Exhibit 10.02(u)

 

EQT CORPORATION

2013 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM

 

 

EQT CORPORATION (the “Company”) hereby establishes this EQT CORPORATION 2013
EXECUTIVE PERFORMANCE INCENTIVE PROGRAM (the “Program”), in accordance with the
terms provided herein.

 

WHEREAS, the Company maintains certain long-term incentive award plans including
the EQT Corporation 2009 Long-Term Incentive Plan (the “2009 Plan”) for the
benefit of its directors and employees, of which the Program is a subset; and

 

WHEREAS, in order to further align the interests of executives and key employees
with the interests of the shareholders, the Company desires to provide long-term
incentive benefits through the Program, in the form of awards qualifying as
“Performance Awards” under the 2009 Plan.

 

NOW, THEREFORE, the Company hereby provides for incentive benefits for
executives and key employees of the Company and adopts the terms of the Program
on the following terms and conditions:

 

Section 1.  Purpose.  The main purpose of the Program is to provide long-term
incentive opportunities to executives and key employees 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, are forfeited
if defined performance levels are not achieved and are subject to negative
adjustment if, among other things, certain other performance measures are not
attained.  By placing a portion of the employee’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 2009 Plan, this Program is subject to and shall be governed by the
terms and conditions of the 2009 Plan.  Capitalized terms used herein and not
otherwise defined shall have the meanings given such terms in the 2009 Plan. 
The Share Units (as defined in Section 4 below) granted under this Program are
intended to meet the performance-based compensation exemption under
Section 162(m) of the Code.

 

Section 2.  Effective Date.  The effective date of this Program is January 1,
2013.  The Program will remain in effect until the earlier of December 31, 2015
or the closing date of a Change of Control event defined in Section 5 unless
otherwise amended or terminated as provided in Section 17 (the “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 Program from those individuals eligible
to participate in the 2009 Plan.  The CEO’s selections will become participants
in the Program (the

 

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“Participants”) only upon approval by the Committee, comprised in accordance
with the requirements of the 2009 Plan, to the extent such individuals are, or
are expected to be, Covered Employees.  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 Program, provided that the Committee must approve all new
participants to the Program who are Covered Employees; provided further that,
individuals who are Covered Employees may only become eligible during the first
90 days of the Performance Period.

 

Section 4.  Performance Incentive Share Unit Awards.  Awards under the Program
are designated in the form of performance incentive share units (as adjusted
from time to time in accordance with Section 12, the “Share Units”), which are
awards to be settled in stock, 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 Program, each Participant shall be awarded a number of Share
Units, which award shall be proposed by the CEO and approved by the Committee. 
Unless otherwise indicated herein in a particular context, the term “Share
Units” includes any Dividend Units accumulated with respect to an award of Share
Units, as provided in Section 12.

 

The Share Units shall be held in book entry form by the Company until settled 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 Conditions.  Subject to Section 7, the amount to be
distributed to a Participant will be based on the following performance
conditions (the “Performance Conditions”): (i) the Company’s total shareholder
return relative to the peer group’s (Attachment A) total shareholder return
calculated as described in (a) below  for the period of January 1, 2013 to the
earlier of December 31, 2015 or the Termination Date (the “Performance Period”)
and (ii) the Company’s cash flow per share calculated as described in (b) below,
for the Performance Period.

 

(a)       Total Shareholder Return.  For purposes of this Program, 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) consecutive business day period ending on and including the date of the
commencement of the Performance Period, for each company.  All references in
this Program 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 the Company and each
member of the peer group.

 

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Step 2

 

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

 

Step 3

 

Except as provided in the following sentence, the “Ending Point” for each
company in the peer group is defined as Total Shares Held at End of Period for
that company times the average of the closing price of such company’s common
stock as reported in the 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 2009 Plan) of the Company (a
“Change of Control”), the “Ending Point” for each company in the peer group is
defined as Total Shares Held at End of Period for that company times the average
of the closing price of such company’s common stock as reported in the
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 (a) any company in the peer group announces during the Performance Period
that it has entered into an agreement that shall cause its common stock to cease
to be publicly traded and does not announce during such period a termination of
such agreement or (b) 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 Program.

 

(b)      Cash Flow per Share.  For purposes of this Program, the Company’s cash
flow per share (“Cash Flow per Share”) shall be calculated by dividing
(i) Annual Operating Cash Flow (as defined below) by (ii) Annual Diluted Common
Shares Outstanding (as defined below).

