Document:

Exhibit
10.1

 

EQUITABLE RESOURCES, INC.

2004 SHORT-TERM INCENTIVE PLAN

 

EQUITABLE
RESOURCES, INC. (the “Company”) hereby establishes this EQUITABLE RESOURCES,
INC 2004 SHORT-TERM INCENTIVE PLAN (the “Plan”) as of this 1st day of January,
2004, in accordance with the terms provided herein.

 

WHEREAS, the
Company has maintained the 2003 Short-Term Incentive Plan for the benefit of
its employees; and

 

WHEREAS, the
Company desires to amend the 2003 Short-Term Incentive Plan and restate the
structure of its incentive programs through the Plan which describes the goals
of the Company and the methodology for awarding incentive amounts under the
programs described within the Plan; and

 

NOW, THEREFORE,
the Company hereby adopts the terms of the Plan as follows:

 

Section 1.  Incentive Program Purposes.  The Company’s main purposes in providing the
incentive programs described within the Plan (collectively, the “Incentive
Programs”) are 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, 2004.  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-program);

•      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 + Preferred Stock + Book Equity)

 

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 Share Growth Rate.  The
Company’s Earnings per Share Growth Rate is calculated as follows:

 

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

  (Peer Comparison)

  
	
   

  	
   

  	
  •        Earnings per Share
  Growth Rate

  (EQT Year to Year Comparison)

  
	
   

  	
   

  	
  •        Business Unit Value
  Driver

  Performance

  
	
   

  	
   

  	
   

  
	
  Equitable Utilities

  	
   

  	
  Net Income After Tax

  
	
   

  	
   

  	
   

  
	
  Equitable Production

  	
   

  	
  Net Income After Tax

  
	
   

  	
   

  	
   

  
	
  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 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.Exhibit 10.2

 

EQUITABLE RESOURCES, INC.

2002 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM

(as amended and restated May 1, 2003 and April 13, 2004)

 

EQUITABLE RESOURCES, INC. (the “Company”) hereby establishes this 2002
EQUITABLE RESOURCES, INC. 2002 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM (the
“Program”) as of this 27th day of February 2003, in accordance
with the terms provided herein.

 

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

 

WHEREAS, in order to further align the interests of executives with the
interests of the shareholders, the Company desires to provide additional
long-term incentive benefits through the Program under the 1999 Plan.

 

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

 

Section 1.  Incentive
Program Purpose. 
The main purpose of the Program is to provide additional long-term
incentive opportunities to key executives to further align their interests with
those of the Company’s shareholders and customers and with the strategic objectives
of the Company.  Awards granted
hereunder may be earned by achieving relative performance levels against a
pre-determined peer group and are forfeited if defined performance levels are
not achieved.  By placing a portion of
the executive’s compensation at risk, the Company has an opportunity to reward
exceptional performance or reduce the compensation opportunity when performance
does not meet expectations.

 

Section 2.  Effective Date.  The effective date of this Program is
March 12, 2002.  The Program will
remain in effect until the earlier of December 31, 2004 or the closing
date of a Change of Control event defined in Section 5 unless otherwise
amended or terminated as provided in Section 18 (“Termination Date”).

 

Section 3.  Eligibility. 
The Chief Executive Officer of the Company (the “CEO”) shall, in his or
her sole discretion, select the employees of the Company who shall be eligible
to participate in the Program.  The
CEO’s selections will become participants in the Program (the “Participants”)
only upon approval by the Compensation Committee of the Board of Directors (the
“Committee”).  In the event that an
employee is hired by the Company during the Performance Period, the CEO shall,
in his or her sole discretion, determine whether the employee will be eligible
to participate in the Program, provided that the Committee must approve all new
participants to the Program.

 

Section 4. 
Performance Incentive Share Unit Awards.  Each
Participant shall be awarded a number of performance incentive share units (the
“Target Share Units”)

 

 

(subject
to the conditions provided herein), the value of which is determined by
reference to the Company’s stock, which shall be proposed by the CEO and
approved by the Committee.  For a new
Participant, the Target Share Units shall be proposed by the CEO and approved
by the Committee and will be pro-rated based on the employee’s hire date and
the contemplated ending date of the program which is December 31,
2004.  The Target Share Units, plus
accrued dividends (“Total Target Share Units”) available for distribution to a
party may be decreased to zero (0) or increased by as much as two (2) times the
Total Target Share Units based on performance as described in Section 5.

 

The Target Share Units shall be held in escrow by the Company subject to
satisfaction of the terms and conditions described below.  A Participant shall have no right to
exchange the Target Share Units for cash, stock or any other benefit and shall
be a mere unsecured creditor of the Company with respect to such share units
and any future rights to benefits.

 

Section 5.  Performance Condition of the Target Share
Units.  Subject to Section 8, the total number
of Target Share Units that will vest and be issued  (“Awarded Share Units”) to a Participant will be based on EQT’s
three-year total shareholder return (the “Performance Condition”) relative to
the peer group’s (Attachment A) three-year total shareholder return, for the
Performance Period of January 1, 2002 to the Termination Date (the
“Performance Period”).  For purposes of
this Program, the Performance Period total shareholder return will be
calculated as follows:

 

Step 1

 

A “Beginning Point” will be established for the
Company and each company in the peer group. 
This Beginning Point will be defined as one share of stock with a value
equal to the average closing stock price as reported in The Wall Street Journal for
the first ten (10) business days of 2002 for each company.

