Document:

Exhibit 10.1

 

EQUITABLE RESOURCES, INC.

2002 EXECUTIVE PERFORMANCE INCENTIVE SHARE PLAN

EQUITABLE RESOURCES, INC.

(the “Company”) hereby establishes this EQUITABLE RESOURCES, INC. 2002

EXECUTIVE PERFORMANCE INCENTIVE SHARE PLAN (the “Plan”) as of this 12th

day of March 2002, in accordance with the terms provided herein.

 

WHEREAS, the Company

maintains certain long-term incentive award plans including the 1999 Equitable

Resources, Inc. Long-Term Incentive Plan for the benefit of its employees and

executives; and

 

WHEREAS, in order to further

align the interests of executives with the interests of the shareholders, the

Company desires to provide additional long-term incentive benefits through the

Plan.

 

NOW, THEREFORE, the Company

hereby provides for additional incentive benefits for certain executive

employees of the Company and adopts the terms of the Plan on the following

terms and conditions:

Section

1.  Incentive Program Purpose.  The main purpose of the Plan is to provide

additional long-term incentive opportunities to key executives to further align

their interests with those of the Company’s shareholders and customers and with

the strategic objectives of the Company. Awards granted hereunder may be earned

by achieving relative performance levels against a pre-determined peer group

and are forfeited if defined performance levels are not achieved.  By placing a portion of the executive’s

compensation at risk, the Company has an opportunity to reward exceptional performance

or reduce compensation opportunity when performance does not meet expectations.

 

Section

2.  Effective Date.  The effective date of this Plan is March 12,

2002.  The Plan will remain in effect

until the earlier of December 31, 2004 or the closing date of a Change of

Control event defined in Section 5 unless otherwise formally amended or

terminated in writing by the Company’s Chief Executive Officer (“Termination

Date”).  Amendment or termination of the

Plan must be approved by the Compensation Committee of the Board of Directors

(the “Committee”).

 

Section 3. 

Eligibility.  The Chief Executive Officer of the Company

(the “CEO”) shall, in his or her sole discretion, select the employees of the

Company who shall be eligible to participate in the Plan. The CEO’s selections

will become participants in the Plan (the “Participants”) only upon approval by

the Committee.   In the event that an

employee is hired by the Company during the Performance Period, the CEO shall,

in his or her sole discretion, determine whether the employee will be eligible to

participate in the Plan, provided that the Committee must approve all new

participants to the Plan.  

 

 

Section 4.  Performance Incentive Share Awards.  Each Participant shall be awarded a number

of performance incentive shares (the “Target Shares”) (subject to the

conditions provided herein) which shall be proposed by the CEO and approved by

the Committee.  For a new Participant,

the Target Shares shall be proposed by the CEO and approved by the Committee

and will be pro-rated based on the employee’s hire date and the contemplated

ending date of the program which is December 31, 2004.   The Target Shares, plus accrued dividends

(“Total Target Shares”) available for distribution to a party may be decreased

to zero (0) or increased by as much as two (2) times the Total Target Shares

based on performance as described in Section 5.

 

The Target

Shares shall be held in escrow by the Company subject to satisfaction of the

terms and conditions described below. A Participant shall have no right to

exchange the Target Shares for cash, stock or any other benefit and shall be a

mere unsecured creditor of the Company with respect to such shares and any

future rights to benefits.

Section 5. 

Performance Condition of the Target Shares.  Subject

to Section 8, the total number of Shares that will vest and be issued  (“Awarded Shares”) to a Participant will be

based on EQT’s three-year total shareholder return relative to the peer group’s

(Attachment A) three-year total shareholder return, for the Performance Period

of January 1, 2002 to the Termination Date (the “Performance Condition”). For

purposes of this Plan, the Performance Period total shareholder return will be

calculated as follows:

Step 1

A “Beginning Point” will be established for the

Company and each company in the peer group. 

This Beginning Point will be defined as one share of stock with a value

equal to the average closing stock price as reported in The Wall Street Journal for

the first ten (10) business days of 2002 for each company.

Step 2

Dividends paid for each company will be

cumulatively added to the Beginning Point as additional shares of such

company’s stock.  The closing price on

the last business day of the month in which the dividend was paid will be used

as the basis for determining the number of shares to be added.   The resulting total number of shares

accumulated during the Performance Period from the Beginning Point will be

referred to as the Total Shares Held at Ending Point.

