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 SEPTEMBER 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 October 31, 1999
Common stock, no par value 33,036,000 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 Nine Months Ended September 30, 1999 and 1998 1
Statements of Condensed Consolidated Cash Flows
for the Nine Months Ended September 30, 1999 and 1998 2
Condensed Consolidated Balance Sheets, September 30,
1999, and December 31, 1998 3 - 4
Notes to Condensed Consolidated Financial Statements 5 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 22
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 22
Part II. Other Information:
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 Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 191,602 $ 156,730 $ 801,289 $ 620,943
Cost of sales 95,465 72,785 470,712 327,480
----------------- ---------------- ----------------- ----------------
Net operating revenues 96,137 83,945 330,577 293,463
----------------- ---------------- ----------------- ----------------
Operating expenses:
Operation and maintenance 18,321 18,171 62,563 59,958
Exploration 4,045 670 8,341 3,083
Production 6,039 6,879 18,490 21,445
Selling, general and administrative 24,840 23,865 69,697 76,322
Depreciation, depletion and amortization 25,585 21,563 77,584 60,762
----------------- ---------------- ----------------- ----------------
Total operating expenses 78,830 71,148 236,675 221,570
----------------- ---------------- ----------------- ----------------
Operating income 17,307 12,797 93,902 71,893
Equity in nonconsolidated subsidiaries 1,056 917 2,306 1,877
----------------- ---------------- ----------------- ----------------
Earnings from continuing operations,
before interest & taxes 18,363 13,714 96,208 73,770
Interest charges 8,559 9,415 26,787 27,818
----------------- ---------------- ----------------- ----------------
Income before income taxes 9,804 4,299 69,421 45,952
Income taxes 4,074 2,262 26,712 16,989
----------------- ---------------- ----------------- ----------------
Net income from continuing operations 5,730 2,037 42,709 28,963
Income (loss) from discontinued operations -
net of tax - - - (4,604)
----------------- ---------------- ----------------- ----------------
Net income $ 5,730 $ 2,037 $ 42,709 $ 24,359
================= ================ ================= ================
Average common shares outstanding -
assuming dilution 34,273 37,128 34,650 37,129
Earnings (loss) per share of common stock:
Basic:
Continuing operations $ 0.17 $ 0.06 $ 1.24 $ 0.78
Discontinued operations - - - (0.12)
----------------- ---------------- ----------------- ----------------
Net income $ 0.17 $ 0.06 $ 1.24 $ 0.66
================= ================ ================= ================
Diluted:
Continuing operations $ 0.17 $ 0.06 $ 1.23 $ 0.78
Discontinued operations - - - (0.12)
----------------- ---------------- ----------------- ----------------
Net income $ 0.17 $ 0.06 $ 1.23 $ 0.66
================= ================ ================= ================
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)
Nine Months Ended
September 30,
1999 1998
-----------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing operations $ 42,709 $ 28,963
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 77,584 60,762
Amortization of net contract costs (234) 2,602
Deferred income taxes 14,115 12,612
Changes in other assets and liabilities 7,657 528
---------------- ----------------
Net cash provided by continuing operations 141,831 105,467
Net cash used in discontinued operations - (2,420)
---------------- ----------------
Net cash provided by operating activities 141,831 103,047
---------------- ----------------
Cash flows from investing activities:
Capital expenditures (72,276) (123,981)
Increase in investment in nonconsolidated subsidiaries (20,861) (7,028)
Proceeds from sale of property 4,661 -
Increase in net noncurrent assets held for sale - (31,935)
---------------- ----------------
Net cash provided by (used in) investing activities (88,476) (162,944)
---------------- ----------------
Cash flows from financing activities:
Retirement of long-term debt (75,000) (10,880)
Increase (decrease) in short-term loans 3,088 (66,451)
Dividends paid (30,858) (32,830)
Proceeds from issuance of long-term debt 17,000 -
Proceeds from preferred trust securities - 125,000
Proceeds from issuance of common stock 2,801 2,392
Purchase of treasury stock (65,999) -
---------------- ----------------
Net cash provided by (used in) financing activities (148,968) 17,231
---------------- ----------------
Net decrease in cash and cash equivalents (95,613) (42,666)
Cash and cash equivalents at beginning of period 102,444 69,442
---------------- ----------------
Cash and cash equivalents at end of period $ 6,831 $ 26,776
================ ================
Cash paid during the period for:
Interest (net of amount capitalized) $ 25,802 $ 38,719
================ ================
Income taxes $ (2,316) $ 10,304
================ ================
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 September 30, December 31,
1999 1998
------------------------------------------
(Thousands)
------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,831 $ 102,444
Accounts receivable 108,791 199,363
Unbilled revenues 26,992 41,616
Inventory 42,755 33,743
Deferred purchased gas cost 24,210 39,445
Prepaid expenses and other 45,989 34,831
---------------- ----------------
Total current assets 255,568 451,442
---------------- ----------------
Property, plant and equipment 1,991,843 1,956,763
Less accumulated depreciation and depletion (814,925) (762,320)
---------------- ----------------
Net property, plant and equipment 1,176,918 1,194,443
---------------- ----------------
Other assets 232,501 214,971
---------------- ----------------
Total $ 1,664,987 $ 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 September 30, December 31,
1999 1998
-----------------------------------------
(Thousands)
-----------------------------------------
<S> <C> <C>
Current liabilities:
Current portion long-term debt $ - $ 74,136
Short-term loans 118,791 115,703
Accounts payable 58,420 147,951
Other current liabilities 112,057 104,170
---------------- ----------------
Total current liabilities 289,268 441,960
---------------- ----------------
Long-term debt 298,280 281,350
Deferred and other credits 297,889 304,127
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 September 30, 1999, 37,252;
December 31, 1998, 37,252 276,213 280,400
Treasury stock, shares at cost September 30, 1999,
3,594; December 31, 1998, 1,396 (100,875) (39,298)
Retained earnings 479,177 467,326
Accumulated other comprehensive income (loss) 35 (9)
---------------- ----------------
Total common stockholders' equity 654,550 708,419
---------------- ----------------
Total $ 1,664,987 $ 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 unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three- and nine-month periods ended
September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Equitable Resources' annual report
on Form 10-K for the year ended December 31, 1998.
B. 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. In December
1998, the Company completed the sale of these operations to various
parties for $338.3 million, which included working capital adjustments.
The condensed consolidated financial statements include these as
discontinued operations.
Net loss from discontinued operations was $4.6 million for the nine
months ended September 30, 1998. These results were reported net of
income tax benefit of $2.3 million. Interest expense allocated to
discontinued operations was $6.5 million in the first nine months of
1998.
C. 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. Interest expense
for the three- and nine months ended September 30, 1999, includes $2.3
million and $6.9 million, respectively, of preferred dividends related to
the trust preferred capital securities.
<PAGE>
D. 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. Equitable
Energy provides gas operations, commodity procurement and delivery, risk
management and customer services to energy consumers including large
industrial, utility, commercial, institutional and residential end-users.
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 Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C>
Revenues from external customers:
Equitable Utilities $ 48,791 $ 39,906 $ 265,932 $ 242,884
Equitable Production 56,872 44,027 138,957 127,465
Equitable Services:
NORESCO 44,107 32,867 123,070 73,309
Equitable Energy 41,832 39,930 273,330 177,285
----------------- ----------------- ---------------- ----------------
Total $ 191,602 $ 156,730 $ 801,289 $ 620,943
================= ================= ================ ================
Intersegment revenues:
Equitable Utilities $ 2,857 $ 4,376 $ 9,644 $ 19,632
Equitable Production 2,569 2,152 13,128 18,000
Equitable Services:
Equitable Energy 36,724 17,589 78,845 51,792
----------------- ----------------- ---------------- ----------------
Total $ 42,150 $ 24,117 $ 101,617 $ 89,424
================= ================= ================ ================
Segment profit (loss):
Equitable Utilities $ 2,042 $ 2,352 $ 54,433 $ 41,463
Equitable Production 12,264 9,883 31,168 32,296
Equitable Services:
NORESCO 4,884 3,320 11,819 5,018
Equitable Energy (408) (2,316) 1,832 (5,631)
----------------- ----------------- ---------------- ----------------
Total operating segments 18,782 13,239 99,252 73,146
Less: reconciling items
Headquarters operating expenses (gains)
not allocated to operating segments 419 (475) 3,044 (624)
Interest expense 8,559 9,415 26,787 27,818
Income tax expenses 4,074 2,262 26,712 16,989
----------------- ----------------- ---------------- ----------------
Net income from continuing operations $ 5,730 $ 2,037 $ 42,709 $ 28,963
================= ================= ================ ================
</TABLE>
<PAGE>
E. 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.
F. 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 September 30,
1999, was $5.7 million, or $0.17 per diluted share, compared with net income of
$2.0 million, or $0.06 per share, for the quarter ended September 30, 1998. The
earnings improvement for the 1999 quarter is primarily attributable to increased
natural gas production and prices, the continuing benefit from last year's cost
structure improvements, increased construction activity in the NORESCO segment
and improved margins in the Equitable Energy natural gas marketing business.
These earnings increases were partially offset by expenses for the
implementation of process improvements in the Company's production and utility
businesses, increased exploration costs in the Production segment, and an
increased provision for performance-related compensation, reflecting the
Company's strong year-to-date and anticipated full-year results and its
continuing move to put more pay at risk for key employees throughout the
Company.
In the nine months ended September 30, 1999, Equitable's consolidated net
income was $42.7 million, or $1.23 per diluted share, compared to $24.4 million,
or $0.66 per share, for the nine months ended September 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 nine months net income of $1.23 per diluted share represents a 58%
increase over earnings per share from continuing operations of $0.78 for same
period in 1998. The 1999 improvement for the nine-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.
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.
The pipeline operations of Equitrans, L.P. (Equitrans) and Three Rivers
Pipeline Corporation are subject to rate regulation by the Federal Energy
Regulatory Commission (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 facilities.
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
September 30, September 30,
1999 1998 1999 1998
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONAL DATA
Heating degree days 113 56 3,589 2,938
Residential sales and transportation volume (MMcf) 1,711 1,680 17,586 15,481
Commercial and industrial volume (MMcf) 2,782 2,816 15,132 13,651
--------------- --------------- ---------------- ---------------
Total throughput (MMcf) - Distribution 4,493 4,496 32,718 29,132
Off-system sales - Distribution 5,005 5,147 13,273 13,285
Throughput (thousand Dths) - Pipeline
- Delivered to distribution system 7,971 6,005 34,069 23,503
- Other deliveries 10,260 9,739 23,851 25,695
FINANCIAL DATA (Thousands $)
Total operating revenues $ 51,648 $ 44,282 $ 275,576 $ 262,516
Purchased gas cost 17,034 9,961 104,137 112,941
Revenue related taxes 1,094 1,154 7,507 8,344
--------------- --------------- ---------------- ---------------
Net operating revenues 33,520 33,167 163,932 141,231
--------------- --------------- ---------------- ---------------
Operating and maintenance expense 15,029 14,723 53,033 49,658
Selling, general and administrative expense 9,215 10,914 28,131 34,484
Depreciation, depletion and amortization 7,234 5,178 28,335 15,626
--------------- --------------- ---------------- ---------------
Total operating expenses 31,478 30,815 109,499 99,768
--------------- --------------- ---------------- ---------------
Earnings from continuing operations,
before interest and taxes $ 2,042 $ 2,352 $ 54,433 $ 41,463
=============== =============== ================ ===============
Capital expenditures $ 9,062 $ 7,987 $ 19,173 $ 18,405
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE UTILITIES (Continued)
Three Months Ended September 30, 1999
vs. Three Months Ended September 30, 1998
Equitable Utilities had earnings before interest and taxes (EBIT) for the
September 1999 quarter of $2.0 million compared to $2.4 million for the 1998
period. The segment's results for the 1999 quarter include charges of $0.9
million for further reorganization of utility segment operating functions and
consolidation of facilities begun in the fourth quarter of 1998. EBIT, excluding
these items, of $2.9 million increased $0.5 million, or 20%, attributed to lower
operating expenses due to restructuring initiatives, partially offset by lower
margins from distribution operations. The lower distribution margins are due
primarily to a favorable settlement of a gas cost filing allowing the
recognition of the sale of pipeline capacity ($1.7 million) reflected in the
third quarter of 1998.
