<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(a)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Chesapeake Utilities Corporation
________________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
Chesapeake Utilities Corporation
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
___________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
___________________________________________________________________________
(5) Total fee paid:
___________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
___________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
(3) Filing Party:
___________________________________________________________________________
(4) Date Filed:
<PAGE>
CHESAPEAKE UTILITIES CORPORATION
909 SILVER LAKE BOULEVARD
DOVER, DELAWARE 19904
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF
CHESAPEAKE UTILITIES CORPORATION: April 1, 1999
The Annual Meeting of Stockholders of Chesapeake Utilities Corporation will be
held at 10:00 a.m. on Tuesday, May 18, 1999, in the Board Room, PNC Bank,
Delaware, 222 Delaware Avenue, Wilmington, Delaware, for the following purposes:
(a) to elect three Class III Directors for three-year terms ending in 2002 and
until their successors are elected and qualified;
(b) to consider and vote upon the ratification of the selection of
PricewaterhouseCoopers, L.L.P. as independent auditors for the fiscal year
ending December 31, 1999; and
(c) to transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 22, 1999, will be
entitled to vote at the meeting and any adjournment thereof.
By Order of the Board of Directors,
William C. Boyles
Corporate Secretary
STOCKHOLDERS ARE REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE, WHETHER OR NOT THEY ARE PERSONALLY ABLE TO ATTEND.
<PAGE>
CHESAPEAKE UTILITIES CORPORATION
909 SILVER LAKE BOULEVARD
DOVER, DELAWARE 19904
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
_____________________________________________
April 1, 1999
SOLICITATION OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of Directors
of Chesapeake Utilities Corporation ("Chesapeake" or the "Company") for use at
the Annual Meeting of Stockholders of Chesapeake to be held in the Board Room,
PNC Bank, Delaware, 222 Delaware Avenue, Wilmington, Delaware at 10:00 a.m. on
May 18, 1999, and at any adjournment thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. Solicitation of proxies
may be made by personal interview, mail, telephone or telegram by directors,
officers and regular employees of Chesapeake. Chesapeake may also request
banking institutions, brokerage firms, custodians, trustees, nominees and
fiduciaries to forward solicitation material to the beneficial owners of capital
stock held of record by such persons, and Chesapeake will reimburse any such
forwarding expenses. In addition, Chesapeake may engage professional proxy
solicitors, although it has no present plans to do so. All costs of preparing,
printing, assembling and mailing the form of proxy and the material used in the
solicitation thereof and all clerical and other expenses of solicitation will be
borne by Chesapeake. Regular employees of Chesapeake will not receive additional
compensation for soliciting proxies.
REVOCATION OF PROXY
The giving of a proxy does not preclude the right to vote in person should the
person giving the proxy so desire. In addition, the person giving the proxy has
the power to revoke the same at any time before it has been exercised by simple
notice in writing received by the Secretary of Chesapeake.
SIGNATURES OF PROXIES IN CERTAIN CASES
If a stockholder is a corporation, the accompanying proxy should be signed in
its corporate name by an authorized officer, and his or her title should be
indicated. If stock is registered in the name of two or more trustees or other
persons, the proxy should be signed by each of them. If stock is registered in
the name of a decedent, the proxy should be signed by an executor or an
administrator, there should be attached to the proxy appropriate instruments
showing his or her qualification and authority, and his or her title as such
should follow the signature. Proxies signed by a person as an agent, attorney,
administrator, executor, guardian or trustee should indicate such person's title
following his or her signature.
<PAGE>
ANNUAL REPORT
The annual report to stockholders, covering the fiscal year of Chesapeake
ended December 31, 1998, is enclosed herewith. The report, which includes
financial statements, does not form any part of the material for the
solicitation of proxies.
VOTING SECURITIES OUTSTANDING
Shares of common stock, 5,115,971 of which were outstanding as of March 22,
1999, are the only outstanding voting securities of the Company. Each share is
entitled to one vote. Only holders of common stock of record at the close of
business on March 22, 1999, will be entitled to vote at the Annual Meeting of
Stockholders.
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
By Management
The following table sets forth the number of shares of Chesapeake's common
stock beneficially owned by each of Chesapeake's directors and nominees for
director, by each executive officer named in the Summary Compensation Table, and
by all directors and executive officers as a group, as of March 22, 1999. Except
as otherwise indicated, each individual named has sole investment and voting
power with respect to the securities shown.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership/1/ Percent
Name of Individual or Group of Class
- --------------------------- ----------------------- --------
<S> <C> <C>
Ralph J. Adkins............................................... 67,287 1.30%
Richard Bernstein............................................. 1,784 *
Walter J. Coleman............................................. 2,600 *
John W. Jardine, Jr........................................... 24,233 *
Rudolph M. Peins, Jr.......................................... 3,415 *
Robert F. Rider............................................... 4,565 *
John R. Schimkaitis........................................... 34,134 *
Jeremiah P. Shea.............................................. 3,760 *
William G. Warden, III........................................ 17,348 *
Michael P. McMasters.......................................... 5,005 *
Stephen C. Thompson........................................... 6,199 *
Philip S. Barefoot............................................ 9,193 *
Executive Officers and Directors as a Group (13 persons)...... 185,228 3.57%
______________________
*Less than one percent (1%).
</TABLE>
2
<PAGE>
/1/ Includes shares of common stock subject to options that are currently
exercisable as follows: Mr. Adkins - 32,940; Mr. Schimkaitis - 20,280; Mr.
