CH ENERGY GROUP, INC.

SHORT-TERM INCENTIVE PLAN

(amended and restated on May 21, 2009)

 

1.           Purpose. The purpose of this Short-Term Incentive Plan (this "STI
Plan") is to reward designated executives of CH Energy Group, Inc. (the
"Company") and its Subsidiaries for the achievement of each year's business plan
objectives and individual performance goals in a manner consistent with the
Company's strategy of achieving long-term shareholder value. On May 21, 2009,
the Company amended and restated the STI Plan in its entirety, as set forth
herein, with respect to Performance Periods (as defined below) commencing on and
after January 1, 2009.

 

2.            Definitions. The following capitalized words as used in this STI
Plan shall have the following meanings:

 

"Award Opportunity" means a cash award opportunity established under the STI
Plan for a Participant by the Committee pursuant to such terms, conditions,
restrictions and/or limitations, if any, as the Committee may establish.

 

"Board" means the Board of Directors of the Company.

 

"Chief Executive Officer" means the Chief Executive Officer of the Company.

 

"Code" means the Internal Revenue Code of 1986, as amended.

 

 

"Committee" means the Compensation Committee of the Board.

 

"Company" has the meaning given such term in Section 1 of this STI Plan.

 

"Discretionary Bonus" has the meaning given such term in Section 7 of this STI
Plan.

 

"Employee" means any person employed by the Company or its Subsidiaries, whether
such Employee is so employed at the time the STI Plan is adopted or becomes so
employed subsequent to the adoption of the STI Plan.

 

"Participant" means, as to any Performance Period, any Employee who is selected
by the Committee to be eligible to participate in the STI Plan for that
Performance Period, as provided herein.

 

"Payout Formula"means the formula established by the Committee for determining
Award Opportunities for a Performance Period based on the level of achievement
of the Performance Objectives for the Performance Period.

 

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"Performance Objectives" means the measurable or subjective performance
objective or objectives established pursuant to this STI Plan for Participants
who have received Award Opportunities. Performance Objectives may be described
in terms of Company-wide objectives or objectives that are related to the
performance of a Subsidiary, division, business unit, department, region or
function within the Company or Subsidiary in which the Participant is employed
(i.e., "team objectives") or in terms of the performance of the individual
Participant (i.e., "individual objectives") and may be based on the following
criteria: earnings per share, operating income, revenues, operating margin,
profit margin, return on assets, return on equity, return on invested capital,
financing, credit ratings, redeployment of capital, cash flow, 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), new customers, cost controls,
operating efficiencies, product development, strategic partnering, research and
development, market penetration, geographic business expansion, cost targets,
productivity, employee satisfaction, management of employment practices and
employee benefits, supervision of litigation or labor negotiations, dealings
with regulatory bodies, acquisitions or divestitures, delivery cost per kilowatt
hour or delivery cost per millions of cubic feet of natural gas, customer
satisfaction, program development, 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, and/or strategic business criteria related to a Participant's
area or areas of responsibility. The Performance Objectives may be made relative
to the performance of other corporations or entities.

 

"Performance Period" means the Company’s fiscal year or such other period as
determined by the Committee in its discretion, within which the Performance
Objectives relating to an Award Opportunity are to be achieved. The Committee
may establish different Performance Periods for different Participants, and the
Committee may establish concurrent or overlapping Performance Periods.

 

"STI Plan" means this CH Energy Group, Inc. Short-Term Incentive Plan, as
amended from time to time.

 

"Subsidiary" means a corporation, company or other entity (i) more than 50
percent of whose outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more than 50
percent of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company.

 

3.             Administration. The Committee shall be responsible for
administration of the STI Plan. The Committee, by majority action, is authorized
to interpret the STI Plan, to prescribe, amend, and rescind regulations relating
to the STI Plan, to provide for conditions and assurances deemed necessary or
advisable to protect the interests of the Company and its Subsidiaries, and to
make all other determinations necessary or advisable for the administration of
the STI Plan, but only to the extent not contrary to the express provisions of
the STI Plan.

 

 

 

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Determinations, interpretations, or other actions made or taken by the Committee
pursuant to the provisions of the STI Plan shall be final, binding and
conclusive for all purposes and upon all Participants. No member of the
Committee shall be liable for any such action or determination made in good
faith. The Board (acting solely by the independent directors as identified under
the applicable exchange listing standards) may perform any function of the
Committee hereunder, in which case the term "Committee" shall refer to the
Board.

