively, when compared to the same period last year.
The decrease in operations and maintenance expenses of $55,293 is due to a
decrease in employee pensions and benefits, as well as maintenance expenses
related to mains, measuring and regulating stations and communication equipment.
Other taxes increased $13,038 due to plant placed in service during the past
year and payroll related taxes.
<PAGE>
Propane Distribution
The propane distribution segment recognized EBIT of $2,005,087 for the first
quarter of 1995. As compared to EBIT for the first quarter of 1994, these
results represent a decrease in earnings of $779,901, or 28%. Generating this
decrease in EBIT was a decline in gross margin, offset minimally by reduced
operating expenses.
FOR THE QUARTER ENDED MARCH 31,
1995 1994 Change
Revenue $7,333,899 $8,671,583 $(1,337,684)
Cost of Gas 3,506,842 4,055,116 (548,274)
--------- --------- ---------
Gross Margin 3,827,057 4,616,467 (789,410)
Operations & Maintenance 1,382,201 1,379,582 2,619
Depreciation & Amortization 323,525 341,500 (17,975)
Other Taxes 116,244 110,397 5,847
--------- --------- ---------
EBIT $2,005,087 $2,784,988 $(779,901)
========= ========= =========
The decrease in gross margin was a combination of volume and selling prices.
For the first quarter of 1995, gallons sold were 15% lower than the first
quarter of 1994. This decrease in volumes was a direct result of the average
temperature being 10% warmer than the same period last year. Furthermore, the
timing and magnitude of the colder temperatures in the first quarter of 1994
were not repeated in 1995. Selling prices were lower due to competition and the
lack of demand generated by warmer temperatures.
Operations and maintenance expenses increased $2,619 as a result of higher
selling and general and administrative salaries, as well as increased
maintenance costs for repairs to the delivery fleet, some of the bulk storage
facilities and idle propane tanks. Offsetting these increased expenses were
lower pension and benefit costs. Depreciation and amortization decreased by
$17,975, or 5%, as many of the vehicles obtained in prior acquisitions became
fully depreciated. Other taxes increased $5,847, or 5%, as a direct result of
the increased selling and general and administrative salaries.
Information Technology Services and Other
For the quarter ended March 31, the information technology services and other
segment recognized EBIT of $290,301 for 1995 and a loss before interest and
taxes ("LBIT") of $13,616 for 1994. This increase in EBIT of $303,917 is the
result of increased revenues and lower operating expenses.
FOR THE QUARTER ENDED MARCH 31,
1995 1994 Change
Revenue $2,292,514 $2,201,250 $91,264
Operations & Maintenance 1,671,944 1,815,614 (143,670)
Depreciation & Amortization 237,142 304,838 (67,696)
Other Taxes 93,127 94,414 (1,287)
--------- --------- -------
EBIT/LBIT $290,301 $(13,616) $303,917
========= ========= =======
Comprising the increase in revenues of $91,264 were higher training revenues and
a sale of Page-IT, the segment's billing software product for the
telecommunications industry. Partially offsetting these increased revenues were
reduced revenues on hardware. Inherent within the results of the first quarters
of 1995 and 1994, respectively, were intercompany revenues of $452,090 and
$673,279 and intercompany profits of $73,646 and $197,306. The intercompany
revenues represented 20% and 31% of the total segment's revenues for the first
quarters of 1995 and 1994, respectively. Both the intercompany revenue and
profit were down due to approximately half as many hours being spent on the
development of UtiliCIS, a customer information and billing system, during the
first quarter of 1995, as compared to the same period in 1994. Of the hours
dedicated to UtiliCIS, a greater percentage have been worked by outside
contractors on which CDS earns no margin on intercompany sales. UtiliCIS is
scheduled to be implemented in the Company's natural gas division offices in
1995.
Operations and maintenance expenses decreased $143,670, or 8%, due to the
absence of $73,166 of expenses incurred by C&A in 1994 (see Note 3 to the
Consolidated Financial Statements), as well as reduced hardware expense and
employee benefits. Hardware expense was down in response to a corresponding
decline in hardware revenue. Employee benefits fell due to employee sharing of
benefit costs. These decreased expenses were offset by increased labor and
training costs, a direct result of increased revenue. Depreciation and
amortization expenses declined $67,696, or 22%, due to certain pieces of
hardware becomming fully depreciated and C&A's dissolution.
Interest
The increase in interest expense is associated with higher short-term borrowing
balances, as compared to the same period last year, and higher interest rates on
those balances.
Non-Operating Income
The decrease of approximately $20,000 in the first quarter of 1995 was due to
the recording of a loss on the sale of certain real property in the information
technology services and other segment.
Operating Income Taxes
Income taxes decreased due to lower first quarter EBIT, as compared to last
year, and the elimination of the valuation allowance for state operating loss
carryforwards associated with the Company's propane segment. The Company
projects the utilization of all state operating loss carryforwards generated by
the propane segment in the early 1990's.
Environmental Matters
The Company continues to work with federal and state environmental agencies to
assess the environmental impacts and explore corrective action at several former
gas manufacturing plant sites (see Note 4 to the Consolidated Financial
Statements). The Company believes that any future costs associated with these
sites will be recoverable in rates.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements reflect the capital intensive nature of its
business and are attributable principally to its construction program and the
retirement of its outstanding debt. The Company relies on funds provided by
operations and short-term borrowings to meet normal working capital requirements
and temporarily finance capital expenditures. During the first three months of
1995, the Company's net cash flow provided by operating activities, net cash
used by investing activities and net cash used by financing activities were
approximately $8,350,000, $2,387,000 and $5,819,000, respectively. Due to the
seasonal nature of the Company's business, there are substantial variations in
the results of operations reported on a quarterly basis.
The Board of Directors has authorized the Company to borrow up to $14,000,000
from banks and trust companies. As of March 31, 1995, the Company had four
$8,000,000 unsecured bank lines of credit. Funds provided from these lines of
credit are used for short-term cash needs to meet seasonal working capital
requirements and to fund portions of its capital expenditures. The outstanding
balances of short-term borrowings at March 31, 1995 and 1994 were $3,000,000 and
$1,000,000, respectively.