McMasters 3,229; Mr. Thompson 3,229; and Mr. Barefoot 2,783. Includes
shares acquired pursuant to the Company's Retirement Savings Plan as to
which executive officers have the authority to direct voting of their
shares as follows: Mr. Adkins 10,741; Mr. Schimkaitis 5,180; Mr.
McMasters - 1,696; Mr. Thompson - 2,769; and Mr. Barefoot 2,217.
By Others
The following table sets forth the number of shares of Chesapeake's common
stock beneficially owned by the only party known to Chesapeake's management to
own more than 5% of Chesapeake's common stock.
Name and Address Amount and Nature of Percent
Of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
William P. Schneider 264,312 5.17%
26491 Riverbank Road
Salisbury, MD 21801
ELECTION OF DIRECTORS
At the annual meeting to be held on May 18, 1999, three Class III Directors
will be elected to serve until the Annual Meeting of Stockholders in 2002 and
until their successors are elected and qualified. Chesapeake's nominees are
Walter J. Coleman, John R. Schimkaitis and Jeremiah P. Shea, all of whom are
currently Class III Directors of Chesapeake whose present terms expire this
year.
Directors are elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors.
Unless you instruct otherwise, it is intended that properly executed proxies
in the enclosed form will be voted FOR the election of each of the nominees
listed below. If, when the election occurs, any of the nominees shall not be a
candidate (an eventuality not anticipated), it is intended that these proxies
will be voted for any substitute nominee who may be designated by the Corporate
Governance Committee.
3
<PAGE>
INFORMATION REGARDING THE BOARD OF DIRECTORS AND NOMINEES
The following information with respect to the principal occupation and
employment of each director and nominee and the name and principal business of
the organization in which such occupation and employment is carried on, and
information with respect to certain other affiliations and to business
experience during the past five years, has been furnished to the Company by the
respective directors and nominees:
Class I Directors (Term Expires 2000)
Richard Bernstein (age 56)
Mr. Bernstein is President and Chief Executive Officer of BAI Aerosystems,
Inc., located in Easton, Maryland. BAI is a manufacturer of lightweight, low-
cost Unmanned Aerial Vehicles (UAVs). Mr. Bernstein is the owner of several
other companies in which he is actively involved including: Salisbury Pewter, a
manufacturer of pewter for the gift and premium markets; Frankoma Pottery, a
creator of unique designs in sculptured earthenware; and Lorch Microwave which
produces microwave filters and electronic components. He has been a director of
Chesapeake since 1994.
John W. Jardine, Jr. (age 72)
Mr. Jardine served as Chairman of the Board of Chesapeake from 1989 through
1997 and Chief Executive Officer from 1983 through 1990. Mr. Jardine has also
served as President, Executive Vice President, Vice President, Secretary,
Treasurer, Assistant Secretary and Assistant Treasurer of Chesapeake. He has
been a director of Chesapeake since 1972.
Rudolph M. Peins, Jr. (age 69)
Mr. Peins retired in February 1993 as Chief Financial Officer and Secretary of
Hunt Manufacturing Co. located in Philadelphia, Pennsylvania. Hunt is a leading
international manufacturer and distributor of art/craft and office supplies,
materials and equipment. He has been a director of Chesapeake since 1993.
Class II Directors (Term Expires 2001)
Ralph J. Adkins (age 56)
Mr. Adkins is Chairman of the Board of Directors of Chesapeake and its
subsidiaries. He has served as Chairman since 1997. Prior to January 1, 1999,
Mr. Adkins served as Chief Executive Officer, a position he had held since 1990.
During his tenure with Chesapeake Mr. Adkins has also served as President and
Chief Executive Officer, President and Chief Operating Officer, Executive Vice
President, Senior Vice President, Vice President and Treasurer of Chesapeake. He
has been a director of Chesapeake since 1989.
Robert F. Rider (age 70)
Mr. Rider is Chairman of the Board and Chief Executive Officer of O. A. Newton
& Son Company located in Bridgeville, Delaware. The company engages in
millwright work and metal fabrication and sells farm equipment, modular homes
and materials handling systems. Mr. Rider is also a director of Blue Cross Blue
Shield of Wilmington, Delaware and Burris Foods. He is a trustee of the
University of Delaware. Mr. Rider also serves as a Governor of the United States
Postal Service. He has been a director of Chesapeake since 1977.
4
<PAGE>
William G. Warden, III (age 67)
Mr. Warden is Chairman of the Board of Superior Group, Inc., a holding company
that is engaged through subsidiaries in metals distribution, furnace
fabrication, metal tube and pipe manufacturing and pharmaceutical packaging,
located in Radnor, Pennsylvania. He has been a director of Chesapeake since
1969.
Class III Directors and Nominees
Walter J. Coleman (age 64)
Mr. Coleman retired in December 1995 as the Chief Executive Officer of Pyramid
Realty and Mortgage Corporation, a diversified company involved in real estate,
mortgages, insurance and business brokerage. He is also the former Chairman of
Real Estate Title Services, Inc., a title insurance and trust company. Mr.
Coleman is now a professor at Florida Southern College and an international
business consultant specializing in strategic management. He has been a director
of Chesapeake since 1992.
