UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-3551
EQUITABLE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0464690
(State of incorporation or organization) (IRS Employer Identification No.)
One Oxford Centre, Suite 3300, 301 Grant Street,
Pittsburgh, Pennsylvania 15219
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (412) 553-5700
------------
NONE
(Former name, former address and former fiscal year,
if changed since last report)
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date.
Outstanding at
Class July 31, 1999
Common stock, no par value 33,889,000 shares
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Index
Page No.
Part I. Financial Information:
Item 1. Financial Statements (Unaudited):
Statements of Consolidated Income for the Three
And Six Months Ended June 30, 1999 and 1998 1
Statements of Condensed Consolidated Cash Flows
for the Three and Six Months Ended June 30, 1999
and 1998 2
Condensed Consolidated Balance Sheets, June 30,
1999, and December 31, 1998 3 - 4
Notes to Condensed Consolidated Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 22
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 22
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature 24
Index to Exhibits 25
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Statements of Consolidated Income (Unaudited)
(Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 189,631 $ 180,764 $ 609,686 $ 464,213
Cost of sales 82,301 96,966 375,246 254,695
-------------- --------------- --------------- --------------
Net operating revenues 107,330 83,798 234,440 209,518
-------------- --------------- --------------- --------------
Operating expenses:
Operation and maintenance 21,238 18,983 44,241 41,787
Exploration 3,795 1,431 4,297 2,413
Production 6,538 7,702 12,450 14,566
Selling, general and administrative 24,330 24,049 44,857 52,457
Depreciation, depletion and amortization 31,060 19,460 52,000 39,199
-------------- --------------- --------------- --------------
Total operating expenses 86,961 71,625 157,845 150,422
-------------- --------------- --------------- --------------
Operating income 20,369 12,173 76,595 59,096
Equity in nonconsolidated subsidiaries 577 541 1,250 960
-------------- --------------- --------------- --------------
Earnings from continuing operations,
before interest & taxes 20,946 12,714 77,845 60,056
Interest charges 8,965 9,236 18,228 18,403
-------------- --------------- --------------- --------------
Income before income taxes 11,981 3,478 59,617 41,653
Income taxes 4,743 1,203 22,638 14,727
-------------- --------------- --------------- --------------
Net income from continuing operations 7,238 2,275 36,979 26,926
Income (loss) from discontinued operations -
net of tax - - - (4,604)
-------------- --------------- --------------- --------------
Net income $ 7,238 $ 2,275 $ 36,979 $ 22,322
============== =============== =============== ==============
Average common shares outstanding 33,960 37,050 34,692 36,953
Earnings (loss) per share of common stock:
Basic:
Continuing operations $ 0.21 $ 0.06 $ 1.07 $ 0.72
Discontinued operations - - - (0.12)
-------------- --------------- --------------- --------------
Net income $ 0.21 $ 0.06 $ 1.07 $ 0.60
============== =============== =============== ==============
Diluted:
Continuing operations $ 0.21 $ 0.06 $ 1.06 $ 0.72
Discontinued operations - - - (0.12)
-------------- --------------- --------------- --------------
Net income $ 0.21 $ 0.06 $ 1.06 $ 0.60
============== =============== =============== ==============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
----------------------------- ---------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income from continuing operations $ 7,238 $ 2,275 $ 36,979 $ 26,926
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 31,060 19,460 52,000 39,199
Amortization of net contract costs 438 836 1,330 3,154
Deferred income taxes (benefits) 4,909 (1,199) 4,876 3,053
Changes in other assets and liabilities 29,891 48,456 14,469 50,356
----------- ------------ ----------- -----------
Net cash provided by continuing operations 73,536 69,828 109,654 122,688
Net cash used in discontinued operations - (1,233) - (3,623)
----------- ------------ ----------- -----------
Net cash provided by operating activities 73,536 68,595 109,654 119,065
----------- ------------ ----------- -----------
Cash flows from investing activities:
Capital expenditures (24,794) (52,018) (46,283) (77,674)
Increase in investment in unconsolidated partnerships (3,248) (1,284) (18,788) (4,098)
Proceeds from sale of property 4,661 - 4,661 -
Increase in net noncurrent assets held for sale - (9,730) - (13,741)
Proceeds from sale of short-term investments 293,761 - 430,091 -
Purchases of short-term investments (199,148) - (336,621) -
----------- ------------ ----------- -----------
Net cash provided by (used in) investing activities 71,232 (63,032) 33,060 (95,513)
----------- ------------ ----------- -----------
Cash flows from financing activities:
Retirement of long-term debt - (5,880) - (10,880)
Increase (decrease) in short-term loans (48,405) (118,001) 9,591 (146,791)
Dividends paid (10,311) - (20,855) (21,878)
Proceeds from issuance of long-term debt 17,000 - 17,000 -
Proceeds from preferred trust securities - 125,000 - 125,000
Proceeds from issuance of common stock 11 350 11 1,755
Purchase of treasury stock (10,815) - (55,418) -
----------- ------------ ----------- -----------
Net cash provided by (used in) financing activities (52,520) 1,469 (49,671) (52,794)
----------- ------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents 92,248 7,032 93,043 (29,242)
Cash and cash equivalents at beginning of period 9,768 33,168 8,973 69,442
----------- ------------ ----------- -----------
Cash and cash equivalents at end of period $ 102,016 $ 40,200 $ 102,016 $ 40,200
=========== ============ =========== ===========
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,690 $ 1,860 $ 14,372 $ 18,710
=========== ============ =========== ===========
Income taxes $ 1,233 $ 8,345 $ 517 $ 9,854
=========== ============ =========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
ASSETS June 30, December 31,
1999 1998
------------------------------------------------
(Thousands)
------------------------------------------------
<S> <C> <C>
Current assets:
Cash and short-term investments $ 102,016 $ 102,444
Accounts receivable 128,040 199,363
Unbilled revenues 27,298 41,616
Inventory 26,026 33,743
Deferred purchased gas cost 17,600 39,445
Prepaid expenses and other 40,666 34,831
------------------ ----------------
Total current assets 341,646 451,442
------------------ ----------------
Property, plant and equipment 1,990,988 1,956,763
Less accumulated depreciation and depletion (810,328) (762,320)
------------------ ----------------
Net property, plant and equipment 1,180,660 1,194,443
------------------ ----------------
Other assets 222,579 214,971
------------------ ----------------
Total $ 1,744,885 $ 1,860,856
================== ================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY June 30, December 31,
1999 1998
---------------------------------------------
(Thousands)
---------------------------------------------
<S> <C> <C>
Current liabilities:
Current portion long-term debt $ 75,000 $ 74,136
Short-term loans 125,295 115,703
Accounts payable 58,334 147,951
Other current liabilities 92,307 104,170
----------------- ----------------
Total current liabilities 350,936 441,960
----------------- ----------------
Long-term debt 298,350 281,350
Deferred and other credits 301,435 304,127
Commitments and contingencies - -
Preferred trust securities 125,000 125,000
Capitalization:
Common stockholders' equity:
Common stock, no par value, authorized 80,000
shares; shares issued June 30, 1999,
37,252; December 31, 1998, 37,252 278,995 280,400
Treasury stock, shares at cost June 30, 1999,
3,415; December 31, 1998, 1,396 (93,313) (39,298)
Retained earnings 483,450 467,326
Accumulated other comprehensive income (loss) 32 (9)
----------------- ----------------
Total common stockholders' equity 669,164 708,419
----------------- ----------------
Total $ 1,744,885 $ 1,860,856
================= ================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
A. The accompanying financial statements should be read in conjunction with
the Company's 1998 Annual Report and Form 10-K.