Net operating revenues for the three months ended September 30, 1999, of
$33.5 million include $1.6 million related to a surcharge for the collection of
stranded costs under the pipeline rate settlement and $0.5 million for the
pass-through of products extraction costs to customers. Net operating revenues
of $31.4 million for the quarter, excluding the impact of the rate settlement
and extraction revenues, decreased $1.8 million, or 5%, from the $33.2 million
for the 1998 period due primarily to the lower distribution margins as described
above.
Total operating expenses of $31.5 million for the three months ended
September 30, 1999, include $1.2 million of amortization expense related to the
stranded plant, products extraction costs of $0.5 million and $0.9 million for
reorganization as more fully described above. Operating expenses of $28.9
million, excluding the effect of the rate settlement, extraction charges and
one-time expenses, decreased $1.9 million, or 6%, from the 1998 amount of $30.8
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)
Nine Months Ended September 30, 1999
vs. Nine Months Ended September 30, 1998
Equitable Utilities had EBIT of $54.4 million for the nine months ended
September 30, 1999. The segment's results for the 1999 period include $3.9
million from recognition of the settlement of Equitrans' rate case described
above. Results also include charges of $3.0 million for further reorganization
of utility segment operating functions and consolidation of facilities. EBIT,
excluding these items, increased $19.8 million, or 31%, over the $41.5 million
for the nine months ended September 30, 1998. The increase in 1999 is a result
of higher net revenues due principally to colder weather during the heating
season ($7.2 million), increased revenues from nontraditional services by the
distribution operations ($2.6 million) and lower operating expenses due to
restructuring initiatives begun in the fourth quarter of 1998.
Net operating revenues for the nine months ended September 30, 1999 of
$163.9 million include $13.8 million related to recognition of the rate
settlement and pass through of stranded costs described above and $1.2 million
for the pass-through of products extraction costs to customers. Net operating
revenues of $148.9 million for the period, excluding the impact of the rate
settlement and extraction revenues, increased $7.7 million, or 5%, over the
$141.2 million for the 1998 period. The increase in net revenues is due
primarily to higher throughput ($7.2 million) and increased revenues from
nontraditional services for distribution operations ($2.6 million).
Total operating expenses of $109.5 million for the nine months ended
September 30, 1999, include $9.9 million of amortization expense related to the
stranded plant from recognition of the rate settlement, $1.2 million of products
extraction costs and $3.0 million for reorganization as more fully described
above. Excluding these items, operating expenses decreased $4.8 million from the
1998 amount of $99.8 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. In 1999 these FERC regulated pipelines filed for
decertification allowing for complete integration of these operations. 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 Ending Nine Months Ending
September 30, September 30,
1999 1998 1999 1998
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONAL DATA
Gas sales (MMcf) - East 9,488 9,427 28,901 28,689
Gas sales (MMcf) - Gulf 6,711 4,797 18,082 11,834
---------------- ---------------- ---------------- ----------------
Total gas sales (MMcf) 16,199 14,224 46,983 40,523
Oil production (000s BBls) - East 110 127 326 371
Oil production (000s BBls) - Gulf 191 97 443 388
---------------- ---------------- ---------------- ----------------
Total oil production (000s Bbls) 301 224 769 759
Liquids production (000s Gals.) - East 15,577 13,322 47,198 45,739
Liquids production (000s Gals.) - Gulf 2,503 1,854 6,594 3,669
---------------- ---------------- ---------------- ----------------
Total liquids production (000s Gals.) 18,080 15,176 53,792 49,408
Produced gas and oil (MMcfe)- East 10,990 11,010 32,696 32,572
Produced gas and oil (MMcfe)- Gulf 7,861 5,382 20,742 14,160
---------------- ---------------- ---------------- ----------------
Total produced gas & oil (MMcfe) 18,851 16,392 53,438 46,732
Transportation (MMcfe) 12,007 11,823 35,883 35,783
Effective gas price - East (per MMBtu) $ 2.32 $ 2.02 $ 2.06 $ 2.16
Effective gas price - Gulf (per MMBtu) $ 2.50 $ 2.12 $ 2.11 $ 2.20
Effective oil price - East (per Bbl) $ 16.34 $ 10.92 $ 13.41 $ 11.80
Effective oil price - Gulf (per Bbl) $ 18.09 $ 15.33 $ 15.56 $ 16.41
Effective liquids price - East (per gallon) $ 0.28 $ 0.26 $ 0.25 $ 0.23
Effective liquids price - Gulf (per gallon) $ 0.20 $ 0.15 $ 0.19 $ 0.18
FINANCIAL DATA (Thousands $)
Total operating revenues $ 59,441 $ 46,179 $ 152,085 $ 145,465
Cost of energy purchased 7,525 4,211 18,489 16,311
---------------- ---------------- ---------------- ----------------
Net operating revenue/gross margin 51,916 41,968 133,596 129,154
---------------- ---------------- ---------------- ----------------
Operating and maintenance expense 3,293 3,449 9,530 10,300
Lease operating expense 6,039 6,879 18,490 21,445
Selling, general and administrative expenses 9,842 7,508 21,123 23,954
Dry hole cost 1,040 0 2,317 115
Exploration expenses 3,005 670 6,024 2,968
Depreciation, depletion and amortization 16,433 13,579 44,944 38,076
---------------- ---------------- ---------------- ----------------
Total operating expenses 39,652 32,085 102,428 96,858
---------------- ---------------- ---------------- ----------------
Earnings from continuing operations,
before interest and taxes $ 12,264 $ 9,883 $ 31,168 $ 32,296
================ ================ ================ ================
Capital expenditures $ 21,294 $ 37,094 $ 56,530 $ 95,619
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE PRODUCTION (Continued)
Three Months Ended September 30, 1999
vs. Three Months Ended September 30, 1998
Equitable Production's EBIT for the September 1999 quarter was $12.3
million, which was $2.4 million higher than the September 1998 quarter. The
segment's positive results were primarily due to increased natural gas and oil
production and higher natural gas and oil prices offset by higher total
operating expenses.
Net operating revenues for the three months ended September 30, 1999,
increased $9.9 million, or 24%, compared with the third quarter of 1998. Natural
gas volumes increased 2.0 billion cubic feet (Bcf), which positively impacted
revenues by $4.5 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 and South Marsh Island 39. Also, crude oil production
increased by 77 thousand barrels (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 contributed $1.4 million to revenues in the
1999 quarter. In addition to the production increases in the current quarter are
increases of 17% and 36% in Equitable Production's average prices for natural
gas and crude oil, respectively. The total impact of these price increases was
$6.4 million additional revenues in the third quarter of 1999, compared to the
same quarter in 1998. Included in 1998 are $2.6 million revenues from direct
bill settlements, which represent the final installment of a FERC pricing
settlement reached in an earlier period.
Total operating expenses for the three months ended September 30, 1999
increased $7.6 million compared with the same quarter in 1998. Depreciation,
depletion and amortization (DD&A) was $2.9 million higher because of increased
production ($2.7 million) and a $1.0 million impairment associated with the
abandonment of a processing facility, offset in part by a lower depletion rate
in the Gulf region in the current year. During the third quarter of 1999, the
Gulf region drilled one dry hole at Eugene Island 44, which accounted for the
current quarter dry hole costs of $1.0 million. Also, other exploration costs
were $2.3 million higher for the September 1999 quarter due primarily to a lease
impairment and the impairment of an equity investment in an oil and gas
production company. Additionally, selling, general and administrative (SG&A)
expenses were $2.3 million higher for the September 1999 quarter. Current
quarter SG&A includes $2.6 million related to process improvements, including
the Company's decision to close its regional office in Kingsport, Tennessee,
consolidate administration in Houston and realign field offices; $2.0 million of
charges related to the decertification of Kentucky West Virginia Gas Company;
and $0.5 million in increased provisions for performance-related compensation
due to the segment's strong performance. These expenses were partially offset by
a $1.6 million savings in SG&A as a result of restructuring activities in the
fourth quarter of 1998. In addition, production costs decreased $0.8 million due
to operating efficiencies and decreased well-tending staff.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE PRODUCTION (Continued)
Nine Months Ended September 30, 1999
vs. Nine Months Ended September 30, 1998
For the nine months ended September 30, 1999, net operating revenues
increased to $133.6 million from $129.2 million for the comparable period last
year. Natural gas production increased 6.5 Bcf, or 16%, in the nine-month
period. This production increase contributed $13.3 million to current year
revenues. The increased production volume is related to the drilling activities
in the Gulf region discussed above under third quarter results and additional
Gulf wells at West Cameron 540, which commenced production in mid-1998.
Partially offsetting the increase in production is a 4% decline in Equitable
Production's year-to-date average sales price for natural gas. The total revenue
impact of this 1999 price decline was $4.3 million. The 1998 revenues include
$2.6 million of direct bill settlements described above.
Total operating expenses for the nine-month period of 1999 increased by
$5.6 million compared with the nine-month period 1998. DD&A is higher by $6.8
million due to increased gas production and a third quarter writedown of $1.0
million partially offset by a lower depletion rate in the Gulf region for 1999.
Dry hole expense is $2.2 million higher due to the dry holes drilled in the
second and third quarters of 1999. Also, other exploration costs were $3.0
million higher in 1999, as described above under third quarter results.
Production costs, however, decreased $3.0 million due to current year operating
efficiencies and decreased well-tending staff. Also, SG&A expenses declined $2.8
million as a result of management and staff headcount reductions and corporate
restructuring activities, which occurred in the fourth quarter of 1998. The
savings in SG&A are partially offset by the third quarter 1999 expenses related
to the implementation of process improvements in the East region and increased
performance compensation accruals.
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.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
NORESCO
NORESCO provides energy and energy related products and services that are
designed to reduce its customers' operating costs and improve their
productivity. 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 energy infrastructure division,
which develops and operates private power, cogeneration and central plant
facilities in the U.S. and selected international markets.
