Document:

Exhibit 10.01

 

EQUITABLE RESOURCES, INC.

2005 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM

 

EQUITABLE RESOURCES, INC. (the “Company”)
hereby establishes this EQUITABLE RESOURCES, INC. 2005 EXECUTIVE PERFORMANCE
INCENTIVE PROGRAM (the “Program”) as of this 23rd day of February, 2005, in accordance with the terms provided
herein.

 

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

 

WHEREAS, in order to further align the
interests of executives with the interests of the shareholders, the Company
desires to provide additional long-term incentive benefits through the Program,
in the form of awards qualifying as “Performance Awards” 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
other absolute and relative performance levels, and are forfeited if defined performance
levels are not achieved.  By placing a
portion of the executive’s compensation at risk, the Company has an opportunity
to reward exceptional performance or reduce the compensation opportunity when
performance does not meet expectations. 
The Program shall be construed consistent with the provisions of the
1999 Plan with respect to awards to Covered Employees, as such
term is defined in the 1999 Plan, and the deductibility of such awards under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the “Code”).

 

Section 2.  Effective Date.  The effective date of this Program is January 1,
2005.  The Program will remain in effect
until the earlier of December 31, 2008 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, up to a maximum of 40 employees. 
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”), comprised in accordance with the requirements of the 1999
Plan.  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.

 

Section 4.  Performance Incentive Share
Unit Awards.  Upon being selected to participate in the
Program, each Participant shall be awarded a number of performance incentive
share units (the “Target Share Units”), the value of which is determined by
reference to the Company’s stock, which award 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,
2008.  The Target Share
Units, plus accrued dividends (“Total Target Share Units”) may be increased by
as much as two and one-half (2.5) times the number awarded based solely on the
achievement of the objective performance criteria as described in Section 5,
and the Committee shall have no discretion to increase the Total Target Share
Units that would otherwise be due upon attainment of the Performance Condition.  The maximum number of Target Share Units that
may be awarded under the Program is 600,000, subject
to adjustment as provided in the preceding sentence and in Section 13.

 

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 be issued (“Awarded Share Units”) to a Participant will be based on (i) the Company’s
total shareholder return relative to the peer group’s (Attachment A) total
shareholder return for the period described in (a) below, and (ii) the Company’s
average absolute return on total capital during the Performance Period
(collectively, the “Performance Condition”), for the Performance Period of January 1,
2005 to the Termination Date (the “Performance Period”).  The Performance Condition with respect to the
Performance Period shall be established by the Committee within 90 days after
its commencement, but in no event later than the date on
which 25% of the Performance Period has elapsed, and before the outcome of the
Performance Condition is no longer substantially uncertain.

 

(a)                                  Total Shareholder Return.  For
purposes of this Program, 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 ten (10) business day period

 

2

 

prior to approval of the Program ending on and including the date
of the Committee’s approval, for each company.

 

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 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 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 the
Performance Period for each company.  In
the event of a change of control as then defined in the 1999 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.

 

The Committee may determine to exclude a member of the peer
group if such member ceases to exist during the Performance Period due to a
cash merger or tender offer, to the extent such determination is consistent
with Treas. Reg. §1.162-27(e)(2).

 

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

 

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

 

The average of those
amounts, calculated by dividing the sum by the number of whole
completed quarters in the Performance

 

3

 

Period,
shall equal the average absolute return on total capital for the Performance
Period.

 

The above amounts shall be calculated as reported on the Company’s financial
statements.

 

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

 

(c)                                  Application of Performance Condition.  The
Total Target Share Units for each Participant will be multiplied by the payout
factor identified on the payout matrix (Attachment B) that corresponds to (i)
the Company’s relative TSR ranking on the payout matrix for the period
specified herein combined with (ii) the Company’s average absolute return on
total capital performance on the payout matrix for the Performance Period.  The result of the calculation is the number of Awarded
Share Units.  Pursuant to such calculation, Awarded Share Units will
equal:

 

(i)                         100 percent of the Total Target Share Units for (x)
median relative TSR performance, provided average absolute return on capital is
greater than 8% and less than 9%, or (y) for TSR performance in the top 66.67%
of all performers, provided average absolute return on capital is greater than
9% and less than 10%,

 

(ii)                      250 percent of the Total Target Share Units for TSR
performance at the top 13.5% of all performers, provided average absolute
return on capital is greater than or equal to 10%,

 

(iii)                   0 percent of the Total Target Share Units for TSR
performance below the top 60% of all performers if average absolute return on
capital is also less than 8%, and

 

(iv)                  for performance levels between those performance levels
identified above, the percent of Total Target Share Units will be determined in
stepped increments.

 

Payments
under the Program are expressly contingent upon achievement of the Performance
Condition and may not exceed the value of the Participant’s Total Target Share
Units and other limits provided herein, subject to adjustment as provided in
Sections 4 and 13.