B. In the opinion of Company's management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
necessary to present fairly the financial position as of June 30, 1999
and 1998, and the results of operations and cash flows for the three and
six months then ended. All adjustments are of a normal, recurring nature
unless otherwise indicated.
C. The results of operations for the three- and six-month periods ended June
30, 1999 and 1998, are not indicative of results for a full year because
of the seasonal nature of the Company's natural gas distribution and
energy marketing operations.
D. In April 1998 management adopted a formal plan to sell the Company's
natural gas midstream operations. The operations include an integrated
gas gathering, processing and storage system in Louisiana and a natural
gas and electricity marketing business based in Houston. The condensed
consolidated financial statements include these as discontinued
operations. In December 1998, the Company completed the sale of these
operations to various parties for $338.3 million, which included working
capital adjustments.
Net loss from discontinued operations was $4.6 million for the six months
ended June 30, 1998. These results were reported net of income tax
benefit of $2.3 million. Interest expense allocated to discontinued
operations was $4.0 million in the first six months of 1998.
E. In April 1998, $125 million of 7.35% Trust Preferred Capital Securities
were issued. The capital securities were issued through a subsidiary
trust, Equitable Resources Capital Trust I, established for the purpose
of issuing the capital securities and investing the proceeds in 7.35%
Junior Subordinated Debentures issued by the Company. The capital
securities have a mandatory redemption date of April 15, 2038; however,
at the Company's option, the securities may be redeemed on or after April
15, 2013. Proceeds were used to reduce short-term debt outstanding.
Interest expense for the three-and six months ended June 30, 1999,
includes $4.6 million of preferred dividends related to the trust
preferred capital securities.
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
F. In May 1999, Company shareholders approved the establishment of the 1999
Equitable Resources, Inc. Long-Term Incentive Plan and the 1999 Equitable
Resources, Inc. Non-Employee Directors' Stock Incentive Plan. These plans
provide for the grant of up to 3,000,000 and 300,000 shares,
respectively, of common stock awards to key employees and directors. The
awards can be in the form of stock options, restricted stock grants or
other performance-based awards, as determined by the Compensation
Committee of the Board of Directors.
Under the terms of these plans and the predecessor plan, 128,000 shares
of restricted stock and options to purchase 1,009,000 shares of common
stock at the then current market price of approximately $30 per share
were granted to employees and directors of the Company on May 26, 1999.
The awards vest three years from the date of grant and expire 5 to 10
years from the grant date.
G. As more fully described in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the Company's Equitrans
subsidiary settled its rate case with the Federal Energy Regulatory
Commission (FERC) in April 1999. The net impact of the settlement on the
three- and six-month periods ending June 30, 1999 recorded in the second
quarter was an increase in earnings before interest and taxes of $3.9
million.
H. Segment Disclosure - The Equitable Utilities segment's activities
comprise the operations of the Company's state-regulated local
distribution company, in addition to gas transportation, storage and
marketing activities involving the Company's interstate natural gas
pipelines. The Equitable Production segment's activities comprise the
exploration, development, production, gathering and sale of natural gas
and oil, and extraction and sale of natural gas liquids. NORESCO's
activities comprise cogeneration and power plant development, the
development and implementation of energy and water efficiency programs,
performance contracting and central facility plant operations. The
Equitable Energy segment provides marketing, supply and transportation
services for the natural gas market.
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Operating segments are evaluated on their contribution to the Company's
consolidated results, based on earnings before interest and taxes.
Interest charges and income taxes are managed on a consolidated basis and
allocated pro forma to operating segments. Headquarters costs are billed
to operating segments based on a fixed allocation of the annual
headquarters' operating budget. Differences between budget and actual
headquarters expenses are not allocated to operating segments, but
included as a reconciling item to consolidated earnings from continuing
operations.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------------------------------ ------------------------------------
(Thousands)
<S> <C> <C> <C> <C>
Revenues from external customers:
Equitable Utilities $ 65,806 $ 62,176 $ 217,139 $ 202,978
Equitable Production 43,761 43,540 82,085 83,438
Equitable Services:
NORESCO 40,986 22,157 78,963 40,442
Equitable Energy 39,078 52,891 231,499 137,355
---------------- ---------------- --------------- ---------------
Total $ 189,631 $ 180,764 $ 609,686 $ 464,213
================ ================ =============== ===============
Intersegment revenues:
Equitable Utilities $ 3,579 $ 4,069 $ 6,789 $ 15,255
Equitable Production 7,526 3,197 10,559 15,848
Equitable Services:
Equitable Energy 24,582 20,106 42,121 34,203
---------------- ---------------- --------------- ---------------
Total $ 35,687 $ 27,372 $ 59,469 $ 65,306
================ ================ =============== ===============
Segment profit (loss):
Equitable Utilities $ 8,168 $ 4,669 $ 52,392 $ 39,110
Equitable Production 10,814 8,323 18,903 22,412
Equitable Services:
NORESCO 3,587 1,691 6,936 1,699
Equitable Energy 817 (1,530) 2,240 (3,315)
---------------- ---------------- --------------- ---------------
Total operating segments 23,386 13,153 80,471 59,906
Less: reconciling items
Headquarters operating expenses (gains)
not allocated to operating segments 2,440 439 2,626 (150)
Interest expense 8,965 9,236 18,228 18,403
Income tax expenses 4,743 1,203 22,638 14,727
---------------- ---------------- --------------- ---------------
Net income from continuing
operations $ 7,238 $ 2,275 $ 36,979 $ 26,926
================ ================ =============== ===============
</TABLE>
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
I. Derivative Instruments and Hedging Activities - In June 1998, the
Financial Accounting Standards Board (FASB) issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The
Company has not yet determined when it will adopt the provisions of this
statement, which may be implemented at the beginning of any fiscal
quarter. SFAS No. 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities or firm commitments through
earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133." This statement delays the required implementation for
the Company until 2001.
