UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. 1 )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
CH ENERGY GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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 or 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:
________________________________________________________________________________
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________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
SEC 1913 (3-99)
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CH ENERGY GROUP, INC.
284 SOUTH AVENUE
POUGHKEEPSIE, NY 12601-4879
March 1, 2000
TO THE HOLDERS OF COMMON STOCK:
I am pleased to invite you to the Annual Meeting of Shareholders of CH
Energy Group, Inc., which is the recently established holding company of Central
Hudson Gas & Electric Corporation and Central Hudson Energy Services, Inc.
The Annual Meeting of Shareholders will be held at the Corporation's
office in Poughkeepsie, NY on Tuesday, April 25, 2000, at 10:30 AM. A formal
Notice of the Annual Meeting and Proxy Statement are attached.
We request that you sign, date and mail the enclosed proxy card
promptly. Prompt return of your voted proxy will reduce the cost of further
mailings. As an alternative to returning your proxy card, you can also vote your
shares by calling the toll-free number on your proxy card or voting through the
Internet at the Website also identified on your proxy card. Both methods of
voting are available 24 hours a day, seven days a week. Internet voting will be
accessible until 12:01 AM on April 18, 2000. You may revoke your voted proxy at
any time prior to the meeting or vote in person if you attend the meeting.
The response from our shareholders in the past has been outstanding,
and this year we are once again looking forward to receiving your proxy.
You are cordially invited to attend the Annual Meeting in person. It is
always a pleasure for me and the other members of the Board of Directors to meet
with our shareholders. We look forward to greeting as many of you as possible at
the meeting.
PAUL J. GANCI
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
CH ENERGY GROUP, INC.
284 SOUTH AVENUE
POUGHKEEPSIE, NY 12601-4879
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF COMMON STOCK:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
the CH Energy Group, Inc. will be held:
TIME 10:30 AM, on Tuesday, April 25, 2000
PLACE Office of the Corporation
284 South Avenue
Poughkeepsie, NY 12601
ITEMS OF BUSINESS (1) To elect three classes of Directors for the
ensuing years; Class I Directors whose terms
expire in 2001, Class II Directors whose terms
expire in 2002 and Class III Directors whose
terms expire in 2003;
(2) To approve the adoption of the Corporation's
Long-Term Performance-Based Incentive Plan;
(3) To ratify the appointment of
PricewaterhouseCoopers LLP as independent
accountants for the five-year term beginning
in 2000; and
(4) To take action upon any other matters that may
properly come before the Meeting.
RECORD DATE Holders of Record of Common Shares on the close of
business March 1, 2000 are entitled to vote at the
Meeting.
ANNUAL REPORT The Annual Report to Shareholders, as combined with
the Corporation's Form 10-K Annual Report to the
Securities and Exchange Commission, is enclosed.
PROXY VOTING It is important that your shares be represented and
voted at the Meeting. Please MARK, SIGN, DATE AND
RETURN PROMPTLY the enclosed proxy card in the
postage-paid envelope furnished for that purpose. As
an alternative to returning your proxy card, you can
also vote your shares by calling the toll-free number
on your proxy card or voting through the Internet at
the Web Site also identified on your proxy card. Both
Internet and telephone voting are available 24 hours a
day, seven days a week. Internet voting will be
accessible until 12:01 AM on April 18, 2000. You may
revoke your voted proxy at any time prior to the
meeting or vote in person if you attend the meeting.
Any proxy may be revoked in the manner described in
the accompanying Proxy Statement at any time prior to
its exercise at the Meeting.
By Order of the Board of Directors,
Gladys L. Cooper
Corporate Secretary
March 1, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
PROXY STATEMENT 1
Shareholders Entitled to Vote 1
Proxies 1
Cost of Proxy Solicitation 2
Shareholder Communications 3
Shareholder Proposals 3
Security Ownership of Directors and Officers 4
Section 16(a) Beneficial Ownership Reporting Compliance 5
PROPOSAL NO. 1 - ELECTION OF DIRECTORS 6
BOARD OF DIRECTORS AND COMMITTEES 9
Meetings and Attendance 9
Committee on Audit 10
Compensation Committee/Interlocks and Insider Participation 10
Compensation of Directors and Officers of the Board 11
Directors' Deferred Compensation Plan 9
Stock Plan for Outside Directors 9
EXECUTIVE COMPENSATION 12
Summary Compensation Table 13
Pensions/Deferred Compensation Plans 14
Employment Contracts and Termination of Employment
and Change of Control Arrangements 16
Report on Executive Compensation 18
Performance Graph 24
PROPOSAL NO. 2 - APPROVAL OF THE CORPORATION'S
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN 25
Description of the Plan 26
Federal Income Tax Consequences 30
New Plan Benefits 31
PROPOSAL NO. 3 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS 34
OTHER MATTERS 35
EXHIBIT A A-1
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PROXY STATEMENT
The enclosed proxy is being solicited by the Board of Directors of the
Corporation for use in connection with the Annual Meeting of Shareholders to be
held on April 25, 2000. This proxy statement and enclosed proxy are first being
sent to shareholders on or about March 1, 2000. The mailing address of the
principal executive office of the Corporation is 284 South Avenue, Poughkeepsie,
NY 12601-4879.
On December 15, 1999, as a result of the holding company formation
approved by the shareholders of Central Hudson Gas & Electric Corporation
("Central Hudson") at a Special Meeting on September 25, 1998, the outstanding
shares of Central Hudson Common Stock were exchanged, on a one-for-one basis,
for shares of the Corporation's Common Stock ("Holding Company Restructuring").
The Corporation owns 100% of the issued and outstanding shares of Central Hudson
Common Stock.
SHAREHOLDERS ENTITLED TO VOTE
The record of shareholders entitled to notice of, and to vote at, the
Annual Meeting was taken at the close of business on March 1, 2000. At that
date, the Corporation had outstanding 16,862,087 shares of Common Stock ($.10
par value) of the Corporation ("Common Stock"). Each share of Common Stock is
entitled to one vote. No other class of securities is entitled to vote at this
meeting.
PROXIES
HOW YOU CAN VOTE
Shareholders of record can give a proxy to be voted at the meeting
either (i) over the telephone by calling the toll-free number identified on the
proxy card, (ii) electronically, using the Internet or (iii) by mailing in the
enclosed proxy card. Shareholders who hold their shares in "street name" must
vote their shares in the manner prescribed by their brokers.
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The telephone and Internet voting procedures have been set up for
shareholder convenience and have been designed to authenticate shareholder
identity, to allow shareholders to give voting instructions and to confirm that
those instructions have been recorded properly. If shareholders of record would
like to vote by telephone or by using the Internet, please refer to the specific
instructions set forth on the enclosed proxy card. If shareholders wish to vote
using a paper format and return their signed proxy before the Annual Meeting,
their shares will be voted as directed.
Whether shareholders choose to vote by telephone, over the Internet or
by mail, they can specify whether their shares should be voted for all, some or
none of the nominees for Director (Proposal 1 on the proxy card). Shareholders
can also specify whether they approve, disapprove or abstain from each of the
other two (2) proposals.
IF SHAREHOLDERS DO NOT SPECIFY ON THEIR PROXY CARD (OR WHEN GIVING
THEIR PROXY BY TELEPHONE OR OVER THE INTERNET) HOW THEY WANT TO VOTE THEIR
SHARES, IT IS THE INTENTION OF THE PERSONS NAMED IN THE PROXY FORM TO VOTE "FOR"
THE ELECTION OF ALL NOMINEES FOR DIRECTOR AS SET FORTH UNDER "PROPOSAL NO. 1 -
ELECTION OF DIRECTORS" AND "FOR" PROPOSALS 2 AND 3. ABSTENTIONS AND BROKER
NON-VOTES ARE VOTED NEITHER "FOR" NOR "AGAINST" AND HAVE NO EFFECT ON THE VOTE,
BUT ARE COUNTED IN THE DETERMINATION OF A QUORUM.
REVOCATION OF PROXIES
Shareholders can revoke their proxy at any time before it is exercised
in any of three ways:
(1) by submitting written notice of revocation to the Corporate
Secretary;
(2) by submitting another proxy by telephone, via the Internet or
by mail that is later dated and, if by mail, that is properly
signed; or
(3) by voting in person at the meeting.
COST OF PROXY SOLICITATION
The cost of preparing, printing and mailing the notice of meeting,
proxy statement, proxy and annual report will be borne by the Corporation. Proxy
solicitation other than by use of the mail may be made by regular employees of
the Corporation by telephone and personal solicitation. Banks, brokerage houses,
custodians, nominees and fiduciaries are
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being requested to forward the soliciting material to their principals and to
obtain authorization for the execution of proxies, and may be reimbursed for
their out-of-pocket expenses incurred in that connection. In addition, the
Corporation has retained D.F. King & Co., Inc. of New York, NY, a proxy
solicitation organization, to assist in the solicitation of proxies. The fee of
such organization in connection therewith is estimated to be $15,000, plus
reasonable out-of-pocket expenses.
SHAREHOLDER COMMUNICATIONS
Highlights of the 2000 Annual Meeting will be included on the
Corporation's Website (cenhud.com) and in the Corporation's August 1, 2000
Report to Shareholders.
Shareholders' comments related to any aspect of the Corporation's
business are welcome. Space for comments is provided on the proxy card given to
shareholders of record. Other shareholders may submit comments to the
Corporation in care of the Corporate Secretary. Although comments are not
answered on an individual basis, they do assist the Directors and management in
addressing the needs of shareholders.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Corporation's 2001 proxy
materials, shareholder proposals must be received by the Corporation by October
31, 2000. In addition, the Corporation's By-Laws provide that shareholders
intending to nominate a Director or bring any other proper business before an
annual shareholder meeting must furnish timely written notice concerning, among
other things, the business to be brought before the meeting and the shareholder
making the proposal. In order to be timely for the 2001 Annual Meeting of the
Corporation, a shareholder entitled to vote at that meeting, must deliver
written notice to the Corporate Secretary between January 25, 2001 and February
24, 2001.
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to the Corporate Secretary, CH Energy Group, Inc., 284 South
Avenue, Poughkeepsie, NY 12601-4879.
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SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table lists the number of shares of equity securities of
the Corporation and its Affiliates beneficially owned by all the Directors, and
nominees for election as Directors, each executive officer listed in the table
under the caption "Executive Compensation" and by all Directors and executive
officers of the Corporation and its Affiliates as a group:
NO. OF % OF THE
SHARES OF THE CORPORATION'S
CORPORATION'S COMMON
NAME COMMON STOCK(1) STOCK(2)
- ---- --------------- --------
Jack Effron............................ 4,320 Less than 1%
Frances D. Fergusson................... 2,417 Less than 1%
Heinz K. Fridrich...................... 3,160 Less than 1%
Edward F. X. Gallagher................. 2,604 Less than 1%
Paul J. Ganci.......................... 11,643 (3) Less than 1%
Stanley J. Grubel...................... 468 Less than 1%
Charles LaForge........................ 4,475 Less than 1%
John E. Mack III....................... 13,051 (3) Less than 1%
Edward P. Swyer........................ 15,920 Less than 1%
Carl E. Meyer.......................... 1,892 Less than 1%
Allan R. Page.......................... 2,832 Less than 1%
Joseph J. DeVirgilio, Jr............... 1,566 Less than 1%
Ronald P. Brand........................ 2,563 Less than 1%
All Directors and executive
officers as a group
(13 persons)......................... 66,911 Less than 1%
- ------------
(1) Based on information furnished to the Corporation by the Directors and
executive officers as of December 31, 1999.
(2) The percentage ownership calculation for each owner has been made on
the basis that there are outstanding 16,862,087 shares of Common Stock
on the record date.
(3) Includes shares owned by the respective spouses of the named
individuals as follows: Mrs. Ganci - 2,098 shares and Mrs. Mack - 921
shares. The shares owned by Mrs. Ganci and Mrs. Mack are considered to
be beneficially owned by Mr. Ganci and Mr. Mack, respectively, only for
the purpose of this proxy statement and the respective named
individuals disclaim any beneficial interest in such shares for all
other purposes.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors and persons who own more than ten percent
of a registered class of the Corporation's equity securities ("Reporting
Persons") to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange. Such Reporting Persons are required by SEC regulations to
furnish the Corporation with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Corporation and
written representations from the Corporation's officers and Directors, all of
the Reporting Persons, with the exception of Mr. Grubel in filing his initial
ownership report, made all requisite filings on a timely basis in 1999 with
respect to shares of the Corporation owned on or after December 15, 1999 (the
date of the Holding Company Restructuring) and shares of Central Hudson owned
prior to December 15, 1999.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Corporation's Restated Certificate of Incorporation and By-Laws
require that at this Annual Meeting the Directors be divided into three (3)
classes as nearly equal in number as possible with staggered terms of one (1),
two (2) and three (3) years so that at each subsequent Annual Meeting of this
Corporation only one (1) class of Directors will stand for election for a term
of three (3) years.
