EXHIBIT A 10.11

 

 

 

CENTRAL VERMONT PUBLIC SERVICE CORPORATION

PERFORMANCE SHARE INCENTIVE PLAN

 

 

Effective January 1, 2008

 

 

Execution Copy

March, 2008

 

CENTRAL VERMONT PUBLIC SERVICE CORPORATION

PERFORMANCE SHARE INCENTIVE PLAN

TABLE OF CONTENTS

   

Section

ARTICLE I

PURPOSE

 

ARTICLE II

DEFINITIONS

   

"Account"
"Award"
"Board"
"Change in Control"
"Code"
"Committee"
"Common Stock" or "Stock"
"Comparison Group"
"Component"
"Dividend Equivalent"
"Effective Date"
"Employer"
"Exchange Act"
"Fair Market Value"
"Operational Measures"
"Participant"
"Performance Cycle"
"PeRS"
"Plan"
"Pro Rata Portion"
"Stock Unit"
"Target PeRS"
"Termination of Employment"
"Total Shareholder Return"

2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.15
2.16
2.17
2.18
2.19
2.20
2.21
2.22
2.23
2.24

ARTICLE III

DETERMINATION OF PERFORMANCE SHARES

   

Designation of PeRS and Related Terms
Adjustment of and Changes in Stock

3.1
3.2

ARTICLE IV

PAYMENT OF GRANTS

   

Performance Awards
Accounts
Payment of Account

4.1
4.2
4.3

ARTICLE V

TERMINATION OF EMPLOYMENT

   

Termination Prior to Completion of Performance Cycle
Change in Control

5.1
5.2

ARTICLE VI

ADMINISTRATION

   

Committee
Amendment and Termination

6.1
6.2

ARTICLE VII

GENERAL PROVISIONS

   

Payments to Minors and Incompetents
No Contract
Use of Masculine and Feminine; Singular and Plural
Non-Alienation of Benefits
Income Tax Withholding
Continuation of Plan
Governing Law
Captions
Severability

7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9

ARTICLE I

PURPOSE

Effective January 1, 2008, Central Vermont Public Service Corporation (the
"Employer") has established The Central Vermont Public Service Corporation
Performance Share Plan (the "Plan") in order to strengthen the ability of the
Employer to attract and retain talented executives and to promote the long-term
growth and profitability of the Employer by linking a significant element of
executives' compensation opportunity to the performance of the Employer in
meeting key operational and shareholder return goals over an extended period of
time. Shareholder return, customer satisfaction, operational efficiency and
capital spending are all relative to established peer groups.

ARTICLE II

DEFINITIONS

2.1

"Account" means the bookkeeping account established for the Participant under
Section 4.2.

2.2

"Award" means any payment or settlement in respect of a grant of Common Stock or
cash or any combination thereof in accordance with Section 4.1.

2.3

"Board" means the Board of Directors of Central Vermont Public Service
Corporation.

2.4

"Change in Control" shall have the same meaning as the term defined in the
standard form Change in Control Agreement approved by the Employer's Board of
Directors and awarded from time to time.

2.5

"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and pertinent regulations issued thereunder. Reference to any section of the
Code shall include any successor provision thereto.

2.6

"Committee" means the Compensation Committee appointed by the Board to
administer this Plan. The Committee shall be comprised of at least 3 members who
qualify as "non-employee directors" within the meaning of Rule 16B-3 promulgated
under the Exchange Act.

2.7

"Common Stock" or "Stock" means the common stock of the Employer.

2.8

"Comparison Group" means the peer group of companies designated by the Committee
as the Comparison Group relative to a given Performance Cycle, as described in
Section 3.1(c)

2.9

"Component" means the part of the plan related to specific measures. Starting in
2005, there are two plan components - one related to relative Total Shareholder
Return performance and the second related to meeting key operational measure
performance.

2.10

"Dividend Equivalent" means credits in respect of each PeRS (as defined in
section 2.18) or other Stock Unit representing an amount equal to the dividends
or distributions declared and paid on a share of Common Stock.

2.11

"Effective Date" means January 1, 2008, the effective date of this Plan.

2.12

"Employer" means Central Vermont Public Service Corporation, its subsidiaries
and affiliates, and its successor or successors.

2.13

"Exchange Act" means the Securities Exchange Act of 1934, as amended and in
effect from time to time, including all rules and regulations promulgated
thereunder.

