FORM OF
DEFERRED COMPENSATION PLAN FOR OFFICERS AND DIRECTORS
OF CENTRAL VERMONT PUBLIC SERVICE CORPORATION

Effective as of January 1, 2002

 

TABLE OF CONTENTS

   

Page

ARTICLE I

NAME AND PURPOSE OF PLAN AND DEFINITIONS

   

1.1
1.2

Name and Purpose
Definitions

1
2

ARTICLE II

ELIGIBILITY AND PARTICIPATION

   

2.1
2.2
2.3

Eligibility
Commencement of Participation
Cessation of Eligibility

5
5
5

ARTICLE III

ELECTION DEFERRAL AGREEMENTS, INVESTMENT EARNINGS, ACCOUNTING

   

3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9

Election Deferral Agreement
Time of Election Deferral Agreement
Amount of Deferrals
Period For Which Election Deferral Agreement Applies
Changes in Election Deferral Agreement
Election Deferral Agreement Contingent on Plan Administrator's Approval
Investment Credits
Accounting
Special Rules for Certain Incentive Pay

6
6
7
7
7
7
7
8
9

ARTICLE IV

VESTING

   

4.1

Vesting of Accounts

10

ARTICLE V

PLAN DISTRIBUTIONS

   

5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9

Time of Payment
Option to Elect Payment no Earlier Than a Specified Age
Option to Elect In-Service Payment
Form of Payment
Payment upon Change in Control of the Employer
Involuntary Cash-Out Provision
Tax Withholding
Distribution of Taxable Amounts
Valuation of Accounts for Distributions and Withdrawals

11
11
12
12
13
14
14
14
14

ARTICLE VI

ADMINISTRATION OF THE PLAN

   

6.1
6.2
6.3
6.4

Plan Administration
Outside Services
Indemnification
Claims Procedure

15
15
15
16

ARTICLE VII

AMENDMENT AND TERMINATION

   

7.1
7.2
7.3

Amendment
Termination
No Reduction Upon Amendment or Termination

17
17
17

ARTICLE VIII

MISCELLANEOUS PROVISIONS

   

8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8

Source of Payments
No Warranties
Inalienability of Benefits
Expenses
No Right of Employment
Headings
Gender and Number
Construction

18
18
18
19
19
19
19
19

ARTICLE I

NAME AND PURPOSE OF PLAN AND DEFINITIONS

1.1

Name and Purpose

. This Plan is established effective January 1, 2002 by Central Vermont Public
Service Corporation (hereafter called the Employer). The name of this plan is
the Deferred Compensation Plan for Officers and Directors of Central Vermont
Public Service Corporation (hereafter called the Plan). The purpose of the Plan
is to permit Participants to voluntarily defer base pay and incentive pay above
and beyond any amounts deferred under any qualified plan (as defined in Section
401(a) of the Internal Revenue Code of 1986, as amended from time to time)
maintained by the Employer.

The Plan is not intended to be qualified under Internal Revenue Code Sections
401(a), 501(a) or any other Code section pertaining to tax qualified retirement
plans. The Employer may set aside assets in a trust or other funding arrangement
as it, or its delegate, deems appropriate to anticipate benefit liabilities
accumulating under the Plan; provided such arrangement is not considered
"funded" for purposes of the Code and the Employee Retirement Income Security
Act of 1974. Accordingly, the assets of any such arrangement shall be subject to
the claims of the Participating Employer's creditors in the event of the
Participating Employer's insolvency. No portion of any funds set apart for a
Participant, Beneficiary, or Spouse pursuant to this Article shall be the
property of such Participant, Beneficiary or Spouse until distribution thereof
has been made to such individual. Further, the rights of a Participant,
Beneficiary or Spouse shall be limited to those of a general, unsecured creditor
of the Participating Employer who has a claim equal to the value of the
Participant's Retirement Benefit hereunder. Benefits under this Plan will be
payable from the general assets of the Participating Employer, or from such
other funding vehicle established for such purpose as described above, or both.

