Document:

Exhibit 10.7

 

EQUITABLE
RESOURCES, INC.

2009 SHAREHOLDER VALUE PLAN

 

EQUITABLE RESOURCES, INC. (the “Company”) hereby establishes this
EQUITABLE RESOURCES, INC. 2009 SHAREHOLDER VALUE PLAN (the “Plan”) as of this 23rd
day of December, 2008, 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 this Plan
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 incentive
benefits through this Plan, in the form of awards qualifying as “Other
Stock-Based Awards” under Section 6.05 of the 1999 Plan.

 

NOW, THEREFORE, the Company
hereby provides for incentive benefits for certain executive employees of the
Company and adopts the terms of the Plan on the following terms and conditions:

 

Section 1.  Purpose.  The main purpose of the Plan is to provide
incentive opportunities to key executives to further align their interests with
those of the Company’s shareholders and with the strategic objectives of the
Company.  Awards granted hereunder may be
earned by achieving relative performance levels against a pre-determined peer
group 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.  As a subset of the 1999 Plan, this Plan is
subject to and shall be governed by the terms and conditions of the 1999 Plan.  Capitalized terms used herein and not
otherwise defined shall have the meanings given such terms in the 1999
Plan.  The Share Units granted under this
Plan are intended to be “Other Stock-Based Awards” under Section 6.05 of
the 1999 Plan, are not intended to meet the performance-based compensation
exemption from Section 162(m) of the Code, and therefore are not
subject to the conditions and limits of 6.04 of the 1999 Plan.

 

Section 2.  Effective Date.  The effective date of this Plan is January 1,
2009.  The Plan will remain in effect
until the earlier of December 31, 2009 or the closing date of a Change of
Control event defined in Section 5 unless otherwise amended or terminated
as provided in Section 17 (“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 Plan, up to a maximum of 35
employees.  The CEO’s selections will
become participants in the Plan (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, as defined below, the CEO shall, in his
or her sole discretion, determine whether the employee will be eligible to
participate in the Plan, provided that the Committee must approve all new
participants to the Plan.

 

Section 4.  Performance Incentive Share Unit Awards.  Awards under the Plan are designated in the
form of performance incentive share units (the “Share Units”), which are awards
to be settled in cash, the amount per unit of which is determined by reference
to one share of the Company’s common stock. Upon being selected to participate
in the Plan, each Participant shall be awarded a number of Share Units, which
award shall be proposed by the CEO and approved by the Committee.  The maximum number of Share Units that may be
awarded under the Plan is 1,000,000, subject to adjustment as provided  in Section 12.

 

The
Share Units shall be held in book entry form by the Company until settled in
cash as described herein.  Share Units do
not represent actual shares of stock.  A
Participant shall have no right to exchange the Share Units for cash, stock or
any other benefit and shall be a mere unsecured creditor of the Company with
respect to such Share Units and any future rights to benefits.

 

Section 5. 
Performance Condition.  Subject to Section 7,
the amount to be distributed 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 close of business at 5:00 p.m., Eastern
Standard Time, on the Termination Date (the “Performance Period”).

 

(a)                                  Total Shareholder Return.  For
purposes of this Plan, total shareholder return will be calculated as follows:

 

Step 1

 

The “Beginning
Point” for the Company and each company in the peer group is defined as one
share of common stock with a value equal to the average closing stock price as
reported in the Nationally Recognized Reporting Service for the ten (10) business
day period ending on and including February 23, 2005, for each company.  All references in this Plan to the “Nationally
Recognized Reporting Service”  shall be
references to either the print or electronic version of a nationally recognized
publication that reports the daily closing stock price of New York Stock
Exchange listed companies.

 

Step 2

 

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

 

2

 

additional shares of
such company’s common stock.  The closing
price on the last business day of the month in which the record date for the
dividend occurs will be used as the basis for determining the number of shares
to be added.  The resulting total number
of shares accumulated during the Performance Period is referred to as the Total
Shares Held at Ending Point.

 

Step 3

 

Except as
provided in the following sentence, the “Ending Point” is defined as Total
Shares Held at Ending Point for each company times the average closing stock
price as reported in Nationally Recognized Reporting Service  for the last ten (10) business days of the Performance
Period for that company.  In the event of
a change of control (as then defined in the 1999 Plan) of the Company (a “Change
of Control”), the Ending Point for each company in the peer group shall be the
Total Shares Held at Ending Point for that company times the average of the
closing price of such company’s common stock as reported in Nationally
Recognized Reporting Service  for the ten (10) business
days preceding the closing of the Change of Control transaction.

 

Step 4

 

Total
Shareholder Return (“TSR”) will be expressed as a percentage and is calculated
by dividing the Ending Point by the Beginning Point and then subtracting 1 from
the result.  Each company including the
Company will be ranked in descending order by the TSR so calculated.

