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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] 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)
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PENNSYLVANIA 25-0464690
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE OXFORD CENTRE, SUITE 3300
PITTSBURGH, PENNSYLVANIA 15219
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (412) 553-5700
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, no par value New York Stock Exchange
Philadelphia Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Philadelphia Stock Exchange
7.35% Capital Securities due April 15, 2038 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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 periods 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of February 29, 2000: $1,218,817,565
The number of shares outstanding of the issuer's classes of common stock as
of February 29, 2000: 32,800,787
DOCUMENTS INCORPORATED BY REFERENCE
Part III, a portion of Item 10 and Items 11, 12 and 13 are incorporated by
reference to the Proxy Statement for the Annual Meeting of Stockholders on May
17, 2000 to be filed with the Commission within 120 days after the close of the
Company's fiscal year ended December 31, 1999.
Index to Exhibits -- Page 63
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1 Business.................................................... 3
Item 2 Properties.................................................. 8
Item 3 Legal Proceedings........................................... 9
Item 4 Submission of Matters to a Vote of Security Holders......... 10
Executive Officers of the Registrant........................ 11
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 12
Item 6 Selected Financial Data..................................... 12
Item 7 Management's Discussion and Analysis of Financial Condition
and
Results of Operations..................................... 13
Item 7A Qualitative and Quantitative Disclosures About Market
Risk...................................................... 29
Item 8 Financial Statements and Supplementary Data................. 30
Item 9 Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure...................................... 59
PART III
Item 10 Directors and Executive Officers of the Registrant.......... 60
Item 11 Executive Compensation...................................... 60
Item 12 Security Ownership of Certain Beneficial Owners and
Management................................................ 60
Item 13 Certain Relationships and Related Transactions.............. 60
PART IV
Item 14 Exhibits and Reports on Form 8-K............................ 61
Index to Financial Statements Covered by Report of
Independent Auditors...................................... 61
Index to Exhibits........................................... 63
Signatures.................................................. 67
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PART I
ITEM 1. BUSINESS
Equitable Resources, Inc. (Equitable or the Company) is an integrated
energy company, with emphasis on Appalachian area natural gas production and
transportation, natural gas distribution and transmission, and energy services
marketing in the northeastern section of the United States. The Company also has
exploration and production interests in the Gulf of Mexico and energy service
management projects in selected U.S. and international markets. The Company and
its subsidiaries offer energy (natural gas, natural gas liquids and crude oil)
products and services to wholesale and retail customers through three primary
business segments: Equitable Utilities, Equitable Production and NORESCO. The
Company and its subsidiaries had 1,620 employees at the end of 1999.
The Company was formed under the laws of Pennsylvania by the consolidation
and merger in 1925 of two constituent companies, the older of which was
organized in 1888. In 1984, the corporate name was changed to Equitable
Resources, Inc. to more appropriately reflect the Company's transition from a
regulated utility to an integrated energy company.
EQUITABLE UTILITIES
Equitable Utilities contains both regulated and nonregulated operations.
The regulated group consists of the distribution and interstate pipeline
operations, while the unregulated group is involved in nonjurisdictional
marketing of natural gas and risk management activities. Equitable Utilities
generated 50 percent of the Company's net operating revenues in 1999.
NATURAL GAS DISTRIBUTION
Equitable Utilities' distribution operations are conducted by Equitable Gas
Company (Equitable Gas), a division of the Company, and Carnegie Natural Gas
Company (Carnegie Natural Gas or Carnegie), acquired on December 15, 1999. The
service territory for Equitable Gas and Carnegie Natural Gas includes
southwestern Pennsylvania, municipalities in northern West Virginia and field
line sales in eastern Kentucky. The distribution operations provide natural gas
services to more than 274,000 customers, comprising 256,000 residential
customers and 18,000 commercial and industrial customers.
Equitable Gas' natural gas portfolio includes short-term, medium-term and
long-term natural gas supply contracts. Most natural gas is purchased from
Southwest suppliers and transported by either Texas Eastern Transmission
Corporation or Tennessee Gas Pipeline Company. A smaller percentage of natural
gas is purchased from production properties in Kentucky owned by Equitable
Production and transported by Columbia Gas Transmission Company.
Because many of its customers use natural gas for heating purposes,
Equitable Gas's revenues are seasonal, with approximately 68% of calendar year
1999 revenues occurring during the winter heating season from November through
March. Significant quantities of purchased natural gas are placed in underground
storage inventory during the off-peak season to accommodate higher customer
demand during the winter heating season.
Competition in markets served by Equitable Gas is expected to continue.
Equitable Gas faces price competition with other energy forms. In addition, with
unbundling of natural gas sales from natural gas distribution and transmission
in the natural gas industry, competition is increasing to provide natural gas
sales to commercial and residential customers. Unregulated natural gas marketers
have been selling natural gas to commercial and industrial customers in
Equitable Gas's service territory for over 20 years and Equitable Gas has
provided transportation services to those customers through contract. Large
customers have been able to select individually or in combination the various
natural gas supply, storage and/or transportation services they require.
Equitable Gas has responded to this competitive environment by offering a
variety of firm and interruptible services, including natural gas
transportation, supply pooling, balancing and brokering, to industrial and
commercial customers.
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On April 1, 1998, Equitable Gas began to offer "unbundled" service to all
of its customers in Pennsylvania, allowing them to choose their natural gas
supplier. Revenues derived from transportation charges on natural gas sold by
other suppliers enable Equitable Gas to minimize economic loss resulting from
the switching of residential customers to other suppliers. Because the margin on
natural gas bundled sales approximates the margin received on
transportation-only volumes, Equitable Gas is neutral as to whether it provides
transportation or bundled sales to retail customers.
In June 1999, Pennsylvania's Governor signed into law the Natural Gas
Choice and Competition Act (the Act) which requires local natural gas
distribution companies to extend the availability of natural gas transportation
service to residential and small commercial customers by July 1, 2000 pursuant
to a plan approved by the Pennsylvania Public Utility Commission (PUC). In
accordance with the Act, Equitable Gas made its restructuring filing on August
16, 1999. The filing was generally a restatement of Equitable's existing tariff,
which reflected its earlier unbundling as previously described. The tariff
provides for recovery of costs associated with Equitable Gas' existing pipeline
capacity and natural gas supply contracts. The Company does not expect that the
Act will have a material adverse impact on the financial statements.
Equitable's distribution rates, terms of service, contracts with affiliates
and issuance of securities are regulated primarily by the Pennsylvania PUC,
along with the Kentucky Public Service Commission and the West Virginia Public
Service Commission.
Significant changes in the residential customer base are considered
unlikely in the near term, even in the deregulated environment, due to the large
investment in infrastructure required for residential natural gas
transportation.
On December 15, 1999, Equitable acquired the distribution, transmission and
production operations of Carnegie Natural Gas. The Carnegie Natural Gas
acquisition is complementary to Equitable's plans to grow its core business and
increase utilization and operational efficiencies of its local distribution and
interstate pipeline operations. The acquisition of Carnegie added approximately
8,000 new distribution customers.
INTERSTATE PIPELINE
Equitable Utilities' interstate pipeline operations include the natural gas
transmission and storage activities of Equitrans, L.P. (Equitrans) and two
smaller affiliates, Three Rivers Pipeline Corporation and Carnegie Interstate
Pipeline Company, which are regulated by the Federal Energy Regulatory
Commission (FERC). The pipeline division transported 73.6 billion cubic feet
(Bcf) of natural gas to both affiliated and nonaffiliated customers in 1999. A
substantial portion of the transportation system's annual throughput has been
natural gas purchased by Equitable Gas. No margin loss is expected as a result
of residential customers of Equitable Gas switching to other suppliers, as
natural gas transported to Equitable Gas by such suppliers will continue to flow
through this pipeline system.
The evolving regulatory environment designed to increase competition in the
natural gas industry has created a number of opportunities for pipeline
companies to expand services and serve new markets. The Company has taken
advantage of selected market expansion opportunities, concentrating on
Equitrans' underground storage facilities and the location and nature of its
pipeline system as a link between the country's major long-line natural gas
pipelines.
The pipeline operations consist of approximately 2,800 miles of
transmission, storage and gathering lines, including 670 miles of transmission
and gathering pipeline obtained in the December 1999 purchase of Carnegie
Interstate Pipeline Company, and interconnections with five major interstate
pipelines. Equitrans also has 15 natural gas storage reservoirs with
approximately 500 MMcf per day of peak delivery capacity. The acquisition of the
Carnegie assets enhances transportation access to large industrial customers in
western Pennsylvania.
ENERGY MARKETING
Equitable Utilities' unregulated marketing operation purchases, stores and
markets natural gas at both the retail and wholesale level, primarily in western
Pennsylvania and West Virginia. Services and products offered by the marketing
division include commodity procurement and delivery, physical natural gas
management
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operations and control, and customer support services to the Company's energy
customers. To manage the price exposure risk of its marketing operations, the
Company engages in risk management activities including the purchase and sale of
financial energy derivative products. Because of this activity, this energy
marketing division is also able to offer energy price risk management services
to its larger industrial customers.
EQUITABLE PRODUCTION
Equitable Production explores for, produces and delivers natural gas and
crude oil, with operations in the Appalachian and the Louisiana offshore Gulf of
Mexico regions of the United States. It also engages in natural gas gathering
and interstate transportation and the processing and sale of natural gas
liquids. Equitable Production generated approximately 42 percent of the
Company's net operating revenues in 1999.
All of the information with respect to Equitable Production - East and
Equitable Production - Gulf in this description of the business is current as of
December 31, 1999. Subsequent to that date, the Company completed a substantial
acquisition in Equitable Production - East and separately, agreed to merge the
assets of Equitable Production - Gulf with those of another company. A
description of these transactions is included in "Management's Discussion and
Analysis of Financial Condition and Results of Operations, Capital Resources and
Liquidity, Acquisitions and Dispositions" and in Note V to the consolidated
financial statements.
EQUITABLE PRODUCTION - EAST
Equitable Production - East is engaged in the development, production,
acquisition, marketing, gathering and transportation of natural gas and oil in
the Appalachian Basin.
Equitable Production - East is one of the largest owners of proved natural
gas reserves in the Appalachian Basin. The majority of the Company's exploration
and production properties are located in the Appalachian Basin, which is the
oldest and geographically one of the largest natural gas producing regions in
the United States. Equitable Production - East currently owns approximately
6,400 net producing wells in Appalachia. As of December 31, 1999, the Company
estimates the total proved reserves to be 1,067 billion cubic feet equivalent
(Bcfe). Of this total, the Company estimates the proved developed reserves to be
907 Bcfe, with future net cash flows discounted at 10% before income taxes of
approximately $652 million. Approximately 93% of the future net discounted cash
flows before income taxes are represented by proved developed reserves located
in eastern Kentucky and western Virginia and approximately 7% of the future net
discounted cash flows before income taxes are represented by proved developed
reserves located in Pennsylvania and West Virginia. As of December 31, 1999, the
Company estimates proved undeveloped reserves to be 160 Bcfe.
The areas in which the Company's Appalachian properties are located are
characterized by wells with comparatively low rates of annual decline in
production, low production costs and high Btu, or energy, content. Once drilled
and completed, wells in the Appalachian Basin typically have low ongoing
operating and maintenance requirements and minimal capital expenditures. These
formations are characterized by slow recovery of the reserves in place, low
rates of production and wells that generally produce for longer than 20 years
and often more than 50 years. Many of the Company's wells in these areas have
been producing for many years, in some cases since the early 1900's. Reserve
estimates for properties with long production histories are generally more
reliable than estimates for properties with shorter histories.