2.14

"Fair Market Value" means the average of the high and low quoted selling price
for a share of Common Stock of the Company on the applicable date as quoted on
the New York Stock Exchange ("NYSE") in the Eastern Edition of the Wall Street
Journal or in a similarly readily available public source on such date. If such
date shall not be a business day, then the preceding day which shall be a
business day, or if no sale takes place, then the average of the bid and asked
prices on such date.

2.15

"Operational Measures" means the specific measures of operational performance
chosen for a three-year performance cycle. (See Exhibit B.)

2.16

"Participant" means an executive officer of the Employer who is selected by the
Board to participate in this Plan.

2.17

"Performance Cycle" means the period over which PeRS designated in respect of
the Performance Cycle potentially may be earned. Performance Cycles will be
three year periods extending from January 1 of the initial year through December
31 of the third year in the Performance Cycle. Performance Cycles generally will
begin each year, and therefore will overlap with one another.

2.18

"PeRS" means Stock Units which are potentially earnable by a Participant
hereunder upon achievement of specific levels of performance for the two plan
components as shown in Exhibit A and B. The term is an acronym for
"performance-based restricted Stock Units".

2.19

"Plan" means the Central Vermont Public Service Corporation Performance Share
Incentive Plan, as set forth herein, as may be amended from time to time. Shares
for this plan were approved by shareholders on May 7, 2002, as the 2002
Long-Term Incentive Plan and any subsequent replacement plans.

2.20

"Pro Rata Portion" means a portion of shares which is determined by multiplying
a predetermined number of PeRS by the ratio of months in a thirty-six month
performance cycle which the executive was employed by the Company in that cycle.

2.21

"Stock Unit" is a bookkeeping unit which represents a right to receive one share
of Common Stock upon settlement, together with a right to accrual of additional
Stock Units as a result of Dividend Equivalents, subject to the terms and
conditions of this Plan. Stock Units are arbitrary accounting measures created
and used solely for purposes of this Plan, and do not represent ownership rights
in the Employer, shares of Common Stock, or any asset of the Employer.

2.22

"Target PeRS" means a number of PeRS designated as a target number that may be
earned by a Participant in respect to a given Performance Cycle plus the number
of PeRS resulting directly or indirectly from Dividend Equivalents on the
originally designated number of Target PeRS.

2.23

"Termination of Employment" means the Participant's termination of employment
with the Employer.

2.24

"Total Shareholder Return" means the amount, expressed as a percentage, of
market price appreciation or depreciation of a share of common stock plus
dividends on a share of Common Stock or on the common stock of a company in the
Comparison Group (in both cases excluding extraordinary dividends), assuming
dividend reinvestment at the dividend payment date, for the specified 3-year
period.

ARTICLE III

DETERMINATION OF PERFORMANCE SHARES

3.1

(a)

Designation of PeRS and Related Terms

. Not later than 90 days after the beginning of a Performance Cycle, the
Committee shall: (i) select employees to participate in the Performance Cycle;
(ii) designate, for each such employee Participant, the Target PeRS number such
Participant shall have the opportunity to earn in such Performance Cycle related
to TSR performance component of the plan; (iii) designate, for each such
employee Participant, the Target PeRS number such Participant shall have the
opportunity to earn in such Performance cycle related to Operational Measure
performance; (iv) specify the duration of the Performance Cycle; (v) specify a
table (Exhibit A), grid or formula that sets forth the amount of PeRS that will
be earned in the first component of the Plan corresponding to the percentile
rank of the Company's average TSR for the three years ending on the last day of
the Performance Cycle as compared to the unweighted average TSR of the
Comparison Group for the three years ending on the last day of the Performance
Cycle; and (vi) specify a table (Exhibit B) grid or formula that sets forth the
amount of PeRS that will be earned corresponding to the Company's performance
based on the key operational measure component of the plan. The Committee may,
in its discretion, reduce or eliminate the amount of payment with respect to an
Award of PeRS to a Participant, notwithstanding the achievement of a specified
performance condition.

 

(b)

New Participants

. The provisions of 3.1(a) notwithstanding, at any time during a Performance
Cycle, the Committee may select a new employee or a newly promoted employee who
was not currently participating in the Performance Cycle to participate in the
Performance Cycle and designate, for any such employee Participant, the number
of PeRS or additional PeRS such Participant shall have the opportunity to earn
in such Performance Cycle; provided, however, that such designation must be
effective at least six months before the stated end date of the Performance
Cycle. In determining the number of Target PeRS to be designated under this
paragraph (b), the Committee may take into account the portion of the
Performance Cycle already elapsed, the performance achieved during such elapsed
portion of the Performance Cycle, and such other considerations as the Committee
may deem relevant. The Committee shall also determine whether any calculation of
the Pro Rata Portion for such Participant shall be adjusted to include or
exclude periods prior to the Participant's employment in the numerator or
denominator used in calculating such amount.