 

If the common
stock of any company in the peer group ceases to be publicly traded during the
Performance Period, such company shall be assigned a TSR value of negative 100%
for purposes of the Plan.

 

(b)                                 Average Absolute Return on Total Capital (“ROTC”).  For
purposes of this Plan, 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 annualized average
of those amounts, calculated by dividing the sum of the quarterly ROTC values by
the number of whole completed quarters in the Performance Period and
multiplying by four (4), shall equal the average absolute return on total
capital for the Performance Period.

 

3

 

The above amounts shall
be calculated as reported on the Company’s financial statements.  The Committee may base such calculation on
unaudited financial statements provided that the methodology for determining
each financial component used in the calculation of Average Absolute ROTC is
the same as that which would be used in the preparation of the Company’s
audited 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.  A
Participant’s  Performance Adjusted Unit
Value shall be calculated by dividing (i) the product of (A) the sum
of such Participant’s Adjusted Share Units and Dividend Units (calculated as
described below and, if appropriate, modified as described in Section 12) multiplied
by (B) the payout factor identified on the payout matrix (Attachment B)
that corresponds to (X) the Company’s relative TSR ranking on the payout
matrix for the period specified herein combined with (Y) the Company’s
average absolute return on total capital performance on the payout matrix for
the Performance Period multiplied by (C)  the closing price of the Company’s
common stock at the end of the Performance Period or, in the case of a Change
of Control, the average of the closing price of the Company’s common stock for
the ten (10) business days preceding the Change of Control transaction, in
each case as reported in the Nationally Recognized Reporting Service by (ii) such
Participant’s Adjusted Share Units.  Solely
for the purpose of calculating the Performance Adjusted Unit Value, Share Units
will be cumulatively credited with cash dividends that are paid on the Company’s
common stock on or after January 1, 2005 in the form of additional units
and such units shall be referred to as the “Dividend Units”.  These Dividend Units shall be deemed to have
been purchased on the last business day of the month in which the record date
for the dividend occurs, using the closing stock price for the Company as
reported in the Nationally Recognized Reporting Service.

 

Payments under the Plan
are expressly contingent upon achievement of the Performance Condition.

 

Section 6.  Issuance and
Distribution. 
Subject to Section 7, each Participant will be paid an amount (the “Awarded
Value”) equal to such Participant’s number of Adjusted Share Units multiplied
by the excess, if any, of (a) the Performance Adjusted Unit Value over (b) the
“Threshold Unit Value” approved by the Compensation Committee and, if
appropriate, modified as described in Section 12. Except as provided in
the remainder of this Section 6, the Awarded Value will be distributed in
cash no later than Friday, March 13, 2010.  Subject to Section 7, in the event of a
Change of Control, the Awarded Value will be distributed in cash on the closing
date of the transaction.  Notwithstanding
the foregoing, to the extent required under Section 409A of the Code or

 

4

 

the regulations thereunder, no distributions may be made earlier than
the time permitted under such regulations to any affected Participant.

 

Section 7.  Change of
Status; Overall Limit. 
In making decisions regarding employees’ participation in the Plan 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 it 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.  Adjusted Share Units
are forfeited.

 

(b)                                 Death
and Disability.  Participants who die
or become Disabled, as defined below, before the end of the Performance Period,
will retain their Adjusted Share Units for the Performance Period, contingent
upon achievement of the Performance Condition set forth in Section 5, as
follows, and any remainder shall be forfeited:

 

	
  Date of Death or Disability

  	
   

  	
  Percent Retained

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prior to April 1, 2009

  	
   

  	
  0

  	
  %

  
	
  April 1, 2009 – June 30, 2009

  	
   

  	
  50

  	
  %

  
	
  July 1, 2009 – September 30, 2009

  	
   

  	
  75

  	
  %

  
	
  October 1, 2009 and thereafter

  	
   

  	
  100

  	
  %

  

 

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

 

(c)                                  Termination.  Adjusted Share Units are forfeited and no
award shall be paid to any employee whose services are terminated prior to the
payment of Adjusted 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 retain his or her Adjusted Share Units for the
Performance Period, contingent upon achievement of the Performance Condition
set forth in Section 5, as follows, and the remainder shall be forfeited:

 

	
  Termination Date

  	
   

  	
  Percent
  Retained

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prior to July 1, 2009

  	
   

  	
  0

  	
  %

  
	
  July 1, 2009 – September 30, 2009

  	
   

  	
  25

  	
  %

  
	
  October 1, 2009 – December 30,
  2009

  	
   

  	
  50

  	
  %

  
	
  December 31, 2009 and thereafter

  	
   

  	
  100

  	
  %

  

 

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

 

5

 

·                  Determining and certifying in writing the extent
to which the Performance Condition has been achieved prior to any payments
under the Plan,

 

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

 

·                  Approving Plan Participants,

 

·                  Authorizing Share Unit awards to Participants,

 

·                  Adjusting Performance Adjusted Unit Value to account
for extraordinary events,

 

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

 

·                  Maintaining final authority to modify or
terminate the Plan at any time.