Step 3

Except as provided in the following sentence, an

“Ending Point” will be defined as Total Shares Held at Ending Point for each

company times the average closing stock price as reported in The Wall

Street Journal for the last ten (10) business days of 2004 for each

company.  In the event of a change of

control as defined in the Equitable Resources, Inc. 1999 Long-Term Incentive

Plan (“Change of Control”), the Ending Point will be defined as the Total

Shares Held at Ending Point times the average of the closing price as reported

in The

Wall 

 

 

2

 

Street Journal for the ten (10) business days preceding the

closing of the Change of Control transaction.

Step 4

Total Shareholder Return (“TSR”) will be

expressed as a percentage and is calculated by dividing the Ending Point by the

Beginning Point and then subtracting 1 from the result.  Each company including the Company will be

ranked in descending order by the TSR so calculated.

Step 5

The

Total Target Shares for each Participant will be multiplied by the factor on

the x axis of the payout curve (identified on Attachment B) that corresponds to

the Company’s relative TSR ranking on the y axis.  Awarded Shares will equal:

	

  (i)

  	

   

  	

  zero

  percent of the Total Target Shares for performance relative to the peer group

  performance at the bottom 13.5% of all performers,

  
	

   

  	

   

  	

   

  
	

  (ii)

  	

   

  	

  100

  percent of the Total Target Shares for median relative performance and

  
	

   

  	

   

  	

   

  
	

  (iii)

  	

   

  	

  200

  percent of the Total Target Shares for performance at the top 13.5% of all

  performers.

  
	

   

  	

   

  	

   

  
	

  (iv)

  	

   

  	

  for

  performance levels between the bottom 13.5%, median and top 13.5% performance

  levels, the percent of Total Target shares will be determined by

  interpolation.  The applicable payout

  curve is provided in Attachment B.

  
	

   

  	

   

  	

   

  

Peer companies that are acquired, cease to exist

or undergo a fundamental change before the conclusion of the Performance Period

will be eliminated from the final calculation. 

The Committee may adjust the peer group based on significant or unusual

transactions that substantially affect the total shareholder return calculation

of any company.

 

Section 6.  Vesting and Distribution.  Subject to Section 8, each Participant will

vest in the number of Awarded Shares calculated according to Section 5 as of

the last day of the Performance Period and, except as provided in the following

sentence, such shares will be issued in the form of Company stock on or around

March 12, 2005.  In the event of a

Change of Control, the value of such vested shares will be distributed in cash

on the closing date of the transaction, which shall be calculated based upon

the average of the closing price of the Company’s stock for the ten (10)

business days preceding the Change of Control transaction as reported in The Wall

Street Journal.  The

Committee may, in its sole discretion, require that to the extent payment of

Awarded Shares exceeds the Internal Revenue Code Section 162(m) limits for tax

deductibility, the amount in excess of the limit be deferred pursuant to the

terms of the Company’s Deferred Compensation Plan to 

 

3

 

the next subsequent year in which it can be paid

to the Participant without exceeding the Code Section 162(m) limit.

 

Section 7.  Dividends.  Each Target Share will be cumulatively

credited with dividends that are paid on the Company’s common stock in the form

of additional shares. These additional shares shall be deemed to have been

purchased on the last business day of the month in which the dividend was

declared by the Company using the closing stock price for the Company as

reported in The

Wall Street Journal and shall be subject to all the same conditions

and restrictions as provided in this Plan applicable to Target Shares, Total

Target Shares and Awarded Shares.

 

Section

8.  Change of Status.  In making decisions regarding employees’

participation in the Plan and the extent to which awards vest and are payable,

the Committee may consider any factors that they may consider relevant.  The following guidelines are provided as general

information about the effect of employee status changes prior to vesting.

 

 

(a)                                  Retirement,

Death, Disability, Resignation.  Shares are forfeited.

 

(b)                                 Termination.  Shares are forfeited and no award shall be

paid to any employee whose services are terminated prior to the vesting of

Awarded Shares for reasons of misconduct, failure to perform, or other

cause.  If the termination is due to

reasons such as reorganization, and not due to the fault of the employee, the

employee will vest in Awarded Shares on the termination of the Performance Period

as follows: 

 

	

  Termination

  Date

  	

   

  	

  Reduction

  	

   

  
	

  Prior to March 1, 2003

  	

   

  	

  100

  	

  %

  
	

  March 1, 2003 — February 28, 2004

  	

   

  	

  50

  	

  %

  
	

  March 1, 2004 — December 31, 2004

  	

   

  	

  25

  	

  %

  

 

Section 9.  Responsibilities of the Committee.  The Committee has responsibility for all aspects

of the Plan’s administration, including:

 

·                  Ensuring that the Plan is administered in

accordance with the provisions of the Plan,

·                  Approving Plan Participants,

·                  Authorizing Target Share awards to Participants,

·                  Adjusting Target Share grants and vesting

requirements to account for extraordinary events,

 

4

 

·                  Ruling on any disagreement between Plan

Participants, Company management, Plan administrators, and any other interested

parties to the Plan, and

·                  Maintaining final authority to modify or

terminate the Plan at any time.

