Exhibit 10.7

 

EQUITRANS MIDSTREAM CORPORATION
EXECUTIVE SHORT-TERM INCENTIVE PLAN

 

Section 1.                                           Incentive Plan Purposes. 
The main purposes of the Equitrans Midstream Corporation (the “Company”)
Executive Short-Term Incentive Plan (the “Plan”) are to maintain a competitive
level of total cash compensation by providing the Company’s executive employees
with an opportunity to earn incentives based upon the achievement of performance
goals over a specified performance period (the “Performance Period”) and to
align the interests of the Company’s executive employees with those of the
Company’s shareholders and customers and with the strategic objectives of the
Company.

 

Section 2.                                           Effective Date.  The
effective date of this Plan is November 12, 2018.  The Plan will remain in
effect until formally amended or terminated in writing by the Company’s Board of
Directors (the “Board”) or the Management Development and Compensation Committee
of the Board of Directors (the “Committee”) and as provided in Section 14 or the
occurrence of a Change of Control as provided in Section 11.

 

Section 3.                                           Eligibility.

 

(a)                                 All executive officers of the Company shall
be eligible to participate in the Plan.

 

(b)                                 The Committee may designate any other
employee for participation in the Plan in its complete and sole discretion. 
Eligible employees who are designated to participate in the Plan for any
Performance Period will be notified in writing of their participation.

 

Section 4.                                           Administration of the
Plan.  The Plan shall be administered by the Committee.  On an annual or
periodic basis, the Committee shall designate the participants and determine the
Performance Goals, as defined in Section 5 of the Plan, and the Incentive
Targets, as defined in Section 6 of the Plan.  Prior to payment of any Incentive
Awards, the Committee shall certify in writing that the Performance Goals and
other material terms were satisfied, which writing may include meeting minutes
of the Committee.  The Committee shall also review and approve any proposed
amendments to the Plan throughout the Performance Period.

 

Section 5.                                           Performance Goals.

 

(a)                                 Each participant shall have specific
performance goals (the “Performance Goals”) determined for his or her position
for the subject Performance Period.  These Performance Goals will support the
business of the Company, affiliate or business unit, as applicable, and be based
upon the specific performance measures established by the Committee for the
Performance Period.

 

(b)                                 A copy of each participant’s Performance
Goals shall be determined in writing by the Committee not later than 90 days
after the commencement of the Performance Period to which they relate; provided
that in no event will Performance Goals be established after 25

 

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percent of the Performance Period has elapsed or when the outcome of such
Performance Goals is no longer substantially uncertain.

 

(c)                                  The Performance Goals determined by the
Committee will be objectively determinable goals, which goals may (but shall not
be required to be) based (without limitation) upon one or more of the following
performance measures:

 

·                                          earnings per share or unit

·                                          revenue

·                                          expenses

·                                          return on equity

·                                          return on total capital

·                                          return on assets

·                                          earnings (such as net income, EBIT
and similar measures)

·                                          cash flow (such as EBITDA, EBITDAX,
after-tax cash flow and similar measures)

·                                          share or unit price

·                                          economic value added

·                                          debt reduction

·                                          gross margin

·                                          operating income

·                                          volumes metrics (such as volumes
transported and similar measures)

·                                          land metrics (such as acres acquired,
land permitted, land cleared and similar measures)

·                                          operating efficiency metrics (such as
unit operating expense measures, general & administrative expense (“G&A”) per
Mcf, G&A per customer and other G&A metrics, unit gathering and compression
expenses and other midstream efficiency measures, lost and unaccounted for gas
metrics, compressor or processing downtime, days from completed well to flowing
gas and similar measures)

·                                          construction efficiency metrics (such
as timely completion, cost within budget and similar measures)

·                                          gas storage metrics (such as lease
acquisition and divestitures)

·                                          customer service measures (such as
wait time, on-time service, calls answered and similar measures)

·                                          closing of a transaction

·                                          safety and environmental performance

·                                          total shareholder or unitholder
return

 