The number of Directors of the Corporation currently is fixed at nine
(9). Therefore, nine (9) Directors are to be elected by a plurality of the votes
cast at this Annual Meeting by the holders of shares entitled to vote. At this
Annual Meeting, the Board of Directors proposes (and recommends a vote in favor
thereof) the following nominees to be elected to the Board of Directors, their
terms to expire at the Annual Meeting in the years noted below or until their
successors are elected and qualified:
CLASS I - 2001
--------------
Edward F. X. Gallagher
Charles LaForge
Edward P. Swyer
CLASS II - 2002
---------------
Stanley J. Grubel
Frances D. Fergusson
John E. Mack III
CLASS III - 2003
----------------
Jack Effron
Heinz K. Fridrich
Paul J. Ganci
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 1.
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<TABLE>
<CAPTION>
BUSINESS
PRINCIPAL OCCUPATION OR EXPERIENCE PERIOD OF
EMPLOYMENT AND POSITIONS DURING SERVICE AS
NAME AND AND OFFICES WITH THE PAST DIRECTOR
AGE CORPORATION(1) FIVE YEARS(1) BEGAN
CLASS I - TERMS EXPIRING IN 2001
<S> <C> <C> <C>
EDWARD F. X. GALLAGHER Owner of Gallagher Transportation Services, Present Positions 1999, served
66 a group of companies engaged in the sale and as a
leasing of commercial motor vehicles, the Director of
[ PHOTO ] distribution of wholesale automotive parts Central
and the operation of several bus companies Hudson
under the trade name of Leprechaun Lines and beginning
Tours 1984(2)
Newburgh, NY
CHARLES LAFORGE President of Wayfarer Inns and owner of the Present Positions 1999,
69 Beekman Arms in Rhinebeck, NY; Trustee of served as a
Rondout Savings Bank in Kingston, NY; Director
[ PHOTO ] Trustee emeritus of the Culinary Institute of Central
of America in Poughkeepsie, NY Hudson
beginning
Rhinebeck, NY 1987(2)
EDWARD P. SWYER President of the Swyer Companies, a real Present Position 1999, served
50 estate firm engaged in the construction, as a
development and management of commercial Director of
[ PHOTO ] properties in the Capital District Region Central
Hudson
Albany, NY beginning
1990(2)
CLASS II - TERMS EXPIRING IN 2002
STANLEY J. GRUBEL Chief Executive Officer, MiCRUS, an advanced Present Positions 1999, served
57 semiconductor manufacturing company; as a
Director of New York State Business Council, Director of
[ PHOTO ] Mid-Hudson Pattern for Progress, Inc., Asyst Central
Technologies of California; Chairman of the Hudson
Marist College School of Management Advisory beginning
Council May 1999(2)
White Plains, NY
FRANCES D. FERGUSSON President and Professor of Art, Vassar Present Positions 1999, served
55 College; Member, Board of Trustees of the as a Director
Ford Foundation; Chair, Board of Trustees of of Central
[ PHOTO ] the Mayo Foundation; Director, HSBC Bank USA Hudson
and Chair of its Personnel Committee beginning
1993(2)
Poughkeepsie, NY
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS
PRINCIPAL OCCUPATION OR EXPERIENCE PERIOD OF
EMPLOYMENT AND POSITIONS DURING SERVICE AS
NAME AND AND OFFICES WITH THE PAST DIRECTOR
AGE CORPORATION(1) FIVE YEARS(1) BEGAN
<S> <C> <C> <C>
JOHN E. MACK III Chairman, Mid Hudson Pattern for Progress, Present Position since 1999, served
65 Inc.; Chairman of the Committee on Finance November 19, 1999; as a
of the Board Retired as Chairman of Director of
[ PHOTO ] Poughkeepsie, NY the Board of Central Central
Hudson, the gas and Hudson
electric utility beginning
subsidiary of the 1981(2)
Corporation, August
1998 - April 1999;
Chairman of the Board
and Chief Executive
Officer of Central
Hudson, August 1998 -
April 1999
CLASS III - TERMS EXPIRING IN 2003
JACK EFFRON Chairman of the Board of EFCO Products, a Present Positions 1999, served
66 bakery ingredients corporation; Chairman of as a
the St. Francis Health Care Foundation; Director of
[ PHOTO ] Chairman of the Committee on Compensation Central
and Succession/Retirement of the Board Hudson
beginning
Poughkeepsie, NY 1987(2)
HEINZ K. FRIDRICH Courtesy Professor, University of Florida at Present Positions 1999, served
66 Gainesville; Chairman of Committee on Audit as a
of the Board Director of
[ PHOTO ] Fernandina Beach, FL Central
Hudson
beginning
1988(2)
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS
PRINCIPAL OCCUPATION OR EXPERIENCE PERIOD OF
EMPLOYMENT AND POSITIONS DURING SERVICE AS
NAME AND AND OFFICES WITH THE PAST DIRECTOR
AGE CORPORATION(1) FIVE YEARS(1) BEGAN
<S> <C> <C> <C>
PAUL J. GANCI Chairman of the Board, President and Chief Present Position since 1999, served
61 Executive Officer of the Corporation; November 19, 1999; as a
Chairman of the Executive and Business Chairman of the Board Director of
[ PHOTO ] Development Committees of the Board and Chief Executive Central
Officer of Central Hudson
Poughkeepsie, NY Hudson since April beginning
1999; President and 1989
Chief Executive
Officer of Central
Hudson, August 1998 -
April 1999; President
and Chief Operating
Officer of Central
Hudson, December 1995 -
August 1998
</TABLE>
- ------------
(1) Based on information furnished to the Corporation by the nominees as of
December 31, 1999.
(2) Resigned as a Central Hudson Director, effective December 15, 1999.
ALTHOUGH THE BOARD OF DIRECTORS DOES NOT CONTEMPLATE THAT ANY OF THE
NOMINEES WILL BE UNABLE TO SERVE, SHOULD SUCH A SITUATION ARISE PRIOR TO THE
MEETING, THE PROXIES WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE
PERSONS ACTING THEREUNDER.
BOARD OF DIRECTORS AND COMMITTEES
MEETINGS AND ATTENDANCE
Between December 15, 1999 (the effective date of the Holding Company
Restructuring) and December 31, 1999, there was one (1) meeting of the Board of
Directors which all the Directors attended.
Prior to December 15, 1999, there were ten (10) meetings of the Board
of Directors of Central Hudson, on which Board each of the nominees served until
that date. All of those Directors attended at least 92% of the total number of
Central Hudson Board
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meetings and meetings of Committees of that Board on which they served. The
level of attendance at such meetings in 1999 ranged from 86% to 100%.
The five (5) standing committees of the Board of Directors are the
Committee on Audit, the Committee on Compensation and Succession/Retirement, the
Executive Committee, the Committee on Finance and the Business Development
Committee. Information with respect to the Committee on Audit and the Committee
on Compensation and Succession/Retirement is set forth below.
COMMITTEE ON AUDIT
The members of this Committee are Heinz K. Fridrich (Chairman), Edward
F. X. Gallagher, Charles LaForge and Frances D. Fergusson. The Committee had one
(1) meeting during 1999 since the December 15, 1999 Holding Company
Restructuring, which was attended by representatives of the Corporation's
independent accountants, PricewaterhouseCoopers LLP. The Committee examines the
adequacy of the Corporation's internal audit activities, reviews the scope of
the audit by the Corporation's independent accountants and related matters
pertaining to the examination of the financial statements, reviews the nature
and extent of any non-audit services provided by the Corporation's independent
accountants, will consult at least three (3) times a year with them and makes
recommendations to the Board of Directors with respect to the foregoing matters
as well as with respect to the appointment of the Corporation's independent
accountants.
A similar Committee of the Board of Directors of Central Hudson had two
(2) meetings during 1999 until December 15, 1999.
COMPENSATION COMMITTEE/INTERLOCKS AND INSIDER PARTICIPATION
The members of the Committee on Compensation and Succession/Retirement
("Compensation Committee") are Jack Effron (Chairman), Stanley J. Grubel,
Charles LaForge, Edward P. Swyer and Frances D. Fergusson. The Compensation
Committee had no meetings in 1999 since the December 15, 1999 Holding Company
Restructuring. The Compensation Committee considers and recommends to the Board
of Directors the compensation (and special terms, if any, of employment) of
Directors; the Chairman of the Board, President and Chief Executive Officer and
officers of the Board of Directors and reviews the salaries of other officers of
the Corporation. The Compensation Committee
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also considers and recommends to the Board of Directors the candidates to be
nominated for election to the Board and candidates for appointment by the Board
as officers of the Corporation. The Compensation Committee is charged with
receiving recommendations of nominees by shareholders for election of the Board
of Directors and reviewing and comparing the qualifications of such nominees
with those of other potential nominees. Any shareholder desiring to submit the
name of a nominee should send it, together with a statement of the candidate's
qualifications, to the Committee on Compensation and Succession/Retirement, c/o
the Corporate Secretary, CH Energy Group, Inc., 284 South Avenue, Poughkeepsie,
NY 12601-4879.
A similar Committee of the Board of Directors of Central Hudson had six
(6) meetings during 1999 until December 15, 1999.
No Compensation Committee interlock relationship existed in 1999 either
for the Corporation or Central Hudson.
COMPENSATION OF DIRECTORS AND OFFICERS OF THE BOARD
Each non-employee member of the Corporation's Board of Directors
("Outside Directors") (Mr. Ganci is an employee-Director), receives an annual
retainer of $15,000, $1,000 for attendance at each meeting of the Board and $850
for attendance at each meeting of any Committee of the Board of which such
Director is a member if such meeting is held on the same day as a meeting of the
Board and $1,000 for such committee meeting if held on a day other than that on
which a Board meeting is held. Mr. Mack also receives compensation in the amount
of $5,000 for his role as Chairman of the Board's Committee on Finance, and
Messrs. Fridrich and Effron each receive $2,500 for their roles as Chairmen of
the Committee on Audit and Compensation Committee, respectively.
CENTRAL HUDSON DIRECTORS' DEFERRED COMPENSATION PLAN
Central Hudson's Directors' Deferred Compensation Plan ("Deferred
Plan") was in effect until January 1, 2000 when it was merged into a new plan of
the Corporation. Prior to the Holding Company Restructuring, the Deferred Plan
applied to outside Directors of Central Hudson and permitted a Director to elect
at any time or from time to time to defer all or part of such Director's
compensation for services thereafter rendered to Central Hudson. For purposes of
the Deferred Plan, compensation was defined to include the amount of money to be
paid to the Director for serving as a member of the Board of
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Directors and any Committee of the Board, for serving as an officer of the Board
of Directors and any Committee of the Board and for any other services rendered
individually by agreement with the Corporation. A Director's compensation
deferred in accordance with the Deferred Plan is paid to said Director
(together with an interest equivalent or an equity option, as elected by the
Director) at such time as the Director ceases being a member of the Central
Hudson Board of Directors or at such other time after ceasing to be a Director
as the Director specified when making the original election to defer
compensation.
THE CORPORATION'S STOCK PLAN FOR OUTSIDE DIRECTORS
The Stock Plan for Outside Directors ("Stock Plan") assures that at
least a portion of compensation of the outside Directors of the Corporation be
made in the form of the Corporations' Common Stock. The Stock Plan is in the
shareholders' interests since it enables the Corporation to retain and attract
qualified outside Directors. The Stock Plan was assumed by the Corporation from
Central Hudson, effective December 15, 1999.
Pursuant to the terms of the Stock Plan, for each full quarter of each
year of service, an outside Director receives, on a quarterly basis, 25 shares
of the Corporation's Common Stock. In addition, when an outside Director ceases
to be a Director for any reason, other than removal for cause, that Director
will receive, quarterly, 25 shares of such Common Stock for each full quarter
(but not beyond 40 such periods) during which that Director served as an outside
Director, including periods with Central Hudson; however, no such distribution
will be made after that Director's death.
EXECUTIVE COMPENSATION
The Summary Compensation Table set forth below includes compensation
information on the Chairman of the Board, President and Chief Executive Officer
of the Corporation and each of the Corporation's four (4) most highly
compensated executive officers, whose salary in 1999 exceeded $100,000, for
services rendered to the Corporation and its Affiliates:
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------------------------
NAME AND PRINCIPAL POSITION(S) YEAR SALARY(1) BONUS COMPENSATION(2)
<S> <C> <C> <C> <C>
PAUL J. GANCI, Chairman of the 1999 $341,569 $20,100(3) $5,000
Board, President and Chief 1998 $322,500 $22,800(3) $5,000
Executive Officer of the Corporation 1997 $280,250 $21,280(3) $4,750
and Chairman of the Board and
Chief Executive Officer of Central Hudson
CARL E. MEYER, Executive Vice 1999 $242,529 $2,471(4) $5,000
President of the Corporation and 1998 $212,000 $3,582(4) $5,000
President and Chief Operating 1997 $186,750 $6,331(4) $4,750
Officer of Central Hudson
ALLAN R. PAGE, Executive 1999 $229,462 $2,205(4) $5,000
Executive Vice President of the 1998 $189,199 $3,180(4) $5,000
Corporation; Vice President of 1997 $165,750 $6,331(4) $4,750
Central Hudson; President and
Chief Operating Officer of Central
Hudson Energy Services, Inc.
