Exhibit 10(iii)43

 

 

 

(CH ENERGY GROUP LOGO) [d73467009.jpg]

 

 

 

May 30, 2007

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  Table of Contents

 

 

Section I.

 

Objectives

3

 

 

 

 

 

 

II.

 

Overview

5

 

 

 

 

 

 

III.

 

Establishing Financial and Operating Goals

8

 

 

 

 

 

 

IV.

 

Individual Contributor Evaluation

10

 

 

 

 

 

 

V.

 

Calculating the Annual Incentive Payment

11

 

 

 

 

 

 

Exhibit I

 

2007 STI Targets

12

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I. Objectives

 

 

 

          Consistent with our emphasis on pay for performance incentive
compensation programs, we have established the Executive Annual Incentive Plan
under which our executive officers are eligible to receive annual incentive cash
payments based on performance against annual established performance targets.
The annual incentive is designed to reward achievement of each year’s business
plan objectives in a manner consistent with achievement of the Corporation’s
strategy of achieving long-term shareholder value.

 

 

 

          In order to ensure that our compensation package is weighted heavily
towards pay for performance, the annual incentive for 2007 represented from 20%
to 60% of an executive’s base salary (assuming payout at the target level),
depending on the executive’s level of responsibility. Moreover, annual
incentives are included in an executive’s “final average pay” for purposes of
determining his/her retirement benefits and are included in the formula for
calculating severance benefits in the event of a change in control.

 

 

 

          Under the Executive Annual Incentive Plan, our executives have the
opportunity to earn targeted incentive cash payments that are calculated as a
percentage of each person’s annual base salary. These percentages are developed
by the CH Energy Group’s Compensation Committee (the “Committee”), and approved
by the independent Directors on our Board of Directors, according to each
person’s position and level of responsibility. Annual incentive award
opportunities for our executives, in the aggregate, are targeted to result in
cash payments equal to the market median of our comparator groups assuming our
target business objectives, which are primarily quantitative and financial in
nature, are achieved. Performance is measured according to levels established
each year for threshold performance, targeted performance, and superior
performance. The performance levels are established so that target attainment is
not assured. Instead, our executives are required to demonstrate significant
effort, dedication, and achievement to attain payment for performance at target
or above.

 

 

 

          After the end of each calendar year, management assesses the
performance of the Corporation for each performance target and calculates the
annual incentive amounts for the prior year. These assessments and calculations
are verified for accuracy each year by the Hay Group. The Compensation Committee
then

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reviews the verified assessments and calculations and approves the resulting
annual incentive amounts. The incentive compensation opportunity will vary, from
0% to 150% of the targeted percentage of base salary, according to the level of
overall corporate performance achieved for the year relative to the established
performance targets.

 

 

 

 

 

The annual incentive amounts for each executive may be adjusted upwards or
downwards by up to 50% based upon the CEO and/or the Committee’s assessment of
the individual’s performance. Such adjustments, if made, are based on an
evaluation of each officer’s contribution to achieving corporate opportunities
and meeting corporate challenges, as well as an evaluation of the quality of 
the individual’s performance in exercising responsibility described in his/her
position description.

 

 

 

Administration

 

The plan shall be administered by CHEG management under the direct supervision
and approval of CHEG’s Board of Directors.

 

 

 

 

 

The plan is based on annual performance and requires that the participant be an
active employee of CH Energy Group, Inc. (“CHEG”) or its subsidiaries or
properties at the end of the calendar year during which performance goals have
been set and results have been evaluated, except in the case of death,
disability or normal retirement, the incentive opportunity will be prorated and
the evaluation of performance against both quantitative goals and subjective
goals will be at the sole discretion of Board of Directors and the CEO.

 

 

 

 

 

Goals shall be agreed upon by the Board of Directors and be documented in
writing no later than February 1 of each year.

 

 

 

 

 

Performance evaluations and incentive award payments shall be completed and
delivered to the participant no later than March 1 of the following year.

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II. Overview of the Plan

 

 

 

Incentive Opportunity

 

 

 

 

 

 

 

Notwithstanding the above statement, the board, at its sole discretion, may
increase the calculated incentive amount or reduce it to zero. The calculated
maximum amount may be exceeded should the directors deem that the participant’s
or company’s performance should merit additional compensation.

 

 

 

 

 

The board, at its sole discretion, may eliminate any or all of the annual awards
under this plan in response to a major employee or public safety occurrence that
resulted in a death or serious injury or a major public incident that reflected
poorly on the company’s image or public trust.