Substantially all of the Appalachian wells are relatively shallow, with
depths ranging from 1,000 to 7,000 feet below the surface. Many of these wells
are completed in more than one producing zone and production from these zones
may be mixed or commingled. Commingled production lowers producing costs on a
per unit basis compared to isolated zone completions.
Natural gas produced in the Appalachian Basin has historically received a
premium over natural gas produced in other regions. The higher average prices
are principally due to the proximity to a substantial number of industrial and
commercial end-users in the northeast United States. For the period 1991 through
1998, natural gas price indices for Appalachian Basin production have averaged
$0.25 per MMbtu more than prices for natural gas contracts traded on the NYMEX
for the delivery of natural gas at Henry Hub, Louisiana. During these eight
years, the average annual Appalachian Basin premium has ranged from $0.14 per
MMbtu to $0.47 per MMbtu.
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The Appalachian Basin premium is typically lower during warmer-than-normal
winters, such as the previous two winters. The premium is somewhat offset by the
high gathering and compression costs in the region.
Natural gas sold from Equitable Production - East properties has
historically received an additional premium because of its higher Btu content.
The average Btu content for each cubic foot of natural gas produced from the
Company's Appalachian properties is approximately 1,160, which has historically
provided an average 16% premium over the standard measure of 1,000 Btu per cubic
foot when calculating realized prices on a per Mcf basis.
The productive lives of producing natural gas properties are often compared
using their reserve-to-production index. This index is calculated by dividing
total proved reserves of the property by annual production for the prior 12
months. The reserve-to-production index for the underlying properties at
December 31, 1999 was approximately 23 years. This reserve-to-production index
shows a relatively long producing life compared to an average index of 8.6 years
for U.S. natural gas properties at year-end 1998. Because production rates
naturally decline over time, the reserve-to-production index may not be a useful
estimate of how long properties should economically produce. Based on the
Company's reserve report, production from the underlying properties is expected
to continue for at least 50 more years.
Equitable Production - East has a record of successfully adding reserves to
the underlying properties through development at costs which are generally less
than U.S. industry averages. Over the three years ended December 31, 1999,
Equitable Production - East has added through development drilling approximately
123 Bcfe of proved developed reserves at an average cost of $0.60 per Mcfe. For
public reporting companies in the United States, the average industry cost of
adding natural gas reserves from 1996 through 1998 was $0.76 per Mcfe. In
addition, during 1998 and 1999, Equitable Production - East had substantial
upward revisions of its proved undeveloped reserve estimates on the producing
properties.
Equitable Production - East currently has an inventory of 2.2 million gross
acres, of which approximately 62% have not been developed. As of December 31,
1999, the Company estimated the proved undeveloped reserves of the underlying
leases to be 160 Bcfe from 495 proved undeveloped drilling locations, with
estimated future net discounted cash flows of $45 million. In the last three
years, Equitable Production has completed approximately 99% of the wells it has
drilled in Appalachia, adding 121 bcfe of proved natural gas and oil reserves.
In December 1999, the unregulated production properties and operations of
Equitable Utilities' Equitrans pipeline division were transferred to Equitable
Production - East. These properties include 800 producing natural gas wells and
38.9 Bcfe of proved developed reserves.
EQUITABLE PRODUCTION - GULF
Equitable Production - Gulf conducts exploration and production activities
in the U.S. Gulf of Mexico, primarily offshore the state of Louisiana. This is a
very competitive market requiring substantial ongoing investment in federal
leases, in which drilling and production activity by producers has increased in
recent years. Approximately 12% of the Company's year-end natural gas and crude
oil reserves are located in the Gulf region. Historically, Equitable Production
has not been successful at consistently earning net income from its operations
in the Gulf region.
Equitable Production sold its oil and natural gas properties in six western
states and the Canadian Rockies in the second half of 1997. The Company used a
part of the proceeds from the property sales to finance the acquisition from
Chevron USA of two producing natural gas and oil fields off Louisiana's Gulf
Coast.
ACQUISITION
In December 1999, the Company completed the acquisition of Carnegie Natural
Gas Company. The production operations of Carnegie include approximately 1,100
producing natural gas wells and 45.1 Bcfe of proved developed reserves. The
Company estimates that the Carnegie acquisition will increase annual production
of natural gas by approximately 8%.
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COMPETITIVE ENVIRONMENT
The combination of its long-lived production, low drilling costs, high
drilling completion rates at shallow depths and proximity to natural gas markets
has had a substantial impact on the development of the Appalachian Basin
resulting in a highly fragmented operating environment. In 1998, Kentucky and
West Virginia had more than 500 independent operators and more than 85,000
producing oil and natural gas wells. Also, the historical availability of tax
incentives has resulted in extensive drilling in the shallow formations with
these low technical risk characteristics.
HEDGING ACTIVITIES
Equitable has historically entered into hedging contracts with respect to
its natural gas and crude oil production at specified prices for a specified
period of time. The Company's hedging strategy and information regarding
derivative instruments used are outlined below in Item 7A, "Qualitative and
Quantitative Disclosures About Market Risk."
NATURAL GAS REGULATION
The availability, terms and cost of transportation significantly affect
sales of natural gas. The interstate transportation and sale for resale of
natural gas is subject to federal regulation, including transportation rates,
storage tariffs and various other matters, primarily by the Federal Energy
Regulatory Commission. Federal and state regulations govern the price and terms
for access to natural gas pipeline transportation. The Federal Energy Regulatory
Commission's regulations for interstate natural gas transmission in some
circumstances may also affect the intrastate transportation of natural gas.
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 energy services business segment was
formed in 1995 and was built through a series of acquisitions of privately held
energy performance and facility management companies. NORESCO operates in a
highly competitive industry, with a significant number of companies, including
affiliates of large energy companies that have entered this market in recent
years. NORESCO provided approximately 8 percent of the Company's net operating
revenues in 1999.
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.
The segment's energy infrastructure division develops and operates private
power, cogeneration and central plant facilities in the U.S. and selected
international markets. These projects serve a diverse clientele including
hospitals, universities, commercial and industrial customers and utilities.
NORESCO's capabilities offer a "turnkey" approach to energy infrastructure
programs including project development, equipment selection, fuel procurement,
environmental permitting, construction, financing and operations and
maintenance.
ERI Services is an autonomous business unit included for financial
reporting purposes within the NORESCO segment. ERI Services provides energy
savings performance contracting (ESPC) services exclusively to the federal
government.
In 1996, the Department of Defense (DOD) and the Department of Energy (DOE)
initiated a series of competitive bids for ESPC contracts. The impetus for these
programs are mandated targets to reduce energy use by 30% by the year 2005.
These contracts serve as a "master" agreement between the DOD/DOE and an energy
service company (ESCO), under which the ESCO may enter into individual
site-specific contracts with government agencies to develop and implement ESPC
projects. Under the terms of these agreements, the ESCO incurs the cost of
developing and implementing projects in exchange for a defined share of the cost
savings that result from the energy conservation measures, over the term of the
contract.
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At the end of 1999, NORESCO employed 338 people including professional
staff, trades-people and plant operators. Construction backlog decreased from
$86.8 million at year-end 1998 to $57.6 million at the end of 1999. The
reduction in backlog is attributable mainly to the facilities management
division, which completed the build-out of three large infrastructure projects
during the fourth quarter of 1999. NORESCO completed $151.8 million of
construction during 1999, an increase of $72.0 million over 1998.
DISCONTINUED OPERATIONS
In December 1998, the Company sold its natural gas midstream operations.
The operations included an integrated gas gathering, processing and storage
system in Louisiana and a natural gas and electricity trading and marketing
business based in Houston, Texas, with an office in Calgary. These businesses
are classified in the consolidated financial statements as discontinued
operations.
OPERATING REVENUES
Operating revenues as a percentage of total operating revenues for each of
the three business segments during the years 1997 through 1999 are as follows:
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1999 1998 1997
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Equitable Utilities:
Residential natural gas sales............................. 19% 25% 32%
Commercial and industrial natural gas sales............... 6 6 7
Marketed natural gas...................................... 31 28 27
Transportation service.................................... 8 6 5
Other..................................................... 1 2 2
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Total Utilities........................................ 65 67 73
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Equitable Production:
Produced natural gas...................................... 14 15 11
Natural gas liquids....................................... 2 2 3
Crude oil................................................. 2 2 3
Other..................................................... 1 2 4
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Total Production....................................... 19 21 21
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NORESCO:
Energy service contracting................................ 16 12 6
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Total Revenues......................................... 100% 100% 100%
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See Management's Discussion and Analysis of Financial Condition and Results
of Operations and Notes T and U to the consolidated financial statements in Part
II, Items 7 and 8 for financial information by business segment and information
regarding environmental matters.
ITEM 2. PROPERTIES
Principal facilities are owned by the Company's business segments with the
exception of various office locations and warehouse buildings. A limited amount
of equipment is also leased. The majority of transmission, storage and
distribution pipelines are located on or under (1) public highways under
franchises or permits from various governmental authorities, or (2) private
properties owned in fee, or occupied under perpetual easements or other rights
acquired for the most part without examination of underlying land titles. The
Company's facilities have adequate capacity, are well maintained and, where
necessary, are replaced or expanded to meet operating requirements.
Equitable Utilities. Equitable Gas and Carnegie Natural Gas own and operate
natural gas distribution properties as well as other general property and
equipment in Pennsylvania, West Virginia and Kentucky. Equitrans owns and
operates production, underground storage and transmission facilities as well as
other general
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property and equipment in Pennsylvania and West Virginia. Three Rivers Pipeline
Corporation and Carnegie Interstate Pipeline own transmission properties in
southwestern Pennsylvania.
Equitable Production. This business segment owns or controls all of the
Company's acreage of proved developed and undeveloped natural gas and oil
production properties principally located in the Appalachian region, with
additional holdings in the U.S. Gulf of Mexico area. In addition, Kentucky West
owns and operates gathering and transmission properties as well as other general
property and equipment in Kentucky. Equitable Production's properties also
include hydrocarbon extraction facilities in Kentucky with a 100-mile liquid
products pipeline which extends into West Virginia. Information relating to
Company estimates of natural gas and crude oil reserves and future net cash
flows is provided in Note X to the consolidated financial statements in Part II.
Natural Gas and Crude Oil Production:
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1999 1998 1997
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Natural Gas -- MMcf produced............................... 66,328 62,135 58,952
-- Average sales price per Mcf sold............ $ 2.39 $ 2.41 $ 2.40
Crude Oil -- Thousands of barrels produced............... 1,070 996 1,544
-- Average sales price per barrel.............. $ 15.53 $ 13.59 $ 17.23
</TABLE>
Average production cost (lifting cost) of natural gas and crude oil during
1999, 1998 and 1997 was $.373, $.462, and $.482 per Mcf equivalent,
respectively.
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NATURAL GAS OIL
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Total productive wells at December 31, 1999:
Total gross productive wells.............................. 6,250 415
Total net productive wells................................ 6,087 370
Total acreage at December 31, 1999:
Total gross productive acres.............................. 925,396
Total net productive acres................................ 880,520
Total gross undeveloped acres............................. 1,463,760
Total net undeveloped acres............................... 1,306,898
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Number of net productive and dry exploratory and development wells drilled:
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1999 1998 1997
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Exploratory wells:
Productive................................................ 3.5 4.3 2.9
Dry....................................................... 0.8 5.0 1.5
Development wells:
Productive................................................ 118.6 74.6 88.7
Dry....................................................... -- 2.0 --
</TABLE>
No report has been filed with any federal authority or agency reflecting a
5% or more difference from the Company's estimated total reserves.