 

Section 6.  Issuance and Distribution.  Subject to Section 8, each Participant will be issued the number of Awarded Share Units calculated
according to Section 5(c) as of the last day of the Performance
Period.  Except as provided in the
remainder of this Section 6, 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

 

4

 

share of Company
stock as of the last day of the Performance Period, as soon as practicable
following the end of the Performance Period on the date determined in the
Company’s discretion, but in no event later than two and one-half months after
the end of the Performance Period.  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 mandatory or voluntary 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 issued 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; provided that 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.  The maximum amount payable to any one
Participant under the Program in any one calendar year within the Performance
Period shall be the amount set forth and as calculated in the 1999 Plan, as
approved by shareholders of the Company.

 

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, including the Performance Condition, applicable to Target Share
Units, Total Target Share Units and Awarded Share Units.

 

Section 8.  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 who terminates employment during
the Performance Period, 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 payment.

 

(a)                                  Retirement
and Resignation.  Share units are forfeited.

 

(b)                                 Death
and Disability.  Participants
who are employed at the commencement of the Performance Period, but who die or
become Disabled, as defined below, before the end of the Performance Period,
will be issued Awarded Share Units for the Performance Period, contingent upon
achievement of the Performance Condition set forth in Section 5, as follows:

 

5

 

	
  Date of Death or Disability

  	
   

  	
  Percent Vested

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prior to December 31,
  2005

  	
   

  	
  0

  	
  %

  	
   

  
	
  January 1,
  2006 – December 31, 2006

  	
   

  	
  50

  	
  %

  	
   

  
	
  January 1,
  2007 – December 31, 2007

  	
   

  	
  75

  	
  %

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  January 1,
  2008 and thereafter

  	
   

  	
  100

  	
  %

  	
   

  

 

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

 

(c)                                  Termination.  Share units are forfeited
and no award shall be paid to any employee whose services are terminated prior
to the payment 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 receive payment for Awarded Share Units
following the termination of the Performance Period, contingent upon
achievement of the Performance Condition set forth in Section 5, as
follows: 

 

	
  Termination Date

  	
   

  	
  Reduction in Awarded Share Units

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prior to January 1,
  2007

  	
   

  	
  100

  	
  %

  	
   

  
	
  January 1,
  2007 – December 31, 2007

  	
   

  	
  75

  	
  %

  	
   

  
	
  January 1,
  2008 – December 31, 2008

  	
   

  	
  50

  	
  %

  	
   

  

 

Section 9.  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 Condition has been achieved prior to any payments
under the Program,

 

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

 

•                  Approving Program Participants,

 

•                  Authorizing Target Share Unit awards to
Participants,

 

•                  Adjusting Target Share Unit grants and issuance
requirements to account for extraordinary events consistent with the terms of
the Program,

 

•                  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.

 

6

 

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 payment, the
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. 
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 Condition was attained.

 

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 shares 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 shares and
Total Target Share Units had been actual Company shares and outstanding on the
date fixed for determining the

 

7

 

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 shares 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, provided such adjustment shall be consistent with Code Section 162(m).

 

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.

 

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

 

8

 

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, 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.  Any suspension or termination shall
automatically cause a Termination Date effective as of the date of the
Committee’s approval.  Notwithstanding
the foregoing, (i) no amendment, suspension or termination shall adversely
affect a Participant’s rights to his or her award after the date of the award,
provided however that to the extent an award is determined with respect to a
Termination Date, including a Termination Date pursuant to the preceding
sentence, Participants’ rights to awards are deemed not to be adversely
affected thereby, and (ii) no amendment may be made following a Change of
Control.

 

9Exhibit 10.02

 

[DATE]

 

[NAME AND ADDRESS]

 

Dear [NAME]:

 

Pursuant to the terms and conditions of the Company’s 1999 Long-Term
Incentive Plan (the “Plan”) and the 2005 Executive Performance Incentive
Program (the “Program”), on February 23, 2005, the Compensation Committee of
the Board of Directors of Equitable Resources, Inc. (the “Committee”) granted
you                     
Target Share Units (the “Award”), the value of which is determined
by reference to the Company’s common stock. 
The terms and conditions of the Award, including, without limitation,
vesting and distribution, shall be governed by the provisions of the Program
document attached hereto as Exhibit A, provided that the Committee retains the
discretion to distribute the Award in cash, Company stock or any combination
thereof.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Johanna G. O’Loughlin

  For the Compensation Committee

  	
   

  

 

 

The undersigned hereby acknowledges receipt of this award granted on
the date shown above, the terms of which are subject to the terms and
conditions of the Program as referenced above. 
The undersigned further acknowledges receipt of a copy of the Program
document and agrees to be bound by all the provisions hereof and thereof.

 

 

	
  Signature:

  	
   

  	
   

  	
  Date:

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