 

 

 

Target and Maximum
Incentive Schedule

 

The following chart specifies the targeted and maximum incentive opportunity as
a percent of base salary for each participant.

 

 

 

 

Allocation of Incentive
Opportunities

 

Percent of Base Salary

 

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Officer Level

Target
Incentive

Maximum Incentive

 

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CEO

60%

90%

 

 

 

 

 

Senior Officers

40%

60%

 

 

 

 

 

President of Griffith

40%

60%

 

 

 

 

 

SVP

30%

45%

 

 

 

 

 

Vice Presidents

25%

37.5%   

 

 

 

 

 

AVP/Other Officers

20%

30%

 

 

 

 

 

The incentive opportunity is divided among various segments with varying weights
for each segment depending on the participant’s business unit affiliation.
Executives at CHEG or one of the business units may have their incentive
opportunity tied to some or all of the following categories. The categories are:

 

 

 

 

 

 

 

1.

Corporate Financial Performance: Financial and investment performance goals
approved by The Board of Directors for CHEG or its subsidiaries or business
units.

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2.

The operation of CHGE against goals approved by the Board of Directors.

 

 

 

 

3.

The operational performance of CHEC or a business unit of CHEC against
milestones approved by the Board of Directors.

 

 

 

 

4.

A subjective evaluation, recommended by the CEO and/or the Compensation
Committee and approved by the Board, of the participant’s overall contribution
to the corporation’s performance based upon the Committee’s assessment of the
individual’s performance. Such adjustments, if made, are based on an evaluation
of each officer’s contribution to achieving corporate opportunities and meeting
corporate challenges, as well as an evaluation of the quality of the
individual’s performance in exercising responsibility described in his position
description.

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Each of the incentive opportunities are measured, evaluated and rewarded
independently although there are interconnections between each of them. The
allocation and weighting of the targeted incentive opportunity and the assigned
STI Target Groupings are as follows.

 

 

 

 

 

 

 

Performance Category

 

CH Energy Group

 

CHG&E

 

Griffith

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Corporate Financial Performance EPS - CH Energy Group

 

100%

 

0%

 

0%

 

 

 

 

 

 

 

Redeployment of Capital Outside of CHG&E

 

 

 

 

 

 

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CHG&E Performance

 

0%

 

100%

 

0%

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Griffith

 

0%

 

0%

 

100%

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     The annual incentive amounts for each executive officer may be adjusted
upwards or downwards by up to 50% based upon the Committee’s assessment of the
individual’s performance. Such adjustments, if made, are based on an evaluation
of each officer’s contribution to achieving corporate opportunities and meeting
corporate challenges, as well as an evaluation of the quality of the
individual’s performance in exercising responsibility described in his position
description.

 

+/-50%

 

+/-50%

 

+/-50%

 

 

 

 

 

2007 STI Target Grouping

 

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CH Energy Group

CHG&E

Griffith

 

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SV Lant

CE Meyer

WR Groft

 

CM Capone

CA Freni

 

 

JJ DeVirgilio

DD VanBuren

 

 

DS Doyle

JP Lovette

 

 

SA Renner

TC Brocks

 

 

 

ML Mosher

 

 

 

KJ Wright

 

 

 

PE Haering

 

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III. Establishing Financial and
Operating Goals and Milestones

 

Agreeing on and Defining
Operating Goals

 

Annually, the CEO and the Board will agree on one or several critical financial
and/or operating goals to be achieved in the coming year by CH Energy Group,
Inc., CHGE and/or CHEC.

 

 

 

The Goal Definition Process

 

Annually, the CEO and the board or its designated committee will reach an
agreement on several parameters for each goal or goals specified:

 

 

 

 

 

•

The definition of the measurement involved

 

 

 

 

 

 

•

The relative weight assigned to that goal for each category of executive.

 

 

 

 

 

 

•

Three performance benchmarks for each goal:

 

 

 

 

 

 

 

•

Threshold performance

 

 

 

 

 

 

 

 

•

Targeted (or expected) performance

 

 

 

 

 

 

 

 

•

Superior performance

 

 

 

 

 

 

 

Wherever possible, goals should be as definitive and quantitative as possible.

 

 

 

 

 

The current year’s Goals are attached as Exhibit I.