The Company has not yet determined what the effect of SFAS No. 133 will
be on the earnings and financial position of the Company.
J. Reclassification - Certain previously reported amounts have been
reclassified to conform with the 1999 presentation.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
OVERVIEW
Equitable's consolidated net income for the quarter ended June 30, 1999,
was $7.2 million, or $0.21 per share, compared with net income of $2.3 million,
or $0.06 per share, for the quarter ended June 30, 1998. The earnings
improvement for the 1999 quarter is primarily attributable to increased natural
gas production in the offshore Gulf of Mexico region, the continuing benefit
from last year's cost structure improvements, a favorable rate settlement at the
Company's Equitrans pipeline subsidiary, increased construction activity in the
NORESCO segment and improved margins in the Equitable Energy natural gas
marketing business. These improvements were partially offset by one-time
expenses for the consolidation of commercial activities and streamlining
administrative functions in the Company's utility businesses, increased
exploration costs in the Production segment, weak natural gas prices in 1999,
and an increased provision for performance-related bonuses, reflecting the
Company's strong first half and anticipated full-year results.
In the six months ended June 30, 1999, Equitable's consolidated net
income was $37.0 million, or $1.07 per share, compared to $22.3 million, or
$0.60 per share, for the six months ended June 30, 1998. The 1998 period
included a loss on the Company's discontinued midstream operations of $4.6
million, or $0.12 per share. These operations were sold in December 1998. The
1999 six months net income of $1.07 per share represents a 50% increase over
earnings per share from continuing operations of $0.72 for the first half of
1998. Excluding one-time items, the 1999 improvement for the six-month period is
due to higher production volumes, increased NORESCO construction activity,
improved gas marketing margins, higher first quarter weather-related sales in
the distribution operations and lower selling, general and administrative
expenses across all of the Company's businesses. These improvements were
partially offset by year-to-date wellhead prices for natural gas that were 18
percent below the average for the first six months of 1998.
RESULTS OF OPERATIONS
EQUITABLE UTILITIES
Equitable Utilities' operations comprise the sale and transportation of
natural gas to retail customers at state-regulated rates, interstate
transportation and storage of natural gas subject to federal regulation and the
marketing of natural gas.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE UTILITIES (Continued)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
EQUITABLE UTILITIES 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands, except prices & degree days)
<S> <C> <C> <C> <C>
Operating revenues:
Residential gas sales $ 28,309 $ 35,974 $ 118,833 $ 140,775
Commercial gas sales 4,041 3,423 16,490 14,073
Industrial and utility gas sales 10,997 10,745 18,386 22,357
Marketed gas sales 2,244 2,698 4,035 5,297
Transportation service 18,702 9,405 54,864 27,948
Storage service 2,678 2,530 5,139 4,975
Other 2,415 1,470 6,181 2,808
-------------- --------------- --------------- -------------
Total revenues 69,386 66,245 223,928 218,233
Cost of energy purchased 15,934 27,382 87,103 102,980
Revenue related taxes 1,540 1,810 6,412 7,190
-------------- --------------- --------------- -------------
Net operating revenues 51,912 37,053 130,413 108,063
Operating expenses:
Operations and maintenance 18,664 16,318 38,004 34,935
Selling, general and administrative 10,108 10,937 18,916 23,570
Depreciation, depletion and amortization 14,972 5,129 21,101 10,448
-------------- --------------- --------------- -------------
Total operating expenses 43,744 32,384 78,021 68,953
-------------- --------------- --------------- -------------
Earnings before interest and taxes $ 8,168 $ 4,669 $ 52,392 $ 39,110
============== =============== =============== =============
Sales quantities (Mcf):
Residential gas sales 2,524 3,050 12,040 13,720
Commercial gas sales 365 342 1,687 1,454
Industrial and utility gas sales 4,738 4,048 8,313 8,666
Marketed gas sales 1,083 1,160 2,116 2,377
Transportation deliveries 9,282 11,808 27,564 22,743
Average selling prices (per Mcf):
Residential gas sales $ 11.216 $ 11.795 $ 9.870 $ 10.261
Commercial gas sales 11.071 10.009 9.775 9.679
Industrial and gas sales 2.321 2.654 2.212 2.580
Marketed gas sales 2.072 2.326 1.907 2.228
Heating degree days (normal:
QTR - 712, YTD - 3,728) 562 572 3,476 2,882
</TABLE>
Three Months Ended June 30, 1999
vs. Three Months Ended June 30, 1998
The pipeline operations of Equitrans, L.P. (Equitrans) and Three Rivers
Pipeline Corporation are subject to rate regulation by the FERC. Equitrans filed
a rate case in April 1997, which addressed the recovery of certain stranded
plant costs related to the implementation of Order 636. The requested rates were
placed into effect in August 1997, subject to refund, pending the final FERC
order. On April 29, 1999, the FERC approved, without modification, the joint
stipulated settlement agreement resolving all issues in its proceeding.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE UTILITIES (Continued)
The approved settlement provides for prospective collection of increased
gathering charges. In addition, the settlement provides Equitrans the
opportunity to retain all revenues associated with interruptible transportation
and negotiated rate agreements as well as moving its gathering charge toward a
cost-based rate. In the second quarter of 1999, Equitrans recorded the final
settlement of the rate case, including adjustment of the prior provisions for
refund and recognition of the previously deferred revenues and costs related to
the stranding of certain gathering plant.
Equitable Utilities had earnings before interest and taxes (EBIT) for the
June 1999 quarter of $8.2 million compared to $4.7 million for the 1998 period.
The segment's results for the 1999 quarter include income of $3.9 million from
recognition of the settlement of Equitrans' rate case described above. Results
also include charges of $2.6 million for further reorganization of utility
segment operating functions and consolidation of facilities. EBIT, excluding
these items, of $6.9 million increased $2.2 million, or 47%, attributed to lower
operating expenses from restructuring initiatives, which began in the fourth
quarter of 1998, and higher margins from distribution operations. The higher
distribution margins are the result of increases in throughput and revenues from
nontraditional services, including balancing and pooling services, and services
provided to marketers on the distribution system.
Net operating revenues for the three months ended June 30, 1999, of $51.9
million include $12.3 million related to recognition of the rate settlement
described above and $0.5 million for the pass-through of products extraction
costs to customers. Net operating revenues of $39.1 million for the quarter,
excluding the impact of the rate settlement and extraction revenues, increased
$2.0 million, or 5%, over the $37.1 million for the 1998 period due primarily to
higher distribution throughput and increased revenues from nontraditional
services for distribution operations.
Operating expenses of $43.7 million for the three months ended June 30,
1999, include $8.7 million of amortization expense related to the stranded plant
from recognition of the rate settlement, products extraction costs of $0.5
million and $2.6 million for reorganization as more fully described above.