During the three months ended March 31, 1995 and 1994, net property, plant and
equipment expenditures were approximately $2,348,000 and $1,823,000,
respectively. For 1995, the Company has budgeted $16.6 million for capital
expenditures. The components of this amount include $11.9 million for natural
gas distribution, $1.7 million for natural gas transmission, $1.8 million for
propane distribution, $1.0 million for Skipjack, Inc. and the remaining $200
thousand for computer equipment. The natural gas and propane expenditures are
for expansion and improvement of their existing service territories. The
expenditures for Skipjack are for construction and improvements. Financing of
the 1995 construction will be provided primarily by short-term borrowings and
cash from operations. The construction program is subject to continuous review
and modification by management. Actual construction expenditures may vary from
the above estimates due to a number of factors including inflation, changing
economic conditions, regulation, load growth and the cost and availability of
capital.
The Company expects to incur environmental related expenditures in the future
(see Note 4 to the Consolidated Financial Statements), a portion of which may
need to be financed through external sources. Management does not expect such
financing to have a material adverse effect on the financial position or capital
resources of the Company.
As of March 31, 1995, common equity represented 62.5% of permanent
capitalization, compared to 60.4% as of December 31, 1994. The Company remains
committed to maintaining a sound capital structure and strong credit ratings in
order to provide the financial flexibility needed to access the capital markets
when required. This commitment, along with adequate and timely rate relief for
the Company's regulated operations, helps to ensure that the Company will be
able to attract capital from outside sources at a reasonable cost. The
achievement of these objectives will provide benefits to customers and
creditors, as well as the Company's investors.
PART II
OTHER INFORMATION
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
Item 1: Legal Proceedings
See Note 4 to Financial Statements
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6(a): Exhibits
Exhibit 10(a) - Executive Employment Agreement dated March 26, 1995,
by and between Chesapeake Utilities Corporation and Jeremy D. West,
filed herewith.
Exhibit 10(b) - Executive Employment Agreement dated March 26, 1995,
by and between Chesapeake Utilities Corporation and Philip S.
Barefoot, filed herewith.
Exhibit 11 - Computation of Primary and Fully Diluted Earnings Per
Share is submitted herewith.
Item 6 (b): Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHESAPEAKE UTILITIES CORPORATION
/s/ John R. Schimkaitis
- -----------------------
John R. Schimkaitis
Senior Vice President and Assistant Treasurer
(Principal Financial and Accounting Officer)
Date: May 11, 1995
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
EXHIBIT 10(A)
EXECUTIVE EMPLOYMENT AGREEMENT
AN EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") dated this 26th day of
March, 1995, by and between Chesapeake Utilities Corporation, a Delaware
corporation (the "Company"), and Jeremy D. West ("Executive").
WITNESSETH:
WHEREAS, the Company is currently obtaining the benefit of Executive's
services as a full-time executive employee in the capacity of Vice-President -
Propane;
WHEREAS, the Company's Board of Directors (the "Board") has authorized
the Company to agree to provide for Executive's continued employment pursuant
to the terms of this Agreement; and
WHEREAS, Executive is willing, in consideration of the covenants
hereinafter provided, to continue to be employed by the Company in the
capacity of Vice-President - Propane and to render services incident to such
position during the term of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Company and Executive hereby agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive
agrees to accept employment, as an executive officer of the Company in the
capacity of Vice-President Propane with such reasonable duties and
responsibilities as are set forth in the By-laws of the Company as of the date
hereof, including, but not limited to, the formulation, implementation and
execution of policies and procedures for the Company's propane operations.
2. Term.
(a) Term of Agreement. The term of this Agreement ("Term")
shall be the Initial Term (as defined in Paragraph 2(b) hereof), and, if
applicable, the Extended Term (as defined in Paragraph 2(c) hereof).
(b) Initial Term. Subject to Paragraph 2(c) hereof, the Initial
Term of this Agreement shall extend until March 26, 1997.
(c) Extended Term. Upon the occurrence of a Change in Control
(as defined in Paragraph 2(d) hereof), the Initial Term shall end and the Term
of this Agreement shall thereupon automatically be extended, commencing on the
date of such Change in Control, for the shorter of five years or the period
until Executive attains the earliest age at which his compulsory retirement
is permitted under section 12(c) of the Age Discrimination in Employment Act
of 1967, as amended, 29 U.S.C. section 631(c), or its successor (such extended
five-year or shorter term constituting the "Extended Term").
(d) Change In Control. For the purposes of this Agreement,
Change in Control shall mean a change in the control of the Company during the
Term of this Agreement, which shall be deemed to have occurred if:
(i) The registration of the Company's voting securities
under the Securities Exchange Act of 1934, as amended (the "1934
Act"), terminates or the Company shall have fewer than 300
stockholders of record; or
(ii) any person or group (within the meaning of Sections
13(d) and 14(d) of the 1934 Act), other than the Company or any of
its majority-controlled subsidiaries, becomes the beneficial owner
(within the meaning of Rule 13d-3 under the 1934 Act) of 30
percent or more of the combined voting power of the Company's then
outstanding voting securities; or
(iii) a tender offer or exchange offer (other than an offer
by the Company or a majority-controlled subsidiary), pursuant to
which 30 percent or more of the combined voting power of the
company's then outstanding voting securities was purchased,
expires; or
(iv) the stockholders of the Company approve an agreement
to merge or consolidate with another corporation (other than a
majority-controlled subsidiary of the Company) unless the
stockholders of the Company immediately before the merger or
consolidation are to own more than 70 percent of the combined
voting power of the resulting entity's voting securities; or
(v) the Company's stockholders approve an agreement
(including, without limitation, a plan of liquidation) to sell or
otherwise dispose of all or substantially all of the business or
assets of the Company; or
(vi) during any period of two consecutive years,
individuals who, at the beginning of such period, constituted the
Board cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for election by the
Company's stockholders of each new director was approved by a vote
of at least two-thirds of the directors then still in office who
were directors at the beginning of the period; or
(vii) the acquisition of direct or indirect beneficial
ownership of more than 15 percent of the Company's then
outstanding voting securities by any person or group is approved
over the formal objection of the Company by the Securities and
Exchange Commission pursuant to Section 9 of the Public Utility
Holding Company Act of 1935, as amended.