The interpretation and construction by the

Committee of any provisions of the Plan or of any Awarded Shares shall be

final. No member of the Committee shall be liable for any action or

determination made in good faith on the Plan or any Awarded Shares

thereunder.  The Committee may designate

another party to administer the Plan, including Company management or an

outside party. All conditions of the Target Shares must be approved by the

Committee.  As early as practicable

prior to or during the Performance Period, the Committee shall approve the

number of Target Shares to be awarded to each Participant. The associated terms

and conditions of the Plan will be communicated to Participants as close as

possible to the Award Date. The Participant will sign and return a participant

agreement to the Committee.

 

Section 10.  Tax Consequences to Participants.  It is intended that: (i) until the

Performance Condition is satisfied, a Participant’s right to an Award under

this Plan shall be considered to be subject to a substantial risk of forfeiture

in accordance with those terms as defined or referenced in Sections 83(a) and

3121(v)(2) of the Internal Revenue Code of 1986, as amended, (the “Code”); (ii)

the Awarded Shares shall be subject to employment taxes only upon the

satisfaction of the Performance Condition; and (iii) until the Awarded Shares

are actually paid to the Participant, the Participants shall have merely an

unfunded, unsecured promise to be paid the benefit, and such unfunded promise

shall not consist of a transfer of “property” within the meaning of Code

Section 83. It is further intended that, because a Participant cannot actually

or constructively receive the Target Shares prior to vesting and payment, the

Participant will not be in actual or constructive receipt of the Target Shares

within the meaning of Code Section 451 until they are actually received as

Awarded Shares.

 

Section 11.  Nonassignment.  A Participant shall not be permitted to

assign, alienate or otherwise transfer his or her Target Shares and any attempt

to do so shall be void.

 

Section

12.  Impact on Benefit Plans.  Payments under the Plan shall not be

considered as earnings for purposes of the Company’s qualified retirement plans

or any such retirement or benefit plan unless specifically provided for and

defined under such plans.

 

Section

13.  Successors; Changes in Stock.  The

obligation of the Company under the Plan shall be binding upon the successors

and assigns of the Company.  If a

dividend or other distribution shall be declared upon the Company’s common

stock payable in shares of Company common stock, the Total Target Shares and

the share of Company Common Stock on which the Performance Condition is based

shall be adjusted by adding thereto the number of shares of Company common

stock which would have been distributable thereon if such shares had been

outstanding on the date fixed for determining the shareholders entitled to

receive such stock dividend or distribution. 

In 

 

 

5

 

the event of any

spin-off, split-off or split-up, or dividend in partial liquidation, dividend

in property other than cash, or extraordinary distribution to shareholders of

the Company’s common stock, the Total Target Shares and the share of Company

common stock on which the Performance Condition is based shall be appropriately

adjusted to prevent dilution or enlargement of the rights of Participants which

would otherwise result from any such transaction.

 

In the case of a Change

of Control, any obligation under the Plan shall be handled in accordance with

the terms of Section 6 hereof.  In any

case not constituting a Change of Control in which the Company’s common stock

is changed into or becomes exchangeable for a different number or kind of

shares of stock or other securities of the Company or another corporation, or

cash or other property, whether through reorganization, reclassification,

recapitalization, stock split-up, combination of shares, merger or

consolidation, then (i) the value of the performance shares constituting an

Award shall be calculated based on the closing price of such common stock on

the closing date of the transaction on the principal market on which such

common stock is traded, (ii) there shall be substituted for each performance

share constituting an Award, the number and kind of shares of stock or other

securities (or cash or other property) into which each outstanding share of the

Company’s common stock shall be so changed or for which each such share shall

be exchangeable, and (iii) the share of Company common stock on which the

Performance Condition is based shall be appropriately and equitably

adjusted.  In the case of any such

adjustment, the Total Target Shares shall remain subject to the terms of the

Plan.