("Services"), an Affiliate of the
Corporation
JOSEPH J. DEVIRGILIO, JR., 1999 $177,436 $1,897(4) $5,000
Senior Vice President - 1998 $162,870 $2,925(4) $5,000
Corporate Services and 1998 $152,720 $6,194(4) $4,750
Administration of Central Hudson
RONALD P. BRAND, Senior Vice 1999 $170,174 $1,826(4) $5,000
President - Engineering, 1998 $153,822 $2,817(4) $5,000
Environmental Affairs and 1997 $141,161 $5,714(4) $4,750
Special Projects of Central Hudson
</TABLE>
- ---------
(1) This base salary amount includes amounts deferred pursuant to Central
Hudson's (i) Flexible Benefits Plan, which Plan is established pursuant
to Section 125 of the Internal Revenue Code of 1986, as amended
("Code"), which permits those electing to participate to defer salary,
within
13
<PAGE>
specified limits, to be applied to qualified medical and/or child care
benefit payments and (ii) Savings Incentive Plan ("SIP"), a "defined
contribution" plan which meets the requirements of the Code, including
Code Section 401(k), which, among other things, permits, within
limitations, participants to tax-defer base salary and, within limits,
provides for Central Hudson contributions to participants.
(2) These are amounts contributed by Central Hudson for the benefit of the
named individual under the SIP.
(3) Compensation paid pursuant to the terms of Central Hudson's Executive
Incentive Compensation Plan ("Executive Incentive Plan"), which terms
are more fully described below under the caption "Report on Executive
Compensation - Central Hudson Executive Incentive Plan".
(4) Compensation paid pursuant to the terms of Central Hudson's Management
Incentive Plan, which terms are more fully described below under the
caption "Report on Executive Compensation - Central Hudson Management
Incentive Plan."
PENSIONS/DEFERRED COMPENSATION PLANS
CENTRAL HUDSON RETIREMENT INCOME PLAN
Central Hudson's Retirement Income Plan ("Retirement Plan") is a
"defined benefit" plan, which meets the requirements of the Code, and applies to
all employees of Central Hudson and those Affiliates which have adopted that
Plan, including the individuals listed in the table under the above caption
"Executive Compensation". In 1999, there were no contributions made to the
Retirement Plan as a result of its full-funding status for Federal income tax
purposes. The Retirement Plan provides for retirement benefits related to the
participant's annual base salary for each year of eligible employment.
Retirement Plan benefits depend upon length of service, age at retirement and
earnings during years of participation in the Retirement Plan and any
predecessor plans. A participant's benefits under the Retirement Plan are
determined as the accumulation, over that participant's career, of a percentage
of each year's base salary. For periods on and after October 1, 1998, the
percentage is 2% of base salary, except that for years in which the participant
is over 50 years of age such percentage is increased to 2.5%. The Retirement
Plan also provides a benefit for service prior to October 1, 1998 based on a
percentage of a participant's average earnings at October 1, 1998 (being 50% of
each of the base salaries at October 1, 1995 and 1998 and 100% of each of the
base salaries at October 1, 1996 and 1997) and the number of years of service
while a member of the Retirement Plan prior to October 1, 1998, all subject to
certain limitations.
14
<PAGE>
A cash balance account benefit is also available upon retirement under
the Retirement Plan, which benefit, generally, provides for a credit to those
participants in the Retirement Plan on January 1, 1987, of 10% of their base
salary on that date, a credit to those participants in the Retirement Plan on
September 30, 1991, of 5% of their base salary on that date, a credit to those
participants in the Retirement Plan on September 30, 1997, of 5% of their base
salary on that date and a further credit to those participants in the Retirement
Plan on September 30, 1999, of 5% of their base salary on that date with, in all
four cases, annual interest earned thereon.
While the amount of the contribution payment or accrual with respect to
a specified person is not and cannot readily be separately or individually
calculated by the actuaries for the Retirement Plan, estimated annual benefits
under the Retirement Plan upon retirement at age 65 for the individuals listed
in the table under the above caption "Executive Compensation", assuming
continuation of current annual salary levels and giving effect to applicable
benefit limitations in the Code, are as follows: Mr. Ganci - $135,000; Mr. Meyer
- - $131,998; Mr. Page - $128,923; Mr. DeVirgilio - $135,000 and Mr. Brand -
$104,107.
CENTRAL HUDSON RETIREMENT BENEFIT RESTORATION PLAN
Central Hudson maintains an unfunded, uninsured pension benefit plan
for a select group of highly compensated management employees called the
Retirement Benefit Restoration Plan ("RBRP"). The RBRP provides an annual
retirement benefit to those participants in the Retirement Plan who hold the
following offices with Central Hudson: Chairman of the Board and Chief Executive
Officer, Vice President (including all levels thereof), Secretary, Treasurer,
Controller and Assistant Vice President. Such benefit is equal to the difference
between (i) that received under the Retirement Plan, giving effect to applicable
salary and benefit limitations under the Code and (ii) that which would have
been received under the Retirement Plan, without giving effect to such
limitations under the Code. The individuals listed in the table under the above
caption "Executive Compensation" have a current salary level which, if continued
to retirement at age 65, would provide a benefit under the RBRP. The estimated
annual benefits under the RBRP upon retirement at age 65 for those individuals,
assuming the continuation of current annual salary levels, are as follows: Mr.
Ganci - $83,757; Mr. Meyer - $43,207; Mr. Page - $28,191; Mr. DeVirgilio -
$6,061 and Mr. Brand - $294.
15
<PAGE>
EXECUTIVE DEFERRED COMPENSATION PLAN
Central Hudson's Executive Deferred Compensation Plan ("EDCP") was
assumed by the Corporation upon the Holding Company Restructuring. The EDCP
covers a select group of highly compensated management employees as an incentive
for them to remain with Central Hudson. Under that Plan, an annual benefit is
payable for 10 years, commencing on retirement, to eligible participants (who
retire at age 60 or older and with 10 or more years of service) of the following
percentage of annual base compensation at retirement: 60 to 63 - 10%; 63 to 65 -
15%; 65 or over -20%. In view of changes in the Code which became effective
January 1, 1994, the EDCP was amended prior thereto so that eligible
participants, who reached age 55 at December 31, 1993, are considered to have
accrued benefits under the EDCP as if they were age 60 and had 10 years of
service with Central Hudson at December 31, 1993. No amounts were paid under the
EDCP for the individuals named in the table under the above caption "Executive
Compensation" for the year 1999. Estimated annual benefits under the EDCP upon
retirement at age 65 for such named individuals, assuming continuation of
current annual salary levels, are as follows: Mr. Ganci - $75,000; Mr. Meyer -
$50,000; Mr. Page - $48,000; Mr. DeVirgilio - $36,000 and Mr. Brand - $34,600.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Corporation has Employment Agreements (each, the "Agreement") with
each of the individuals listed in the table under the above caption "Executive
Compensation" ("Officers"). Until a Change of Control occurs, each Agreement is
automatically renewed for one (1) year on each July 31, unless a notice not to
extend is given. Each of the Agreements and Central Hudson's Change of Control
Policy were assumed by the Corporation from Central Hudson, effective December
15, 1999.
If a Change of Control (defined in the Agreement) occurs during the
term of an Agreement, then the Agreement becomes operative for a fixed three
(3)-year period. Upon a Change of Control, each Agreement provides generally
that the Officers' terms and conditions of employment (including position,
location, base salary, bonus and benefits) will not be adversely changed during
the three (3) year period after a Change of Control. If the Officer's employment
is terminated by the Corporation or an Affiliate, including Central Hudson, for
reasons other than death, cause or disability (as those terms are defined in
each Agreement), by the Officer for good reason (as that term is defined in each
16
<PAGE>
Agreement), by the Officer regardless of reason (during the 30-day period
beginning on the first anniversary of the Change of Control), upon certain
terminations prior to a Change of Control or in connection with or in
anticipation of a Change of Control, the Officer, in addition to all amounts
accrued to the date of termination, will receive a lump-sum payment ("Lump-Sum
Payment") equal to the sum of (i) the Officer's base salary through the date of
termination, (ii) a proportionate bonus based on the higher of the Officer's
most recent annual bonus and the Officer's annual bonus for the last fiscal year
("Highest Annual Bonus"), (iii) accrued vacation and (iv) three (3) times the
sum of the Officer's base salary and the Officer's Highest Annual Bonus. In
addition, such Officers would be entitled to continued employee welfare benefits
and to credit for pension purposes for the three (3) years from the date of such
termination.
Mr. Ganci's Agreement is substantially identical to the other Officers,
except that it is modified to limit the term of his Agreement to his normal
retirement date, May 1, 2003. In addition, Mr. Ganci will not receive a lump sum
payment if his employment is terminated at any time on or after a Change of
Control through May 1, 2003, (i) by the Corporation, or an Affiliate including
Central Hudson, for reasons other than for cause or disability, (ii) by Mr.
Ganci for any reason, (iii) upon certain terminations prior to a Change of
Control or (iv) in connection with or in anticipation of a Change of Control. In
such case, he will receive all amounts accrued to the date of his termination
and will be treated as if he had retired on May 1, 2003 for all employee welfare
benefits of the Corporation or an Affiliate, including Central Hudson. If Mr.
Ganci's employment is so terminated for any reason other than by the Corporation
or an Affiliate, including Central Hudson, for cause, Mr. Ganci or his
beneficiaries, as the case may be, will receive collective benefits under the
EDCP, the RBRP and the Retirement Plan as if Mr. Ganci had continued to be
employed through May 1, 2003, and as if his base salary and other cash
compensation had increased by 10% annually on each October 1 from the date of
his termination of employment to May 1, 2003.
In the event any payments made to any of the Officers as a result of a
Change of Control, whether under an Agreement or otherwise, would subject the
Officer to the excise tax on certain "excess parachute payments" payable under
Code Section 4999, or interest or penalties with respect to such tax, the
Officer will be entitled to be made whole for the payment of any such taxes,
interest or penalties. Each Officer, while covered by an Agreement, is not
entitled to participate in the Corporation's Change of Control Severance Policy.
In the event of a Change of Control, the Agreements will supersede any
individual employment and/or severance agreements entered into by the
Corporation with the Officers, except in certain instances.
17
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The following disclosure is made over the name of each outside
Director, on the date hereof, and shall be considered a report of the outside
Directors and the Compensation Committee:
The compensation of the executive officers of the Corporation for 1999
was received only from Central Hudson.
As described above under the caption "Board of Directors and
Committees-Compensation Committee/Interlocks and Insider Participation," the
members of the Compensation Committee are Jack Effron, Stanley J. Grubel,
Charles LaForge, Edward P. Swyer and Frances D. Fergusson. Among the
responsibilities of the Compensation Committee are consideration and
recommendation to the Board of Directors of the salaries of officers of the
Corporation. Annual salary determinations by the Board of Directors become
effective as of the Annual Meeting of Shareholders of each year and continue
until the following Annual Meeting. Until the Holding Company Restructuring,
Central Hudson's Board of Directors maintained a similar Compensation Committee
("Central Hudson Compensation Committee").
COMPENSATION PHILOSOPHY
The Central Hudson Compensation Committee based its 1999 officers'
compensation recommendations to the Central Hudson Board of Directors on an
evaluation of each of the following three (3) factors, giving balanced weight to
each, which factors reflect a long-standing executive compensation philosophy of
Central Hudson:
(1) Compensation comparisons of other comparable executive
officers. Comparisons are made to the compensation of officers
of other New York State utilities and of other utilities with
revenues and other characteristics similar to those of Central
Hudson, using data received from the Edison Electric Institute
("EEI") and the American Gas Association, which utilities are
some, but not all, of the utilities included on the graph
under the below caption "Performance Graph." Every two (2)
years, an executive compensation study is performed by an
independent consultant engaged by Central Hudson. The data
obtained by these various sources was
18
<PAGE>
evaluated, and compensation levels for Central Hudson's
officers were established based generally on averages of
comparative salary ranges;
(2) The experience, responsibility and contribution of each
individual officer to Central Hudson's performance; and
(3) The incumbent's performance in carrying out the
responsibilities and duties of his or her office, as described
below.
The performance of each officer of Central Hudson (other than Mr.
Ganci, as discussed below) was also evaluated by the Central Hudson Compensation
Committee, on the basis of how he or she contributed, to the extent applicable,
to furthering Central Hudson's mission:
to provide Central Hudson's customers with safe, reliable
utility service at the lowest reasonable price;
to provide a competitive return to Central Hudson's
shareholders;
to provide a safe working environment that will attract,
retain and motivate employees; and
to provide corporate resources to enhance the quality of life
in Central Hudson's service territory.
With the exception of (1) above, the performance criteria set forth
above for Mr. Ganci and each other officer of Central Hudson were subjectively
evaluated by the Central Hudson Compensation Committee in its deliberations
related to compensation for each officer, based on an assessment of the degree
to which each such officer (i) met the criteria set forth in his or her position
description and (ii) accomplished Central Hudson's strategic goals and
objectives for which such officers were responsible.