1.2

Definitions

. The following terms have the meanings set forth below unless a different
meaning is required by the context.

 a. Account means the hypothetical credit balance of a Participant under the
    Plan represented by the sum of deferrals and investment earnings credited
    hereunder. Accounts are maintained strictly for accounting purposes and do
    not represent separate funding of the benefits under the Plan. Accounts
    shall be maintained as part of the general assets of the Employer.
 b. Base Pay, for Officers, means base salary. For Directors, Base Pay means
    retainers and fees.
 c. Beneficiary means the person or persons designated by the Participant to
    receive benefits under the Plan in the event of the Participant's death. In
    the absence of an effective designation at the time of the Participant's
    death, the Beneficiary shall be the surviving spouse of the Participant, or,
    if the Participant does not have a surviving spouse, his surviving children
    in equal shares, or, if he has no surviving children, his estate.
 d. Board means the Board of Directors of Central Vermont Public Service
    Corporation.
 e. Code means the Internal Revenue Code of 1986, as amended from time to time.
 f. Director means a member of the Board of Directors of Central Vermont Public
    Service Corporation.
 g. Effective Date means January 1, 2002.
 h. Election Deferral Agreement means the agreement between the Employer and the
    Participant, memorialized by the Participant's completed Election Deferral
    Form and described in Section 3.1.
 i. Employee means an individual employed by the Employer.
 j. Employer means Central Vermont Public Service Corporation and any other
    related company that adopts this Plan with Central Vermont Public Service
    Corporation's approval.
 k. Entry Date means any January 1 (or, for new hires, any other date determined
    by the Plan Administrator) when an eligible Officer or Director may begin
    participating in the Plan.
 l. Incentive Pay means, with respect to Officers, annual incentive pay,
    Performance Share Plan awards and gains resulting from the exercise of
    Employer stock options. Incentive pay means, with respect to Directors, pay
    in the form of stock grants or gains resulting from the exercise of Employer
    stock options.
 m. Officer means an Employee who holds one of the following job titles: (i)
    Assistant Vice President; (ii) Vice President; (iii) Senior Vice President;
    or (iv) Chief Executive Officer.
 n. Participant means an Officer or Director who meets the eligibility
    requirements of the Plan and elects to participate in the Plan or who has an
    Account under the Plan.
 o. Plan means the Deferred Compensation Plan for Officers and Directors of
    Central Vermont Public Service Corporation, as embodied herein.
 p. Plan Administrator means the Plan Administrator appointed pursuant to
    Section 6.1.
 q. Plan Year means the calendar year.
 r. Prime Rate means the interest rate posted by a majority of the top
    twenty-five insured United States chartered banks as published in the Wall
    Street Journal.

ARTICLE II

ELIGIBILITY AND PARTICIPATION

2.1

Eligibility

. Directors and Officers shall be eligible to participate under the Plan for a
Plan Year provided they complete an Election Deferral Agreement pursuant to
Article III.

2.2

Commencement of Participation

. An eligible Officer or Director shall commence participation in the Plan
effective as of the Entry Date immediately following the date on which he
completes an Election Deferral Agreement pursuant to Article III.

2.3

Cessation of Eligibility

. If, after becoming eligible to participate under the Plan, an Officer or
Director no longer meets the eligibility requirements in 2.1 above, he shall no
longer be eligible to participate in the Plan with respect to deferrals
described in Article III until such time as he again meets such requirements. If
an Officer or Director has an Account balance under the Plan at the time he is
no longer eligible to participate, his Account balance shall remain under the
Plan and continue subject to the same terms and conditions as if the Officer or
Director were still a Participant.

ARTICLE III

ELECTION DEFERRAL AGREEMENTS, INVESTMENT EARNINGS, ACCOUNTING

3.1

Election Deferral Agreement

. An eligible Officer or Director may elect to defer a portion of his Base Pay
and/or Incentive Pay by entering into an Election Deferral Agreement with the
Employer pursuant to the rules set forth in this Article III. Amounts deferred
shall be credited to the Officer's or Director's Account as soon as practicable
after the deferral is withheld from such pay.

