Document:

Exhibit

10.31

 

CHANGE

OF CONTROL AGREEMENT

 

THIS AGREEMENT (the “Agreement”) dated as of the 1st

day of September, 2002 (the “Effective Date”) is made by and between EQUITABLE

RESOURCES, INC., a Pennsylvania corporation with its principal place of

business at Pittsburgh, Pennsylvania (the “Company”), and JOSEPH E. O’BRIEN, an

individual (the “Employee”);

 

WITNESSETH:

 

WHEREAS, the Company and the Employee are parties to a

Change of Control Agreement dated as of January 30, 2001, which provides for

the payment of certain benefits to the Employee if the Employee’s employment

terminates in certain circumstances following a change of control of the

Company (the “Existing Agreement”); and

 

WHEREAS, the Board of Directors of the Company (the

“Board”) continues to believe that it is in the best interest of the Company

and its shareholders to assure that the Company will have the continued

dedication of the Employee, notwithstanding the possibility, threat or

occurrence of a Change of Control (as defined below) of the Company; that it is

imperative to diminish the inevitable distraction of the Employee by virtue of

the personal uncertainties and risks created by a pending or threatened Change

of Control and to encourage the Employee’s full attention and dedication to the

Company currently and in the event of any threatened or pending Change of

Control; and that it is appropriate to provide the Employee with compensation

and benefits arrangements upon a Change of Control which ensure that the

compensation and benefits expectations of the Employee will be satisfied and

which are competitive with those of other corporations in the industry in which

the Company’s principal business activity is conducted; and

 

WHEREAS, in consideration of the compensation and

benefits payable to the Employee under this Agreement, the Company desires to

restrict the Employee from competing with the Company and from soliciting

customers and employees of the Company for one year following the termination

of the Employee’s employment within two years following a Change of Control,

and the Employee is willing to agree to such a restriction in consideration of

the compensation and benefits payable under this Agreement; and

 

WHEREAS, in order to accomplish the foregoing

objectives, the Company and the Employee desire to terminate the Existing

Agreement and to enter into this Agreement which, among other things, (i)

provides for the payment of compensation and benefits payable to the Employee

if the Employee’s employment terminates in certain circumstances following a

Change of Control of the Company, and (ii) restricts the Employee’s right to

compete with Company and to solicit customers and employees of the Company for

one year following such termination of employment;

 

NOW THEREFORE, in consideration of the premises and

mutual covenants contained herein, and intending to be legally bound hereby,

the parties hereto agree as follows:

 

1.                                       Term.  The term of this Agreement shall commence on

the Effective Date hereof and, subject to Sections 3(f), 5 and 8, shall

terminate on the earlier of (i) the date of the termination of Employee’s

employment by the Company for any reason prior to a Change

 

 

of Control; or (ii) unless further extended as

hereinafter set forth, the date which is thirty-six (36) months after the

Effective Date; provided, that, commencing on the last day of the first full

calendar month after the Effective Date and on the last day of each succeeding

calendar month, the term of this Agreement shall be automatically extended

without further action by either party (but not beyond the date of the

termination of Employee’s employment prior to a Change of Control) for one (1)

additional month unless one party provides written notice to the other party

that such party does not wish to extend the term of this Agreement.  In the event that such notice shall have

been delivered, the term of this Agreement shall no longer be subject to

automatic extension and the term hereof shall expire on the date which is thirty-six

(36) calendar months after the last day of the month in which such written

notice is received.

 

2.                                       Change

of Control.  Except as provided in

Section 12, Change of Control shall mean any of the following events (each of

such events being herein referred to as a “Change of Control”):

 

(a)                                  The

sale or other disposition by the Company of all or substantially all of its

assets to a single purchaser or to a group of purchasers, other than to a

corporation with respect to which, following such sale or disposition, more

than eighty percent (80%) of, respectively, the then outstanding shares of

Company common stock and the combined voting power of the then outstanding

voting securities entitled to vote generally in the election of the Board of

Directors is then owned beneficially, directly or indirectly, by all or

substantially all of the individuals and entities who were the beneficial

owners, respectively of the outstanding Company common stock and the combined

voting power of the then outstanding voting securities immediately prior to

such sale or disposition in substantially the same proportion as their

ownership of the outstanding Company common stock and voting power immediately

prior to such sale or disposition;

 

(b)                                 The

acquisition in one or more transactions by any person or group, directly or

indirectly, of beneficial ownership of twenty percent (20%) or more of the

outstanding shares of Company common stock or the combined voting power of the

then outstanding voting securities of the Company entitled to vote generally in

the election of the Board of Directors; provided, however, that the following

shall not constitute a Change of Control: 

(x) any acquisition by the Company or any of its subsidiaries, or any

employee benefit plan (or related trust) sponsored or maintained by the Company

or any of its subsidiaries, (y) an acquisition by any person that is eligible,

pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as

of November 1, 1995) to file a statement on Schedule 13G with respect to its

beneficial ownership of Company common stock and other voting securities,

whether or not such person shall have filed a statement on Schedule 13G, unless

such person shall have filed a statement on Schedule 13D with respect to

beneficial ownership of fifteen percent or more of the Company’s voting

securities, (z) an acquisition by any person or group of persons of not more

than forty percent (40%) of the outstanding shares of Company common stock or

the combined voting power of the then outstanding voting securities of the

Company if such acquisition resulted from the issuance of capital stock by the

 

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Company and the issuance and the acquiring person or

group was approved in advance of such issuance by at least two-thirds of the

Continuing Directors then in office;

 

(c)                                  The

Company’s termination of its business and liquidation of its assets;

 

(d)                                 There

is consummated a merger, consolidation, reorganization, share exchange, or

similar transaction involving the Company (including a triangular merger), in

any case, unless immediately following such transaction:  (i) all or substantially all of the persons

who were the beneficial owners of the outstanding common stock and outstanding

voting securities of the Company immediately prior to the transaction

beneficially own, directly or indirectly, more than 60% of the outstanding

shares of common stock and the combined voting power of the then outstanding

voting securities entitled to vote generally in the election of directors of

the corporation resulting from such transaction (including a corporation or

other person which as a result of such transaction owns the Company or all or

substantially all of the Company’s assets through one or more subsidiaries (a

“Parent Company”)) in substantially the same proportion as their ownership of

the common stock and other voting securities of the Company immediately prior

to the consummation of the transaction, (ii) no person (other than (A) the

Company, any employee benefit plan sponsored or maintained by the Company or,

if reference was made to equity ownership of any Parent Company for purposes of

determining whether clause (i) above is satisfied in connection with the

transaction, such Parent Company, or (B) any person or group that satisfied the

requirements of subsection (b)(y), above, prior to such transaction)

beneficially owns, directly or indirectly, 20% or more of the outstanding

shares of common stock or the combined voting power of the voting securities

entitled to vote generally in the election of directors of the corporation

resulting from such transaction and (iii) individuals who were members of the

Company’s Board of Directors immediately prior to the consummation of the

transaction constitute at least a majority of the members of the board of

directors resulting from such transaction (or, if reference was made to equity

ownership of any Parent Company for purposes of determining whether clause, (i)

above is satisfied in connection with the transaction, such Parent Company); or

 

(e)                                  The

following individuals (sometimes referred to herein as “Continuing Directors”)

cease for any reasons to constitute a majority of the number of directors then

serving:  individuals who, on the date

hereof, constitute the entire Board of Directors and any new director (other

than a director whose initial assumption of office is in connection with an

actual or threatened election contest, including but not limited to a consent

solicitation, relating to the election of directors of the Company) whose

appointment or election by the Board or nomination for election by the

Company’s shareholders was approved by a vote of at least two-thirds (2/3) of

the directors then still in office who either were directors on the date hereof

or whose appointment, election or nomination for election was previously so

approved.

 

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3.                                       Salary

and Benefits Continuation.

 

(a)                                  “Salary

and Benefits Continuation” shall be defined to mean the following:

 

(i)                                     payment

of an amount of cash equal to three (3) times the Employee’s base salary at the

rate of base salary per annum in effect immediately prior to the Change of

Control or the termination of Employee’s employment, whichever is higher;

 

(ii)                                  payment

of an amount of cash equal to three (3) times the greater of (A) the highest

annual incentive (bonus) payment earned (including all deferred amounts) by the

Employee under the Company’s Short-Term Incentive Plan (or any successor plan)

for any year in the five (5) years prior to the termination of Employee’s

employment or (B) the target incentive (bonus) award under the Company’s

Short-Term Incentive Plan (or any successor plan) for the year in which the

Change of Control or termination of Employee’s employment occurs, whichever is

higher;

 

(iii)                               provision to Employee

and his/her eligible dependents of medical, long-term disability, dental and

life insurance coverage (to the extent such coverage was in effect immediately

prior to the Change of Control) for thirty-six (36) months (at the end of which

period the Company shall make such benefits available to the Employee and

his/her eligible dependents in accordance with the Consolidated Omnibus Budget

Reconciliation Act of 1985 (“COBRA”), whether or not the Company is then

required to comply with COBRA); and if the Employee would have become entitled

to benefits under the Company’s post-retirement health care or life insurance

plans (as in effect immediately prior to the Change of Control or the date of

the Employee’s termination of employment, whichever is most favorable to the

Employee) had the Employee’s employment terminated at any time during the

period of thirty-six (36) months after such date of termination, the Company

shall provide such post-retirement health care or life insurance benefits to

the Employee (subject to any employee contributions required under the terms of

such plans at the level in effect immediately prior to the Change of Control or

the date of termination, whichever is more favorable to the Employee)

commencing on the later of (i) the date that such coverage would have first

become available or (ii) the date that benefits described in this subsection

(iii) terminate;

 

(iv)                              contribution

by the Company to Employee’s account under the Company’s defined contribution

retirement plan (currently, the Equitable Resources, Inc. Employee Savings

Plan) of an amount of cash equal to the amount that the Company would have

contributed to such plan (including both retirement contributions and Company

matching contributions in respect of Employee contributions to the plan) had

the Employee continued to be employed by the Company for an additional

thirty-six (36) months at a base salary equal to the Employee’s base

salary immediately prior to the

 

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Change of Control or the termination of Employee’s

employment, whichever is higher (and assuming for this purpose that the

Employee continued to make the maximum permissible contributions to such plan

during such period), such contribution being deemed to be made immediately

prior to the termination of Employee’s employment; provided, that to the extent

that the amount of such contribution exceeds the amount then allowed to be

contributed to the plan under the applicable rules relating to tax-qualified

retirement plans, then the excess shall be paid to the Employee in cash (for

the avoidance of doubt, such cash payment includes the amount that the Company

would have otherwise contributed to the Company’s Deferred Compensation Plan

(or other non-qualified plan) in respect of both retirement and matching

contributions under the Company’s Employee Savings Plan (or any successor plan)

because of applicable rules relating to tax-qualified retirement plans);

 

(v)                                 reimbursement

to Employee of reasonable costs incurred by Employee for outplacement services

in the twenty-four (24) month period following termination of Employee’s

employment; and

 

(vi)                              establishment

and funding by the Company of an irrevocable grantor trust holding an amount of

assets sufficient to pay all such remaining premiums owed by the Company (which

trust shall be required to pay such premiums), under any insurance policy

insuring the life of the Employee under any “split dollar” insurance

arrangement in effect between the Employee and the Company, for which trust the

trustee appointed by the Employee under such “split dollar” insurance

arrangement shall serve as sole trustee.