However, no Change in Control shall be deemed to have occurred by reason of
any event involving a transaction in which Executive, or a group of persons or
entities with which Executive acts in concert, acquires, directly or
indirectly, more than 30 percent of the common stock or the business or assets
of the Company; any event involving or arising out of a proceeding under Title
11 of the United States Code (or the provisions of any future United States
bankruptcy law), an assignment for the benefit of creditors or an insolvency
proceeding under state or local law; or any event constituting approval by the
Company's stockholders of a merger or consolidation if a majority of the group
consisting of the President and Vice Presidents of the Company who are parties
to agreements conferring rights upon a Change in Control shall have agreed in
writing prior to such approval that that approval shall be deemed not to
constitute a Change in Control.
3. Time. Executive agrees to devote all reasonable full time and
best efforts for the benefit of the Company and any subsidiary of the Company,
and not to serve any other business enterprise or organization in any capacity
during the Term hereof without the prior written consent of the Company, which
consent shall not be unreasonably withheld.
4. Office.
(a) Initial Term. During the Initial Term, the Company shall
elect Executive as its Vice-President - Propane.
(b) Extended Term. During the Extended Term of this Agreement:
(i) Executive shall hold and perform an office with the
responsibility, importance and scope within the Company at least
equal to that of the office described and contemplated in
Paragraph 1 hereof; and
(ii) Executive's office shall be located in
Dover, Delaware, and Executive shall not be required, without his
written consent, to change his office location or to be absent
therefrom on business for more than 60 working days in any year.
5. Compensation.
(a) Initial Term. The Company shall compensate Executive for his
services hereunder during the Initial Term at a rate of $130,000 per annum,
payable in equal semimonthly installments, or such greater or lesser amount as
the Board may determine ("Base Compensation"). The Base Compensation rate
shall be reviewed annually and may be increased or decreased from time to
time.
(b) Extended Term. During the Extended Term, the Company shall
compensate Executive for his services hereunder at a rate per annum, payable
in equal semi-monthly installments, equal to his Base Compensation at the time
the Extended Term commences, increased:
(i) effective on each anniversary of the date of this
Agreement during the Extended Term by an amount equal to the
product of such Base Compensation times the increase in the
preceding calendar year of the Consumer Price Index for Urban Wage
Earners and Clerical Workers for the Philadelphia metropolitan
region as reported by the U.S. Department of Labor (or, if such
index is no longer reported, the corresponding increase in a
comparable index); and
(ii) by such additional amounts as the Board may determine
from time to time based, in part, on an annual review of
Executive's compensation.
6. Expenses. During the Term of this Agreement, the Company shall
pay all necessary and reasonable business expenses incurred by Executive on
behalf of the Company in the course of his employment hereunder, including,
without limitation, expenses incurred in the conduct of the Company's business
while away from his domicile and expenses for travel, meals, lodging,
entertainment and related expenses that are for the benefit of the Company.
7. Other Benefits.
(a) Executive shall be entitled to participate in any
profit-sharing, insurance, medical and retirement benefit plans, together with
vacation and other employee benefits of the Company, now in effect or as
hereafter amended or established in accordance with the terms and provisions
of such plans.
(b) The Company shall furnish Executive with a suitable office,
the secretary of Executive's choice and customary furniture and furnishings
for such office. The Company further agrees that Executive shall have the use
of a Company-owned or Company-leased and -maintained automobile, new every
three years, of a kind and model appropriate to his position with the Company.
(c) Nothing in this Agreement shall preclude the Company from
amending or terminating any employee benefit plan or practice, but, it being
the intent of the parties that the Executive shall continue to be entitled
during the Extended Term to benefits and perquisites as set forth in
Paragraphs 7(a) and 7(b) hereof at least equal to those attached to his
position on the date of this Agreement, nothing in this Agreement shall
operate as, or be construed to authorize, a reduction during the Extended Term
without Executive's written consent in the level of such benefits or
perquisites as in effect on the date of a Change in Control. If and to the
extent that such benefits or perquisites are not payable or provided to
Executive under any such plan or practice by reason of an amendment thereto or
termination thereof during the Extended Term, the Company shall pay or provide
such benefits or perquisites to Executive.
8. Termination.
(a) Termination for Cause. This Agreement and Executive's
employment hereunder may be terminated by the Company at any time for Cause.
During the Initial Term, Cause shall be as the Board may reasonably determine.
During the Extended Term, termination of this Agreement and the Executive's
employment shall be deemed to have been for Cause only if it shall have been
the result of:
(i) conduct by Executive that constitutes a felony under
the laws of the United States or a state in which Executive works
or resides;
(ii) an act or acts of dishonesty by Executive resulting or
intended to result directly or indirectly in material gain to or
personal enrichment of Executive at the Company's expense;
(iii) a deliberate and intentional refusal by Executive
during the Extended Term (except by reason of incapacity due to
illness or accident) to comply with the provisions of Paragraph 1
hereof, provided that such breach shall have resulted in
demonstrably material injury to the Company and the Executive
shall have failed to remedy such breach within thirty days after
notice from the Secretary of the Company demanding that the
Executive remedy such breach; or
(iv) the engagement in conduct by Executive that is
materially injurious to the Company if such conduct was undertaken
without good faith and the reasonable belief that such conduct was
in the best interest of the Company.