John R. Schimkaitis (age 51)
Mr. Schimkaitis is President and Chief Executive Officer of Chesapeake and its
subsidiaries. Mr. Schimkaitis assumed the role of Chief Executive Officer on
January 1, 1999. He has served as President since 1997. His present term will
expire on May 18, 1999. Prior to his new post, Mr. Schimkaitis has also served
as President and Chief Operating Officer, Executive Vice President and Chief
Operating Officer, Senior Vice President and Chief Financial Officer, Vice
President, Treasurer, Assistant Treasurer and Assistant Secretary of Chesapeake.
He has been a director of Chesapeake since 1996.
Jeremiah P. Shea (age 72)
Mr. Shea retired in February 1990 as the Chairman and Chief Executive Officer
of Bank of Delaware Corporation (PNC Bank Delaware), located in Wilmington,
Delaware. He has been a director of Chesapeake since 1981.
Directors' Compensation
Directors who are not officers of the Company are awarded 400 shares of the
Company's common stock annually, in advance at the time of the Company's annual
meeting, pursuant to Chesapeake's Directors Stock Compensation Plan. Directors
are also paid an attendance fee of $800 for each Board and committee meeting
attended. No additional attendance fees are paid if a director attends more than
one meeting on the same day.
COMMITTEES OF THE BOARD
The Audit Committee was established in 1976. It must be comprised of directors
who are not employees of the Company or any of its subsidiaries. In general, the
Audit Committee is charged with reviewing the internal auditor's reports of
practices and procedures as well as the reports of Chesapeake's independent
auditors relating to the results of their audit and the adequacy of internal
controls. The Audit Committee has the responsibility to make recommendations to
management arising from the aforementioned reviews. The Audit Committee held
three meetings during 1998. The current members of the Audit Committee are:
Rudolph M. Peins, Jr., Chairman, Robert F. Rider, and William G. Warden, III.
5
<PAGE>
The Compensation Committee, established in 1979, has the responsibility of
fixing the salaries of officers and fees for directors. The Compensation
Committee held four meetings during 1998. The current members of the
Compensation Committee are: John W. Jardine, Jr., Jeremiah P. Shea, Chairman,
and William G. Warden, III.
The Plan Committee was established in 1992 for the purpose of administering
the Chesapeake Utilities Corporation Performance Incentive Plan and Cash Bonus
Plan. The Plan Committee held four meetings during 1998. The members of the Plan
Committee are: John W. Jardine, Jr., Jeremiah P. Shea, Chairman, and William G.
Warden, III.
The Nominating Committee was established in 1979, for the purpose of
identifying candidates for election to and membership on the Board of Directors.
The Committee held one meeting during 1998. On May 19, 1998, the functions of
the Nominating Committee were transferred to the Corporate Governance Committee
and the Nominating Committee was abolished.
The Corporate Governance Committee was established in 1994 for the purpose of
reviewing and advising the Board on general corporate governance and structure
issues. On May 19, 1998, this Committee also adopted the functions of the
Nominating Committee. The Corporate Governance Committee held two meetings
during 1998. The members of the Corporate Governance Committee are: Richard
Bernstein, Walter J. Coleman, Chairman, Rudolph M. Peins, Jr., and Jeremiah P.
Shea.
In connection with its nominating function, the Corporate Governance Committee
will consider nominees recommended by stockholders. Nominations by stockholders
are required by the Company's bylaws to be in the form of a notice which sets
forth: (a) as to each nominee, (i) the name, age, business address and, if
known, residence address of such nominee; (ii) the principal occupation or
employment of such nominee; (iii) the number of shares of stock beneficially
owned by the nominee; (iv) the consent of the nominee to serve as a director of
the Corporation if so elected; (v) a description of all arrangements or
understandings among the stockholder and the nominee and any other person or
persons pursuant to which the nomination is to be made by the stockholder and;
(vi) any other information relating to the nominee required to be disclosed in
solicitations of proxies for election of directors, or otherwise required
pursuant to Schedule 14A under the Securities and Exchange Act of 1934, as
amended, and (b) as to the stockholder giving the notice, (i) the name and
address, as they appear on the Company's books, of such stockholder; and (ii)
the number of shares beneficially owned by such stockholder. All recommendations
received by the Secretary will be brought to the attention of the Corporate
Governance Committee.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met eight times during 1998. Each director attended 75%
or more of the aggregate of (1) the total number of meetings of the Board of
Directors and (2) the total number of meetings held by each committee of the
Board on which he served.
6
<PAGE>
MANAGEMENT COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation of the
Company's Chief Executive Officer and other executive officers for each of the
Company's last three fiscal years.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------- ------------------------------------
Awards Payouts
------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares
Name and Underlying LTIP All Other
Prinicipal Fiscal Salary Bonus Options/SARs Payments Compensation
Position Year ($) ($) (#) ($) ($)
- ------------------------------- ----------- ------------- ------------- ------------------ --------------- ---------------
Ralph J. Adkins/1/............. 1998 300,000 0 0 21,052/3/ 12,300/5/
Chairman, Chief Executive 1997 251,250 0 0 354,546/4/ 12,200
Officer and Director 1996 235,250 87,088 0 0 11,228
John R. Schimkaitis/1/......... 1998 225,000 0 0 25,655/3/ 11,328/5/
President, Chief Operating 1997 179,000 0 0 220,297/4/ 11,214
Officer and Director 1996 166,000 53,884 0 0 10,481
Michael P. McMasters/6/........ 1998 135,000 0 0 0 8,549/5/
Vice President, Treasurer 1997 105,250 3,210 14,906/2/ 0 6,492
and Chief Financial Officer
Stephen C. Thompson/6/......... 1998 135,000 0 0 0 8,390/5/
Vice President 1997 102,375 10,290 14,906/2/ 0 6,849
Philip S. Barefoot............. 1998 120,500 0 0 0 6,170/5/
Vice President 1997 114,750 9,860 12,848/2/ 125,010/4/ 5,165
1996 109,500 27,248 0 0 4,916
Jeremy D. West/7/.............. 1998 115,833 0 0 0 4,831/5/
Vice President 1997 138,000 1,390 14,288/2/ 148,706/4/ 5,386
1996 133,750 23,843 0 0 5,056
- -------------------------------
</TABLE>
/1/ On January 1, 1999 Mr. Schimkaitis succeeded Mr. Adkins as Chief Executive
Officer.
