Document:

Exhibit 10.1

 

EQUITABLE

RESOURCES, INC.

2003 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM

 

EQUITABLE

RESOURCES, INC. (the “Company”) hereby establishes this EQUITABLE RESOURCES,

INC. 2003 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM (the “Program”) as of this 27th

day of February 2003, 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; and

 

WHEREAS, in

order to further align the interests of executives with the interests of the

shareholders, the Company desires to provide additional long-term incentive

benefits through the Program under the 1999 Plan.

 

NOW, THEREFORE, the Company hereby provides

for additional incentive benefits for certain executive employees of the

Company and adopts the terms of the Program on the following terms and

conditions:

 

Section 1.  Incentive Program

Purpose.  The

main purpose of the Program is to provide additional long-term incentive

opportunities to key executives to further align their interests with those of

the Company’s shareholders and customers 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 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.

 

Section 2.  Effective Date.  The effective date of this Program is

February 27, 2003.  The Program

will remain in effect until the earlier of December 31, 2005 or the closing

date of a Change of Control event defined in Section 5 unless otherwise amended

or terminated as provided in Section 18 (“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.  The CEO’s selections will

become participants in the Program (the “Participants”) only upon approval by

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, 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.

 

 

Section

4.  Performance Incentive Share Unit

Awards.  Each Participant

shall be awarded a number of performance incentive share units (the “Target

Share Units”) (subject to the conditions provided herein), the value of which

is determined by reference to the Company’s stock, which shall be proposed by

the CEO and approved by the Committee. 

For a new Participant, the Target Share Units shall be proposed by the

CEO and approved by the Committee and will be pro-rated based on the employee’s

hire date and the contemplated ending date of the program which is December 31,

2005.  The Target Share Units, plus

accrued dividends (“Total Target Share Units”) available for distribution to a

party may be decreased to zero (0) or increased by as much as two (2) times the

Total Target Share Units based on performance as described in Section 5.

 

The

Target Share Units shall be held in escrow by the Company subject to

satisfaction of the terms and conditions described below.  A Participant shall have no right to

exchange the Target 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 of the Target Share

Units.  Subject to Section 8, the total number

of Target Share

Units that will vest and be

issued  (“Awarded Share Units”) to a Participant will be based on EQT’s three-year total

shareholder return (the “Performance Condition”) relative to the peer group’s

(Attachment A) three-year total shareholder return, for the Performance Period

of January 1, 2003 to the Termination Date (the “Performance

Period”).  For purposes of this Program,

the Performance Period total shareholder return will be calculated as follows:

 

Step 1

 

A “Beginning Point” will be established for the

Company and each company in the peer group. 

This Beginning Point will be defined as one share of stock with a value

equal to the average closing stock price as reported in The Wall Street Journal for

the first ten (10) business days of 2003 for each company.

 

Step 2

 

Dividends paid for each company will be

cumulatively added to the Beginning Point as additional shares of such

company’s 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 from the Beginning Point will

be referred to as the Total Shares Held at Ending Point.

 

Step 3

 

Except as provided in the following sentence, an

“Ending Point” will be defined as Total Shares Held at Ending Point for each

company times the average closing stock price as reported in The Wall Street Journal for the last ten

(10) business days of 2005 for each company. 

In the event of a change of control as

 

2

 

then defined in the Equitable Resources, Inc. 1999 Long-Term

Incentive Plan (“Change of Control”), the Ending Point will be defined as the

Total Shares Held at Ending Point times the average of the closing price as

reported in The Wall Street Journal 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.

 

Step 5

 

The Total Target Share Units for each

Participant will be multiplied by the factor on the x axis of the payout curve

(identified on Attachment B) that corresponds to the Company’s relative TSR

ranking on the y axis.  Awarded Share

Units will equal:

 

(i)                                     zero percent of the Total Target Share Units for

performance relative to the peer group performance at the bottom 13.5% of all

performers,

 

(ii)                                  100 percent of the Total Target Share Units for median

relative performance,

 

(iii)                               200 percent of the Total Target Share Units for

performance at the top 13.5% of all performers, and

 

(iv)                              for performance levels between the bottom 13.5%,

median and top 13.5% performance levels, the percent of Total Target Share

Units will be determined by interpolation. 

The applicable payout curve is provided in Attachment B.