3.2

Time of Election Deferral Agreement

. Subject to the provisions of Section 3.3, an eligible Officer or Director may
enter into a written Election Deferral Agreement regarding Base Pay and/or
Incentive Pay. Such Election Deferral Agreement must be entered into prior to
the applicable Entry Date for a Plan Year (or such other date as the Plan
Administrator may permit under uniform rules). The Election Deferral Agreement
shall apply to:

 a. Pay earned in the Plan Year immediately following the execution of such
    agreement;
 b. The exercise of Employer Stock options expiring in the Plan Year immediately
    following execution of such agreement; and
 c. Performance Share Plan awards, provided that a Participant makes his
    deferral election regarding such awards no later than the second December 31
    preceding the date on which the Participant receives such awards. By way of
    example, a deferral election for a Performance Share Plan award to be
    received in 2004 must be made by December 31, 2002.

3.3

Amount of Deferrals

.

 a. From Incentive Pay. Subject to Section 3.9, an eligible Officer or Director
    may elect to defer up to 100% of his Incentive Pay as specified in his
    Election Deferral Agreement. However, if an eligible Officer or Director
    elects to defer the amount of his Incentive Pay attributable to gains
    resulting from the exercise of Employer stock options, then the Officer or
    Director must defer 100% of such amount.
 b. From Base Pay. Notwithstanding Section 3.3(a), an eligible Officer may elect
    to defer up to 50% of his Base Pay, as specified in his Election Deferral
    Agreement, for the 2002 Plan Year. Thereafter, such eligible Officer may
    elect to defer up to 25% of his Base Pay, as specified in his Election
    Deferral Agreement. For all Plan Years, Directors may elect to defer up to
    100% of their Base Pay.

3.4

Period For Which Election Deferral Agreement Applies

. An Election Deferral Agreement for a Plan Year shall apply only with respect
to that Plan Year. Deferrals for a subsequent Plan Year shall be made only
pursuant to a new Election Deferral Agreement which applies with respect to such
subsequent year.

3.5

Changes in Election Deferral Agreement

. An eligible Officer or Director may not change the amount he elects to defer
under his Election Deferral Agreement for a Plan Year after the beginning of the
Plan Year to which the agreement applies.

3.6

Election Deferral Agreement Contingent on Plan Administrator's Approval

. An Election Deferral Agreement hereunder shall become effective only if the
Plan Administrator determines that such agreement complies with the rules of the
Plan and thereupon accepts and approves the agreement.

3.7

Investment Credits

. All Accounts hereunder shall be credited with notional investment earnings on
a quarterly basis and based on the investment option(s) selected by the
Participant in his Election Deferral Agreement.

a.          Except as provided in Section 3.7(b), a Participant shall have a
choice of the following two investment
             options:

 i.  a fixed rate of return equal to the Prime Rate plus 1%; or
 ii. the rate of return on Employer stock for the applicable year, including
     dividends credited to the Participant's Account on the date dividends are
     paid to the Employer's shareholders.

If the investment option described in Section 3.7(a)(i) applies, the
Participant's Account will be credited on the last business day of each quarter.
The rate will be based on the Prime Rate published on the last business day of
the preceding quarter plus 1%.

b.          The investment option described in Section 3.7 (a)(ii) shall apply
at all times to deferrals resulting
             from the exercise of Employer stock options.

Except for the portion of his Account attributable to deferrals resulting from
his exercise of Employer stock options, a Participant may change annually his
investment option selection for his existing Account, as well as for future
deferrals, by completing the appropriate section(s) of his Election Deferral
Agreement.

3.8

Accounting

. The Plan Administrator shall maintain individual accounting for Participants
hereunder to reflect the amounts deferred and credits made hereunder, and
payments and expenses charged thereto. Such accounting shall not be construed to
segregate any assets of the Employer for payment of benefits hereunder. The Plan
Administrator shall provide each Participant with an annual statement of the
value of his Account under the Plan.

3.9

Special Rules for Certain Incentive Pay

. If an eligible Officer or Director elects to defer the amount of his Incentive
Pay attributable to gains resulting from the exercise of Employer stock options,
then the following rules shall apply:

 a. the Officer or Director must defer 100% of gains from Employer stock options
    set to expire during the Plan Year following the date on which he completes
    his Election Deferral Agreement;
 b. such Employer stock options must be exercised on the day before the options
    expire;
 c. such Employer stock options will only be exercised under this Section 3.9 if
    the stock price on the date of exercise exceeds the exercise price;
 d. such Employer stock options will only be exercised under this Section 3.9
    if, prior to the date of exercise, the Officer or Director provides
    satisfactory evidence to the Plan Administrator showing that such Officer or
    Director holds a sufficient number of mature shares (shares he has held for
    at least six months) of Employer stock at least equal in value to the
    aggregate exercise price of such options and that such mature shares are
    available under the stock-for-stock exchange rules of Code Section 1036;
 e. such gains will be paid to the Participant in a single lump sum payment as
    specified under Section 5.4(c); and
 f. such other rules as the Plan Administrator may adopt.