(b) Termination During Extended Term. During the
Extended Term of this Agreement, the term "Termination" shall mean:
(i) Termination by the Company of Executive's employment;
or
(ii) Termination by Executive of his employment following
the occurrence of any of the following events:
(A) Failure to elect or reelect Executive to, or
removal of Executive from, the office or offices set forth
in Paragraph 1 hereof, or to or from the Board if Executive
shall have been a member of the Board immediately prior to a
Change in Control of the Company;
(B) Executive's good-faith determination that there
has been a significant change in the nature or scope of his
authorities, powers, functions, duties or responsibilities
attached to the positions contemplated in Paragraph 1 hereof
or a reduction in his compensation as provided in Paragraph
5 hereof or his benefits as provided in Paragraph 7, which
change or reduction is not remedied within thirty days after
notice to the Company by Executive;
(C) Any other breach by the Company of any provision
of this Agreement (including, without limitation, relocation
of Executive in violation of Paragraph 4(b) hereof), which
breach is not remedied within thirty days after notice to
the Company by Executive; or
(D) The liquidation, dissolution, consolidation or
merger of the Company or transfer of all or a significant
portion of its assets unless a successor or successors (by
merger, consolidation or otherwise) to which all or a
significant portion of its assets has been transferred shall
have assumed all duties and obligations of the Company under
this Agreement;
provided that in any event set forth in this Paragraph 8(b)(ii),
Executive shall have elected to terminate his employment under this
Agreement upon not less than forty and not more than ninety days' notice
to the Board, attention of the Secretary, given, except in the case of a
continuing breach, within three calendar months after (1) failure to be
so elected or reelected, or such removal, (2) expiration of the 30-day
cure period with respect to such event, or (3) the closing date of such
liquidation, dissolution, consolidation, merger or transfer of assets.
An election by Executive to terminate his employment under the
provisions of this Paragraph shall not be deemed a voluntary termination of
employment by Executive for the purpose of this Agreement or any plan or
practice of the Company.
(c) Payment Upon Termination. In the event of a Termination of
this Agreement during the Extended Term hereof for any reason other than Cause
or Executive's death, the Company shall, subject to Paragraph 9 hereof, pay to
Executive (or, in the event of his death following the Termination, his legal
representative) in cash within thirty days after the date of such Termination
(the "Termination Date"):
(i) An amount equal to the product of multiplying the
monthly rate of Base Compensation to which Executive was entitled
under Paragraph 5(b) hereof on the day immediately prior to the
Termination Date by the lesser of (A) twenty-four months or (B)
the number of months remaining in the Term of this Agreement (the
shorter of such periods constituting the "Covered Period");
(ii) An amount equal to the present value of the additional
benefits that would have been paid Executive under the Company's
retirement plans if he had continued to be employed pursuant to
this Agreement during the Covered Period and the retirement plans
had continued during such period without change from the date of
the Change in Control;
(iii) For each share of Company stock subject to a stock
option that was awarded to Executive under a Company stock option
plan, was held by Executive on the day immediately prior to his
Termination Date, was not exercisable on that date but would have
become exercisable during the Covered Period if Executive's
employment with the Company had continued during that period, an
amount equal to the excess of (A) the daily average closing price
for a share of the Company's stock on NASDAQ or, if so listed, on
a national securities exchange during the 30-day period ending
upon the date of the Change in Control, or, if higher, during the
30-day period ending upon the Termination Date (adjusted as
appropriate for any changes in the capital structure of the
Company) over (B) the option price for a share of the Company's
stock subject to the option; and
(iv) An amount equal to the aggregate of the Company's
contributions to the Company's savings plan in respect of
Executive that were not vested on the day immediately prior to the
Termination Date but that would have been vested at the end of the
Covered Period if Executive had remained employed by the Company
for the duration of that period.
For purposes of calculating the present value specified in Paragraph 8(c)(ii),
the discount rate shall equal the PBGC interest rate for immediate annuities,
as referred to in 29 C.F.R. section 2619.26(b)(2)(iv) or its successor, in
effect for a valuation date coinciding with the Termination Date. If that rate
should no longer be published, the discount rate shall be such closely
comparable interest rate as the Company may reasonably determine.
9. Maximum Payment Upon Termination. Notwithstanding any other
provision of this Agreement, if the Company should determine, in consultation
with tax advisors satisfactory to Executive, that any amount payable to
Executive pursuant to Paragraph 8 of this Agreement, either alone or in
conjunction with any payments or benefits to or on behalf of Executive
pursuant to this Agreement or otherwise, would not be deductible by the
Company, in whole or in part, for federal income tax purposes by reason of
section 280G of the Internal Revenue Code or its successor, then the aggregate
amount payable to Executive pursuant to Paragraph 8 shall be reduced to the
largest amount that, in the opinion of such tax advisors, the Company could
pay Executive under Paragraph 8 without any part of that amount being
nondeductible by the Company as a result of Section 280G or its successor.
10. Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement either by seeking other
employment or otherwise. The amount of any payment provided for herein shall
not be reduced by any remuneration that Executive may earn from employment
with another employer or otherwise following his Termination Date.
11. Noncompetition Covenant. For a period of one year following the
Termination Date and, if Executive has given a notice pursuant to Paragraph
8(b)(ii) hereof, for a period of 15 months following the giving of such
notice, Executive shall assist no individual or entity other than the Company
to acquire any entity with respect to which a proposal to acquire was
presented to the Board prior to the beginning of the period.
12. Indemnification. The Company shall indemnify Executive to the
fullest extent permitted by applicable Delaware law (as may be amended from
time to time), including the advance of expenses permitted therein.
13. Performance. The failure of either party to this Agreement to
insist upon strict performance of any provision hereof shall not constitute a
waiver of its rights subsequently to insist upon strict performance of such
provision or any other provision of this Agreement.
14. Non-Assignability. Neither party shall have the right to assign
this Agreement or any rights or obligations hereunder without the consent of
the other party.
15. Invalidity. If any provisions of this Agreement shall be found to
be invalid by any court of competent jurisdiction, such finding shall not
affect the remaining provisions of this Agreement, all of the which shall
remain in full force and effect.