NORESCO. NORESCO is based in Framingham, Massachusetts, and leases offices
in 24 locations throughout the country.
Headquarters. The headquarters is located in leased office space in
Pittsburgh, Pennsylvania.
ITEM 3. LEGAL PROCEEDINGS
Two subsidiaries of the Company, ET Blue Grass Company and EQT Capital
Corporation, were among a group of defendants in a lawsuit filed by Raytheon
Engineers & Constructors, Inc. (Raytheon). The lawsuit was filed in the Supreme
Court of New York, Steuben County, in June 1997 for payment for work done by
Raytheon in connection with a natural gas storage project in Avoca, New York.
The storage project's operating partnership and partners, including another
subsidiary of the Company, subsequently filed for bankruptcy. The claims of
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Raytheon and other creditors against all defendants were settled by mediation.
The Company's portion of the settlement is approximately $1 million, included in
accrued liabilities at December 31, 1999.
In May 1998, the jury in U.S. Gas Transportation, Inc. v. Equitable
Resources Marketing Company, a breach of contract action filed in the Judicial
District Court of Dallas County, Texas, in July 1996, returned a verdict against
the Company in the amount of $4.36 million. On motion by the Company, the judge
subsequently reduced the award to $762,000. Final judgment was entered, together
with $550,000 in attorneys' fees. The case is on appeal.
In Interstate Natural Gas Company v. Equitable Resources Energy Company et
al. (including Kentucky West Virginia Gas Company), a royalty case filed in June
1995 in the Kentucky Circuit Court in Floyd County, the judge granted
plaintiffs' motion for summary judgment against the Company for breach of
fiduciary duty and contract unconscionability. In late 1998, the court entered
judgment for damages totaling $1.9 million. After posting a guarantee of $2.6
million (including estimated postjudgment interest), the Company appealed the
judgments to the Kentucky Court of Appeals. The Kentucky Court of Appeals has
set oral argument for April 11, 2000.
There are no other material pending legal proceedings, other than those
which are adequately covered by insurance, to which the Company or any of its
subsidiaries is a party, or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1999.
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EXECUTIVE OFFICERS OF THE REGISTRANT
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NAME AND AGE TITLE BUSINESS EXPERIENCE
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Murry S. Gerber (47) President and First elected to present
Chief Executive Officer position June 1, 1998; Chief
Executive Officer of Coral
Energy, Houston, TX, from
November 1995; Treasurer, Shell
Oil Company, Houston, from
October 1994.
Johanna G. O'Loughlin (53) Vice President, General Counsel Elected to present position May
and Secretary 26, 1999; Vice President and
General Counsel from December
19, 1996; Deputy General Counsel
from April 1996; Senior Vice
President and General Counsel of
Fisher Scientific Company,
Pittsburgh, PA, from June 1986.
David L. Porges (42) Executive Vice President and Chief Elected to present position
Financial Officer effective February 1, 2000;
Senior Vice President and Chief
Financial Officer from July 1,
1998; Managing Director, Bankers
Trust Corporation, Houston, TX,
and New York, NY, from December
1992.
Gregory R. Spencer (51) Senior Vice President and Chief First elected to present
Administrative Officer position May 23, 1996; Vice
President-Human Resources and
Administration from May 1995;
Vice President-Human Resources
from October 1994.
Jeffrey C. Swoveland (44) Vice President - Finance First elected to present
and Treasurer position May 23, 1996; Interim
Chief Financial Officer from
October 1997 to July 1998;
Treasurer from December 1995;
Director of Alternative Finance
from September 1994.
</TABLE>
- ---------------
Officers are elected annually to serve during the ensuing year or until their
successors are chosen and qualified. Except as indicated, the officers listed
above were elected on May 26, 1999.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange and the
Philadelphia Stock Exchange. The high and low sales prices reflected in the New
York Stock Exchange Composite Transactions as reported by The Wall Street
Journal and the dividends declared and paid per share are summarized as follows
(in U.S. dollars per share):
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter.................................. 29 3/4 24 1/4 $0.295 35 1/4 29 5/8 $0.295
2nd Quarter.................................. 37 3/4 23 1/4 $0.295 35 27 $0.295*
3rd Quarter.................................. 39 35 15/16 $0.295 30 1/4 20 9/16 $0.295
4th Quarter.................................. 38 3/8 32 9/16 $0.295 29 15/16 25 $0.295
</TABLE>
- ---------------
* Actually declared near the end of the preceding quarter.
As of February 29, 2000, there were approximately 5,400 shareholders of
record of the Company's common stock.
The indentures under which the Company's long-term debt is outstanding
contain provisions limiting the Company's right to declare or pay dividends and
make certain other distributions on, and to purchase any shares of, its common
stock. Under the most restrictive of such provisions, $496 million of the
Company's consolidated retained earnings at December 31, 1999 was available for
declarations or payments of dividends on, or purchases of, its common stock.
The Company anticipates dividends will continue to be paid on a regular
quarterly basis.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating revenues............... $1,062,738 $ 870,628 $ 913,069 $ 856,367 $ 624,998
========== ========== ========== ========== ==========
Net income (loss) from continuing
operations (a)................. $ 69,130 $ (27,052) $ 74,187 $ 53,527 $ 17,812
========== ========== ========== ========== ==========
Net income (loss) from continuing
operations per common share:
Basic....................... $ 2.03 $ (0.73) $ 2.06 $ 1.52 $ 0.51
========== ========== ========== ========== ==========
Assuming dilution........... $ 2.01 $ (0.73) $ 2.05 $ 1.52 $ 0.51
========== ========== ========== ========== ==========
Total assets..................... $1,789,574 $1,860,856 $2,328,051 $2,096,299 $1,963,313
Long-term debt................... $ 298,350 $ 281,350 $ 417,564 $ 422,112 $ 415,527
Preferred trust securities....... $ 125,000 $ 125,000 $ -- $ -- $ --
Cash dividends paid per share of
common stock................... $ 1.18 $ 1.18 $ 1.18 $ 1.18 $ 1.18
</TABLE>
- ---------------
(a) Includes nonrecurring items in 1998 and 1997, as described in Management's
Discussion and Analysis of Financial Condition and Results of Operations and
in Notes C, D and F to the consolidated financial statements.
Excludes discontinued operations and extraordinary items recognized in 1998
and 1997, as described in Management's Discussion and Analysis of Financial
Condition and Results of Operations and in Notes E and L to the consolidated
financial statements.
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Equitable's consolidated net income from continuing operations for 1999 was
$69.1 million, or $2.01 per diluted share, compared with a loss of $(27.1)
million, or $(0.73) per diluted share, for 1998 and $74.2 million, or $2.05 per
diluted share, for 1997.
The improved 1999 earnings are due to increased natural gas production;
increased throughput in the regulated distribution operations, primarily due to
cooler weather; lower exploration costs; increased construction volume in the
Company's NORESCO business; and lower operating and administrative expenses
throughout the organization due to prior years' restructuring efforts coupled
with continuing process improvement efforts in all significant business units.
Equitable's net loss from continuing operations for 1998 of ($27.1)
million, or ($0.73) per diluted share, compared with net income from continuing
operations of $74.2 million, or $2.05 per diluted share, for 1997. In addition
to the nonrecurring items described below, 1998 earnings were impacted by
discontinued operations and an extraordinary loss on early extinguishment of
debt, described in Notes E and L to the consolidated financial statements. In
December 1998, the Company completed the sale of its natural gas midstream
operations. Income (loss) from these discontinued operations after taxes was
$(8.8) million or $(.24) per share in 1998; and $3.9 million, or $0.11 per
share, for 1997. The 1998 results from discontinued operations are recorded net
of an after-tax gain on the sale of the operations of $10.1 million, or $0.28
per share. In the fourth quarter of 1998, the Company recognized an
extraordinary loss of $8.3 million after taxes, or $0.22 per share, for early
retirement of certain long-term debt, repurchased with a portion of the proceeds
of the sale of the midstream operations. Also, in 1998, the Company recognized
$81.8 million for restructuring, impairment charges and nonrecurring items
across all segments, and a $6.2 million reduction of utility operating revenues
primarily as a result of the FERC rejection of a proposed pipeline rate case
settlement in December 1998.
Earnings for 1997 include the following items: an after-tax gain of $31.3
million, $0.87 per share, on the sale of certain crude oil and natural gas
producing properties in the western United States and Canada and its contract
drilling operations; an after-tax charge of $8.5 million, $0.24 per share, from
the impairment of a proposed bedded salt natural gas storage project; and a $6.7
million after-tax charge, $0.19 per share, related to the evaluation and
reduction of headquarters and noncore business functions.
The decrease in operating income in 1998 compared to 1997, excluding
restructuring, impairment charges and nonrecurring items, and the impact of the
FERC settlement rejection, is primarily due to increased dry hole cost due to
unsuccessful wells in the offshore region, decreases in crude oil and natural
gas liquids prices, decreased sales volumes in the distribution division
resulting from 19% warmer weather, and increased depreciation, depletion and
amortization (DD&A) expense. The increase in DD&A is principally a result of
increased production in the offshore Gulf of Mexico, where depletion rates are
substantially higher than in the Company's other operating regions. The decrease
in 1998 operating income was partially offset by higher revenues in the
Equitable Utilities distribution division from increased customer charges in
tariff rates established in the fourth quarter of 1997 and increased income from
the inclusion of a full year of operations at NORESCO, acquired in mid-1997.
BUSINESS SEGMENT RESULTS
Business segment operating results are presented in the segment discussions
and financial tables on the following pages. The Company revised its
presentation of business segment information beginning with the 1999 Form 10-K.
Equitable Energy is now reported in the Equitable Utilities segment instead of
Equitable Services, and Equitable Services is now being reported as NORESCO.
Prior periods have been reclassified to conform to the current presentation.
13
<PAGE> 14
EQUITABLE UTILITIES
Equitable Utilities' operations are comprised of 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 unregulated marketing of natural gas.
DISTRIBUTION
The local distribution operations of Equitable Gas Company (Equitable Gas)
and Carnegie Natural Gas Company (Carnegie) provide natural gas services in
southwestern Pennsylvania, municipalities in northern West Virginia and field
line sales in eastern Kentucky. Equitable Gas and Carnegie are subject to rate
regulation by state regulatory commissions in Pennsylvania, West Virginia and
Kentucky.
On April 1, 1998, Equitable Gas began to offer "unbundled" service to all
of its customers in Pennsylvania, allowing them to choose their natural gas
supplier. Revenues derived from transportation charges on natural gas sold by
other suppliers enable Equitable Gas to minimize economic loss resulting from
the switching of residential customers to other suppliers. Because the margin on
natural gas bundled sales approximates the margin received on
transportation-only volumes, Equitable Gas is economically neutral as to whether
it provides transportation or sales to retail customers. In addition, the new
rate structure approved by the Pennsylvania Public Utility Commission (PUC)
increased the portion of revenues derived from the fixed monthly customer charge
making margins for the residential distribution operation less sensitive to
weather fluctuations.