SECTION 162(m) OF THE CODE
The Compensation Committee and the Board of Directors are aware of and
have considered the qualifying compensation regulations established in Section
162(m) of the Code, which provides that, unless an appropriate exemption
applies, a tax deduction for
19
<PAGE>
the Corporation for remuneration of any officer named in the above captioned -
"Executive Compensation - Summary Compensation Table" will not be allowed to the
extent such remuneration in any taxable year exceeds $1 million. As no officer
of the Corporation or Central Hudson received remuneration during the 1999
fiscal year approaching $1 million, neither the Corporation nor Central Hudson
has developed an executive compensation policy with respect to qualifying
compensation paid to its executive officers for deductibility under Section
162(m) of the Code, except as may be provided in the Long-Term Performance-Based
Incentive Plan described below under the caption "Proposal No. 2 - Approval of
the Corporation's Long-Term Performance-Based Incentive Plan."
CENTRAL HUDSON MANAGEMENT INCENTIVE PLAN
The Central Hudson Management Incentive Plan is a cash bonus program
which bases its awards on Central Hudson meeting certain "Incentive Goals," as
such term is defined in that Plan. All Central Hudson management employees are
eligible to receive awards except for (i) Central Hudson's Chairman of the Board
and Chief Executive Officer (Mr. Ganci) and any other officer(s) which Mr. Ganci
shall determine from time to time, (ii) temporary employees and (iii) those
employees whose employment is terminated in a year in which an incentive award
is made unless such termination is a retirement.
The Incentive Goal is established each fiscal year by the Central
Hudson Board of Directors. After the audited financial results of Central Hudson
for a fiscal year have been made public, the Board of Directors of Central
Hudson determines whether or not the Incentive Goal has been met for that fiscal
year, which determination is final. The resulting award is allocated among and
paid to each eligible management employee in the same proportion that each such
employee's compensation for the fiscal year bears to base compensation paid to
all such eligible management employees for that fiscal year.
CENTRAL HUDSON EXECUTIVE INCENTIVE PLAN
The Executive Incentive Plan of Central Hudson, established in 1993,
was terminated effective January 1, 2000. That Plan is applicable to Mr. Ganci
during 1999 as President and Chief Executive Officer of Central Hudson until
April 27, 1999, and thereafter as the Chairman of the Board and Chief Executive
Officer of Central Hudson, and to Carl E. Meyer, as President and Chief
Operating Officer of Central Hudson on and after April 27, 1999. That Plan was
also applicable to Mr. Mack until his retirement, as Chairman of the Board of
Central Hudson, on April 27, 1999.
20
<PAGE>
The Executive Incentive Plan established the compensation for the
incumbents in such offices based on two components: annual base salary (which
becomes effective as of April 1 of each year and continues until the following
March 31) and an incentive feature (which provides an award, as noted below, for
performance for the most recently ended calendar year). The determination of
1999 annual base salary and incentive compensation, if any, was determined by
the outside Directors of Central Hudson.
Under the incentive component of the Executive Incentive Plan, Messrs.
Ganci, Mack and Meyer had the opportunity to earn up to an additional 10% of
their base salaries, based on a formula which measures Central Hudson's
achievement of goals within the following four (4) categories: (i) shareholder
value, (ii) level of Central Hudson customer electric and gas prices and
reliability, (iii) employee safety and (iv) community involvement.
A determination as to whether or not any incentive compensation is
earned is made within 90 days after the end of each calendar year; and if an
award is made, compensation will be made in a lump sum within 30 days of such
determination.
CENTRAL HUDSON 1999 BASE SALARIES AND EXECUTIVE INCENTIVE
COMPENSATION FOR MESSRS. GANCI, MACK AND MEYER
The 1999 performances of Mr. Ganci, as President and Chief Executive
Officer of Central Hudson until April 27, 1999 and as Chairman of the Board and
Chief Executive Officer of Central Hudson thereafter, of Mr. Mack, as Chairman
of the Board until April 27, 1999 and of Mr. Meyer, as President and Chief
Operating Officer of Central Hudson since April 27, 1999, were evaluated under
the Executive Incentive Plan by the outside Directors of Central Hudson.
In establishing the annual base salary component for Messrs. Ganci and
Meyer under the Executive Incentive Plan, which for the period April 1, 1999 to
March 31, 2000 are $375,000 and $250,000, respectively, the outside Directors of
Central Hudson reviewed Messrs. Ganci and Meyer's performances during 1998
related to their policies and leadership in the goal of building a more
profitable corporation and thereby increasing shareholder value while providing
reliable service at reasonable prices. As a measure of this goal, their
performances were evaluated pursuant to the following criteria:
Has the confidence of the financial community and Central
Hudson's shareholders been maintained and/or enhanced? Key
financial indices,
21
<PAGE>
credit ratings, total return to shareholders and the adequacy
of cash flow are significant quantitative factors.
Does Central Hudson have effective management and other
personnel to assure a high quality of customer service and to
meet the changing needs of its customers?
Has Central Hudson's physical plant and equipment been
maintained and/or improved to assure that Central Hudson
continues to meet its objective of providing highly reliable
utility service at the lowest reasonable price?
Is Central Hudson's strategic plan effective in keeping
Central Hudson abreast of or ahead of changes that occur as a
result of competition, technology changes and new regulation?
Mr. Mack's performance in 1998 was also evaluated based on the above
criteria. With respect to the relationship of Central Hudson's performance in
1998 to Messrs. Ganci's and Meyer's base salaries for 1999, the outside
Directors of Central Hudson determined that performance by Messrs. Ganci and
Meyer of their duties in 1998 more than satisfied the related performance
criteria, as described above.
Not all of these performance criteria lend themselves to objective
measurement. However, in 1998 (i) Central Hudson's total return to shareholders
was 49.1% as compared to the EEI peer group return of 29.3%, (ii) Central
Hudson's residential electric prices were 20% lower than the New York State
average, (iii) Central Hudson's Employee Safety Index was lower than the average
of the prior five years and (iv) Central Hudson demonstrated a high level of
involvement in the communities served.
Based on the recommendation of the Central Hudson Compensation
Committee, the Board of Directors of Central Hudson, on February 27, 1999,
awarded Mr. Ganci 6% (or $20,100) and Mr. Mack 6% (or $24,000) of their
respective 1998 Base Salaries as incentive compensation. Mr. Meyer was not
eligible for an incentive compensation award with respect to his 1998 Base
Salary.
22
<PAGE>
Mr. Ganci did not participate in the determination of his 1999
compensation.
Jack Effron
Frances D. Fergusson
Stanley J. Grubel
Charles LaForge
Edward P. Swyer
23
<PAGE>
PERFORMANCE GRAPH
The line graph set forth below reflects the Holding Company
Restructuring on December 15, 1999 and provides a comparison of the
Corporation's cumulative total shareholder return on its Common Stock with the
Standard & Poor's 500 Index and, as a Corporation determined peer comparison,
with the EEI Combination Gas and Electric Investor-Owned Utilities' Index ("EEI
Index"). Such shareholder return is the sum of the dividends paid and the change
in the market price of stock.
-------------------------------------------------------------------------------
COMPARISON OF THE CORPORATION'S FIVE YEAR TOTAL
CUMULATIVE RETURN WITH THE S&P 500 INDEX AND
THE EEI INDEX
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE REPRESENTS A LINE GRAPH IN THE PRINTED PROXY STATEMENT]
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999**
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CH ENERGY GROUP, INC. $100 $126 $137 $204 $219 $170
S&P 500 INDEX $100 $138 $169 $226 $290 $351
EEI INDEX $100 $131 $133 $169 $192 $157
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Assumes $100 invested on January 1, 1994 in Central Hudson's Common
Stock, the S&P 500 Index and the EEI Index.
** The Central Hudson Common Stock was exchanged on a one-for-one basis
with this Corporation upon the Holding Company Restructuring on
December 15, 1999.
24
<PAGE>
PROPOSAL NO. 2 - APPROVAL OF
THE CORPORATION'S LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN
The Corporation is presenting for shareholder approval and adoption its
Long-Term Performance-Based Incentive Compensation Plan ("Plan"). The Plan,
which was adopted by the Central Hudson Board of Directors in October 1999 and
assumed by this Corporation on December 15, 1999, reflects a restructuring of
employee compensation to more closely align compensation with the short and
long-term initiatives of the Corporation and its Affiliates in order to increase
shareholder value and to increase the quality of electric and gas service of its
principal Affiliate, Central Hudson Gas & Electric Corporation.
The Plan has been structured in accordance with the following
principles for the Corporation and its Affiliates:
(1) Establishing and maintaining salaries of key executives,
including base compensation and short and long-term
incentives, at competitive market levels:
(2) Establishing a portion of compensation that is "at risk" and
tied to performance relative to specific objectives. The
portion of salary "at risk" will be increased from the 1999
level of a maximum of 10% of total compensation for the
Chairman of the Board, President and Chief Executive Officer,
to a target range of 15% to 30% for key executives; and
(3) The Plan establishes long-term incentives that include:
(a) Annual awards of performance-based shares that are
awarded on the basis of achieving superior total
shareholder return as measured against an industry
index; and
(b) Awarding stock options, the value of which are
directly tied to the long-term increased market
value of the Corporation's Common Stock.
The portion of the above plan which includes the participants and to
the long-term incentives, which incentives will provide certain tax benefits to
the Participants and to the Corporation, requires
25
<PAGE>
shareholder approval and is presented as "Proposal 2 - Approval of the
Corporation's Long-Term Performance-Based Incentive Plan" of this Proxy
Statement. A summary of the Plan, which would become effective January 1, 2000
upon shareholder approval, is presented below.
DESCRIPTION OF THE PLAN
Set forth below is a summary of certain important features of the Plan,
which summary is qualified in its entirety by reference to the actual plan
attached as Exhibit A to this Proxy Statement. All capitalized terms which are
not defined herein are defined in the Plan.
AWARDS. The Plan provides for the granting, as determined by the Board
of Directors' Committee on Compensation and Succession/Retirement ("Compensation
Committee") and, subject to approval by the Board of Directors, of Incentive
Stock Options that qualify under Section 422 of the Code and Non-qualified Stock
Options, Stock Appreciation Rights, Restricted Stock Awards, Performance Shares
and Performance Units (collectively "Awards") to the following ("Participants"):
officers and other employees of the Corporation and its Affiliates who are
responsible for or contribute to the management, governance, growth and
profitability of the business of the Corporation or its Affiliates. No Award can
be made to a non-employee Director. The entire class of persons eligible to
receive Awards under the Plan has not yet been determined by the Compensation
Committee.
TERM. The Plan is effective January 1, 2000, if approved by at least a
majority of shareholders voting in person or by proxy at the Annual Meeting, and
will terminate on December 31, 2009.
SHARES AVAILABLE. The total number of shares of Common Stock of the
Corporation available for the grant of Awards is 500,000, which number is
subject to equitable adjustment, as determined by the Compensation Committee, in
the event of a change in the Corporation's capitalization. Not more than 50,000
of such shares will be granted as Restricted Stock Awards which do not have
Performance Goals as the sole or partial condition for vesting. No Participant
may be granted Awards covering in excess of 150,000 shares of Common Stock over
the term of the Plan. These shares may be authorized but
26
<PAGE>
unissued shares treasury shares, or may be purchased on the open market or any
combination thereof.
ADMINISTRATION. The Plan is administered by the Compensation Committee
which is required by the Plan to be comprised of at least two non-employee
Directors.
The Compensation Committee is comprised of non-employee Directors who
are not eligible for Awards. The Compensation Committee will have authority
under the Plan to grant Awards, subject to approval of the Board of Directors.
STOCK OPTIONS. The Compensation Committee may designate a Stock Option
as an Incentive Stock Option ("ISO")or as a Non-qualified Stock Option. The
terms of each Stock Option will be set out in an option agreement.
The Compensation Committee will determine the exercise price of any
Stock Option, but in no event will the Stock Option prices be less than the Fair
Market Value of the Corporation's Common Stock on the date of grant. Stock
Options will be exercisable at such times as the Compensation Committee will
determine, but in no event may a Stock Option be exercisable after ten (10)
years from the date of grant. ISOs must meet the requirements of Section 422 of
the Code.
Stock Options may be exercised in whole or part by payment in full of
the exercise price in cash or, if approved by the Compensation Committee, by
delivery of unrestricted Common Stock held by the optionee for at least six (6)
months having a Fair Market Value on the date of exercise equal to the exercise
price of the Stock Option. The Compensation Committee may impose restrictions on
the exercise of any Stock Option.
STOCK APPRECIATION RIGHTS ("SAR"). SARs may be granted with all or part
of any Stock Option granted, subject to such conditions as the Compensation
Committee may determine. Upon exercise of a SAR, the holder is entitled to
receive the excess of the Fair Market Value of one share of Common Stock on the
date of exercise over the option price per share of the related Stock Option,
multiplied by the number of shares of Common Stock for which the SAR will have
been exercised. Payment may be made in cash or Common Stock or both, as the
Compensation Committee shall determine.
27
<PAGE>
RESTRICTED STOCK. Restricted Stock may be granted either alone or in
addition to other Awards, subject to entering into a Restricted Stock Agreement.
The Compensation Committee will determine the conditions and restrictions of a
Restricted Stock Award, including forfeiture Restriction Periods, forfeiture
restrictions, conditioned vesting and the attainment of Performance Goals.
Unless otherwise restricted, the Participant will have all of the rights of a
shareholder of Common Stock of the Corporation with respect to the shares which
are the subject of the Restricted Stock Award, including the right to vote and
receive cash dividends. Any such cash dividends will be deferred and reinvested
in additional Restricted Stock. Except as may otherwise be determined by the
Compensation Committee, upon a Participant's termination of employment for any
reason during a Restriction Period or before the applicable Performance Goals
are satisfied, all shares subject to restriction will be forfeited by the
Participant.