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
September 30, September 30,
1999 1998 1999 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONAL DATA (Thousands $)
Construction backlog, end of period $ 78,714 $ 100,251
Construction completed $ 35,941 $ 23,699 $ 109,496 $ 51,307
FINANCIAL DATA (Thousands $)
Total revenue $ 44,107 $ 32,867 $ 123,070 $ 73,309
Contract costs 33,685 24,651 95,657 53,212
---------------- ------------------ -------------- ----------------
Gross profit margin 10,422 8,216 27,413 20,097
---------------- ------------------ --------------- ----------------
Equity earnings of non-consolidated subsidiaries (1,056) (917) (2,306) (1,877)
Selling, general and administrative expenses 4,761 4,700 13,818 13,683
Amortization of goodwill 937 957 2,810 2,862
Depreciation and depletion 896 156 1,272 411
---------------- ------------------ --------------- ----------------
Total expenses (net of equity earnings) 5,538 4,896 15,594 15,079
---------------- ------------------ --------------- ----------------
Earnings from continuing operations,
before interest and taxes $ 4,884 $ 3,320 $ 11,819 $ 5,018
================ ================== =============== ================
Capital expenditures $ (662) $ 318 $ 184 $ 876
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
NORESCO (Continued)
Three Months Ended September 30, 1999
vs. Three Months Ended September 30, 1998
NORESCO's gross profit margin increased by 27% to $10.4 million for the
quarter ended September 30, 1999, compared to $8.2 million for the same period
in 1998. The increase in gross profit margin reflects the continued expansion of
this segment's operations and the implementation of larger value contracts.
Construction completed during the third quarter of $35.9 million was $12.2
million greater than the third quarter of 1998, an increase of 52%. The gross
margin rate as a percent of sales declined to 23.6% compared to 25.0% 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 September 30, 1999, construction backlog totaled approximately $79
million, a decrease of $22 million from backlog at September 30, 1998, due
primarily to the build-out of several large energy infrastructure projects which
were in backlog in 1998.
Total 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. Equity earnings
of non-consolidated subsidiaries come primarily from power generation assets.
Nine Months Ended September 30, 1999
vs. Nine Months Ended September 30, 1998
NORESCO's gross profit margin increased by 36% to $27.4 million for the
nine months ended September 30, 1999, compared to $20.1 million for the same
period in 1998. The increase in gross profit margin reflects the continued
expansion of this segment's operations and the implementation of larger value
contracts. Construction completed during the nine months of $109.5 million was
up 113% from the $51.3 million completed during the same period in 1998. The
gross margin rate as a percent of sales declined to 22.3% compared to 27.2%
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. Other factors contributing to the decline in average gross
margin rates are increased competition in the energy services industry and an
increase in revenues from the sale of natural gas and electricity included in
the segment's integrated energy management services.
Total expenses for this segment remained relatively unchanged for the
nine-month period, as increased marketing and project development expenses were
offset by lower administrative expenses and a reduction in allocated corporate
overhead expense. The increase in equity earnings of non-consolidated
subsidiaries of $0.4 million for the nine-month period results from the
contributions of assets which were fully operational in 1999, but which were
either partially operating or in construction during the same period in 1998.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE ENERGY
Equitable Energy provides gas operations, commodity procurement and
delivery, risk management and customer services to energy consumers including
large industrial, utility, commercial, institutional and residential end-users.
This segment's primary focus is to provide products and services in those areas
where the Company has a strategic marketing advantage, usually due to geographic
coverage and ownership of physical assets.
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
September 30, September 30,
1999 1998 1999 1998
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONAL DATA
Sales volume (MMbtu):
Large industrial 5,181 7,058 19,499 21,085
On-system residential 19 180 2,830 344
Off-system residential 61 - 587 -
Other commercial & industrial 2,087 3,541 7,244 11,423
Utilities/trading companies 19,928 15,651 109,530 63,027
---------------- ---------------- ---------------- ---------------
Total sales (MMbtu) 27,276 26,430 139,690 95,879
================ ================ ================ ===============
Total weighted average sales price ($/MMbtu) $ 2.88 $ 2.18 $ 2.52 4 2.39
FINANCIAL DATA (Thousands $)
Total revenue $ 78,556 $ 57,519 $ 352,175 $ 229,077
Purchased gas cost 77,593 56,926 345,860 226,096
---------------- ---------------- ---------------- ---------------
Net operating revenue 963 593 6,315 2,981
Selling, general and administrative expenses 1,324 2,782 4,338 8,210
Depreciation, depletion and amortization 47 127 145 402
---------------- ---------------- ---------------- ---------------
Total operating expenses 1,371 2,909 4,483 8,612
---------------- ---------------- ---------------- ---------------
Earnings (loss) from continuing operations,
before interest and taxes $ (408) $ (2,316) $ 1,832 $ (5,631)
================ ================ ================ ===============
Capital expenditures $ 60 $ 4 $ 92 $ 42
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
EQUITABLE ENERGY (Continued)
Three Months Ended September 30, 1999
vs. Three Months Ended September 30, 1998
Net operating revenues increased to $1 million for the quarter ended
September 30, 1999, compared to $.6 million for the same period in 1998.
Increased Company production volumes sold to utility/marketing companies
contributed to higher margins for gas sales.
Total operating expenses for the quarter were 53% lower than those of the
third 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.
Nine Months Ended September 30, 1999
vs. Nine Months Ended September 30, 1998
Net operating revenues increased to $6.3 million for the nine-month
period ended September 30, 1999, compared to $3 million for the same period in
1998. During the first nine months, Equitable Energy marketed 136 billion cubic
feet (Bcf) of natural gas compared to 93 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 (45 Bcf).
Effective July 1, 1999, Equitable Energy gave its residential customers in the
Pennsylvania choice program the option to transfer back to Equitable Gas Company
at lower gas prices. All but approximately 3,100 have taken this option. 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.
Total operating expenses for the nine-month period ended September 30,
1999, were 48% 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)
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
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. Equitable Resources' primary source of
commodity price exposure comes from the production and sale of natural gas.
However, the Company does have crude oil and natural gas liquid production as
well.
The Company's overall objective in its hedging program is to protect
earnings from undue exposure to the risk of falling commodity prices. Since it
is primarily a natural gas company, this leads to different approaches to
hedging natural gas than for crude oil and natural gas liquids.
With respect to hedging the Company's exposure to changes in natural gas
commodity prices, management's objective is to provide price protection for the
majority of expected production for the year 2000. Its preference is to use
derivative instruments which create a price floor, in order to provide downside
protection while allowing the Company to participate in upward price movements.
This is accomplished with the use of a mix of costless collars, straight floors
and some fixed price swaps. This mix allows the Company to participate in a
range of prices, while protecting shareholders from significant price
deterioration. In addition to this current strategy, part of the Company's
portfolio of natural gas hedges is a swap entered into in 1995 as part of a
financing transaction. This swap, covering about 15% of natural gas production
at a NYMEX price of $1.82/Mcf, expires near the end of the year 2000.
Crude oil and natural gas liquids prices are currently at relatively high
levels compared to historical averages. As a result, the Company has used swaps
and other derivative instruments to lock in current prices for the majority of
expected production of crude oil and of natural gas liquids for the remainder of
1999. Management is in the process of executing the same strategy for the year
2000.
During the nine months ended September 30, 1999, cash provided by
operating activities increased to $141.8 million, compared to $103.0 million
from continuing operations for the first nine months of 1998. The $38.8 million
increase is primarily a result of increased sales volumes in the Production and
NORESCO segments and lower cash operating expenses throughout the Company. In
addition, in 1999 the Utility segment has collected $15 million from its
customers for gas costs deferred in prior periods.
During the three months and nine months ended September 30, 1999, the
Company repurchased 0.3 million and 2.6 million shares of common stock at
average prices of $36.94 and $28.17, respectively, per share. Including shares
repurchased in the fourth quarter of 1998, the Company has repurchased 4.2
million shares. In October 1999, the Company's Board of Directors increased from
5.6 million to 6.7 million the total shares authorized for repurchase.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
Liquidity (Continued)
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 nine months of 1999 were approximately $72.3 million, including $33.7
million and $19.0 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.
The energy infrastructure business of the Company's Noresco segment
requires capital expenditures for capital projects accounted for as investments
in nonconsolidated subsidiaries. Such projects used $21 million dollars in the
nine months ended September 30, 1999.
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 4.68% during the first nine 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. Portions 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. In the quarter ended September
30, 1999 $75 million was used to retire additional long-term debt that matured
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.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
CAPITAL RESOURCES AND LIQUIDITY (Continued)
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.
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 (99% complete) and
on schedule. The testing and remediation of systems applications are on schedule
with approximately 98% of the critical applications remediated and tested.
Equitable anticipates that all critical systems will be Y2K compliant by
December 15, 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 until the end of 1999.
Costs
The total cost to date of the Company's Year 2000 project is $3.5 million
and the total cost estimate for the balance of the project is an additional $0.5
million. All of the costs have been or will be charged to operating expense
except $0.6 million of systems upgrades, which have been 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 are not expected to be material to results of
operations in any future period.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Year 2000 (Continued)
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.
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 and electricity 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 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Employment Agreement dated July 9, 1999 by and between
Equitable Resources, Inc. and John C. Gongas, Jr.
10.2 Non-Competition Agreement dated July 9, 1999 by and
between Equitable Resources, Inc. and John C. Gongas,
Jr.
10.3 Release Agreement dated August 19, 1999 by and between
Equitable Resources, Inc. and Richard D. Spencer.
10.4 Equitable Resources, Inc. Directors' Deferred
Compensation Plan.
(b) Reports on Form 8-K during the quarter ended September 30,
1999:
None.
<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: November 12, 1999
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Document Description
10.1 Employment Agreement dated July 9, Filed Herewith
1999 by and between Equitable
Resources, Inc. and John C. Gongas, Jr.
10.2 Non-Competition Agreement dated July 9, Filed Herewith
1999 by and between Equitable Resources,
Inc. and John C. Gongas, Jr.
10.3 Release Agreement dated August 19, 1999 Filed Herewith
by and between Equitable Resources, Inc.
and Richard D. Spencer.
10.4 Equitable Resources, Inc. Directors' Deferred Filed Herewith
Compensation Plan.
27 Financial Data Schedule for the Period Filed Herewith
Ended September 30, 1999
EMPLOYMENT AGREEMENT
This Employment Agreement is made this 9th day of July, 1999 by and
between Equitable Resources, Inc., a Pennsylvania corporation having a business
address at One Oxford Centre, Suite 3300, 301 Grant Street, Pittsburgh,
Pennsylvania 15219 (Equitable Resources, Inc. and its subsidiary companies
hereinafter collectively known as the "Company") and John C. Gongas, Jr. ("the
Employee").
WITNESSETH
WHEREAS, in connection with Employee's accepting a new assignment, the
Company and Employee have agreed to enter into an employment contract to set
forth the applicable terms and conditions; and
WHEREAS, the parties further agree that as a condition of the
Employment Agreement, they will enter into a Non-Competition Agreement of even
date herewith which agreement requires the execution of a release upon
termination of Employee's employment.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employee shall be employed as a Senior Vice President of the
Company, reporting to the President and Chief Executive Officer, with
responsibility for those matters assigned to him by the President in his
discretion which are generally consistent with his experience and shall be paid
therefor a base salary of $6,000 per biweekly pay period, commencing July 1,
l999. To the extent that diligent performance of the work assigned to him does
not require Employee's full time, then he may pursue outside employment
activities, provided that they do not violate the provisions of the
Non-Competition Agreement or any policies of the Company, including the policy
relating to conflicts of interest.