 

The Committee may adjust the

peer group or a company’s relative placement within the peer group based on

significant or unusual transactions or events that substantially affect the

total shareholder return calculation of any company or that, for

non-operational or other reasons, do not reflect or otherwise skew the relevant

performance metric intended to be measured within the Program.  Upon the occurrence of any such transaction

or event, the Company’s Chief Financial Officer will, as soon as reasonably

practicable, so advise the Committee, describing the impact on the performance

metric and recommending an appropriate adjustment for the Committee’s

consideration.

 

Section 6.  Vesting and

Distribution. 

Subject to Section 8, each Participant will vest in the number of

Awarded Share Units calculated according to Section 5 as of the last day of the

Performance Period and, except as provided in the following two sentences, such

share units will be distributed in cash, the amount of which shall be

calculated based upon each Awarded Share Unit being equal in value to a

corresponding

 

3

 

share

of Company stock as of the last day of the Performance Period, on or around

March 12, 2006.  Notwithstanding

the foregoing sentence, the Participant may elect to receive payment in the

form of Company stock and the Committee may determine, in its discretion, that

Awarded Share Units will be issued in the form of Company stock; provided,

further, that if the Participant has not satisfied any stock ownership

guidelines of the Company as then in effect, such Awarded Share Units shall be

issued in the form of Company stock to the extent as may be necessary toward

satisfaction of such stock ownership guidelines.  Subject to Section 8, in the event of a Change of Control, the

value of such vested share units will be distributed in cash on the closing

date of the transaction, which shall be calculated based upon the average of

the closing price of the Company’s stock for the ten (10) business days

preceding the Change of Control transaction as reported in The Wall Street Journal.  Notwithstanding the foregoing provisions of

this Section 6, the value of any Awarded Share Units shall be paid to the

Participant only to the extent that the deductibility of such payment to the

Company is not limited by reason of Section 162(m) of the Internal Revenue Code

of 1986, as amended (the “Code”).  In

the event that the payment of all or a part of the Awarded Share Units exceeds

the Code Section 162(m) limit, the amount in excess of the limit shall be

considered a required deferral and be credited, as cash except to the extent required

as Company stock in the case of a Participant who has not satisfied any stock

ownership guidelines of the Company as then in effect, to the Company’s

Deferred Compensation Plan as then in effect and payment shall automatically be

deferred to the next subsequent year in which it can be paid to the Participant

without exceeding the Code Section 162(m) limit.

 

Section 7.  Dividends.  Each Target Share Unit will be cumulatively

credited with dividends that are paid on the Company’s common stock in the form

of additional share units.  These

additional share 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 Wall Street Journal and shall be

subject to all the same conditions and restrictions as provided in this Program

applicable to Target Share Units, Total Target Share Units and Awarded Share

Units.

 

Section 8.  Change of Status.  In making decisions regarding employees’

participation in the Program and the extent to which awards vest and are

payable, the Committee may consider any factors that they may consider

relevant.  The following guidelines are

provided as general information about the effect of employee status changes

prior to vesting.

 

(a)                                  Retirement, Death, Disability, Resignation.  Share units

are forfeited.

 

(b)                                 Termination.  Share units

are forfeited and no award shall be paid to any employee whose services are

terminated prior to the vesting of Awarded 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 vest in Awarded Share

Units on the termination of the Performance Period, contingent upon achievement

of the Performance Condition in Section 5, as follows: 

 

4

 

	

  Termination Date

  	

   

  	

  Reduction

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Prior to March 1, 2004

  	

   

  	

  100

  	

  %

  
	

  March 1, 2004 – February 28, 2005

  	

   

  	

  50

  	

  %

  
	

  March 1, 2005 – December 31, 2005

  	

   

  	

  25

  	

  %

  

 

Section 9.  Responsibilities of

the Committee. 

The Committee has responsibility for all aspects of the Program’s

administration, including:

 

•            Ensuring that the

Program is administered in accordance with the provisions of the Program,

 

•            Approving Program

Participants,

 

•            Authorizing Target

Share Unit awards to Participants,

 

•            Adjusting Target Share

Unit grants and vesting requirements 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 modify or terminate the Program at any time.