 

Step 2

 

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

 

Step 3

 

Except as provided in the following sentence, an
“Ending Point” will be defined as Total Shares Held at Ending Point for each
company times the average closing stock price as reported in The Wall
Street Journal for the last ten (10) business days of 2004 for each
company.  In the event of a change of
control as then defined in the Equitable Resources, Inc. 1999 Long-Term
Incentive Plan (“Change of Control”), the Ending Point will be defined as the
Total Shares Held

 

2

 

at
Ending Point times the average of the closing price as reported in The Wall Street
Journal for the ten (10) business days preceding the closing of the
Change of Control transaction.

 

Step 4

 

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

 

Step 5

 

The Total Target Share Units for each
Participant will be multiplied by the factor on the x axis of the payout curve
(identified on Attachment B) that corresponds to the Company’s relative TSR
ranking on the y axis.  Awarded Share
Units will equal:

 

(i)                         zero percent of
the Total Target Share Units for performance relative to the peer group
performance at the bottom 13.5% of all performers,

 

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

 

(iii)                   200 percent of the Total
Target Share Units for performance at the top 13.5% of all performers, and

 

(iv)                  for performance levels between
the bottom 13.5%, median and top 13.5% performance levels, the percent of Total
Target Share Units will be determined by interpolation.  The applicable payout curve is provided in
Attachment B.

 

The
Committee may adjust the peer group or a company’s relative placement within
the peer group based on significant or unusual transactions or events that
substantially affect the total shareholder return calculation of any company or
that, for non-operational or other reasons, do not reflect or otherwise skew
the relevant performance metric intended to be measured within the
Program.  Upon the occurrence of any
such transaction or event, the Company’s Chief Financial Officer will, as soon
as reasonably practicable, so advise the Committee, describing the impact on
the performance metric and recommending an appropriate adjustment for the
Committee’s consideration.

 

Section 6. 
Vesting and Distribution.  Subject to
Section 8, each Participant will vest in the number of Awarded Share Units
calculated according to Section 5 as of the last day of the Performance
Period and, except as provided in the following two sentences, such share units
will be distributed in cash, the amount of which shall be calculated based upon
each Awarded Share Unit being equal in value to a corresponding share of
Company stock as of the last day of the Performance Period, on or around
March 12, 2005.  Notwithstanding
the foregoing sentence, the Participant may elect to

 

3

 

receive
payment in the form of Company stock and the Committee may determine, in its
discretion, that Awarded Share Units will be issued in the form of Company
stock; provided, further, that if the Participant has not satisfied any stock
ownership guidelines of the Company as then in effect, such Awarded Share Units
shall be issued in the form of Company stock to the extent as may be necessary
toward satisfaction of such stock ownership guidelines.  Subject to Section 8, in the event of a
Change of Control, the value of such vested share units will be distributed in
cash on the closing date of the transaction, which shall be calculated based
upon the average of the closing price of the Company’s stock for the ten (10)
business days preceding the Change of Control transaction as reported in The Wall
Street Journal. 
Notwithstanding the foregoing provisions of this Section 6, and
subject to the Committee’s authority under Section 10.01 of the 1999 Plan
to modify or waive award terms or conditions at any time, the value of any
Awarded Share Units shall be paid to the Participant only to the extent that
the deductibility of such payment to the Company is not limited by reason of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”).  In the event that the payment
of all or a part of the Awarded Share Units exceeds the Code
Section 162(m) limit, the amount in excess of the limit may be considered
a required deferral and be credited, as cash except to the extent required to
be distributed as Company stock in the case of a Participant who has not
satisfied applicable stock ownership guidelines of the Company as then in
effect, to the Company’s Deferred Compensation Plan as then in effect, and
payment shall automatically be deferred to the next subsequent year in which it
can be paid to the Participant without exceeding the Code Section 162(m)
limit.

 

Section 7. 
Dividends.  Each Target Share Unit will be cumulatively
credited with dividends that are paid on the Company’s common stock in the form
of additional share units.  These
additional share units shall be deemed to have been purchased on the last
business day of the month in which the record date for the dividend occurs
using the closing stock price for the Company as reported in The Wall
Street Journal and shall be subject to all the same conditions and
restrictions as provided in this Program applicable to Target Share Units,
Total Target Share Units and Awarded Share Units.

 

Section 8.  Change of
Status.  In
making decisions regarding employees’ participation in the Program and the
extent to which awards vest and are payable, the Committee may consider any
factors that they may consider relevant. 
The following guidelines are provided as general information about the
effect of employee status changes prior to vesting.