 

Section 14.  Dispute Resolution.  The Participant may make a claim to the

Committee with regard to a payment of benefits provided herein. If the

Committee receives a claim in writing, the Committee must advise the

Participant of its decision on the claim in writing in a reasonable period of

time after receipt of the claim (not to exceed 120 days). The notice shall set

forth the following information:

 

(a)          The specific basis for its decision,

(b)         Specific reference to pertinent Plan provisions

on which the decision is based,

(c)          A description of any additional material or information

necessary for the Participant to perfect a claim and an explanation of why such

material or information is necessary, and

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

 

Section

15.  Applicable Law.  This Plan shall be governed by and construed

under the laws of the Commonwealth of Pennsylvania without regard to its

conflict of law provisions.

 

Section

16.  Severability.  In the event that any one or more of the

provisions of this Plan shall be held to be invalid, illegal or unenforceable,

the validity, legality or 

 

6

 

enforceability

of the remaining provisions shall not in any way be affected or impaired

thereby.

 

Section

17.  Headings.  The descriptive headings of the Sections of

this Plan are inserted for convenience of reference only and shall not

constitute a part of this Plan.

 

Section 18. 

Amendment or Termination of this Plan.  This Plan may be

amended by the Company, in its sole discretion, at any time by a written action

authorized by its Board of Directors or by the Company’s Chief Executive

Officer if approved by the Committee, except that no amendment shall adversely

affect a Participant’s rights to his or her Award after the Award Date and no

amendment may be made following a Change of Control. This plan shall terminate

upon the earlier of the satisfaction of the Performance Condition or March 12,

2005.

 

7Exhibit 10.2

 

EQUITABLE

RESOURCES, INC.

2002 SHORT-TERM INCENTIVE PLAN

EQUITABLE

RESOURCES, INC. (the “Company”) hereby establishes this EQUITABLE RESOURCES,

INC 2002 SHORT-TERM INCENTIVE PLAN (the “Plan”) as of this 1st day of January,

2002, in accordance with the terms provided herein.

WHEREAS,

the Company has maintained the 2001 Short-Term Incentive Plan for the benefit

of its employees; and

WHEREAS,

the Company desires to amend the 2001 Short-Term Incentive Plan and restate the

structure of its incentive programs through the Plan which describes the goals

of the Company and the methodology for awarding incentive amounts under the

programs described within the Plan; and

NOW,

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

Section 1.  Incentive Program Purposes.  The Company’s main purposes in providing the

incentive programs described within the Plan (collectively, the “Incentive

Programs”) are to maintain a competitive level of total cash compensation and

to align the interests of the Company’s employees with those of the Company’s

shareholders, customers, and with the strategic objectives of the Company.  By placing a portion of employee

compensation at risk, the Company can reward performance based on the overall

performance of the Company, the business segment and the individual

contribution of each employee.

Section 2.  Effective Date.  The effective date of this Plan is

January 1, 2002.  The Plan will

remain in effect from year to year (each calendar year shall be referred to herein

as a “Plan Year”) until formally amended or terminated in accordance with

Section 17.

Section 3.  Eligibility.  Specific eligibility requirements for each

Incentive Program shall be proposed by the President of each business segment

or corporate officer, as applicable, and approved by the Company’s Chief

Administrative Officer.  Based upon such

eligibility requirements, the Company’s Chief Administrative Officer or the

Company’s Director of Compensation and Benefits, as applicable, may designate

any eligible employee for participation in the Plan in his or her complete and

sole discretion.  Eligible employees who

are designated to participate in an Incentive Program will be notified in

writing of their participation and given a Plan document for their reference.

Section 4. 

Administration of the Plan. 

The Equitable Resources Headquarters Short-Term Incentive Program (the

“Headquarters Incentive Program”), and any other Incentive Program that covers

the officers of the Company, shall be administered by the Compensation

Committee of the Board of Directors (the “Committee”).  The Company’s Director of Compensation and

Benefits shall administer all other Incentive Programs under the general

direction of the Company’s Chief Administrative Officer; provided, however, that the

Committee shall at all times retain the discretion with respect to all

Incentive Programs to reduce, eliminate, substitute or determine the source of

any payment or award hereunder without regard to any particular factors

specified in the Plan.  On an annual

basis, the Committee must review and approve (a) the Plan, (b) the Headquarters

Incentive Program, and other Incentive Programs covering officers of the

Company, (c) the Incentive Targets, as defined in Section 8 of the Plan, for

officers of the Company, (d) the methodology for determining the incentive

pools, including the Financial Measures as defined in Section 7 and the Value

Drivers, as defined in Section 7 of the Plan, and (e) the projected payout

under the Plan and under each Incentive Program.  The Committee must also review and approve all incentive payments

under the Headquarters Incentive Program and other Incentive Programs covering

officers of the Company, as well as any proposed amendments to the Plan

throughout the Plan Year.