2. Unless Employee is earlier terminated for cause, as defined in
Paragraph 2 of the Non-Competition Agreement, or the term of this Agreement is
extended by mutual written agreement of the parties, Employee's position will be
eliminated and his employment shall be terminated on November 30, 1999 (the
"termination date"). If the parties agree in writing to extend the term of this
Employment Agreement beyond November 30, 1999, then the term of the post
employment period of theNon-Competition Agreement shall not expire until 12
months following the extended termination date.
3. Unless terminated for cause, as defined in Paragraph 2 of the
Non-Competition Agreement, Employee shall, upon termination of his employment,
be entitled to six months separation pay (payable at an annual salary rate of
$270,000) and continued health care coverage for six months following the
termination date (under either the employee or retiree program if Employee
retires) in lieu of and in substitution for the benefits prescribed in the
Company's separation allowance plan. The separation amount will be paid in a
lump sum to the Employee within 45 days of Employee's notice to the Company of a
payment date, ehich notice shall be given no later than the termination date.
4. During the term hereof, Employee will continue to participate in the
Company's employee benefit plans, including health care, life and disability
insurance, the Employee Stock Purchase Plan and the Employee Savings Plan, in
accordance with the terms of those plans on the same terms as all other
employees, and shall continue to be eligible for the executive perquisites
(excluding the automobile allowance but including financial planning services)
he is currently receiving, except that he will relinquish his membership in the
Rivers Club immediately and his membership in Diamond Run Golf and Country Club
upon termination of employment. Further, during the term hereof, Employee will
continue to participate in the Executive Retention Plan in accordance with the
terms of the award agreement and the plan and in the Deferred Compensation Plan
and the Breakthrough Plan in accordance with the terms of those plans.
Employee's existing Change of Control Agreement continues in effect in
accordance with its terms until the termination date or such earlier date as may
be provided under that agreement. Upon termination, in accordance with the terms
of the split dollar life insurance agreement, the policy will be surrendered to
Employee, but the Company will recoup premiums paid and will not be obligated to
make any further premium payments.
5. Employee shall be eligible for 31 days vacation in 1999 and will be
entitled to be paid for any unused 1999 vacation upon termination of his
employment in 1999.
6. The Employee will not receive any further awards under the Company's
Long-Term Incentive Plan but any existing option award agreements which have not
expired continue in effect in accordance with the terms of such agreements and
the plan. Employee shall be eligible to continue as a participant in the 1999
Short-Term Incentive Plan at his current target bonus level as though employed
for the full year 1999; he shall be eligible to be paid any award earned as
though he had continued to be employed through said payment date. The actual
amount of any such award will be based on his performance in connection with the
assignments made by the President and will be subject to Compensation Committee
evaluation and approval.
7. When engaged on Company business, Employee will have the use of a
workstation at the Company's headquarters, a computer, mobile phone and other
office equipment and systems and will be reimbursed for reasonable and necessary
business travel expenses (excluding commuting mileage).
8. This Employment Agreement and the rights of the parties relating to
the subject matter hereof shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania. This Agreement shall inure to the
benefit of the Company's successors and assigns, subject to the obligations of
the Company hereunder.
9. Except for the Non-Competition Agreement and the Release Agreement
referenced therein, this Agreement contains the entire between the parties
hereto with respect to Employee's employment and supersedes all prior agreements
and understandings, oral or written, relating to this subject matter. This
Agreement may not be changed, amended or modified, except by a written
instrument signed by the parties.
IN WITNESS WHEREOF, the Company has caused this Employment Agreement to
be executed by its officers thereunto duly authorized, and the Employee had
hereunto set his hand, all as of the day and year first above written.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Johanna G. O'Loughlin /s/ G. R. Spencer
- ------------------------------------ -----------------------------
Gregory R. Spencer
Senior Vice President and
Chief Administrative Officer
WITNESS: EMPLOYEE:
/s/ Crystal Doll /s/ John C. Gongas
- --------------------------------- -----------------------------
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is made this 9th day of July, 1999 by
and between Equitable Resources, Inc., a Pennsylvania corporation having a
business address at One Oxford Centre, Suite 3300, Pittsburgh, Pennsylvania
15219 (Equitable Resources, Inc. and its subsidiary companies hereinafter
collectively known as the "Company") and John C. Gongas, Jr. ("the Employee").
WITNESSETH
WHEREAS, in connection with the Employee's accepting a new assignment
with the Company pursuant to the terms of an Employment Agreement of even date
herewith, the Company and the Employee have determined that it is in the best
interests of both parties to enter into this agreement;
WHEREAS, the Company is willing to grant to the Employee certain
additional benefits in consideration of the Employee's agreement to comply with
specific post-employment non-competition requirements and to execute the
attached release; and
WHEREAS, the Company and the Employee wish to enter into this agreement
to reflect their understanding of those benefits and requirements;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. During the term of his employment and for a period of twelve (12)
months from the termination date of his employment with the Company, the
Employee will not (i) engage, directly or indirectly, (including by way of
example only, as a principal, partner, joint venturer, employee, agent or
consultant) nor have any direct or indirect interest in any enterprise which
engages in the production, transmission, storage or distribution of natural gas
or natural gas liquids in Pennsylvania, West Virginia, Kentucky, Virginia,
western Maryland, eastern Ohio or western New York, except with the Company's
prior written consent; (ii) act in any capacity, directly or indirectly, to
provide information or services to any third party in any way relating to the
Company without the Company's prior written consent; (iii) engage in any
business activity competitive with any project or proposed project which has
been discussed by the Employee in the course of his employment with the Company
or any project or proposed project with respect to which the Company has
initiated any business activity; (iv) take away or interfere, or attempt to
interfere, with any customer, trade or existing contractual relations of the
Company, including any business project or any contemplated business project
which representatives of the Company have discussed with any potential
participant in such project; or (v) interfere, or attempt to interfere with any
officer, employee, representative, or agent of the Company, or induce, or
attempt to induce, any of them to leave the employ of the Company, its
successors, assigns, or affiliates, or to violate the terms of their contracts
with the Company. The foregoing provisions shall not restrict the Employee from
having any investments in any competing enterprise the stock of which is listed
on a national securities exchange or traded publicly over-the-counter so long as
such investment does not give the Employee more than one percent (1%) of the
voting stock of such company.
2. In consideration of the foregoing covenants and conditional upon the
execution by the Employee of a release at the time of termination substantially
in the form attached hereto as Exhibit A, the Company agrees that if the
employment of the Employee with the Company is terminated by the Company for any
reason (other than as the result of a conviction of a felony, conviction of a
crime of moral turpitude or conviction of fraud, or as the result of the
Employee's willful and continuous engagement in conduct which is demonstrably
and materially injurious to the Company, or as the result of repeated and
willful refusal by the Employee to perform his or her job duties in a reasonable
manner) or if the Employee resigns within ninety (90) days of receiving a
demotion and/or a reduction (or freeze beyond the date when other Company
officers receive an annual increase) in the Employee's salary, the Employee
shall receive, from the date of termination twelve (12) months of base salary
payments based on an annual base salary rate of $270,000, subject to withholding
taxes. Such base salary amount shall be paid by the Company to the Employee in
biweekly installments following the termination date. It is intended that
benefits payable under this Agreement should be treated as payments in the
nature of compensation within the meaning of Code Section 280G and the
Regulations thereunder (the "280G Rules") and that such payments constitute
reasonable compensation within the meaning of the 280G Rules.
3. Employee acknowledges his continuing obligation under Company policy
and common law during employment and following termination thereof to preserve
the Company's confidential information and to return all Company property
promptly after termination of employment.
4. The Company may terminate this Agreement upon twelve (12) months'
prior written notice to the Employee; provided that all provisions of this
Agreement shall apply to any event specified in paragraph 1 or 2 hereof
occurring prior to the expiration of such twelve (12) month period.
5. To the extent that any provision of this Agreement is deemed
unenforceable in any court of law such provision may be modified by such court
to the extent necessary to make this Agreement enforceable.
6. The covenants set forth in Paragraph 1 are independent of any
Company policies or agreements other than this Non-Competition Agreement and the
existence of any claim or cause of action of Employee against the Company
predicated on such policies or other agreements shall not constitute a defense
to the enforcement by the Company of such covenants. Without limiting the
remedies available to the Company, Employee acknowledges that damages at law
will be an insufficient remedy to the Company in the event that he violates the
terms of such covenants and that the Company may apply for and have injunctive
relief in any court of competent jurisdiction to restrain the breach or
threatened breach of, or otherwise to specifically enforce, such covenants.
Further, in the event of breach by Employee of the covenants, the Company shall
have the right to cease making payments to Employee, and to recover amounts
previously paid, under Paragraph 2 above. This provision will not limit
Employee's liability if the Company's actual damages, including attorneys' fees
and expenses, exceed such amounts. The time period set forth in Paragraph 1
shall be extended by the length of time during which Employee shall have been in
breach of any of said provisions. Employee shall have the right to enforce the
Company's obligations hereunder in the event of a breach thereof by the Company.
7. This Agreement shall inure to the benefit of any successors or
assigns of the Company, subject to the obligations of the Company hereunder.
8. This Agreement and the rights of the parties relating to the subject
matter hereof shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
9. This Agreement contains the entire agreement between the parties
hereto with respect to the non-competition and other covenants of the Employee
set forth in Paragraph 1 hereof and the consideration therefor and supersedes
all prior agreements and understandings, oral or written, relating to this
subject matter. This Agreement may not be changed, amended, or modified, except
by a written instrument signed by the parties. The payments referenced in
Paragraph 2 hereof are not in lieu of or substitution for any separation
payments to which Employee may otherwise be entitled under the terms of the
Company's separation allowance plan as in effect on the termination date and
under the Employment Agreement of even date herewith.
IN WITNESS WHEREOF, the Company has caused this Non-Competition
Agreement to be executed by its officers thereunto duly authorized, and the
Employee has hereunto set his hand, all as of the day and year first above
written.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Johanna G. O'Loughlin /s/ G. R. Spencer
- ------------------------------------ -----------------------------
Gregory R. Spencer
Senior Vice President and
Chief Administrative Officer
WITNESS: EMPLOYEE:
/s/ Crystal Doll /s/ John C. Gongas
- --------------------------------- -----------------------------
RELEASE AGREEMENT
This Release Agreement is made this 19th day of August, 1999 by and
between Equitable Resources, Inc., a Pennsylvania corporation having a business
address at One Oxford Centre, Suite 3300, Pittsburgh, Pennsylvania, 15219 (the
"Company") and Richard D. Spencer (the "Employee").
WITNESSETH
WHEREAS, Employee desires to voluntarily resign from the Company to
pursue other opportunities;
WHEREAS, The Company desires an orderly transition in light of the
Employee's resignation; and
WHEREAS, the parties desire to settle any and all matters relating to
Employee's employment and the termination thereof;
NOW, THEREFORE, the Company and Employee, in consideration of the
premises, covenants and agreements contained herein and each intending to be
legally bound, agree as follows:
1. Employee resigns his employment with the company effective August
20, 1999 ("Termination Date").
2. This Release Agreement is not, and should not be construed as, an
allegation or admission on the part of either Employee or the Company that
either of them has acted unlawfully or has violated any federal, state or local
law, rule or regulation.
3. In consideration for the Employee's covenants hereunder, the Company
agrees to provide the following:
a. A lump sum payment of $50,000 payable through the normal pay
process on September 1, 1999 and, a second lump sum payment of
$50,000 payable not later than February 15, 2000. Both payments
will be subject to normal withholdings.
b. Medical, dental and vision coverage for a maximum of twelve (12)
months or until replacement coverage is established. Employee
monthly co-payment for the actual months of coverage will apply.