PERFORMANCE AWARDS. Performance Units and/or Performance Shares
(collectively, a "Performance Award") may be awarded either alone or in addition
to other Awards, subject to entering into a Performance Award agreement. A
Performance Award will entitle the Participant to receive, during an Award
Cycle, payments upon the achievement of Performance Goals established during the
Award Cycle. Before any Performance Award may be paid, the Compensation
Committee must certify in writing that the applicable Performance Goals have
been satisfied. The maximum value of any Performance Award payment to a
Participant in any year is $600,000.
Payment of Performance Units will be in cash or in the Corporation's
Common Stock, the Fair Market Value of which to be equal to the cash value
earned, all as determined by the Compensation Committee. Payment of Performance
Shares (and associated reinvested dividends) earned by the Participant, will be
paid in shares of the Corporation's Common Stock. Except as otherwise provided
by the Compensation Committee, upon a Participant's Termination of Employment
for any reason during an Award Cycle or before any applicable Performance Goals
are satisfied, the Performance Awards will be forfeited.
COMPENSATION DEDUCTION LIMITATION. Section 162(m) of the Code generally
limits to $1 million per year per employee the tax deduction available to public
companies for certain compensation paid to designated executives, including the
officers listed under the above caption "Executive Compensation."
28
<PAGE>
Section 162(m)(4)(C) of the Code provides an exception from this
deduction limitation for certain "performance-based compensation" if specified
requirements are satisfied including: (i) the establishment by a compensation
committee comprised of outside directors of performance goals which must be met
for the additional compensation to be earned, (ii) the approval of the material
terms of the performance goals by the shareholders after adequate disclosure and
(iii) the certification by the compensation committee that the performance goals
have been met. The Plan is designed to satisfy these statutory requirements for
Restricted Stock, Performance Shares and Performance Units.
The Compensation Committee intends to establish Performance Goals in
accordance with Section 162(m) of the Code to enable the Corporation to deduct
in full the total payment of any Performance Award as "performance-based
compensation."
CHANGE OF CONTROL. In the event of a Change of Control, (i) any Stock
Options and SARs, which are not then exercisable and vested, will become fully
exercisable and vested, (ii) the restrictions and deferral limitations
applicable to any Restricted Stock will lapse and such Stock will become free of
all restrictions and become fully vested and (iii) all Performance Shares will
be considered to be earned and payable. During the 60-day period from and after
a Change of Control, unless the Compensation Committee determines otherwise, the
Participant will have the right to elect to surrender all or part of the Stock
Option and receive cash equal to the amount by which the Change in Control price
per share of Common Stock on the date of such election exceeds the exercise
price per share of Common Stock under the Stock Option, multiplied by the number
of shares granted under the Stock Option and covered by such election.
LIMITS ON TRANSFERABILITY/EXERCISE. Except as set forth below, Awards
will not be transferable and will be exercisable only by the Participant. Stock
Options are transferable (i) by will or by the laws of descent and distribution
or (ii) in the case of Non-qualified Stock Option, pursuant to (a) a "qualified
domestic relations order" under the Employee Retirement Income Security Act of
1974, as amended, or (b) a gift to the Participant's children. The Plan provides
for limited periods of the right to exercise Stock Options in the event a
Participant's employment is terminated due to death, Disability, Retirement or
for other reasons (other than Cause). If a Participant incurs a Termination of
Employment for Cause, all Stock Options held by the Participant will terminate.
29
<PAGE>
AMENDMENT OR TERMINATION. The Board of Directors may amend, alter or
discontinue the Plan, provided that any such action cannot (i) impair the rights
under an Award without the Participant's consent (unless an amendment is made to
qualify for the exemption provided by Rule 16b-3 or (ii) disqualify the Plan or
any Award from the exemption provided by Rule 16b-3. No such amendment or
alteration may be made without the approval of the Corporation's shareholders to
the extent required by law, regulation or agreement, including Section 422 of
the Code.
The Compensation Committee may amend the terms of any Award, but no
amendment will impair the rights of any Participant of the Award without the
Participant's consent and no Stock Option will be reissued or repriced.
FEDERAL INCOME TAX CONSEQUENCES
The Corporation believes that, under present law, the following are the
federal tax consequences generally arising with respect to Awards granted under
the Plan. This summary is not intended to be exhaustive, does not constitute tax
advice and, among other things, does not describe state, local or foreign tax
consequences.
The grant of a Stock Option or a SAR will create no tax consequence for
a Participant or the Corporation. The Participant will have no taxable income
upon exercising an ISO (except that the alternative minimum tax may apply) and
the Corporation will receive no deduction when an ISO is exercised. Upon
exercising a Non-qualified Stock Option, the Participant will recognize ordinary
income equal to the difference between the exercise price and the fair market
value of unrestricted Common Stock on the date of exercise, and the Corporation
will be entitled to a deduction for the same amount. Upon exercising a SAR, the
Participant will recognize ordinary income equal to the amount of any cash
received and the fair market value of any unrestricted Common Stock received,
and the Corporation will be entitled to a deduction for the same amount. The tax
treatment to a Participant on disposition of Common Stock acquired by the
exercise of a Stock Option will depend on how long the stock has been held and
if the stock were acquired by exercising an ISO or a Non-Qualified Stock Option.
Generally, there will be no tax consequences to the Corporation in connection
with the disposition of Common Stock acquired under a Stock Option, except that
the Corporation may be entitled to a deduction in the case of a disposition of
shares acquired under an ISO before the applicable ISO holding periods have been
satisfied.
30
<PAGE>
With respect to other Awards under the Plan that are settled either in
cash or in Common Stock that is either transferrable or not subject to
substantial risk of forfeiture, the Participant will recognize ordinary income
equal to the cash or the fair market value of Common Stock received; and the
Corporation will be entitled to a deduction for the same amount. With respect to
Awards that are settled in Common Stock that is restricted as to transferability
and subject to substantial risk of forfeiture, the Participant will recognize
ordinary income equal to the fair market value of the stock at the first time
the stocks become transferrable or not subject to substantial risk of
forfeiture, whichever occurs earlier; and the Corporation will be entitled to a
deduction for the same amount.
NEW PLAN BENEFITS
It cannot be determined at this time what benefits or amounts, if any,
will be received by or allocated to any persons or group of persons under the
Plan if the Plan is approved by shareholders. Such determinations are subject to
the discretion of the Compensation Committee. However, certain Awards authorized
for 2000 by the Board of Directors are described below.
2000 AWARDS UNDER THE PLAN. The Corporation's Board of Directors, on
December 17, 1999, authorized the Compensation Committee to grant, effective
January 1, 2000, Stock Options and Performance Shares to the executive officers
listed below, covering the number of shares of Common Stock indicated, at an
established exercise price for Stock Options of $31.94 per share, all subject to
shareholder approval of the Plan:
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<PAGE>
NUMBER OF NUMBER OF
STOCK OPTION PERFORMANCE
NAME AND POSITION SHARES* SHARES*
- ----------------- ------------ -----------
PAUL J. GANCI
Chairman of the Board, 8,900 1,900
President and Chief
Executive Officer of the
Corporation and Chairman
of the Board and Chief
Executive Officer of
Central Hudson
CARL E. MEYER 3,600 750
Executive Vice President of
the Corporation and
President and Chief
Operating Officer of
Central Hudson
ALLAN R. PAGE 3,600 750
Executive Vice President of
the Corporation; Vice
President of Central
Hudson; President
and Chief Operating
Officer of Services
JOSEPH J. DEVIRGILIO, JR. 2,200 460
Senior Vice President -
Corporate Services and
Administration of Central
Hudson
RONALD P. BRAND 2,200 460
Senior Vice President -
Engineering, Environmental
Affairs and Special Projects
of Central Hudson
EXECUTIVE GROUP 20,500 4,320
NON-EXECUTIVE OFFICER 9,800 2,060
EMPLOYEE GROUP
- ----------
* The Compensation Committee has not finalized the grant of these Awards,
including determining the terms of the Awards and the terms of the
related agreements. Therefore, no dollar value is determinable for such
Awards.
32
<PAGE>
This Proposal No. 2 must be approved by the vote of a majority of all
outstanding shares of Common Stock entitled to vote.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE PLAN IS IN THE
BEST INTERESTS OF ALL SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" PROPOSAL NO. 2.
33
<PAGE>
PROPOSAL NO. 3 - RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of PricewaterhouseCoopers
LLP as independent accountants for the Corporation for the five-year term
beginning in 2000 and recommends to shareholders ratification of such
appointment.
The appointment of the independent accountants is approved by the Board
of Directors and is based on the recommendation of the Committee on Audit, which
reviews the qualifications of independent accountants and which reviews and
approves the audit scope, reasonableness of fees and also the types of non-audit
services for the coming year.
While there is no legal requirement that this appointment be submitted
to a vote of shareholders for ratification, this action is being requested in
response to past suggestions by shareholders and also because the Board of
Directors believes that the selection of the independent accountants to audit
the books, records and accounts of the Corporation is of sufficient importance
to seek ratification. If this action were not ratified, the Board of Directors
would, in due course and having regard for the requirements of an orderly
transition, select other independent accountants upon the recommendation of the
Committee on Audit.
This Proposal No. 3 must be approved by the vote of a majority of all
outstanding shares of Common Stock entitled to vote.
Representatives of PricewaterhouseCoopers LLP will be present at the
Annual Meeting of shareholders and will have an opportunity to make a statement
if they desire to do so. They will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3.
34
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters to be brought
before the meeting other than those referred to in the notice hereof. If any
other matters properly come before the meeting, it is the intention of the
persons named in the form of proxy to vote such proxy in accordance with their
judgment on such matters.
By Order of the Board of Directors,
Gladys L. Cooper
CORPORATE SECRETARY
March 1, 2000
35
<PAGE>
P
R
O
X
Y
CH ENERGY GROUP, INC.
PROXY OF COMMON SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints PAUL J. GANCI, JACK EFFRON, HEINZ K. FRIDRICH
and JOHN E. MACK III, or anyone or more of them, proxy, with full power of
substitution, to vote, as designated on the reverse hereof, all shares of Common
Stock owned by the undersigned at the annual meeting of shareholders of CH
Energy Group, Inc. to be held at the office of the Corporation, 284 South
Avenue, Poughkeepsie, New York, on April 25, 2000, or any adjournment thereof,
upon all such matters as may properly come before the meeting, including the
following proposals described in the Proxy Statement, dated March 1, 2000, a
copy of which has been received by the undersigned:
1. Election of Directors, Nominees by Class:
CLASS I: 2001
01. Edward F. X. Gallagher
02. Charles La Forge
03. Edward P. Swyer
CLASS II: 2002
04. Stanley J. Grubel
05. Frances D. Fergusson
06. John E. Mack III
CLASS III: 2003
07. Jack Effron
08. Heinz K. Fridrich
09. Paul J. Ganci
2. Adoption of Long-Term Performance-Based Incentive Plan
3. Ratification of Appointment of Independent
Accountants
Change of Address/Comments (If Any)
- ------------------------------------
- ------------------------------------
- ------------------------------------
(If you have written in the above space, please mark the corresponding box on
the reverse side of this card.)
SEE REVERSE SIDE
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
ADMISSION TICKET
Present to the CH Energy Group, Inc.
Representative at the entrance to the auditorium.
ANNUAL MEETING OF SHAREHOLDERS
April 25, 2000, 10:30 a.m.
284 South Avenue, Poughkeepsie, NY
AGENDA
Election of Three Classes of Directors
o
Adoption of Long-Term Performance-Based Incentive Plan
o
Ratification of Pricewaterhouse Coopers LLP as Independent Accountants
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING,
WHETHER OR NOT YOU ATTEND THE MEETING IN PERSON.
TO MAKE SURE YOUR SHARES ARE REPRESENTED,
WE URGE YOU TO COMPLETE AND MAIL THE PROXY CARD ABOVE OR USE THE
TELEPHONE OR INTERNET VOTING AS DESCRIBED ON THE REVERSE SIDE OF THIS TICKET.
IF YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE MARK THE APPROPRIATE BOX ON THIS SIDE OF THIS PROXY CARD.
PRESENT THIS ADMISSION TICKET TO THE REPRESENTATIVE
AT THE ENTRANCE TO THE ANNUAL MEETING ROOM.
<PAGE>
1535
[X]PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
- --------------------------------------------------------------------------------
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2 AND 3.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Three Classes of Directors [ ] [ ]
(see reverse)
For, except vote withheld from the following nominee(s):
________________________________________________________
FOR AGAINST ABSTAIN
2. Adoption of Long-Term
Performance-Based Incentive Plan [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratification of Appointment of
Pricewaterhouse Coopers LLP as
Independent Accountants for a five-year
term beginning in 2000 [ ] [ ] [ ]
- --------------------------------------------------------------------------------
SPECIAL ACTION
- --------------------------------------------------------------------------------
If you plan to attend the Annual
Meeting, place an X in this box. [ ] [ ] [ ]
If you wish us to discontinue Annual
Report mailing for this account, place
an X in this box. [ ] [ ] [ ]
If you indicated a change of address or
comments on reverse side, place an X in
this box. [ ] [ ] [ ]
SIGNATURE (S) _____________________________________________ DATE _______________
NOTE: Please sign exactly as name appears above. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
You may also vote the shares held in this account by telephone or electronically
through the Internet. Voting by telephone or via the Internet will eliminate the
need to mail voted proxy card(s) representing shares held in this account. To
vote, please follow the steps below:
O HAVE YOUR PROXY CARD AND SOCIAL SECURITY NUMBER AVAILABLE.