 

 

 

Section 5.  Incentive

Programs.  The following Incentive

Programs shall be administered under the Plan:

•                  Equitable Resources Headquarters Short-Term Incentive

Program;

•                  Equitable Utilities Short-Term Incentive Program;

•                  Equitable Production Short-Term Incentive Program; and

•                  NORESCO Short-Term Incentive Program.

Section 6.  Definitions.  The following provides the definition of

certain Financial Measures, defined in Section 7 of the Plan, as may be

used in the Incentive Programs:

(a)                                  Net Income After Tax. 

Net Income After Tax, if used in the Headquarters Incentive Program, is

calculated as follows:

Total Revenue of the Company minus

Total Expenses of the Company for the Plan Year.

For

purposes of the foregoing calculation, Total Revenue shall mean revenue from

continuing operations.  Income from

unusual items, as determined by the Company’s Chief Financial Officer, will be

excluded.  Expenses shall include

interest, taxes, corporate overhead and the accrual charge for the Incentive

Program funding.  Expenses from unusual

items, as determined by the Company’s Chief Financial Officer, will be

excluded.  The Company’s Chief Financial

Officer is responsible for determining this Financial Measure under the general

direction of the Committee.

Net

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

follows:

Total Revenue of the applicable

business segment minus Total Expenses of the applicable business segment for

the Plan Year.

For

purposes of the foregoing calculation, the same methodology described above is

used, except that the following process shall apply for calculating the

expenses associated with business segment interest and taxes:

Pro forma

financials below the business segment “Earnings before Interest and Taxes” line

will be used.  For purposes of

calculating interest and taxes, the business segment’s capital structure, tax

rate, and interest rate will be fixed at the capital structure, tax rate and

interest rate reflected in the respective business segment’s final business

plan for such Plan Year.  Interest will

be determined by multiplying 1) the predetermined interest rate, by

2) the predetermined percentage debt in the capital structure and

3) the 12-month average actual total capital employed during the

year.  Taxes will be determined by

multiplying the predetermined effective tax rate by the business segment’s

pre-tax income and then deducting a predetermined amount of investment tax

credit amortization.  This calculation

will be completed by the President of the respective business segment and

submitted to the Company’s Chief Financial Officer for review and

approval.  The Company’s Chief Financial

Officer will determine, for purposes of the Plan, the final business segment Net

Income After Tax under the general direction of the Committee.

 

 

2

 

(b)                                 Return on Total Capital. 

The Company’s Return on Total Capital is calculated as follows:

Net

Income After Tax + (Interest x (1 - Effective Tax Rate)) 

(Short and Long Term Debt + Preferred

Stock + Book Equity)

For

purposes of the foregoing calculation, all factors in the denominator shall be

calculated by determining each specific factor at the end of each of the four

quarters of the Plan Year and at the end of December of the previous year.  The average of those five numbers shall be

the value used for each factor.  The

Company’s Chief Financial Officer is responsible for determining this Financial

Measure under the general direction of the Committee.

(c)                                  Earnings per Share Growth Rate. 

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

The

positive difference between the Company’s actual earnings per share for the

Plan Year and the year immediately preceding the Plan Year, divided by the

Company’s earnings per share for the year immediately preceding the Plan Year.

For

purposes of the foregoing calculation, actual earnings per share shall be as

reported in the Company’s published financial statements for the subject year

on a fully-diluted basis; provided, however, that any changes in tax laws, the

effects of acquisitions and extraordinary items as defined by generally

accepted accounting principles, including divestitures and Financial Accounting

Standards Board accounting changes, may be excluded in the discretion of the

Company’s Chief Financial Officer under the general direction of the Committee.

(d)                                 Total Shareholder Return. 

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

	

  (B +

  C) - A

  
	

  A

  

 

For

purposes of the foregoing calculation:

A

is the average closing price of the Company’s common stock for the first ten

trading days of the Plan Year.

B

is the average closing price of the Company’s common stock for the last ten

trading days of the Plan Year.

C

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

The Company’s

Chief Financial Officer is responsible for determining this Financial Measure

under the general direction of the Committee.

 

 

3

 

(e)                                Peer Group. 

The Committee will establish a Peer Group for purposes of peer

comparative performance measures used in the Plan.  This Peer Group is listed in Attachment A.  Any changes to the Peer Group must be

approved by the Committee.