In June 1999, Pennsylvania Governor Ridge signed into law the Natural Gas
Choice and Competition Act (the Act) which requires local natural gas
distribution companies to extend the availability of natural gas transportation
service to residential and small commercial customers by July 1, 2000 pursuant
to a PUC-approved plan. In accordance with the Act, Equitable made its
restructuring filing on August 16, 1999. The filing was generally a restatement
of Equitable's existing tariff. The tariff provides for recovery of costs
associated with Equitable Gas' existing pipeline capacity and natural gas supply
contracts. The Company does not expect that the Act will have a material adverse
impact on the financial statements.
INTERSTATE PIPELINE
The pipeline operations of Equitrans, L.P., Three Rivers Pipeline
Corporation and Carnegie Interstate Pipeline are subject to rate regulation by
the FERC. Under present rates, a majority of the annual costs are recovered
through fixed charges to customers. Equitrans filed a rate case in April 1997,
which addressed the recovery of certain stranded plant costs related to the
implementation of FERC Order No. 636. The requested rates were placed into
effect in August 1997, subject to refund, pending the issuance of a final order.
On April 29, 1999, the FERC approved, without modification, the joint stipulated
settlement agreement resolving all issues in the proceeding.
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.
ENERGY MARKETING
Equitable's unregulated marketing division provides natural 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 division'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 or
contractual assets.
14
<PAGE> 15
CAPITAL EXPENDITURES
Equitable Utilities has set the 2000 capital expenditure level at $32.0
million, a 26% increase over capital expenditures of $25.3 million for 1999. The
2000 capital expenditures include $24.4 million for the distribution operations
and $7.6 million for pipeline operations, including maintenance and improvements
to existing lines and facilities, and approximately $7.0 million for new
business development opportunities.
EQUITABLE UTILITIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1999 1998 1997
-------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Utility revenues........................................... $324,869 $322,057 $402,826
Marketing revenues......................................... 487,005 329,967 312,057
-------- -------- --------
Total revenues........................................ 811,874 652,024 714,883
Purchased natural gas cost................................. 573,101 449,098 492,678
Revenue related taxes...................................... 10,873 11,587 15,437
-------- -------- --------
Net revenues.......................................... 227,900 191,339 206,768
Operating and maintenance expense.......................... 67,923 68,749 71,137
Selling, general and administrative expense................ 43,740 55,153 63,346
Depreciation, depletion and amortization................... 35,596 20,570 19,778
Restructuring and impairment charges....................... -- 14,693 13,000
-------- -------- --------
Total expenses........................................ 147,259 159,165 167,262
-------- -------- --------
Operating income........................................... $ 80,641 $ 32,174 $ 39,507
======== ======== ========
Capital expenditures....................................... $ 43,979 $ 20,860 $ 29,957
VALUE DRIVERS
Operating expenses/net revenues............................ 64.62% 75.51% 80.89%
Earnings (loss) before interest and taxes:
Distribution............................................. $ 54,704 $ 30,385 $ 36,917
Pipeline................................................. 22,354 8,663 8,136
Marketing................................................ 3,583 (6,873) (5,547)
</TABLE>
Operating income for Equitable Utilities increased 150% from 1998 to 1999.
Results for the 1999 period include $3.9 million from the recognition of the
settlement of Equitrans' rate case described above. Results also include charges
of $3.0 million for improvement of utility segment operating processes and
consolidation of facilities. Results for 1998 include a pretax charge of $14.7
million related to restructuring as more fully described in Note C to the
consolidated financial statements. Excluding the nonrecurring items in both
periods, operating income increased $33.8 million, or 72.1% over the $46.9
million in 1998. The increase in 1999 is a result of higher net revenues due
principally to cooler weather during the heating season, increased revenues from
energy marketing activities and lower operating expenses due to restructuring
initiatives begun in the fourth quarter of 1998.
Operating income for Equitable Utilities decreased 18.5% from 1997 to 1998.
Results for 1998 include charges related to restructuring of $14.7 million as
described above. Results for 1997 include a charge of $13.0 million related to
the Avoca natural gas storage project as more fully described in Note C to the
consolidated financial statements. Excluding the nonrecurring items in both
periods, operating income decreased $5.6 million to $46.9 million in 1998 due
primarily to warmer weather and lower margins from marketed natural gas sales.
15
<PAGE> 16
DISTRIBUTION OPERATIONS
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Net revenues............................................... $144,969 $133,393 $136,729
Operating costs............................................ 73,179 85,130 85,663
Depreciation, depletion and amortization................... 17,086 14,986 14,149
Restructuring and impairment charge........................ -- 2,892 --
-------- -------- --------
Operating income........................................... $ 54,704 $ 30,385 $ 36,917
======== ======== ========
VALUE DRIVERS
Degree days (normal = 5,964)............................... 5,485 4,808 5,919
O&M* per customer.......................................... $ 254.85 $ 311.94 $ 309.61
Volumes (MMcf):
Residential.............................................. 25,431 22,641 28,503
Commercial industrial.................................... 22,209 19,165 21,383
-------- -------- --------
Total natural gas sales and transportation............ 47,640 41,806 49,886
======== ======== ========
</TABLE>
- ---------------
* O&M is defined for this calculation as the sum of operating and maintenance
and selling, general and administrative expenses, excluding other taxes.
Weather in the distribution service territory during 1999 was 8% warmer
than normal (normal is based on the 30-year average determined by the National
Oceanic and Atmospheric Administration) but 14% cooler than 1998. Total system
throughput increased 5.8 billion cubic feet (Bcf) primarily as a result of the
cooler weather's effect on residential and commercial customers who use natural
gas for heating.
Net revenues for the distribution operations increased 8.7% from 1998 to
1999. The increase in net revenues for 1999 is due to the impact of weather that
was 14% colder than the prior year. In addition, total margin from delivery
service customers was higher in 1999, reflecting higher average delivery service
rates and slightly higher volumes transported.
Operating expenses for the distribution operations for 1999 decreased 12.4%
from 1998. Results for 1998 period include $2.9 million related to the
restructuring of utility segment operating functions and consolidation of
facilities. Excluding the restructuring charge in 1998, operating expenses
decreased $9.9 million, or 9.8%, over the $100.1 million in 1998. The decrease
in 1999 is due principally to restructuring initiatives begun in the fourth
quarter of 1998.
Operating income for 1999 increased 64.4% from the operating income of
1998, excluding the impact of restructuring charges. The increase was due
primarily to higher throughput, resulting from the colder weather and lower
operating expenses due to restructuring initiatives begun in the fourth quarter
of 1998.
Net revenues for the distribution operations decreased 2.4% from 1997 to
1998. The decrease in net revenues for 1998 is due to the impact of weather that
was 19% warmer than the prior year. This decrease was partially offset by an
increase in net revenues from fixed monthly customer charges of $12.5 million,
which reduced the earnings impact of the lower throughput.
Operating expenses of $100.1 million for 1998, excluding restructuring
charges of $2.9 million, were substantially unchanged from the $99.8 million for
1997.
Operating income of $33.3 million for 1998, excluding the impact of
restructuring charges, decreased $3.6 million, or 9.9%, from the operating
income of $36.9 million for 1997. The decrease was due primarily to lower
throughput resulting from the warmer weather, partially offset by the impact of
the new rate structure.
16
<PAGE> 17
PIPELINE OPERATIONS
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Net revenues................................................ $73,273 $51,344 $60,575
Operating costs............................................. 32,607 28,611 34,433
Depreciation, depletion and amortization.................... 18,312 5,299 5,006
Restructuring and impairment charge......................... -- 8,771 13,000
------- ------- -------
Operating income............................................ $22,354 $ 8,663 $ 8,136
======= ======= =======
VALUE DRIVERS
Transportation throughput (MMBtu)........................... 76,727 67,590 75,016
</TABLE>
Net revenues for the pipeline operations increased 42.7% from 1998 to 1999.
Pipeline revenues in 1999 include $15.5 million related to recognition of the
rate settlement and pass-through of stranded costs described above and $1.7
million for the pass-through of FERC surcharges and products extraction costs to
customers. Net revenues of $56.1 million for the period, excluding the impact of
the rate settlement and extraction revenues, increased $4.8 million, or 9.4%,
over the $51.3 million for the 1998 period. The increase in revenues for 1999
was due primarily to increased margins on gathering throughput and increased
storage service revenues.
Operating expenses increased 19.3% in 1999 over 1998. The operating
expenses for 1999 include $11.6 million of amortization expense related to the
stranded plant from recognition of the rate settlement, $1.7 million of products
extraction costs and $4.0 million for utility segment process improvements as
more fully described above. Operating expenses for 1998 include restructuring
charges of $8.8 million as more fully described in Note C to the consolidated
financial statements. Operating expenses, excluding the nonrecurring charges in
both periods, were substantially the same. Excluding the nonrecurring items in
both periods, operating expenses of $33.6 million reflected a decrease of $0.3
million from $33.9 million in 1998.
Excluding the impact of nonrecurring charges in both periods, operating
income of $22.4 million for 1999 increased $4.9 million, or 28.2%, from the
operating income of $17.4 million for 1998. The increase in operating income is
due primarily to increased revenues from the pipeline gathering and storage
services and the benefit of restructuring initiatives.
Net revenues for the pipeline operations decreased 15.2% in 1998 from 1997.
The decrease in revenues for 1998 was due primarily to lower unit margin rates
and reduced revenues from extraction services resulting from a change in the
contract arrangements.
Operating expenses decreased 18.6% from 1997 to 1998. The operating
expenses for 1998 and 1997 include nonrecurring charges of $8.8 million and
$13.0 million, respectively, as more fully described above. The decrease in
expenses for 1998, excluding nonrecurring charges, was due primarily to lower
expenses for extraction services resulting from a change in the contract
arrangements, lower benefits costs reflecting regulatory treatment and lower
corporate overhead costs.
Excluding the impact of nonrecurring charges in both periods, operating
income of $17.4 million for 1998 decreased $3.7 million, or 17.5%, from the
operating income of $21.1 million for 1997. The decrease in operating income is
due primarily to lower margins due to the 1997 base rate case partially offset
by reduced operating costs.
17
<PAGE> 18
ENERGY MARKETING
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Net revenues............................................... $ 9,658 $ 6,603 $ 9,464
Operating costs............................................ 5,877 10,161 14,387
Depreciation, depletion and amortization................... 198 285 624
Restructuring and impairment charge........................ -- 3,030 --
-------- -------- --------
Operating income (loss).................................... $ 3,583 $ (6,873) $ (5,547)
======== ======== ========
VALUE DRIVERS
Marketed gas sales (MMBtu)................................. 181,453 134,455 111,031
Net revenue/MBtu........................................... $ 0.0513 $ 0.0471 $ 0.0740
</TABLE>
The increase in gross margins in 1999 is attributable to increased
throughput and more extensive use of storage. The increased volume in 1999
compared to 1998 is a result of the addition of residential customer choice
programs in Pennsylvania and Ohio and increased utility/marketing company
volumes transported during the 1999 winter heating season. Gross margin per
MMBtu was also higher in 1999, due primarily to the residential choice programs
and greater volatility in weather in 1999.
The 1999 decrease in operating costs is primarily due to a significant
staff reduction and office closings completed as part of the corporate-wide
restructuring in the fourth quarter of 1998.
Net revenues decreased by $2.9 million in 1998 from 1997. A large group of
high margin customers were renewed at lower rates reflecting the highly
competitive nature of the business. Also in the last half of 1998, the business
yielded lower margins due to decreased throughput for large industrial steel
producing clients.