16. Arbitration and Legal Fees. In the event of any dispute regarding
a refusal or failure by the Company to make payments or provide benefits
hereunder for any reason, Executive shall have the right, in addition to all
other rights and remedies provided by law, to arbitration of such dispute
under the rules of the American Arbitration Association, which right shall be
invoked by serving upon the Company a notice to arbitrate, stating the place
of arbitration, within ninety days of receipt of notice in any form
(including, without limitation, failure by the Company to respond to a notice
from Executive within thirty days) that the Company is withholding or proposes
to withhold payments or provisions of benefits. In the event of any such dis-
pute, whether or not Executive exercises his right to arbitration, if it shall
ultimately be determined that the Company's refusal or failure to make
payments or provide benefits hereunder was wrongful or otherwise inconsistent
with the terms of this Agreement, the Company shall indemnify and hold
harmless Executive from and against any and all expenses incurred in
connection with such determination, including legal and other fees and
expenses. Without limitation of or by the foregoing, the Company shall,
within 10 days after notice from Executive, provide Executive with an
irrevocable letter of credit in the amount of $100,000 from a bank
satisfactory to Executive against which Executive may draw to pay legal fees
and other fees and expenses in connection with any attempt by Executive to
enforce any of his rights under this Agreement during the Extended Term. Said
letter of credit shall not expire before 10 years following the date of this
Agreement.
17. Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive (and his personal representative), the Company and
any successor organization or organizations that shall succeed to
substantially all of the business and property of the Company, whether by
means of merger, consolidation, acquisition of substantially all of the assets
of the Company or otherwise, including by operation of law.
18. Set-off. The Company shall have no right of set-off or
counterclaim in respect of any claim, debt or obligation against any payments
or benefits provided for in this Agreement.
19. Amendments. No Amendment to this Agreement shall be effective
unless in writing and signed by both the Company and Executive.
20. Governing Law. This Agreement shall be interpreted and enforced
in accordance with the laws of the State of Delaware.
21. Notices. Unless otherwise stated herein, all notices hereunder
shall be in writing and shall be deemed to be given when personally delivered
or mailed by United States registered or certified mail, postage prepaid, to,
if to the Company, 861 Silver Lake Boulevard, Cannon Building, Dover, Delaware
19901, and, if to Executive, the last address therefor shown on the records of
the Company. Either the Company or Executive may, by notice to the other,
designate an address other than the foregoing for the receipt of subsequent
notices.
22. Withholding. The Company may withhold from any amounts payable to
Executive hereunder all federal, state, city or other taxes that the Company
may reasonably determine are required to be withheld pursuant to any
applicable law or regulation.
23. Nature of Payments Upon Termination. All payments to Executive
pursuant to Paragraphs 8 and 9 of this Agreement shall be considered as
liquidated damages or as severance payments in consideration of Executive's
past services to the Company, and no such payment shall be regarded as a
penalty to the Company.
24. Acknowledgment. The parties hereto each acknowledge that each has
read this Agreement and understands the same and that each enters into this
Agreement freely and voluntarily.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CHESAPEAKE UTILITIES CORPORATION
[CORPORATE SEAL] /S/ Ralph J. Adkins
President & Chief Executive Officer
ATTEST:
/S/ William C. Boyles
Asst. Secretary EXECUTIVE
/S/ Jeremy D. West
<PAGE>
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
EXHIBIT 10(B)
EXECUTIVE EMPLOYMENT AGREEMENT
AN EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") dated this 26th day of
March, 1995, by and between Chesapeake Utilities Corporation, a Delaware
corporation (the "Company"), and Philip S. Barefoot ("Executive").
WITNESSETH:
WHEREAS, the Company is currently obtaining the benefit of Executive's
services as a full-time executive employee in the capacity of Senior Vice
President - Natural Gas Operations;
WHEREAS, the Company's Board of Directors (the "Board") has authorized
the Company to agree to provide for Executive's continued employment pursuant
to the terms of this Agreement; and
WHEREAS, Executive is willing, in consideration of the covenants
hereinafter provided, to continue to be employed by the Company in the
capacity of Senior Vice President - Natural Gas Operations and to render
services incident to such position during the term of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Company and Executive hereby agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive
agrees to accept employment, as an executive officer of the Company in the
capacity of Senior Vice President - Natural Gas Operations with such
reasonable duties and responsibilities as are set forth in the By-laws of the
Company as of the date hereof, including, but not limited to, developing
policies and procedures for and directing the operation of the Company's
Natural Gas Transmission, Distribution and Engineering operations.
2. Term.
(a) Term of Agreement. The term of this Agreement ("Term")
shall be the Initial Term (as defined in Paragraph 2(b) hereof), and, if
applicable, the Extended Term (as defined in Paragraph 2(c) hereof).
(b) Initial Term. Subject to Paragraph 2(c) hereof, the Initial
Term of this Agreement shall extend until March 26, 1997.
(c) Extended Term. Upon the occurrence of a Change in Control
(as defined in Paragraph 2(d) hereof), the Initial Term shall end and the Term
of this Agreement shall thereupon automatically be extended, commencing on the
date of such Change in Control, for the shorter of five years or the period
until Executive attains the earliest age at which his compulsory retirement
is permitted under section 12(c) of the Age Discrimination in Employment Act
of 1967, as amended, 29 U.S.C. section 631(c), or its successor (such extended
five-year or shorter term constituting the "Extended Term").
(d) Change In Control. For the purposes of this Agreement,
Change in Control shall mean a change in the control of the Company during the
Term of this Agreement, which shall be deemed to have occurred if:
(i) The registration of the Company's voting securities
under the Securities Exchange Act of 1934, as amended (the "1934
Act"), terminates or the Company shall have fewer than 300
stockholders of record; or
(ii) any person or group (within the meaning of Sections
13(d) and 14(d) of the 1934 Act), other than the Company or any of
its majority-controlled subsidiaries, becomes the beneficial owner
(within the meaning of Rule 13d-3 under the 1934 Act) of 30
percent or more of the combined voting power of the Company's then
outstanding voting securities; or
(iii) a tender offer or exchange offer (other than an offer
by the Company or a majority-controlled subsidiary), pursuant to
which 30 percent or more of the combined voting power of the
company's then outstanding voting securities was purchased,
expires; or
(iv) the stockholders of the Company approve an agreement
to merge or consolidate with another corporation (other than a
majority-controlled subsidiary of the Company) unless the
stockholders of the Company immediately before the merger or
consolidation are to own more than 70 percent of the combined
voting power of the resulting entity's voting securities; or
(v) the Company's stockholders approve an agreement
(including, without limitation, a plan of liquidation) to sell or
otherwise dispose of all or substantially all of the business or
assets of the Company; or
(vi) during any period of two consecutive years,
individuals who, at the beginning of such period, constituted the
Board cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for election by the
Company's stockholders of each new director was approved by a vote
of at least two-thirds of the directors then still in office who
were directors at the beginning of the period; or
(vii) the acquisition of direct or indirect beneficial
ownership of more than 15 percent of the Company's then
outstanding voting securities by any person or group is approved
over the formal objection of the Company by the Securities and
Exchange Commission pursuant to Section 9 of the Public Utility
Holding Company Act of 1935, as amended.