 

The interpretation and

construction by the Committee of any provisions of the Program or of any

Awarded 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 Awarded Share Units thereunder.  The Committee may designate another party to

administer the Program, including Company management or an outside party.  All conditions of the Target 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 Target 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 Participant will sign and return a participant agreement to the

Committee.

 

Section 10.  Tax Consequences to

Participants. 

It is intended that: (i) until the Performance Condition is satisfied, a

Participant’s right to 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) and 3121(v)(2) of the Internal Revenue

Code of 1986, as amended, (the “Code”); (ii) the Awarded Share Units shall be

subject to employment taxes only upon the satisfaction of the Performance

Condition; and (iii) until the Awarded Share Units are 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, because a

Participant cannot actually or constructively receive the Target Share Units

prior to vesting and payment, the

 

5

 

Participant will not be in

actual or constructive receipt of the Target Share Units within the meaning of

Code Section 451 until they are actually received as Awarded Share Units.

 

Section 11.  Nonassignment.  A Participant shall not be permitted to

assign, alienate or otherwise transfer his or her Target Share Units and any

attempt to do so shall be void.

 

Section 12.  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.

 

Section 13.  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, the Total Target Share Units and the share of

Company Common Stock on which the Performance Condition is based shall be

adjusted by adding thereto the number of shares of Company common stock which

would have been distributable thereon if such share and Total Target Share

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 extraordinary distribution to shareholders of the Company’s common

stock, the Total Target Share Units and the share of Company common stock on

which the Performance Condition is based shall be appropriately adjusted to

prevent dilution or enlargement of the rights of Participants which would otherwise

result from any such transaction.

 

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

value of the performance share units constituting an award 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 performance share units

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 share of Company common stock on which the

Performance Condition is based shall be appropriately and equitably adjusted.  In the case of any such adjustment, the

Total Target Share Units shall remain subject to the terms of the Program.

 

6

 

Section 14.  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 15.  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 16.  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 17.  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 18.  Amendment or

Termination of this Program.  This Program may be amended or terminated by the Company, in its

sole discretion, at any time by the Committee, except that no amendment or

termination shall adversely affect a Participant’s rights to his or her award

after the date of the award and no amendment may be made following a Change of

Control.

 

7Exhibit 10.2

 

EQUITABLE RESOURCES, INC.

2002 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM

(as amended and restated May 1, 2003)

 

EQUITABLE RESOURCES, INC. (the “Company”) hereby establishes this 2002

EQUITABLE RESOURCES, INC. 2002 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM (the

“Program”) as of this 27th day of February 2003, 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; and

 

WHEREAS, in order to further align the interests of executives with the

interests of the shareholders, the Company desires to provide additional

long-term incentive benefits through the Program under the 1999 Plan.

 

NOW,

THEREFORE, the Company hereby provides for additional incentive benefits for

certain executive employees of the Company and adopts the terms of the Program

on the following terms and conditions:

 

Section 1. 

Incentive Program Purpose.  The main purpose of the Program is to

provide additional long-term incentive opportunities to key executives to

further align their interests with those of the Company’s shareholders and

customers 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

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.

 

Section 2. 

Effective Date.  The effective date of this Program is March 12, 2002.  The Program will remain in effect until the

earlier of December 31, 2004 or the closing date of a Change of Control event

defined in Section 5 unless otherwise amended or terminated as provided in

Section 18 (“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.  The CEO’s selections will become

participants in the Program (the “Participants”) only upon approval by 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, 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.

 

 

Section 4.  Performance

Incentive Share Unit Awards.  Each Participant shall be awarded a number of performance

incentive share units (the “Target Share Units”) (subject to the conditions

provided herein), the value of which is determined by reference to the

Company’s stock, which shall be proposed by the CEO and approved by the

Committee.  For a new Participant, the

Target Share Units shall be proposed by the CEO and approved by the Committee

and will be pro-rated based on the employee’s hire date and the contemplated

ending date of the program which is December 31, 2004.  The Target Share Units, plus accrued

dividends (“Total Target Share Units”) available for distribution to a party

may be decreased to zero (0) or increased by as much as two (2) times the Total

Target Share Units based on performance as described in Section 5.

 

The Target

Share Units shall be held in escrow by the Company subject to satisfaction of

the terms and conditions described below. 

