Exhibit 10.7

 

EQUITABLE RESOURCES, INC.
2009 SHAREHOLDER VALUE PLAN

 

EQUITABLE RESOURCES, INC. (the “Company”) hereby establishes this EQUITABLE
RESOURCES, INC. 2009 SHAREHOLDER VALUE PLAN (the “Plan”) as of this 23rd day of
December, 2008, in accordance with the terms provided herein.

 

WHEREAS, the Company maintains certain long-term incentive award plans including
the 1999 Equitable Resources, Inc. Long-Term Incentive Plan (the “1999 Plan”)
for the benefit of its employees and executives, of which this Plan is a subset;
and

 

WHEREAS, in order to further align the interests of executives with the
interests of the shareholders, the Company desires to provide incentive benefits
through this Plan, in the form of awards qualifying as “Other Stock-Based
Awards” under Section 6.05 of the 1999 Plan.

 

NOW, THEREFORE, the Company hereby provides for incentive benefits for certain
executive employees of the Company and adopts the terms of the Plan on the
following terms and conditions:

 

Section 1.  Purpose.  The main purpose of the Plan is to provide incentive
opportunities to key executives to further align their interests with those of
the Company’s shareholders and with the strategic objectives of the Company. 
Awards granted hereunder may be earned by achieving relative performance levels
against a pre-determined peer group and other absolute and relative performance
levels, and are forfeited if defined performance levels are not achieved.  By
placing a portion of the executive’s compensation at risk, the Company has an
opportunity to reward exceptional performance or reduce the compensation
opportunity when performance does not meet expectations.  As a subset of the
1999 Plan, this Plan is subject to and shall be governed by the terms and
conditions of the 1999 Plan.  Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the 1999 Plan.  The Share
Units granted under this Plan are intended to be “Other Stock-Based Awards”
under Section 6.05 of the 1999 Plan, are not intended to meet the
performance-based compensation exemption from Section 162(m) of the Code, and
therefore are not subject to the conditions and limits of 6.04 of the 1999 Plan.

 

Section 2.  Effective Date.  The effective date of this Plan is January 1, 2009.
 The Plan will remain in effect until the earlier of December 31, 2009 or the
closing date of a Change of Control event defined in Section 5 unless otherwise
amended or terminated as provided in Section 17 (“Termination Date”).

 

Section 3.  Eligibility.  The Chief Executive Officer of the Company (the “CEO”)
shall, in his or her sole discretion, select the employees of the Company who
shall be eligible to participate in the Plan, up to a maximum of 35 employees. 
The CEO’s selections will become participants in the Plan (the “Participants”)
only upon approval by

 

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the Compensation Committee of the Board of Directors (the “Committee”).  In the
event that an employee is hired by the Company during the Performance Period, as
defined below, the CEO shall, in his or her sole discretion, determine whether
the employee will be eligible to participate in the Plan, provided that the
Committee must approve all new participants to the Plan.

 

Section 4.  Performance Incentive Share Unit Awards.  Awards under the Plan are
designated in the form of performance incentive share units (the “Share Units”),
which are awards to be settled in cash, the amount per unit of which is
determined by reference to one share of the Company’s common stock. Upon being
selected to participate in the Plan, each Participant shall be awarded a number
of Share Units, which award shall be proposed by the CEO and approved by the
Committee.  The maximum number of Share Units that may be awarded under the Plan
is 1,000,000, subject to adjustment as provided  in Section 12.

 

The Share Units shall be held in book entry form by the Company until settled in
cash as described herein.  Share Units do not represent actual shares of stock.
 A Participant shall have no right to exchange the Share Units for cash, stock
or any other benefit and shall be a mere unsecured creditor of the Company with
respect to such Share Units and any future rights to benefits.

 

Section 5.  Performance Condition.  Subject to Section 7, the amount to be
distributed to a Participant will be based on (i) the Company’s total
shareholder return relative to the peer group’s (Attachment A) total shareholder
return for the period described in (a) below, and (ii) the Company’s average
absolute return on total capital during the Performance Period (collectively,
the “Performance Condition”), for the Performance Period of January 1, 2005 to
the close of business at 5:00 p.m., Eastern Standard Time, on the Termination
Date (the “Performance Period”).