 

(vii)                           Notwithstanding anything in

this Agreement to the contrary, if the aggregate gross amount payable to the

Employee under Sections 3(a)(i), (ii), (iv) and (v) (collectively, the “Payments”)

is less than an amount equal to $2,931,000, plus interest on this amount from

the Effective Date through the date of payment at the rate of 5.5% per annum,

compounded semi-annually (in the aggregate, the “Floor Amount”), the

Company shall pay to the Employee an additional cash payment (the “Additional

Payment”) within thirty (30) days after the termination of the Employee’s

employment in an amount such that the sum of the Payments plus the Additional

Payment is equal to the Floor Amount.

 

(b)                                 All

amounts payable by the Company to the Employee in cash pursuant to Section 3(a)

shall be made in a lump sum unless the Employee otherwise elects and notifies

the Company in writing prior to the termination of Employee’s employment of

Employee’s desire to have all payments made in accordance with the Company’s

regular salary and benefit payment practices, provided that (i) the lump sum

payment or first payment shall be made within thirty (30) days after the

Employee’s termination, and (ii) the Employee may elect to defer such payments

pursuant to the Company’s then-existing deferred compensation plan(s).  All other

 

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amounts payable by the Company to the Employee

pursuant to Section 3 shall be paid or provided in accordance with the

Company’s standard payroll and reimbursement procedures, as in effect

immediately prior to the Change of Control.

 

(c)                                  In

the event that medical, long-term disability, dental and life insurance

benefits cannot be provided under appropriate Company group insurance policies

pursuant to Section 3(a)(iii), an amount equal to the premium necessary for the

Employee to purchase directly the same level of coverage in effect immediately

prior to the Change of Control shall be added to the Company’s payments to

Employee pursuant to Section 3(a) (payable in the manner elected by the

Employee pursuant to Section 3(b)), but such amount shall not be considered a

Payment for purposes of Section 3(a)(vii). 

If Employee is required to pay income or other taxes on any medical,

long-term disability, dental or life insurance benefits provided or paid to the

Employee pursuant to Section 3(a)(iii) or this Section 3(c), then the Company

shall pay to the Employee an amount of cash sufficient to “gross-up” such

benefits or payments so that Employee’s “net” benefits received under Section

3(a)(iii) and this Section 3(c) are not diminished by any such taxes that are

imposed with respect to the same or the Company’s gross-up hereunder with

respect to such taxes.

 

(d)                                 If

there is a Change of Control as defined above, the Company will provide Salary

and Benefits Continuation if at any time during the first twenty-four (24)

months following the Change of Control, either (i) the Company terminates the

Employee’s employment other than for Cause as defined in Section 4 below or

(ii) the Employee terminates his/her employment for “Good Reason” as defined

below.

 

(e)                                  For

purposes of this Agreement, “Good Reason” is defined as:

 

(i)                                     Removal

of the Employee from the position he/she held immediately prior to the Change

of Control (by reason other than death, disability or Cause);

 

(ii)                                  The

assignment to the Employee of any duties inconsistent with those performed by

the Employee immediately prior to the Change of Control or a substantial

alteration in the nature or status of the Employee’s responsibilities which

renders the Employee’s position to be of less dignity, responsibility or scope;

 

(iii)                               A reduction by the

Company in the overall level of compensation of the Employee for any year from

the level in effect for the Employee in the prior year.  For purposes of this subsection (iii), the

following shall not constitute a reduction in the overall level of compensation

of the Employee:  (A) across-the-board

reductions in base salary similarly affecting all executives of the Company and

all executives of any person in control of the Company, provided, however, that

the Employee’s annual base salary rate shall not be reduced by an amount equal

to ten percent or

 

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more of the Employee’s annual base salary rate in

effect immediately prior to the Change of Control; (B) changes in the mix of

base salary payable to and the short-term incentive opportunity available to

the Employee; provided, that in no event shall the Employee’s base salary for

any year be reduced below 90% of the annual base salary paid to such Employee

in the prior year; (C) a reduction in the compensation of the Employee

resulting from the failure to achieve corporate, business unit and/or

individual performance goals established for purposes of incentive compensation

for any year or other period; provided, that the aggregate short-term incentive

opportunity, when combined with the Employee’s annual base salary, provides, in

the aggregate, an opportunity for the Employee to realize at least the same

overall level of base salary and short term incentive compensation as was paid

in the immediately prior year or period at target performance levels; and

provided, further, that such target performance levels are reasonable at all

times during the measurement period, taking into account the fact that one of

the purposes of such compensation is to incentivize the Employee; (D)

reductions in compensation resulting from changes to any Company benefit plan;

provided, that such changes are generally applicable to all participants in

such Company benefit plan; and (E) any combination of the foregoing;

 

(iv)                              The

failure to grant the Employee an annual salary increase reasonably necessary to

maintain such salary as reasonably comparable to salaries of senior executives

holding positions equivalent to the Employee’s in the industry in which the

Company’s then principal business activity is conducted;

 

(v)                                 The

Company requiring the Employee to be based anywhere other than the Company’s

principal executive offices in the city in which the Employee is principally

located immediately prior to the Change of Control, except for required travel

on the Company’s business to an extent substantially consistent with the

Employee’s business travel obligations prior to the Change of Control;

 

(vi)                              Any

material reduction by the Company of the benefits enjoyed by the Employee under

any of the Company’s pension, retirement, profit sharing, savings, life

insurance, medical, health and accident, disability or other employee benefit

plans, programs or arrangements, the taking of any action by the Company which

would directly or indirectly materially reduce any of such benefits or deprive

the Employee of any material fringe benefits, or the failure by the Company to

provide the Employee with the number of paid vacation days to which he/she is

entitled on the basis of years of service with the Company in accordance with

the Company’s normal vacation policy, provided that this paragraph (vi) shall

not apply to any proportional across-the-board reduction or action similarly

affecting all executives of the Company and all executives of any person in control

of the Company; or

 

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(vii)                           The failure of the Company

to obtain a satisfactory agreement from any successor to assume and agree to

perform this Agreement, as contemplated in Section 15 hereof, or any other

material breach by the Company of its obligations contained in this Agreement.

 

(f)                                    The

Employee’s right to Salary and Benefits Continuation shall accrue upon the

occurrence of either of the events specified in (i) or (ii) of

Section 3(d) and shall continue as provided, notwithstanding the

termination or expiration of this Agreement pursuant to Section 1 hereof.  The Employee’s subsequent employment, death

or disability following the Employee’s termination of employment in connection

with a Change of Control shall not affect the Company’s obligation to continue

making Salary and Benefits Continuation payments.  The Employee shall not be required to mitigate the amount of any

payment provided for in this Section 3 by seeking employment or otherwise.  The rights to Salary and Benefits

Continuation shall be in addition to whatever other benefits the Employee may

be entitled to under any other agreement or compensation plan, program or

arrangement of the Company; provided, that the Employee shall not be entitled

to any separate or additional severance payments pursuant to the Company’s

severance plan as then in effect and generally applicable to similarly situated

employees.  The Company shall be

authorized to withhold from any payment to the Employee, his/her estate or

his/her beneficiaries hereunder all such amounts, if any, that the Company may

reasonably determine it is required to withhold pursuant to any applicable law

or regulation.

 

4.                                       Termination

of Employee for Cause.

 

(a)                                  Upon

or following a Change of Control, the Company may at any time terminate the

Employee’s employment for Cause. 

Termination of employment by the Company for “Cause” shall mean

termination upon:  (i) the willful and

continued failure by the Employee to substantially perform his/her duties with

the Company (other than (A) any such failure resulting from Employee’s

disability or (B) any such actual or anticipated failure resulting from

Employee’s termination of his/her employment for Good Reason), after a written

demand for substantial performance is delivered to the Employee by the Board of

Directors which specifically identifies the manner in which the Board of

Directors believes that the Employee has not substantially performed his/her

duties, and which failure has not been cured within thirty days (30) after such

written demand; or (ii) the willful and continued engaging by the Employee in

conduct which is demonstrably and materially injurious to the Company,

monetarily or otherwise, or (iii) the breach by the Employee of any of the

covenants set forth in Section 8 hereof.

 

(b)                                 For

purposes of this Section 4, no act, or failure to act, on the Employee’s part

shall be considered “willful” unless done, or omitted to be done, by the

Employee in bad faith and without reasonable belief that such action or

omission was in the best interest of the Company.  Notwithstanding the foregoing, the Employee shall not be deemed

to have been terminated for Cause unless and until there shall have

 

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been delivered to him/her a copy of a resolution duly

adopted by the affirmative vote of not less than three-quarters of the entire

membership of the Board of Directors at a meeting of the Board of Directors

called and held for that purpose (after reasonable notice to the Employee and

an opportunity for the Employee, together with his/her counsel, to be heard

before the Board of Directors) finding that in the good faith opinion of the

Board of Directors the Employee is guilty of the conduct set forth above in

clauses (a)(i), (ii) or (iii) of this Section 4 and specifying the particulars

thereof in detail.

 

5.                                       Prior

Termination.  Anything in this

Agreement to the contrary notwithstanding, if the Employee’s employment with

the Company is terminated prior to the date on which a Change of Control occurs

either (i) by the Company other than for Cause or (ii) by the Employee for Good

Reason, and it is reasonably demonstrated by Employee that such termination of

employment (a) was at the request of a third party who has taken steps

reasonably calculated to effect the Change of Control, or (b) otherwise arose

in connection with or anticipation of the Change of Control, then for all

purposes of this Agreement the termination shall be deemed to have occurred

upon a Change of Control and the Employee will be entitled to Salary and

Benefits Continuation as provided for in Section 3 hereof.

 

6.                                       Employment

at Will.  Subject to the provisions

of any other agreement between the Employee and the Company, the Employee shall

remain an employee at will and nothing herein shall confer upon the Employee

any right to continued employment and shall not affect the right of the Company

to terminate the Employee for any reason not prohibited by law; provided,

however, that any such removal shall be without prejudice to any rights the

Employee may have to Salary and Benefits Continuation hereunder.

 

7.                                       Construction

of Agreement.

 

(a)                                  Governing

Law.  This Agreement shall be

governed by and construed under the laws of the Commonwealth of Pennsylvania

without regard to its conflict of law provisions.

 

(b)                                 Severability.  In the event that any one or more of the

provisions of this Agreement 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.

 

(c)                                  Headings.  The descriptive headings of the several

paragraphs of this Agreement are inserted for convenience of reference only and

shall not constitute a part of this Agreement.