ARTICLE IV

VESTING

4.1

Vesting of Accounts

. Each Participant shall be one hundred percent (100%) vested at all times in
the value of his Account.

ARTICLE V

PLAN DISTRIBUTIONS

5.1

Time of Payment

. Except as otherwise provided in Section 5.2 or 5.3, normal distribution of a
Participant's Account shall be made after the earliest to occur of the following
events:

 a. the Participant's termination of employment;
 b. the Participant's retirement;
 c. the Participant's disability; or
 d. the Participant's death.

In any event, distribution of a Participant's Account must be made or begin no
later than the calendar quarter immediately following a Participant's attainment
of age 70.

5.2

Option to Elect Payment no Earlier Than a Specified Age

. At the time a Participant first elects to make a deferral under the Plan, he
may elect that his Account be distributed no earlier than his attainment of a
specific age. Such an election shall apply to all future deferrals under the
Plan, except those specified in Section 5.3, and shall be irrevocable. If a
Participant makes such an election, payment of his Account shall not be made or
begin until the later of (a) the date on which the specified age is attained,
or, (b) the date on which an event described in Section 5.1(a), (b) or (c)
occurs.

If the Participant should die before attainment of the specified age, his
Account shall be paid to his designated Beneficiary as soon as practicable
following his death.

5.3

Option to Elect In-Service Payment

. A Participant may elect a specific year in which he will receive payment of
the deferrals (and earnings thereon) provided for in his Election Deferral
Agreement. For purposes of this Article V, such specific year shall be referred
to as an "in-service distribution date," such a distribution shall be referred
to as an "in-service distribution" and the following rules shall apply:

 a. No more than two in-service distribution dates may apply to a Participant's
    Account at one time.
 b. Payment of an in-service distribution shall be made in a lump sum as soon as
    administratively practical following the January 1 containing the in-service
    distribution date.
 c. If a Participant elects payment under this Section 5.3 but terminates his
    employment with the Employer before the in-service distribution date, such
    Participant's Account shall be distributed to him as soon as
    administratively practical following the first date on which he is no longer
    employed by the Employer.

5.4

Form of Payment

. Subject to Sections 5.3, 5.4(c) and 5.6, in his initial Election Deferral
Agreement, a Participant may elect to receive his Account in accordance with
either Section 5.4(a) or (b). A Participant may change the form of payment
elected under Section 5.4(a) or (b) in writing and at least one year before
payment is scheduled to be made or begin.

 a. Lump Sum Payment. A Participant may elect to receive his Account in one lump
    sum payment. Such payment will be made within the first thirty days of the
    quarter immediately following the date a Participant becomes eligible to
    receive his Account in accordance with Section 5.1 or 5.2. An in-service
    distribution shall automatically be paid in the form of a lump sum payment.
 b. Annual Payments. Except in the case of an in-service distribution, a
    Participant may elect to receive his Account in annual payments over a
    period not exceeding fifteen years. Such cash payments will be made within
    the first thirty days of the quarter immediately following the date a
    Participant becomes eligible to receive his Account in accordance with
    Section 5.1 or 5.2 and will be made on or about the same day each year. Each
    annual payment shall equal his Account on the date payment is due, divided
    by the number of remaining annual payments. Once annual payments begin, the
    remaining Account shall continue to be credited with notional earnings on a
    quarterly basis using a fixed rate of return equal to the Prime Rate plus
    1%.
 c. Medium of Payment. The portion of a Participant's Account consisting of
    gains from the exercise of Employer stock options (and earnings thereon)
    shall only be distributed in the form of Employer stock (partial shares
    shall be distributed in cash) and shall be distributed in a single lump sum
    payment in accordance with the time period described in Section 5.4(a). All
    other distributions shall be paid in cash, according to the terms of the
    Participant's Election Deferral Agreement.
 d. Payment Upon death. Upon a Participant's death, a Participant's remaining
    Account shall automatically be distributed in a lump sum payment to the
    Beneficiary as soon as practicable following such death.