Operating expenses of $31.9 million, excluding the effect of the rate
settlement, extraction charges and one-time expenses, decreased $0.5 million
from the 1998 amount of $32.4 million due primarily to restructuring
initiatives, which began in the fourth quarter of 1998.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE UTILITIES (Continued)
Six Months Ended June 30, 1999
vs. Six Months Ended June 30, 1998
Equitable Utilities had EBIT of $52.4 million for the six months ended
June 30, 1999. The segment's results for the 1999 period of $51.1 million,
excluding the impact of the Equitrans' rate case settlement and charges
described above, increased $12.0 million, or 31%, over the $39.1 million for the
six months ended June 30, 1999. The increase in EBIT is a result of higher net
revenues due principally to colder weather during the heating season and
increased revenues from nontraditional services by the distribution operations.
Net operating revenues for the six months ended June 30, 1999, of $130.4
million include $12.3 million related to recognition of the rate settlement
described above and $0.7 million for the pass-through of products extraction
costs to customers. Net operating revenues of $117.4 million for the period,
excluding the impact of the rate settlement and extraction revenues, increased
$9.3 million, or 9%, over the $108.1 million for the 1998 period. The increase
in net revenues is due primarily to higher throughput and increased revenues
from nontraditional services for distribution operations.
Operating expenses of $78.0 million for the six months ended June 30,
1999, include $8.7 million of amortization expense related to the stranded plant
from recognition of the rate settlement, $0.7 million of products extraction
costs and $2.6 million for reorganization as more fully described above.
Operating expenses of $66.0 million, excluding the effect of the rate
settlement, extraction costs and reserves, decreased $3.0 million from the 1998
amount of $69.0 million due primarily to the benefit of restructuring
initiatives, which began in the fourth quarter of 1998, substantially offset by
higher depreciation expense.
EQUITABLE PRODUCTION
The Production operations comprise the exploration and production of
natural gas, natural gas liquids and crude oil through operations focused in the
Appalachian and Gulf of Mexico regions.
In 1998, the managerial responsibility for the operations conducted by
two subsidiaries, Kentucky West Virginia Gas Company and Nora Transmission
Company, were transferred from Equitable Utilities to Equitable Production under
a services agreement. The financial results for both periods are reclassified to
reflect the new structure.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE PRODUCTION (Continued)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
EQUITABLE PRODUCTION 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands, except prices)
<S> <C> <C> <C> <C>
Operating revenues:
Produced natural gas $ 31,541 $ 28,257 $ 57,761 $ 60,023
Transportation 6,331 6,397 12,940 13,015
Natural gas liquids 4,461 4,110 8,464 9,939
Crude oil 4,336 3,690 6,008 7,856
Marketed natural gas 2,530 2,573 4,473 4,530
Other 2,088 1,709 2,998 3,922
-------------- -------------- -------------- --------------
Total revenues 51,287 46,736 92,644 99,285
Cost of energy purchased 6,632 7,078 10,964 12,100
-------------- -------------- -------------- --------------
Net operating revenues 44,655 39,658 81,680 87,185
Operating expenses:
Operating and maintenance 2,574 2,665 6,237 6,852
Production 6,538 7,702 12,450 14,566
Dry hole 1,247 11 1,277 115
Other exploration 2,548 1,420 3,020 2,298
Selling, general and administration 6,057 7,240 11,281 16,446
Depreciation, depletion and amortization 14,877 12,297 28,512 24,496
-------------- -------------- -------------- --------------
Total operating expenses 33,841 31,335 62,777 64,773
Earnings from continuing operations,
before interest and taxes $ 10,814 $ 8,323 $ 18,903 $ 22,412
============== ============== ============== ==============
Sales quantities:
Produced natural gas (Mcf) 15,401 13,305 30,784 26,299
Transportation deliveries (Mcf) 9,056 11,439 18,671 22,161
Natural gas liquids (gallons) 16,938 16,021 35,712 34,232
Crude oil (Bbls) 304 271 468 535
Marketed gas sales (Mcf) 1,115 1,345 2,517 2,332
Average selling prices:
Produced natural gas (per Mcf) $ 2.048 $ 2.124 $ 1.876 $ 2.282
Natural gas liquids (per gallon) 0.263 0.257 0.237 0.290
Crude oil (per barrel) 14.263 13.616 12.838 14.684
Marketed gas sales (per Mcf) 2.269 1.913 1.777 1.943
</TABLE>
Three Months Ended June 30, 1999
vs. Three Months Ended June 30, 1998
Equitable Production's EBIT for the June 1999 quarter was $10.8 million,
which was $2.5 million higher than the June 1998 quarter. The segment's positive
results were primarily due to increased natural gas production offset in part by
lower natural gas prices and higher total operating expenses.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE PRODUCTION (Continued)
Net operating revenues for the three months ended June 30, 1999,
increased $5.0 million, or 13%, compared with the second quarter of 1998.
Natural gas volumes increased 2.1 Bcf, which positively impacted revenues by
$4.3 million. The higher gas production volumes are related to production
increases in the Gulf of Mexico region from drilling activities at West Cameron
180/198, West Cameron 540 and South Marsh Island 39. Also crude oil production
increased by 33 MBbls in the current quarter compared with the same quarter last
year due to the drilling activities at South Marsh Island 39. The increase in
oil production as well as higher sales quantities of natural gas liquids
contributed $0.7 million to revenues. Partially offsetting the production
increases in the current quarter was a $.076 per Mcf decline in Equitable
Production's average natural gas price, which negatively impacted revenues by
$1.0 million.
Total operating expenses for the current quarter increased $2.5 million
compared with the same quarter in 1998. Depreciation, depletion and amortization
(DD&A) was $2.6 million higher because of increased natural gas production.
During the second quarter of 1999, the Gulf region drilled one dry hole at West
Cameron 575, which accounted for the current quarter dry hole costs of $1.2
million. Also other exploration costs were $1.1 million higher for the June 1999
quarter due to a lease impairment taken in the Appalachian region. These
operating expense increases were partially offset by a $1.2 million decline in
selling, general and administrative (SG&A) expenses as a result of management
and staff headcount reductions and corporate restructuring activities, which
occurred in the fourth quarter of 1998. Also production costs decreased $1.2
million due to operating efficiencies and decreased well-tending staff.