Section 7.  Determination

of Incentive Pools.

(a)                                  All Incentive Programs provide for

incentive payments that are funded based on incentive pools.  An incentive pool is created for each

Incentive Program.  The base amount of

each incentive pool shall be determined by the extent to which one or more

specific and defined Financial Measures are achieved for the Plan Year.  One or more additional, defined operational

measures (“Value Drivers”) may affect the determination of the incentive pools,

in the discretion of the Company’s Chief Executive Officer (the “CEO”).  The Value Drivers for each of the incentive

pools are attached hereto as Attachment B.

(b)                                 The following chart provides the specific

Financial Measures for each of the Incentive Programs.

	

  Incentive Program

  	

   

  	

  Financial Measures

  
	

  Equitable Resources

  Headquarters

  	

   

  	

  •       Return on Total Capital  

  (Peer Comparison) 

  
	

   

  	

   

  	

  •       Earnings per Share Growth Rate  

  (Peer Comparison) 

  
	

   

  	

   

  	

  •       Earnings per Share Growth Rate 

  (EQT Year to Year Comparison)

  
	

   

  	

   

  	

   

  
	

  Equitable Utilities

  	

   

  	

  Net Income After Tax

  
	

   

  	

   

  	

   

  
	

  Equitable Production

  	

   

  	

  Net Income After Tax

  
	

   

  	

   

  	

   

  
	

  NORESCO

  	

   

  	

  Net Income After Tax

  

 

(c)                                  Each incentive pool is determined based

on the Financial Measures listed above, any minimum threshold amounts

established therefor, and, if applicable, the Value Drivers, in accordance with

the weightings assigned to each as listed on Attachments B and C.  Attachment D to this Plan specifies the

base amount for each incentive pool, expressed as a multiple of the total of

all Incentive Targets, as defined in Section 8 of the Plan, of those

participants in each particular Incentive Program.  The CEO may, in his sole and absolute discretion, adjust the

determination of the base amount of any business segment incentive pool (i) by

any amount up to fifty (50%) percent based on the Value Drivers applicable to

the particular business segment incentive pool and (ii) by an amount up to

twenty-five percent (25%) based on the impact of weather, the prices of gas,

oil and liquids, and/or any acquisitions or divestitures.  The Committee may, in its sole and absolute

discretion, adjust the determination of the base amount of the Headquarters

Incentive Program by an amount of up to twenty-five percent (25%) based on the

impact of weather, the prices of gas, oil and liquids, acquisitions or divestitures

and any peer group or performance factors determined by the  Committee.  Such adjustments by the CEO or the Committee

may be either positive or negative.

 

 

4

 

Section 8.  Incentive Targets.  Each participant under the Plan shall be

given an incentive target (an “Incentive Target”) that shall be determined

based on market competitive levels. 

Incentive Targets for all corporate officers shall be determined within

90 days of the commencement of each Plan Year and approved by the

Committee.  All other Incentive Targets

shall be determined within 90 days of the commencement of each Plan Year by the

Company’s Director of Compensation and Benefits, in consultation with the

appropriate business segment President or corporate officer, as applicable, and

approved by the Company’s Chief Administrative Officer.  Actual incentive awards payable (“Incentive

Awards”), subject to adjustments as provided in the Plan, shall be based on the

overall determination of the incentive pools and on individual performance.

Section 9.  Performance

Goals.

(a)                                  Each participant shall have specific

performance goals (the “Performance Goals”) determined for his or her position

for the subject Plan Year.  These

Performance Goals must support the approved business plan of the Company,

affiliate or business unit, as applicable, and should identify how the

participant will support any specific Value Drivers established.

(b)                                 A copy of each participant’s Performance

Goals and objectives shall be determined in writing, and kept on file with the

appropriate business segment Human Resources Department, by February 28 of the

Plan Year to which they relate.

(c)                                  Following the determination of the

incentive pools as described in Section 7, an evaluation of each

participant’s actual performance relative to his or her individual Performance

Goals for the Plan Year shall be completed. 

Performance can be rated as Exceeds Expectations, Successful or Lower

10%.  The definition of each rating is

as follows: 

	

  Performance Level

  	

   

  	

  Performance Definition

  
	

   

  	

   

  	

   

  
	

  Exceeds Expectations

  	

   

  	

  Performance

  consistently exceeds established expectations.  Performance at this level creates new standards of performance.

  
	

   

  	

   

  	

   

  
	

  Successful

  	

   

  	

  Performance meets and

  often exceeds established performance expectations.