Employee will notify the Company once replacement coverage has
been obtained.
c. A payment equal to $332,852 to be paid September 1, 1999 in lieu
of vested stock options (21,000 options) under the Long -Term
Incentive Plan and vested shares (3,454 shares) under the
Executive Retention Plan, all of which, both options and shares,
are forfeited.
Other than the foregoing payments, Employee shall be entitled to no
additional payments or benefits, including but not limited to those programs
outlined in Exhibit A attached hereto.
4. In return for the consideration described herein, Employee, on
behalf of himself and his heirs, executors, representatives, estates and
assigns, voluntarily and irrevocably releases the Company, its subsidiaries,
predecessors, affiliates, shareholders, and their respective officers,
directors, employees, agents, attorneys, successors and assigns (severally and
collectively called "Releasees") from any and all claims (known and unknown)
which Employee has or might have against any of the Releasees arising in any
manner at any time up to the effective date of this Release Agreement. This
release includes, without limitation, claims which Employee has or might have
involving his employment with any of the Releasees, the termination of that
employment or its timing or the terms and conditions of that employment. This
includes, without limitation, any claim arising under any constitution, law,
statute, ordinance, regulation, rule, guideline, or common-law theory, and
specifically all claims arising under all state, federal or local employment
discrimination or wrongful discharge laws, regulations or common-law theories,
including, but not limited to, Title VII of the Civil Rights Act of 1964, the
Employee Retirement Income Security Act of 1974, the Americans With Disabilities
Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers
Benefit Protection Act, and the Pennsylvania Human Relations Act, as well as any
claim for breach of contract or wrongful discharge, or otherwise for any reason
arising prior to the effective date of this Agreement. Employee also releases
all Releasees from any and all claims for the fees, costs and expenses of any
attorneys who have at any time represented Employee (or are now representing
Employee) in connection with this Agreement or in connection with any matter
released in this Agreement.
5. Employee agrees not to file a lawsuit against any of the Releasees
in any court of the United States or any State thereof concerning any matter
released in this Release Agreement. Notwithstanding any other language in this
Release Agreement, the parties understand that this Release Agreement does not
prohibit Employee from filing an administrative charge of alleged employment
discrimination under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act of
1990 or the Equal Pay Act of 1963. Employee, however, waives his right to
monetary or other recovery should any federal, state or local administrative
agency pursue any claims on his behalf arising out of or relating to his
employment with and/or separation from employment with any of the Releasees.
This means that by signing this Release Agreement, Employee will have waived any
right he had to bring a lawsuit or obtain a recovery if an administrative agency
pursues a claim against any of the Releasees based on any actions taken by any
of the Releasees up to the date of the signing of this Release Agreement, and
that Employee will have released the Releasees of any and all claims of any
nature arising up to the date of the signing of this Agreement.
6. If Employee files suit against any of the Releasees in breach of the
release and covenant not to sue, then Employee shall pay to the Company all
attorneys' fees and expenses incurred by the Company in connection therewith
plus interest at the legal rate. This provision is not intended to limit
Employee's liability to the Company if the actual damages to the Company exceed
these costs.
7. In exchange for the payments outlined in paragraph 3(a), Employee
agrees to attend the two (2) remaining regularly scheduled Board of Directors
and Audit Committee meetings, if requested to do so by the Company and if notice
is given to Employee at least ten (10) days prior to the meeting. In addition,
Employee agrees to provide other consulting services to the Company as it may
request for the purpose of ensuring an orderly transition of all Y2K related
matters. The Company shall compensate the Employee for his services at $250.00
per hour for meetings and consulting services, and he shall be reimbursed for
reasonable business travel expenses.
8. Employee acknowledges that Employee has been advised to consult with
an attorney about this Agreement prior to signing it and that Employee has had a
full and fair opportunity to consult with an attorney if Employee desired to do
so. Employee further acknowledges that Employee has been given at least 21
calendar days in which to consider this Agreement and to make a decision as to
whether to accept it.
9. Within seven (7) calendar days after signing this Release Agreement,
Employee may change his mind and revoke his acceptance by delivering a
revocation in writing to Equitable Resources, Inc., One Oxford Centre, Suite
3300, 301 Grant Street, Pittsburgh, Pennsylvania, 15219, Attention: Gene D.
Musial - Director, Human Resources. This Release Agreement shall not become
effective or enforceable until that seven-day revocation period has expired.
10. This Release Agreement contains the entire agreement of the parties
relating to Employee's employment and termination of employment. There are no
representations or terms relating thereto other than those set forth in this
written Release Agreement. This Release Agreement and the rights of the parties
relating to the subject matter hereof shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
11. If any of the provisions of this Release Agreement are declared or
determined by any court to be invalid or unenforceable for any reason, the
remaining provisions and portions of this Release Agreement -- at the company's
sole option -- shall be unaffected thereby and shall remain in full force to the
fullest extent permitted by law.
12. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS CAREFULLY READ AND FULLY
UNDERSTANDS ALL OF THE PROVISIONS OF THIS RELEASE AGREEMENT, AND THAT EMPLOYEE
IS VOLUNTARILY EXECUTING AND ENTERING INTO THIS RELEASE AGREEMENT, WITH FULL
KNOWLEDGE OF ITS SIGNIFICANCE AND INTENDING TO BE LEGALLY BOUND BY IT.
13. Employee acknowledges his continuing obligation under Company
policy and common law during employment and following termination thereof to
preserve the Company's confidential information and to return all Company
property promptly after termination of employment.
IN WITNESS WHEREOF, the Company has caused this Release Agreement to be
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his hand, all as of the day and year first above written.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ R. D. Spencer /s/ G. R. Spencer
- ------------------------------------ ----------------------------------
Gregory R. Spencer
Senior Vice President and
Chief Administrative Officer
WITNESS: EMPLOYEE:
/s/ Gene D. Musial /s/ R. D. Spencer
- --------------------------------- -----------------------------------
Equitable Resources, Inc.
DIRECTORS' DEFERRED COMPENSATION PLAN
Effective as of May 26, 1999
<PAGE>
ARTICLE I
1.1 Purpose of Plan.
This Equitable Resources, Inc. Directors' Deferred Compensation Plan (the
"Plan") hereby is created to provide an opportunity for the members of the Board
of Directors of Equitable Resources, Inc. (the "Board") to defer payment of all
or a portion of the fees to which they are entitled as compensation for their
services as members of the Board. The Plan also shall provide for an award of
Phantom Stock to certain members of the Board. In addition, Plan Participants
shall be entitled to direct the Company to transfer to this Plan directors' fees
previously deferred under the 1980 Board of Directors' Deferred Compensation
Plan as in effect prior to May 26, 1999 (the "Prior Plan"). The Plan is
effective as of May 26, 1999, and supercedes all prior deferred compensation and
retirement plan arrangements established or maintained for the benefit of
non-employee members of the Board.
ARTICLE II
DEFINITIONS
When used in this Plan and initially capitalized, the following words and
phrases shall have the meanings indicated:
2.1 "Account" means the total of a Participant's Deferral Account, Phantom Stock
Account and Transferred Amounts Account under the Plan.
2.2 "Beneficiary" means the person or persons designated or deemed to be
designated by the Participant pursuant to Section 7.1 of the Plan to receive
benefits payable under the Plan in the event of the Participant's death.
2.3 "Change in Control" means 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 (80%)
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 of Directors
is then owned beneficially, directly or indirectly,
by all or substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the outstanding Company common stock
and the combined voting power of the then outstanding
voting securities immediately prior to such sale or
disposition in substantially the same proportion as
their ownership of the outstanding Company common
stock and voting power immediately prior to such sale
or disposition.
(b) The acquisition in one or more transactions by any
person or group, directly or indirectly, of
beneficial ownership of twenty percent (20%) or more
of the outstanding shares of Company common stock or
the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of the Board; 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 such rule is in effect as of
November 1, 1995) to file a statement on Schedule 13G
with respect to its beneficial ownership of Company
common stock and other voting securities whether or
not such person shall have filed a statement on
Schedule 13G, unless such person shall have filed a
statement on Schedule 13D with respect to beneficial
ownership of fifteen percent (15%) 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) The reorganization, merger or consolidation of the
Company into or with another person or entity, by
which reorganization, merger or consolidation the
persons who hold one hundred percent (100%) of the
voting securities of the Company prior to such
reorganization, merger or consolidation receive or
continue to hold less than sixty percent (60%) of the
outstanding voting shares of the new or continuing
corporation; or
(e) If, during any two-year period, less than a majority
of the members of the Board are persons who were
either (i) nominated or recommended for election by
at least two-thirds vote of the persons who were
members of the Board or Nominating Committee of the
Board at the beginning of the period, or (ii) elected
by at least two-thirds vote of the persons who were
members of the Board at the beginning of the period.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means the Compensation Committee of the Board.
2.6 "Company" means Equitable Resources, Inc. and any successor thereto.
2.7 "Deferral Account" means the recordkeeping account established on the books
and records of the Company to record a Participant's deferral amounts under
Section 5.1 of the Plan, plus or minus any investment gain or loss allocable
thereto under Section 5.4 of the Plan.
2.8 "Directors' Fees" means the fees that are paid by the Company to members of
the Board as compensation for services performed by them as members of the
Board.
2.9 "Enrollment Form" means the agreement to participate and related elections
filed by a Participant pursuant to Section 5.1 of the Plan, in the form
prescribed by the Committee, directing the Company to reduce the amount of
Directors' Fees otherwise currently payable to the Participant and credit such
amount to the Participant's Deferral Account hereunder.
2.10 "Hardship Withdrawal" shall have the meaning set forth in Section 6.4 of
the Plan.
2.11 "In-Service Distribution" shall have the meaning set forth in Section 6.3
of the Plan.
2.12 "Investment Options" means the investment options described in Appendix A
to the Plan into which a Participant may direct all or part of his or her
Deferral Account and/or Transferred Amounts Account pursuant to Section 5.2 of
the Plan.
2.13 "Investment Return Rate" means:
(a) In the case of an Investment Option named in Exhibit
A of a fixed income nature, the interest deemed to be
credited as determined in accordance with the
procedures applicable to the same investment option
provided under the Equitable Resources, Inc. Employee
Savings Plan, originally adopted September 1, 1985,
as amended ("Equitable 401(k) Plan");
(b) In the case of a Investment Option named in Exhibit A
of an equity investment nature, the increase or
decrease in deemed value and any dividends deemed to
be credited as determined in accordance with the
procedures applicable to the same investment option
provided under the Equitable 401(k) Plan; or
(c) In the case of the Equitable Resources Common Stock
Fund, the increase or decrease in the deemed value,
and the reinvestment in the Equitable Resources
Common Stock Fund of any dividends deemed to be
credited, as determined in accordance with the
procedures applicable to investments in the Equitable
Resources Common Stock Fund under the Equitable
401(k) Plan.
2.14 "Irrevocable Trust" means a grantor trust that may be established prior to
the occurrence of a Change in Control of the Company to assist the Company in
fulfilling its obligations under this Plan but which shall be established by the
Company in the event of a Change in Control of the Company. All amounts held in
such Irrevocable Trust shall remain subject to the claims of the general
creditors of the Company and Participants in this Plan shall have no greater
rights to any amounts held in any such Irrevocable Trust than any other
unsecured general creditor of the Company.