 

(a)                                  Total Shareholder Return.  For purposes of
this Plan, total shareholder return will be calculated as follows:

 

Step 1

 

The “Beginning Point” for the Company and each company in the peer group is
defined as one share of common stock with a value equal to the average closing
stock price as reported in the Nationally Recognized Reporting Service for the
ten (10) business day period ending on and including February 23, 2005, for each
company.  All references in this Plan to the “Nationally Recognized Reporting
Service” shall be references to either the print or electronic version of a
nationally recognized publication that reports the daily closing stock price of
New York Stock Exchange listed companies.

 

Step 2

 

Dividends paid for each company from the beginning of the Performance Period
will be cumulatively added to the Beginning Point as

 

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additional shares of such company’s common stock.  The closing price on the last
business day of the month in which the record date for the dividend occurs will
be used as the basis for determining the number of shares to be added.  The
resulting total number of shares accumulated during the Performance Period is
referred to as the Total Shares Held at Ending Point.

 

Step 3

 

Except as provided in the following sentence, the “Ending Point” is defined as
Total Shares Held at Ending Point for each company times the average closing
stock price as reported in Nationally Recognized Reporting Service for the last
ten (10) business days of the Performance Period for that company.  In the event
of a change of control (as then defined in the 1999 Plan) of the Company (a
“Change of Control”), the Ending Point for each company in the peer group shall
be the Total Shares Held at Ending Point for that company times the average of
the closing price of such company’s common stock as reported in Nationally
Recognized Reporting Service for the ten (10) business days preceding the
closing of the Change of Control transaction.

 

Step 4

 

Total Shareholder Return (“TSR”) will be expressed as a percentage and is
calculated by dividing the Ending Point by the Beginning Point and then
subtracting 1 from the result.  Each company including the Company will be
ranked in descending order by the TSR so calculated.

 

If the common stock of any company in the peer group ceases to be publicly
traded during the Performance Period, such company shall be assigned a TSR value
of negative 100% for purposes of the Plan.

 

(b)                                 Average Absolute Return on Total Capital
(“ROTC”).  For purposes of this Plan, average absolute return on total capital
will be calculated for each completed calendar quarter within the Performance
Period as follows:

 

Net Income After Tax + (Interest x (1 - Effective Tax Rate)), with such sum
divided by (Debt + Preferred Stock + Book Equity - Cash).

 

The annualized average of those amounts, calculated by dividing the sum of the
quarterly ROTC values by the number of whole completed quarters in the
Performance Period and multiplying by four (4), shall equal the average absolute
return on total capital for the Performance Period.

 

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The above amounts shall be calculated as reported on the Company’s financial
statements.  The Committee may base such calculation on unaudited financial
statements provided that the methodology for determining each financial
component used in the calculation of Average Absolute ROTC is the same as that
which would be used in the preparation of the Company’s audited financial
statements.

 

In the event of a Change of Control or other Termination Date occurring after
the end of a calendar quarter, the immediately preceding calendar quarter shall
be the final quarter considered for purposes of the above calculation.

 

(c)                                  Application of Performance Condition.  A
Participant’s  Performance Adjusted Unit Value shall be calculated by dividing
(i) the product of (A) the sum of such Participant’s Adjusted Share Units and
Dividend Units (calculated as described below and, if appropriate, modified as
described in Section 12) multiplied by (B) the payout factor identified on the
payout matrix (Attachment B) that corresponds to (X) the Company’s relative TSR
ranking on the payout matrix for the period specified herein combined with
(Y) the Company’s average absolute return on total capital performance on the
payout matrix for the Performance Period multiplied by (C)  the closing price of
the Company’s common stock at the end of the Performance Period or, in the case
of a Change of Control, the average of the closing price of the Company’s common
stock for the ten (10) business days preceding the Change of Control
transaction, in each case as reported in the Nationally Recognized Reporting
Service by (ii) such Participant’s Adjusted Share Units.  Solely for the purpose
of calculating the Performance Adjusted Unit Value, Share Units will be
cumulatively credited with cash dividends that are paid on the Company’s common
stock on or after January 1, 2005 in the form of additional units and such units
shall be referred to as the “Dividend Units”.  These Dividend Units shall be
deemed to have been purchased on the last business day of the month in which the
record date for the dividend occurs, using the closing stock price for the
Company as reported in the Nationally Recognized Reporting Service.