However, no Change in Control shall be deemed to have occurred by reason of
any event involving a transaction in which Executive, or a group of persons or
entities with which Executive acts in concert, acquires, directly or
indirectly, more than 30 percent of the common stock or the business or assets
of the Company; any event involving or arising out of a proceeding under Title
11 of the United States Code (or the provisions of any future United States
bankruptcy law), an assignment for the benefit of creditors or an insolvency
proceeding under state or local law; or any event constituting approval by the
Company's stockholders of a merger or consolidation if a majority of the group
consisting of the President and Vice Presidents of the Company who are parties
to agreements conferring rights upon a Change in Control shall have agreed in
writing prior to such approval that that approval shall be deemed not to
constitute a Change in Control.
3. Time. Executive agrees to devote all reasonable full time and
best efforts for the benefit of the Company and any subsidiary of the Company,
and not to serve any other business enterprise or organization in any capacity
during the Term hereof without the prior written consent of the Company, which
consent shall not be unreasonably withheld.
4. Office.
(a) Initial Term. During the Initial Term, the Company shall
elect Executive as its Senior Vice President.
(b) Extended Term. During the Extended Term of this Agreement:
(i) Executive shall hold and perform an office with the
responsibility, importance and scope within the Company at least
equal to that of the office described and contemplated in
Paragraph 1 hereof; and
(ii) Executive's office shall be located in
Dover, Delaware, and Executive shall not be required, without his
written consent, to change his office location or to be absent
therefrom on business for more than 60 working days in any year.
5. Compensation.
(a) Initial Term. The Company shall compensate Executive for his
services hereunder during the Initial Term at a rate of $105,000 per annum,
payable in equal semimonthly installments, or such greater or lesser amount as
the Board may determine ("Base Compensation"). The Base Compensation rate
shall be reviewed annually and may be increased or decreased from time to
time.
(b) Extended Term. During the Extended Term, the Company shall
compensate Executive for his services hereunder at a rate per annum, payable
in equal semi-monthly installments, equal to his Base Compensation at the time
the Extended Term commences, increased:
(i) effective on each anniversary of the date of this
Agreement during the Extended Term by an amount equal to the
product of such Base Compensation times the increase in the
preceding calendar year of the Consumer Price Index for Urban Wage
Earners and Clerical Workers for the Philadelphia metropolitan
region as reported by the U.S. Department of Labor (or, if such
index is no longer reported, the corresponding increase in a
comparable index); and
(ii) by such additional amounts as the Board may determine
from time to time based, in part, on an annual review of
Executive's compensation.
6. Expenses. During the Term of this Agreement, the Company shall
pay all necessary and reasonable business expenses incurred by Executive on
behalf of the Company in the course of his employment hereunder, including,
without limitation, expenses incurred in the conduct of the Company's business
while away from his domicile and expenses for travel, meals, lodging,
entertainment and related expenses that are for the benefit of the Company.
7. Other Benefits.
(a) Executive shall be entitled to participate in any
profit-sharing, insurance, medical and retirement benefit plans, together with
vacation and other employee benefits of the Company, now in effect or as
hereafter amended or established in accordance with the terms and provisions
of such plans.
(b) The Company shall furnish Executive with a suitable office,
the secretary of Executive's choice and customary furniture and furnishings
for such office. The Company further agrees that Executive shall have the use
of a Company-owned or Company-leased and -maintained automobile, new every
three years, of a kind and model appropriate to his position with the Company.
(c) Nothing in this Agreement shall preclude the Company from
amending or terminating any employee benefit plan or practice, but, it being
the intent of the parties that the Executive shall continue to be entitled
during the Extended Term to benefits and perquisites as set forth in
Paragraphs 7(a) and 7(b) hereof at least equal to those attached to his
position on the date of this Agreement, nothing in this Agreement shall
operate as, or be construed to authorize, a reduction during the Extended Term
without Executive's written consent in the level of such benefits or
perquisites as in effect on the date of a Change in Control. If and to the
extent that such benefits or perquisites are not payable or provided to
Executive under any such plan or practice by reason of an amendment thereto or
termination thereof during the Extended Term, the Company shall pay or provide
such benefits or perquisites to Executive.
8. Termination.
(a) Termination for Cause. This Agreement and Executive's
employment hereunder may be terminated by the Company at any time for Cause.
During the Initial Term, Cause shall be as the Board may reasonably determine.
During the Extended Term, termination of this Agreement and the Executive's
employment shall be deemed to have been for Cause only if it shall have been
the result of:
(i) conduct by Executive that constitutes a felony under
the laws of the United States or a state in which Executive works
or resides;
(ii) an act or acts of dishonesty by Executive resulting or
intended to result directly or indirectly in material gain to or
personal enrichment of Executive at the Company's expense;
(iii) a deliberate and intentional refusal by Executive
during the Extended Term (except by reason of incapacity due to
illness or accident) to comply with the provisions of Paragraph 1
hereof, provided that such breach shall have resulted in
demonstrably material injury to the Company and the Executive
shall have failed to remedy such breach within thirty days after
notice from the Secretary of the Company demanding that the
Executive remedy such breach; or
(iv) the engagement in conduct by Executive that is
materially injurious to the Company if such conduct was undertaken
without good faith and the reasonable belief that such conduct was
in the best interest of the Company.