/2/ Options to acquire shares of common stock pursuant to Stock Option
Agreements under the Company's Performance Incentive Plan (the "Plan"), for
the performance period beginning January 1, 1998 and ending December 31,
2000 (the "1997 Option Agreements"). With respect to each recipient, one-
half of
7
<PAGE>
these options become exercisable in equal increments on each of December 31,
1998, 1999 and 2000. The second one-half of these options become exercisable
in three annual increments based on the Company's achievement of certain
annual performance goals (including earnings growth, growth in non-gas net
income, and share price relative to book value). In the event of a change in
control, as defined in the Plan, all options subject to time vesting that
have not theretofore become exercisable will become exercisable in full and
all options subject to performance vesting for the award year in which the
change in control occurs will become exercisable as if all performance
criteria were satisfied for such award year but only in proportion to the
total number of days in the year that have elapsed prior to the change in
control.
/3/ Reflects performance shares earned under Performance Share Agreements with
each of Messrs. Adkins and Schimkaitis under the Company's Performance
Incentive Plan for the award period beginning January 1, 1998 and ending
December 31, 2000 (the "1997 Performance Share Agreements"). At the end of
each calendar year during the award period, each recipient is eligible to
earn a maximum number of performance shares equal to one-third of the total
number of performance shares granted plus the "Rollover Number" (the
"Maximum Award"), based on the Company's achievement of certain performance
goals (including earnings growth, growth in non-gas net income, and share
price relative to book value). The "Rollover Number" is 75% of the
difference between the Maximum Award for the prior calendar year and the
number of Performance Shares actually earned during that year. (For 1998,
the Rollover Number is 0.) Performance Shares, once earned and issued, may
not be sold for a three-year period. In the event of a change in control,
the Maximum Award for the fiscal year, prorated based on the proportion of
the calendar year that has elapsed, is deemed earned. Performance shares
earned for 1998 are valued as of February 26, 1999.
/4/ Reflects performance shares earned under Tandem Stock Option and Performance
Share Agreements covering the three-year performance period from January 1,
1995 through December 31, 1997, valued as of February 27, 1998.
/5/ Consists of the Company's contribution to its Retirement Savings Plan on
behalf of such officer (Mr. Adkins - $9,600; Mr. Schimkaitis - $9,600; Mr.
McMasters - $8,100; Mr. Thompson - $8,100; Mr. Barefoot - $5,070; and Mr.
West- $4,170) and term life insurance premiums paid by the Company on behalf
of such officer (Mr. Adkins - $2,700; Mr. Schimkaitis - $1,728; Mr.
McMasters -$449; Mr. Thompson - $290; Mr. Barefoot - $1,100; and Mr. West -
$661).
/6/ Messrs. McMasters and Thompson became executive officers of the Company on
May 20, 1997.
/7/ Mr. West ceased serving as an executive officer of the Company on April 26,
1998.
8
<PAGE>
Aggregated Option/SAR Exercises During 1998 Fiscal Year
and Fiscal Year End Option/SAR Values
The following table sets forth information concerning options exercised by the
named executive officers during the 1998 fiscal year and the number and value of
options held by such officers at fiscal year end.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-End (#) At FY-End ($)
Acquired on Value ---------------------------- ----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ralph J. Adkins 0 0 32,940 0 183,229 0
John R. Schimkaitis 0 0 20,280 0 112,808 0
Michael P. McMasters 0 0 3,229 11,677 0 0
Stephen C. Thompson 0 0 3,229 11,677 0 0
Philip S. Barefoot 0 0 2,783 10,065 0 0
Jeremy D. West 0 0 14,925 0 83,020 0
</TABLE>
Pension Plan Table
<TABLE>
<CAPTION>
Final Years of Service at Normal Retirement Age
Average --------------------------------------------------------------------------------------------------------
Earnings 15 20 25 30 35 40
- ----------- --------------- --------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $25,957 $ 34,609 $ 43,261 $ 51,913 $ 60,566 $ 60,566
$125,000 $33,175 $ 44,234 $ 55,292 $ 66,351 $ 77,409 $ 77,409
$150,000 $40,394 $ 53,859 $ 67,324 $ 80,788 $ 94,253 $ 94,253
$175,000 $47,613 $ 63,484 $ 79,355 $ 95,226 $111,097 $111,097
$200,000 $54,832 $ 73,109 $ 91,386 $109,663 $127,941 $127,941
$225,000 $62,050 $ 82,734 $103,417 $124,101 $144,784 $144,784
$250,000 $69,269 $ 92,359 $115,449 $138,538 $161,628 $161,628
$275,000 $76,488 $101,984 $127,480 $152,976 $178,472 $178,472
$300,000 $83,707 $111,609 $139,511 $167,413 $195,316 $195,316
</TABLE>
The above table sets forth the estimated annual retirement benefits payable
under the Company's retirement plan to its regular employees, including
officers, in the final average earnings and years of service classifications
indicated. The retirement plan is funded solely by the Company. Benefits
normally are paid in the form of a straight life annuity or joint and survivor
annuity and are not subject to any deduction for Social Security or other offset
amounts.