5.5

Payment Upon Change in Control of the Employer

. The Plan Administrator may elect to pay out the remaining Accounts hereunder
in the form of an immediate lump sum payment if it determines, in its sole
discretion, that there has been a change in control of the Employer (or such
change in control appears imminent) which has a reasonable probability of
adversely affecting the rights of the Participants under the Plan.

5.6

Involuntary Cash-Out Provision

. If the value of a Participant's Account is $5,000 or less at the time he
becomes eligible to receive his Account in accordance with Section 5.1 or 5.2,
and payment has not yet begun, a lump sum cash payment shall automatically be
made to the Participant or his Beneficiary as soon as administratively practical
following the date he becomes eligible to receive his Account.

5.7

Tax Withholding

. Payments and deferrals hereunder shall be subject to tax withholding pursuant
to applicable federal and state requirements.

5.8

Distribution of Taxable Amounts

. Notwithstanding the foregoing, in the event any Participant or Beneficiary is
determined to be subject to federal income tax on any amount credited to his
Account prior to the time of payment hereunder, the entire amount, subject to
applicable withholding, determined to be so taxable shall be paid by the
Employer to such Participant or Beneficiary. Any amount to the credit of a
Participant's Account shall be determined to be subject to federal income tax
upon the earlier of:

 a. determination by the Internal Revenue Service that amounts to the credit of
    a Participant's Account are subject to federal income tax which is not
    appealed; or
 b. a final determination by the United States Tax Court or any other Federal
    Court affirming any such determination by the Internal Revenue Service that
    amounts to the credit of a Participant's Account are subject to federal
    income tax.

5.9

Valuation of Accounts for Distributions and Withdrawals

. In general, the value of a Participant's Account as of the last day of the
quarter preceding the distributions (adjusted for any subsequent debits or
credits to the Account) shall be used to determine the amount of the
distribution, provided that the Plan Administrator may adopt other methods
consistent with the account process used to value Accounts.

ARTICLE VI

ADMINISTRATIONOF THE PLAN

6.1

Plan Administrator

. The Employer shall designate a Plan Administrator which shall be solely
responsible for the operation and administration of the Plan. The Plan
Administrator shall have all powers necessary and appropriate to carry out its
responsibilities in operating and administering the Plan including the power to
determine eligibility for benefits hereunder and to interpret the Plan. However,
the Plan Administrator shall have no power to override the Plan's provisions.
The Plan Administrator may, where necessary, prescribe rules for the equitable
determination of any matter arising under the Plan that it, in its sole
discretion, deems necessary or appropriate. The Plan Administrator may delegate
specific responsibilities to other persons as the Plan Administrator shall
determine.

6.2

Outside Services

. The Plan Administrator may engage counsel and such clerical, financial,
investment, accounting, and other specialized services as the Plan Administrator
may deem necessary or desirable to the operation and administration of the Plan.
The Plan Administrator shall be entitled to rely upon any opinions, reports, or
other advice furnished by counsel or other specialists engaged for that purpose
and, in so relying, shall be fully protected in any action, determination, or
omission made in good faith.

6.3

Indemnification

. The Employer shall indemnify the Plan Administrator against any and all
claims, loss, damages, expenses (including reasonable counsel fees), and
liability arising from any action, failure to act, or other conduct in the Plan
Administrator's official capacity, except when due to the Plan Administrator's
own gross negligence or willful misconduct.

6.4

Claims Procedure

. If any application for a distribution or withdrawal under the Plan is denied,
the Plan Administrator shall so notify the claimant within ninety (90) days
after receipt of the application and shall afford such claimant a reasonable
opportunity for a full and fair review of the decision denying his claim. Notice
of such denial shall set forth, in addition to the specific reasons for the
denial, the following:

 a. reference to pertinent provisions of the Plan;
 b. a description of any additional information or material necessary to perfect
    the claim and an explanation of why it is necessary; and
 c. an explanation of the claims review procedure including advising the
    claimant that he may request the opportunity to review pertinent Plan
    documents and submit a statement of issues and comments in writing.

