Document:

Exhibit 10.1

 

 

EQUITABLE RESOURCES, INC.

EXECUTIVE SHORT-TERM INCENTIVE PLAN

 

Section 1.  Incentive Plan Purposes. 
The main purposes of the Equitable Resources, Inc. (the “Company”)
Executive Short-Term Incentive Plan (the “Plan”) are to maintain a competitive
level of total cash compensation and to align the interests of the Company’s
executive employees with those of the Company’s shareholders, customers and
with the strategic objectives of the Company. By placing a portion of executive
employee compensation at risk, the Company can reward performance based on the
overall performance of the Company.

 

Section 2.  Effective Date. 
The original effective date of this Plan is January 1, 2001. The
Plan was amended and restated subject to shareholder approval on
December 7, 2005. The Plan will remain in effect from year to year (each
calendar year shall be referred to herein as a “Plan Year”) until formally
amended or terminated in writing by the Company’s Board of Directors or the
Compensation Committee of the Board of Directors (“Committee”) and as provided
in Section 13 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; provided, however, that no employee who
participates in the Company’s annual Short-Term Incentive Plan 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 Plan Year will
be notified in writing of their participation and given a Plan document for
their reference.

 

Section 4.  Administration of the Plan.  The Plan shall be administered by the
Committee, which shall be comprised solely of two or more outside directors
within the meaning of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the “Code”) and the regulations promulgated thereunder. On an
annual 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, as defined in Section 6 of the Plan, 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 Plan Year.

 

Section 5.  Performance Goals.

 

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

 

(b)     A copy of each participant’s Performance Goals
shall be determined in writing, and kept on file by the Committee and with the
appropriate business segment Human Resources Department, not later than
90 days after the commencement of the Plan Year to which they relate;
provided that in no event will Performance Goals be established after 25 percent
of the Plan Year has elapsed or when the outcome of such Performance Goals is
no longer substantially uncertain.

 

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(c)     The Performance Goals determined by the Committee
will be based upon one or more of the following objective performance measures
and expressed in either, or a combination of, absolute or relative values:
earnings per share, earnings per share growth, net income, revenue growth,
revenues, expenses, return on equity, return on total capital, return on
assets, earnings (including EBITDA and EBIT), cash flow, share price, economic
value added, gross margin, operating income, or total shareholder return. The
Performance Goals may be based either on the performance of the Company, a
subsidiary or subsidiaries, any branch, department, business unit, or other
portion thereof under such measure for the Plan Year 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 at
the time of making an Incentive Award.

 

(d)     When the Performance Goals are determined by the
Committee, the Committee shall specify the manner in which the Performance
Goals shall be calculated and may also determine that unusual items or certain
specified events or occurrences, including changes in accounting standards or
tax laws, shall be excluded from the calculation of the Performance Goal.

 

Section 6.  Incentive Targets and Awards.

 

(a)     Incentive compensation targets (“Incentive Targets”)
shall be determined by the Committee and expressed as a percentage of the
participants’ base salary in effect at the time the Performance Goal is
established. The Incentive Targets shall be based upon the level of achievement
of the Performance Goals, and shall be determined in writing by the Committee
at the commencement of each Plan Year.

 

(b)     Incentive awards (“Incentive Awards”) may be
earned by participants during a Plan Year; 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 Plan Year and (ii) may not exceed the participant’s
Incentive Target established for the actual level of achievement attained.

 

(c)     The Committee shall have no discretion to increase
any Incentive Target or Incentive Award payable that would otherwise be due
upon attainment of the Performance Goals, but the Committee may in its
discretion reduce or eliminate such Incentive Target or 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 Target or
Incentive Award payable to any other participant.

 

(d)     The maximum Incentive Award payable to any
participant for any Plan Year is $5,000,000.

 

(e)     Except as provided in Section 7 of the Plan,
Incentive Awards shall be paid in cash within 2 1¤2 months
following the end of a Plan Year and after the 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 value equal to the cash
payment, under and pursuant to the terms of the Company’s 1999 Long-Term
Incentive Plan, or any successor or substitute plan, in the case of a
participant who at the time of payment has not met the stock ownership
requirements set by the Committee.

 

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.

 

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Section 9.  Tax Consequences. 
It is intended that nothing in this Plan shall change the tax
consequences of the Plan under Federal or State law and specifically shall not
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 Section 162(m) of the
Code.

 

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 information regarding employee
status changes:

 

(a)     New Hire, Transfer, Promotion. A newly hired employee qualifying for participation
will participate in the Plan Year following the year in which they are hired,
unless otherwise specified in their employment offer. An employee who is
promoted or transferred during the first 90 day period of the Plan Year 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 program and the percentage of the Plan
Year the employee is in the participating position. 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.