 

Payments under the Plan are expressly contingent upon achievement of the
Performance Condition.

 

Section 6.  Issuance and Distribution.  Subject to Section 7, each Participant
will be paid an amount (the “Awarded Value”) equal to such Participant’s number
of Adjusted Share Units multiplied by the excess, if any, of (a) the Performance
Adjusted Unit Value over (b) the “Threshold Unit Value” approved by the
Compensation Committee and, if appropriate, modified as described in Section 12.
Except as provided in the remainder of this Section 6, the Awarded Value will be
distributed in cash no later than Friday, March 13, 2010.  Subject to Section 7,
in the event of a Change of Control, the Awarded Value will be distributed in
cash on the closing date of the transaction.  Notwithstanding the foregoing, to
the extent required under Section 409A of the Code or

 

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the regulations thereunder, no distributions may be made earlier than the time
permitted under such regulations to any affected Participant.

 

Section 7.  Change of Status; Overall Limit.  In making decisions regarding
employees’ participation in the Plan and the extent to which awards are payable
in the case of an employee who terminates employment during the Performance
Period, the Committee may consider any factors that it may consider relevant. 
The following guidelines are provided as general information about the effect of
employee status changes prior to payment.

 

(a)                                  Retirement and Resignation.  Adjusted Share
Units are forfeited.

 

(b)                                 Death and Disability.  Participants who die
or become Disabled, as defined below, before the end of the Performance Period,
will retain their Adjusted Share Units for the Performance Period, contingent
upon achievement of the Performance Condition set forth in Section 5, as
follows, and any remainder shall be forfeited:

 

Date of Death or Disability

 

Percent Retained

 

 

 

 

 

Prior to April 1, 2009

 

0

%

April 1, 2009 – June 30, 2009

 

50

%

July 1, 2009 – September 30, 2009

 

75

%

October 1, 2009 and thereafter

 

100

%

 

“Disabled” means a Participant is “disabled” as defined in
Section 409A(a)(2)(C) of the Code.

 

(c)                                  Termination.  Adjusted Share Units are
forfeited and no award shall be paid to any employee whose services are
terminated prior to the payment of Adjusted Share Units for reasons of
misconduct, failure to perform, or other cause.  If the termination is due to
reasons such as reorganization, and not due to the fault of the employee, the
employee will retain his or her Adjusted Share Units for the Performance Period,
contingent upon achievement of the Performance Condition set forth in Section 5,
as follows, and the remainder shall be forfeited:

 

Termination Date

 

Percent Retained

 

 

 

 

 

Prior to July 1, 2009

 

0

%

July 1, 2009 – September 30, 2009

 

25

%

October 1, 2009 – December 30, 2009

 

50

%

December 31, 2009 and thereafter

 

100

%

 

Section 8.  Responsibilities of the Committee.  The Committee has responsibility
for all aspects of the Plan’s administration, including:

 

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·                  Determining and certifying in writing the extent to which the
Performance Condition has been achieved prior to any payments under the Plan,

 

·                  Ensuring that the Plan is administered in accordance with its
provisions,

 

·                  Approving Plan Participants,

 

·                  Authorizing Share Unit awards to Participants,

 

·                  Adjusting Performance Adjusted Unit Value to account for
extraordinary events,

 

·                  Ruling on any disagreement between Plan Participants, Company
management, Plan administrators, and any other interested parties to the Plan,
and

 

·                  Maintaining final authority to modify or terminate the Plan
at any time.