 

(c)

Comparison Group

. The Comparison Group for each Performance Cycle shall be designated by the
Committee, provided that, if the Committee does not designate a new Comparison
Group for any Performance Cycle, the Comparison Group shall be that most
recently designated by the Committee.

The Comparison Group for each Performance Cycle for the TSR Component of the
Plan is developed including all publicaly traded utilities as defined by SIC
Codes 4911 - Electric Services, and 4931 - Electric Services and Other Service
Combinations. In the event a merger, acquisition, or other extraordinary
corporate event affects a company included in the Comparison Group, and if as a
result in the Committee's judgment such event causes TSR for such company not to
be comparable with periods prior to the event or otherwise necessitates a change
or adjustment to ensure continued comparability, the Committee shall make such
adjustments in order to maintain the comparability of results of the Comparison
Group.

The Comparison Group for relative customer satisfaction, one of the measures in
the operational component, is all East Region electric utilities in the J.D.
Power residential customer satisfaction telephone survey. These include all
electric utilities with over 200,000 customers throughout the East Region
including vertically integrated utilities, utilities with retail access, and
public and private utilities. The Employer's overall customer satisfaction
compared to the East Region average of electric utilities measured by J.D. Power
will be calculated for each year and averaged over the 3-year performance cycle.
The 3 year average percent vs. East Region average will be used to determine
relative performance.

The Comparison Group for operational efficiency and capital spending (which is
one of the measures in the operational component) is a group of utilities chosen
by the Pacific Economics Group (PEG), an independent econometric firm. PEG
creates a model based on their universe of utilities to predict performance of
utilities vs. model predictions based on a utility's characteristics.

 

(d)

Determination of Number of Earned PeRS

. Not later than 120 days after the end of each Performance Cycle, the Committee
shall determine the extent to which the performance goals for the earning of
PeRS were achieved during such Performance Cycle and the number of PeRS (or, the
"Award") earned by each Participant with respect to each component for the
Performance Cycle (see Exhibit A and Exhibit B). The Committee shall make
written determinations that the performance goals and any other material terms
relating to the earning of PeRS were in fact satisfied.

3.2

 

Adjustment of and Changes in Stock

. In the event of any change in the outstanding shares of Common Stock by reason
of any stock dividend or split, recapitalization, merger, consolidation,
spinoff, combination or exchange of shares or other similar corporate
transaction, or any distributions to common shareholders other than regular cash
dividends, the Committee may make such substitution or adjustment, if any, as it
deems to be equitable, as to the number or kind of shares of Common Stock, PeRS,
and/or other securities issued, reserved or granted for any purpose under this
Plan.

ARTICLE IV

PAYMENT OF GRANTS

4.1

Performance Awards

. Subject to the applicable provisions of Article III, each Participant shall be
entitled to receive an Award of Common Stock in an amount equal to the aggregate
Fair Market Value of the PeRS earned in respect of a Performance Cycle.
Participants shall be immediately vested in such Award as of the date it is
granted.

4.2

Accounts

. The Committee shall maintain a bookkeeping Account for each Participant
reflecting the number of PeRS credited to the Participant hereunder including
dividend equivalents. The Account may include subaccounts or other designations
as the Committee may deem appropriate.

4.3

Payment of Account

. Payment of an Account may be made in shares of Common Stock, in cash equal to
the Fair Market Value of the shares on the date as of which payment is made, or
in any combination of Common Stock and cash, and at such time or times as the
Committee, in its discretion, shall determine. The intent is to grant the
payment in shares of Common Stock subject to sections 3.2 and 7.5 of this Plan.
Payment shall be made on or before March 15th immediately following the
conclusion of the Performance Cycle.

The Committee may permit (subject to such conditions as the Committee may from
time to time establish in order to provide for matters such as the effective
deferral of taxation) a Participant to elect to defer receipt of all or any
portion of any payment of shares of Common Stock that would otherwise be due to
such Participant in payment or settlement of any Award under the Plan. An
eligible participant may elect to defer the award through the Deferred
Compensation Plan for Officers and Directors of Central Vermont Public Service
Corporation. Any deferred amount will be invested in phantom "company stock".

The shares of Common Stock which may be issued under the Plan may be authorized
and unissued shares or issued shares which have been reacquired by the Employer.
No fractional share of the Common Stock shall be issued under the Plan. Awards
of fractional shares of the Common Stock, if any, shall be settled in cash.