2.15 "Participant" means any non-employee member of the Board who (i) receives
an award of Phantom Stock pursuant to Section 4.1 of the Plan, (ii) who elects
to participate in the Plan for purposes of deferring his or her Directors' Fees
by filing an Enrollment Form with the Committee pursuant to Section 5.1 of the
Plan, and/or (iii) who elects to transfer amounts previously deferred under the
Prior Plan to this Plan by filing a Transfer of Existing Account Credits, or
other form supplied by and/or acceptable to the Committee, pursuant to Section
5.2 of the Plan.
2.16 "Phantom Stock" means those shares of the common stock of the Company: (a)
conditionally awarded to certain members of the Board in the amounts described
in Appendix B to the Plan, (b) which are subject to forfeiture in accordance
with Section 6.1, (c) which are contributed to the Irrevocable Trust by the
Company to assist it in satisfying its potential obligations under this Plan,
and (d) which will be distributed to eligible Plan Participants satisfying all
the conditions of this Plan.
2.17 "Phantom Stock Account" means the recordkeeping account established on the
books and records of the Company to record the number of shares Phantom Stock
allocated to a Participant under the Plan.
2.18 "Phantom Stock Agreement" means the agreement filed by a Participant
pursuant to Section 4.1 of the Plan in the form prescribed by the Committee
directing the Company to convert the Participant's benefit under the Equitable
Resources, Inc. Directors' Defined Benefit Plan (the "Defined Benefit Plan")
into Phantom Stock under this Plan and relinquishing all rights to any benefits
under such Defined Benefit Plan.
2.19 "Plan" means this Equitable Resources, Inc. Directors' Deferred
Compensation Plan, as amended from time to time.
2.20 "Plan Year" means a twelve-month period commencing January 1 and ending the
following December 31.
2.21 "Prior Plan" means the 1980 Board of Director's Deferred Compensation Plan
as in effect prior to May 26, 1999, under which members of the Board were
permitted to defer payment of all or a portion of the fees to which they were
entitled as compensation for their services as members of the Board.
2.22 "Transferred Amounts Account" means the recordkeeping account established
on behalf of a Participant to account for those amounts previously deferred
under the Prior Plan which were transferred to this Plan by filing a Transfer of
Existing Account Credits, or other form supplied by and/or acceptable to the
Committee, pursuant to Section 5.2 of the Plan.
2.23 "Transfer of Existing Account Credits" means the form filed with the
Committee by a Participant directing the Committee to transfer amounts
previously deferred under the Prior Plan to this Plan.
2.24 "Valuation Date" means the last day of each calendar quarter and any other
date determined by the Committee or specified herein.
2.25 "Year of Service" means the twelve (12) month period beginning on the first
day an individual is a member of the Board, and each twelve (12) month period
thereafter.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility for Phantom Stock Account.
Eligibility to participate in the Plan for purposes of the Phantom Stock Account
under Article IV of the Plan is limited to those non-employee members of the
Board designated by the Committee and listed on Exhibit B to the Plan. An
eligible Board member shall commence participation in the Plan for purposes of
the Phantom Stock Account as of May 26, 1999.
3.2 Eligibility for Deferral Account.
Eligibility to participate in the Plan for purposes of deferring Directors' Fees
under Section 5.1 of the Plan is limited to non-employee members of the Board.
An eligible Board member shall commence participation in the Plan for purposes
of deferring Directors' Fees as of the first day of the month following the
receipt of his or her Enrollment Form by the Committee.
3.3 Eligibility for Transferred Amounts Account.
Eligibility to elect to transfer Transferred Amounts to this Plan is limited to
those non-employee members of the Board who were participants in the Prior Plan
and who had accounts in the Prior Plan as of May 25, 1999, representing fees for
their prior service as members of the Board which were previously deferred
pursuant to the terms of the Prior Plan. An eligible Board member not otherwise
participating pursuant to Sections 3.1 or 3.2 of the Plan shall become a
Participant in the Plan and have a Transferred Amounts Account established on
his or her behalf as of the effective date of any transfer of Transferred
Amounts to this Plan.
3.4 Ineligible Participant.
Notwithstanding any other provisions of this Plan to the contrary, if the
Committee determines that the participation in the Plan by any Board member will
jeopardize the status of the Plan as exempt from the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or regulations thereunder, the
Committee may, in its sole discretion, determine that such Participant shall
cease to be eligible to participate in the Plan. As soon as administratively
feasible following such determination, the Company shall make a lump sum
payment, in cash and/or shares of Company common stock, as applicable, to the
Participant equal to the value of his or her Account as of the most recent
Valuation Date, less any income or employment tax withholding required under
applicable law. Upon such payment, no benefit shall thereafter be payable under
this Plan either to the Participant or any Beneficiary of the Participant, and
all of the Participant's elections as to the time and manner of payment of his
or her Account shall be deemed canceled.
ARTICLE IV
PHANTOM STOCK ACCOUNT
4.1 Phantom Stock Award.
As of May 26, 1999, the Phantom Stock Account of a Participant eligible for an
award of Phantom Stock pursuant to Section 3.1 of the Plan shall be credited
with an award of Phantom Stock in the number of shares specified in Exhibit B to
the Plan. The Company shall contribute shares of Company common stock to the
Irrevocable Trust in an amount equal to the aggregate number of shares of
Phantom Stock credited to all Phantom Stock Accounts under the Plan. Any such
contributions to an Irrevocable Trust and related investments shall be solely to
assist the Company in satisfying its obligations under this Plan and no
Participant shall have any right, title or interest whatsoever in any such
contributions or investments.
4.2 Valuation of Phantom Stock Account; Deemed Reinvestment of Dividends
As of each Valuation Date, the value of a Participant's Phantom Stock Account
shall equal (i) the value of the number of shares of Phantom Stock credited to
such account as of the last Valuation Date, plus (ii) the value of the number of
shares of Phantom Stock deemed to have been credited to such account as a result
of the deemed reinvestment of any dividends deemed to have been paid on such
Phantom Stock since the last Valuation Date. Any dividends paid on the common
stock of the Company shall be deemed to be paid on the Phantom Stock under the
Plan in an equal amount; provided, however, that to the extent they are paid in
a form other than additional shares of the common stock of the Company, they
shall be deemed to be immediately reinvested in such number of shares of the
common stock of the Company as are represented by the aggregate amount of the
dividends divided by the value of one share of the common stock of the Company
on the date the dividend is paid.
For purposes of this Plan, the "value" of a share of Phantom Stock shall be
deemed to equal the closing price of a share of Company common stock as listed
on the New York Stock Exchange ("NYSE") on any date of reference. In the event
that the date of reference is a date on which the NYSE is not open for business,
the value of a share of Phantom Stock shall equal the average of the closing
prices on the dates immediately preceding and following the date of reference
during which the NYSE was open for business. Notwithstanding anything in this
Plan to the contrary, the Company may adopt alternate procedures for determining
the value of Phantom Stock in the event Company common stock ceases to be traded
on the NYSE or to reflect the occurrence of a Conversion Event described in
Section 4.3.
For purposes of determining the value of the Phantom Stock credited to a
Participant's Phantom Stock Account as of any time of reference, each share of
Phantom Stock shall be deemed equivalent in value to one share of the
outstanding shares of common stock of the Company. For purposes of valuing a
Participant's Phantom Stock Account upon the termination of his or her
membership on the Board, the Valuation Date shall be the business day coincident
with or immediately preceding the termination of the Participant's Board
membership.
4.3 Adjustment and Substitution of Phantom Stock
In the event of: (a) a stock split (or reverse stock split) with respect to the
common stock of the Company; (b) the conversion of the common stock of the
Company into another form of security or debt instrument of the Company; (c) the
reorganization, merger or consolidation of the Company into or with another
person or entity; or (d) any other action which would alter the number of,
and/or shareholder rights of, holders of outstanding shares of the common stock
of the Company (collectively, a "Conversion Event"), then, notwithstanding the
fact that Plan Participants have no rights to the shares of Company common stock
represented by their Phantom Stock Account nor to the shares of such Company
common stock contributed by the Company to the Irrevocable Trust, the number of
shares of Phantom Stock then allocated to a Participant's Phantom Stock Account
shall be deemed to be converted, to the extent possible, to reflect any such
Conversion Event to the same extent as the shares of holders of outstanding
shares of Company common stock would have been converted upon the occurrence of
the Conversion Event. On and after any such Conversion Event, this Plan shall be
applied, mutatis mutandis, as if the Participant's Phantom Stock Account was
comprised of the cash, securities, notes or other instruments into which the
outstanding shares of Company common stock was converted. Following the
occurrence of a Conversion Event, the Board is authorized to amend the Plan as
it, in its sole discretion, determines to be necessary or appropriate to address
any administrative or operational details presented by the Conversion Event
which are not addressed in the Plan.
4.4 Shareholder Rights.
Except as specifically provided herein, an award of Phantom Stock under the Plan
shall not entitle a Participant to voting rights or any other rights of a
shareholder of the Company.
4.5 Statement of Phantom Stock Account.
As soon as administratively feasible following the last day of each calendar
quarter, the Committee shall provide to each eligible Participant a statement of
the value of his or her Phantom Stock Account as of the most recent Valuation
Date.
ARTICLE V
DEFERRAL ACCOUNT; TRANSFERRED AMOUNTS ACCOUNT
5.1 Deferral of Directors' Fees.
Any non-employee member of the Board may elect to defer a specified percentage
of his or her Directors' Fees under the Plan by submitting to the Committee a
written Enrollment Form. Such election shall be effective with respect to
Directors' Fees paid for services performed by such Participant beginning the
first day of the month following the receipt by the Committee of the
Participant's Enrollment Form and shall remain in effect until withdrawn by the
Participant by written notice to the Committee in accordance with uniform rules
established by the Committee; provided that a Participant who withdraws his or
her Enrollment Form during a Plan Year may not then file another Enrollment Form
with the Committee with respect to the same Plan Year. The withdrawal by a
Participant of his or her Enrollment Form shall be effective with respect to
Directors' Fees payable on or after the first day of the month following the
receipt of such notice by the Committee.
5.2 Option to Establish a Transferred Amounts Account
Any non-employee member of the Board may elect to have amounts previously
deferred under the Prior Plan transferred to this Plan by filing with the
Committee a Transfer of Existing Account Credits, or other form supplied by
and/or acceptable to the Committee. Such election may be made at any time;
provided, however, that any such election must represent the transfer to this
Plan of the eligible non-employee Board member's entire account under the Prior
Plan. Upon receipt of any such election, the Committee shall cause a Transferred
Amounts Account to be established for the Participant under this Plan
documenting the amount initially transferred. Except to the extent necessary to
comply with any applicable law or regulation, in the event that a Participant
electing to transfer a Transferred Amount from the Prior Plan previously elected
(or subsequently elects) to defer Director's Fees under the Plan by filing with
the Committee a written Enrollment Form, a separate Transferred Amounts Account
will not be maintained after the initial transfer to the Plan and all
Transferred Amounts shall be commingled with and invested and reinvested in the
same manner as a Participant's Deferral Account hereunder.