SG&A expenses decreased from 1997 to 1998 by $4.2 million. The decreases
were due primarily to decreased consulting costs and reduced staffing and office
closures. Included in 1998 operating costs is a $3.0 million restructuring
charge for office closings and personnel reductions.
EQUITABLE PRODUCTION
Production operations comprise the production and sale of natural gas,
natural gas liquids and crude oil through Equitable Production Company
(Equitable Production). In 1999, the exploration and production operations
conducted by Equitrans were transferred to Equitable Production - East from
Equitable Utilities. The financial results of both segments have been restated
to reflect the new structure for all periods presented.
EQUITABLE PRODUCTION - EAST
In the Appalachian Region during 1999, 153 gross wells were drilled at a
success rate of 100%. This drilling was concentrated within the core areas of
southwest Virginia and southeast Kentucky. This activity resulted in an
additional 9 Mcf per day of gas sales and proved reserve additions of 46.5 Bcfe.
EQUITABLE PRODUCTION - GULF
In the Gulf Region during 1999, 11 gross wells were drilled at a success
rate of 82%. This activity resulted in additions of 48.5 Bcfe. The increase is
the result of successful development of the West Cameron Block 180 and 198
fields and South Marsh Island 39 field. Equitable Production operates both
fields.
Equitable Production also participated in exploratory activity during the
year, including a successful well at South Timbalier 196, in which Equitable
Production has a 50% working interest. Unsuccessful exploratory activity during
1999 on the West Cameron 575 and the Eugene Island 44 blocks resulted in dry
hole expense of approximately $2.5 million in 1999.
18
<PAGE> 19
CAPITAL EXPENDITURES
Equitable Production has set the 2000 capital expenditure level at $116
million. This includes $46 million for exploration and development drilling in
the Gulf of Mexico and $70 million for development of Appalachian holdings,
including $4 million for improvements to gathering system pipelines. The
evaluation of new prospects, market forecasts and price trends for natural gas
and oil will continue to be the principal factors for the economic justification
of drilling investments.
EQUITABLE PRODUCTION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1999 1998 1997
-------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Operating revenues......................................... $211,821 $200,479 $251,396
Cost of energy purchased................................... 24,188 21,494 26,543
-------- -------- --------
Net operating revenues................................ 187,633 178,985 224,853
Operating expenses:
Operation and maintenance................................ 12,956 13,991 31,579
Lease operating expense.................................. 26,206 30,289 31,851
Dry hole................................................. 2,455 23,101 2,738
Other exploration........................................ 6,833 4,110 4,523
Selling, general and administrative...................... 26,003 30,783 30,922
Depreciation, depletion and amortization................. 58,565 56,380 50,418
Restructuring charges.................................... -- 44,675 2,200
-------- -------- --------
Total operating expenses.............................. 133,018 203,329 154,231
-------- -------- --------
Operating income (loss).................................... $ 54,615 $(24,344) $ 70,622
======== ======== ========
Capital expenditures....................................... $ 92,099 $126,752 $185,558
VALUE DRIVERS
Natural gas sales (MMcf)................................... 63,863 59,551 56,847
Crude oil sales (MBbls).................................... 1,070 996 1,544
Natural gas liquids sales (MGals.)......................... 66,072 67,137 65,525
Produced natural gas and oil (MMcfe)....................... 72,745 68,110 68,215
Average selling prices:
Natural gas (per Mcf).................................... $ 2.39 $ 2.41 $ 2.40
Crude oil (per barrel)................................... $ 15.53 $ 13.59 $ 17.23
Natural gas liquids (per gallon)......................... $ 0.30 $ 0.27 $ 0.38
</TABLE>
Net operating revenues, which are derived primarily from the sale of
produced natural gas, crude oil and natural gas liquids, increased 4.8% from
1998 to 1999. The increase in net operating revenues of $8.6 million in 1999
compared to 1998, is due primarily to increases in natural gas sales volumes
($7.8 million), crude oil sales prices ($3.1 million), and natural gas liquids
sales prices ($2.1 million). These improvements were offset somewhat by a $1.3
million reduction in transportation revenues due to lower throughput. In
addition, 1998 includes $2.6 million of direct bill revenues resulting from a
FERC pricing settlement, as described in Note D to the consolidated financial
statements.
Operating expenses decreased 34.6% in 1999 from 1998. The 1998 expenses
include nonrecurring items primarily associated with write-downs of the carrying
value of assets of approximately $44.7 million. The 1998 operating expenses also
include $23.1 million of dry hole expense associated with the unsuccessful
drilling of five exploratory prospects offshore in the Gulf of Mexico compared
to $2.5 million in 1999 associated with two exploratory prospects. Other
exploration expenses increased $2.7 million in 1999 due primarily to a lease
impairment and the impairment of an equity investment in an oil and natural gas
production company. Depreciation, depletion and amortization (DD&A) increased
$2.2 million in 1999 because of increased
19
<PAGE> 20
production and a $1.0 million impairment associated with the abandonment of a
processing facility. Also included in 1999 operating expenses is $2.8 million
related to process improvements, including the Company's decision to close its
regional office in Kingsport, Tennessee, consolidate administration and realign
field offices; $2.0 million of charges related to the decertification of
Kentucky West Virginia Gas Company; and $1.8 million in performance-related
compensation. Partially offsetting these items are $700,000 and $1.0 million
reductions in environmental and pension liabilities, respectively. The decrease
in operating expenses in 1999 of approximately $14.6 million, excluding the
items above, is due to continued improvements in operating efficiencies and
decreased staff, as a result of the initiatives begun in 1998.
Net operating revenues decreased 20.4% from 1997 to 1998. Included in 1997
are $5.2 million additional revenues from direct bill settlements as described
in Note D to the consolidated financial statements, $18.3 million from contract
drilling services associated with Union Drilling, a contract drilling operation
which the Company sold in 1997, and $22.8 million from the western United States
and Canada oil and natural gas properties sold in 1997. The decrease in net
operating revenues of $0.5 million in 1998 compared to 1997, excluding
nonrecurring amounts and sold operations, is due primarily to decreases in
commodity prices and reduced transportation revenues from affiliated companies.
These decreases are essentially offset by increased natural gas and crude oil
production excluding production associated with the operations in the western
United States and Canada.
Operating expenses for 1998 increased 32% from 1997. The 1998 operating
expenses include the restructuring charges of $44.7 million discussed above. The
1998 operating expenses also include approximately $23.1 million of dry hole
expense primarily associated with unsuccessful drilling of five exploratory
prospects offshore Gulf of Mexico. Included in the 1997 amounts is approximately
$34.4 million of operating expenses associated with the assets sold in 1997. The
increase in operating expenses in 1998, excluding the nonrecurring items and
sold operations, is primarily due to higher DD&A from increased production.
Additionally, production expenses increased $4.5 million in the Gulf operations
as a result of a full year of the 1997 acquisition of West Cameron 180 and 198
fields.
PRODUCTION - EAST OPERATIONS
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Net operating revenues..................................... $122,739 $126,450 $154,517
Operating costs............................................ 53,064 55,940 56,689
Depreciation, depletion and amortization................... 29,141 28,728 28,905
Restructuring charges...................................... -- 7,575 --
-------- -------- --------
Operating income........................................... $ 40,534 $ 34,207 $ 68,923
======== ======== ========
VALUE DRIVERS
Natural gas sales (MMcf)................................... 40,763 40,649 40,940
Crude oil sales (MBbls).................................... 445 502 531
Natural gas liquids sales (MGals).......................... 59,062 61,878 61,900
Average selling prices:
Natural gas (per Mcf).................................... $ 2.46 $ 2.47 $ 2.60
Crude oil (per barrel)................................... $ 14.33 $ 11.22 $ 17.12
Natural gas liquids (per gallon)......................... $ 0.30 $ 0.27 $ 0.38
LOE/Mcfe sales............................................. $ 0.445 $ 0.463 $ 0.450
G&A/Mcfe sales............................................. $ 0.438 $ 0.473 $ 0.467
Depletion/Mcfe produced.................................... $ 0.418 $ 0.445 $ 0.447
</TABLE>
Net operating revenues for the East operations decreased 3% from 1998 to
1999. The decrease in net operating revenues of $3.7 million in 1999 compared to
1998 is primarily attributable to a $1.3 million reduction in transportation
revenues in 1999 due to lower throughput and the direct bill settlements
recognized in 1998 of
20
<PAGE> 21
$2.6 million. These unfavorable variances are partially offset by the positive
effects of higher crude oil and natural gas liquids prices.
Operating expenses decreased 11% in 1999 from 1998. The decrease in
operating expenses of $10 million in 1999 is due primarily to the $7.6 million
of nonrecurring items in 1998 primarily associated with write-downs of the
carrying value of assets. The remaining positive variance is due to continued
improvements in operating efficiencies and decreased staff partially offset by
charges for 1999 process improvements discussed in the Equitable Production
comparison above.
Net operating revenues decreased 18% from 1997 to 1998 primarily due to
lower commodity prices and reduced transportation revenues from affiliated
companies. In addition, 1997 includes $5.2 million of additional revenues from
direct bill settlements.
Operating expenses for 1998 were $6.6 million higher than 1997 due to the
$7.6 million of restructuring charges recorded in 1998.
PRODUCTION - GULF OPERATION
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- -------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Net operating revenues...................................... $64,894 $ 52,535 70,336
Operating costs............................................. 21,389 46,334 44,925
Depreciation, depletion and amortization.................... 29,424 27,652 21,512
Restructuring charges....................................... -- 37,100 2,200
------- -------- -------
Operating income (loss)..................................... $14,081 $(58,551) $ 1,699
======= ======== =======
VALUE DRIVERS
Natural gas sales (MMcf).................................... 23,100 18,902 15,907
Crude oil sales (MBbls)..................................... 625 494 1,013
Natural gas liquids sales (MGals)........................... 7,010 5,259 3,625
Average selling prices:
Natural gas (per Mcf)..................................... $ 2.26 $ 2.28 $ 1.88
Crude oil (per barrel).................................... $ 16.38 $ 15.99 $ 17.30
Natural gas liquids (per gallon).......................... $ 0.26 $ 0.16 $ 0.36
LOE/Mcfe sales.............................................. $ 0.256 $ 0.461 $ 0.544
G&A/Mcfe sales.............................................. $ 0.260 $ 0.463 $ 0.469
Depletion/Mcfe produced..................................... $ 1.090 $ 1.216 $ 0.849
</TABLE>
Net operating revenues for the Gulf operations increased 24% from 1998 to
1999. The increase in net operating revenues of $12.4 million in 1999 compared
to 1998, is due primarily to increases in natural gas and crude oil sales
volumes of $8.0 million and $2.1 million, respectively. In addition, higher
commodity prices in 1999 contributed $1.8 million to the increase in net
operating revenues.
Operating expenses decreased 54.3% in 1999 from 1998. The 1998 expenses
include $37.1 million of restructuring charges and $23.1 million of dry hole
expense associated with the unsuccessful drilling of five wells. In 1999, two
unsuccessful exploratory wells were drilled for a total of $2.5 million of dry
hole cost. Other exploration expenses increased $2.0 million in 1999 due
primarily to a lease impairment and the impairment of an equity investment in an
oil and natural gas production company. DD&A increased $1.8 million in 1999
because of increased production. The remaining positive variance of $6.2 million
is due to continued improvements in operating efficiencies and decreased staff.