(d)                                 The Performance Goals may be based either on
the performance of the Company, a subsidiary or subsidiaries or other
affiliates, any branch, department, business unit, or other portion thereof
under such measure for the Performance Period and/or upon a comparison of such
performance with the performance of a peer group of corporations, prior Company
performance or other comparative measure selected by the Committee before, at,
or after the time of making an Incentive Award.  Performance Goals may be
specified in absolute terms, on an adjusted basis, in percentages, or in terms
of growth or reduction from period to period or

 

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growth or reduction rates over time, as well as measured relative to the
performance of a group of comparator companies, or a published or special index,
or a stock market index, or otherwise, in any such case that the Committee deems
appropriate.  Performance Goals need not be based upon an increase or positive
result under a business criterion and could include, for example, the
maintenance of the status quo, the reduction of expenses or the limitation of
economic losses (measured, in each case, by reference to a specific business
criterion).  Performance measures may but need not be determinable in
conformance with generally accepted accounting principles.

 

(e)                                  When the Performance Goals are determined
by the Committee, the Committee shall specify the manner in which the level of
achievement of the Performance Goals shall be calculated and the weighting
assigned to the Performance Goals.  In addition, if the Committee determines
that a change in the business, operations, corporate structure or capital
structure of the Company or the manner in which the Company or any of its
affiliates conducts its business has occurred, or other events or circumstances
have rendered performance goals to be unsuitable or otherwise appropriate for
adjustment, the Committee may modify such performance goals, in whole or in
part, as the Committee deems appropriate.

 

Section 6.                                           Section Incentive Targets
and Awards.

 

(a)                                 Incentive compensation targets (“Incentive
Targets”) shall be determined by the Committee in writing not later than 90 days
after the commencement of each Performance Period (and provided that not more
than 25 percent of the Performance Period has elapsed).  The Incentive Targets
shall be based upon the level of achievement of the Performance Goals. 
Incentive Targets may be expressed as a range of outcomes, such as “threshold,”
“target” and “maximum,” based on the level of achievement of the Performance
Goals.

 

(b)                                 Incentive awards (“Incentive Awards”) may be
earned by participants during a Performance Period; provided, however, that
payment of any Incentive Award under the Plan to a participant (i) shall be
contingent upon the attainment of the Performance Goals established by the
Committee for the Performance Period and (ii) may not exceed the participant’s
maximum Incentive Target established for the actual level of achievement
attained.

 

(c)                                  The Committee shall have no discretion to
increase any Incentive Award that would otherwise be payable based upon
attainment of the Performance Goals, but the Committee may in its discretion
reduce or eliminate such Incentive Award; provided, however, that the exercise
of such negative discretion shall not be permitted to result in any increase in
the amount of any Incentive Award payable to any other participant.

 

(d)                                 The maximum aggregate Incentive Award
payable to any participant for any calendar year is $5,000,000.

 

(e)                                  Except as provided in Section 7 of the
Plan, Incentive Awards shall be paid in cash no later than 21/2 months after the
end of a Performance Period in which the right to payment is no longer subject
to a substantial risk of forfeiture; provided, further, that the

 

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Committee has determined and certified in writing the extent to which the
Performance Goals have been attained and the Incentive Awards have been earned.

 

Section 7.                                           Form of Payment.  The
Committee may, in its discretion, determine to satisfy, in whole or in part, an
obligation for any Incentive Award by issuing, in substitution for a cash
payment, shares of Company common stock having a fair market value (measured as
of the date of the Committee’s determination of the payment amount) equal to the
cash payment, under and pursuant to the terms of the Company’s 2018 Long-Term
Incentive Plan, or any successor or substitute plan.

 

Section 8.                                           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 or as otherwise
determined by the Committee.

 

Section 9.                                           Tax Consequences.

 

(a)                                 It is intended that nothing in this Plan
shall cause the participants in the Plan to be taxed currently under the
Constructive Receipt or Economic Benefit Doctrines and as expressed in Sections
451 and 83 of the Code.  The terms, requirements and limitations of this Plan
shall be interpreted and applied in a manner consistent with such intent.

 

(b)                                 It is intended that the Incentive Awards
payable under the Plan shall either be exempt from the application of, or comply
with, the requirements of Section 409A of the Code.  The Plan shall be construed
in a manner that effects such intent.  Nevertheless, the tax treatment of the
benefits provided under the Plan or any Incentive Award is not warranted or
guaranteed.  None of the Company, its affiliates and their respective directors,
officers, employees or advisers shall be held liable for any taxes, interest,
penalties or other monetary amounts owed by any participant or other taxpayer as
a result of the Plan or any Incentive Award.