 

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8.                                       Covenant

as to Confidential Information, Non-Competition and Non-Solicitation.

 

(a)                                  Confidentiality

of Information and Nondisclosure. 

The Employee acknowledges and agrees that his/her employment by the

Company necessarily involves his/her knowledge of and access to confidential

and proprietary information pertaining to the business of the Company and its

subsidiaries.  Accordingly, the Employee

agrees that at all times during the term of this Agreement and for a period of

two (2) years after the termination of the Employee’s employment, he/she will

not, directly or indirectly, without the express written authority of the

Company, unless directed by applicable legal authority having jurisdiction over

the Employee, disclose to or use, or knowingly permit to be so disclosed or

used, for the benefit of himself/herself, any person, corporation or other

entity other than the Company and its subsidiaries, (i) any information

concerning any financial matters,  customer  relationships,

competitive status, supplier matters, internal organizational matters, current

or future plans, or other business affairs of or relating to the Company and

its subsidiaries, (ii) any management, operational, trade, technical or other

secrets or any other proprietary information or other data of the Company or

its subsidiaries, or (iii) any other information related to the Company or its

subsidiaries which has not been published and is not generally known outside of

the Company.  The Employee acknowledges

that all of the foregoing, constitutes confidential and proprietary

information, which is the exclusive property of the Company.

 

(b)                                 Non-Competition

and Non-Solicitation.  At all times

while the Employee is an employee of the Company and, if the Employee is

entitled to Salary and Benefits Continuation under Section 3 hereof, then for a

period of one (1) year after the termination of Employee’s employment, the

Employee will not (i) engage, directly or indirectly, whether as principal or

as agent, officer, director, employee, consultant, owner, partner, shareholder

or otherwise, alone or in association with any other person, corporation or

other entity, in any business which derives a material portion of its revenues

(i.e., greater than 5% of its consolidated revenues in its last completed

fiscal year) from the sale of any products or services in competition with

products or services from the sale of which the Company and its subsidiaries

derive a material portion of their revenues (i.e., greater than 5% of their

consolidated revenues in the last completed fiscal year) in any geographic

market where the Company and its subsidiaries are materially engaged in

business (i.e., they derived greater than 5% of their consolidated revenue from

the sale of products or services in such geographic market in their last

completed fiscal year);  (ii) solicit,

directly or indirectly, either for himself or any other person, any business

related to the business of any customer, supplier, licensee or other person

having a business relationship with the Company, or induce or attempt to induce

any such person to cease doing business with the Company; (iii) interfere, or

attempt to interfere, with any contemplated business project which

representatives of the Company and its subsidiaries have discussed with any

potential participant in such project; or (iv) solicit or induce or attempt to

induce any employee of the

 

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Company or its subsidiaries to leave the employ of the

Company or its subsidiaries or to violate the terms of his or her contract with

the Company or its subsidiaries. 

Notwithstanding the provisions of Section 8(b), the Employee may

purchase or otherwise acquire up to (but not more than) 1% of any class of

securities of any enterprise (but without otherwise participating in the

activities of such enterprise) if such securities are listed on any national or

regional securities exchange or have been registered under Section 12 of the

Securities Exchange Act of 1934.  The

Employee agrees that the covenants in this Section 8(b) are reasonable with

respect to duration, geographical area and scope.

 

(c)                                  Company

Remedies.  The Employee acknowledges

and agrees that any breach of this Section 8 by him/her will result in

immediate irreparable harm to the Company, and that the Company cannot be

reasonably or adequately compensated by damages in an action at law.  In the event of an actual or threatened

breach by the Employee of the provisions of this Section 8, the Company shall

be entitled, to the extent permissible by law, immediately to cease to pay or

provide the Employee or his/her dependents any compensation or benefit being,

or to be, paid or provided to him pursuant to Section 3 of this Agreement, and also

to obtain immediate injunctive relief restraining the Employee from conduct in

breach or threatened breach of the covenants contained in this Section 8.  Nothing herein shall be construed as

prohibiting the Company from pursuing any other remedies available to it for

such breach or threatened breach, including the recovery of damages from the

Employee.

 

9.                                       Reimbursement

of Fees.  The Company agrees to pay,

to the full extent permitted by law, all legal fees and expenses which the

Employee may reasonably incur as a result of any contest by the Company,

Internal Revenue Service or others regarding the validity or enforceability of,

or liability under, any provision of this Agreement or any guarantee of

performance thereof (including as a result of any contest by the Employee about

the amount of any payment pursuant to Section 3 of this Agreement) or in

connection with any dispute arising from this Agreement, regardless of whether

Employee prevails in any such contest or dispute.  The Company shall pay such fees and expenses within ten (10) days

after the presentment of an invoice for the same by the Employee and any

amounts not paid within such period shall bear interest at the rate per annum

established by PNC Bank, National Association (or its successor) from time to

time as its “prime” or equivalent rate.

 

10.                                 Tax

Gross-Up

 

(a)                                  Notwithstanding

anything in this Agreement to the contrary, if it shall be determined that any

payments, benefits and distributions due under this Agreement and those which

are otherwise payable or distributable to or for the benefit of the Employee

relating to the termination of the Employee’s employment in connection with a

change of control of the Company, including a Change of Control (whether paid

or payable or distributed or distributable pursuant to the terms of this

Agreement or otherwise, including without limitation (i) payments, benefits and

distributions pursuant to Section 3 of this Agreement, including the

 

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Additional Payment, and (ii) deemed amounts under the

Internal Revenue Code of 1986, as amended (the “Code”), resulting from

the acceleration of the vesting of any stock options or other equity-based

incentive award) (all such payments, benefits and distributions being referred

to herein as “Gross Payments”), would be subject to the excise tax

imposed by Section 4999 of the Code or any interest or penalties are incurred

by the Employee with respect to the excise tax (such excise tax, together with

any such interest and penalties, are hereinafter collectively referred to as

the “Excise Tax”), then the Company shall pay to the Employee an

additional payment (a “Gross-Up Payment”) in an amount such that after

the payment by the Employee of all taxes (including any interest or penalties

imposed with respect to such taxes), including, without limitation, any income

taxes (and any interest and penalties imposed with respect thereto) and Excise

Tax imposed on the Gross-Up Payment, the Employee retains an amount of the

Gross-Up Payment equal to the Excise Tax imposed on the Gross Payments.

 

(b)                                 Subject

to the provisions of this Section 10, all determinations required to be made

under this Section 10, including, whether and when a Gross-Up Payment is

required and the amount of such Gross-Up Payment, shall be made by a nationally

recognized accounting firm designated by the Company (the “Accounting Firm”)

which shall provide detailed supporting calculations both to the Company and

the Employee within fifteen (15) business days after there has been a Payment,

or such earlier time as requested by the Company.  In the event that the Accounting Firm is serving as accountant or

auditor for the individual, entity or group effecting the Change of Control,

the Company shall appoint another nationally recognized accounting firm to make

the determinations required hereunder (which accounting firm shall then be

referred to as the Accounting Firm hereunder). 

All fees and expenses of the Accounting Firm shall be borne solely by

the Company.  Any Gross-Up Payment, as

determined pursuant to this Section 10, shall be paid by the Company to the

Employee within five days of the receipt of the Accounting Firm’s

determination.  Any determination by the

Accounting Firm shall be binding upon the Company and the Employee.  As a result of the uncertainty in the

application of Section 4999 of the Code at the time of the initial

determination by the Accounting Firm hereunder, it is possible that Gross-Up

Payments which will not have been made by the Company should have been made (“Underpayment”),

consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its

remedies pursuant to Section 10(c) and the Employee thereafter is required to

make a payment of any income taxes or Excise Tax, the Accounting Firm shall

determine the amount of the Underpayment that has occurred and any such

Underpayment shall be promptly paid by the Company to or for the benefit of the

Employee.

 

(c)                                  The

Employee shall notify the Company in writing of any claim by the Internal

Revenue Service that, if successful, would require the payment by the Company

of the Gross-Up Payment.  Such

notification shall be given as soon as practicable but no later than ten (10)

business days after the Employee is informed in writing of such claim and shall

apprise the Company of the nature of such claim and the date on which such

claim is requested to be paid.  The

Employee shall not pay

 

12

 

such claim prior to the expiration of the 30-day

period following the date on which it gives such notice to the Company (or such

shorter period ending on the date any payment of taxes with respect to such

claim is due).  If the Company notifies

the Employee in writing prior to the expiration of such period that it desires

to contest such claim, the Employee shall:

 

(i)            give the Company any information

reasonably requested by the Company relating to such claim;

 

(ii)           take such action in connection with

contesting such claim as the Company shall reasonably request in writing from

time to time, including, without limitation, accepting legal representation

with respect to such claim by an attorney reasonably selected by the Company;

 

(iii)          cooperate with the Company in good

faith in order effectively to contest such claim; and

 

(iv)          permit the Company to participate in

any proceedings relating to such claim;

 

provided, however, that the Company shall bear and pay

directly all costs and expenses (including additional interest and penalties)

incurred in connection with such contest and shall indemnify and hold the

Employee harmless, on an after-tax basis, for any income taxes or Excise Tax

(including interest and penalties with respect thereto) imposed as a result of

such representation and payment of costs and expenses.  Without limitation on the foregoing

provisions of this Section 10, the Company shall control all proceedings taken

in connection with such contest and, at its sole option, may pursue or forego

any and all administrative appeals, proceedings, hearings and conferences with

the taxing authority in respect of such claim and may, at its sole option,

either direct the Employee to pay the tax claimed and sue for a refund or

contest the claim in any permissible manner, and the Employee agrees to

prosecute such contest to a determination before any administrative tribunal,

in a court of initial jurisdiction and in one or more appellate courts, as the

Company shall determine; provided, however, that if the Company

directs the Employee to pay such claim and sue for a refund, the Company shall

advance the amount of such payment to the Employee, on an interest-free basis,

and shall indemnify and hold the Employee harmless, on an after-tax basis, from

any income taxes or Excise Tax (including interest or penalties with respect

thereto) imposed with respect to such advance or with respect to any imputed

income with respect to such advance; and further provided that any extension of

the statute of limitations relating to payment of taxes for the taxable year of

the Employee with respect to which such contested amount is claimed to be due

is limited solely to such contested amount. 

Furthermore, the Company’s control of the contest shall be limited to

issues with respect to which a Gross-Up Payment would be payable hereunder and

the Employee shall be entitled to settle or contest, as the case may be, any

other issue raised by the Internal Revenue Service or any other taxing

authority.

 

13

 

(d)                                 If,

after the receipt by the Employee of an amount advanced by the Company pursuant

to Section 10, the Employee becomes entitled to receive any refund with

respect to such claim, the Employee shall (subject to the Company’s complying

with the requirements of Section 10) promptly pay to the Company the

amount of such refund (together with any interest paid or credited thereon

after taxes applicable thereto).  If,

after the receipt by the Employee of an amount advanced by the Company pursuant

to Section 10, a determination is made that the Employee shall not be entitled

to any refund with respect to such claim and the Company does not notify the

Employee in writing of its intent to contest such denial of refund prior to the

expiration of 30 days after such determination, then such advance shall be

forgiven and shall not be required to be repaid and the amount of such advance

shall offset, to the extent thereof, the amount of Gross-Up Payment required to

be paid.