 

The interpretation and construction by the Committee of any provisions of the
Plan or of any Adjusted Share Units shall be final.  No member of the Committee
shall be liable for any action or determination made in good faith on the Plan
or any Share Units thereunder.  The Committee may designate another party to
administer the Plan, including Company management or an outside party.  All
conditions of the Share Units must be approved by the Committee.  The Committee
shall approve the number of Share Units to be awarded to each Participant.  The
associated terms and conditions of the Plan will be communicated to Participants
as close as possible to the date an award is made.  The Participants will sign
and return a participant agreement to the Committee.

 

Section 9.  Tax Consequences to Participants.  It is intended that: (i) until
the Performance Condition is satisfied, a Participant’s right to payment for an
award under this Plan shall be considered to be subject to a substantial risk of
forfeiture in accordance with those terms as defined or referenced in Sections
83(a), 409A and 3121(v)(2) of the Code; (ii) the Awarded Value shall be subject
to employment taxes only upon the satisfaction of the Performance Condition; and
(iii) until the Awarded Value is actually paid to the Participant, the
Participants shall have merely an unfunded, unsecured promise to be paid the
benefit, and such unfunded promise shall not consist of a transfer of “property”
within the meaning of Code Section 83.  The payment of awards under this Plan is
not intended to meet the performance-based compensation exemption from
Section 162(m) of the Code.

 

Section 10.  Nonassignment.  A Participant shall not be permitted to assign,
alienate or otherwise transfer his or her Adjusted Share Units and any attempt
to do so shall be void.

 

Section 11.  Impact on Benefit Plans.  Payments under the Plan shall not be
considered as earnings for purposes of the Company’s qualified retirement plans
or any such retirement or benefit plan unless specifically provided for and
defined under such plans.  Nothing herein shall prevent the Company from
maintaining additional compensation plans and arrangements, provided however
that no payments shall be made

 

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under such plans and arrangements if the effect thereof would be the payment of
compensation otherwise payable under this Plan regardless of whether the
Performance Condition was attained.

 

Section 12.  Successors; Changes in Stock.  The obligation of the Company under
the Plan shall be binding upon the successors and assigns of the Company.  If a
dividend or other distribution shall be declared upon the Company’s common stock
payable in shares of Company common stock, each Participant’s Share Units and
Dividend Units and the Threshold Unit Value shall be adjusted by adding thereto
the number of shares of Company common stock that would have been distributable
thereon if such units had been actual Company shares and outstanding on the date
fixed for determining the shareholders entitled to receive such stock dividend
or distribution.  In the event of any spin-off, split-off or split-up, or
dividend in partial liquidation, dividend in property other than cash or Company
common stock, or extraordinary distribution to shareholders of the Company’s
common stock, each Participant’s  Share Units and Dividend Units and the
Threshold Unit Value shall be appropriately adjusted to prevent dilution or
enlargement of the rights of Participants which would otherwise result from any
such transaction, provided such adjustment shall be consistent with Section 409A
of the Code.  A Participant’s Share Units as adjusted by this Section 12 shall
be such Participant’s “Adjusted Share Units”.

 

In the case of a Change of Control, any obligation under the Plan shall be
handled in accordance with the terms of Section 6 hereof.  In any case not
constituting a Change of Control in which the Company’s common stock is changed
into or becomes exchangeable for a different number or kind of shares of stock
or other securities of the Company or another corporation, or cash or other
property, whether through reorganization, reclassification, recapitalization,
stock split-up, combination of shares, merger or consolidation, then (i) the
Performance Adjusted Unit Value shall be calculated based on the closing price
of such common stock on the closing date of the transaction on the principal
market on which such common stock is traded, (ii) there shall be substituted for
each Adjusted Share Unit constituting an award, the number and kind of shares of
stock or other securities (or cash or other property) into which each
outstanding share of the Company’s common stock shall be so changed or for which
each such share shall be exchangeable, and (iii) the Threshold Unit Value shall
be appropriately and equitably adjusted; provided that any such adjustment shall
be consistent with Section 409A of the Code.  In the case of any such
adjustment, the Share Units shall remain subject to the terms of the Plan.