O BE READY TO ENTER THE PIN NUMBER INDICATED ABOVE JUST BELOW THE
PERFORATION.
To vote using the telephone:
O USING A TOUCH-TONE TELEPHONE, DIAL 1-877-PRX-VOTE (1-877-779-8683) 24
HOURS A DAY, 7 DAYS A WEEK UNTIL 12:01 AM ON 04/18/00.
To vote using the Internet:
O LOG ON TO THE INTERNET AND GO TO THE WEBSITE
HTTP://WWW.EPROXYVOTE.COM/CHG 24 HOURS A DAY, 7 DAYS A WEEK UNTIL 12:01
AM ON 04/18/00.
Both voting systems preserve the confidentiality of your vote and will confirm
your voting instructions with you. You may also change your selections on any or
all of the proposals to be voted.
YOUR VOTE IS IMPORTANT TO US. THANK YOU FOR VOTING.
CH ENERGY GROUP, INC.
EXHIBIT A
CH ENERGY GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN
<PAGE>
CH ENERGY GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The Plan has been structured in accordance with the following
principles for the Corporation and its Affiliates:
(1) Establishing and maintaining salaries of key executives,
including base compensation and short and long-term
incentives, at competitive market levels;
(2) Establishing a portion of compensation that is "at risk" and
tied to performance relative to specific objectives. The
portion of salary "at risk" will be increased from the 1999
level of a maximum of 10% of total compensation for the
Chairman of the Board, President and Chief Executive Officer,
to a target range of 15% to 30% for key executives; and
(3) The Plan establishes long-term incentives that include:
(a) Annual awards of performance based shares that are
awarded on the basis of achieving superior total
shareholder return as measured against an industry
index; and
(b) Awarding stock options, the value of which are
directly tied to the long-term increased market
value of the Corporation's Common Stock.
For purposes of the Plan, the following terms are defined as set forth below:
a. "Affiliate" means a corporation or other entity controlled by the
Corporation and designated by the Committee, as defined in Section 2,
from time to time as such.
b. "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock, Performance Share or Performance Unit.
c. "Award Cycle" shall mean a period of consecutive fiscal years or
portions thereof designated by the Committee over which Awards are to
be earned or are to vest.
d. "Board" means the Board of Directors of the Corporation.
e. "Cause" means (1) conviction of a participant for committing a felony
under federal law or the law of the state in which such action
occurred, (2) dishonesty in the course of fulfilling a participant's
employment duties or (3) willful and deliberate failure on the part of
a participant to perform employment duties in any material respect, or
such other events as shall be determined by the Committee. The
1
<PAGE>
Committee shall have the sole discretion to determine whether "Cause"
exists, and its determination shall be final.
f. "Change of Control" and "Change of Control Price" have the meanings set
forth in Sections 10(b) and (c), respectively.
g. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
h. "Commission" means the Securities and Exchange Commission or any
successor agency.
i. "Committee" means the Committee, as defined in Section 2.
j. "Common Stock" means the common stock of the Corporation.
k. "Corporation" means Central Hudson Gas & Electric Corporation, a New
York corporation and upon the assignment to and assumption of the Plan
by CH Energy Group, Inc., "Corporation" shall mean CH Energy Group,
Inc.
l. "Covered Employee" means a participant designated prior to the grant of
an Award or Awards by the Committee who is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the
year in which an award or awards are expected to be taxable to such
participant.
m. "Disability" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
n. "Early Retirement" means retirement from active employment with the
Corporation or an Affiliate pursuant to the early retirement provisions
of the applicable pension plan of such employer.
o. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
p. "Fair Market Value" means, as of any given date, the mean between the
highest and lowest reported sales prices of the Corporation's Common
Stock on the New York Stock Exchange Composite Tape or, if not listed
on such exchange, on any other national securities exchange on which
the Common Stock is listed or on NASDAQ. If there is no regular public
trading market for such Common Stock, the Fair Market Value of the
Common Stock shall be determined by the Committee in good faith.
q. "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "Incentive Stock Option" within the meaning of Section
422 of the Code.
r. "Non-qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
s. "Non-Employee Director" means a member of the Board who qualifies as a
NonEmployee Director as defined in Rule 16b-3(b)(3), as promulgated by
the Commission under the Exchange Act, or any successor definition
adopted by the Commission.
2
<PAGE>
t. "Normal Retirement" means retirement from active employment with the
Corporation, or an Affiliate, at or after age 65.
u. "Performance Goals" means the performance goals established by the
Committee prior to the grant of Restricted Stock, Performance Shares or
Performance Units that are based on the attainment of one or any
combination of the following: Specified levels of earnings per share
from continuing operations, operating income, revenues, return on
assets, return on equity, return on invested capital, shareholder
value, economic value added, shareholder return (measured in terms of
stock price appreciation) and/or total shareholder return (measured in
terms of stock price appreciation and/or dividend growth), achievement
of cost controls, delivery cost per kilowatt hour or delivery cost per
millions of cubic feet of natural gas, customer satisfaction ratings,
frequency or duration of electric or gas service interruptions, number
of or severity of gas leaks, avoidance of environmental, public or
employee safety problems, realization of the regulated return on
equity, or the price of the Common Stock, fixed on a company-wide basis
or with reference to the Affiliate, business unit, division or
department of the Corporation for or within which the participant is
primarily employed, and that are intended to qualify under Section
162(m)(4)(C) of the Code. Such Performance Goals also may be based upon
attaining specified levels of performance under one or more of the
measures described above relative to the performance of other
corporations. Such Performance Goals shall be set by the Committee
within the time period prescribed by Section 162(m) of the Code and
related regulations.
v. "Performance Units" or "Performance Shares" means awards made pursuant
to Section 8 or Section 9 respectively.
w. "Plan" means the Corporation's Long-Term Performance-Based Incentive
Plan, as set forth herein and as hereinafter amended from time to time.
x. "Restricted Stock" means an award granted under Section 7.
y. "Retirement" means Normal or Early Retirement.
z. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
aa. "Stock Appreciation Right" means a right granted under Section 6.
bb. "Stock Option" means an option granted under Section 5.
cc. "Termination of Employment" means the termination of the participant's
employment with the Corporation and any Affiliate. A participant
employed by an Affiliate shall also be deemed to incur a Termination of
Employment if the Affiliate ceases to be such an Affiliate and the
participant does not immediately thereafter become an employee of the
Corporation or another Affiliate. Temporary absences from employment
because of illness, vacation or leave of absence and transfers among
the Corporation and Affiliates shall not be considered Terminations of
Employment.
In addition, certain other terms used herein have definitions given to them in
the first place in which they are used.
3
<PAGE>
SECTION 2. ADMINISTRATION
The Corporation, acting by and through its Board of Directors, shall have
overall responsibility for the operation of the Plan. The Plan shall be
administered by the Committee on Compensation and Succession/Retirement or such
other committee of the Board as the Board may from time to time designate (the
"Committee"), which shall be composed of not less than two Non-Employee
Directors, each of whom shall be required to be an "outside director" for
purposes of Section 162(m)(4) of the Code, and shall be appointed by and serve
at the pleasure of the Board.
The Committee shall have plenary authority to grant Awards pursuant to the terms
of the Plan to officers and employees of the Corporation and its Affiliates.
Among other things, the Committee shall have the authority, subject to the terms
of the Plan and subject to approval of the Board:
(a) To select the officers and other employees of the Corporation and its
Affiliates to whom Awards may from time to time be granted;
(b) Determine whether and to what extent an Award or any combination of
Awards are to be granted hereunder;
(c) Determine the number of shares of Common Stock to be covered by each
Award granted hereunder;
(d) Determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section
5(a)), any vesting condition, restriction or limitation (which may be
related to the performance of the participant, the Corporation or any
Affiliate) and any vesting acceleration or forfeiture waiver regarding
any Award and the shares of Common Stock relating thereto, based on
such factors as the Committee shall determine;
(e) Modify, amend or adjust the terms and conditions of any Award, at any
time or from time to time, including but not limited to Performance
Goals; provided, however, that the Committee may not adjust upwards the
amount payable to a designated Covered Employee with respect to a
particular Award upon the satisfaction of applicable Performance Goals;
(f) Determine to what extent and under what circumstances Common Stock and
other amounts payable with respect to an Award shall be deferred; and
(g) Determine under what circumstances and/or in what proportions an Award
may be settled in cash or Common Stock under Sections 5(j) and 8(b)(i).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office, except
that the members thereof may (i) delegate to an officer of the Corporation the
authority to make decisions pursuant to paragraphs (c), (f), (g), (h) and (i) of
Section 5 (provided that no such delegation may be made that would cause any
Award or transaction under the Plan to cease to be exempt from Section 16(b) of
the Exchange Act or cause any Award or payment made in respect thereof to be
"applicable employee remuneration" under Section
4
<PAGE>
162(m)(4)(A) of the Code) and (ii) authorize any one or more of their number or
any officer of the Corporation to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Corporation and Plan participants, subject
to the next paragraph.
The Committee annually shall report to the Corporation's Board of Directors with
respect to the operation of the Plan and at least annually shall meet with such
Board to review the Committee's acts and determinations with respect to the
Plan. The Board of Directors of the Corporation shall have the right to review
any decision, act or determination made by the Committee and shall have the
right to amend, modify, reverse or rescind any such decision, act or
determination, which Board action shall be final and binding on all persons,
including the Corporation and Plan participants.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available for grant
under the Plan shall be 500,000, no more than 50,000 of which shares shall be
granted as Awards of Restricted Stock which do not have Performance Goals as the
sole or partial conditions for vesting. No participant may be granted Awards
covering in excess of 150,000 shares of Common Stock over the life of the Plan,
including Awards that expire or terminate unexercised. Shares subject to an
Award under the Plan may be authorized and unissued shares or may be treasury
shares or may be purchased on the open market or any combination thereof.
Any shares subject to an Award under the Plan, which Award for any reason
expires or is terminated unexercised as to such shares, shall, subject to the
provisions of the previous paragraph that may restrict their reissuance to a
particular participant, again be available for the grant of other Awards under
the Plan.
Subject to Sections 7(c)(iv) and 9(b) (iii), if any shares of Restricted Stock
or Performance Shares are forfeited or if any Stock Option (and related Stock
Appreciation Right, if any) terminates without being exercised, or if any Stock
Appreciation Right is exercised for cash, shares subject to such Awards shall,
subject to the provisions of the first paragraph of this section that may
restrict their distribution to a particular participant, again be available for
distribution in connection with Awards under the Plan.
In the event of any change in corporate capitalization, such as a stock split or
a corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of the
Corporation, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Corporation ("Corporate Transaction"), the Committee
or Board may make such substitution or adjustments in the aggregate number and
kind of shares reserved for issuance under the Plan, in the number, kind and
option price of shares subject to outstanding Stock Options and Stock
Appreciation Rights, in the number and kind of shares subject to other
outstanding Awards granted under the Plan and/or such other equitable
substitution or adjustments as it may determine to be appropriate in its sole
discretion; provided, however, that the number of shares subject to any Award
shall always be a whole number. Such adjusted option price shall also be used to
determine the amount
5
<PAGE>
payable by the Corporation upon the exercise of any Stock Appreciation Right
associated with any Stock Option.
SECTION 4. ELIGIBILITY
Officers and other employees of the Corporation and its Affiliates who are
responsible for or contribute to the management, governance, growth and
profitability of the business of the Corporation or its Affiliates are eligible
to be granted Awards under the Plan. No grant shall be made under this Plan to a
director who is not an officer or a salaried employee of the Corporation or its
Affiliates.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards granted under
the Plan and may be of two types-Incentive Stock Options and Non-qualified
Stock Options. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive Stock
Options, Non-qualified Stock Options or both types of Stock Options (in each
case with or without Stock Appreciation Rights); provided, however, that grants
hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Corporation and its Affiliates (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-qualified Stock
Option.
Stock Options shall be evidenced by option agreements, the terms and provisions
of which may differ. An option agreement shall indicate on its face whether it
is intended to be an agreement for an Incentive Stock Option or a Non-qualified
Stock Option. The grant of a Stock Option shall occur on the date on which the
Committee by resolution selects an individual to be a participant in any grant
of a Stock Option, determines the number of shares of Common Stock to be subject
to such Stock Option to be granted to such individual and specifies the terms
and provisions of the Stock Option. The Corporation shall notify a participant
of any grant of a Stock Option, and a written option agreement or agreements
shall be duly executed and delivered by the Corporation to the participant. Such
agreement or agreements shall become effective upon execution by the Corporation
and the participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent of the
optionee affected, to disqualify any Incentive Stock Option under said Section
422.