Six Months Ended June 30, 1999
vs. Six Months Ended June 30, 1998
For the six months ended June 30, 1999, Equitable Production had EBIT of
$18.9 million compared with $22.4 million for the first six months of 1998. The
decrease in the segment's EBIT was attributable to lower average market prices
for natural gas, crude oil and natural gas liquids partially offset by increased
natural gas production and lower total operating expenses.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE PRODUCTION (Continued)
For the first six months of 1999, net operating revenues decreased to
$81.7 million from $87.2 million for the comparable period last year. This
decrease was primarily due to reductions of 18%, 13% and 18% in Equitable
Production's average prices for natural gas, crude oil and natural gas liquids,
respectively. The total revenue impact of these 1999 price declines was $13.5
million, of which $10.7 million was due to lower gas prices. Partially
mitigating the effect of lower prices, natural gas production increased 4.5 Bcf,
or 17%, in the first half of 1999 compared with the same period in 1998. This
production increase contributed $8.4 million to current year revenues. The
increased production volume is related to the drilling activities in the Gulf
region discussed above under second quarter results. The decline in crude oil
production in the six-month period reflects the depletion of West Cameron 580
and certain West Cameron 180/198 wells offset in part by new production at South
Marsh Island 39.
Total operating expenses for the six-month period of 1999 decreased by
$2.0 compared with the first half of 1998. The decline in expenses reflects
lower SG&A and production costs partially offset by higher DD&A due to increased
gas production and the dry hole drilled in the second quarter of 1999. The
savings in SG&A as well as production costs were primarily due to the reasons
noted above under second quarter results. In addition, prior year SG&A includes
$1.4 million of expenses recorded in the first quarter of 1998 related to the
sales of the Company's Colombian operations and Western properties. Also first
quarter 1998 production costs for the Gulf region were $0.6 million higher due
to initial costs for certain properties acquired at the end of 1997.
EQUITABLE SERVICES
Equitable Services provides energy and energy related products and
services that are designed to reduce its customers' operating costs and improve
their productivity. The majority of Equitable Services' revenue and earnings is
derived from energy saving performance contracting services and natural gas
marketing activities.
Equitable Services is comprised of two distinct business segments:
NORESCO and Equitable Energy. The NORESCO segment includes ERI Services, a
specialized business unit providing performance contracting services exclusively
to the Federal Government. The financial results of the NORESCO segment include
ERI Services.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
NORESCO
NORESCO's customers include commercial, governmental, institutional and
industrial end-users. The majority of NORESCO's revenue and earnings comes from
energy saving performance contracting services. NORESCO provides the following
integrated energy management services: project development and engineering
analysis; construction; management; financing; equipment operation and
maintenance; and energy savings metering, monitoring and verification. NORESCO
also manages the segment's facilities management division, which develops and
operates private power, cogeneration and central plant facilities in the U.S.
and selected international markets.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
NORESCO 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C>
Energy service contracting revenues $ 40,986 $ 22,157 $ 78,963 $ 40,442
Energy service contract cost 32,470 15,529 61,972 28,560
-------------- -------------- -------------- -----------
Gross margin 8,516 6,628 16,991 11,882
-------------- -------------- -------------- -------------
Operating expenses:
Selling, general and administrative 4,368 4,403 9,057 8,983
Depreciation, depletion and amortization 1,138 1,075 2,248 2,160
-------------- -------------- -------------- -------------
Total operating expenses 5,506 5,478 11,305 11,143
Other income 577 541 1,250 960
-------------- -------------- -------------- -------------
Earnings before interest and taxes $ 3,587 $ 1,691 $ 6,936 $ 1,699
============== ============== ============== =============
</TABLE>
Three Months Ended June 30, 1999
vs. Three Months Ended June 30, 1998
NORESCO's gross margin increased by 28% to $8.5 million for the quarter
ended June 30, 1999, compared to $6.6 million for the same period in 1998. The
increase in gross margin reflects the continued expansion of this segment's
operations and the implementation of larger value contracts. Construction
completed during the quarter of $40.0 million was more than double the $19.5
million completed during the second quarter of 1998. The gross margin rate as a
percent of sales declined to 21% compared to 30% during 1998, primarily due to
the increase in revenues from the federal government market, which contributes
lower gross margins than the company's other core markets. At June 30, 1999,
construction backlog totaled approximately $85 million, an increase of $13
million over backlog at June 30, 1998.
Operating expenses for this segment remained relatively unchanged, as
increased marketing and development expenses were offset by lower direct labor
costs and a reduction in allocated corporate overhead expense. Other income
represents equity-in-earnings for the company's investments in unconsolidated
entities, primarily power generation assets.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
NORESCO (Continued)
Six Months Ended June 30, 1999
vs. Six Months Ended June 30, 1998
NORESCO's gross margin increased by 43% to $17.0 million for the six
months ended June 30, 1999, compared to $11.9 million for the same period in
1998. The increase in gross margin reflects the continued expansion of this
segment's operations and the implementation of larger value contracts.
Construction completed during the six months of $73.6 million was up 166% from
the $27.6 million completed during the same period in 1998. The gross margin
rate as a percent of sales declined to 22% compared to 29% during 1998,
primarily due to the increase in revenues from the federal government market,
which contributes lower gross margins than the company's other core markets.
Increased competition in the energy services industry has also contributed to
the decline in average gross margins.
Operating expenses for this segment remained relatively unchanged for the
six-month period, as increased marketing and project development expenses were
offset by lower administrative expenses and a reduction in allocated corporate
overhead expense. Other income represents equity-in-earnings for the company's
investments in unconsolidated entities, primarily power generation assets.
EQUITABLE ENERGY
Equitable Energy is a non-regulated residential, commercial and
industrial marketer of natural gas. Services and products offered by Equitable
Energy include commodity procurement and delivery, physical gas management
operations and control, financial risk management and customer support services.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Equitable Energy 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Marketed natural gas $ 61,693 $ 72,998 $ 271,528 $ 171,559
Crude oil 1,804 - 1,804 -
Other 163 - 288 -
-------------- -------------- -------------- -------------
Total revenues 63,660 72,998 273,620 171,559
Cost of energy purchased 61,414 72,539 268,267 169,171
-------------- -------------- -------------- -------------
Net operating revenues 2,246 459 5,353 2,388
-------------- -------------- -------------- -------------
Operating expenses:
Selling, general and administrative 1,379 2,011 3,014 5,428
Depreciation, depletion and amortization 50 (22) 99 275
-------------- -------------- -------------- -------------
Total operating expenses 1,429 1,989 3,113 5,703
-------------- -------------- -------------- -------------
Earnings (loss) before interest and taxes $ 817 $ (1,530) $ 2,240 $ (3,315)
============== ============== ============== =============
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE ENERGY (Continued)
Three Months Ended June 30, 1999
vs. Three Months Ended June 30, 1998
Net operating revenues increased to $2.2 million for the quarter ended
June 30, 1999, compared to $0.5 million for the same period in 1998. Equitable
Energy recognized a $0.3 million positive transportation settlement in the
second quarter of 1999. Margins on a per-unit basis for the second quarter were
higher than the same period in 1998 due to an increased emphasis in the
residential and industrial markets.