A Participant shall have no right to exchange the Target 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 of the Target Share Units.  Subject to Section 8, the total number

of Target Share Units that will vest and be issued  (“Awarded Share Units”) to a Participant will be based on EQT’s three-year

total shareholder return (the “Performance Condition”) relative to the peer

group’s (Attachment A) three-year total shareholder return, for the Performance

Period of January 1, 2002 to the Termination Date (the “Performance

Period”).  For purposes of this Program,

the Performance Period total shareholder return will be calculated as follows:

 

Step 1

 

A “Beginning Point” will be established for the Company and each

company in the peer group.  This

Beginning Point will be defined as one share of stock with a value equal to the

average closing stock price as reported in The Wall Street Journal for the first ten

(10) business days of 2002 for each company.

 

Step 2

 

Dividends paid for each company will be cumulatively added to the

Beginning Point as additional shares of such company’s 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 from the Beginning Point will be

referred to as the Total Shares Held at Ending Point.

 

Step 3

 

Except as provided in the following sentence, an “Ending Point” will be

defined as Total Shares Held at Ending Point for each company times the average

closing stock price as reported in The Wall

Street Journal for the last ten (10) business days of 2004 for each

company.  In the event of a change of

control as

 

2

 

then defined in the Equitable Resources, Inc. 1999 Long-Term Incentive

Plan (“Change of Control”), the Ending Point will be defined as the Total

Shares Held at Ending Point times the average of the closing price as reported

in The Wall Street Journal 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.

 

Step 5

 

The Total Target Share Units for each Participant will be multiplied by

the factor on the x axis of the payout curve (identified on Attachment B) that

corresponds to the Company’s relative TSR ranking on the y axis.  Awarded Share Units will equal:

 

(i)                          zero percent of the Total

Target Share Units for performance relative to the peer group performance at

the bottom 13.5% of all performers,

 

(ii)                       100 percent of the Total Target

Share Units for median relative performance,

 

(iii)                    200 percent of the Total Target

Share Units for performance at the top 13.5% of all performers, and

 

(iv)                   for performance levels between the

bottom 13.5%, median and top 13.5% performance levels, the percent of Total

Target Share Units will be determined by interpolation.  The applicable payout curve is provided in

Attachment B.

 

The Committee may adjust the

peer group or a company’s relative placement within the peer group based on

significant or unusual transactions or events that substantially affect the

total shareholder return calculation of any company or that, for

non-operational or other reasons, do not reflect or otherwise skew the relevant

performance metric intended to be measured within the Program.  Upon the occurrence of any such transaction

or event, the Company’s Chief Financial Officer will, as soon as reasonably

practicable, so advise the Committee, describing the impact on the performance

metric and recommending an appropriate adjustment for the Committee’s

consideration.

 

Section 6.  Vesting and

Distribution. 

Subject to Section 8, each Participant will vest in the number of

Awarded Share Units calculated according to Section 5 as of the last day of the

Performance Period and, except as provided in the following two sentences, such

share units will be distributed in cash, the amount of which shall be

calculated based upon each Awarded Share Unit being equal in value to a

corresponding

 

3

 

share of Company stock as of

the last day of the Performance Period, on or around March 12, 2005.  Notwithstanding the foregoing sentence, the

Participant may elect to receive payment in the form of Company stock and the

Committee may determine, in its discretion, that Awarded Share Units will be

issued in the form of Company stock; provided, further, that if the Participant

has not satisfied any stock ownership guidelines of the Company as then in

effect, such Awarded Share Units shall be issued in the form of Company stock

to the extent as may be necessary toward satisfaction of such stock ownership

guidelines.  Subject to Section 8, in

the event of a Change of Control, the value of such vested share units will be

distributed in cash on the closing date of the transaction, which shall be

calculated based upon the average of the closing price of the Company’s stock

for the ten (10) business days preceding the Change of Control transaction as

reported in The

Wall Street Journal. 

Notwithstanding the foregoing provisions of this Section 6, the value of

any Awarded Share Units shall be paid to the Participant only to the extent

that the deductibility of such payment to the Company is not limited by reason

of Section 162(m) of the Internal Revenue Code of 1986, as amended (the

“Code”).  In the event that the payment

of all or a part of the Awarded Share Units exceeds the Code Section 162(m)

limit, the amount in excess of the limit shall be considered a required

deferral and be credited, as cash except to the extent required as Company

stock in the case of a Participant who has not satisfied any stock ownership

guidelines of the Company as then in effect, to the Company’s Deferred

Compensation Plan as then in effect and payment shall automatically be deferred

to the next subsequent year in which it can be paid to the Participant without

exceeding the Code Section 162(m) limit.