 

The interpretation and
construction by the Committee of any provisions of the Plan or of any Adjusted Share
Units shall be final.  No member of the
Committee shall be liable for any action or determination made in good faith on
the Plan or any Share Units thereunder. 
The Committee may designate another party to administer the Plan,
including Company management or an outside party.  All conditions of the Share Units must be
approved by the Committee.  The Committee
shall approve the number of Share Units to be awarded to each Participant.  The associated terms and conditions of the Plan
will be communicated to Participants as close as possible to the date an award
is made.  The Participants will sign and
return a participant agreement to the Committee.

 

Section 9.  Tax Consequences to Participants.  It is intended that: (i) until the
Performance Condition is satisfied, a Participant’s right to payment for an
award under this Plan shall be considered to be subject to a substantial risk
of forfeiture in accordance with those terms as defined or referenced in
Sections 83(a), 409A and 3121(v)(2) of the Code; (ii) the Awarded
Value shall be subject to employment taxes only upon the satisfaction of the
Performance Condition; and (iii) until the Awarded Value is actually paid
to the Participant, the Participants shall have merely an unfunded, unsecured
promise to be paid the benefit, and such unfunded promise shall not consist of
a transfer of “property” within the meaning of Code Section 83.  The payment of awards under this Plan is not
intended to meet the performance-based compensation exemption from Section 162(m) of
the Code.

 

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

 

Section 11.  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.  Nothing herein shall prevent the Company from
maintaining additional compensation plans and arrangements, provided however
that no payments shall be made

 

6

 

under such plans and arrangements if the effect thereof would be the
payment of compensation otherwise payable under this Plan regardless of whether
the Performance Condition was attained.

 

Section 12.  Successors;
Changes in Stock.  The
obligation of the Company under the Plan shall be binding upon the successors and assigns of the Company.  If a dividend or other distribution shall be
declared upon the Company’s common stock payable in shares of Company common
stock, each Participant’s Share Units and Dividend Units and the Threshold Unit
Value shall be adjusted by adding thereto the number of shares of Company
common stock that would have been distributable thereon if such units had been
actual Company shares and outstanding on the date fixed for determining the
shareholders entitled to receive such stock dividend or distribution.  In the event of any spin-off, split-off or
split-up, or dividend in partial liquidation, dividend in property other than
cash or Company common stock, or extraordinary distribution to shareholders of
the Company’s common stock, each Participant’s 
Share Units and Dividend Units and the Threshold Unit Value 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 Section 409A of the Code.  A Participant’s Share Units as adjusted by
this Section 12 shall be such Participant’s “Adjusted Share Units”.

 

In the case of a Change of Control, any
obligation under the Plan
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 Performance
Adjusted Unit Value shall be calculated based on the closing price of such
common stock on the closing date of the transaction on the principal market on
which such common stock is traded, (ii) there shall be substituted for
each Adjusted Share Unit constituting an award, the number and kind of shares
of stock or other securities (or cash or other property) into which each
outstanding share of the Company’s common stock shall be so changed or for
which each such share shall be exchangeable, and (iii) the Threshold Unit
Value shall be appropriately and equitably adjusted; provided that any such
adjustment shall be consistent with Section 409A of the Code.  In the case of any such adjustment, the Share
Units shall remain subject to the terms of the Plan.

 

Section 13.  Dispute Resolution.  The Participant may make a claim to the
Committee with regard to a payment of benefits provided herein.  If the Committee receives a claim in writing,
the Committee must advise the Participant of its decision on the claim in
writing in a reasonable period of time after receipt of the claim (not to
exceed 120 days).  The notice shall set
forth the following information:

 

(a)                                  The specific basis for its decision,

 

7

 

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

 

Section 14.  Applicable Law.  This Plan shall be governed by and construed
under the laws of the Commonwealth of Pennsylvania without regard to its
conflict of law provisions.

 

Section 15.  Severability.  In the event that any one or more of the
provisions of this Plan shall be held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.

 

Section 16.  Headings.  The descriptive headings of the Sections of
this Plan are inserted for convenience of reference only and shall not
constitute a part of this Plan.

 

Section 17. 
Amendment or Termination of this Plan.  This Plan may be
amended, suspended or terminated by the Company at any time upon approval by
the Committee and following a determination that the Plan 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 the Company may amend this Plan from time to time without
any participant’s consent to the extent deemed necessary or appropriate, in its
sole discretion, to effect compliance with Section 409A of the Code,
including regulations and interpretations thereunder, which amendments may
result in a reduction of benefits provided hereunder and/or other unfavorable
changes to participants, (ii) no amendment may alter the time of payment
as provided in Section 6 of the Plan, and (iii) no amendment may be
made following a Change of Control.