 

Annual Operating Cash Flow is the Company’s aggregate net cash provided by
operating activities excluding changes in operating assets and liabilities

 

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during the Performance Period (as reported in the Company’s Form 10-Qs (for
partially completed years in the event of a Change of Control) and 10-Ks (for
fully completed years)), adjusted to reflect the Fixed Price for the Performance
Period.  The Fixed Price shall be equal to the “NYMEX natural gas price ($/Mcf)”
for the year ended December 31, 2012 as reported in the Company’s Form 10-K for
the year ended December 31, 2012.

 

Annual Diluted Common Shares Outstanding is the Company’s aggregate diluted
common shares outstanding as of the end of each year in the Performance Period
(as reported in the Company’s Form 10-Qs (for partially completed years in the
event of a Change of Control) and 10-Ks (for fully completed years)).

 

In the event of a Change of Control on or prior to December 31, 2015, the Cash
Flow per Share shall be calculated based upon the number of calendar quarters
actually completed prior to the closing date of the Change of Control.

 

 

(c)       Application of Performance Condition and Negative Adjustment.  A
Participant’s “Awarded Value” shall be calculated by multiplying (A) the sum of
such Participant’s Share Units, by (B) the Payout Multiple identified on the
payout matrix (Attachment B) that corresponds to the Company’s TSR ranking and
Cash Flow per Share performance on the payout matrix for the Performance Period 
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.   Share Units will be cumulatively
credited with cash dividends that are paid on the Company’s Common Stock on or
after January 1, 2013 in the form of additional Share Units, which 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 Program are expressly contingent upon achievement of the
Performance Conditions.

 

Section 6.  Issuance and Distribution.  Subject to Section 7 and except as
provided in the remainder of this Section 6, each Participant’s Awarded Value
will be distributed in stock no later than March 15, 2016.  Subject to
Section 7, in the event of a Change of Control, the Awarded Value will be
distributed in stock on the closing date of the transaction.  Notwithstanding
the foregoing, to the extent required under Section 409A of the Code or the
regulations thereunder, no distributions may be made earlier than the time
permitted under such regulations to any affected Participant.  Notwithstanding
the first

 

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sentence of this Section 6, the Committee may determine, in its discretion and
for any reason, that the Awarded Value will be issued in whole or in part in
cash.  If a Participant receives payment in the form of Company stock, the
number of shares of stock shall be based on the closing price of the Company’s
stock on the Termination Date (or the last preceding date on which the Company’s
Common Stock was traded) or, in the case of a Change of Control, the value per
share of Common Stock distributed to holders of the Company’s Common Stock in
such transaction.  The maximum amount payable to any one Participant under the
Program with respect to any one calendar year within the Performance Period
shall be the amount set forth and as calculated in the 2009 Plan with respect to
Performance Awards, which limit has been approved by the shareholders of the
Company.  No elections shall be permitted with respect to the timing of any
payments.   The Awarded Value paid to Participants hereunder, including any
shares of stock or cash transferred to Participants and any cash or other
benefit acquired upon the sale of stock acquired hereunder, shall be subject to
the terms and conditions of any compensation recoupment policy adopted from time
to time by the Board of Directors of the Company (the “Board”) or any committee
of the Board, to the extent such policy is applicable to this Program.

 

Section 7.  Change of Status; Overall Limit.  In making decisions regarding
employees’ participation in the Program and the extent to which awards are
payable in the case of an employee whose employment ceases prior to payment, the
Committee may consider any factors that it may consider relevant.  Unless
otherwise determined by the Committee, the following shall apply in the case of
a Participant whose employment ceases prior to payment of the Awarded Value:

 

(a)       Retirement and Resignation.  Unless the Participant remains on the
Board of Directors of the Company following his or her retirement or resignation
as an employee, Share Units shall be forfeited.  If a Participant’s employment
is terminated voluntarily or involuntarily without fault on the Participant’s
part (including retirement) and the Participant remains on the Board of
Directors of the Company following such termination of employment, then
notwithstanding any prior agreement to the contrary (including an agreement to
enter into a form of an executive alternative work arrangement) the Participant
shall retain all of his or her Share Units, contingent upon achievement of the
Performance Conditions set forth in Section 5, for as long as the Participant
remains on the Board, in which case any references herein to such Participant’s
employment shall be deemed to include his or her continued service on the Board.