 

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

 

(b)                                 Termination.  Share units are forfeited and no award shall
be paid to any employee whose services are terminated prior to the vesting of
Awarded Share Units for reasons of misconduct, failure to perform, or other
cause.  If the termination is due to
reasons such as reorganization, and not due to the fault of the employee, the
employee will vest in Awarded Share Units on the termination of the Performance
Period, contingent upon achievement of the Performance Condition in
Section 5, as follows: 

 

4

 

	
  Termination Date

  	
   

  	
  Reduction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prior to March 1, 2003

  	
   

  	
  100

  	
  %

  
	
  March 1, 2003 – February 28, 2004

  	
   

  	
  50

  	
  %

  
	
  March 1, 2004 – December 31, 2004

  	
   

  	
  25

  	
  %

  

 

Section 9. 
Responsibilities of the Committee.  The Committee
has responsibility for all aspects of the Program’s administration, including:

 

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

 

•                  Approving Program Participants,

 

•                  Authorizing Target Share Unit awards to
Participants,

 

•                  Adjusting Target Share Unit grants and
vesting requirements to account for extraordinary events,

 

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

 

•                  Maintaining final authority to modify or
terminate the Program or to modify or waive terms or conditions of awards at
any time.

 

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

 

Section 10. 
Tax Consequences to Participants.  It is
intended that: (i) until the Performance Condition is satisfied, a
Participant’s right to an award under this Program shall be considered to be subject
to a substantial risk of forfeiture in accordance with those terms as defined
or referenced in Sections 83(a) and 3121(v)(2) of the Internal Revenue Code of
1986, as amended, (the “Code”); (ii) the Awarded Share Units shall be subject
to employment taxes only upon the satisfaction of the Performance Condition;
and (iii) until the Awarded Share Units are actually paid to the Participant,
the Participants shall have merely an unfunded, unsecured promise to be paid
the benefit, and such unfunded promise shall not consist of a transfer of
“property” within the meaning of Code Section 83.  It is further intended that, because a
Participant cannot actually or

 

5

 

constructively
receive the Target Share Units prior to vesting and 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.

 

Section 13.  Successors;
Changes in Stock.  The obligation of the Company
under the Program shall be binding
upon the successors and assigns of the Company.  If a dividend or other distribution shall be declared upon the
Company’s common stock payable in shares of Company common stock, the Total
Target Share Units and the share of Company Common Stock on which the Performance
Condition is based shall be adjusted by adding thereto the number of shares of
Company common stock which would have been distributable thereon if such share
and Total Target Share Units had been actual Company shares and outstanding on
the date fixed for determining the shareholders entitled to receive such stock
dividend or distribution.  In the event
of any spin-off, split-off or split-up, or dividend in partial liquidation,
dividend in property other than cash, or extraordinary distribution to
shareholders of the Company’s common stock, the Total Target Share Units and
the share of Company common stock on which the Performance Condition is based
shall be appropriately adjusted to prevent dilution or enlargement of the
rights of Participants which would otherwise result from any such transaction.

 

In the case of a Change of Control, any
obligation under the Program
shall be handled in accordance with the terms of Section 6 hereof.  In any case not constituting a Change of
Control in which the Company’s common stock is changed into or becomes
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, or cash or other property,
whether through reorganization, reclassification, recapitalization, stock
split-up, combination of shares, merger or consolidation, then (i) the value of
the performance share units constituting an award shall be calculated based on
the closing price of such common stock on the closing date of the transaction
on the principal market on which such common stock is traded, (ii) there
shall be substituted for each performance share units constituting an award,
the number and kind of shares of stock or other securities (or cash or other
property) into which each outstanding share of the Company’s common stock shall
be so changed or for which each such share shall be exchangeable, and (iii) the
share of Company common stock on which the Performance Condition is based shall
be appropriately and equitably adjusted. 
In the case of any such adjustment, the Total Target Share Units shall
remain subject to the terms of the Program.

 

6

 

Section 14. 
Dispute Resolution.  The
Participant may make a claim to the Committee with regard to a payment of
benefits provided herein.  If the
Committee receives a claim in writing, the Committee must advise the
Participant of its decision on the claim in writing in a reasonable period of
time after receipt of the claim (not to exceed 120 days).  The notice shall set forth the following
information:

 

(a)                                  The specific basis for its decision,

 

(b)                                 Specific reference to pertinent Program
provisions on which the decision is based,

 

(c)                                  A description of any additional material or
information necessary for the Participant to perfect a claim and an explanation
of why such material or information is necessary, and

 

(d)                                 An explanation of the Program’s claim
review procedure.

 

Section 15. 
Applicable Law.  This Program shall be governed
by and construed under the laws of the Commonwealth of Pennsylvania without
regard to its conflict of law provisions.

 

Section 16. 
Severability.  In the event that any one or more of the
provisions of this Program shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

Section 17. 
Headings.  The descriptive headings of the Sections of
this Program are inserted for convenience of reference only and shall not
constitute a part of this Program.

 

Section 18.  Amendment or Termination of this Program.  This Program may be amended or terminated by the Company, in its
sole discretion, at any time by the Committee, except that no amendment or
termination shall adversely affect a Participant’s rights to his or her award
after the date of the award and no amendment may be made following a Change of
Control.

 

7

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