5.3 Investment Direction.
A Participant may direct that amounts deferred pursuant to his or her Enrollment
Form (and/or, as the context so requires, amounts deferred under the Prior Plan
which are transferred to this Plan in accordance with an election made pursuant
to Section 5.2) be deemed to be invested in one or more of the Investment
Options listed in Exhibit A to the Plan (a "New Money Election") and credited
with shares or units in each such Investment Option in the same manner as
equivalent contributions would be invested under the same Investment Options
available under the Equitable 401(k) Plan. Except as otherwise provided with
respect to directions to invest in the Equitable Resources Common Stock Fund
("Company Stock Fund"), no more frequently than once a month, a Participant may
direct that amounts previously credited to his or her Deferred Account and/or
Transferred Amount Account and deemed invested in the available Investment
Options be transferred between and among the then available Investment Options
(a "Reallocation Election").
Special rules apply to directions to invest in the Company Stock Fund. No
restrictions are placed on New Money Elections. Accordingly, a Participant may
make a New Money Election to invest in the Company Stock Fund or to cease future
investments in such Fund in the same manner as any other Investment Option.
Reallocation Elections, however, may not direct that amounts previously credited
to a Participant's Deferred Account and/or Transferred Amount Account and which
were directed to be invested in the Company Stock Fund be transferred out of
such Fund and into another Investment Option.
Reallocation Elections into the Company Stock Fund are permitted. Accordingly,
no restrictions apply to Reallocation Elections directing that amounts
previously credited to a Participant's Deferred Account and/or Transferred
Amount Account and which were directed to be invested in an Investment Option
other than the Company Stock Fund be transferred out of such other Investment
Option and into the Company Stock Fund.
Except as otherwise provided with respect to the Company common stock,
regardless of whether the investment direction is a New Money Election or a
Reallocation Election, a Participant's Deferral Account and/or Transferred
Amount Account shall only be deemed to be invested in such Investment Options
for purposes of crediting investment gain or loss under Section 5.5 of the Plan
and the Company shall not be required to actually invest, on behalf of any
Participant, in any Investment Option listed on Exhibit A to the Plan.
Notwithstanding the preceding sentence, the Company may, but shall not be
required to, elect to make contributions to an Irrevocable Trust in an amount
equal to the amounts deferred by Participants and actually invest such
contributions in the Investment Options elected by a particular Participant;
provided, however, that the Company shall contribute shares of Company common
stock to the Irrevocable Trust in an amount equal to the aggregate number of
shares of Company common stock represented by Participant investment directions
to the Company Stock Fund. Any such contributions to an Irrevocable Trust and
related investments shall be solely to assist the Company in satisfying its
obligations under this Plan and no Participant shall have any right, title or
interest whatsoever in any such contributions or investments.
All investment elections shall be made by written notice to the Committee in
accordance with uniform procedures established by the Committee; provided,
however, that investment directions to an Investment Option must be in multiples
of ten percent (10%). Any such investment election shall be effective as of the
first day of the month immediately following the date on which the written
notice is received by the Committee and shall remain in effect until changed by
the Participant. In the event that a Participant fails to direct the investment
of his or her account, the Committee shall direct such Participant's Deferral
Account and/or Transferred Amounts Account to an Investment Option named in
Exhibit A of a fixed income nature.
5.4 No Right to Investment Options.
Notwithstanding anything in the Plan to the contrary, the Investment Options
offered under the Plan may be changed or eliminated at any time in the sole
discretion of the Committee. Prior to the change or elimination of any
Investment Option under the Plan, the Committee shall provide written notice to
each Participant with respect to whom a Deferral Account and/or Transferred
Amount Account is maintained under the Plan and any Participant who has directed
any part of his or her Deferral Account and/or Transferred Amount Account to
such Investment Option shall be permitted to redirect such portion of his or her
Deferral Account and/or Transferred Amount Account to another Investment Option
offered under the Plan.
5.5 Crediting of Investment Return.
Each Participant's Deferral Account and/or Transferred Amount Account shall be
credited with deemed investment gain or loss at the Investment Return Rate as of
each Valuation Date, based on the average daily balance of the Participant's
Deferral Account and/or Transferred Amount Account since the immediately
preceding Valuation Date, but after such Deferral Account and/or Transferred
Amount Account has been adjusted for any contributions or distributions to be
credited or deducted for such period. Until a Participant or his or her
Beneficiary receives his or her entire Deferral Account and/or Transferred
Amount Account, the unpaid balance thereof shall be credited with investment
gain or loss at the Investment Return Rate, as provided in this Section 5.5 of
the Plan.
5.6 Valuation of Deferral Account.
As of each Valuation Date, a Participant's Deferral Account and/or Transferred
Amount Account shall equal (i) the balance of the Participant's Deferral Account
and/or Transferred Amount Account as of the immediately preceding Valuation
Date, plus (ii) the Participant's deferred Directors' Fees since the immediately
preceding Valuation Date, plus or minus (iii) investment gain or loss credited
as of such Valuation Date pursuant to Section 5.5 of the Plan, and minus (iv)
the aggregate amount of distributions, if any, made from such Deferral Account
and/or Transferred Amount Account since the immediately preceding Valuation
Date. For purposes of valuing a Participant's Deferral Account and/or
Transferred Amount Account upon the termination of the Participant's membership
on the Board, the Valuation Date shall be the business day coinciding with or
immediately preceding the date of the termination of the Participant's Board
membership.
5.7 Statement of Deferral Account and/or Transferred Amount Account.
As soon as administratively feasible following the last day of each calendar
quarter, the Committee shall provide to each Participant a statement of the
value of his or her Deferral Account and/or Transferred Amount Account as of the
most recent Valuation Date.
ARTICLE VI
PAYMENT OF BENEFITS
6.1 Payment of Phantom Stock Account.
As soon as administratively feasible following a Participant's termination of
membership on the Board, the Company shall distribute to the Participant or, in
the event of the Participant's death following such termination of membership,
to his Beneficiary, the number of shares of Company common stock represented by
the Participant's Phantom Stock Account, as determined in accordance with
Article IV of the Plan, less any income tax withholding required under
applicable law; provided, however, that a Participant who terminates his or her
membership on the Board for any reason prior to the earlier of (i) the
completion of five (5) Years of Service as a Board member, or (ii) a Change in
Control of the Company, shall forfeit his or her Phantom Stock Account. In the
event that a Participant dies prior to the termination of his membership on the
Board, such Participant's Phantom Stock Account shall be forfeited and no amount
shall be payable to the Participant's Beneficiary under the Plan.
6.2 Payment of Deferral and/or Transferred Amounts Account
As soon as administratively feasible following a Participant's termination of
membership on the Board and without regard to whether the Participant is
entitled to payment of his or her Phantom Stock Account, the Company shall pay
to the Participant or, in the event of the Participant's death, to his
Beneficiary, an amount equal to the value of the Participant's Deferral Account
and/or Transferred Amount Account, as determined in accordance with Article V of
the Plan, less any income tax withholding required under applicable law. Except
as otherwise provided in the following sentence, such payment shall be made in
cash in the form elected by the Participant pursuant to Section 6.5 of the Plan.
Notwithstanding the preceding sentence, to the extent the Participant had
directed that any portion of his Deferral Account and/or Transferred Amount
Account be invested in the Company Stock Fund, the Company shall distribute such
portion in such number of shares of Equitable Resources Common Stock as would be
represented by an equal amount invested in the Company Stock Fund under the
Company 401(k) Plan.
6.3 In-Service Distribution of Deferral and/or Transferred Amounts Account.
A Participant may make an irrevocable election to receive a distribution of all
or a specified dollar amount of his or her Deferral Account and/or Transferred
Amount Account on a date certain in the future prior to the termination of his
or her membership on the Board (an "In-Service Distribution"); provided that
such In-Service Distribution shall be subject to any income tax withholding
required under applicable law. Such election must be made in writing at the time
the Participant first elects to participate in this Plan by filing an Enrollment
Form with the Committee.
For purposes of reducing a Participant's Deferral Account and/or Transferred
Amount Account and adjusting the balances in the various Investment Options in
which such reduced Deferral Account and/or Transferred Amount Account is deemed
to be invested to reflect such In-Service Distribution, amounts represented by
such In-Service Distribution shall be deemed to have been withdrawn first, on a
pro rata basis, from that portion of his Deferral Account and/or Transferred
Amounts Account deemed to be invested in Investment Options other than the
Equitable Common Stock Fund (the "Non Stock Investments") and, second, to the
extent the In-Service Distribution cannot be fully satisfied by a deemed
withdrawal of the Non Stock Investments, from the portion deemed invested in the
Company Stock Fund.
Any such In-Service Distribution shall be made in one lump sum cash payment.
Notwithstanding the preceding sentence, to the extent the Participant had
directed that any portion of his Deferral Account and/or Transferred Amount
Account be invested in the Company Stock Fund, the Company shall distribute such
portion in such number of shares of Equitable Resources Common Stock as would be
represented by an equal amount invested in the Company Stock Fund under the
Company 401(k) Plan.
6.4 Hardship Withdrawal from Deferral and/or Transferred Amounts Account.
In the event that the Committee, in its sole discretion, determines upon the
written request of a Participant in accordance with uniform procedures
established by the Committee, that the Participant has suffered an unforeseeable
financial emergency, the Company may pay to the Participant in a lump sum as
soon as administratively feasible following such determination, an amount
necessary to meet the emergency, but not exceeding the aggregate balance of such
Participant's Deferral Account and/or Transferred Amount Account as of the date
of such payment (a "Hardship Withdrawal"). Any such Hardship Withdrawal shall be
subject to any income tax withholding required under applicable law.
For purposes of this Section 6.4, an "unforeseeable financial emergency" shall
mean an event that the Committee determines to give rise to an unexpected need
for cash arising from an illness, casualty loss, sudden financial reversal, or
other such unforeseeable occurrence. The amount of a Hardship Withdrawal may not
exceed the amount the Committee reasonably determines to be necessary to meet
such emergency needs (including taxes incurred by reason of a taxable
distribution).
The form of payment of the Hardship Withdrawal, the amount of the Participant's
Deferral Account and/or Transferred Amount Account otherwise payable, and the
amounts deemed credited to the Investment Options under the Plan; shall be paid,
reduced and adjusted to reflect the payment of the Hardship Withdrawal in the
same manner described in Section 6.3 applicable to In-Service Distributions.
6.5 Form of Payment.
(a) In General. A Participant may elect to receive that portion of his or her
Account payable hereunder in one of the following forms:
(i) Annual payments of a fixed amount which shall
amortize the value of the Account over a period of
five, ten, or fifteen years (together, in the case of
each annual payment, with interest and dividends
credited thereto after the payment commencement date
pursuant to Sections 4.2, 5.5 and 5.6 of the Plan);
or
(ii) A lump sum.
Such an election must be made in writing in accordance with uniform procedures
established by the Committee no later than the date that is one (1) year and one
(1) day prior to the date of the Participant's termination as a member of the
Board. In the event a Participant fails to make a distribution election within
the time period prescribed, his or her Account shall be distributed in the form
of a lump sum.
(b) Distribution of Company Common Stock. In the event the Company is required
to distribute some or all of a Participant's Account in shares of Equitable
Resources Common Stock in accordance with Plan Sections 6.1 and/or 6.2, the
aggregate amount of such shares shall be distributed in the same manner as the
Participant elected in subsection (a). To the extent the Participant elected an
installment form of payment, the number of shares of Equitable Common Stock to
be distributed in each installment shall be determined by multiplying (i) the
aggregate number of shares of Equitable Resources Common Stock deemed credited
to the Participant's Account as of the installment payment date by (ii) a
fraction, the numerator of which is one and the denominator of which is the
number of unpaid installments, and by rounding the resulting number down to the
next whole number.