 

(b)      Death and Disability.  If a Participant’s service is terminated due to
death or Disability, Share Units shall be retained by the Participant or his or
her estate or beneficiary, contingent upon achievement of the Performance
Conditions set forth in Section 5, as follows, and the remainder shall be
forfeited:

 

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Date of Death or Disability

 

Percent Retained

 

 

 

 

 

Prior to January 1, 2014

 

0%

 

January 1, 2014 – December 31, 2014

 

25%

 

January 1, 2015 – December 31, 2015

 

50%

 

 

(c)       Termination.  If a Participant’s service is terminated for reasons of
misconduct, failure to perform, or other cause, Share Units shall be forfeited. 
If the termination is due to reasons such as reorganization, and not due to the
fault of the Participant, the Participant will retain his or her Share Units,
contingent upon achievement of the Performance Conditions set forth in
Section 5, as follows, and the remainder shall be forfeited:

 

Termination Date

 

Percent Retained

 

 

 

 

 

Prior to January 1, 2014

 

0%

 

January 1, 2014 – December 31, 2014

 

25%

 

January 1, 2015 – December 31, 2015

 

50%

 

 

(d)     Change of Position.  A Participant whose position within the Company
changes to a non-Program eligible position as determined by the Committee but
who remains employed through the date of payment of the Awarded Value will
retain his or her Share Units, contingent upon achievement of the Performance
Conditions set forth in Section 5, as follows, and the remainder shall be
forfeited:

 

Change of Position Date

 

Percent Retained

 

 

 

 

 

Prior to January 1, 2014

 

0%

 

January 1, 2014 – December 31, 2014

 

25%

 

January 1, 2015 – December 31, 2015

 

50%

 

 

In such events, any Share Units that are retained shall be payable at the time
specified in Section 6 except that, in the event such amounts are conditioned
upon a separation from service and not compensation the Participant could
receive without separating from service, then no such payments may be made to a
Participant who is a “specified employee” under Section 409A of the Code until
the first day of the seventh month following the Participant’s separation from
service.  Notwithstanding any other provisions of the Program, Participants
shall have no vested rights to any Share Units prior to payment.

 

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

 

·                 Determining and certifying in writing, the extent to which the
Performance Conditions have been achieved prior to any payments under the
Program,

 

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

 

·                 Approving Program Participants,

 

·                 Authorizing Share Unit awards to Participants,

 

·                 Adjusting Share Unit awards  to account for extraordinary
events,

 

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

 

·                 Maintaining final authority to amend, modify or terminate the
Program at any time.

 

The interpretation and construction by the Committee of any provisions of the
Program 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 Program or any Share Units thereunder.  The Committee may designate another
party to administer the Program, including Company management or an outside
party to the extent permitted under Code Section 162(m).  All conditions of the
Share Units must be approved by the Committee.  As early as practicable prior to
or during the Performance Period, the Committee shall approve the number of
Share Units to be awarded to each Participant.  The associated terms and
conditions of the Program will be communicated to Participants as close as
possible to the date an award is made.  The Participants will acknowledge
receipt of the participant agreement and will agree to the terms of this Program
in accordance with the Company’s procedures.

 

Section 9.  Tax Consequences to Participants/Payment of Taxes.  (a) It is
intended that:  (i) until the Performance Conditions are satisfied, a
Participant’s right to payment for an award under this Program 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 Conditions; 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.  It is further intended that Participants will not be in actual or
constructive receipt of compensation with respect to the Share Units within the
meaning of Code Section 451 until the Awarded Value is paid.

 

(b)   The Company or any affiliate employing Participant has the authority and
the right to deduct or withhold, or require Participant to remit to the
employer, an amount sufficient to satisfy federal, state, and local taxes
(including Participant’s FICA obligation) required by law to be withheld with
respect to any taxable event arising as a

 

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result of an award.  With respect to withholding required upon any taxable event
arising as a result of an award, the employer may satisfy the tax withholding
required by withholding shares of Common Stock having a Fair Market Value (as
defined in the 2009 Plan) as of the date that the amount of tax to be withheld
is to be determined as nearly equal as possible to (but no more than) the total
minimum statutory tax required to be withheld. The obligations of the Company
under this Program will be conditioned upon such payment or arrangements, and
the Company, and, where applicable, its affiliates will, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to Participant.