(b) Termination During Extended Term. During the
Extended Term of this Agreement, the term "Termination" shall mean:
(i) Termination by the Company of Executive's employment;
or
(ii) Termination by Executive of his employment following
the occurrence of any of the following events:
(A) Failure to elect or reelect Executive to, or
removal of Executive from, the office or offices set forth
in Paragraph 1 hereof, or to or from the Board if Executive
shall have been a member of the Board immediately prior to a
Change in Control of the Company;
(B) Executive's good-faith determination that there
has been a significant change in the nature or scope of his
authorities, powers, functions, duties or responsibilities
attached to the positions contemplated in Paragraph 1 hereof
or a reduction in his compensation as provided in Paragraph
5 hereof or his benefits as provided in Paragraph 7, which
change or reduction is not remedied within thirty days after
notice to the Company by Executive;
(C) Any other breach by the Company of any provision
of this Agreement (including, without limitation, relocation
of Executive in violation of Paragraph 4(b) hereof), which
breach is not remedied within thirty days after notice to
the Company by Executive; or
(D) The liquidation, dissolution, consolidation or
merger of the Company or transfer of all or a significant
portion of its assets unless a successor or successors (by
merger, consolidation or otherwise) to which all or a
significant portion of its assets has been transferred shall
have assumed all duties and obligations of the Company under
this Agreement;
provided that in any event set forth in this Paragraph 8(b)(ii),
Executive shall have elected to terminate his employment under this
Agreement upon not less than forty and not more than ninety days' notice
to the Board, attention of the Secretary, given, except in the case of a
continuing breach, within three calendar months after (1) failure to be
so elected or reelected, or such removal, (2) expiration of the 30-day
cure period with respect to such event, or (3) the closing date of such
liquidation, dissolution, consolidation, merger or transfer of assets.
An election by Executive to terminate his employment under the
provisions of this Paragraph shall not be deemed a voluntary termination of
employment by Executive for the purpose of this Agreement or any plan or
practice of the Company.
(c) Payment Upon Termination. In the event of a Termination of
this Agreement during the Extended Term hereof for any reason other than Cause
or Executive's death, the Company shall, subject to Paragraph 9 hereof, pay to
Executive (or, in the event of his death following the Termination, his legal
representative) in cash within thirty days after the date of such Termination
(the "Termination Date"):
(i) An amount equal to the product of multiplying the
monthly rate of Base Compensation to which Executive was entitled
under Paragraph 5(b) hereof on the day immediately prior to the
Termination Date by the lesser of (A) twenty-four months or (B)
the number of months remaining in the Term of this Agreement (the
shorter of such periods constituting the "Covered Period");
(ii) An amount equal to the present value of the additional
benefits that would have been paid Executive under the Company's
retirement plans if he had continued to be employed pursuant to
this Agreement during the Covered Period and the retirement plans
had continued during such period without change from the date of
the Change in Control;
(iii) For each share of Company stock subject to a stock
option that was awarded to Executive under a Company stock option
plan, was held by Executive on the day immediately prior to his
Termination Date, was not exercisable on that date but would have
become exercisable during the Covered Period if Executive's
employment with the Company had continued during that period, an
amount equal to the excess of (A) the daily average closing price
for a share of the Company's stock on NASDAQ or, if so listed, on
a national securities exchange during the 30-day period ending
upon the date of the Change in Control, or, if higher, during the
30-day period ending upon the Termination Date (adjusted as
appropriate for any changes in the capital structure of the
Company) over (B) the option price for a share of the Company's
stock subject to the option; and
(iv) An amount equal to the aggregate of the Company's
contributions to the Company's savings plan in respect of
Executive that were not vested on the day immediately prior to the
Termination Date but that would have been vested at the end of the
Covered Period if Executive had remained employed by the Company
for the duration of that period.
For purposes of calculating the present value specified in Paragraph 8(c)(ii),
the discount rate shall equal the PBGC interest rate for immediate annuities,
as referred to in 29 C.F.R. section 2619.26(b)(2)(iv) or its successor, in
effect for a valuation date coinciding with the Termination Date. If that rate
should no longer be published, the discount rate shall be such closely
comparable interest rate as the Company may reasonably determine.
9. Maximum Payment Upon Termination. Notwithstanding any other
provision of this Agreement, if the Company should determine, in consultation
with tax advisors satisfactory to Executive, that any amount payable to
Executive pursuant to Paragraph 8 of this Agreement, either alone or in
conjunction with any payments or benefits to or on behalf of Executive
pursuant to this Agreement or otherwise, would not be deductible by the
Company, in whole or in part, for federal income tax purposes by reason of
section 280G of the Internal Revenue Code or its successor, then the aggregate
amount payable to Executive pursuant to Paragraph 8 shall be reduced to the
largest amount that, in the opinion of such tax advisors, the Company could
pay Executive under Paragraph 8 without any part of that amount being
nondeductible by the Company as a result of Section 280G or its successor.
10. Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement either by seeking other
employment or otherwise. The amount of any payment provided for herein shall
not be reduced by any remuneration that Executive may earn from employment
with another employer or otherwise following his Termination Date.
11. Noncompetition Covenant. For a period of one year following the
Termination Date and, if Executive has given a notice pursuant to Paragraph
8(b)(ii) hereof, for a period of 15 months following the giving of such
notice, Executive shall assist no individual or entity other than the Company
to acquire any entity with respect to which a proposal to acquire was
presented to the Board prior to the beginning of the period.
12. Indemnification. The Company shall indemnify Executive to the
fullest extent permitted by applicable Delaware law (as may be amended from
time to time), including the advance of expenses permitted therein.
13. Performance. The failure of either party to this Agreement to
insist upon strict performance of any provision hereof shall not constitute a
waiver of its rights subsequently to insist upon strict performance of such
provision or any other provision of this Agreement.
14. Non-Assignability. Neither party shall have the right to assign
this Agreement or any rights or obligations hereunder without the consent of
the other party.
15. Invalidity. If any provisions of this Agreement shall be found to
be invalid by any court of competent jurisdiction, such finding shall not
affect the remaining provisions of this Agreement, all of the which shall
remain in full force and effect.