 

4.            Eligibility. The Committee, in its sole discretion, shall
determine which Employees will be eligible to participate in the STI Plan for
any given Performance Period. When making this determination, the Committee
shall consider the recommendations of the Chief Executive Officer. Eligible
Participants shall be designated by the Committee either before or within 90
days following the beginning of the Performance Period. An Employee who is a
Participant for a given Performance Period is neither guaranteed nor assured of
being selected for participation in any subsequent Performance Period.

 

 

5.

Award Opportunities

 

a.         No later than the first 90 days following the beginning of each
Performance Period, the Committee shall establish the Award Opportunity for each
Participant, including the applicable Performance Objectives and Payout Formula.
Each Performance Objective will be weighted by the Committee to reflect its
relative importance to the Company in the applicable Performance Period. The
Payout Formulas, Performance Objectives and weighting of the Performance
Objectives need not be uniform with respect to any or all Participants. The
Committee shall consider the recommendations of the Chief Executive Officer in
determining the applicable Payout Formulas, Performance Objectives or weighting
of the Performance Objectives with respect to Participants other than the Chief
Executive Officer. The Committee may also establish Award Opportunities for
newly hired or newly promoted employees without compliance with such timing and
other limitations as provided herein, which Award Opportunities may be based on
performance during less than the full Performance Period and may be pro rated in
the discretion of the Committee.

 

b.         Participants must achieve the Performance Objectives established by
the Committee in order to receive payment of an Award Opportunity under the STI
Plan. However, the Committee may determine that only a threshold level relating
to a Performance Objective must be achieved for Award Opportunities to be paid
under the STI Plan. Similarly, the Committee may establish a minimum threshold
performance level, a maximum performance level, and one or more intermediate
performance levels or ranges, with target award levels or ranges that will
correspond to the respective performance levels or ranges included in the Payout
Formula.

 

c.         The Committee may in its sole discretion modify the Payout Formulas,
Performance Objectives or the related minimum acceptable level of achievement,
in whole or in part, as the Committee deems appropriate and equitable (i) to
reflect a change in the business, operations, corporate structure or capital
structure of the Company or its Subsidiaries, the manner in which it conducts
its business, or other events or circumstances or (ii) in the event that

 

 

 

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a Participant's responsibilities materially change during a Performance Period
or the Participant is transferred to a position that is not designated or
eligible to participate in the STI Plan.

 

 

6.

Determination of Award Opportunities.

 

a.         Within the first 60 days following the end of each Performance
Period, the Committee shall determine in writing whether and to what extent the
Performance Objectives with respect to each Participant for the applicable
Performance Period have been achieved and, if such Performance Objectives have
been achieved, to approve actual payment of each Award Opportunity under the STI
Plan pursuant to the applicable Payout Formulas. The Committee shall consider
the recommendations of the Chief Executive Officer when determining whether the
Performance Objectives have been achieved with respect to Participants other
than the Chief Executive Officer.

 

b.         In the event a Participant terminates employment with the Company and
its Subsidiaries for any reason prior to the last day of the Performance Period,
the Participant shall not be entitled to payment of an Award Opportunity with
respect to that Performance Period; provided that in the case of termination of
employment by reason of death, disability or normal or early retirement, or in
the case of other special circumstances, the Committee may, in it sole
discretion, pay all or any portion of the Award Opportunity to the Participant
(or to the Participant's estate in the event of his or her death) as the
Committee deems appropriate and equitable.

 

c.         Notwithstanding anything in this STI Plan to the contrary, the
Committee may, in its sole discretion, reduce (but not increase) the resulting
Award Opportunity otherwise payable to any Participant for a particular
Performance Period, regardless of the level of attainment of the Performance
Objectives, at any time prior to the payment of the Award Opportunity, in light
of such Participant's individual performance during the Performance Period or
such other factors as the Committee deems relevant, including changed or special
circumstances that arose during the Performance Period; provided that the amount
of any such reduction may not exceed fifty percent (50%) of the Participant's
target Award Opportunity allocated to individual objectives for the Performance
Period. The Committee shall consider the recommendations of the Chief Executive
Officer when determining whether to reduce an Award Opportunity under this
Section 6(c), and the amount of any such reduction, with respect to Participants
other than the Chief Executive Officer.