Stock Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee and set forth
in the option agreement, but shall not be less than the Fair Market
Value of the Common Stock subject to the Stock Option on the date of
grant.
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(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than
10 years after the date on which the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment
exercise provisions, in whole or in part, based on such factors as the
Committee may determine. In addition, the Committee may at any time
accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5, Stock
Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Corporation
specifying the number of shares of Common Stock subject to the Stock
Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the
Corporation may accept. If approved by the Committee, payment, in full
or in part, may also be made in the form of unrestricted Common Stock
already owned by the optionee (based on the Fair Market Value of the
Common Stock on the date the Stock Option is exercised) and which has
been held by the optionee for at least six (6) months; provided,
however, that, in the case of an Incentive Stock Option, the right to
make a payment in the form of already owned shares of Common Stock may
be authorized only at the time the Stock Option is granted.
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed
exercise notice to the Corporation, together with a copy of irrevocable
instructions to a broker to deliver promptly to the Corporation the
amount of sale or loan proceeds to pay the purchase price, and, if
requested, by the amount of any federal, state, local or foreign
withholding taxes. To facilitate the foregoing, the Corporation may
enter into agreements for coordinated procedures with one or more
brokerage firms.
In addition, in the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by instructing the Committee
to withhold a number of such shares having a Fair Market Value on the
date of exercise equal to the aggregate exercise price of such Stock
Option.
No shares of Common Stock shall be issued until full payment therefor
has been made. An optionee shall have all of the rights of a
shareholder of the Corporation holding the class or series of Common
Stock that is subject to such Stock Option (including, if applicable,
the right to vote the shares and the right to receive dividends), when
the optionee has given written notice of exercise, has paid in full for
such shares and, if requested, has given the representation described
in Section 13(a).
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of
descent and distribution; or (ii) in the case of a Non-qualified Stock
Option, pursuant to (a) a qualified domestic relations order (as
defined in the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder) or (b) a
gift to such optionee's children, whether directly or indirectly or by
means of a trust or partnership or
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otherwise, if expressly permitted under the applicable option
agreement. All Stock Options shall be exercisable, subject to the terms
of this Plan, during the optionee's lifetime, only by the optionee or
by the guardian or legal representative of the optionee or, in the case
of a Non-qualified Stock Option, its alternative payee pursuant to such
qualified domestic relations order or the recipient of a gift permitted
under the applicable option agreement, it being understood that the
terms "holder" and "optionee" include the guardian and legal
representative of the optionee named in the option agreement and any
person to whom an option is transferred by will or the laws of descent
and distribution or, in the case of a Non-qualified Stock Option,
pursuant to a qualified domestic relations order or a gift permitted
under the applicable option agreement.
(f) Termination by Death. Unless otherwise determined by the Committee, if
an optionee's employment terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised in full,
whether or not then exercisable, or on such accelerated basis as the
Committee may determine, for a period of three (3) years (or such other
period as the Committee may specify in the option agreement) from the
date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time
of termination, or on such accelerated basis as the Committee may
determine, for a period of three (3) years (or such shorter period as
the Committee may specify in the option agreement) from the date of
such termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is the shorter; provided,
however, that if the optionee dies within such period, any unexercised
Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to
which it was exercisable at the time of death for a period of one (1)
year from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. In the
event of termination of employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code,
such Stock Option will thereafter be treated as a Non-qualified Stock
Option.
(h) Termination by Reason of Retirement. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time
of such Retirement, or on such accelerated basis as the Committee may
determine, for a period of five (5) years (or such shorter period as
the Committee may specify in the option agreement) from the date of
such termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is the shorter; provided
however, that if the optionee dies within such period, any unexercised
Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to
which it was exercisable at the time of death for a period of twelve
(12) months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter. In
the event of termination of employment by reason of Retirement, if an
Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code,
such Stock Option will thereafter be treated as a Non-qualified Stock
Option.
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(i) Other Termination. Unless otherwise determined by the Committee: (A) If
an optionee incurs a Termination of Employment for Cause, all Stock
Options held by such optionee shall thereupon terminate; and (B) If an
optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement or for Cause, any Stock Option held by
such optionee, to the extent then exercisable, or on such accelerated
basis as the Committee may determine, may be exercised for the lesser
of three (3) months from the date of such Termination of Employment or
the balance of such Stock Option's term; provided however, that if the
optionee dies within such three (3)-month period, any unexercised Stock
Option held by such optionee shall, notwithstanding the expiration of
such three (3)-month period, continue to be exercisable to the extent
to which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
Notwithstanding the foregoing, if an optionee incurs a Termination of
Employment at or after a Change of Control (as defined Section 10(b)),
other than by reason of death, Disability or Retirement, any Stock
Option held by such optionee shall be exercisable for the lesser of (1)
six (6) months and one (1) day from the date of such Termination of
Employment, and (2) the balance of such Stock Option's term. In the
event of Termination of Employment, if an Incentive Stock Option is
exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter
be treated as a Non-qualified Stock Option.
(j) Cashing Out of Stock Option. Upon receipt of written notice of
exercise, the Committee may elect to cash out all or part of the
portion of the shares of Common Stock for which a Stock Option is being
exercised by paying the optionee an amount, in cash or Common Stock,
equal to the excess of the Fair Market Value of the Common Stock over
the option price times the number of shares of Common Stock for which
the Option is being exercised on the effective date of such cash-out.
(k) Change of Control Cash-Out. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change of Control (the
"Exercise Period"), unless the Committee shall determine otherwise at
the time of grant, an optionee shall have the right, whether or not the
Stock Option is fully exercisable and in lieu of the payment of the
exercise price for the shares of Common Stock being purchased under the
Stock Option and by giving notice to the Corporation, to elect (within
the Exercise Period) to surrender all or part of the Stock Option to
the Corporation and to receive cash, within 30 days of such notice, in
an amount equal to the amount by which the Change of Control Price per
share of Common Stock on the date of such election shall exceed the
exercise price per share of Common Stock under the Stock Option (the
"Spread") multiplied by the number of shares of Common Stock granted
under the Stock Option as to which the right granted under this Section
5(k) shall have been exercised.
(l) Notwithstanding anything in the Plan to the contrary, no Stock Option
shall be reissued or repriced.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the
Plan. In the case of a Non-qualified Stock Option, such rights may be
granted either at or after the time of grant of such Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only
at the time of grant of such Stock Option. A Stock Appreciation Right
shall
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<PAGE>
terminate and no longer be exercisable upon the termination or exercise
of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of
the related Stock Option in accordance with procedures established by
the Committee. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in
Section 6(b). Stock Options which have been so surrendered shall no
longer be exercisable to the extent the related Stock Appreciation
Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee,
including the following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to
which they relate are exercisable in accordance with the
provisions Section 5 and this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of
Common Stock or both, equal in value to the excess of the Fair
Market Value of one share of Common Stock over the option
price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in
accordance with Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right
is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 on the number
of shares of Common Stock to be issued under the Plan, but
only to the extent of the number of shares covered by the
Stock Appreciation Right at the time of exercise based on the
value of the Stock Appreciation Right at such time.
SECTION 7. RESTRICTED STOCK
(a) Administration. Shares of Restricted Stock may be awarded either alone
or in addition to other Awards granted under the Plan. The Committee
shall determine the officers and other employees of the Corporation and
its Affiliates to whom and the time or times at which grants of
Restricted Stock will be awarded, the number of shares to be awarded to
any participant (subject to the aggregate limit on grants to individual
participants set forth in Section 3), the conditions for vesting, the
time or times within which such Awards may be subject to forfeiture and
any other terms and conditions of the Awards, in addition to those
contained in Section 7(c).
The Committee may, prior to grant, condition vesting of Restricted
Stock upon the attainment of Performance Goals. The Committee may, in
addition to requiring satisfaction of Performance Goals, condition
vesting upon the continued service of the participant. The provisions
of Restricted Stock Awards (including the applicable Performance Goals)
need not be the same with respect to each recipient. All Performance
Goals applicable to Awards of Restricted Stock shall be approved by
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the Committee in writing as required by Section 162(m) of the Code and
the rules and regulations thereunder in order for the value of the
Restricted Stock delivered pursuant to such Award to be deductible.
(b) Awards and Certificates. Shares of Restricted Stock shall be evidenced
in such manner as the Committee may deem appropriate, including book-
entry registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock shall be
registered in the name of such participant and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Award, substantially in the following form:
"THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING
FORFEITURE) OF CH ENERGY GROUP, INC. LONG-TERM PERFORMANCE-BASED
INCENTIVE PLAN AND A RESTRICTED STOCK AGREEMENT. COPIES OF SUCH PLAN
AND AGREEMENT ARE ON FILE AT THE OFFICES OF THE SECRETARY OF CH ENERGY
GROUP, INC., 284 SOUTH AVENUE, POUGHKEEPSIE, NEW YORK."
The Committee may require that the certificates evidencing such shares
be held in custody by the Corporation until the restrictions thereon
shall have lapsed and that, as a condition of any Award of Restricted
Stock, the participant shall have delivered a stock power, endorsed in
blank, relating to the Common Stock covered by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during the period,
if any, set by the Committee, commencing with the date of such
Award for which such participant's continued service is
required (the "Restriction Period"), and until the later of
(i) the expiration of the Restriction Period and (ii) the date
the applicable Performance Goals (if any) are satisfied, the
participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock;
provided, that the foregoing shall not prevent a participant
from pledging Restricted Stock as security for a loan, the
sole purpose of which is to provide funds to pay the option
price for Stock Options. Within these limits, the Committee
may provide for the lapse of restrictions based upon period of
service in installments or otherwise and may accelerate or
waive, in whole or in part, restrictions based upon period of
service or upon performance; provided, however, that in the
case of Restricted Stock subject to Performance Goals granted
to a participant who is a Covered Employee, the applicable
Performance Goals have been satisfied.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i)
and the Restricted Stock Agreement, the participant shall
have, with respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Corporation holding the
class or series of Common Stock that is the subject of the
Restricted Stock, including, if applicable, the right to vote
the shares and the right to receive any cash dividends. If so
determined by the Committee in the applicable Restricted Stock
Agreement and subject to Section 13(e) of the Plan, (1) cash
dividends on the class or series of Common Stock that is the
subject of the Restricted Stock Award shall be automatically
deferred and reinvested in additional Restricted Stock, held
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subject to vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to
dividends, and (2) dividends payable in Common Stock shall be
paid in the form of Restricted Stock of the same class as the
Common Stock with which such dividend was paid, held subject
to vesting of the underlying Restricted Stock, and/or held
subject to meeting Performance Goals applicable only to
dividends.
(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i), 7(c)(iv) and
10(a)(ii), upon a participant's Termination of Employment for
any reason during the Restriction Period or before the
applicable Performance Goals are satisfied, all shares still
subject to restriction shall be forfeited by the participant.
(iv) Except to the extent otherwise provided in Section 10(a)(ii),
in the event that a participant retires or such participant's
employment is involuntarily terminated (other than for Cause),
the Committee shall have the discretion to waive, in whole or
in part, any or all remaining restrictions (other than, in the
case of Restricted Stock with respect to which a participant
is a Covered Employee, satisfaction of any applicable
Performance Goals unless the participant's employment is
terminated by reason of death or Disability) with respect to
any or all of such participant's shares of Restricted Stock.
(v) If and when any applicable Performance Goals are satisfied and
the Restriction Period expires without a prior forfeiture of
the Restricted Stock, unlegended certificates for such shares
shall be delivered to the participant upon surrender of the
legended certificates.
(vi) Each Award shall be confirmed by, and be subject to, the terms
of a Restricted Stock Agreement.
SECTION 8. PERFORMANCE UNITS
(a) Administration. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall
determine the officers and other employees of the Corporation and its
Affiliates to whom and the time or times at which Performance Units
shall be awarded, the number of Performance Units to be awarded to any
participant (subject to the aggregate limit on grants to individual
participants set forth in Section 3), the duration of the Award Cycle
and any other terms and conditions of the Award, in addition to those
contained in Section 8(b).
The Committee may, prior to grant, condition the settlement of
Performance Units upon continued employment and/or the attainment of
Performance Goals. The provisions of such Awards (including the
applicable Performance Goals) need not be the same with respect to each
recipient. All Performance Goals applicable to Awards of Performance
Units awarded during an Award Cycle shall be approved by the Committee
in writing as required by Section 162(m) of the Code and the rules and
regulations thereunder in order for the cash and/or property delivered
pursuant to such Award to be deductible.
(b) Terms and Conditions. Performance Units Awards shall be subject to the
following terms and conditions:
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(i) Subject to the provisions of the Plan and the Performance
Units Agreement referred to in Section 8(b)(vi), Performance
Units may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Award Cycle. At the expiration
of the Award Cycle, the Committee shall evaluate the
Corporation's performance in light of the Performance Goals
for such Award to the extent applicable, and shall determine
the value of Performance Units granted to the participant
which have been earned, and the Committee may then elect to
deliver (1) the cash amount equal to the value and number of
the Performance Units determined by the Committee to have been
earned, or (2) the number of shares of Common Stock whose Fair
Market Value is equal to cash value and number of the
Performance Units determined by the Committee to have been
earned the participant. The maximum value of cash and/or
property that any participant may receive with respect to
Performance Units in any year is $600,000.