 

8

 

Attachment A

 

2009 SHAREHOLDER VALUE PLAN

 

Peer Group

 

AGL Resources
Inc.

ATMOS Energy
Corporation

CMS Energy
Corporation

Dynegy
Incorporated

El Paso
Corporation

Energen
Corporation

Laclede Group, Inc.

MDU Resources
Group Incorporated

National Fuel
Gas Company

New Jersey
Resources Corporation

NICOR, Inc.

NISOURCE
Incorporated

Northwest
Natural Gas Company

OGE Energy
Corporation

ONEOK Inc.

Piedmont
Natural Gas Company, Inc.

Questar
Corporation

Sempra Energy

Southern Union
Company

Southwest Gas
Corporation

Southwestern
Energy Company

UGI
Corporation

Westar Energy
Inc. (formerly Western Gas Resources Incorporated)

WGL Holdings, Inc.

Williams
Industries, Incorporated

 

9

 

Attachment B

 

SHAREHOLDER VALUE PLAN Payout Matrix

 

Payout Factor

 

Average Absolute Return on Total Capital

 

	
  Greater than or equal to 10%

  	
   

  	
  0.90

  	
   

  	
  1.10

  	
   

  	
  1.25

  	
   

  	
  1.50

  	
   

  	
  1.75

  	
   

  	
  2.00

  	
   

  	
  2.25

  	
   

  	
  2.50

  	
   

  
	
  Greater than or equal to 9% but less than
  10%

  	
   

  	
  0.60

  	
   

  	
  0.80

  	
   

  	
  1.00

  	
   

  	
  1.20

  	
   

  	
  1.40

  	
   

  	
  1.60

  	
   

  	
  1.80

  	
   

  	
  2.00

  	
   

  
	
  Greater than or equal to 8% but less than
  9%

  	
   

  	
  0.40

  	
   

  	
  0.60

  	
   

  	
  0.80

  	
   

  	
  1.00

  	
   

  	
  1.20

  	
   

  	
  1.30

  	
   

  	
  1.40

  	
   

  	
  1.50

  	
   

  
	
  Less than 8%

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.40

  	
   

  	
  0.50

  	
   

  	
  0.60

  	
   

  	
  0.70

  	
   

  	
  0.80

  	
   

  
	
   

  	
   

  	
  26 – 24

  	
   

  	
  23 – 21

  	
   

  	
  20 – 18

  	
   

  	
  17 – 14

  	
   

  	
  13 – 11

  	
   

  	
  10 – 8

  	
   

  	
  7 – 5

  	
   

  	
  4 – 1

  	
   

  

Total Shareholder Return Rank

 

10Exhibit
10.8

 

EQUITABLE RESOURCES, INC.

2005 SHORT-TERM INCENTIVE PLAN

 

EQUITABLE
RESOURCES, INC. (the “Company”) hereby establishes this EQUITABLE RESOURCES,
INC 2005 SHORT-TERM INCENTIVE PLAN (the “Plan”) as of this 1st day of January,
2005, in accordance with the terms provided herein.

 

WHEREAS, the
Company desires to establish an 
incentive plan which describes the goals of the Company and the
methodology for awarding incentive amounts; NOW, THEREFORE, the Company hereby
adopts the terms of the Plan as follows:

 

Section 1.  Incentive
Program Purposes.  The Company’s main
purpose in providing the incentive programs described within the Plan
(collectively, the “Incentive Programs”) is to maintain a competitive level of
total cash compensation and to align the interests of the Company’s employees
with those of the Company’s shareholders, customers, and with the strategic
objectives of the Company.  By placing a
portion of employee compensation at risk, the Company can reward performance
based on the overall performance of the Company, the business segment and the
individual contribution of each employee.

 

Section 2.  Effective
Date.  The effective date of this
Plan is January 1, 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 accordance
with Section 17.

 

Section 3.  Eligibility.  Specific eligibility requirements for each
Incentive Program shall be proposed by the President of each business segment
or corporate officer, as applicable, and approved by the Company’s Vice
President-Human Resources.  Based upon
such eligibility requirements, the Company’s Vice President-Human Resources or
the Company’s Director of Compensation and Benefits, as applicable, may
designate any eligible employee for participation in the Plan in his or her
complete and sole discretion.  Eligible
employees who are designated to participate in an Incentive Program will be
notified in writing of their participation and given a Plan document for their
reference.