  
	

   

  	

   

  	

   

  
	

  Lower 10%

  	

   

  	

  When compared to other

  employees in the business unit, performance is in the lower  10% of the business segment.  For purposes of this rating, performance

  is relative to other employee’s performance.

  

 

Based on the evaluation of the employee’s performance

relative to his or her Performance Goals, individual performance adjustments

can be made by the business segment President or appropriate corporate officer,

as applicable, ranging from elimination of the Incentive Target to 150% of the

Incentive Target.  The CEO must approve

all individual performance adjustments under the Plan and may make individual

performance adjustments in excess of 150%.

 

 

5

 

Section 10.  Distributing the Incentive Pool.  Incentive Awards may be earned based on the

determination of the incentive pools and individual performance as follows:

(1)                                  The incentive pool is determined as

described in Section 7.  If the

established Financial Measures for the incentive pool are not achieved, the

process to calculate Incentive Awards for the related Incentive Program is

terminated.

(2)                                  The performance of each employee is

reviewed by the business segment President or appropriate corporate officer, as

applicable, and the individual performance adjustment described in

Section 9, if any, is applied as appropriate to the employee’s original

Incentive Target.

(3)                                  The Incentive Targets for each employee

within an incentive pool, after giving effect to the individual performance

adjustments described in Section 9, are totaled.  Each employee’s adjusted Incentive Target is then calculated as a

percent of the total adjusted Incentive Targets for all employees within the

incentive pool.

(4)                                  The percent assigned to each employee in

step 3 is multiplied by the total incentive pool generated, resulting in

the amount of the employee’s actual Incentive Award payable, subject to

reduction, elimination or substitution by the Committee as provided in

Section 4.

(5)                                  Additional or substituted distributions,

if any, may be paid in cash or other forms from the Plan or other source as

determined by the Committee, in its discretion.

Except as provided in Sections 10(5), 11 and 14 of the Plan, the

amount of the Incentive Awards payable from the Plan, as calculated in Section

10(4), above, shall be paid in cash to participants as promptly as practicable

following the end of a Plan Year and after determination of the incentive pools

and the achievement of the Performance Goals. 

An Incentive Award shall not be earned and a participant shall have no

vested interest or entitlement to any Incentive Award hereunder prior to its

actual payment.

Section 11.  Incentive

Pool Calculation and Distribution for Selected Employees.

(a)                                  Employees who directly report to the CEO

or those who are Chief Operating Officers of the Company’s business segments

will have eighty percent (80%) of their Incentive Award tied to the performance

of the Headquarters Incentive Program incentive pool and twenty percent (20%)

of their Incentive Award tied to the performance of their specific business

segment incentive pool.  Employees who

directly report to Chief Operating Officers of the Company’s business segments

will have twenty percent (20%) of their Incentive Award tied to the performance

of the Headquarters Incentive Program incentive pool and eighty percent (80%)

of their Incentive Award tied to the performance of the appropriate business

segment incentive pool.

(b)                                 Except as otherwise determined by the

Committee, employees who directly report to the CEO will be required to defer

twenty percent (20%) of their Incentive Award into the Company’s common stock

fund under and pursuant to the Company’s Deferred Compensation Plan.  Except as otherwise determined by the

Committee, employees who directly report to executives who report directly to

the CEO will be required to defer ten (10%) of their Incentive Award into the

Company’s common stock fund under and pursuant to the Company’s Deferred

Compensation Plan.

Section 12. 

Impact on Benefit Plans. 

Payments under the Plan shall not be considered as earnings for purposes

of the Company’s qualified retirement plans or any such retirement or benefit

plan unless specifically provided for and defined under such plans.

 

 

6

 

Section 13.  Tax Consequences.  It is intended that nothing in the Plan

shall change the tax consequences of the Plans under Federal or State law and

specifically shall not cause the participants in the Incentive Programs to be

taxed currently under the Constructive Receipt or Economic Benefit Doctrines

and as expressed in Sections 451 and 83 of the Internal Revenue Code of 1986,

as amended.

Section 14.  Change of Status.  In making decisions regarding employees’

participation in the Plan, the Company’s Chief Administrative Officer or

Director of Compensation and Benefits, as applicable, may consider any factors

that he or she may consider relevant in their sole discretion.  The Company shall have no obligation to exercise

its discretion to make an award to any employee affected by the described

status changes.  The following

guidelines are provided as general information regarding employee status

changes upon the occurrence of the events described below, provided that the

recommendation to include an employee in the Plan must originate from the

business segment President or appropriate corporate officer, as applicable:

(a)                                  New Hire, Transfer, Promotion. 