 

(c)                                  Notwithstanding anything in the Plan to the
contrary, to the extent that any Incentive Award would constitute nonexempt
“deferred compensation” for purposes of Section 409A of the Code and would be
payable or distributable under the Plan by reason of the occurrence of a Change
of Control, or the participant’s disability or separation from service, such
amount or benefit will not be payable or distributable to the participant by
reason of such circumstance unless the circumstances giving rise to such Change
of Control, disability or separation from service meet any description or
definition of “change in control event”, “disability” or “separation from
service”, as the case may be, in Section 409A of the Code and applicable
regulations (without giving effect to any elective provisions that may be
available under such definition).  This provision does not prohibit the vesting
of any Incentive Award upon a change of control, disability or separation from
service, however defined.  If this provision prevents the payment or
distribution of any Incentive Award, such Incentive Award shall be made on the
payment date that would have applied absent such designated event or
circumstance.

 

(d)                                 Notwithstanding anything in the Plan to the
contrary, to the extent that any Incentive Award would constitute nonexempt
“deferred compensation” for purposes of Section

 

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409A of the Code and would otherwise be payable under this Plan by reason of a
participant’s separation from service during a period in which the participant
is a Specified Employee (as defined below), then, subject to any permissible
acceleration of payment by the Committee under Treas. Reg.
Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of
interest), or (j)(4) (vi) (payment of employment taxes):  (i) the amount of such
non-exempt deferred compensation that would otherwise be payable during the
six-month period immediately following the participant’s separation from service
will be accumulated through and paid or provided on the first day of the seventh
month following the participant’s separation from service (or, if the
participant dies during such period, within 30 days after the participant’s
death) (in either case, the “Required Delay Period”); and (ii) the normal
payment or distribution schedule for any remaining payments or distributions
will resume at the end of the Required Delay Period.  For purposes of this Plan,
the term “Specified Employee” has the meaning given such term in Code
Section 409A and the final regulations thereunder, provided, however, that, as
permitted in such final regulations, the Company’s Specified Employees and its
application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall
be determined in accordance with rules adopted by the Board or any committee of
the Board, which shall be applied consistently with respect to all nonqualified
deferred compensation arrangements of the Company, including this Plan.

 

Section 10.                                    Change of Status.  In making
decisions regarding employees’ participation in the Plan, the Committee may
consider any factors that they may consider relevant.  The following guidelines
are provided as general guidelines regarding employee status changes:

 

(a)                                 New Hire,  Transfer,  Promotion.  A newly
hired executive officer whose hire date is during the first 90 day period of a
Performance Period (and when not more than 25 percent of the Performance Period
has elapsed) will participate in the Plan and be eligible for an Incentive Award
as determined by the Committee, unless otherwise specified in the employment
offer.  An employee who is promoted or transferred during the first 90 day
period of a Performance Period (and when not more than 25 percent of the
Performance Period has elapsed) to a position qualifying for participation may
be recommended for a pro rata Incentive Award under the Plan based on the level
of participation in his or her previous annual or other incentive program(s) and
the percentage of the Performance Period the employee is in the participating
position under this Plan.  This includes employees who leave positions that
qualify for incentive payments in other Company business segments.  These
potential payments shall be considered when determining the employee’s Incentive
Target and Incentive Award under this Plan; provided, however, that no amounts
of deferred compensation under other plans and arrangements may be substituted
for or in respect of amounts payable under the Plan.

 

(b)                                 Demotion.  No Incentive Award shall be paid
to an employee who has been demoted during a Performance Period because of
performance.  If the demotion is due to an organizational change, a pro rata
Incentive Award may be made, provided the employee otherwise qualifies for
payment of an Incentive Award.