 

Section 4.  Administration
of the Plan.  The Equitable Resources
Headquarters Short-Term Incentive Program (the “Headquarters Incentive Program”),
and any other Incentive Program that covers the officers of the Company, shall
be administered by the Compensation Committee of the Board of Directors (the “Committee”).  The Company’s Director of Compensation and
Benefits shall administer all other Incentive Programs under the general
direction of the Company’s Vice President-Human Resources; provided,
however, that the Committee shall at all times retain the discretion with
respect to all Incentive Programs to reduce, eliminate, substitute or determine
the source of any payment or award hereunder without regard to any particular
factors specified in the Plan.  On an
annual basis, the Committee must review and approve (a) the Plan, (b) the
Headquarters Incentive Program, and other Incentive Programs covering officers
of the Company, (c) the Incentive Targets, as defined in Section 8 of
the Plan, for officers of the Company, (d) the methodology for determining
the incentive pools, including the Financial Measures and the Value Drivers, as
defined in Section 7 of the Plan, and (e) the projected payout under
the Plan and under each Incentive Program. 
The Committee must also review and approve all incentive payments under
the Headquarters Incentive Program and other Incentive Programs covering
officers of the Company, as well as any proposed amendments to the Plan
throughout the Plan Year.

 

 

Section 5.  Incentive
Programs.  The following Incentive
Programs shall be administered under the Plan:

 

·                  Equitable Resources Headquarters Short-Term Incentive
Program (including the shared services sub-programs);

 

·                  Equitable Utilities Short-Term Incentive Program
(including any collectively bargained sub-programs);

 

·                  Equitable Supply Short-Term Incentive Program; and

 

·                  NORESCO Short-Term Incentive Program.

 

Section 6.  Definitions.  The following provides the definition of
certain Financial Measures, identified in Section 7 of the Plan, as may be
used in the Incentive Programs:

 

(a)                                  Net Income After Tax. 
Net Income After Tax, if used in the Headquarters Incentive Program, is
calculated as follows:

 

Total Revenue of the Company
minus Total Expenses of the Company for the Plan Year.

 

For purposes of the foregoing calculation, Total Revenue shall mean
revenue from continuing operations. 
Income from unusual items, as determined by the Company’s Chief
Financial Officer, will be excluded. 
Expenses shall include interest, taxes, corporate overhead and the
accrual charge for the Incentive Program funding.  Expenses from unusual items, as determined by
the Company’s Chief Financial Officer, will be excluded.  The Company’s Chief Financial Officer is responsible
for determining this Financial Measure under the general direction of the
Committee.

 

Net Income After Tax, if used in all other Incentive Programs, is
calculated as follows:

 

Total Revenue of the applicable
business segment minus Total Expenses of the applicable business segment for
the Plan Year.

 

This calculation will be completed by the President of the respective
business segment and submitted to the Company’s Chief Financial Officer for
review and approval.  The Company’s Chief
Financial Officer will determine, for purposes of the Plan, the final business
segment Net Income After Tax under the general direction of the Committee.

 

(b)                                 Return on Total Capital. 
The Company’s Return on Total Capital is calculated as follows:

 

Net Income After Tax + (Interest
x (1 — Effective Tax Rate) 

(Debt +
Book Equity-Cash)

 

For purposes of the foregoing calculation, all factors in the
denominator shall be calculated by determining each specific factor at the end
of each of the four quarters of the Plan Year and at the end of December of
the previous year.  The average of those
five numbers shall be the value used for each factor.  The Company’s Chief Financial Officer is
responsible for determining this Financial Measure under the general direction
of the Committee.

 

 

(c)                                  Earnings per Diluted Share Growth Rate. 
The Company’s Earnings per Diluted Share Growth Rate is calculated as
follows:

 

The positive
difference between the Company’s actual earnings per diluted share for the Plan
Year and the year immediately preceding the Plan Year, divided by the Company’s
earnings per diluted share for the year immediately preceding the Plan Year.

 

For purposes of the foregoing calculation, actual earnings per share
shall be as reported in the Company’s published financial statements for the
subject year on a fully-diluted basis; provided, however, that any changes in
tax laws, the effects of acquisitions and extraordinary items as defined by
generally accepted accounting principles, including divestitures and Financial Accounting
Standards Board accounting changes, may be excluded in the discretion of the
Company’s Chief Financial Officer under the general direction of the Committee.

 

(d)                                 Total Shareholder Return. 
The Company’s Total Shareholder Return (“TSR”) is calculated as follows:

 

	
  (B + C) — A

  	
   

  
	
  A

  	
   

  

 

                                                For purposes of the foregoing
calculation:

 

                                                A is the average closing price of the
Company’s common stock for the first ten trading days of the Plan Year.

 

                                                B is the average closing price of the
Company’s common stock for the last ten trading days of the Plan Year.

 

                                                C is the dividends per share paid on the
Company’s common stock in the plan year.

 

                                                The Company’s Chief Financial Officer is
responsible for determining this Financial Measure under the general direction
of the Committee.

 

(e)                                  Peer Group. 
The Committee will establish a Peer Group for purposes of peer
comparative performance measures used in the Plan.  This Peer Group is listed in Attachment A.  Any changes to the Peer Group must be
approved by the Committee.