A newly hired eligible employee will participate in the Plan Year following

the year in which he is hired, unless otherwise specified in their employment

offer.  An employee who is promoted or

transferred during the Plan Year to a position qualifying for participation may

be recommended for a pro rata Incentive Award based on the level of

participation in his or her previous program and the percentage of the Plan

Year the employee is in the participating position.  This includes employees who leave positions that qualify for

incentive payments in other Company business segments.

(b)                                 Demotion.  No Incentive

Award shall be paid to an employee who has been demoted during the Plan Year

because of performance.  If the demotion

is due to an organizational change, a pro rata Incentive Award may

be made, provided the employee otherwise qualifies for payment of an Incentive

Award.

 (c)                               Termination. 

No Incentive Award shall be paid to any employee whose services are

terminated prior to payment of an Incentive Award for reasons of misconduct,

failure to perform, or other cause.  If

the termination is due to reasons such as reorganization, and not due to the

fault of the employee, the employee may be considered for a pro rata

Incentive Award, provided the employee otherwise qualifies for payment of an

Incentive Award.

(d)                                 Resignation.  No Incentive Award shall be paid to an employee who resigns for

any reason, including retirement, before Incentive Awards are paid; provided,

however, if the employee has voluntarily terminated his or her employment with

the Company’s consent, the employee may be considered for a pro rata Incentive

Award, provided the employee otherwise qualifies for payment of an Incentive

Award.

(e)                                  Death and Disability. 

An employee whose status as an active employee is changed prior to

payment of an Incentive Award for any reason other than the reasons cited

above, including death and disability, may be considered for a pro rata

Incentive Award, provided the employee otherwise qualifies for payment of an

Incentive Award.  In the event that an

Incentive Award is paid on behalf of an employee who has terminated employment

by reason of death, any such payments or other amounts due shall be paid to the

employee’s estate.

Nothing in the Plan, in

any Program or in any Incentive Target or Incentive Award shall confer any

right on any employee to continue in the employ of the Company.

 

 

7

 

Section 15.  Change of Control. 

In the event of a Change of Control of the Company, as then defined

under the Company’s 1999 Long-Term Incentive Plan, Incentive Awards shall be

paid, on a pro-rata basis for the portion of the Plan Year elapsed through the

date of the Change of Control, to all Plan participants as if the target

Financial Measures and Value Drivers were achieved and without adjustment to

any individual Incentive Targets, but subject to the Committee’s overall

discretion as provided in Section 4. 

The pro-rata Incentive Awards payable pursuant to the foregoing sentence

shall be paid immediately prior to consummation of such Change of Control or at

such other time and subject to such other conditions as the Committee shall in

its sole discretion determine, contingent upon consummation of such Change of

Control.

Section 16.  Dispute Resolution. 

The following is the exclusive procedure to be followed by all

participants in resolving disputes arising from participation in and payments

made under the Plan.  All disputes

relative to a given Plan Year must be presented to the Director of Compensation

and Benefits within thirty (30) days following the payment date of the

Incentive Award for that Plan Year, or the participant’s right to dispute a

payment will be irrevocably waived. 

Once the Director of Compensation and Benefits has been notified of a dispute,

he or she will assemble a Compensation Review Committee (the “CRC”) to review

the issue.  The CRC will consist of the

following: the Director of Compensation and Benefits, the manager of the

employee with the dispute, the human resources director or vice president of

the business segment, and a peer chosen by the employee with the dispute.  The employee with the concern will be given

an opportunity to present his or her issues to the CRC.  A decision will be rendered by the CRC

within thirty (30) business days of the meeting.  The Director of Compensation and Benefits will be responsible for

preparing a written version of the decision. 

This decision may be appealed to the Chief Administrative Officer (the

“CAO”) of the Company.  Appealed

decisions will be reviewed by the CAO with information requested from the

appropriate parties as he or she may determine in his or her sole

discretion.  The decision made by the

CAO regarding the matter is final and binding on all Plan participants.

Section 17.  Amendment or Termination of this Plan. 

The Company shall have the right to amend or terminate the Plan at any

time by written action approved by the Committee, provided that any amendment

or termination shall not affect any amounts deferred into the Company’s

Deferred Compensation Plan and that no employee or participant shall have any

vested right to payment of any Incentive Award hereunder prior to its

payment.  The Company shall notify

affected employees in writing of any amendment or Plan termination.

 

 

8

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