9
<PAGE>
Annual compensation used to determine final average earnings under the plan
includes salary, as set forth in the Summary Compensation Table, commissions,
and, with respect to employees earning a salary less than a stated amount (which
for 1998 was $80,000), bonus payments. Compensation covered by the plan for 1998
was as follows: Mr. Adkins - $300,000; Mr. Schimkaitis - $225,000; Mr. McMasters
- - $135,000; Mr. Thompson - $135,000; Mr. Barefoot - $120,500; and Mr. West -
$115,833. The calculation of benefits under the plan generally is based on
average earnings for the highest five consecutive years of the ten years
preceding retirement.
For 1998, the Internal Revenue Code of 1986, as amended, generally limits the
annual benefits which may be paid under the plan to $130,000 and limits the
amount of annual compensation that may be taken into account in determining
final average earnings to $160,000. The table above does not reflect these
limits. However, these limits may increase in future years. Furthermore,
benefits earned before the limits went into effect generally are not affected by
the limits. The Company has adopted a plan that is not a tax-qualified plan to
provide the benefits that would have been provided under the Company's
retirement plan but for these limits. The plan was effective January 1, 1995.
The plan is unfunded but is required to be funded in the event of a change in
control of the Company.
As of December 31, 1998, the number of years of credited service under the
retirement plan for each of the named executive officers were as follows: Mr.
Adkins - 36 years; Mr. Schimkaitis - 13 years; Mr. McMasters - 17 years; Mr.
Thompson - 15 years; Mr. Barefoot - 10 years; and Mr. West - 8 years.
As of December 31, 1998, the Company amended its pension plan so that current
participants in the plan, including executive officers, could elect either (1)
to continue their participation in the plan or, alternatively, (2) to receive a
one-time payout, plus an increase in the Company's matching contributions to the
employee's account in the Company's Section 401(k) retirement savings plan.
Based on these elections, Mr. Adkins and Mr. Barefoot ceased accruing benefits
under the plan after December 31, 1998.
Employment Contracts and Change in Control Provisions
Chesapeake has entered into employment agreements with Messrs. Schimkaitis,
McMasters, Thompson and Barefoot. These agreements are designed to help retain
such officers who are essential to the proper supervision of Chesapeake's
business by assuring them of equitable treatment in the event of a termination
of employment following a change in control of the Company. Under the
agreements, if a change in control occurs, the failure to elect or re-elect the
officer to, or the removal of the officer from, the office held by the officer,
or the failure to elect or re-elect the officer to, or the removal of the
officer from, the Board of Directors of the Company (if the officer shall have
been a member of the Board immediately prior to a change in control) would
entitle the officer to terminate his employment and to receive certain
termination payments as described below. An officer's good faith determination
that the nature or scope of his duties has been significantly altered subsequent
to a change in control would also entitle him to terminate his employment and to
receive the termination payments provided in the agreement.
10
<PAGE>
The agreement with Mr. Schimkaitis was entered into on March 26, 1997, and
provides for his employment as the Company's Executive Vice President and Chief
Financial Officer at a salary of $182,000 or such greater or lesser amounts as
the Company's Board of Directors may determine. This agreement is operative for
an initial term of five years, ending March 26, 2002, and provides that if a
change in control occurs prior to that date, the agreement will be automatically
extended for a maximum of five years commencing on the date the change in
control occurred (the "extension period"). The agreements with Messrs.
McMasters, Thompson and Barefoot were entered into on March 26, 1997, and
provide for the employment of Messrs. McMasters, Thompson and Barefoot as Vice
Presidents of the Company, also at salaries determined by the Company's Board of
Directors. These agreements expire on March 26, 2000, and provide that if a
change in control occurs prior to that date, an extension period of three years
will automatically be effectuated. Currently, all other vice presidents of the
Company have employment agreements. Actual compensation for each of the officers
is described in the Summary Compensation Table.
The agreements are intended to maintain compensation and benefits following a
change in control at levels generally comparable to those that such officers
could reasonably have expected in the absence of a change in control. The
agreements provide for the payment of compensation during the extension period
at a level equal to the rate existing immediately prior to the change in
control, adjusted throughout such period to reflect increases in the consumer
price index. Each agreement also provides for the officer's continued
eligibility during such extension period under the Company's employee benefit
plans. In the event of a termination of employment other than for cause, an
officer would receive under his agreement a termination payment equal to an
amount approximating the compensation and the value of certain benefits under
the Company's retirement, savings and stock option plans that he would have
received had he continued to be employed by the Company for the lesser of 24
months (12 in the case of Messrs. McMasters, Thompson and Barefoot) or the
number of months remaining under the extended term of the agreement. However,
such termination payment could not exceed the maximum amount that the Company
could pay the officer without some part of the amount being nondeductible by the
Company under Section 280G of the Internal Revenue Code. Each agreement also
provides that the Company will indemnify the officer for any expenses he incurs
in successfully enforcing his right to payments or benefits under his agreement
and that the Company, upon the request of the officer, will provide the officer
with an irrevocable letter of credit from a bank in the amount of $100,000
against which the officer may draw to pay any expenses he incurs in attempting
to enforce any of his rights under his agreement following a change in control.