 

(e)                                  The

payments provided for in this Section 10 shall be made not later than the

tenth (10th) day following the termination of the Employee’s employment; provided,

however, that if the amounts of such payments cannot be finally

determined on or before such day, the Company shall pay to the Employee on such

day an estimate, as determined in good faith by the Employee, of the minimum

amount of such payments to which the Employee is clearly entitled and shall pay

the remainder of such payments (together with interest at 120% of the rate

provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof

can be determined but in no event later than the thirtieth (30th) day after the

termination of the Employee’s employment. 

In the event that the amount of the estimated payments exceeds the

amount subsequently determined to have been due, such excess shall constitute a

loan by the Company to the Employee, payable on the fifth (5th) business day

after demand by the Company (together with interest at 120% of the rate

provided in Section 1274(b)(2)(B) of the Code).  In the event the Company should fail to pay when due the amounts

described in this Section 10, the Employee shall also be entitled to receive

from the Company an amount representing interest on any unpaid or untimely paid

amounts from the due date, as determined under this Section 10, to the date of

payment at a rate equal to 120% of the rate provided in Section 1274(b)(2)(B)

of the Code.

 

11.                                 Resolution

of Differences Over Breaches of Agreement. 

Except as otherwise provided herein, in the event of any controversy,

dispute or claim arising out of, or relating to this Agreement, or the breach

thereof, or arising out of any other matter relating to the Employee’s

employment with the Company or the termination of such employment, the parties

may seek recourse only for temporary or preliminary injunctive relief to the

courts having jurisdiction thereof and if any relief other than injunctive

relief is sought, the Company and the Employee agree that such underlying

controversy, dispute or claim shall be settled by arbitration conducted in

Pittsburgh, Pennsylvania in accordance with this Section 11 of this Agreement

and the Commercial Arbitration Rules of the American Arbitration Association

(“AAA”).  The matter shall be heard and

decided, and awards rendered by a panel of three (3) arbitrators (the

“Arbitration Panel”).  The Company and

the Employee shall each select one arbitrator from the AAA National Panel of

Commercial Arbitrators (the “Commercial Panel”) and AAA shall select a third

 

14

 

arbitrator from the Commercial Panel.  The award rendered by the Arbitration Panel

shall be final and binding as between the parties hereto and their heirs,

executors, administrators, successors and assigns, and judgment on the award

may be entered by any court having jurisdiction thereof.

 

12.                                 Treatment

of Certain Incentive Awards.  All

“Awards” held by the Employee under the Company’s 1994 Long-Term Incentive Plan

(the “1994 Plan”) or the Company’s 1999 Long-Term Incentive Plan (the “1999

Plan”) shall, upon a Change of Control, be treated in accordance with the terms

of those Plans as in effect on the date of this Agreement, without regard to

the subsequent amendment of those Plans. 

For purposes of this Section 12, the terms “Award” and “Change of

Control” shall have the meanings ascribed to them in the 1999 Plan and the 1994

Plan, as the case may be.

 

13.                                 Release.  The Employee hereby acknowledges and agrees

that prior to the Employee’s or his/her dependents’ right to receive from the

Company any compensation or benefit to be paid or provided to him/her or

his/her dependents pursuant to Section 3 of this Agreement, the Employee may be

required by the Company, in its sole discretion, to execute a release in a form

reasonably acceptable to the Company, which releases any and all claims (other

than amounts to be paid to Employee as expressly provided for under this

Agreement) the Employee has or may have against the Company or its

subsidiaries, agents, officers, directors, successors or assigns arising under

any public policy, tort or common law or any provision of state, federal or

local law, including, but not limited to, the Pennsylvania Human Relations Act,

the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964,

the Civil Rights Protection Act, Family and Medical Leave Act, the Fair Labor

Standards Act, the Age Discrimination in Employment Act of 1967, or the

Employee Retirement Income Security Act of 1974, all as amended.

 

14.                                 Waiver.  The waiver by a party hereto of any breach

by the other party hereto of any provision of this Agreement shall not operate

or be construed as a waiver of any subsequent breach by a party hereto.

 

15.                                 Assignment.  This Agreement, including the

non-competition and non-solicitation covenant in Section 8(b) hereof, shall be

binding upon and inure to the benefit of the successors and assigns of the

Company.  The Company shall be obligated

to require any successor (whether direct or indirect, by purchase, merger,

consolidation or otherwise) to all or substantially all of the Company’s

business or assets, by a written agreement in form and substance satisfactory

to the Employee, to expressly assume and agree to perform this Agreement in the

same manner and to the same extent that the Company would be required to

perform if no succession had taken place. 

This Agreement shall inure to the extent provided hereunder to the

benefit of and be enforceable by the Employee or his/her legal representatives,

executors, administrators, successors, heirs, distributees, devisees and

legatees.  The Employee may not delegate

any of his/her duties, responsibilities, obligations or positions hereunder to

any person and any such purported delegation by him shall be void and of no

force and effect with respect to matters relating to his/her employment and

termination of employment.  Without

limiting the foregoing, the Employee’s rights to receive payments and benefits

hereunder shall not be assignable

 

15

 

or transferable, other than a transfer by Employee’s

will or by the laws of descent and distribution.

 

16.                                 Notices.  Any notices required or permitted to be

given under this Agreement shall be sufficient if in writing, and if personally

delivered or when sent by first class certified or registered mail, postage

prepaid, return receipt requested — in the case of the Employee, to his/her

residence address as set forth below, and in the case of the Company, to the

address of its principal place of business as set forth below, in care of the

Chairman of the Board — or to such other person or at such other address with

respect to each party as such party shall notify the other in writing.

 

17.                                 Pronouns.  Pronouns stated in either the masculine,

feminine or neuter gender shall include the masculine, feminine and neuter.

 

18.                                 Entire

Agreement.  This Agreement contains

the entire agreement of the parties concerning the matters set forth herein and

all promises, representations, understandings, arrangements and prior

agreements regarding the subject matter hereof (including the Existing

Agreement, which the parties agree shall terminate as of the Effective Date

hereof) are merged herein and superseded hereby.  The provisions of this Agreement may not be amended, modified,

repealed, waived, extended or discharged except by an agreement in writing

signed by the party against whom enforcement of any amendment, modification,

repeal, waiver, extension or discharge is sought.  No person acting other than pursuant to a resolution of the Board

of Directors shall have authority on behalf of the Company to agree to amend,

modify, repeal, waive, extend or discharge any provision of this Agreement or

anything in reference thereto or to exercise any of the Company’s rights to terminate

or to fail to extend this Agreement.

 

[The remainder of this

page is intentionally left blank.  The

next page is the signature page.]

 

16

 

IN WITNESS WHEREOF, the Company has caused this

Agreement to be executed by its officers thereunto duly authorized, and the

Employee has hereunto set his/her hand, all as of the day and year first above

written.

 

	

  ATTEST:

  	

   

  	

  EQUITABLE RESOURCES, INC.

  
	

   

  	

   

  	

   

  
	

  /s/ Johanna G. O’Loughlin

  	

   

  	

  /s/ Gregory R. Spencer

  
	

   

  	

   

  	

  By:

  	

  Gregory R. Spencer

  
	

   

  	

   

  	

  Title:

  	

  Senior Vice President and

  Chief Administrative Officer

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Address:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  One Oxford Centre

  
	

   

  	

   

  	

  Suite 3300

  
	

   

  	

   

  	

  Pittsburgh, PA 

  15219

  
					

 

	

  WITNESS:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  /s/ Johanna G. O’Loughlin

  	

   

  	

  /s/ Joseph E. O’Brien

  
	

   

  	

   

  	

  Name:  Joseph

  E. O’Brien

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Address:

  
	

   

  	

   

  	

  10 Johnson Rd.

  
	

   

  	

   

  	

  Andover, MA

  01810

  

 

17Exhibit 10.38

 

1999 EQUITABLE RESOURCES, INC.

 

LONG-TERM INCENTIVE PLAN

 

(As amended and restated May 18, 2001)

 

SECTION 1.  PURPOSES

 

1.01  The

purpose of the 1999 Equitable Resources, Inc. Long-Term Incentive Plan (the

“Plan”) is to assist the Company in attracting, retaining and motivating

employees of outstanding ability and to align their interests with those of the

shareholders of the Company.

 

SECTION 2.  DEFINITIONS; CONSTRUCTION

 

2.01  Definitions.  In addition to the terms defined elsewhere

in the Plan, the following terms as used in the Plan shall have the following

meanings when used with initial capital letters:

 

2.01.1  “Award” means any

Option, Restricted Stock, Performance Award or Other Stock-Based Award, or any

other right or interest relating to Shares or cash granted under the Plan.

 

2.01.2  “Award Agreement” means

any written agreement, contract or other instrument or document evidencing an

Award.

 

2.01.3  “Board” means the

Company’s Board of Directors.

 

2.02.4  “Cause,” when used with

respect to the termination of employment of a Participant, means:

 

(a)  the willful and continued

failure by the Participant to substantially perform his duties with the Company

or a Subsidiary (other than any such failure resulting from the Participant’s

disability), after a written demand for substantial performance is delivered to

the Participant by the Board which specifically identifies the manner in which

the Board believes that the Participant has not substantially performed his

duties, and which failure has not been cured within 30 days after such written

demand; or

 

(b)  the willful and continued

engaging by the Participant in conduct which is demonstrably and materially

injurious to the Company or a Subsidiary, monetarily or otherwise, or

 

(c)  the breach by the

Participant of any obligation of confidentiality owed to the Company or a

Subsidiary.

 

For purposes of this Section 2.02.4, no act, or failure to act, on

the Participant’s part shall be considered “willful” unless done, or omitted to

be done, by the Participant in bad faith and without reasonable belief that

such action or omission was in the best interest of the Company.  Notwithstanding the foregoing, the

Participant shall not be deemed to have been terminated for Cause unless and

until there shall have been delivered to him a copy of a resolution duly

adopted by the affirmative vote of not less than three-quarters of the entire

membership of the Board at a meeting of the Board called and held for that

purpose (after reasonable notice to the Participant and an opportunity for the

Participant, together with his counsel, to be heard before the Board) finding

that in the good faith opinion of the Board the Participant is guilty of the

conduct set forth

 

 

above in

clauses (a), (b) or (c) of this Section 2.02.4 and specifying the

particulars thereof in detail.

 

2.01.5  “Code” means the

Internal Revenue Code of 1986, as amended from time to time, together with

rules, regulations and interpretations promulgated thereunder.  References to particular sections of the

Code shall include any successor provisions.

 

2.01.6  “Change of Control” has

the meaning provided in Section 9.03.