 

7.            Discretionary Bonus. Notwithstanding anything in this STI Plan to
the contrary, after the end of each Performance Period, the Committee may, in
its sole discretion, make a discretionary bonus award (a "Discretionary Bonus")
to any Participant in light of such Participant's individual performance during
the Performance Period or such other factors as the Committee deems relevant,
including changed or special circumstances that arose during the Performance
Period; provided that a Discretionary Bonus shall not be awarded for purposes of
replacing amounts that were not otherwise earned under this STI Plan. The amount
of the Discretionary Bonus that may be payable to any such Participant with
respect to a Performance Period may not exceed fifty percent (50%) of the
Participant's target Award Opportunity allocated to individual objectives for
that Performance Period. The Committee shall consider the

 

 

 

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recommendations of the Chief Executive Officer when determining whether to award
a Discretionary Bonus under this Section 7, and the amount of any such award,
with respect to Participants other than the Chief Executive Officer.

 

8.          Payment. Any Award Opportunity or Discretionary Bonus earned by a
Participant for a particular Performance Period shall be paid in cash after the
end of the Performance Period, but in no event later than two-and-one-half
months after the end of the Performance Period. The Committee may, in its sole
discretion, determine that all or part of an Award Opportunity or Discretionary
Bonus shall be paid in the form of an equivalent amount of Company common
shares; provided that the shares shall be issued under the Company's equity
compensation plans in existence at the time of grant. Notwithstanding the
foregoing, a Participant may elect to defer receipt of payment of any amounts
payable under this STI Plan in accordance with the terms and subject to the
conditions of the Directors and Executives Deferred Compensation Plan (or any
successor plan).

 

9.         Tax Withholding.The Company and its Subsidiaries shall have the right
to deduct from all payments made to any person under the STI Plan any federal,
state, local, foreign or other taxes which, in the opinion of the Company and
its Subsidiaries, are required to be withheld with respect to such payments.

 

10.        No Employment Contract. Nothing contained in this STI Plan shall
confer upon a Participant any right with respect to continuance of employment by
the Company and its Subsidiaries, nor limit or affect in any manner the right of
the Company and its Subsidiaries to terminate the employment or adjust the
compensation of a Participant. For purposes of the STI Plan, the transfer of
employment of a Participant between the Company and any one of its Subsidiaries
(or between Subsidiaries) shall not be deemed a termination of the Participant’s
employment.

 

11.         Transferability. No right or benefit under this STI Plan will be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber,
or charge such right or benefit will be void. No such right or benefit will in
any manner be liable for or subject to the debts, liabilities, or torts of a
Participant.

 

12.        Successors. All obligations of the Company under the STI Plan shall
be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business or assets of the
Company.

 

13.        Governing Law. The STI Plan and all Award Opportunities shall be
construed in accordance with and governed by the laws of the State of New York,
but without regard to its conflict of law provisions.

 

14.        Amendment or Termination. The Board reserves the right, at any time,
to amend, suspend or terminate the STI Plan, in whole or in part, in any manner,
and for any reason, and without the consent of any Participant, Eligible
Employee or other person; provided,

 

 

 

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that no such amendment, suspension or termination shall adversely affect the
payment of any amount for a Performance Period ending prior to the action of the
Board amending, suspending or terminating the STI Plan.

 

15.         Participation by Employees of Subsidiaries. Any Subsidiary may, by
action of its board of directors or equivalent governing body and with the
consent of the Board, adopt the STI Plan; provided that the Board may waive the
requirement that such board of directors or equivalent governing body effect
such adoption. By its adoption of or participation in the STI Plan, the adopting
Subsidiary shall be deemed to appoint the Company its exclusive agent to
exercise on its behalf all of the power and authority conferred by the STI Plan
upon the Company and accept the delegation to the Committee of all the power and
authority conferred upon it by the STI Plan. The authority of the Company to act
as such agent shall continue until the STI Plan is terminated as to the
participating Subsidiary. Any amount payable pursuant to this STI Plan to a
Participant employed by a participating Subsidiary shall be paid in accordance
with the STI Plan solely by that Subsidiary, unless the Board otherwise
determines that the Company shall be responsible for payment. Amounts that may
become payable under the STI Plan shall be paid solely from the general assets
of the Company or the Subsidiary responsible for payment thereof. Nothing in
this STI Plan shall be construed to create a trust or to establish or evidence
any Participant's claim of any right to payment of an amount under this STI Plan
other than as an unsecured general creditor with respect to any payment to which
he or she may be entitled.

 

IN WITNESS WHEREOF, CH Energy Group, Inc. caused this amended and restated STI
Plan to be executed by its duly authorized officer as of May 21, 2009.

 

 

CH ENERGY GROUP, INC.

 

 

By: /s/ Steven V. Lant                                            

 

Steven V. Lant, Chairman, President and

 

Chief Executive Officer of

 

CH Energy Group, Inc.

 

 

 

 

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