(ii) Except to the extent otherwise provided in the applicable
Performance Unit Agreement and Sections 8(b)(iii) and
10(a)(iii), upon a participant's Termination of Employment for
any reason during the Award Cycle or before any applicable
Performance Goals are satisfied, the rights to the shares
still covered by the Performance Units Award shall be
forfeited by the participant.
(iii) Except to the extent otherwise provided in Section 10(a)(iii),
in the event that a participant's employment is terminated
(other than for Cause) or in the event a participant retires,
the Committee shall have the discretion to waive, in whole or
in part, any or all remaining payment limitations (other than,
in the case of Performance Units with respect to which a
participant is a Covered Employee, satisfaction of any
applicable Performance Goals unless the participant's
employment is terminated by reason of death or Disability)
with respect to any or all of such participant's Performance
Units.
(iv) A participant may elect to further defer receipt of the
Performance Units payable under an Award (or an installment of
an Award) for a specified period or until a specified event,
subject in each case to the Committee's approval and to such
terms as are determined by the Committee (the "Elective
Deferral Period"). Such election must generally be made prior
to commencement of the Award Cycle for the Award (or for such
installment of an Award).
(v) If and when any applicable Performance Goals are satisfied and
the Elective Deferral Period expires without a prior
forfeiture of the Performance Units, payment in accordance
with Section 8(b)(i) hereof shall be made to the participant.
(vi) Each Award shall be confirmed by, and be subject to, the terms
of a Performance Unit Agreement.
SECTION 9. PERFORMANCE SHARES
(a) Administration. Performance Shares may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall
determine the officers and other employees of the Corporation and its
Affiliates to whom and the time or times at which Performance Shares
shall be awarded, the number of Performance Shares to be awarded to any
participant (subject to the aggregate limit on grants to individual
participants set forth in Section 3), the duration of the Award Cycle
and
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any other terms and conditions of the Award, in addition to those
contained in Section 9(b).
The Committee may, prior to grant, condition the settlement of
Performance Shares upon continued employment and/or the attainment of
Performance Goals. The provisions of such Awards (including the
applicable Performance Goals) need not be the same with respect to each
recipient. All Performance Goals applicable to Awards of Performance
Shares awarded during an Award Cycle shall be approved by the Committee
in writing as required by Section 162(m) of the Code and the rules and
regulations thereunder in order for the property delivered pursuant to
such Award to be deductible by the Corporation under the Code.
(b) Terms and Conditions. Performance Shares Awards shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Performance
Shares Agreement referred to in Section 9(b)(vi), Performance
Shares may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Award Cycle. At the expiration
of the Award Cycle, the Committee shall evaluate the
Corporation's performance in light of the Performance Goals
for such Award to the extent applicable, and shall determine
the value and number of Performance Shares and associated
reinvested dividends earned by the participant. If so
determined by the Committee in the applicable Performance
Shares Agreement and subject to Section 13(e) of the Plan, (1)
cash dividends on the class or series of Common Stock that is
the subject of the Performance Share Award shall be
automatically deferred and reinvested in additional shares of
Common Stock, held subject to vesting of the underlying
Performance Shares, or held subject to meeting Performance
Goals, and (2) dividends payable in Common Stock shall be
paid in the form of shares of Common Stock of the same class
as the Common Stock with which such dividend was paid, held
subject to vesting of the underlying Performance Shares, or
held subject to meeting the Performance Goals. The maximum
value of property that any participant may receive with
respect to Performance Shares in any year is $600,000.
Delivery to the participant will be in shares of Common Stock
only.
(ii) Except to the extent otherwise provided in the applicable
Performance Unit Agreement and Sections 9(b)(iii) and
10(a)(iii), upon a participant's Termination of Employment for
any reason during the Award Cycle or before any applicable
Performance Goals are satisfied, the rights to the shares
still covered by the Performance Shares Award shall be
forfeited by the participant.
(iii) Except to the extent otherwise provided in Section 10(a)(iii),
in the event that a participant's employment is terminated
(other than for Cause) or in the event a participant retires,
the Committee shall have the discretion to waive, in whole or
in part, any or all remaining payment limitations (other than,
in the case of Performance Shares with respect to which a
participant is a Covered Employee, satisfaction of any
applicable Performance Goals unless the participant's
employment is terminated by reason of death or Disability)
with respect to any or all of such participant's Performance
Shares.
(iv) A participant may elect to further defer receipt of the
Performance Shares payable under an Award (or an installment
of an Award) for a specified period or until a specified
event, subject in each case to the Committee's
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approval and to such terms as are determined by the Committee
(the "Elective Deferral Period"). Such election must be made
prior to commencement of the Award Cycle for the Award (or for
such installment of an Award).
(v) If and when any applicable Performance Goals are satisfied and
the Elective Deferral Period expires without a prior
forfeiture of the Performance Shares, payment in accordance
with Section 9(b)(i) hereof shall be made to the participant.
(vi) Each Award shall be confirmed by, and be subject to, the terms
of a Performance Unit Agreement.
SECTION 10. CHANGE OF CONTROL PROVISIONS
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change of Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding as
of the date such Change of Control is determined to have
occurred, and which are not then exercisable and vested, shall
become fully exercisable and vested to the full extent of the
original grant.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall
become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(iii) All Performance Shares shall be considered to be earned and
payable to the extent that any Performance Goals which the
Committee shall establish have been met or exceeded, and any
deferral or other restriction shall lapse and such Performance
Shares shall be settled in cash as promptly as is practicable.
(b) Definition of Change of Control. For purposes of the Plan, a "Change of
Control" shall mean the happening of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or more of
either (1) the then outstanding shares of Common Stock of the
Corporation (the "Outstanding Corporation Common Stock") or
(2) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in
the election of directors (the "Outstanding Corporation Voting
Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not
constitute a Change of Control; (1) any acquisition directly
from the Corporation, (2) any acquisition by the Corporation
or (3) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation.
(ii) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation or the sale of
all or substantially all of the
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<PAGE>
assets of the Company or the merger or consolidation of the
Corporation with or into another corporation.
(c) Change of Control Price. For purposes of the Plan, "Change of Control
Price" means the higher of (i) the highest reported sales price,
regular way, of a share of Common Stock in any transaction reported on
the New York Stock Exchange Composite Tape or other national exchange
on which such shares are listed or on NASDAQ during the 60-day period
prior to and including the date of a Change of Control or (ii) if the
Change of Control is the result of a tender or exchange offer or a
Corporate Transaction, the highest price per share of Common Stock paid
in such tender or exchange offer or Corporate Transaction; provided,
however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change of
Control Price shall be in all cases the Fair Market Value of the Common
Stock on the date such Incentive Stock Option or Stock Appreciation
Right is exercised. To the extent that the consideration paid in any
such transaction described above consists all or in part of securities
or other non-cash consideration, the value of such securities or other
noncash consideration shall be determined in the sole discretion of the
Board.
SECTION 11. TERM, AMENDMENT AND TERMINATION
The Plan will terminate 10 years after the effective date of the Plan. Awards
outstanding as of such date shall not be affected or impaired by the termination
of the Plan.
The Board may amend, alter or discontinue the Plan, but no amendment, alteration
or discontinuation shall be made which would (i) impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award, Performance Share Award or Performance Unit Award
therefore granted without the optionee's or recipient's consent, except such an
amendment made to cause the Plan to qualify for the exemption provided by Rule
16b-3, or (ii) disqualify the Plan or any Award or transaction thereunder from
the exemption provided by Rule 16b-3. In addition, no such amendment shall be
made without the approval of the Corporation's shareholders to the extent such
approval is required by law, regulation or agreement.
The Committee may amend the terms of any Stock Option or other Award theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any holder without the holder's consent except such an amendment made
to cause the Plan, or Award, transaction or payment made under the Plan, to
qualify for the exemption provided by Rule 16b-3 and any such amendment shall be
subject to Section 2(e) hereof.
Subject to the above provisions, the Board shall have authority to amend the
Plan to take into account changes in law and tax and accounting rules as well as
other developments, and to grant Awards which qualify for beneficial treatment
under such rules with shareholder approval.
SECTION 12. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan shall constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
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SECTION 13. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Corporation in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any
restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Corporation shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock
under the Plan prior to fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance of
such shares on the New York Stock Exchange, Inc., or such
other securities exchange as may at the time be the principal
market for the Common Stock;
(2) Any registration or other qualification of such shares of the
Corporation under any state or federal law or regulation, or
maintaining in effect any such registration or other
qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or
advisable; and
(3) Obtaining any other consent, approval or permit from any state
or federal governmental agency which the Committee shall, in
its absolute discretion after receiving the advice of counsel,
determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
Affiliate from adopting other or additional compensation arrangements
for its employees.
(c) Neither adoption of the Plan nor the grant or any Award thereunder
shall confer upon any employee any right to continued employment, nor
shall it interfere in any way with the right of the Corporation or any
Affiliate to terminate the employment of any employee at any time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the participant for federal income tax purposes
with respect to any Award under the Plan, the participant shall pay to
the Corporation, or make arrangements satisfactory to the Corporation
regarding the payment of, any federal, state, local or foreign taxes of
any kind required by law to be withheld with respect to such amount.
Unless otherwise determined by the Corporation, withholding obligations
may be settled with Common Stock, including Common Stock that is part
of the Award that gives rise to the withholding requirement. The
obligations of the Corporation under the Plan shall be conditioned upon
such payment or arrangements, and the Corporation and its Affiliates
shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The
Committee may establish such procedures as it deems appropriate,
including making irrevocable elections, for settlement of withholding
obligations with Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock or Performance
Shares at the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are available under Section 3 for
such reinvestment (taking into account then outstanding Stock Options
and other Awards).
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(f) The Committee shall establish such procedures as it deems appropriate
for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to paid or by whom
any rights of the participant, after the participant's death, may be
exercised.
(g) In the case of a grant of an Award to any employee of an Affiliate of
the Corporation, the Corporation may, if the Committee so directs,
issue or transfer the shares of Common Stock, if any, covered by the
Award to the Affiliate, for such lawful consideration as the Committee
may specify, upon the condition or understanding that the Affiliate
will transfer the shares of Common Stock to the employee in accordance
with the terms of the Award specified by the Committee pursuant to the
provisions of the Plan.
(h) Notwithstanding the foregoing, if any right granted pursuant to this
Plan would make a Change of Control transaction ineligible for
pooling-of-interests accounting under APB No.16 that but for the nature
of such grant would otherwise be eligible for such accounting
treatment, the Committee shall have the ability to substitute for any
cash payable pursuant to such right Common Stock with a Fair Market
Value equal to the cash that would otherwise be payable hereunder.
(i) Notwithstanding anything in this Plan to the contrary, no transaction
between a participant and the Corporation that requires as a condition
of its exemption from Section 16 of the Exchange Act approval in the
manner set forth in paragraph (d)(1) or (d)(2) of Rule 16b-3 shall be
consummated until such approval is obtained; but failure to obtain such
approval shall not cause a transaction consummated to be void or
voidable without the consent of such participant nor shall it
disqualify the transaction from the benefit of any of available
exemption from said Section 16.
(j) Unless the Committee shall otherwise determine or any provision of the
Plan shall otherwise specifically require, no delivery of cash and/or
property shall be made to any "covered employee", as that term is
defined in Section 162(m)(3) of the Code, or any transferee to whom the
right of such covered employee to receive such cash and/or property has
been transferred as the result of a transfer permitted by the Plan, in
any year to the extent that the value such cash and/or property,
together with the value of all other cash and/or property delivered to
such covered employee or transferee in such year, shall not be
deductible by the Corporation as a result of the operation of Section
162(m) of the Code. Any cash and/or property not deliverable because of
the application of the previous sentence shall be delivered together
with the value of all other cash and/or property delivered to such
covered employee or transferee in such year, is so deductible, until
such cash and/or property shall have been delivered in full. Such
undelivered cash and/or property shall bear interest from the date on
which it was first payable, but for the application of this Section
(j), until paid in full, at a rate of interest per annum to be
determined by the Committee in accordance with any rules adopted under
said Section 162. For purposes of computing such interest, the
Committee shall determine the value of such property, based upon (i)
its Fair Market Value (adjusted as the Committee shall see fit, but at
least quarterly) if it is Common Stock or if its value is determinable
with reference to the price of Common Stock or (ii) as the Committee
shall determine in all other cases. This Section (j) shall cease to
have effect upon the occurrence of a Change of Control and the Plan
shall thereafter be construed as if this Section (j) had never been
part thereof, except in respect of the obligation of the Corporation to
pay interest pursuant to the provisions of this Section (j); without
limiting the generality of this sentence, (i) all property deliverable
as a result of such occurrence shall be delivered when due as if this
Section (j) were not part of the Plan and (ii) all property
deliverable, but for the provisions of this Section (j),
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shall become deliverable upon such Change of Control, together with
interest accrued thereon.
(k) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
New York, without reference to principles of conflict of laws.
SECTION 14. EFFECTIVE DATE - SHAREHOLDER APPROVAL
The Plan shall become effective on January 1, 2000, subject to obtaining the
approval of the shareholders of the Corporation as required by Code Section
422(b) and Rule 16 b-3(d)(2) of the Exchange Act.
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