Equitable Energy operating expenses for the quarter were 30% lower than
those of the second quarter of 1998, reflecting more cost control plus a
significant staff reduction and office closing completed as part of the
corporate-wide restructuring in the fourth quarter of 1998.
Six Months Ended June 30, 1999
vs. Six Months Ended June 30, 1998
Net operating revenues increased to $5.4 million for the six month period
ended June 30, 1999, compared to $2.4 million for the same period in 1998.
During the first six months, Equitable Energy marketed 110 billion cubic feet
(bcf) of natural gas compared to 66 bcf for the same period last year. The
increased volume is a result of the addition of residential customer choice
programs in Pennsylvania and Ohio (3 bcf) and increased utility/marketing
company volumes transported during the 1999 winter heating season (32 bcf).
Effective June 1, 1999, Equitable Energy discontinued its participation in the
residential customer choice program in Pennsylvania and transferred those
customers back to Equitable Gas Company. The utility/marketing company business
represents high volume, comparatively low margin transactions, which complement
the higher margin, lower volume base commercial and residential sales. Many of
these utility/marketing company contracts expired at the end of March 1999 and
were not renewed.
Equitable Energy operating expenses for the six month period ended June
30, 1999, were 45% below those of the same period of 1998, again reflecting cost
control, a significant staff reduction and office closing completed as part of
the corporate-wide restructuring in the fourth quarter of 1998.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
CAPITAL RESOURCES AND LIQUIDITY
Cash Flows
Cash required for operations is impacted primarily by the seasonal nature
of Equitable Resources' natural gas distribution operations and the volatility
of oil and gas commodity prices.
Cash provided by operating activities totaled $73.5 million in the three
months ended June 30, 1999, compared to cash provided by continuing operations
of $68.6 million in the 1998 period. Cash flows from operations increased in
1999 primarily as a result of the increase in earnings and improved collections
of accounts receivable, offset in part by an increase in gas in storage in the
current year.
During the six months ended June 30, 1999, cash provided by operating
activities decreased to $109.7 million, compared to $119.1 million from
continuing operations for the first six months of 1998. The $9.4 million
decrease is primarily a result of a decrease of $16 million in accounts payable
and accrued expenses in production due to decreased capital expenditures for
drilling in the Gulf and final payment on working capital adjustments for the
December 1998 sale of the Company's midstream operations, decreased production
receipts due to lower commodity prices, and the payment of $5 million of
severance accrued at December 31, 1998 under the corporate restructuring
program. The 1999 decrease was partially offset by increased distribution
division collections due to colder winter weather and lower gas cost, and lower
expenses throughout the Company. During the first six months of 1999, there were
no material changes in the restructuring charge accrued in prior periods.
During the three months and six months ended June 30, 1999, the Company
repurchased 0.3 million and 2.1 million shares of common stock at average prices
of $34.10 and $27.17, respectively, per share. Including shares repurchased in
the fourth quarter of 1998, the Company has repurchased 3.4 million shares.
Equitable Resources' financial objectives require ongoing capital
expenditures for growth projects in continuing operations of the Equitable
Production segment, as well as replacements, improvements and additions to plant
assets in the Equitable Utilities segment. Such capital expenditures during the
first half of 1999 were approximately $46.3 million, including $23.5 million and
$11.8 million for exploration and production projects in the Gulf of Mexico and
Appalachian regions, respectively. A total of $119 million has been authorized
for the 1999 capital expenditure program. The Company expects to continue to
finance its 1999 capital expenditure program with cash generated from operations
and with short-term loans.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
CAPITAL RESOURCES AND LIQUIDITY (Continued)
On June 1, 1999 the Company announced an agreement to purchase Carnegie
Natural Gas Company and affiliated subsidiaries (Carnegie) from USX-Marathon
Group. Management anticipates the purchase will be completed during the fourth
quarter 1999. The purchase of Carnegie will be funded by cash from operations or
existing sources of short-term debt. The purchase will not have a material
effect on the Company's financial position or results of operations.
Capital Resources
Equitable Resources has adequate borrowing capacity to meet its financing
requirements. Bank loans and commercial paper, supported by available credit,
are used to meet short-term financing requirements. Interest rates on these
short-term loans averaged 4.86% during the first six months of 1999. Equitable
Resources maintains a revolving credit agreement with a group of banks providing
$500 million of available credit. Adequate credit is expected to continue to be
available in the future.
In the fourth quarter of 1998, the Company completed the sale of its
midstream operations for $338 million. A portion of the proceeds to the Company
were used to retire a portion of the Company's outstanding long- and short-term
debt and to fund the repurchase of common stock. At June 30, 1999, $95 million
of proceeds is included in cash and cash equivalents, of which $75 million was
used to retire additional long-term debt maturing on July 1, 1999.
The Company has completed the evaluation of its Gulf region production
operations, previously identified as a non-core business. Management is actively
exploring alternatives to maximize the shareholder value from these operations.
Year 2000
State of Readiness
The Company initiated an enterprise-wide project in 1996 to address the
Year 2000 issue. A management team was put in place to manage this project and a
detailed project plan has been developed to address the three identified primary
risk areas: process controls and facilities, business information systems
applications and issues relative to third party product and service providers.
This plan is continuously updated and reviewed regularly with senior management
and the Board of Directors. The Company is on schedule to complete remediation
and testing of all critical components as planned.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
CAPITAL RESOURCES AND LIQUIDITY (Continued)
To date the Company has completed the inventory and assessment phases
covering all process controls (embedded chips), facilities and systems
applications. The remediation and testing of process controls, using both
internal resources and contracted engineers, is well underway (98% complete) and
on schedule. The testing and remediation of systems applications are on schedule
with approximately 96% of the critical applications remediated and tested.
Equitable anticipates that all critical systems will be Y2K compliant by
September 1999.
Additionally, the Company has developed a formal communications process
with external parties with whom it does business to determine the extent to
which they have addressed their Year 2000 compliance. The Company will continue
to evaluate responses as they are received. Actions to remediate potential
problems (up to and including shifting business to Year 2000 compliant vendors
from those with problems) will take place in 1999.
Costs
The total cost to date of the Company's Year 2000 project is $3.4 million
and the total cost estimate for the balance of the project is an additional $1.6
million. All of the costs have been or will be charged to operating expense
except $.5 million of systems upgrades, which will be capitalized and charged to
expense over the estimated useful life of the associated hardware and software.
Additional costs could be incurred if significant remediation activities are
required with third party suppliers (see below). The estimated costs to convert
remaining systems is not expected to be material to results of operations in any
future period.