 

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

 

Section 11.  Impact on Benefit Plans.  Payments under the Program 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 under such plans and arrangements if the effect
thereof would be the payment of compensation otherwise payable under this
Program regardless of whether the Performance Conditions were attained.

 

Section 12.  Successors; Changes in Stock.  The obligation of the Company under
the Program 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
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
shall be appropriately adjusted to prevent dilution or enlargement of the rights
of Participants that would otherwise result from any such transaction, provided
such adjustment shall be consistent with Section 409A of the Code.

 

In the case of a Change of Control, any obligation under the Program 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
Awarded 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, and (ii) there shall be substituted for each

 

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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.  In the case of any such adjustment, the Share Units
shall remain subject to the terms of the Program.

 

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,

 

(b)      Specific reference to pertinent Program 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 Program’s claim review procedure.

 

Section 14.  Applicable Law.  This Program 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 Program 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 Program
are inserted for convenience of reference only and shall not constitute a part
of this Program.

 

Section 17.  Amendment or Termination of this Program.  This Program may be
amended, suspended or terminated by the Company at any time upon approval by the
Committee and following a determination that the Program is no longer meaningful
in relation to the Company’s strategy.  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
the Company may amend this Program from time to time without any participant’s
consent to the extent deemed necessary or appropriate, in its sole discretion,
to effect compliance with Sections 409A or any other provision of the Code,
including regulations and interpretations thereunder, which amendments may
result in a reduction of benefits provided hereunder and/or other

 

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unfavorable changes to participants, (ii) no amendment may alter the time of
payment as provided in Section 6 of the Program, and (iii) no amendment may be
made following a Change of Control.

 

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Attachment A

 

 

2013 Executive Performance Incentive Program

 

Peer Group

 

 

CABOT OIL & GAS CORP

CHESAPEAKE ENERGY CORP

CIMAREX ENERGY CO

CONCHO RESOURCES, INC.

CONSOL ENERGY, INC

ENERGEN CORP

EOG RESOURCES INC

EXCO RESOURCES INC

MARKWEST ENERGY PARTNERS LP

MDU RESOURCES GROUP INC

NATIONAL FUEL GAS CO

NEWFIELD EXPLORATION COMPANY

ONEOK INC

PIONEER NATURAL RESOURCES CO

PLAINS EXPLORATION & PRODUCTION CO

QUESTAR CORP

QUICKSILVER RESOURCES INC

RANGE RESOURCES CORP

SEMPRA ENERGY

SM ENERGY

SOUTHWESTERN ENERGY CO

SPECTRA ENERGY CORP

ULTRA PETROLEUM CORP

WHITING PETROLEUM CORPORATION

WILLIAMS COMPANIES INC

 

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Attachment B

 

 

2013 Executive Performance Incentive Program

 

Payout Matrix

 

 

 

 

 

Payout Factor

 

Cumulative Cash Flow per Share*

 

 20% Compounded Annual Growth

 

.75

1.00

1.50

2.00

2.40

2.60

2.80

3.00

 

 15% Compounded Annual Growth

 

.55

.95

1.35

1.75

2.15

2.35

2.55

2.75

 

 10% Compounded Annual Growth

 

.30

.70

1.10

1.50

1.90

2.10

2.30

2.50

 

5% Compounded Annual Growth

 

.00

.20

.60

1.00

1.40

1.60

1.80

2.00

 

Less than or equal to 2012 Cash Flow per Share

.00

.00

.00

.50

.90

1.10

1.30

1.50

 

 

26-24

 

23-21

20-18

17-14

13-11

10-8

7-5

4-1

 

 

 

Total Shareholder Return Rank

 

 

 

·                 Payout Factor shall be interpolated between stated levels of
Cumulative Cash Flow per Share.

 

·                 2012 Cash Flow per Share shall be calculated by dividing
(i) the 2012 Operating Cash Flow (as defined below) by (ii) the 2012 Diluted
Common Shares Outstanding (as defined below).  2012 Operating Cash Flow is the
Company’s aggregate net cash provided by operating activities excluding changes
in operating assets and liabilities during 2012 as reported in the Company’s
2012 Form 10-K. 2012 Diluted Common Shares Outstanding is the Company’s
aggregate diluted common shares outstanding as of the end of 2012 as reported in
the Company’s 2012 Form 10-K.

 

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