 

(c)                                  Termination.  No Incentive Award shall be
paid to any employee whose services are terminated during a Performance Period
for cause including:  (i) the conviction of a felony, a crime of moral turpitude
or fraud or having committed fraud, misappropriation or embezzlement in
connection with the performance of his duties; (ii) willful and repeated
failures to substantially

 

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perform his assigned duties or (iii) a violation of any express significant
policies of the Company.  If the termination is due to reasons such as
reorganization, and not due to the fault of the employee, the employee may be
considered for a pro rata Incentive Award, provided the employee otherwise
qualifies for payment of an Incentive Award.  Notwithstanding the foregoing, a
participant who at the time of his termination was an executive officer shall
not be deemed to have been terminated for cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of a majority of the members of the Board at a duly-held
meeting of the Board finding that, in the good faith opinion of the Board, the
participant is guilty of the conduct set forth above.

 

(d)                                 Resignation.  No Incentive Award shall be
paid to an employee who resigns for any reason before Incentive Awards are paid;
provided, however, if the employee has voluntarily terminated his or her
employment with the Company’s consent, all or any portion of the Incentive Award
may be made in the discretion of the Company, provided the employee otherwise
qualifies for payment of an Incentive Award.

 

(e)                                  Death and Disability.  An employee whose
status as an active employee is changed during a Performance Period for any
reason other than the reasons cited above, including termination for death or
disability, may be considered for a pro rata or full payment of an Incentive
Award, provided the employee otherwise qualifies for payment of an Incentive
Award.  In the event that an Incentive Award is paid on behalf of an employee
who has terminated employment by reason of death, any such payments or other
amounts due shall be paid to the employee’s estate.

 

Nothing in the Plan or in any Incentive Target or Incentive Award shall confer
any right on any employee to continue in the employ of the Company, its
affiliates or any business unit.  In the event any payments are made under the
guidelines provided in this Section 10, the timing of such payments shall be in
accordance with the provisions of Section 6(e) or, if applicable,
Sections 9(c)-(d).

 

Section 11.                                    Change of Control.  In the event
of a Change of Control of the Company, as then defined under the Company’s 2018
Long-Term Incentive Plan, or its successor, whichever is in effect at that time,
the Performance Period shall end on the date of the Change of Control, the
Performance Goals shall be deemed to have been achieved for the pro-rata portion
of the Performance Period that elapsed through the date of the Change of
Control, at target levels or, if actual performance is greater, at actual
levels.  In such event, any Incentive Awards earned shall be paid to
participants on a pro-rata (or, in the discretion of the Committee, full) basis
in accordance with the provisions of Section 6(e) or, if applicable,
Sections 9(c)-(d), but subject to the Committee’s overall discretion as provided
in Section 6(c).

 

Section 12.                                    Compensation Recoupment Policy. 
Any Incentive Awards paid to participants hereunder shall be subject to the
terms and conditions of any compensation recoupment policy adopted from time to
time by the Board or any committee of the Board, to the extent such policy is
applicable to incentive compensation under this Plan.  In addition, the
Committee may specify in an Incentive Award agreement that the participant’s
rights, payments and benefits with respect to an Incentive Award shall be
subject to reduction, cancellation,

 

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forfeiture or recoupment upon the occurrence of certain specified events, in
addition to any otherwise applicable vesting or performance conditions of an
Incentive Award.

 

Section 13.                                    Dispute Resolution.  The
following is the exclusive procedure to be followed by all participants in
resolving disputes arising from payments made under this Plan.  All disputes
relative to a given Performance Period must be presented to the Company’s Chief
Human Resources Officer (who will forward the dispute to the Committee) within
thirty (30) days following the payment date of the Incentive Award for that
Performance Period, or the participant’s right to dispute a payment will be
irrevocably waived.  The employee with the concern must include a written
statement setting forth in reasonable detail, the basis for the dispute,
including, but not limited to, specific reference to the pertinent Plan and/or
Incentive Award agreement provisions on which the dispute is based.  A decision
will be rendered by the Committee within one hundred twenty (120) days of the
Committee’s receipt of the dispute.  The Chairperson of the Committee will be
responsible for preparing a written version of the decision.  The decision by
the Committee regarding the matter is final and binding on all Plan
participants.

 

Section 14.                                    Amendment or Termination of this
Plan.  The Company’s Board of Directors and the Committee shall each have the
right to amend or terminate the Plan at any time.  No employee or participant
shall have any vested right, interest or entitlement to any Incentive Award
hereunder prior to its payment.  The Company shall notify affected employees in
writing of any amendment or Plan termination.

 

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