Risks and Contingencies
The Company continues to evaluate risks associated with the potential
inability of outside parties to successfully complete their Year 2000 effort,
and contingency plans are being developed and/or adapted as appropriate. While
the Company believes it has taken the necessary steps to provide for the
continued safe and reliable operation of its natural gas delivery system into
the Year 2000, monitoring the progress of critical suppliers is an ongoing
process. A worst-case scenario would involve the failure of one or more of the
gas marketers or pipelines supplying the Company's distribution operations. If
this occurs, the Company would either supply its customers from existing
internal supply sources or attempt to purchase supply on the "spot" market,
probably at somewhat higher prices. Unless supply shortfalls were of a long
duration or occurred during a period of extreme weather conditions when spot
supplies might not be as readily available, it would be unlikely that the
distribution company would have to curtail deliveries to its customers. If it
appears that this scenario is more than a remote possibility additional
contingency plans will be put into place.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Disclosures in this report may include forward-looking statements related
to such matters as anticipated financial performance, business prospects,
capital projects, new products and operational matters. The Company notes that a
variety of factors could cause the Company's actual results to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company business
include, but are not limited to, the following: weather conditions, the pace of
deregulation of retail natural gas markets, the timing and extent of changes in
commodity prices for natural gas and crude oil, changes in interest rates, the
timing and extent of the Company's success in acquiring natural gas and crude
oil properties and in discovering, developing and producing reserves, the
inability of the Company or others to remediate Year 2000 concerns in a timely
fashion, delays in obtaining necessary governmental approvals, the impact of
competitive factors on profit margins in various markets in which the Company
competes and other factors detailed in the Company's filings with the Securities
and Exchange Commission.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have not been any material changes regarding quantitative and
qualitative disclosures about market risk from the information reported in the
Company's 1998 Annual Report on Form 10-K.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on May 26, 1999.
(c) Brief description of matters voted upon:
(1) Elected the named directors to serve three-year terms as
follows:
Shares Shares
Director Voted For Withheld
Phyllis A. Domm, Ed.D. 30,360,767 564,569
James E. Rohr 30,399,907 507,429
David S. Shapira 30,366,263 541,073
(2) Ratified appointment of Ernst & Young, LLP, as
independent auditors for the year ended December 31,
1999. Vote was 30,696,426 shares for; 143,450 shares
against and 67,460 shares abstained.
(3) Approved the 1999 Equitable Resources, Inc.
Non-Employee Directors' Stock Incentive Plan. Vote was
16,421,275 shares for; 11,018,155 shares against and
67,460 shares abstained.
(4) Approved the 1999 Equitable Resources, Inc. Long-Term
Incentive Plan. Vote was 14,728,651 shares for;
12,711,487 shares against and 297,693 shares
abstained.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 The 1999 Equitable Resources, Inc. Non-Employee
Directors' Stock Incentive Plan (As Amended May 26,
1999).
10.2 The 1999 Equitable Resources, Inc. Long-Term Incentive
Plan (As Amended May 26, 1999).
(b) Reports on Form 8-K during the quarter ended June 30, 1999:
Form 8-K Current report dated June 1, 1999, announcing
agreement between the Registrant, Equitable Resources, Inc.,
(EQT) and USX-Marathon Group (MRO) wherein EQT and/or its
subsidiaries will acquire from MRO 100 percent of the stock
of Carnegie Natural Gas Company and affiliated subsidiaries
of USX Corporation.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITABLE RESOURCES, INC.
--------------------------------------------------
(Registrant)
/s/ David L. Porges
--------------------------------------------------
David L. Porges
Senior Vice President
and Chief Financial Officer
Date: August 13, 1999
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Document Description
10.1 The 1999 Equitable Resources, Inc. Filed Herewith
Non-Employee Directors' Stock Incentive
Plan (As Amended May 26, 1999).
10.2 The 1999 Equitable Resources, Inc. Filed Herewith
Long-Term Incentive Plan (As Amended
May 26, 1999).
27 Financial Data Schedule for the Period Filed Herewith
Ended June 30, 1999
1999 EQUITABLE RESOURCES, INC.
NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN
(As amended May 26, 1999)
SECTION 1. PURPOSE
1.01 The purpose of the 1999 Equitable Resources, Inc. Non-Employee
Directors' Stock Incentive Plan (the "Plan") is to assist the Company in
attracting and retaining the services of non-employee directors who exhibit a
high degree of business responsibility, personal integrity and professionalism.
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 or Other Stock-Based
Award 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.
2.01.4 "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.
2.01.5 "Change of Control" has the meaning provided in
Section 9.03.
2.01.6 "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.
2.01.7 "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.
2.01.8 "Disability" means that a Participant is disabled
within the meaning of Section 422(c)(6) of the Code.
2.01.9 "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
2.01.10 "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.
2.01.11 "Option" means a right granted under Section
6.02 hereof to purchase Shares at a specified price during specified
time periods as provided in Section 6.02. Each Option shall be a
nonstatutory stock option, which is an Option not intended to meet
the requirements of Section 422 of the Code.
2.01.12 "Other Stock-Based Award" means an Award,
granted under Section 6.04 hereof, that is denominated or payable
in, valued in whole or in part by reference to, or otherwise based
on, or related to, Shares.
2.01.13 "Participant" means at any time any person who
is a member of the Board, but who is not at the time a full-time
employee of the Company or any Subsidiary nor has been a full-time
employee during the preceding 12-month period. The term
"Participant" does not include advisory, emeritus or honorary
directors.
2.01.14 "Reload Option Rights" and "Reload Option" have
the meanings provided in Section 6.02.2(v).
2.01.15 "Retirement" means that a Participant ceases to
be a member of the Board for any reason on or after reaching the age
of fifty-eight (58) years with at least sixty (60) months of service
as a director. Service shall include the time a director was an
employee director.
2.01.16 "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.
2.01.17 "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.
2.01.18 "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 interpret and administer the Plan and any
instrument or agreement relating to, or Award granted under, the
Plan;
(ii) to adopt, amend, suspend, waive and rescind such
rules and regulations as the Committee may deem necessary or
advisable to administer the Plan;
(iii) 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 granted under the Plan;
(iv) to determine the type or types of Other Stock-Based
Awards to be granted to each Participant;
(v) to determine the number of Other Stock-Based Awards
to be granted, the number of Shares or amount of cash or other
property to which an Other Stock-Based Award will relate, the terms
and conditions of any Other Stock-Based 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 Other
Stock-Based Award;
(vi) to determine whether, to what extent and under what
circumstances an Other Stock-Based Award may be settled in, or the
exercise price of an Other Stock-Based Award may be paid in cash,
Shares, other Awards or other property, or an Other Stock-Based
Award may be accelerated, vested, canceled, forfeited, exchanged or
surrendered;
(vii) to determine whether, to what extent and under
what circumstances cash, Shares, other Awards, other property and
other amounts payable with respect to an Other Stock-Based Award
shall be deferred, whether automatically or at the election of the
Committee or at the election of the Participant;
(viii) to prescribe the form of each Award Agreement,
which need not be identical for each Participant;
(ix) 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
(x) 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, Participants, any
Person claiming any rights under the Plan from or through any Participant 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 the authority, subject to such terms as the Committee
shall determine, to perform administrative functions under the Plan. 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 any officer, manager or other
employee of the Company, 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. Any and all powers,
authorizations and discretions granted by the Plan to the Committee shall
likewise be exercisable at any time by the Board.