Prior to January 1, 1999, Chesapeake had an agreement with Mr. Adkins
providing for his employment as President and Chief Executive Officer. This
agreement was substantially the same as the current agreement with Mr.
Schimkaitis except that the initial salary specified in Mr. Adkins' agreement
was $255,000. As of January 1, 1999, Mr. Adkins assumed a new executive office
entitled Chairman of the Board of Directors and signed a new agreement with the
Company employing him in that capacity on a part-time basis until December 31,
2000. This agreement does not provide for an extension of Mr. Adkins' term of
employment in the event of a change in control of the Company, but the agreement
does provide for a significantly narrower set of circumstances that would permit
his termination for cause following any change in control. The agreement also
provides a severance payment for Mr. Adkins if he is terminated without cause,
either before or after a change
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in control, equal to the balance of the base compensation that he would have
earned if he had remained employed with the Company pursuant to the agreement
until December 31, 2000.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors hereby provides the
following report on executive compensation for the year ended December 31, 1998.
Policies and Goals
The Company's compensation goal is to enhance the profitability of the
Company, and thus increase stockholder value, by attracting high-quality
executive talent and closely aligning the financial interests of its senior
managers with those of its stockholders. To this end, the Company's executive
compensation program has been designed to provide competitive compensation
levels based upon the successful achievement of specific annual and long-term
objectives drawn from the Company's strategic plan.
Components
The Company's executive compensation program relies on three interrelated
components, consisting of base salary, annual bonus and long-term equity-based
rewards.
Base Salary
The base salary structure for the Chief Executive Officer and the other
executives was determined by means of a study prepared by independent
compensation consultants, using comparison data from the same group of
diversified natural gas organizations which the Company uses in its stock
performance review (the "Industry Peer Group") and from the general industry
using companies of a similar size and nature to Chesapeake. The midpoints of
the recommended structure are set at or reasonably close to comparison
averages, thereby providing marketplace priced compensation guidelines for
executives. Annual salary adjustments are subjectively made after giving
consideration to the individual's performance and contributions to the success
of the Company. Executive base salaries generally fall below, but close to,
the comparison averages. Salaries for the Chief Executive, Chief Operating,
Chief Financial, and other Executive Officers named in the Summary
Compensation Table are originally set by employment contracts (see "Management
Compensation - Employment Contracts and Change in Control Provisions"), but
are adjusted annually pursuant to the process described above.
Annual Incentive Bonus
Annual bonuses are paid under the Company's performance-based cash bonus
plan, adopted in January, 1992, based on the attainment of financial and non-
financial objectives relative to pre-established performance targets. At the
beginning of each year, the Committee selects the executives eligible to
12
<PAGE>
receive bonuses based on the executives' seniority and responsibilities. The
Committee designates a target bonus amount for each executive, which is a
percentage of that executive's base salary ranging from 20% to 30%. Target
bonus amounts are determined separately for each of the Chief Executive
Officer and other selected executives to conform with the median prevailing
practices for individuals in similar positions in a peer group of
approximately 1,000 organizations of comparable size. Because size rather than
line of business was the primary consideration in choosing this group, it
includes some but not all of the companies in the Industry Peer Group. The
Committee also identifies performance goals for the year for each selected
executive, relating to one or more business segments, to the Company as a
whole, or both, and an aggressive target net income range for the Company or
designated segments. Bonus awards for the year are made to each selected
executive, based on successful attainment of the relevant goals, adjusted by
applying a payout factor (which may vary for each executive) that is
determined by the relationship between the actual net income of the Company or
relevant segments and the relevant aggressive target net income range. For
1998, most of the performance goals were achieved, either entirely or to a
significant extent, including, approximately in order of relative weight: (1)
expansion of current franchise territories; (2) implementation of changes in
rate design; (3) achievement of certain customer growth goals; (4) successful
Year 2000 compliance testing; (5) development of new service offerings; and
(6) implementation of certain strategies that reduce expenses. However, since
the Company's net income did not come within the aggressive target net income
range, the payout factor was zero, and therefore, no payouts were made.
Long-Term Performance Incentive Plan
Long-term equity-based awards are granted under the Company's Performance
Incentive Plan, adopted in 1992, which permits the Plan Committee flexibility
in providing different forms and levels of equity-based awards to key
employees.
In 1997 the Company granted performance share awards to Messrs. Adkins and
Schimkaitis and option awards to Messrs. McMasters, Thompson, Barefoot, and
West, among others, under the Performance Incentive Plan. These awards are
intended to align the interests of the executives with those of the Company's
stockholders by providing the executives with equity-based incentives. The
performance period for the 1997 grants commences January 1, 1998 and ends
December 31, 2000. The Performance Share Agreements and the Option Agreements
under which these awards were made are described in notes 2 and 3 to the
Summary Compensation Table, which appears earlier in this Proxy Statement.
Under each Performance Share Agreement, at the end of each calendar year
during the performance period, the recipient is entitled to earn one-third of
the total number of performance shares specified in the Agreement, based on
the Company's achievement of certain performance goals including earnings
growth, growth in non-gas net income and share price relative to book value
plus a carryover amount of shares in the second and third years of the
performance period. Under each Option Agreement, one-half of the options vest
automatically, and the remaining half become exercisable in three annual
increments based on the Company's achievement of the same three goals. A
certain number of performance shares
13
<PAGE>
and options are allocated to the achievement of each goal. In 1998, the
Company achieved the performance goal relating to growth in non-gas net
income, but did not achieve the other two performance goals. Accordingly, the
performance shares allocated to the achievement of the non-gas net income goal
were awarded, and the options allocated to that goal became exercisable.