 

Section 7.  Determination
of Incentive Pools.

 

(a)                                  All Incentive Programs provide for
incentive payments that are funded based on incentive pools.  An incentive pool is created for each
Incentive Program.  The base amount of
each incentive pool shall be determined by the extent to which one or more
specific and defined financial measures (the “Financial Measures”) are achieved
for the Plan Year.  One or more
additional, defined operational measures (“Value Drivers”) may affect the
determination of the incentive pools, in the discretion of the Company’s Chief
Executive Officer (the “CEO”).  The Value
Drivers for each of the incentive pools are attached hereto as
Attachment B.

 

 

(b)                                 The following chart provides the specific
Financial Measures for each of the Incentive Programs.

 

	
  Incentive Program

  	
   

  	
  Financial Measures

  
	
  Equitable
  Resources Headquarters

  	
   

  	
  ·       Return on Total Capital

  (Peer Comparison)

  
	
   

  	
   

  	
  ·       Earnings per Diluted Share Growth Rate

  (Peer Comparison)

  
	
   

  	
   

  	
  ·       Earnings per Diluted Share Growth Rate

  (EQT Year to Year Comparison)

  
	
   

  	
   

  	
  ·        Business Unit Value Driver Performance

  
	
  Equitable
  Utilities

  	
   

  	
  Net Income After
  Tax

  
	
  Equitable Supply

  	
   

  	
  Net Income After
  Tax and Volume

  
	
  NORESCO

  	
   

  	
  Net Income After
  Tax

  

 

(c)                                  Each incentive pool is determined based
on the Financial Measures listed above, any minimum threshold amounts
established therefor, and, if applicable, the Value Drivers, in accordance with
the weightings assigned to each as listed on Attachment C.  Attachment D to this Plan specifies the
base amount for each incentive pool, expressed as a multiple of the total of
all Incentive Targets, as defined in Section 8 of the Plan, of those
participants in each particular Incentive Program.  The CEO may, in his sole and absolute
discretion, adjust the determination of the base amount of any business segment
incentive pool (i) by any amount up to fifty (50%) percent based on the
Value Drivers applicable to the particular business segment incentive pool and (ii) by
an amount up to twenty-five percent (25%) based on the impact of weather, the
prices of gas, oil and liquids, and/or any acquisitions or divestitures.  The Committee may, in its sole and absolute
discretion, adjust the determination of the base amount of the Headquarters
Incentive Program by an amount of up to twenty-five percent (25%) based on the
impact of weather, the prices of gas, oil and liquids, acquisitions or
divestitures and any peer group or performance factors determined by the  Committee.  Such adjustments by the CEO or the Committee
may be either positive or negative.

 

Section 8.  Incentive
Targets.  Each participant under the
Plan shall be given an incentive target (an “Incentive Target”) that shall be
determined based on market competitive levels. 
Incentive Targets for all corporate officers shall be determined within
90 days of the commencement of each Plan Year and approved by the
Committee.  All other Incentive Targets
shall be determined within 90 days of the commencement of each Plan Year by the
Company’s Director of Compensation and Benefits, in consultation with the
appropriate business segment President or corporate officer, as applicable, and
approved by the Company’s Vice President-Human Resources.  Actual incentive awards payable (“Incentive
Awards”), subject to adjustments as provided in the Plan, shall be based on the
overall determination of the incentive pools and on individual performance.

 

 

Section 9.  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 must support the approved business plan of the Company,
affiliate or business unit, as applicable, and should identify how the
participant will support any specific Value Drivers established.

 

(b)                                 A copy of each participant’s Performance
Goals and objectives shall be determined in writing, and kept on file with the
appropriate business segment Human Resources Department, by February 28 of
the Plan Year to which they relate.

 

(c)                                  Following the determination of the
incentive pools as described in Section 7, an evaluation of each
participant’s actual performance relative to his or her individual Performance
Goals for the Plan Year shall be completed. 
Performance can be rated as Exceptional, Successful, Marginal, Fails to
Meet Expectations and Not Rated.  The
definition of each rating is as follows:

 

	
  Performance Level

  	
   

  	
  Performance Definition

  
	
   

  	
   

  	
   

  
	
  Exceptional

  	
   

  	
  Makes significant contributions to department, business unit, and/or
  Company’s business results. Overall performance far exceeds all requirements
  necessary to fulfill the principal duties, responsibilities, objectives and
  expectations of the position.

  
	
   

  	
   

  	
   

  
	
  Successful

  	
   

  	
  Overall performance meets all and may exceed some of the requirements
  necessary to fulfill the principal duties, responsibilities, objectives and
  expectations of the position.

  

 

 

	
  Marginal

  	
   

  	
  Overall performance meets most of the requirements necessary to
  fulfill the principal duties, responsibilities, objectives and expectations
  of the position. Performance Improvement Plan is required.