 

2.01.7  “Committee” means the

Compensation Committee or such other Committee of the Board as may be

designated by the Board to administer the Plan, as referred to in Section 3.01

hereof; provided however, that any member of the Committee participating in the

taking of any action under the Plan shall qualify as a “non-employee director”

as then defined under Rule 16b-3 and an “outside director” as then defined

under Section 162(m) of the Code.

 

2.01.8  “Common Stock” means

shares of the common stock, without par value, and such other securities of the

Company as may be substituted for Shares pursuant to Section 8.01 hereof.

 

2.01.9  “Covered Employee” shall

have the meaning provided in Section 162(m)(3) of the Code.

 

2.01.10  “Exchange Act” means

the Securities Exchange Act of 1934, as amended.

 

2.01.11  “Fair Market Value” of

shares of any stock, including but not limited to Common Stock, or units of any

other securities (herein “shares”), shall be the closing price for the date as

of which Fair Market Value is to be determined in the principal market in which

such shares are traded, as quoted in The Wall Street Journal (or in such other

reliable publication as the Committee, in its discretion, may determine to rely

upon).  If the Fair Market Value of

shares on any date cannot be determined on the basis set forth in the preceding

sentence, or if a determination is required as to the Fair Market Value on any

date of property other than shares, the Committee shall in good faith determine

the Fair Market Value of such shares or other property on such date.  Fair Market Value shall be determined

without regard to any restriction other than a restriction which, by its terms,

will never lapse.

 

2.01.12  “Incentive Stock

Option” means an Option that is intended to meet the requirements of Section

422 of the Code and is designated as such in the Award Agreement relating

thereto.

 

2.01.13  “Option” means a right,

granted under Section 6.02 hereof, to purchase Shares at a specified price

during specified time periods.  An

Option may be either an Incentive Stock Option or a nonstatutory stock option,

which is an Option not intended to be an Incentive Stock Option.

 

2.01.14  “Other Stock-Based

Award” means an Award, granted under Section 6.05 hereof, that is denominated

or payable in, valued in whole or in part by reference to, or otherwise based

on, or related to, Shares.

 

2.01.15  “Participant” means an

employee of the Company or any Subsidiary, including, but not limited to,

Covered Employees, who is granted an Award under the Plan.

 

2.01.16  “Performance Award,”

“Performance Goal” and “Performance Period” shall have the meanings provided in

Section 6.04.

 

2

 

2.01.17  “Reload Option Rights”

and “Reload Option” have the meanings provided in Section 6.02(v).

 

2.01.18  “Restricted Stock”

means Shares, granted under Section 6.03 hereof, that are subject to certain

restrictions.

 

2.01.19  “Rule 16b-3” means Rule

16b-3 under the Exchange Act, as amended from time to time, or any successor to

such Rule promulgated by the Securities and Exchange Commission under Section

16 of the Exchange Act.

 

2.01.20  “Shares” means the

common stock of the Company, without par value, and such other securities of

the Company as may be substituted for Shares pursuant to Section 8.01 hereof.

 

2.01.21  “Subsidiary” means any

corporation in an unbroken chain of corporations beginning with the Company, if

each of the corporations other than the last corporation in the chain owns

stock possessing at least 50% of the total combined voting power of all classes

of stock in one of the other corporations in the chain.

 

2.02  Construction.  For purposes of the Plan, the following

rules of construction shall apply:

 

2.02.1  The word “or” is

disjunctive but not necessarily exclusive.

 

2.02.2  Words in the singular

include the plural; words in the plural include the singular; words in the

neuter gender include the masculine and feminine genders, and words in the

masculine or feminine gender include the other and neuter genders.

 

SECTION 3. ADMINISTRATION

 

3.01  The Plan

shall be administered by the Committee. 

The Committee shall have full and final authority to take the following

actions, in each case subject to and consistent with the provisions of the

Plan:

 

(i)  to designate Participants;

 

(ii)  to determine the type or

types of Awards to be granted to each Participant;

 

(iii)  to determine the number

of Awards to be granted, the number of Shares or amount of cash or other

property to which an Award will relate, the terms and conditions of any Award

(including, but not limited to, any exercise price, grant price or purchase

price, any limitation or restriction, any schedule for lapse of limitations,

forfeiture restrictions or restrictions on exercisability or transferability,

and accelerations or waivers thereof, based in each case on such considerations

as the Committee shall determine), and all other matters to be determined in

connection with an Award;

 

(iv)  to determine whether, to

what extent and under what circumstances an Award may be settled in, or the

exercise price of an Award may be paid in cash, Shares, other Awards or other

property, or an Award may be accelerated, vested, canceled, forfeited,

exchanged or surrendered;

 

(v)  to determine whether, to

what extent and under what circumstances cash, Shares, other Awards, other

property and other amounts payable with respect to an Award shall be

 

3

 

deferred, whether

automatically or at the election of the Committee or at the election of the

Participant;

(vi)  to interpret and

administer the Plan and any instrument or agreement relating to, or Award made

under, the Plan;

 

(vii)  to prescribe the form of

each Award Agreement, which need not be identical for each Participant;

 

(viii)  to adopt, amend,

suspend, waive and rescind such rules and regulations as the Committee may deem

necessary or advisable to administer the Plan;

 

(ix)  to correct any defect or

supply any omission or reconcile any inconsistency, and to construe and

interpret the Plan, the rules and regulations, any Award Agreement or other

instrument entered into or Award made under the Plan;

 

(x)  to make all other decisions

and determinations as may be required under the terms of the Plan or as the

Committee may deem necessary or advisable for the administration of the Plan;

and

 

(xi)  to make such filings and

take such actions as may be required from time to time by appropriate state,

regulatory and governmental agencies.

 

Any action of the Committee with respect to the Plan

shall be final, conclusive and binding on all Persons, including the Company,

Subsidiaries, Participants, any Person claiming any rights under the Plan from

or through any Participant, employees and shareholders.  The express grant of any specific power to

the Committee, and the taking of any action by the Committee, shall not be

construed as limiting any power or authority of the Committee.  The Committee may delegate to officers or

managers of the Company or any Subsidiary the authority, subject to such terms

as the Committee shall determine, to perform administrative functions under the

Plan and, with respect to Participants who are not subject to Section 16 of the

Exchange Act, to take such actions and perform such functions under the Plan as

the Committee may specify.  Each member

of the Committee shall be entitled to, in good faith, rely or act upon any

report or other information furnished to him by an officer, manager or other

employee of the Company or a Subsidiary, the Company’s independent certified

public accountants, or any executive compensation consultant or other

professional retained by the Company to assist in the administration of the

Plan.

 

SECTION 4.  SHARES SUBJECT TO THE PLAN

 

4.01  The maximum net number of Shares which may be issued and in

respect of which Awards may be granted under the Plan shall be limited to

(i) 6,000,000 shares (3,000,000 shares prior to the June 11, 2001

stock split) of Common Stock, subject to adjustment as provided in Section

8.01, which may be used for all forms of Awards, and (ii) 5,000,000 shares

(2,500,000 shares prior to the June 11, 2001 stock split) of Common Stock,

subject to adjustment as provided in Section 8.01, which may be used for all

forms of Awards excluding Incentive Stock Options.  For purposes of determining the number of Shares available under

either of the foregoing categories, Shares issued with respect to Awards

granted on or after May 17, 2001, the amendment date, shall be deemed to have

been issued from category (ii) of the foregoing sentence unless such Award is

an Incentive Stock Option or as otherwise determined by the Committee.

 

For purposes of this Section 4.01, the number of

Shares to which an Award relates shall be counted against the number of Shares

available under the Plan at the time of grant of the Award, unless such number

of Shares cannot be determined at that time, in which case the number of Shares

actually

 

4

 

distributed pursuant to the Award shall be counted

against the number of Shares available under the Plan at the time of

distribution; provided, however, that Awards related to or retroactively added

to, or granted in tandem with, substituted for or converted into, other Awards

shall be counted or not counted against the number of Shares reserved and

available under the Plan in accordance with procedures adopted by the Committee

so as to ensure appropriate counting but avoid double counting.

If any Shares to which an Award relates are forfeited,

or payment is made to the Participant in the form of cash, cash equivalents or

other property other than Shares, or the Award otherwise terminates without

payment being made to the Participant in the form of Shares, any Shares counted

against the number of Shares available under the Plan with respect to such

Award shall, to the extent of any such forfeiture, alternative payment or

termination, again be available for Awards under the Plan.  If the exercise price of an Award is paid by

delivering to the Company Shares previously owned by the Participant, the

Shares covered by the Award equal to the number of Shares so delivered shall

again be available for Awards under the Plan. 

Any Shares distributed pursuant to an Award, if granted pursuant to

category (i) of the first sentence of this Section, may consist, in whole or

part, of authorized and unissued Shares or of treasury Shares, including Shares

repurchased by the Company for purposes of the Plan and, if granted pursuant to

category (ii) of the first sentence of this Section, shall consist of treasury

Shares.

 

SECTION 5.  ELIGIBILITY

 

5.01  Awards

may be granted only to individuals who are full-time employees (including,

without limitation, employees who also are directors or officers and Covered

Employees) of the Company or any Subsidiary; provided, however, that no Award

shall be granted to any member of the Committee.

 

SECTION 6.  SPECIFIC TERMS OF AWARDS

 

6.01  General.  Subject to the terms of the Plan and any

applicable Award Agreement, Awards may be granted as set forth in this Section

6.  In addition, the Committee may

impose on any Award or the exercise thereof, at the date of grant or thereafter

(subject to the terms of Section 10.01), such additional terms and conditions,

not inconsistent with the provisions of the Plan, as the Committee shall

determine, including separate escrow provisions and terms requiring forfeiture of

Awards in the event of termination of employment by the Participant.  Except as provided in Section 7.01, or as

required by applicable law, Awards may be granted for no consideration other

than prior and/or future services.

 

6.02  Options.  The Committee is authorized to grant Options

to Participants on the following terms and conditions:

 

(i)  Exercise Price.  The exercise price per Share of an Option

shall not be less than 100% of the Fair Market Value of a Share on the date of

grant of such Option, except as otherwise provided in Section 7.01.

 

(ii)  Option Term.  The term of each Option shall be determined

by the Committee, except that no Incentive Stock Option shall be exercisable

after the expiration of ten years from the date of grant.

 

(iii)  Times and Methods of Exercise.  The Committee shall determine the time or

times at which an Option may be exercised in whole or in part, the methods by

which the exercise price may be paid or deemed to be paid, and the form of such

payment, including, without limitation, cash (including notes or other

contractual obligations of Participants to make payment on a deferred basis, to

the extent permitted by law), Shares, other outstanding Awards or other

 

5

 

property or any

combination thereof, having a Fair Market Value on the date of exercise equal

to the exercise price, provided, however, that (1) in the case of a Participant

who is at the time of exercise subject to Section 16 of the Exchange Act, any

portion of the exercise price representing a fraction of a Share shall in any

event be paid in cash or in property other than any equity security (as defined

by the Exchange Act) of the Company and (2) except as otherwise determined by

the Committee, in its discretion, at the time the Option is granted, no shares

which have been held for less than six months may be delivered in payment of

the exercise price of an Option.