 

(b)     Demotion. No Incentive Award shall be paid to an employee who has been demoted
during the Plan Year 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 the Plan Year 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 may be considered for a pro rata Incentive
Award, provided the employee otherwise qualifies for payment of an Incentive
Award.

 

(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 a pro
rata Incentive Award may be made,
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 the Plan Year for any reason other than the reasons cited
above, including termination for death or disability, may be considered for a pro rata 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) except to the extent as may be
necessary to delay payment to avoid the imposition of additional taxes and interest
under Section 409A of the Code.

 

Section 11.  Change of Control. 
In the event of a Change of Control of the Company, as then defined
under the Company’s 1999 Long-Term Incentive Plan, or its successor, the Plan
Year 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 calendar
year that elapsed through the date of the Change of Control, at target levels
or, if, actual performance is greater, at actual levels, and Incentive Awards
shall be paid

 

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to participants on such pro-rata
basis in accordance with the provisions of Section 6(e), but subject to
the Committee’s overall discretion as provided in Section 6(c).

 

Section 12.  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 Plan Year must be presented to the Committee
within thirty (30) days following the payment date of the Incentive Award
for that Plan Year, or the participant’s right to dispute a payment will be
irrevocably waived. The employee with the concern will be given an opportunity
to present his or her issues to the Committee. A decision will be rendered by
the Committee within ten (10) business days of the meeting. 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 13.  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;
provided, however, that the material terms of the Performance Goals, including
any amendments to the class of employees eligible to receive compensation
pursuant to, or participate in, the Plan, the criteria upon which the
Performance Goals are based or the maximum amount of compensation payable to
any employee hereunder, may not be amended without shareholder approval. No
employee or participant shall have any vested right to payment of any Incentive
Award hereunder prior to its payment. The Company shall notify affected
employees in writing of any amendment or Plan termination.

 

4Exhibit 10.1
 

Reliant Energy, Inc.

1000 Main Street

Houston, TX  77002

 

April 18, 2006

 

Seneca
Capital, L.P.

590
Madison Ave.

28th
Floor

New
York, NY  10022

Attn:
Douglas A. Hirsch

 

 

Dear
Mr. Hirsch:

 

 

Reference is made to the submission (the “Advance
Notice Submission”) by Seneca Capital, L.P. (“Seneca”) of its intention to
nominate three candidates to stand for election to the Board of Directors (the “Board”)
of Reliant Energy, Inc. (the “Company”) at the Company’s 2006 Annual
Meeting of Stockholders (the “2006 Annual Meeting”) and Seneca’s stated
intention to solicit proxies in support of its nominees (the “Proxy Contest”).

 

As we have discussed, subject to Seneca’s agreement
to the terms and conditions set forth in this letter agreement (this “Letter
Agreement”), the Company agrees that on or before September 1, 2006, the
Nominating and Corporate Governance Committee will recommend the appointment,
and the Board will appoint, to the Board as a director a representative of a
substantial institutional stockholder of the Company (based on such stockholder’s
stock ownership as of the date of such appointment), the particular identity of
such individual to be determined by the Board in its sole discretion. It being
the intent of the parties that representative means an officer, employee or
former executive of that substantial institutional shareholder or a person who
represents the interests and objectives of a substantial institutional
shareholder of the Company. The Company further agrees to issue a press release
announcing this settlement and the terms thereof no later than 5:30 P.M.
EDT on Tuesday, April 18, 2006. Effective upon execution of this Letter
Agreement, Seneca irrevocably withdraws its Advance Notice Submission and
agrees to terminate the Proxy Contest. Seneca further agrees that it shall
vote, and shall cause each of its affiliated entities and individuals,
described in the Advance Notice Submission or otherwise, to vote, all shares of
the Company’s common stock which they are entitled to vote at the 2006 Annual
Meeting in favor of the election of each of the Board’s nominees.

 

If the terms of this Letter Agreement are acceptable
to you, please execute where indicated below and return a signed copy of this
Letter Agreement to the undersigned, which shall thereupon constitute a binding
agreement.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  RELIANT ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ 
  Joel Staff

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joel Staff

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  
						

 

Accepted
and Agreed to as

of
the date first written above:

 

	
  SENECA CAPITAL, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: SENECA CAPITAL ADVISORS, LLC,

  	
   

  	
   

  
	
  its general partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  /s/ 
  Douglas A. Hirsch

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Douglas A. Hirsch

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

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