ARTICLE V

TERMINATION OF EMPLOYMENT

5.1

Termination Prior to Completion of Performance Cycle

.

 

(a)

Upon a Participant's Termination of Employment with the Employer prior to
completion of a Performance Cycle all unearned PeRS relating to such Performance
Cycle shall cease to be earnable and shall be cancelled, and Participant shall
have no further rights or opportunities hereunder.

 

(b)

Disability, Death, or Retirement

. If Termination of Employment is due to the death or the Disability or
Retirement (as such terms are defined under the provisions of The Pension Plan
of Central Vermont Public Service Corporation and Its Subsidiaries, i.e., the
"Pension Plan") of the Participant, the Participant or his beneficiary (as
designated for purposes of the Pension Plan) shall be deemed to have earned and
shall be entitled to receive settlement of the Pro Rata Portion of the PeRS
relating to the Performance Cycles in effect at the date of termination, at the
time and to the extent such PeRS would otherwise have been earned and settled,
in accordance with Article IV if the individual had not terminated until after
the close of the Performance Cycles. Notwithstanding the foregoing, in the event
that such Termination of Employment is effective as of the last day of a
calendar year, the Participant shall only be entitled to earn the aforementioned
PeRS, as otherwise determined in this paragraph (b), upon approval of the Board.

If the Participant has timely filed an irrevocable election to defer settlement
of PeRS following a termination of employment, such earned PeRS shall be settled
in accordance with such deferral election. Other PeRS relating to the
Performance Cycles in effect at the date of such termination will cease to be
earnable and will be cancelled.

5.2

Change in Control.

Upon a Change in Control, Section 5.1(a) shall cease to apply and each
Participant shall be 100% vested in the PeRS at target performance relating to
the Performance Cycles in effect as of the Change in Control. Accordingly, if
for example the Change in Control results in Executive's Termination of
Employment prior to the completion of a Performance Cycle, Executive will be
deemed to have earned and shall be entitled to receive, in accordance with the
applicable provisions of the Plan including Section 4.3 hereof concerning the
timing for payment, the Pro Rata Portion of the PeRS at target performance
relating to Performance Cycles in effect as of the Change in Control.

ARTICLE VI

ADMINISTRATION

6.1

Committee

. This Plan shall be administered by the Board through the Compensation
Committee. The Committee shall have full discretion to interpret and administer
the Plan and its decision in any matter involving the interpretation and
application of this Plan shall be final and binding on all parties. The
Committee may delegate to one or more of its members or to any Officer or
Officers of the Company such administrative duties under the Plan as the
Committee may deem advisable.

6.2

Amendment and Termination

. The Compensation Committee reserves the right to amend, modify, suspend or
terminate this Plan in whole or in part at any time by action of the Board.
However, no such amendment may alter the maximum number of shares without
shareholder approval.

ARTICLE VII

GENERAL PROVISIONS

7.1

Payments to Minors and Incompetents

. If any Participant, spouse or beneficiary entitled to receive any benefits
hereunder is a minor or is deemed by the Committee or is adjudged to be legally
incapable of giving valid receipt and discharge for such benefits, they will be
paid to such person or institution as the Committee may designate or to the duly
appointed guardian. Such payment shall, to the extent made, be deemed a complete
discharge of any such payment under the Plan.

7.2

No Contract

. This Plan shall not be deemed a contract of employment with any Participant,
nor shall any provision hereof affect the right of the Employer to terminate a
Participant's employment.

7.3

Use of Masculine and Feminine; Singular and Plural

. Wherever used in this Plan, the masculine gender will include the feminine
gender and the singular will include the plural, unless the context indicates
otherwise.

7.4

Non-Alienation of Benefits

. No amount payable to, or held under the Plan for the account of, any
Participant, spouse or beneficiary shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to so anticipate, alienate, sell, transfer, assign,
pledge, encumber, or charge the same shall be void; nor shall any amount payable
to, or held under the Plan for the account of, any Participant be in any manner
liable for such Participant's debts, contracts, liabilities, engagements, or
torts, or be subject to any legal process to levy upon or attach.

7.5

Income Tax Withholding

. As a condition to the delivery of any Shares, the Committee may require that
the Participant, at the time of such payment of shares, pay to the Company an
amount to satisfy any applicable tax withholding obligation or such greater
amount of withholding as the Committee shall determine from time to time, or the
Committee may take such other action as it may deem necessary to satisfy any
such withholding obligations. The Committee, in its sole discretion, may permit
or require Participant to satisfy all or a part of the tax withholding
obligations incident to the payment of shares by having the Company withhold a
portion of the Shares that would otherwise be issuable to the Participant. Such
Shares shall be valued based on their Fair Market Value on the date the tax
withholding is required to be made. Any such Share withholding with respect to a
Participant subject to Section 16(a) of the Exchange Act shall be subject to
such limitations as the Committee may impose to comply with the requirements of
Section 16 of the Exchange Act.