 

Delivery of Shares in payment of the exercise price of an Option, if

authorized by the Committee, may be accomplished through the effective transfer

to the Company of Shares held by a broker or other agent.  Unless otherwise determined by the

Committee, the Company will also cooperate with any person exercising an Option

who participates in a cashless exercise program of a broker or other agent

under which all or part of the Shares received upon exercise of the Option are

sold through the broker or other agent, or under which the broker or other

agent makes a loan to such person, for the purpose of paying the exercise price

of an Option.  Notwithstanding the

preceding sentence, unless the Committee, in its discretion, shall otherwise

determine, the exercise of the Option shall not be deemed to occur, and no

Shares will be issued by the Company upon exercise of an Option, until the

Company has received payment in full of the exercise price.

 

Notwithstanding any other provision contained in the Plan or in any

Award Agreement, but subject to the possible exercise of the Committee’s

discretion contemplated in the last sentence of this Section 6.02(iii), the

aggregate Fair Market Value, determined as of the date of grant, of the Shares

with respect to which Incentive Stock Options are exercisable for the first

time by a Participant during any calendar year under all plans of the

corporation employing such employee, any parent or subsidiary corporation of

such corporation and any predecessor corporation of any such corporation shall

not exceed $100,000.  If the date on which

one or more of such Incentive Stock Options could first be exercised would be

accelerated pursuant to any provision of the Plan or any Award Agreement, and

the acceleration of such exercise date would result in a violation of the

restriction set forth in the preceding sentence, then, notwithstanding any such

provision, but subject to the provisions of the next succeeding sentence, the

exercise dates of such Incentive Stock Options shall be accelerated only to the

date or dates, if any, that do not result in a violation of such restriction

and, in such event, the exercise dates of the Incentive Stock Options with the

lowest option prices shall be accelerated to the earliest such dates.  The Committee may, in its discretion,

authorize the acceleration of the exercise date of one or more Incentive Stock

Options even if such acceleration would violate the $100,000 restriction set

forth in the first sentence of this paragraph and even if such Incentive Stock

Options are thereby converted in whole or in part to nonstatutory stock

options.

 

(iv)  Termination of Employment.  Unless otherwise determined by the Committee

and reflected in the Award Agreement:

 

(A)  if a Participant shall die

while employed by the Company or a Subsidiary or during a period following

termination of employment during which an Option otherwise remains exercisable

under this Section 6.02(iv), Options granted to the Participant, to the extent

exercisable at the time of the Participant’s death, may be exercised within one

year after the date of the Participant’s death, but not later than the

expiration date of the Option, by the executor or administrator of the

Participant’s estate or by the Person or Persons to whom the Participant shall

have transferred such right by will, by the laws of descent and distribution

or, if permitted by the Committee, by inter vivos transfer.

 

6

 

(B)  if the employment of a

Participant with the Company or a Subsidiary shall be involuntarily terminated

under circumstances which would qualify the Participant for benefits under the

Company’s Separation Allowance Plan, or if a Participant shall retire under the

terms of any retirement plan of the Company or a Subsidiary or shall terminate

his or her employment with the written consent of the Company or a Subsidiary

specifically permitting such exercise, Options granted to the Participant, to

the extent exercisable at the date of the Participant’s termination of

employment, may be exercised within 90 days after the date of termination of

employment, but not later than the expiration date of the Option.

 

(C)  except to the extent an

Option remains exercisable under paragraph (A) or (B) above or under Section

9.02, any Option granted to a Participant shall terminate immediately upon the

termination of all employment of the Participant with the Company or a

Subsidiary.

 

(v)  Reload Option Rights.  Reload Option Rights if awarded with respect

to an Option shall entitle the holder of the Option, upon exercise of the

Option or any portion thereof through delivery of previously owned Shares, to

automatically be granted on the date of such exercise a new nonstatutory stock

option (a “Reload Option”) (1) for a number of Shares not exceeding the number

of full Shares delivered in payment of the option price of the original Option

and any withholding taxes related thereto, (2) having an option price not less

than 100% of the Fair Market Value per Share of the Common Stock on such date

of grant, (3) having an expiration date not later than the expiration date of

the original Option so exercised and (4) otherwise having terms permissible for

the grant of an Option under the Plan. 

Subject to the preceding sentence and the other provisions of the Plan,

Reload Option Rights and Reload Options shall have such terms and be subject to

such restrictions and conditions, if any, as shall be determined, in its

discretion, by the Committee.  In

granting Reload Option Rights, the Committee, may, in its discretion, provide

for successive Reload Option grants upon the exercise of Reload Options granted

thereunder.  Unless otherwise

determined, in its discretion, by the Committee, Reload Option Rights shall

entitle the holder of an Option to be granted a Reload Option only if the

underlying Option to which they relate is exercised during employment with the

Company or a Subsidiary of the original grantee of the underlying Option.  Except as otherwise specifically provided

herein or required by the context, the term Option as used in this Plan shall

include Reload Options granted hereunder.

 

(vi)  Individual Option Limit.  The aggregate number of Shares

for which Options may be granted under the Plan to any single Participant shall

not exceed 1,500,000 Shares.  The

limitation in the preceding sentence shall be interpreted and applied in a

manner consistent with Section 162(m) of the Code and, to the extent consistent

with Section 162(m) of the Code, in accordance with Section 4.01 hereof.  To the extent consistent with Section 162(m)

of the Code, in applying this limitation a Reload Option shall not be deemed to

increase the number of Shares covered by the original underlying Option grant.

 

6.03  Restricted

Stock.  The Committee is

authorized to grant Restricted Stock to Participants on the following terms and

conditions:

 

(i)  Issuance and Restrictions.  Restricted Stock shall be subject to such

restrictions on transferability and other restrictions as the Committee may

impose (including, without limitation, limitations on the right to vote

Restricted Stock or the right to receive dividends thereon), which restrictions

may lapse separately or in combination at such times, under such circumstances,

in such installments or otherwise, as the Committee shall determine at the time

of grant or thereafter.

 

7

 

(ii)  Forfeiture.  Except as otherwise determined by the

Committee at the time of grant or thereafter, upon termination of employment

(as determined under criteria established by the Committee) during the

applicable restriction period, Restricted Stock that is at that time subject to

restrictions shall be forfeited and reacquired by the Company; provided,

however, that the Committee may provide, by rule or regulation or in any Award

Agreement, that restrictions on Restricted Stock shall be waived in whole or in

part in the event of terminations resulting from specified causes, and the

Committee may in other cases waive in whole or in part restrictions on

Restricted Stock.

 

(iii)  Certificates for Shares.  Restricted Stock granted under the Plan may

be evidenced in such manner as the Committee shall determine, including,

without limitation, issuance of certificates representing Shares. Certificates

representing Shares of Restricted Stock shall be registered in the name of the

Participant and shall bear an appropriate legend referring to the terms,

conditions and restrictions applicable to such Restricted Stock.

 

6.04  Performance

Awards.  The Committee is

authorized to grant Performance Awards to Participants on the following terms

and conditions:

 

(i)  Right to Payment.  A Performance Award shall represent a right

to receive Shares, cash, other property or any combination thereof based on the

achievement, or the level of achievement, during a specified Performance Period

of one or more Performance Goals established by the Committee at the time of

the Award.

 

(ii)  Terms of Performance Awards.  At the time a Performance Award is granted,

the Committee shall cause to be set forth in the Award Agreement or otherwise

in writing (1) the Performance Goals applicable to the Award and the

Performance Period during which the achievement of the Performance Goals shall

be measured, (2) the amount which may be earned by the Participant based

on the achievement, or the level of achievement, of the Performance Goals or the

formula by which such amount shall be determined and (3) such other terms

and conditions applicable to the Award as the Committee may, in its discretion,

determine to include therein.  The terms

so established by the Committee shall be objective such that a third party

having knowledge of the relevant facts could determine whether or not any

Performance Goal has been achieved, or the extent of such achievement, and the

amount, if any, which has been earned by the Participant based on such

performance.  The Committee may retain

the discretion to reduce (but not to increase) the amount of a Performance

Award which will be earned based on the achievement of Performance Goals.

 

(iii)  Performance Goals.  “Performance Goals” shall mean one or more

preestablished, objective measures of performance during a specified

Performance Period by the Company, a Subsidiary or Subsidiaries, any branch,

department or other portion thereof or the Participant individually, selected

by the Committee in its discretion to determine whether Performance Award has

been earned in whole or in part. 

Performance Goals may be based on earnings per share, net income,

revenue growth, revenues, expenses, return on equity, return on total capital

or return on assets.  Performance Goals

based on such performance measures may be based either on the performance of

the Company, Subsidiary or portion thereof under such measure for the

Performance Period and/or upon a comparison of such performance with the

performance of a peer group of corporations selected or defined by the

Committee at the time of making a Performance Award.  The Committee may in its discretion also determine to use other

objective performance measures as Performance Goals.

 

(iv)  Committee Certification.  Following completion of the applicable

Performance Period, and prior to any payment of a Performance Award to the

Participant, the Committee shall

 

8

 

determine in

accordance with the terms of the Performance Award and shall certify in writing

whether the applicable Performance Goal or Goals were achieved, or the level of

such achievement, and the amount, if any, earned by the Participant based upon

such performance.  For this purpose,

approved minutes of the meeting of the Committee at which certification is made

shall be sufficient to satisfy the requirement of a written certification.

 

(v)  Maximum Individual Performance Award

Payments.  With respect to

all Performance Periods ending in any one calendar year, the maximum amount

which may be earned by any single Participant under all Performance Awards

granted under the Plan shall be limited to $1,000,000.  In applying this limit, the amount of any

cash or the Fair Market Value of any Shares or other property earned by a

Participant shall be measured as of the close of the applicable Performance

Period, regardless of the fact that certification by the Committee and actual

payment to the Participant may occur in a subsequent calendar year or years.

 

6.05  Other

Stock-Based Awards.  The Committee

is authorized, subject to limitations under applicable law, to grant to

Participants such other Awards that are denominated or payable in, valued in

whole or in part by reference to, or otherwise based on, or related to, Shares,

as deemed by the Committee to be consistent with the purposes of the Plan,

including, without limitation, purchase rights, Shares awarded which are not

subject to any restrictions or conditions, convertible securities, exchangeable

securities or other rights convertible or exchangeable into Shares, as the

Committee in its discretion may determine. 

In the discretion of the Committee, such Other Stock-Based Awards,

including Shares, or other types of Awards authorized under the Plan, may be

used in connection with, or to satisfy obligations of the Company or a

Subsidiary under, other compensation or incentive plans, programs or

arrangements of the Company or any Subsidiary for eligible Participants,

including without limitation the Short-Term Incentive Compensation Plan, the Deferred

Compensation Plan and executive contracts.