 

Section 7.  Dividends.  Each Target Share Unit will be cumulatively

credited with dividends that are paid on the Company’s common stock in the form

of additional share units.  These

additional share 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 Wall Street Journal and shall be

subject to all the same conditions and restrictions as provided in this Program

applicable to Target Share Units, Total Target Share Units and Awarded Share

Units.

 

Section 8. 

Change of Status.  In making decisions regarding employees’ participation in the

Program and the extent to which awards vest and are payable, the Committee may

consider any factors that they may consider relevant.  The following guidelines are provided as general information

about the effect of employee status changes prior to vesting.

 

(a)                  Retirement,

Death, Disability, Resignation. 

Share units are forfeited.

 

(b)                 Termination.  Share units are forfeited and no award shall

be paid to any employee whose services are terminated prior to the vesting of

Awarded 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 vest in Awarded Share Units on the termination of the Performance

Period, contingent upon achievement of the Performance Condition in Section 5,

as follows: 

 

4

 

	

  Termination Date

  	

   

  	

  Reduction

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Prior to March 1, 2003

  	

   

  	

  100

  	

  %

  
	

  March 1, 2003 – February 28, 2004

  	

   

  	

  50

  	

  %

  
	

  March 1, 2004 – December 31, 2004

  	

   

  	

  25

  	

  %

  

 

Section

9.  Responsibilities of the Committee.  The Committee has responsibility for all

aspects of the Program’s administration, including:

 

•                       Ensuring that the Program is administered in accordance with the

provisions of the Program,

 

•                       Approving Program Participants,

 

•                       Authorizing Target Share Unit awards to Participants,

 

•                       Adjusting Target Share Unit grants and vesting requirements 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 modify or terminate the Program at

any time.

 

The interpretation and

construction by the Committee of any provisions of the Program or of any

Awarded 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 Awarded Share Units thereunder.  The Committee may designate another party to

administer the Program, including Company management or an outside party.  All conditions of the Target 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 Target 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 Participant will sign and return a participant agreement to

the Committee.

 

Section 10.  Tax Consequences to

Participants. 

It is intended that: (i) until the Performance Condition is satisfied, a

Participant’s right to 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) and 3121(v)(2) of the Internal Revenue

Code of 1986, as amended, (the “Code”); (ii) the Awarded Share Units shall be

subject to employment taxes only upon the satisfaction of the Performance

Condition; and (iii) until the Awarded Share Units are 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, because a

Participant cannot actually or constructively receive the Target Share Units

prior to vesting and payment, the

 

5

 

Participant will not be in

actual or constructive receipt of the Target Share Units within the meaning of

Code Section 451 until they are actually received as Awarded Share Units.

 

Section 11.  Nonassignment.  A Participant shall not be permitted to

assign, alienate or otherwise transfer his or her Target Share Units and any

attempt to do so shall be void.

 

Section 12.  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.

 

Section 13. 

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, the Total Target Share Units and the share of Company Common Stock on

which the Performance Condition is based shall be adjusted by adding thereto

the number of shares of Company common stock which would have been

distributable thereon if such share and Total Target Share 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 extraordinary distribution to shareholders of the Company’s common

stock, the Total Target Share Units and the share of Company common stock on

which the Performance Condition is based shall be appropriately adjusted to

prevent dilution or enlargement of the rights of Participants which would

otherwise result from any such transaction.

 

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 value of

the performance share units constituting an award 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 performance share units 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 share

of Company common stock on which the Performance Condition is based shall be

appropriately and equitably adjusted. 

In the case of any such adjustment, the Total Target Share Units shall

remain subject to the terms of the Program.

 

6

 

Section 14.  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 15.  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 16.  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 17.  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 18.  Amendment or

Termination of this Program.  This Program may be amended or terminated by the Company, in its

sole discretion, at any time by the Committee, except that no amendment or

termination shall adversely affect a Participant’s rights to his or her award

after the date of the award and no amendment may be made following a Change of

Control.

 

7

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