Net operating revenues decreased 25.3% from 1997 to 1998. Revenues in 1997
include $41.1 million associated with Union Drilling and the western United
States and Canada operations, which were all sold during 1997. The increase in
operating revenues of $23.3 million in 1998 compared to 1997, excluding sold
operations,
21
<PAGE> 22
is due primarily to increased production of natural gas and crude oil from the
acquisition of West Cameron 180 and 198 in the fourth quarter 1997.
Operating expenses for 1998 increased 61.8% from 1997. Excluding the 1998
restructuring charges and dry hole expenses, which are discussed above, and
$34.4 million of 1997 operating costs related to the assets sold in that year,
total operating expenses increased $16.7 million in 1998 compared with 1997.
This increase is due primarily to higher depreciation and depletion from
increased production. Additionally, production expenses increased $4.5 million
as a result of a full year of the 1997 acquisition of the West Cameron 180 and
198 fields.
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 facilities management division,
which develops and operates private power, cogeneration and central plant
facilities in the U.S. and selected international markets.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
(THOUSANDS)
<S> <C> <C> <C>
FINANCIAL DATA
Energy service contracting revenues......................... $169,633 $109,493 $52,790
Energy service contract cost................................ 133,088 80,800 37,164
-------- -------- -------
Gross margin........................................... 36,545 28,693 15,626
-------- -------- -------
Operating expenses:
Selling, general and administrative....................... 19,889 19,218 15,298
Depreciation, depletion and amortization.................. 6,078 4,300 2,775
Restructuring charges..................................... -- 2,716 200
-------- -------- -------
Total operating expenses............................... 25,967 26,234 18,273
-------- -------- -------
Operating income (loss)..................................... 10,578 2,459 (2,647)
Other income................................................ 2,863 2,667 --
-------- -------- -------
Earnings (loss) before interest and taxes................... $ 13,441 $ 5,126 $(2,647)
======== ======== =======
Capital expenditures........................................ $ 6,041 $ 11,102 $28,096
VALUE DRIVERS
Contract backlog at December 31 (thousands)................. $ 57,299 $ 77,270 $15,296
Gross profit margin......................................... 21.5% 26.2% 29.7%
SG&A as a % of revenue...................................... 11.7% 17.6% 29.0%
Development expense as a % of revenue....................... 2.6% 3.3% 2.6%
</TABLE>
Revenues increased from 1998 to 1999 by $60.1 million, or 55%, reflecting
the continued expansion of the business. Total construction completed during
1999 was $151.8 million, an increase of $72.0 million over 1998.
Gross margins from energy services contracting activities decreased to
21.5% in 1999 from 26.2% in 1998. The deterioration in gross margin results
mainly from the higher proportion of lower margin government contracts
implemented in 1999.
SG&A expenses increased from 1998 to 1999 by $0.7 million. Increases during
1999 include project development expense of $0.8 million, marketing expense of
$0.2 million and rent expense of $0.1 million which were partially offset by a
$0.7 million reduction in corporate overhead expense.
22
<PAGE> 23
Depreciation, depletion and amortization (DD&A) expense increased from 1998
to 1999 by $1.8 million, or 41.3%. This increase is primarily due to the
company's cogeneration facility in Jamaica which was put into service in
February 1999.
Other income of $2.9 million in 1999 and $2.7 million in 1998 reflects
NORESCO's share of the earnings from its equity investments in power plant
assets, primarily a 50 mega-watt facility in Panama which is 50% owned by the
company. A 96 mega-watt facility in Panama and a 7 mega-watt facility in
Providence, RI were brought on line in late 1999.
Revenues increased from 1997 to 1998 by $56.7 million. On an annualized
basis, NORESCO's revenues increased by 74% from 1997 to 1998 reflecting both the
continued expansion of the business and a movement toward higher value
contracts. Total construction completed during 1998 was $79.7 million, an
increase of $49.0 million over 1997.
Gross margins from energy services contracting activities decreased to
26.2% in 1998 from 29.7% in 1997. The deterioration in gross margin is a result
of a change in the mix of contracts due to the increase in revenues from the
lower margin government market and increased competition.
SG&A expenses increased from 1997 to 1998 by $3.9 million. Increases in
corporate overhead expense of $2.0 million and NORESCO's SG&A of $6.0 million
(12 months in 1998 compared to 7 months in 1997) were partially offset by
expense reductions in NORESCO's facilities management division of $2.1 million.
ERI Services reduced SG&A expense by $3.2 million in 1998, reflecting a shift
away from a start-up enterprise focused mainly on business and staff development
and toward a focus on implementation and construction of contract assets.
DD&A expense increased from 1997 to 1998 by $1.5 million. This increase
reflects goodwill amortization for the full year in 1998 of $3.7 million as
compared to $2.2 million in 1997.
1998 AND 1997 RESTRUCTURING, IMPAIRMENT AND OTHER NONRECURRING CHARGES
During 1998, management expressed its intention to focus on fundamental
strengths in its core businesses. In October 1998, the Company's Board of
Directors approved a restructuring plan. As a result of this plan, along with
its earlier decision to discontinue and sell the natural gas midstream business,
and the sustained decrease in oil and natural gas commodity prices, the Company
took specific actions to reduce its overall cost structure. Certain of the
actions taken by the Company resulted in pretax impairment, restructuring and
other nonrecurring charges in the fourth quarter of 1998 amounting to $81.8
million. The restructuring activities (shown below in tabular format) primarily
relate to the following:
The elimination of employment positions Company-wide: Early in the fourth
quarter of 1998, the Company announced that the restructuring plan would
eliminate a substantial number of positions. Related charges included severance
packages, cash payments made directly to terminated employees as well as
outplacement services and noncash charges for curtailment of certain defined
benefit pension and other postretirement benefit plans. A total of 164 employees
terminated employment.
Redirection of offshore Gulf production: As a result of the decrease in oil
and natural gas prices and unsuccessful drilling results in several of the
Company's nonoperated blocks, a review of the Gulf operations was undertaken.
The Company eliminated several layers of management and focused its operations
on lower risk, Company-operated exploration and development. In addition, the
production and commodity price trends indicated that the undiscounted cash flows
from this division would be substantially less than the carrying value of the
producing properties. Producing property write-downs were measured based on a
comparison of the assets' net book value to the net present value of the
properties' estimated future net cash flows. The undeveloped leases no longer
intended to be developed were written down to estimated market value less costs
to dispose.
Improved integration of Appalachian production operations: To improve the
efficiency of Appalachian production operations, the Company obtained authority
in 1999 from the Federal Energy Regulatory Commission to decertify the pipeline
facilities of Kentucky West Virginia Gas Company, LLC.
23
<PAGE> 24
Decentralization of administrative functions: In the fall of 1998,
management initiated a major decentralization and downsizing of administrative
functions. Costs incurred, in addition to severance and other employee
separation costs described above, included one-time costs for third party
processing, costs to make assets available for sale, lease cancellations for
office and computer equipment and noncash charges for the write-down of assets
no longer in use and subsequently sold.
Exiting certain noncore businesses: As a result of the continued evaluation
of profitability of the Company's nonregulated retail natural gas sales
business, the Company has refocused its marketing along core regional lines and
eliminated five field offices. In addition, the Company intends to curtail its
involvement in several auxiliary business ventures, such as radio dispatch
operations and residential real estate development, and has written these
investments down to net realizable value.
<TABLE>
<CAPTION>
RESERVE RESERVE
CASH/ RESTRUCTURING 1998 BALANCE AT 1999 BALANCE AT
NONCASH CHARGE ACTIVITY 12/31/98 ACTIVITY 12/31/99
------- ------------- -------- ---------- -------- ----------
1998 (MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Elimination of employment positions
Company-wide:
Severance and other employment
packages........................... Cash $ (8.2) $ 2.6 $(5.6) $5.6 $--
Pension/other benefit plan
curtailments....................... Noncash (2.1) 2.1 -- -- --
Other................................ Cash (0.8) 0.5 (0.3) 0.3 --
Redirection of offshore Gulf production:
Impairment of undeveloped leases..... Noncash (15.9) 15.9 -- -- --
Impairment of producing properties... Noncash (19.6) 19.6 -- -- --
Improved integration of Appalachian
production operations:
Impairment of regulatory assets...... Noncash (4.0) 4.0 -- -- --
Impairment of undeveloped leases..... Noncash (1.4) 1.4 -- -- --
Decentralization of administrative
functions:
Impairment of headquarters
building........................... Noncash (5.1) 5.1 -- -- --
Impairment of enterprise-wide
computer system.................... Noncash (7.7) 7.7 -- -- --
Impairment of other assets........... Noncash (3.3) 3.3 -- -- --
Exiting certain noncore businesses:
Office closing/lease buyout.......... Cash (1.7) 1.6 (0.1) 0.1 --
Impairment of radio system
assets/buyout lease................ Noncash/Cash (3.3) 2.1 (1.2) 1.2 --
Impairment of investments............ Noncash (1.5) 1.5 -- -- --
Impairment of other assets........... Noncash (3.6) 3.6 -- -- --
Impairment of pipeline stranded
costs.............................. Noncash (3.6) 3.6 -- -- --
------ ----- ----- ---- ---
Total.................................... $(81.8) $74.6 $(7.2) $7.2 $--
====== ===== ===== ==== ===
</TABLE>
24
<PAGE> 25
In 1997, the Company recognized an impairment charge of $13.0 million related to
its investment in a proposed bedded-salt natural gas storage project and began
the restructuring of its headquarters and nonregulated energy sales offices.
These latter actions resulted in an operating charge in that quarter of $11.1
million. The 1997 restructuring activities primarily relate to the following:
<TABLE>
<CAPTION>
RESERVE RESERVE
CASH/ RESTRUCTURING 1997 BALANCE AT 1998 BALANCE AT
NONCASH CHARGE ACTIVITY 12/31/97 ACTIVITY 12/31/98
------- ------------- -------- ---------- -------- ----------
1997 (MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Downsize headquarters staff:
Severance packages.............. Cash $ (3.1) $ 2.8 $(0.3) $0.3 $--
Terminate consulting
contracts..................... Cash (2.1) 2.1 -- -- --
Impairment of assets............ Noncash (1.7) 1.7 -- -- --
Impairment of investments....... Noncash (2.2) 2.2 -- -- --
Airplane lease exit costs....... Cash (1.7) 1.7 -- -- --
Other........................... Cash (0.3) 0.3 -- -- --
Exit Avoca storage project:
Impairment of investment........ Noncash (12.7) 12.7 -- -- --
Other........................... Cash (0.3) 0.3 -- -- --
------ ----- ----- ---- ---
Total......................... $(24.1) $23.8 $(0.3) $0.3 $--
====== ===== ===== ==== ===
</TABLE>
OTHER INCOME STATEMENT ITEMS
OTHER INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------ ------ -------
<S> <C> <C> <C>
Other income (thousands):
Gain on sale of assets.................................... $ -- $ -- $50,120
Equity earnings of nonconsolidated subsidiaries........... 2,863 2,667 --
------ ------ -------
Total other income..................................... $2,863 $2,667 $50,120
====== ====== =======
</TABLE>
In 1997, Equitable Production entered into sales agreements for $170 million
with five purchasers covering its crude oil and natural gas properties in the
western United States and Canada. Also in 1997, Equitable Production sold its
Union Drilling division, a contract drilling company. These asset sales in 1997
resulted in pretax gains of $50.1 million. There were no other significant
changes in other income between 1999 and 1997.