16. Arbitration and Legal Fees. In the event of any dispute regarding
a refusal or failure by the Company to make payments or provide benefits
hereunder for any reason, Executive shall have the right, in addition to all
other rights and remedies provided by law, to arbitration of such dispute
under the rules of the American Arbitration Association, which right shall be
invoked by serving upon the Company a notice to arbitrate, stating the place
of arbitration, within ninety days of receipt of notice in any form
(including, without limitation, failure by the Company to respond to a notice
from Executive within thirty days) that the Company is withholding or proposes
to withhold payments or provisions of benefits. In the event of any such dis-
pute, whether or not Executive exercises his right to arbitration, if it shall
ultimately be determined that the Company's refusal or failure to make
payments or provide benefits hereunder was wrongful or otherwise inconsistent
with the terms of this Agreement, the Company shall indemnify and hold
harmless Executive from and against any and all expenses incurred in
connection with such determination, including legal and other fees and
expenses. Without limitation of or by the foregoing, the Company shall,
within 10 days after notice from Executive, provide Executive with an
irrevocable letter of credit in the amount of $100,000 from a bank
satisfactory to Executive against which Executive may draw to pay legal fees
and other fees and expenses in connection with any attempt by Executive to
enforce any of his rights under this Agreement during the Extended Term. Said
letter of credit shall not expire before 10 years following the date of this
Agreement.
17. Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive (and his personal representative), the Company and
any successor organization or organizations that shall succeed to
substantially all of the business and property of the Company, whether by
means of merger, consolidation, acquisition of substantially all of the assets
of the Company or otherwise, including by operation of law.
18. Set-off. The Company shall have no right of set-off or
counterclaim in respect of any claim, debt or obligation against any payments
or benefits provided for in this Agreement.
19. Amendments. No Amendment to this Agreement shall be effective
unless in writing and signed by both the Company and Executive.
20. Governing Law. This Agreement shall be interpreted and enforced
in accordance with the laws of the State of Delaware.
21. Notices. Unless otherwise stated herein, all notices hereunder
shall be in writing and shall be deemed to be given when personally delivered
or mailed by United States registered or certified mail, postage prepaid, to,
if to the Company, 861 Silver Lake Boulevard, Cannon Building, Dover, Delaware
19901, and, if to Executive, the last address therefor shown on the records of
the Company. Either the Company or Executive may, by notice to the other,
designate an address other than the foregoing for the receipt of subsequent
notices.
22. Withholding. The Company may withhold from any amounts payable to
Executive hereunder all federal, state, city or other taxes that the Company
may reasonably determine are required to be withheld pursuant to any
applicable law or regulation.
23. Nature of Payments Upon Termination. All payments to Executive
pursuant to Paragraphs 8 and 9 of this Agreement shall be considered as
liquidated damages or as severance payments in consideration of Executive's
past services to the Company, and no such payment shall be regarded as a
penalty to the Company.
24. Acknowledgment. The parties hereto each acknowledge that each has
read this Agreement and understands the same and that each enters into this
Agreement freely and voluntarily.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CHESAPEAKE UTILITIES CORPORATION
[CORPORATE SEAL] /S/ Ralph J. Adkins
President & Chief Executive Officer
ATTEST:
/S/ William C. Boyles
Asst. Secretary EXECUTIVE
/S/ Philip S. Barefoot
CHESAPEAKE UTILITIES CORPORATION AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE QUARTER
ENDED MARCH 31,
----------------------
1995 1994
---- ----
Shares outstanding 3,680,675 3,618,447
=========== ===========
Primary earnings per share calculation:
Weighted average number of shares assuming
primary dilution 3,672,036 3,605,199
=========== ===========
Consolidated net income $3,658,431 $3,746,087
=========== ===========
Total primary earnings per share $1.00 $1.04
=========== ===========
Fully diluted earings per share calculation (1):
Weighted average number of shares assuming
primary dilution 3,672,036 3,605,199
Contingent shares 255,281 257,305
----------- -----------
Weighted average number of shares assuming
full dilution 3,927,317 3,862,504
=========== ===========
Consolidated net income $3,658,431 $3,746,087
Interest on convertible debt 88,348 89,048
Less: Applicable federal income taxes 34,456 34,729
----------- -----------
Adjusted net income $3,712,323 $3,800,406
=========== ===========
Fully diluted earnings per share $0.95 $0.98
=========== ===========
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 61,582,716
<OTHER-PROPERTY-AND-INVEST> 16,773,458
<TOTAL-CURRENT-ASSETS> 14,618,797
<TOTAL-DEFERRED-CHARGES> 13,203,962
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 106,178,933
<COMMON> 1,796,271
<CAPITAL-SURPLUS-PAID-IN> 17,143,291
<RETAINED-EARNINGS> 22,310,653
<TOTAL-COMMON-STOCKHOLDERS-EQ> 40,355,682
0
0
<LONG-TERM-DEBT-NET> 24,254,639
<SHORT-TERM-NOTES> 3,000,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,236,349
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 36,437,730
<TOT-CAPITALIZATION-AND-LIAB> 106,178,933
<GROSS-OPERATING-REVENUE> 30,896,798
<INCOME-TAX-EXPENSE> 2,030,851
<OTHER-OPERATING-EXPENSES> 24,534,985
<TOTAL-OPERATING-EXPENSES> 26,565,836
<OPERATING-INCOME-LOSS> 4,330,962
<OTHER-INCOME-NET> 44,260
<INCOME-BEFORE-INTEREST-EXPEN> 4,375,222
<TOTAL-INTEREST-EXPENSE> 716,791
<NET-INCOME> 3,658,431
0
<EARNINGS-AVAILABLE-FOR-COMM> 3,658,431
<COMMON-STOCK-DIVIDENDS> 828,152
<TOTAL-INTEREST-ON-BONDS> 2,316,779
<CASH-FLOW-OPERATIONS> 8,349,970
<EPS-PRIMARY> 1.00
<EPS-DILUTED> .95
</TABLE>