 

The Committee shall determine the terms and conditions

of Other Stock-Based Awards.  Except as

provided in Section 7.01, Shares or securities delivered pursuant to a purchase

right granted under this Section 6.05 shall be purchased for such

consideration, paid for by such methods and in such forms, including, without

limitation, cash, Shares, outstanding Awards or other property or any

combination thereof, as the Committee shall determine, but the value of such

consideration shall not be less than the Fair Market Value of such Shares or

other securities on the date of grant of such purchase right.  Delivery of Shares or other securities in

payment of a purchase right, if authorized by the Committee, may be accomplished

through the effective transfer to the Company of Shares or other securities

held by a broker or other agent.  Unless

otherwise determined by the Committee, the Company will also cooperate with any

person exercising a purchase right who participates in a cashless exercise

program of a broker or other agent under which all or part of the Shares or

securities received upon exercise of a purchase right are sold through the

broker or other agent, or under which the broker or other agent makes a loan to

such person, for the purpose of paying the exercise price of a purchase

right.  Notwithstanding the preceding

sentence, unless the Committee, in its discretion, shall otherwise determine,

the exercise of the purchase right shall not be deemed to occur, and no Shares

or other securities will be issued by the Company upon exercise of a purchase

right, until the Company has received payment in full of the exercise price.

 

6.06  Exchange

Provisions.  The Committee

may at any time offer to exchange or buy out any previously granted Award for a

payment in cash, Shares, another Award or other property, based on such terms

and conditions as the Committee shall determine and communicate to the

Participant at the time that such offer is made.

 

SECTION 7.  GENERAL TERMS OF AWARDS

 

7.01  Stand-Alone,

Tandem and Substitute Awards. 

Awards granted under the Plan may, in the discretion of the Committee,

be granted either alone or in addition to, in tandem with or in substitution

 

9

 

for, any other Award granted under the Plan or any

award granted under the Management Incentive Compensation Plan, or any other

plan, program or arrangement of the Company or any Subsidiary (subject to the

terms of Section 10.01) or any business entity acquired or to be acquired by

the Company or a Subsidiary, except that an Incentive Stock Option may not be

granted in tandem with other Awards or awards. 

If an Award is granted in substitution for another Award or award, the

Committee shall require the surrender of such other Award or award in

consideration for the grant of the new Award. 

Awards granted in addition to or in tandem with other Awards or awards

may be granted either at the same time as or at a different time from the grant

of such other Awards or awards.  The

exercise price of any Option or the purchase price of any other Award

conferring a right to purchase Shares:

 

(i)  granted in substitution for

an outstanding Award or award shall be not less than the Fair Market Value of

Shares at the date such substitute Award is granted; provided, however, that

(1) except in the case of (a) an Incentive Stock Option or (b) an Option

granted to a Covered Employee, the exercise, grant or purchase price per share

of the substituted Award may be reduced to reflect the Fair Market Value of the

Award or award required to be surrendered by the Participant as a condition to

receipt of such substitute Award, and (2) in the case of any Participant, the

Committee may, in lieu of such price reduction, make an additional Award or

payment to the Participant reflecting the Fair Market Value of the Award or

award required to be surrendered; or

 

(ii)  retroactively granted in

tandem with an outstanding Award or award shall be not less than the lesser of

the Fair Market Value of Shares at the date of grant of the later Award or the

Fair Market Value of Shares at the date of grant of the earlier Award.

 

7.02  Certain

Restrictions Under Rule 16b-3. 

Upon the effectiveness of any amendment to Rule 16b-3, this Plan and any

Award Agreement for an outstanding Award held by a Participant then subject to

Section 16 of the Exchange Act shall be deemed to be amended, without further

action on the part of the Committee, the Board or the Participant, to the

extent necessary for Awards under the Plan or such Award Agreement to qualify

for the exemption provided by Rule 16b-3, as so amended, except to the extent

any such amendment requires shareholder approval.

 

7.03  Decisions

Required to be Made by the Committee.  Other provisions of the Plan and any Award Agreement

notwithstanding, if any decision regarding an Award or the exercise of any

right by a Participant, at any time such Participant is subject to Section 16

of the Exchange Act, is required to be made or approved by the Committee in

order that a transaction by such Participant will be exempt under Rule 16b-3,

then the Committee shall retain full and exclusive power and authority to make

such decision or to approve or disapprove any such decision by the Participant.

 

7.04  Term of

Awards.  The term of each

Award shall be for such period as may be determined by the Committee; provided,

however, that in no event shall the term of any Incentive Stock Option exceed a

period of ten years from the date of its grant.

 

7.05  Form of

Payment of Awards.  Subject

to the terms of the Plan and any applicable Award Agreement, payments or

substitutions to be made by the Company upon the grant, exercise or other

payment or distribution of an Award may be made in such forms as the Committee shall

determine at the time of grant or thereafter (subject to the terms of Section

10.01), including, without limitation, cash, Shares, other Awards or other

property or any combination thereof, and may be made in a single payment or

substitution, in installments or on a deferred basis, in each case in

accordance with rules and procedures established, or as otherwise determined,

by the Committee.  Such rules and

procedures or determinations may include, without limitation, provisions for

the payment or crediting of reasonable interest on installment or deferred

payments or the grant or crediting of dividend equivalents in respect of

installment or deferred payments.

 

10

 

7.06  Limits on

Transfer of Awards; Beneficiaries. 

No right or interest of a Participant in any Award shall be pledged,

encumbered or hypothecated to or in favor of any Person other than the Company,

or shall be subject to any lien, obligation or liability of such Participant to

any Person other than the Company or a Subsidiary.  Except to the extent otherwise determined by the Committee, no

Award and no rights or interests therein shall be assignable or transferable by

a Participant otherwise than by will or the laws of descent and distribution,

and any Option or other right to purchase or acquire Shares granted to a

Participant under the Plan shall be exercisable during the Participant’s

lifetime only by such Participant.  A

beneficiary, guardian, legal representative or other Person claiming any rights

under the Plan from or through any Participant shall be subject to all the

terms and conditions of the Plan and any Award Agreement applicable to such

Participant as well as any additional restrictions or limitations deemed

necessary or appropriate by the Committee.

 

7.07  Registration

and Listing Compliance.  No

Award shall be paid and no Shares or other securities shall be distributed with

respect to any Award in a transaction subject to the registration requirements

of the Securities Act of 1933, as amended, or any state securities law or

subject to a listing requirement under any listing agreement between the

Company and any national securities exchange, and no Award shall confer upon

any Participant rights to such payment or distribution until such laws and

contractual obligations of the Company have been complied with in all material

respects.  Except to the extent required

by the terms of an Award Agreement or another contract between the Company and

the Participant, neither the grant of any Award nor anything else contained

herein shall obligate the Company to take any action to comply with any

requirements of any such securities laws or contractual obligations relating to

the registration (or exemption therefrom) or listing of any Shares or other

securities, whether or not necessary in order to permit any such payment or

distribution.

 

7.08  Stock

Certificates.  All

certificates for Shares delivered under the terms of the Plan shall be subject

to such stop-transfer orders and other restrictions as the Committee may deem

advisable under federal or state securities laws, rules and regulations

thereunder, and the rules of any national securities exchange or automated

quotation system on which Shares are listed or quoted.  The Committee may cause a legend or legends

to be placed on any such certificates to make appropriate reference to such

restrictions or any other restrictions or limitations that may be applicable to

Shares.  In addition, during any period

in which Awards or Shares are subject to restrictions or limitations under the

terms of the Plan or any Award Agreement, or during any period during which

delivery or receipt of an Award or Shares has been deferred by the Committee or

a Participant, the Committee may require any Participant to enter into an

agreement providing that certificates representing Shares issuable or issued

pursuant to an Award shall remain in the physical custody of the Company or

such other Person as the Committee may designate.

 

SECTION 8.  ADJUSTMENT PROVISIONS

 

8.01  In the

event that the Committee shall determine that any dividend or other

distribution (whether in the form of cash, Shares, other securities or other

property), recapitalization, stock split, reverse stock split, reorganization,

merger, consolidation, split-up, spin-off, combination, repurchase, exchange of

Shares or other securities of the Company, or other similar corporate

transaction or event affects the Shares such that an adjustment is determined

by the Committee to be appropriate in order to prevent dilution or enlargement

of Participants’ rights under the Plan, then the Committee shall, in such

manner as it may deem equitable, adjust any or all of (i) the number and kind

of Shares which may thereafter be issued in connection with Awards; (ii) the

number and kind of Shares issued or issuable in respect of outstanding Awards;

and (iii) the exercise price, grant price or purchase price relating to any

Award or, if deemed appropriate, make provision for a cash payment with respect

to any outstanding Award; provided, however, in each case, that (1) with

respect to Incentive Stock Options, no such adjustment shall be authorized to

the extent that such authority would cause the Plan to violate Section

422(b)(1) of the Code and (2) with respect to Options or Performance Awards

held by a Covered

 

11

 

Employee,

no such adjustment shall be authorized to the extent that such authority would

cause such Awards to fail to qualify as “performance-based compensation” under

Section 162(m)(4)(C) of the Code.  In

addition, the Committee is authorized to make adjustments in the terms and

conditions of, and the criteria of, Awards in recognition of unusual or

nonrecurring events (including, without limitation, events described in the

preceding sentence) affecting the Company or the financial statements of the

Company, or in response to changes in applicable laws, regulations or

accounting principles; provided, however, that (1) with respect to Incentive

Stock Options, no such adjustment shall be authorized to the extent that such

authority would cause the Plan to violate Section 422(b)(1) of the Code and (2)

with respect to Options or Performance Awards held by a Covered Employee, no

such adjustment shall be authorized to the extent that such authority would

cause such Awards to fail to qualify as “performance-based compensation” under

Section 162(m)(4)(C) of the Code.

 

SECTION 9.  CHANGE OF CONTROL PROVISIONS

 

9.01  Acceleration

of Exercisability and Lapse of Restrictions.  Unless otherwise determined by the Committee

at the time of grant of an Award or unless otherwise provided in the applicable

Award Agreement, if the shareholders of the Company shall approve a transaction

which upon consummation would constitute a Change of Control of the Company, or

if any Change of Control of the Company not subject to shareholder approval

shall occur:

 

(i)  all outstanding Awards

pursuant to which the Participant may have rights, the exercise of which is

restricted or limited, shall become fully exercisable;

 

(ii)  all restrictions or

limitations (including risks of forfeiture and deferrals) on outstanding Awards

subject to restrictions or limitations under the Plan shall lapse unless prior

to such lapse the right to lapse of restrictions or limitations is waived or

deferred by the Participant; and

 

(iii)  all performance criteria

and other conditions to payment of Awards under which payments of cash, Shares

or other property are subject to conditions shall be deemed to be achieved or

fulfilled and shall be waived by the Company.