INTEREST CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Interest charges (thousands)................................ $37,132 $40,302 $34,903
======= ======= =======
</TABLE>
Interest costs decreased in 1999 as a result of an $86 million decrease in
average debt outstanding, due to proceeds from the sale in late 1998 of the
natural gas midstream operations, lower capital expenditures and improved cash
flows from operations. The savings from the lower debt level were partially
offset by a slightly higher overall interest rate, due to the full year effect
of the Preferred Trust Debentures issued in 1998.
Interest costs increased in 1998 as a result of a $44 million increase in
average debt outstanding during the year and an increase in the Company's
average overall interest rate. The increase in debt outstanding was due to
increased capital spending for Gulf of Mexico and midstream projects completed
during 1998. The increased rate is due to the April 1998 issuance of 7.35%
Preferred Trust Debentures, which replaced lower rate commercial paper
borrowings. Interest charges for 1998 and 1997 exclude interest related to
discontinued operations sold in 1998.
Average annual interest rates on short-term debt remained relatively
constant, in a range of 5.0% to 5.7%, throughout the three-year period.
25
<PAGE> 26
CAPITAL RESOURCES AND LIQUIDITY
WORKING CAPITAL
During 1998, the Company divested its natural gas midstream operations.
Prior to this divestiture, these operations had entered into large volume
natural gas trading contracts with expiration dates in 1999. Subsequent to the
divestiture, these contracts were served out by the Energy Marketing division of
Equitable Utilities. The balance in accounts receivable and payable at December
31, 1998 included $42.4 million and $44.8 million, respectively, related to
these deals, which did not recur in 1999. There were no other significant
changes in working capital between 1998 and 1999.
HEDGING
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 that create a price floor, in order to provide down-side
protection while allowing the Company to participate in a portion of the 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 year 2000.
CAPITAL EXPENDITURES
The Company expended approximately $102 million in 1999 compared to $139
million in 1998 for capital expenditures. These expenditures in both years
represented growth projects in the Equitable Production and NORESCO segments,
and replacements, improvements and additions to plant assets in the Equitable
Utilities unit. Equitable Production expenditures for 1999 in the Gulf region of
$40.5 million include natural gas and crude oil production assets. Equitable
Production invested $29.2 million in 1999 in the Appalachian region for new
coal-bed methane and conventional natural gas wells. NORESCO expended $6.0
million for international power project development, in addition to its
investment in nonconsolidated subsidiaries, described below. The Utilities
segment expended $25.3 million for distribution plant replacements and
improvements.
A total of $166 million has been authorized for the 2000 capital
expenditure program, described in more detail in the segment discussions above.
The Company expects to finance this program with cash generated from operations
and with short-term loans.
INVESTMENTS IN NONCONSOLIDATED SUBSIDIARIES
The Company, within the NORESCO segment, has equity ownership interests in
independent power plant (IPP) projects located domestically and in select
international countries. Long-term power purchase agreements (PPAs) are signed
with the customer whereby they agree to purchase the energy generated by the
plant. The length of these contracts range from 5 to 30 years. The Company has
invested approximately $29.3 million in these operations since January 1998. The
Company's share of the earnings for this same time period is approximately $5.5
million. These projects generally are financed on a project basis with
nonrecourse financings established at the foreign subsidiary level.
26
<PAGE> 27
ACQUISITIONS AND DISPOSITIONS
In December 1999, the Company acquired Carnegie Natural Gas Company and
subsidiaries for $40 million, including natural gas distribution, pipeline,
exploration and production operations. The Company financed this purchase with
commercial paper borrowings.
In February 2000, the Company acquired the Appalachian production assets of
Statoil Energy Inc. for $630 million plus working capital. The Company initially
funded this acquisition through commercial paper, to be replaced by a
combination of financings and cash from asset sales.
In March 2000, the Company agreed to merge Equitable Production - Gulf with
Westport, Inc., an oil and natural gas exploration and development company based
in Denver, Colorado, for a 49% ownership interest in the combined entity. The
combined company intends to repay $50 million of Equitable Production - Gulf
intercompany debt and replace it with third party debt.
SHORT-TERM BORROWINGS
Cash required for operations is affected primarily by the seasonal nature
of the Company's natural gas distribution operations and the volatility of oil
and natural gas commodity prices. Short-term loans are used to support working
capital requirements during the summer months and are repaid as natural gas is
sold during the heating season.
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 5.26% during 1999. The Company maintains a revolving credit agreement
with a group of banks providing $500 million of available credit, which expires
in 2001. In addition, in January 2000, the Company obtained an additional $500
million, 364-day revolving credit agreement to back the issuance of commercial
paper. Effective February 1, 2000, the Company has the authority and credit
backing to support a $1 billion commercial paper program. This program is being
used to finance the acquisition of the Appalachian oil and natural gas
properties of Statoil Energy, Inc. described above, as well as ongoing working
capital and other short-term financing requirements.
FINANCING
The Company has adequate borrowing capacity to meet its financing
requirements.
In July 1999, the Company repaid $75 million of 7 1/2% debentures, using
cash proceeds received in 1998 from the sale of its natural gas midstream
operations.
In 1999, the Company received proceeds of $17.0 million from the issuance
of nonrecourse debt used to finance a cogeneration facility owned by a
subsidiary of the Company and located in Jamaica. The note is backed by the
assets of the Jamaican facility.
Beginning in October 1998, the Company has undertaken a stock buyback
program. Total purchases under the program of 4.7 million shares include 3.3
million shares of stock repurchased in 1999 for $101.4 million. In total, the
Company has repurchased 12.7% of shares outstanding at December 31, 1997.
Cash generated in all years was partially offset by the payment of the
Company's dividends on common shares, which for 1999 and 1998 were $40.4 million
and $43.8 million, respectively.
RATE REGULATION
Accounting for the operations of Equitable's Utilities segment is in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." As
described in Note A to the consolidated financial statements, regulatory assets
and liabilities are recorded to reflect future collections or payments through
the regulatory process. The Company believes that it will continue to be subject
to rate regulation that will provide for the recovery of deferred costs.
27
<PAGE> 28
ENVIRONMENTAL MATTERS
Equitable and its subsidiaries are subject to extensive federal, state and
local environmental laws and regulations that affect their operations.
Governmental authorities may enforce these laws and regulations with a variety
of civil and criminal enforcement measures, including monetary penalties,
assessment and remediation requirements and injunctions as to future activities.
Management does not know of any environmental liabilities that will have a
material effect on Equitable's financial position or results of operations. The
Company has identified situations that require remedial action for which
approximately $4.0 million is accrued at December 31, 1999. Environmental
matters are described in Note U to the consolidated financial statements.
INFLATION AND THE EFFECT OF CHANGING ENERGY PRICES
The rate of inflation in the United States has been moderate over the past
several years and has not significantly affected the profitability of the
Company. In prior periods of high general inflation, oil and natural gas prices
generally increased at comparable rates; however, there is no assurance that
this will be the case in the current environment or in possible future periods
of high inflation. Regulated utility operations would be required to file a
general rate case in order to recover higher costs of operations. Margins in the
energy marketing business in the Equitable Utilities segment are highly
sensitive to competitive pressures and may not reflect the effects of inflation.
The results of operations in the Company's three business segments will be
affected by future changes in oil and natural gas prices and the
interrelationship between oil, natural gas and other energy prices.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $1.0 million during 1999 in connection with remediating
its systems. The Company is not aware of any material problems resulting from
Year 2000 issues, either with its products, its internal systems, or the
products and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
AUDIT COMMITTEE
The Audit Committee, composed entirely of outside directors, meets
periodically with Equitable's independent auditors and management to review the
Company's financial statements and the results of audit activities. The Audit
Committee, in turn, reports to the Board of Directors on the results of its
review and recommends the selection of independent auditors.
FORWARD-LOOKING STATEMENTS
Disclosures in this annual report may include forward-looking statements
related to projected Company plans and expected results of operations. 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, availability of financing,
the timing and extent of the Company's success in acquiring natural gas and
crude oil properties and in discovering, developing and producing reserves,
delays in obtaining necessary governmental approvals, the impact of competitive
factors on profit margins in various markets in which the Company competes, and
the successful integration of acquired companies.
28
<PAGE> 29
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is the volatility of future
prices for natural gas, crude oil and propane, which can affect the operating
results of Equitable through the Equitable Production segment and the
unregulated marketing group within the Utilities segment. The Company's use of
derivatives to reduce the effect of this volatility is described in Note B to
the consolidated financial statements. The Company uses simple, nonleveraged
derivative instruments that are placed with major institutions whose
creditworthiness is continually monitored. The Company's use of these derivative
financial instruments is implemented under a set of policies approved by the
Board of Directors.
For commodity price derivatives used to hedge Company production, Equitable
sets policy limits relative to expected production and sales levels which are
exposed to price risk. The level of price exposure is limited by the value at
risk limits allowed by this policy. Volumes associated with future activities,
such as new drilling, recompletions and acquisitions, are not eligible for
hedging. Management monitors price and production levels on essentially a
continuous basis and will make adjustments to quantities hedged as warranted. In
general, Equitable's strategy is to become more highly hedged at prices
considered to be at the upper end of historical levels.
For commodity price derivatives used to hedge marketing physical positions,
the marketing group will engage in financial transactions also subject to
policies that limit the net positions to specific value at risk limits. In
general, this marketing group considers profit opportunities in both physical
and financial positions, and Equitable's policies apply equally thereto.
With respect to the energy derivatives held by the Company as of December
31, 1999, a decrease of 10% in the market price of natural gas and crude oil
from the December 31, 1999 levels would decrease the fair value of the natural
gas instruments by approximately $.7 million and would increase the fair value
of the crude oil instruments by approximately $.5 million. A 10% decrease would
have minimal impact on the fair value of the propane instruments.
The above analysis of the energy derivatives utilized for risk management
purposes does not include the favorable impact that the same hypothetical price
movement would have on the Company and its subsidiaries' physical purchases and
sales of natural gas. The portfolio of energy derivatives held for risk
management purposes approximates the notional quantity of the expected or
committed transaction volume of physical commodities with commodity price risk
for the same time periods. Furthermore, the energy derivative portfolio is
managed to complement the physical transaction portfolio, reducing overall risks
within limits. Therefore, an adverse impact to the fair value of the portfolio
of energy derivatives held for risk management purposes associated with the
hypothetical changes in commodity prices referenced above would be offset by a
favorable impact on the underlying hedged physical transactions, assuming the
energy derivatives are not closed out in advance of their expected term, the
energy derivatives continue to function effectively as hedges of the underlying
risk, and as applicable, anticipated transactions occur as expected.
The disclosure with respect to the energy derivatives relies on the
assumption that the contracts will exist parallel to the underlying physical
transactions. If the underlying transactions or positions are liquidated prior
to the maturity of the energy derivatives, a loss on the financial instruments
may occur, or the options might be worthless as determined by the prevailing
market value on their termination or maturity date, whichever comes first.
The Company has variable rate short-term debt. As such, there is some
limited exposure to future earnings due to changes in interest rates. A 100
basis point increase or decrease in interest rates would not have a significant
impact on future earnings of the Company.
29
<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE REFERENCE
--------------
<S> <C>
Report of Independent Auditors.............................. 31
Statements of Consolidated Income for each of the three
years in the period ended December 31, 1999............... 32
Statements of Consolidated Cash Flows for each of the three
years in the period ended December 31, 1999............... 33
Consolidated Balance Sheets December 31, 1999 and 1998...... 34 & 35
Statements of Common Stockholders' Equity for each of the
three years in the period ended December 31, 1999......... 36
Notes to Consolidated Financial Statements.................. 37 - 59
</TABLE>
30
<PAGE> 31
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Equitable Resources, Inc.