Within sixty days following receipt of notice of denial of his claim, a claimant
may request a review of such denial by the Plan Administrator. The Plan
Administrator shall take appropriate steps to review its decision in light of
any further information or comments submitted by such claimant. The Plan
Administrator shall render a decision within sixty days after claimant's request
for review and shall advise claimant in writing of its decision on such review,
specifying its reasons and identifying appropriate provisions of the Plan or of
its own rules, which may include rules adopted pursuant to Section 6.1 hereof,
including rules adopted to address any matters raised by the then claimant,
whether as a matter of first impression or otherwise.

ARTICLE VII

AMENDMENT AND TERMINATION

7.1

Amendment

. By action of the Board or its delegate, the Employer reserves the right at any
time and from time to time to amend any or all provisions of the Plan. In
addition, the Plan Administrator shall have the right at any time and from time
to time to amend the Plan to the extent that such amendments are administrative
in nature, are not substantive, and do not materially increase the financial
obligations of the Employer. No Board action or consent shall be necessary for
the Plan Administrator to amend the Plan under the provisions of this Section
7.1.

7.2

Termination

. The Plan is purely voluntary on the part of the Employer and the Employer
reserves the right to terminate the Plan at any time. In the event the Plan is
terminated, the Plan Administrator may direct that remaining Account balances,
including any Account balances that are being paid out in the form of
installment payments, be paid out immediately in the form of an immediate lump
sum cash payment or, in the case of the portion of the Account balance
attributable to the exercise of Employer stock options, in the form of Employer
stock.

7.3

No Reduction Upon Amendment or Termination

. Notwithstanding Sections 7.1 and 7.2, no Plan amendment, or termination of the
Plan shall have the effect of reducing a Participant's Account hereunder as of
the later of the adoption or effective date of such amendment, termination or
suspension.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

8.1

Source of Payments

. All payments hereunder to Participants and their Beneficiaries shall be paid
from the general assets of the Employer. The Employer shall not by virtue of any
provisions of the Plan be deemed to be a trustee or other fiduciary of any
property for any Participant or his Beneficiaries, and the liabilities of the
Employer to a Participant or his Beneficiaries pursuant to the Plan shall be
those of a debtor pursuant only to such contractual obligations as are created
by the Plan. No such obligation of the Employer shall be deemed to be secured by
any pledge or other encumbrance on any property of the Employer. To the extent
that any Participant or his Beneficiaries acquire a right to receive a payment
from the Employer under the Plan, such right shall be no greater than the right
of any unsecured general creditor of the Employer. Neither the purchase of
securities or other investments pursuant to Section 3.7 nor the accounting
provided for under Section 3.8 shall give a Participant or Beneficiary a greater
right than provided under this Section 8.1.

8.2

No Warranties

. Neither the Plan Administrator nor the Employer warrants or represents in any
way that the value of each Participant's Account will increase and not decrease.
Each Participant (and his Beneficiary) assumes all risk in connection with any
change in such value, which may include losses in value.

8.3

Inalienability of Benefits

. Except as provided by law, no benefit under, or interest in, the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, and any attempt to do so shall be void. Any such
benefit or interest shall not in any manner be liable for, or subject to,
garnishment, attachment, execution, or levy, or subject to the debts, contract
liabilities, engagements, or torts of any Participant or his Beneficiaries.

8.4

Expenses

. The Employer may pay all costs and expenses incurred in operating and
administering the Plan, but the Employer reserves the right to charge
Participants' Accounts for any or all such costs and expenses.

8.5

No Right of Employment

. Nothing contained herein, nor any action taken under the provisions hereof,
shall be construed as giving any Officer the right to be retained in the employ
of the Employer or any Director the right to continue in his capacity as a
Director.

8.6

Headings

. The headings of the sections in the Plan are placed herein for convenience of
reference, and, in the case of any conflict, the text of the Plan, rather than
such heading, shall control.

8.7

Gender and Number

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

8.8

Construction

. The Plan shall be construed, regulated, and administered in accordance with
the laws of the State of Vermont and applicable federal laws.