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Calculating a Weighted
Performance Grade

 

Each of the goal-based performances would be evaluated at the end of the year
and evaluation % approved by the committee. The relationship between performance
and % award is as follows:

 

 

 

 

 

•     Below “Threshold” — 0%

 

 

 

 

 

•     “Threshold” — 50%

 

 

 

 

 

•     “Targeted’ — 100%

 

 

 

 

 

•     “Superior” — 150%

 

 

 

 

 

•     Above “Superior” — 150%

 

 

 

 

 

For performances between these benchmarks, a fractional % would be given based
on a linear interpolation of the measurement and the % award. For example, if
the performance were exactly midway between Targeted and Superior, then 125% of
Target (midway between 100 and 150 %) would be awarded.

 

 

 

 

 

Each performance category has been assigned a weighting. These have been
specified in Section II of this document. For purposes of calculating an
incentive, the % earned in each category is then weighted based on the weighting
assigned to the category.

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IV.

Individual Contributor Evaluation

 

 

Intent of this Element

          The annual incentive amounts for each executive officer may be
adjusted upwards or downwards by up to 50% based upon the Committee’s assessment
of the individual’s performance. Such adjustments, if made, are based on an
evaluation of each officer’s contribution to achieving corporate opportunities
and meeting corporate challenges, as well as an evaluation of the quality of the
individual’s performance in exercising responsibility described in his position
description. This incentive opportunity is intended to provide the CEO and
Compensation Committee with flexibility to reflect the participant’s performance
in areas other than those directly quantified in the previous incentive
elements. Included in the considerations for this incentive would be the
following:

 

 

 

An assessment of the quality of performance relative to the major
responsibilities identified in the position description.

 

 

 

An assessment of the contribution made toward advancing corporate projects and
priorities included in the business plan for the year and/or the contributions
made toward effectively responding to emerging issues during the year.

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V.

Calculating the Annual Incentive Payment

 

 

Calibration of the Incentive Award

For all executives the weighting for this segment is +/- 50% of the incentive
opportunity. The targeted evaluation is 0%.Calculating the Incentive Payment

 

 

 

The steps used to convert the various weighted average % earned are as follows:

 

 

 

 

1.

Calculate the evaluation % for each performance category.

 

 

 

 

2.

Convert the evaluation % based on the weighting for each category.

 

 

 

 

3.

Add the weighted evaluation percentages for all categories to determine the
award percentage.

 

 

 

 

4.

Adjust the award percentage by +/- 50 % for the individual contribution
evaluation and apply this amount to the incumbent’s salary at the beginning of
the year to arrive at the incentive payment to be made.

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EXHIBIT I

Revision — May 30, 2007
(Revisions in Bold Type)
December 15, 2006 FINAL

2007 STI Targets

 

 

 

 

 

 

Target

Weight

Threshold

Target

Superior

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CH Energy Group

 

 

 

 

 

 

 

 

 

 

 

EPS4, 6

75

%

$2.48

$2.68

$2.88

 

 

 

 

 

 

Redeployment of Capital2, 5
Outside of CHGE

25

%

$15 Million

$20 Million

$25 Million

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CHGE
EPS4

60

%

$1.94

$2.04

$2.14

 

 

 

 

 

 

Customer Satisfaction -
JD Power 3

20

%

7th of 15
Companies
or 53rd
Percentile

Top Third

Top Quartile

 

 

 

 

 

 

Reliability (SAIF1)

20

%

1.50

LT 1.45
(JP Penalty Level)

1.40

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Griffith

 

 

 

 

 

 

 

 

 

 

 

EPS4

60

%

$.20

$.24

$.28

 

 

 

 

 

 

Acquisitions2, 5

20

%

$3 Million

$5 Million

$10 Million

 

 

 

 

 

 

Additional Residential
Customers - Automatic
Delivery

10

%

0

600

1,200

 

 

 

 

 

 

Delivery Efficiency1

10

%

11.2¢

11.0¢

10.6¢

 

 

1 -

Total Delivered Expense/Total Delivered Gallons.

 

 

2 -

Based on dollars deployed. Performance of investments will be tracked in
subsequent years vs. projections at time of commitment. Variations from
projections will be considered in subsequent years, when relevant, in
determining “individual contributor” adjustments to STI awards (±50%).

 

 

3 -

Versus eastern region.

 

 

4 -

Normalized for heating and cooling degree days, both revenue and expense and
major storms.

 

 

5 -

Includes both tuck-ins and expansions closed during the year.

 

 

6 -

Net of interest income.

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