  
	
   

  	
   

  	
   

  
	
  Fails to Meet
  Expectations

  	
   

  	
  Overall performance fails to meet all or most of the requirements
  necessary to fulfill the principal duties, responsibilities, objectives and
  expectations of the position.

  
	
   

  	
   

  	
   

  
	
  Not Rated

  	
   

  	
  Appropriate only
  for employees who have been in their current position less than three months.

  

 

Based on the evaluation
of the employee’s performance relative to his or her Performance Goals,
individual performance adjustments can be made by the business segment
President or appropriate corporate officer, as applicable, ranging from
elimination of the Incentive Target to 150% of the Incentive Target.  The CEO must approve all individual
performance adjustments under the Plan and may make individual performance
adjustments in excess of 150%.

 

Section 10.  Distributing
the Incentive Pool.  Incentive Awards
may be earned based on the determination of the incentive pools and individual
performance as follows:

 

(1)                                  The incentive pool is determined as
described in Section 7.  If the
established Financial Measures for the incentive pool are not achieved, the
process to calculate Incentive Awards for the related Incentive Program is
terminated.

 

(2)                                  The performance of each employee is
reviewed by the business segment President or appropriate corporate officer, as
applicable, and the individual performance adjustment described in Section 9,
if any, is applied as appropriate to the employee’s original Incentive Target.

 

(3)                                  The Incentive Targets for each employee
within an incentive pool, after giving effect to the individual performance
adjustments described in Section 9, are totaled.  Each employee’s adjusted Incentive Target is
then calculated as a percent of the total adjusted Incentive Targets for all employees
within the incentive pool.

 

(4)                                  The percent assigned to each employee in
step 3 is multiplied by the total incentive pool generated, resulting in
the amount of the employee’s actual Incentive Award payable, subject to
reduction, elimination or substitution by the Committee as provided in Section 4.

 

(5)                                  Additional or substituted distributions,
if any, may be paid in cash or other forms from the Plan or other source as
determined by the Committee, in its discretion.

 

Except as provided
in Sections 10(5), 11 and 14 of the Plan, the amount of the Incentive
Awards payable from the Plan, as calculated in Section 10(4), above, shall
be paid in cash to participants 

 

 

as promptly as
practicable following the end of a Plan Year and after determination of the
incentive pools and the achievement of the Performance Goals.  An Incentive Award shall not be earned and a
participant shall have no vested interest or entitlement to any Incentive Award
hereunder prior to its actual payment.

 

Section 11.  Incentive
Pool Calculation and Distribution for Selected Employees.

 

(a)                                  Employees who directly report to the CEO
or those who are Chief Operating Officers of the Company’s business segments
will have eighty percent (80%) of their Incentive Award tied to the funding multiple
of the Headquarters Incentive Program incentive pool and twenty percent (20%)
of their Incentive Award tied to the funding multiple of their specific
business segment incentive pool. 
Employees who directly report to Chief Operating Officers of the Company’s
business segments will have twenty percent (20%) of their Incentive Award tied
to the funding multiple of the Headquarters Incentive Program incentive pool
and eighty percent (80%) of their Incentive Award tied to the funding multiple
of the appropriate business segment incentive pool.

 

(b)                                 In accordance with the Company’s Stock
Ownership Guidelines adopted on January 30, 2003, the CEO may elect to pay
all or some of an individual’s Incentive Award in stock if the individual has
not satisfied the Guideline.

 

Section 12.  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.

 

Section 13.  Tax
Consequences.  It is intended that
nothing in the Plan shall change the tax consequences of the Plans under
Federal or State law and specifically shall not cause the participants in the
Incentive Programs to be taxed currently under the Constructive Receipt or
Economic Benefit Doctrines and as expressed in Sections 451 and 83 of the
Internal Revenue Code of 1986, as amended.

 

Section 14.  Change
of Status.  In making decisions
regarding employees’ participation in the Plan, the Company’s Vice
President-Human Resources or Director of Compensation and Benefits, as
applicable, may consider any factors that he or she may consider relevant in
their sole discretion .  The Company
shall have no obligation to exercise its discretion to make an award to any
employee affected by the described status changes.  The following guidelines are provided as
general information regarding employee status changes upon the occurrence of
the events described below, provided that the recommendation to include an
employee in the Plan must originate from the business segment President or
appropriate corporate officer, as applicable:

 

(a)                                  New Hire, Transfer, Promotion. 
A newly hired employee 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 Plan Year to a position qualifying for participation may be recommended for a pro rata Incentive Award 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.

 

(b)                                 Demotion.  No Incentive
Award shall be paid to an employee who has been demoted during the Plan Year
because of performance.

 

 

(c)                                  Termination. 
No Incentive Award shall be paid to any employee whose services are
terminated by the Company prior to payment of an Incentive Award.