 

Section 13.  Dispute Resolution.  The Participant may make a claim to the
Committee with regard to a payment of benefits provided herein.  If the
Committee receives a claim in writing, the Committee must advise the Participant
of its decision on the claim in writing in a reasonable period of time after
receipt of the claim (not to exceed 120 days).  The notice shall set forth the
following information:

 

(a)                                  The specific basis for its decision,

 

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(b)                                 Specific reference to pertinent Plan
provisions on which the decision is based,

 

(c)                                  A description of any additional material or
information necessary for the Participant to perfect a claim and an explanation
of why such material or information is necessary, and

 

(d)                                 An explanation of the Plan’s claim review
procedure.

 

Section 14.  Applicable Law.  This Plan shall be governed by and construed under
the laws of the Commonwealth of Pennsylvania without regard to its conflict of
law provisions.

 

Section 15.  Severability.  In the event that any one or more of the provisions
of this Plan shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

 

Section 16.  Headings.  The descriptive headings of the Sections of this Plan
are inserted for convenience of reference only and shall not constitute a part
of this Plan.

 

Section 17.  Amendment or Termination of this Plan.  This Plan may be amended,
suspended or terminated by the Company at any time upon approval by the
Committee and following a determination that the Plan is no longer meaningful in
relation to the Company’s strategy.  Any suspension or termination shall
automatically cause a Termination Date effective as of the date of the
Committee’s approval.  Notwithstanding the foregoing, (i) no amendment,
suspension or termination shall adversely affect a Participant’s rights to his
or her award after the date of the award, provided however that to the extent an
award is determined with respect to a Termination Date, including a Termination
Date pursuant to the preceding sentence, Participants’ rights to awards are
deemed not to be adversely affected thereby, and the Company may amend this Plan
from time to time without any participant’s consent to the extent deemed
necessary or appropriate, in its sole discretion, to effect compliance with
Section 409A of the Code, including regulations and interpretations thereunder,
which amendments may result in a reduction of benefits provided hereunder and/or
other unfavorable changes to participants, (ii) no amendment may alter the time
of payment as provided in Section 6 of the Plan, and (iii) no amendment may be
made following a Change of Control.

 

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Attachment A

 

2009 SHAREHOLDER VALUE PLAN

 

Peer Group

 

AGL Resources Inc.

ATMOS Energy Corporation

CMS Energy Corporation

Dynegy Incorporated

El Paso Corporation

Energen Corporation

Laclede Group, Inc.

MDU Resources Group Incorporated

National Fuel Gas Company

New Jersey Resources Corporation

NICOR, Inc.

NISOURCE Incorporated

Northwest Natural Gas Company

OGE Energy Corporation

ONEOK Inc.

Piedmont Natural Gas Company, Inc.

Questar Corporation

Sempra Energy

Southern Union Company

Southwest Gas Corporation

Southwestern Energy Company

UGI Corporation

Westar Energy Inc. (formerly Western Gas Resources Incorporated)

WGL Holdings, Inc.

Williams Industries, Incorporated

 

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Attachment B

 

SHAREHOLDER VALUE PLAN Payout Matrix

 

Payout Factor

 

Average Absolute Return on Total Capital

 

Greater than or equal to 10%

 

0.90

 

1.10

 

1.25

 

1.50

 

1.75

 

2.00

 

2.25

 

2.50

 

Greater than or equal to 9% but less than 10%

 

0.60

 

0.80

 

1.00

 

1.20

 

1.40

 

1.60

 

1.80

 

2.00

 

Greater than or equal to 8% but less than 9%

 

0.40

 

0.60

 

0.80

 

1.00

 

1.20

 

1.30

 

1.40

 

1.50

 

Less than 8%

 

0.00

 

0.00

 

0.00

 

0.40

 

0.50

 

0.60

 

0.70

 

0.80

 

 

 

26 – 24

 

23 – 21

 

20 – 18

 

17 – 14

 

13 – 11

 

10 – 8

 

7 – 5

 

4 – 1

 

Total Shareholder Return Rank

 

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