Compensation of the Chief Executive Officer
During 1998, the compensation of the Company's Chief Executive Officer, Ralph
J. Adkins, was determined pursuant to the three-part program described above.
First, Mr. Adkins' base salary was set to approximate the midpoint of chief
executive salaries paid by companies in the Industry Peer Group. Second, Mr.
Adkins' target bonus was $90,000 or 30% of salary. The Committee determined that
although a significant percentage of his performance goals had been met by
virtue of the accomplishment of goals set forth for executive officers under
"Annual Incentive Bonus" above, the Company's net income did not come within the
aggressive target net income range, and therefore no bonus was paid. Finally,
the long-term performance incentive component of Mr. Adkins' compensation was
determined as described under "Long-Term Performance Incentive Plan" above. Mr.
Adkins received 1,204 performance shares based on the Company's achievement of
its performance goal related to non-gas net income.
Compliance with Internal Revenue Code Section 162(m)
Internal Revenue Code Section 162(m), enacted in 1993, precludes any public
corporation from taking a deduction for compensation in excess of $1 million
paid to its chief executive officer and any of its other named executive
officers. Certain performance-based compensation is specifically exempted from
the deduction limit. No formal policy has been adopted by the Company with
respect to qualifying compensation paid to its executive officers from the
deduction limit. The Company does not anticipate that compensation paid to any
of its executive officers in 1999 will exceed the dollar limit.
THE COMPENSATION COMMITTEE
John W. Jardine, Jr.
Jeremiah P. Shea (Chairman)
William G. Warden, III
Stock Performance Chart
The following chart compares the yearly percentage change in the cumulative
total stockholder return on the Company's common stock during the five fiscal
years ended December 31, 1998, with the cumulative total return on the S&P 500
Index and an industry index consisting of 19 diversified natural gas companies
as published by Edward D. Jones & Co. The 19 companies in the Edward D. Jones &
Co. industry index are as follows: Chesapeake Utilities Corporation, Columbia
Energy Group, Inc., Consolidated Natural Gas Company, Eastern Enterprises,
Energen Corporation, Equitable Resources, Inc., KN Energy, Inc., MCN Energy
Group, Inc., MDU Resources Group, Inc., National Fuel Gas Company, NICOR, Inc.,
Oneok, Inc., Questar Corporation, SEMCO Energy, Inc., Southwest Gas Corporation,
Southwestern Energy Company, UGI Corporation, Valley Resources, Inc., and WICOR,
Inc. The comparison assumes $100 was invested on December 31, 1993 in the
Company's common stock and in each of the foregoing indices and assumes
reinvestment of dividends.
14
<PAGE>
[STOCK PERFORMANCE GRAPH APPEARS HERE]
Stock Performance
<TABLE>
<CAPTION>
Cumulative Total Stockholder Return
----------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Chesapeake 100.0 88.4 108.2 131.9 169.0 159.5
S&P 500 100.0 101.3 139.3 171.3 228.5 293.9
Industry Index 100.0 88.6 117.3 147.8 185.2 170.6
</TABLE>
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Board's Compensation Committee and Plan Committee are Mr.
Jardine, Mr. Shea and Mr. Warden. Mr. Jardine was formerly Chief Executive
Officer of the Company from 1983 to 1990.
CERTAIN TRANSACTIONS
William P. Schneider (see "Beneficial Ownership of the Company's Securities
By Others") and his brother James R. Schneider serve as executive officers of
Tri-County Gas Company, Inc., a subsidiary of the Company which they formerly
owned, pursuant to a five-year employment agreement entered into on March 6,
1997 that provides for a salary of $100,000 per year (which has been increased
by approximately seven percent per year), together with retirement and other
benefits.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, following the recommendation of the Audit Committee,
appointed PricewaterhouseCoopers, L.L.P. (formerly Coopers & Lybrand, L.L.P.) to
serve as Chesapeake's independent accountants for the year ending December 31,
1998, to perform audits of the financial statements of Chesapeake and its
subsidiaries. The Board's selection of PricewaterhouseCoopers, L.L.P. was
ratified by the stockholders at the Company's 1998 Annual Meeting.
PricewaterhouseCoopers, L.L.P. was also retained during 1998 to render certain
non-audit professional services.
It is not expected that a representative from PricewaterhouseCoopers, L.L.P.
will be present at the Annual Meeting of Stockholders.
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of PricewaterhouseCoopers, L.L.P.
to serve as the independent auditors of Chesapeake and its consolidated
subsidiaries for the fiscal year ending December 31, 1999. The Board is
submitting the selection of PricewaterhouseCoopers, L.L.P. for ratification by
stockholders.
16
<PAGE>
PricewaterhouseCoopers, L.L.P. has served as independent auditors of
Chesapeake and its subsidiaries since 1982. (See "Relationship with Independent
Public Accountants"). The firm has wide experience in accounting and auditing
for public utilities and other companies. PricewaterhouseCoopers, L.L.P. is a
member of the Securities and Exchange Commission Practice Section of the
American Institute of Certified Public Accountants. By virtue of their
membership in this Section, they have agreed to undergo a review by an
independent accounting firm once every three years. Neither
PricewaterhouseCoopers, L.L.P. nor any of its partners has any direct or
indirect financial interest in or any connection (other than as independent
auditors or with respect to non-audit professional services) with Chesapeake or
any of its subsidiaries. All of the professional services provided by
PricewaterhouseCoopers, L.L.P. are furnished at customary rates and terms.