 

(d)                                 Resignation. 
No Incentive Award shall be paid to an employee who resigns for any
reason, including retirement, before Incentive Awards are paid.

 

(e)                                  Death and Disability. 
An employee whose status as an active employee is changed prior to
payment of an Incentive Award  because of
death or disability, may be
considered for a pro rata Incentive Award, provided the employee would
have otherwise qualified 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, in any Program or in any Incentive Target or Incentive Award shall confer
any right on any employee to continue in the employ of the Company.

 

Section 15.  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, Incentive Awards shall be paid, on a pro-rata basis for the
portion of the Plan Year elapsed through the date of the Change of Control, to
all Plan participants as if the target Financial Measures and Value Drivers
were achieved and without adjustment to any individual Incentive Targets, but
subject to the Committee’s overall discretion as provided in Section 4.  The pro-rata Incentive Awards payable
pursuant to the foregoing sentence shall be paid immediately prior to
consummation of such Change of Control or at such other time and subject to
such other conditions as the Committee shall in its sole discretion determine,
contingent upon consummation of such Change of Control.

 

Section 16.  Dispute
Resolution.  The following is the
exclusive procedure to be followed by all participants in resolving disputes
arising from participation in and payments made under the Plan.  All disputes relative to a given Plan Year
must be presented to the Director of Compensation and Benefits 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.  Once the Director of
Compensation and Benefits has been notified of a dispute, he or she will
assemble a Compensation Review Committee (the “CRC”) to review the issue.  The CRC will consist of the following: the
Director of Compensation and Benefits, the manager of the employee with the
dispute, the human resources director or vice president of the business
segment, and a peer chosen by the employee with the dispute.  The employee with the concern will be given
an opportunity to present his or her issues to the CRC.  A decision will be rendered by the CRC within
thirty (30) business days of the meeting. 
The Director of Compensation and Benefits will be responsible for preparing
a written version of the decision.  This
decision may be appealed to the Vice President-Human Resources of the
Company.  Appealed decisions will be
reviewed by the Vice President-Human Resources with information requested from
the appropriate parties as he or she may determine in his or her sole
discretion.  The decision made by the
Vice President-Human Resources regarding the matter is final and binding on all
Plan participants.

 

Section 17.  Amendment or Termination of this Plan. 
The Company shall have the right to amend or terminate the Plan at any
time by written action approved by the Committee, provided that any amendment
or termination shall not affect any amounts deferred into the Company’s
Deferred Compensation Plan and that 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.

 

 

ATTACHMENT
A

 

Peer
Group

 

 

 

                CMS Energy Corporation

 

                Energen Corporation

 

                Keyspan Corporation

 

                Kinder Morgan Incorporated

 

                National Fuel Gas Company

 

                NISOURCE Incorporated

 

                OGE Energy Corporation

 

                ONEOK Inc

 

                Peoples Energy Corporation

 

                Questar Corporation

 

                Southwestern Energy Corporation

 

 

ATTACHMENT B

 

Value Drivers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ATTACHMENT C

 

Weighting
of Financial Measures

 

	
  Programs and Measures

  	
   

  	
  Weighting

  	
   

  
	
  Equitable Resources
  Headquarters Short-Term Incentive Plan

  	
   

  	
   

  	
   

  
	
  External
  Measures

  	
   

  	
   

  	
   

  
	
  Return on Total Capital
  (Peer Comparison)

  	
   

  	
  30

  	
  %

  
	
  Earnings per Diluted
  Share Growth Rate (Peer Comparison)

  	
   

  	
  10

  	
  %

  
	
  Internal
  Measures

  	
   

  	
   

  	
   

  
	
  Earnings per Diluted
  Share Growth Rate (Year to Year Comparison)

  	
   

  	
  40

  	
  %

  
	
  Business Unit Value
  Driver Performance

  	
   

  	
  20

  	
  %

  
	
  Total

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Minimum Threshold Amounts

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Programs
  and Measures

  	
   

  	
  Minimum Threshold

  	
   

  
	
  Equitable Resources
  Headquarters Short-Term Incentive Plan

  	
   

  	
   

  	
   

  
	
  Return on Total Capital
  (Actual rate achieved for Plan Year)

  	
   

  	
  8.0

  	
  %*

  

*                 Failure to achieve minimum threshold may result in a
reduction of the incentive pool by up to 25%, as determined by the Committee,
in its sole discretion.

 

 

ATTACHMENT D

 

Incentive Targets

 

	
  Headquarters (excluding
  Shared Financial Services, Information Technology and Risk Management)

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  - Shared Financial
  Services

  	
   

  	
  $

  	
  200,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  - Information
  Technology

  	
   

  	
  $

  	
  600,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  - Risk Management

  	
   

  	
  $

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Utility

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Supply

  	
   

  	
  $

  	
  1,900,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  NORESCO

  	
   

  	
  $

  	
  3,100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  10,400,000

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