6.6 Payments to Beneficiaries.
In the event of a Participant's death prior to the Participant's termination of
membership on the Board, the Participant's Beneficiary shall receive payment of
the Participant's Deferral Account and/or Transferred Amount Account (but not
his Phantom Stock Account, if any) as soon as administratively feasible
following the Participant's death in the form elected by the Participant
pursuant to Section 6.5 of the Plan, less any income tax withholding required
under applicable law. If no such election was made by the Participant, the
Participant's Beneficiary shall receive payment of the Participant's Deferral
Account and/or Transferred Amount Account in the form of a lump sum. In the
event of the Participant's death after commencement of installment payments
under the Plan, but prior to receipt of his or her entire Account (including, by
way of clarification, the Participant's Phantom Stock Account, if any), the
Participant's Beneficiary shall receive the remaining installment payments at
such times as such installments would have been paid to the Participant until
the Participant's entire Account is paid.
6.7 Small Benefit.
In the event that the value of a Participant's Account is less than $5,000 as of
the Valuation Date immediately preceding the commencement of payment to the
Participant under the Plan, or the balance of the Participant's Account payable
to any Beneficiary is less than $5,000 as of the Valuation Date immediately
preceding the commencement of payment to the Participant's Beneficiary under the
Plan, the Committee may inform the Company and the Company, in its discretion,
may choose to pay the benefit in the form of a lump sum, notwithstanding any
provision of the Plan or an election of a Participant under Section 6.5 of the
Plan to the contrary.
ARTICLE VII
BENEFICIARY DESIGNATION
7.1 Beneficiary Designation.
Each Participant shall have the sole right, at any time, to designate any person
or persons as his or her Beneficiary to whom payment may be made of any amounts
which may become payable in the event of his or her death prior to the complete
distribution to the Participant of his or her Account. Any Beneficiary
designation shall be made in writing in accordance with uniform procedures
established by the Committee. A Participant's most recent Beneficiary
designation shall supercede all prior Beneficiary designations. In the event a
Participant does not designate a Beneficiary under the Plan, any payments due
under the Plan shall be made first to the Participant's spouse; if no spouse,
then in equal amounts to the Participant's children; if no children, then to the
Participant's estate.
ARTICLE VIII
ADMINISTRATION
8.1 Committee.
The Committee shall have sole discretion to: (i) designate non-employee
directors eligible to participate in the Plan; (ii) interpret the provisions of
the Plan; (iii) supervise the administration and operation of the Plan; and (iv)
adopt rules and procedures governing the Plan.
8.2 Agents.
The Committee may delegate its administrative duties under the Plan to one or
more individuals, who may or may not be employees of the Company.
8.3 Binding Effect of Decisions.
Any decision or action of the Committee with respect to any question arising out
of or in connection with the eligibility, participation, administration,
interpretation, and application of the Plan shall be final and binding upon all
persons having any interest in the Plan.
8.4 Indemnification of Committee.
The Company shall indemnify and hold harmless the members of the Committee and
their duly appointed agents under Section 8.2 against any and all claims,
losses, damages, expenses, or liabilities arising from any action or failure to
act with respect to the Plan, except in the case of gross negligence or willful
misconduct by any such member or agent of the Committee.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment.
The Company (or its delegate) may at any time, or from time to time, modify or
amend any or all of the provisions of the Plan. Where the action is to be taken
by the Company, it shall be accomplished by written action of the Board at a
meeting duly called at which a quorum is present and acting throughout. Where
the action is to be taken by a delegate of the Company, it shall be accomplished
pursuant to any procedures established in the instrument delegating the
authority. Regardless of whether the action is taken by the Company or its
delegate, no such modification or amendment shall have the effect of reducing
the value of any Participant's Account under the Plan as it existed as of the
day before the effective date of such modification or amendment, without such
Participant's prior written consent. Written notice of any modification or
amendment to the Plan shall be provided to each Participant under the Plan.
9.2 Termination.
The Company, in its sole discretion, may terminate this Plan at any time and for
any reason whatsoever by written action of the Board at a meeting duly called at
which a quorum is present and acting throughout; provided that such termination
shall not have the effect of reducing the value of any Participant's Account
under the Plan as it existed on the day before the effective date of the
termination of the Plan without such Participant's prior written consent.
Notwithstanding any Participant election to the contrary, the Account of each
Participant under the Plan shall be paid as soon as administratively feasible
following the termination of the Plan. The Valuation Date for purposes of
determining the value of Participants' Accounts upon termination of the Plan
shall be the date prior to the date of the termination of the Plan.
ARTICLE X
MISCELLANEOUS
10.1 Funding.
The Company's obligation to pay benefits under the Plan shall be merely an
unfunded and unsecured promise of the Company to pay money in the future. Except
as otherwise provided in Sections 4.1 and 5.3, prior to the occurrence of a
Change in Control, the Company, in its sole discretion, may elect to make
contributions to an Irrevocable Trust to assist the Company in satisfying all or
any portion of its obligations under the Plan. Regardless of whether the Company
elects to contribute to an Irrevocable Trust, Plan Participants, their
Beneficiaries, and their heirs, successors and assigns, shall have no secured
interest or right, title or claim in any property or assets of the Company.
Notwithstanding the foregoing, upon the occurrence of an event resulting in a
Change in Control, the Company shall make a contribution to an Irrevocable Trust
in an amount which, when added to the then value of any amounts previously
contributed to an Irrevocable Trust to assist the Company in satisfying all or
any portion of its obligations under the Plan, shall be sufficient to bring the
total value of assets held in the Irrevocable Trust to an amount not less than
the total value of all Participants' Accounts under the Plan as of the Valuation
Date immediately preceding the Change in Control; provided that any such funds
contributed to an Irrevocable Trust pursuant to this Section 10.1 shall remain
subject to the claims of the Company's general creditors and provided, further,
that such contribution shall reflect any Conversion Event described in Section
4.3 . Upon the occurrence of the Change in Control of the Company, all deferrals
to the Plan shall cease, any adjustments required by Section 4.3 shall be made
and the Company shall provide to the trustee of the Irrevocable Trust all Plan
records and other information necessary for the trustee to make payments to
Participants under the Plan in accordance with the terms of the Plan.
10.2 Nonassignability.
No right or interest of a Participant or Beneficiary under the Plan may be
assigned, transferred, or subject to alienation, anticipation, sale, pledge,
encumbrance or other legal process or in any manner be liable for or subject to
the debts or liabilities of any such Participant or Beneficiary, or any other
person.
10.3 Legal Fees and Expenses.
It is the intent of the Company that no Participant be required to incur the
expenses associated with the enforcement of his or her rights under this Plan by
litigation or other legal action because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Participant hereunder. Accordingly, if after a Change in Control it should
appear that the Company has failed to comply with any of its obligations under
this Plan, or in the event that the Company or any other person takes any action
to declare this Plan void or unenforceable, or institutes any litigation
designed to deny, or to recover from, the Participant the benefits intended to
be provided to such Participant hereunder, the Company irrevocably authorizes
such Participant to retain counsel of his or her choice, at the expense of the
Company as hereafter provided, to represent such Participant in connection with
the initiation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, stockholder or other person
affiliated with the Company in any jurisdiction. The Company shall pay and be
solely responsible for any and all attorneys' and related fees and expenses
incurred by such Participant as a result of the Company's failure to perform
under this Plan or any provision thereof; or as a result of the Company or any
person contesting the validity or enforceability of this Plan or any provision
thereof.
10.4 Captions.
The captions contained herein are for convenience only and shall not control or
affect the meaning or construction hereof.
10.5 Governing Law.
The provisions of the Plan shall be construed and interpreted according to the
laws of the Commonwealth of Pennsylvania.
10.6 Successors.
The provisions of the Plan shall bind and inure to the benefit of the Company,
its affiliates, and their respective successors and assigns. The term successors
as used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise, acquire all or
substantially all of the business and assets of the Company or a participating
affiliate and successors of any such corporation or other business entity.
10.7 Right to Continued Service.
Nothing contained herein shall be construed to confer upon any Participant the
right to continue to serve as a member of the Board or in any other capacity.
Executed this 29th day of September , 1999.
Equitable Resources, Inc.
/s/ G. R. Spencer
- --------------------------------------------------------------
By: Gregory R. Spencer
Title: Senior Vice President and Chief Administrative Officer
<PAGE>
EXHIBIT A
The following are the Investment Options available as of the date indicated that
are used in determining the Investment Return Rate under the Plan.
- --------------------------------------------------------------------------------
Account Name Effective Date
- --------------------------------------------------------------------------------
Equitable Resources Common Stock Fund 5/26/99
- --------------------------------------------------------------------------------
Putnam International Fund 5/26/99
- --------------------------------------------------------------------------------
Putnam Voyager Fund 5/26/99
- --------------------------------------------------------------------------------
The Putnam Fund for Growth and Income 5/26/99
- --------------------------------------------------------------------------------
The George Putnam Fund of Boston 5/26/99
- --------------------------------------------------------------------------------
Putnam Income Fund 5/26/99
- --------------------------------------------------------------------------------
Putnam Stable Value Fund 5/26/99
- --------------------------------------------------------------------------------
Asset Allocation Funds 5/26/99
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
Phantom Stock Awards
(May 26, 1999)
- --------------------------------------------------------------------------------
Director Phantom Stock Shares
- --------------------------------------------------------------------------------
E. Lawrence Keyes, Jr. 6,108.73
- --------------------------------------------------------------------------------
Thomas A. McConomy 4,937.89
- --------------------------------------------------------------------------------
Malcolm M. Prine 6,108.73
- --------------------------------------------------------------------------------
Paul Christiano, Ph.D. 1,883.53
- --------------------------------------------------------------------------------
Donald I. Moritz 6,108.73
- --------------------------------------------------------------------------------
J. Michael Talbert 2,494.40
- --------------------------------------------------------------------------------
James E. Rohr 1,883.53
- --------------------------------------------------------------------------------
Phyllis A. Domm, Ed.D 1,883.53
- --------------------------------------------------------------------------------
David S. Shapira 6,108.73
- --------------------------------------------------------------------------------
Guy W. Nichols 1,221.75
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 6,831
<SECURITIES> 0
<RECEIVABLES> 117,093
<ALLOWANCES> 8,302
<INVENTORY> 42,755
<CURRENT-ASSETS> 255,568
<PP&E> 1,991,843
<DEPRECIATION> 814,925
<TOTAL-ASSETS> 1,664,987
<CURRENT-LIABILITIES> 289,268
<BONDS> 298,280
0
0
<COMMON> 175,338
<OTHER-SE> 479,212
<TOTAL-LIABILITY-AND-EQUITY> 1,664,987
<SALES> 0
<TOTAL-REVENUES> 801,289
<CGS> 0
<TOTAL-COSTS> 470,712
<OTHER-EXPENSES> 228,643
<LOSS-PROVISION> 8,032
<INTEREST-EXPENSE> 26,787
<INCOME-PRETAX> 69,421
<INCOME-TAX> 26,712
<INCOME-CONTINUING> 42,709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,709
<EPS-BASIC> 1.24
<EPS-DILUTED> 1.23
</TABLE>