7.6

Continuation of Plan

. In the event of a Change in Control, this Plan shall remain in full force and
effect as an obligation of the Employer or its successors in interest.

7.7

Governing Law

. The provisions of the Plan shall be interpreted, construed, and administered
in accordance with the referenced provisions of the Code and with the laws of
the State of Vermont.

7.8

Captions

. The captions contained in the Plan are inserted only as a matter of
convenience and for reference and in no way define, limit, enlarge, or describe
the scope or intent of the Plan nor in any way affect the construction of any
provision of the Plan.

7.9

Severability

. If any provision of the Plan is held invalid or unenforceable, its invalidity
or unenforceability will not affect any other provision of the Plan, and the
Plan will be construed and enforced as if such provision had not been included.

IN WITNESS WHEREOF, the Employer has caused this instrument to be executed by
its duly authorized officer as of the 6th day of March, 2008.

 

CENTRAL VERMONT PUBLIC SERVICE CORPORATION

 

 

 

Attest:
By:  /s/ Mary C. Marzec                   
                    Mary Marzec

(Corporate Seal)

By:  /s/ Joan Gamble                    

Title:  Vice President, Strategic Change
              and Business Services

Exhibit A

PeRS Earned for Total Shareholder Return Performance Component
for 2008-2010 Performance Cycle

Three Year Total Shareholder
Return - Employer Percentile
Rank vs. Comparison Group

Multiple of
Target PeRS Earned

75th percentile or higher

50th percentile

30th percentile

Below 30th percentile

1.5

1.0

0.3

0.0

The resulting three year Total Shareholder Return determined for this Plan shall
be rounded up to nearest percentile specified above. The multiple of Target PeRS
earned between each of the respective percentiles specified above shall be
determined by linear interpolation.

 

Exhibit B

PeRS earned for Operational Measure Performance Component
For 2008-2010 Performance Cycle

 

Operational Measures

Reasoning

0X
Threshold

1X
Target

1.5X
Max

Weight

Financial

A measure of operation financial performance - ROA (Return on Assets) -average
over 3 years

Operational financial measures that help drive TSR are also key in the
operational part of LTIP. ROA has been used for the last several years based on
a Mercer analysis. Management recommends recalculating this mid-cycle when alt.
reg. is finalized.

2.88%

3.39%

4.07%

20%

CV's financial strength (investment grade status) is restored.

Key corporate focus until achieved. Financial strength is critical to meeting
the long-term needs of our customers.

Move to positive outlook BB+

Achieve investment grade status (BBB- or better by 2010)

Achieve investment grade status (BBB- or better by 2008 or 2009)

25%

Customer

CV's % of the East Region electric utilities weighted average in overall
customer perception as measured by J.D. Power (average over 3 years)

CV has had a steady increase in overall customer satisfaction. This measure
seeks to also focus on relative customer perception vs. East Region electric
utilities in the J.D. Power study. CV % of East Region Average 2005=101%;
2006=105%; 2007=107%

102% of East Region weighted average

105% of East Region weighted average

108% of East Region weighted average

15%

Service Quality as determined by a subset of the SERVE matrix (average over 3
years). The subset includes: CAIDI, SAIFI, and transactional customer service.

Include a subset of SERVE in LTIP to balance to financial measures and continue
focus on customer reliability and service.

3

4

5

15%

People

Strength of CV culture as measured by the Denison culture survey in 2010.

The Denison Survey results are correlated with key business performance metrics.
Measured by the quartile results of the total CVPS circumplex.

6 of 12 higher than the utility benchmark

10 of 12 higher than the utility benchmark

Meet target and entire 2nd quartile filled our and 3 above the 50th percentile

15%

Safety as measured by the 2012 workers compensation experience modification
factor which includes our experience for the years 2008-2010.

CV has a continued focus on safety. The mod factor is a three-year measure that
benchmarks our actual experience versus the expected utility experience of 1.0.
['04=1.34; '05=1.28; '06=1.11; '07=.88; '08=1.0; '09=.91]

1.0

0.91

0.88

10%

           

100%

The multiple of Target PeRS is determined by using the weighted performance of
the measures above. Linear interpolation is used for actual performance between
performance Points specified above for the quantitative measures.