 

9.02  Termination

of Employment Following Change of Control.  If within three years following the date of any Change of Control

the employment of a Participant shall be terminated voluntarily or

involuntarily for any reason other than for Cause, then unless otherwise

provided in the applicable Award Agreement, and in addition to any other rights

of post-termination exercise which the Participant (or other holder of the

Award) may have under the Plan or the applicable Award Agreement, any Option or

other Award granted to the Participant and outstanding on the date of the

Change of Control, the payment or receipt of which is dependent upon exercise

by the Participant (or other holder of the Award) shall be exercisable for a

period of 90 days following the date of such termination of employment but not

later than the expiration date of the Award.

 

9.03  Definition

of Change of Control.  For

purposes of this Section 9, a “Change of Control” of the Company shall mean any

of the following events:

 

(a)  The sale or other

disposition by the Company of all or substantially all of its assets to a

single purchaser or to a group of purchasers, other than to a corporation with

respect to which, following such sale or disposition, more than eighty percent

of, respectively, the then outstanding shares of Common Stock and the combined

voting power of the then outstanding voting securities entitled to vote

generally in the election of the Board is then owned beneficially, directly or indirectly,

by all or substantially all of the individuals and entities who were the

beneficial owners, respectively of the outstanding Common Stock and the

combined voting power of the

 

12

 

then outstanding

voting securities immediately prior to such sale or disposition in

substantially the same proportion as their ownership of the outstanding Common

Stock and voting power immediately prior to such sale or disposition;

 

(b)  The acquisition in one or

more transactions by any person or group, directly or indirectly, of beneficial

ownership of twenty percent or more of the outstanding shares of Common Stock

or the combined voting power of the then outstanding voting securities of the

Company entitled to vote generally in the election of the Board; provided,

however, that any acquisition by (x) the Company or any of its Subsidiaries, or

any employee benefit plan (or related trust) sponsored or maintained by the

Company or any of its Subsidiaries or (y) any person that is eligible, pursuant

to Rule 13d-1(b) under the Exchange Act (as in effect on the effective date of

the Plan) to file a statement on Schedule 13G with respect to its beneficial

ownership of Common Stock and other voting securities, whether or not such

person shall have filed a statement on Schedule 13G, unless such person shall

have filed a statement on Schedule 13D with respect to beneficial ownership of

fifteen percent or more of the Company’s voting securities, shall not

constitute a Change of Control;

 

(c)  The Company’s termination

of its business and liquidation of its assets;

 

(d)  There is consummated a

merger, consolidation, reorganization, share exchange, or similar transaction

involving the Company (including a triangular merger), in any case, unless

immediately following such transaction: 

(i) all or substantially all of the persons who were the beneficial

owners of the outstanding Commons Stock and outstanding voting securities of

the Company immediately prior to the transaction beneficially own, directly or

indirectly, more than 60% of the outstanding shares of Commons Stock and the

combined voting power of the then outstanding voting securities entitled to

vote generally in the election of directors of the corporation resulting from

such transaction (including a corporation or other person which as a result of

such transaction owns the Company or all or substantially all of the Company’s

assets through one or more subsidiaries (a “Parent Company”)) in substantially

the same proportion as their ownership of the Common Stock and other voting

securities of the Company immediately prior to the consummation of the

transaction, (ii) no person (other than the Company, any employee benefit

plan sponsored or maintained by the Company or, if reference was made to equity

ownership of any Parent Company for purposes of determining whether clause (i)

above is satisfied in connection with the transaction, such Parent Company)

beneficially owns, directly or indirectly, 20% or more of the outstanding shares

of Common Stock or the combined voting power of the voting securities entitled

to vote generally in the election of directors of the corporation resulting

from such transaction and (iii) individuals who were members of the Board

immediately prior to the consummation of the transaction constitute at least a

majority of the members of the board of directors resulting from such

transaction (or, if reference was made to equity ownership of any Parent

Company for purposes of determining whether clause (i) above is satisfied

in connection with the transaction, such Parent Company); or

 

(e)  The following individuals

cease for any reason to constitute a majority of the number of directors then

serving:  individuals who, on the date

hereof, constitute the entire Board and any new director (other than a director

whose initial assumption of office is in connection with an actual or

threatened election contest, including but not limited to a consent

solicitation, relating to the election of directors of the Company) whose

appointment or election by the Board or nomination for election by the

Company’s shareholders was approved by a vote of at least two-thirds (2/3) of

the directors then still in office who either were directors on the effective

date of the Plan or whose appointment, election or nomination for election was

previously so approved.

 

13

 

SECTION 10.  AMENDMENTS TO AND TERMINATION OF THE PLAN

 

10.01  The

Board may amend, alter, suspend, discontinue or terminate the Plan without the

consent of shareholders or Participants, except that, without the approval of

the shareholders of the Company, no amendment, alteration, suspension,

discontinuation or termination shall be made if shareholder approval is

required by any federal or state law or regulation or by the rules of any stock

exchange on which the Shares may then be listed, or if the Board in its

discretion determines that obtaining such shareholder approval is for any

reason advisable; provided, however, that except as provided in Section 7.02,

without the consent of the Participant, no amendment, alteration, suspension,

discontinuation or termination of the Plan may materially and adversely affect

the rights of such Participant under any Award theretofore granted to him.  The Committee may waive any conditions or

rights under, amend any terms of, or amend, alter, suspend, discontinue or

terminate, any Award theretofore granted, prospectively or retrospectively;

provided, however, that except as provided in Section 7.02, without the consent

of a Participant, no amendment, alteration, suspension, discontinuation or

termination of any Award may materially and adversely affect the rights of such

Participant under any Award theretofore granted to him; and provided further

that, except as provided in Section 8.01 of the Plan, the exercise price of any

outstanding Option may not be reduced, whether through amendment, cancellation

or replacement, unless such reduction is approved by the shareholders of the

Company.

 

SECTION 11.  GENERAL PROVISIONS

 

11.01  No Right to

Awards; No Shareholder Rights. 

No Participant or employee shall have any claim to be granted any Award

under the Plan, and there is no obligation for uniformity of treatment of

Participants and employees, except as provided in any other compensation

arrangement.  No Award shall confer on

any Participant any of the rights of a shareholder of the Company unless and

until Shares are in fact issued to such Participant in connection with such

Award.

 

11.02  Withholding.  To the extent required by applicable

Federal, state, local or foreign law, the Participant or his successor shall

make arrangements satisfactory to the Company, in its discretion, for the

satisfaction of any withholding tax obligations that arise in connection with

an Award.  The Company shall not be

required to issue any Shares or make any cash or other payment under the Plan

until such obligations are satisfied.

 

The Company is authorized to withhold from any Award

granted or any payment due under the Plan, including from a distribution of

Shares, amounts of withholding taxes due with respect to an Award, its exercise

or any payment thereunder, and to take such other action as the Committee may

deem necessary or advisable to enable the Company and Participants to satisfy

obligations for the payment of such taxes. 

This authority shall include authority to withhold or receive Shares,

Awards or other property and to make cash payments in respect thereof in satisfaction

of such tax obligations.

 

11.03  No Right to

Employment.  Nothing

contained in the Plan or any Award Agreement shall confer, and no grant of an

Award shall be construed as conferring, upon any Participant any right to

continue in the employ of the Company or to interfere in any way with the right

of the Company to terminate his employment at any time or increase or decrease

his compensation from the rate in existence at the time of granting of an

Award, except as provided in any Award Agreement or other compensation

arrangement.

 

11.04  Unfunded

Status of Awards; Creation of Trusts.  The Plan is intended to constitute an “unfunded” plan for

incentive and deferred compensation. 

With respect to any payments not yet made to a Participant pursuant to

an Award, nothing contained in the Plan or any Award Agreement shall give any

such Participant any rights that are greater than those of a general unsecured

creditor of the Company; provided, however, that the Committee may authorize

the creation of trusts or make other arrangements to

 

14

 

meet the Company’s obligations under the Plan to

deliver cash, Shares or other property pursuant to any Award, which trusts or

other arrangements shall be consistent with the “unfunded” status of the Plan

unless the Committee otherwise determines.

 

11.05  No Limit on

Other Compensatory Arrangements. 

Nothing contained in the Plan shall prevent the Company from adopting

other or additional compensation arrangements (which may include, without

limitation, employment agreements with executives and arrangements which relate

to Awards under the Plan), and such arrangements may be either generally

applicable or applicable only in specific cases.  Notwithstanding anything in the Plan to the contrary, the terms

of each Award shall be construed so as to be consistent with such other

arrangements in effect at the time of the Award.

 

11.06  No

Fractional Shares.  No

fractional Shares shall be issued or delivered pursuant to the Plan or any

Award.  The Committee shall determine whether

cash, other Awards or other property shall be issued or paid in lieu of

fractional Shares or whether such fractional Shares or any rights thereto shall

be forfeited or otherwise eliminated.

 

11.07  Governing

Law.  The validity,

interpretation, construction and effect of the Plan and any rules and

regulations relating to the Plan shall be governed by the laws of the

Commonwealth of Pennsylvania (without regard to the conflicts of laws thereof),

and applicable Federal law.

 

11.08  Severability.  If any provision of the Plan or any Award is

or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction,

or would disqualify the Plan or any Award under any law deemed applicable by

the Committee, such provision shall be construed or deemed amended to conform

to applicable laws or if it cannot be construed or deemed amended without, in

the determination of the Committee, materially altering the intent of the Plan

or Award, it shall be deleted and the remainder of the Plan or Award shall

remain in full force and effect; provided, however, that, unless otherwise

determined by the Committee, the provision shall not be construed or deemed

amended or deleted with respect to any Participant whose rights and obligations

under the Plan are not subject to the law of such jurisdiction or the law

deemed applicable by the Committee.

 

SECTION 12.  EFFECTIVE DATE AND TERM OF THE PLAN

 

12.01  The

effective date and date of adoption of the Plan shall be March 17, 1999, the

date of adoption of the Plan by the Board, provided that such adoption of the

Plan is approved by a majority of the votes cast at a duly held meeting of

shareholders held on or prior to March 16, 2000 at which a quorum representing

a majority of the outstanding voting stock of the Company is, either in person

or by proxy, present and voting. 

Notwithstanding anything else contained in the Plan or in any Award

Agreement, no Option or other purchase right granted under the Plan may be

exercised, and no Shares may be distributed pursuant to any Award granted under

the Plan, prior to such shareholder approval or prior to any required approval

or consent from those governmental agencies having jurisdiction in these

matters.  In the event such shareholder

or regulatory approval is not obtained, all Awards granted under the Plan shall

automatically be deemed void and of no effect. 

Absent additional shareholder approval, (1) no Performance Award

may be granted under the Plan subsequent to the Company’s Annual Meeting of

Shareholders in 2004, (2) no Performance Period for any Performance Award

granted under the Plan may end later than December 31, 2007 and (3) no other

Award may be granted under the Plan subsequent to March 16, 2009, except that

Reload Options may be granted pursuant to Reload Option Rights then

outstanding.

 

15

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