Based upon the recommendation of the Audit Committee, the Board of Directors
selected this firm to act as Chesapeake's independent auditors for the year
1999, subject to ratification by the stockholders, in the belief that
PricewaterhouseCoopers, L.L.P. is well qualified. Should the selection of
PricewaterhouseCoopers, L.L.P. as independent auditors of Chesapeake not be
ratified by the stockholders, the Board of Directors will reconsider the matter.
SUBMISSION OF STOCKHOLDERS PROPOSALS
Any stockholder who wishes to submit a proposal for possible inclusion in
Chesapeake's proxy statement for the next annual meeting must submit the
proposal in writing to the Board of Directors on or before December 2, 1999.
Written proposals should be directed to William C. Boyles, Corporate Secretary,
Chesapeake Utilities Corporation, 909 Silver Lake Boulevard, Dover, Delaware
19904.
If the proposal is received by the Company on or before February 15, 2000, the
persons named as proxies in the Company's 2000 proxy material will have the
discretionary authority to vote on the matter in accordance with their best
judgment without disclosure of such matter in that proxy material and without
disclosure of how the proxy holders intend to exercise their discretionary
authority to vote on such matter.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K
CHESAPEAKE WILL PROVIDE WITHOUT CHARGE TO ANY PERSON, UPON THE WRITTEN REQUEST
OF SUCH PERSON, A COPY OF CHESAPEAKE'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE
FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER THE SECURITIES
EXCHANGE ACT OF 1934 FOR CHESAPEAKE'S FISCAL YEAR ENDED DECEMBER 31, 1998.
WRITTEN REQUESTS SHOULD BE DIRECTED TO WILLIAM C. BOYLES, CORPORATE SECRETARY,
CHESAPEAKE UTILITIES CORPORATION, 909 SILVER LAKE BOULEVARD, DOVER, DELAWARE
19904.
17
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires each of the Company's directors and executive
officers, and any beneficial owner of more than 10% of the Company's common
stock, to file with the Securities and Exchange Commission (the "SEC") initial
reports of beneficial ownership of Chesapeake's common stock and reports of
changes in such beneficial ownership. Such persons also are required by SEC
regulations to furnish Chesapeake with copies of such reports. To Chesapeake's
knowledge, based solely on its review of the copies of such reports furnished to
Chesapeake and on the written representations made by such persons that no other
reports were required, during the fiscal year ending December 31, 1997, the
following persons each filed late reports on Form 4 as indicated: Mr. Rider 1
report, 1 transaction; Mr. Warden 3 reports, 38 transactions.
OTHER MATTERS
The Board of Directors knows of no other matter to be presented at the
meeting. If, however, any other business properly comes up for action at the
meeting or any adjournment thereof, it is intended that the persons acting under
the proxies in the form enclosed will vote in regard thereto according to their
discretion.
By Order of the Board of Directors,
William C. Boyles
Corporate Secretary
18
<PAGE>
Chesapeake Utilities Corporation April 1, 1999
A Diversified Utility Company
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Chesapeake Utilities Corporation to be held at 10:00 A.M. on May 18, 1999, in
the Board Room, PNC Bank, Delaware, 222 Delaware Avenue, Wilmington, Delaware.
Your Board of Directors looks forward to greeting personally those stockholders
able to attend. The Secretary's formal Notice of Annual Meeting of Stockholders
and the Proxy Statement appear on the enclosed pages and describe the matters
that will be submitted to a vote of stockholders at the meeting.
Whether or not you plan to attend, it is important that your shares are
represented at the meeting. Accordingly, you are requested to promptly sign,
date and mail the attached proxy in the envelope provided.
Thank you for your consideration and continued support.
Sincerely,
/s/ Ralph J. Adkins
RALPH J. ADKINS
Chairman of the Board
DETACH HERE
Please mark your
votes as in this
example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1 and 2.
1. Election of Directors
Nominees: Walter J. Coleman, John R. Schimkaitis, Jeremiah P. Shea
FOR WITHHELD
[_] [_]
[_] ______________________________________
For all nominees except as noted above
2. For ratification of the selection of
independent auditors. FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing a each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give the full title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature:______________________________ Date: ____________________
Signature:______________________________ Date: ____________________
<PAGE>
DETACH HERE
PROXY
CHESAPEAKE UTILITIES CORPORATION
909 SILVER LAKE BOULEVARD
DOVER, DELAWARE 19904
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1999 IN THE BOARD ROOM
PNC BANK, DELAWARE
222 DELAWARE AVENUE
WILMINGTON, DELAWARE 19899
The undersigned stockholder hereby appoints Ralph J. Adkins and John R.
Schimkaitis and each one of them, with power of substitution and revocation, the
attorneys of the undersigned to vote all shares in the name of the undersigned
on all matters set forth in the proxy statement and such other matters as may
properly come before the Annual Meeting and all adjournments thereof.
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given, shares will be voted FOR Items 1 and 2.
The Board of Directors Recommends a Vote FOR Items 1 and 2.
[SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE
SIDE] SIDE]