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
300,000 shares of Common Stock, subject to adjustment as provided in Section
8.01.
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 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 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.
SECTION 5. ELIGIBILITY
5.01 Awards shall be granted only to Participants as defined in
Section 2.01.13.
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. Except as required by applicable law,
Awards may be granted for no consideration other than prior and/or future
services.
6.02 Automatic Option Grants.
6.02.1 Annual Option Grants. Subject to Section 12.01
hereof, on the first day of June (or if not a day on which the New
York Stock Exchange is open for trading, then on the first such
trading day thereafter) in each year during the term of the Plan,
each Person who is then a Participant shall automatically be granted
an Option for 500 Shares.
6.02.2 Terms of Options. The Options granted under
Section 6.02.1 shall be granted to Participants on the following
terms and conditions:
(i) Exercise Price. The exercise price per
Share of an Option shall be 100% of the Fair Market
Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option
shall be five (5) years from the date of grant, provided
however, that the Option shall expire upon the
Participant's termination of service as a director of
the Company for any reason other than Retirement,
Disability or death.
(iii) Exercisability. The Option shall
become exercisable upon the expiration of three years
from the date of grant or, if earlier, upon the
Participant's termination of service as a director of
the Company by reason of Retirement, Disability or
death.
(iv) Methods of Exercise. The exercise price
of any Option may be paid in cash or Shares, or any
combination thereof, having a Fair Market Value on the
date of exercise equal to the exercise price, provided,
however, that (1) any portion of the exercise price
representing a fraction of a Share shall in any event be
paid in cash and (2) 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 may be
accomplished through the effective transfer to the
Company of Shares held by a broker or other agent. 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, 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.
(v) Reload Option Rights. Options granted
under this Section 6.02 shall have Reload Option Rights
which 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 equal to the number of full Shares delivered in
payment of the option price of the original Option, (2)
having an option price equal to 100% of the Fair Market
Value per Share of the Common Stock on such date of
grant, (3) becoming exercisable six months from such
date of grant, (4) having the same expiration date as
the original Option so exercised and (5) having the same
other terms and conditions as apply to an Option granted
under Section 6.02.1. Subject to the preceding sentence
and the other provisions of the Plan, Reload Option
Rights and Reload Options shall have such additional
terms and be subject to such additional restrictions and
conditions, if any, as shall be determined, in its
discretion, by the Committee. The Committee may, in its
discretion, provide in an Award Agreement for such
limitations on the number or frequency of exercises of
Reload Option Rights, or the minimum numbers of Shares
for which such rights may be exercised, as the Committee
may deem advisable for the efficient administration of
the Plan. Reload Option Rights granted under this
Section 6.02 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 service as a
director of the Company 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 under this paragraph.
6.02.3 Allocation of Shares. If on any date on which
Options would otherwise be granted under this Section 6.02 the
number of Shares remaining available under Section 4.01 is not
sufficient for each Participant otherwise entitled to the grant of
an Option to be granted an Option for the full number of Shares
provided in this Section 6.02, then each such Participant shall
automatically be granted an Option for the number of whole Shares
(if any) equal to (a) the number of Shares then remaining available
under the Plan, multiplied by (b) a fraction of which (1) the
numerator is the number of Shares for which such Participant would
otherwise be granted an Option on such date and (2) the denominator
is the number of Shares for which all Participants would otherwise
be granted Options on such date, with any fractional shares being
disregarded.
6.03. Nature of Automatic Award Grants; Award Agreements. The grant
of the Awards provided for in Section 6.02 shall be automatic and not subject to
the discretion of the Committee or any other Person. However, the Committee may
condition the right of a Participant to be granted any such Award upon the
execution and delivery by the Participant of an Award Agreement setting forth
the terms and conditions of the Award as provided herein and such other terms,
conditions and restrictions, not inconsistent with the provisions of the Plan,
as the Committee in its discretion may determine.
6.04 Other Stock-Based Awards. In addition to the automatic Awards
provided for in Section 6.02, 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, stock
options or purchase rights having terms and conditions similar to or different
from Options granted under 6.02, Shares awarded subject to restrictions, 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 under, other compensation or incentive plans,
programs or arrangements of the Company for eligible Participants.
The Committee shall determine the terms and conditions of Other
Stock-Based Awards. Except as provided in the next paragraph, Shares or
securities delivered pursuant to a stock option or other purchase right granted
under this Section 6.04 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.
Awards granted under this Section 6.04 may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with or in
substitution for, any other Award granted under the Plan or any award granted
under any other plan, program or arrangement of the Company (subject to the
terms of Section 10.01) or any business entity acquired or to be acquired by the
Company or a Subsidiary. 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 an 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)
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.
6.05 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 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.
7.02 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.
7.03 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.
7.04 Registration and Listing Compliance. No Award shall be paid and
no Shares 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. 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 delivery or distribution.
7.05 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.
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.
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 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 Service Following Change of Control. If within
three years following the date of any Change of Control the service of a
Participant as a director of the Company shall be terminated voluntarily or
involuntarily for any reason, 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 service 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 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.
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 determines that obtaining such shareholder approval is for any reason
advisable; provided, however, that except as provided in Section 7.01, 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.
10.02 Notwithstanding any of the provision of this Plan to the
contrary, except as provided in Section 8.01 of the Plan, the exercise price of
any outstanding Option or the exercise price or minimum purchase price of any
Other Stock-Based Award 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 Shareholder Rights. 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 No Right to Directorship. 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 as a director of the
Company or interfere in any way with the rights of the shareholders of the
Company or the Board to elect and remove directors.
11.03 Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive compensation. With
respect to any Shares not yet issued or 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 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.
11.04 No Limit on Other Compensatory Arrangements. Nothing contained
in the Plan shall prevent the Company from adopting other or additional
compensation arrangements, and such arrangements may be either generally
applicable or applicable only in specific cases. To the extent consistent with
the Plan, the terms of each Award shall be construed so as to be consistent with
such other arrangements in effect at the time the Award is granted.
11.05 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.
11.06 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.
11.07 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 certificates for
Shares may be delivered 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.
1999 EQUITABLE RESOURCES, INC.
LONG-TERM INCENTIVE PLAN
(As amended May 26, 1999)
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.
2.01.17 "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 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
3,000,000 shares of Common Stock, subject to adjustment as provided in Section
8.01.
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 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 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.
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 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.
(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 750,000 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.
(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 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 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.
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 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 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.
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 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.
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