We have audited the accompanying consolidated balance sheets of Equitable
Resources, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, common stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Equitable
Resources, Inc. and Subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
--------------------------------
Ernst & Young LLP
Pittsburgh, Pennsylvania
February 14, 2000
31
<PAGE> 32
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1999 1998 1997
---------- -------- ----------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating revenues........................................ $1,062,738 $870,628 $913,069
Cost of sales............................................. 610,659 471,609 467,163
---------- -------- --------
Net operating revenues............................... 452,079 399,019 445,906
---------- -------- --------
Operating expenses:
Operation and maintenance............................... 80,879 82,744 104,200
Exploration............................................. 9,288 27,211 7,260
Production.............................................. 26,206 30,289 31,851
Selling, general and administrative..................... 92,229 103,563 100,328
Depreciation, depletion and amortization................ 100,722 85,170 76,032
Restructuring, impairment and other nonrecurring
charges.............................................. -- 81,840 24,055
---------- -------- --------
Total operating expenses............................. 309,324 410,817 343,726
---------- -------- --------
Operating income (loss)................................... 142,755 (11,798) 102,180
Equity in earnings of nonconsolidated subsidiaries........ 2,863 2,667 --
Gain on sale of assets.................................... -- -- 50,120
---------- -------- --------
Earnings (loss) from continuing operations, before
interest & taxes........................................ 145,618 (9,131) 152,300
Interest charges.......................................... 37,132 40,302 34,903
---------- -------- --------
Income (loss) before income taxes......................... 108,486 (49,433) 117,397
Income taxes (benefits)................................... 39,356 (22,381) 43,210
---------- -------- --------
Net income (loss) from continuing operations before
extraordinary loss...................................... 69,130 (27,052) 74,187
Income (loss) from discontinued operations after taxes.... -- (8,804) 3,870
Extraordinary loss after taxes -- early extinguishment of
debt.................................................... -- (8,263) --
---------- -------- --------
Net income (loss)......................................... $ 69,130 $(44,119) $ 78,057
========== ======== ========
Earnings (loss) per share of common stock:
Basic:
Continuing operations, before extraordinary loss..... $ 2.03 $ (0.73) $ 2.06
Discontinued operations.............................. -- (0.24) 0.11
Extraordinary loss -- early extinguishment of debt... -- (0.22) --
---------- -------- --------
Net income (loss).................................... $ 2.03 $ (1.19) $ 2.17
========== ======== ========
Diluted:
Continuing operations, before extraordinary loss..... $ 2.01 $ (0.73) $ 2.05
Discontinued operations.............................. -- (0.24) 0.11
Extraordinary loss -- early extinguishment of debt... -- (0.22) --
---------- -------- --------
Net income (loss).................................... $ 2.01 $ (1.19) $ 2.16
========== ======== ========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 33
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- --------
(THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations, before
extraordinary items..................................... $ 69,130 $ (27,052) $ 74,187
--------- --------- --------
Adjustments to reconcile net income (loss) to net cash
provided
by operating activities:
Impairment of assets.................................. -- 75,245 13,000
Exploration expense................................... 9,288 27,211 7,260
Depreciation, depletion and amortization.............. 100,722 85,170 76,032
Gain on sale of property.............................. -- -- (50,120)
Amortization of construction contract costs........... 23,100 8,271 7,925
Deferred income taxes (benefits)...................... 14,635 (29,537) 31,008
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues.......... 42,639 117,521 (59,015)
Contract receivables............................... (25,170) 459 (4,000)
Deferred purchased gas cost........................ 10,370 5,646 16,026
Prepaid expenses and other......................... (19,460) 32,353 (12,858)
Accounts payable................................... (66,535) (121,396) 54,254
Deferred revenue................................... (13,867) (16,529) (22,156)
Other -- net....................................... 28,543 (31,186) (28,003)
--------- --------- --------
Total adjustments................................ 104,265 153,228 29,353
--------- --------- --------
Net cash provided by continuing operating
activities................................... 173,395 126,176 103,540
Net cash (used in) provided by discontinued
operations................................... -- (24,473) 18,321
--------- --------- --------
Net cash provided by operating activities...... 173,395 101,703 121,861
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on continuing operations............. (101,991) (158,714) (227,360)
Capital expenditures on discontinued operations........... -- (32,004) (32,835)
Carnegie acquisition...................................... (40,128) -- --
Increase in investment in nonconsolidated subsidiaries.... (23,436) (17,010) (427)
Proceeds from sale of property............................ 8,935 338,255 181,566
--------- --------- --------
Net cash provided by (used in) investing
activities....................................... (156,620) 130,527 (79,056)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.................................. -- 2,496 6,631
Purchase of treasury stock................................ (94,615) (37,747) (28,596)
Dividends paid............................................ (40,384) (43,800) (42,679)
Proceeds from issuance of nonrecourse note for project
financing............................................... 17,000 -- --
Purchase of debt due 2000 through 2026.................... -- (68,556) --
Proceeds from preferred trust securities.................. -- 125,000 --
Repayments and retirements of long-term debt.............. (74,972) (10,880) --
Increase (decrease) in short-term loans................... 91,783 (165,741) 76,544
--------- --------- --------
Net cash provided (used) by financing activities... (101,188) (199,228) 11,900
--------- --------- --------
Net increase (decrease) in cash and cash equivalents........ (84,413) 33,002 54,705
Cash and cash equivalents at beginning of year.............. 102,444 69,442 14,737
--------- --------- --------
Cash and cash equivalents at end of year.................... $ 18,031 $ 102,444 $ 69,442
========= ========= ========
CASH PAID DURING THE YEAR FOR:
Interest (net of amount capitalized)...................... $ 54,516 $ 46,973 $ 43,533
========= ========= ========
Income taxes.............................................. $ 5,759 $ 15,568 $ 16,030
========= ========= ========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE> 34
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 18,031 $ 102,444
Accounts receivable (less accumulated provision for
doubtful accounts: 1999, $13,024; 1998, $9,818)........ 148,103 199,362
Unbilled revenues......................................... 46,686 41,616
Inventory................................................. 40,859 33,743
Deferred purchased gas cost............................... 29,075 39,445
Prepaid expenses and other................................ 44,084 34,832
---------- ----------
Total current assets................................... 326,838 451,442
---------- ----------
INVESTMENT IN NONCONSOLIDATED SUBSIDIARIES.................. 40,873 17,437
---------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Equitable Utilities....................................... 919,815 889,572
Equitable Production...................................... 1,107,345 1,041,269
NORESCO................................................... 25,368 25,922
---------- ----------
Total property, plant and equipment.................... 2,052,528 1,956,763
Less accumulated depreciation and depletion................. 831,097 762,320
---------- ----------
Net property, plant and equipment...................... 1,221,431 1,194,443
---------- ----------
OTHER ASSETS:
Regulatory assets......................................... 63,382 65,983
Goodwill.................................................. 64,382 68,128
Other..................................................... 72,668 63,423
---------- ----------
Total other assets..................................... 200,432 197,534
---------- ----------
Total................................................ $1,789,574 $1,860,856
========== ==========
</TABLE>
See notes to consolidated financial statements.
34
<PAGE> 35
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion long-term debt............................ $ -- $ 74,136
Short-term loans.......................................... 207,486 115,703
Accounts payable.......................................... 81,444 147,979
Other current liabilities................................. 140,600 104,142
---------- ----------
Total current liabilities.............................. 429,530 441,960
---------- ----------
LONG-TERM DEBT:
Debentures and medium-term notes.......................... 281,350 281,350
Nonrecourse project financing............................. 17,000 --
---------- ----------
Total long-term debt................................... 298,350 281,350
DEFERRED AND OTHER CREDITS:
Deferred income taxes..................................... 183,896 172,676
Deferred investment tax credits........................... 16,614 17,695
Deferred revenue.......................................... 59,451 70,441
Other..................................................... 33,923 43,315
---------- ----------
Total deferred and other credits....................... 293,884 304,127
---------- ----------
Commitments and contingencies............................... -- --
---------- ----------
PREFERRED TRUST SECURITIES.................................. 125,000 125,000
---------- ----------
COMMON STOCKHOLDERS' EQUITY:
Common stock, no par value, authorized 80,000 shares;
shares issued: 1999 and 1998, 37,252................... 280,617 280,400
Treasury stock, shares at cost: 1999, 4,522; 1998,
1,396.................................................. (133,913) (39,298)
Retained earnings......................................... 496,072 467,326
Accumulated other comprehensive income (loss)............. 34 (9)
---------- ----------
Total common stockholders' equity...................... 642,810 708,419
---------- ----------
Total................................................ $1,789,574 $1,860,856
========== ==========
</TABLE>
See notes to consolidated financial statements.
35
<PAGE> 36
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
------------------------ OTHER COMMON
SHARES NO RETAINED COMPREHENSIVE STOCKHOLDERS'
OUTSTANDING PAR VALUE EARNINGS INCOME EQUITY
----------- --------- --------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996........... 35,346 $223,637 $519,867 $(1,221) $ 742,283
Comprehensive income:
Net income for the year 1997..... 78,057 78,057
Foreign currency translation..... 1,168 1,168
---------
Total comprehensive income....... 79,225
Dividends ($1.18 per share)........ (42,679) (42,679)
Stock issued:
Acquisition of subsidiary........ 2,401 68,276 68,276
Conversion of 9 1/2%
debentures..................... 33 370 370
Stock-based compensation plans... 106 3,323 3,323
Dividend reinvestment plan....... 43 1,318 1,318
Treasury stock purchases........... (1,000) (28,596) (28,596)
---------
Net change in common stock....... 44,691
------ -------- -------- ------- ---------
BALANCE, DECEMBER 31, 1997........... 36,929 268,328 555,245 (53) 823,520
Comprehensive income (loss):
Net loss for the year 1998....... (44,119) (44,119)
Foreign currency translation..... 44 44
---------
Total comprehensive loss......... (44,075)
Dividends ($1.18 per share)........ (43,800) (43,800)
Stock issued:
Acquisition of subsidiary........ 171 5,460 5,460
Stock-based compensation plans... 56 3,990 3,990
Dividend reinvestment plan....... 40 1,071 1,071
Stock repurchase program........... (1,340) (37,747) (37,747)
---------
Net change in common stock....... (27,226)
------ -------- -------- ------- ---------
BALANCE, DECEMBER 31, 1998........... 35,856 241,102 467,326 (9) 708,419
Comprehensive income:
Net income for the year 1999..... 69,130 69,130
Foreign currency translation..... 43 43
---------
Total comprehensive income....... 69,173
Dividends ($1.18 per share)........ (40,384) (40,384)
Stock issued:
Stock-based compensation plans... 220 6,959 6,959
Stock repurchase program........... (3,347) (101,357) (101,357)
---------
Net change in common stock....... (94,398)
------ -------- -------- ------- ---------
BALANCE, DECEMBER 31, 1999........... 32,729 $146,704 $496,072 $ 34 $ 642,810
------ -------- -------- ------- ---------
</TABLE>
- ---------------
Common shares authorized: 80,000,000 shares. Preferred shares authorized:
3,000,000 shares. There are no preferred shares issued or outstanding.
Common shares outstanding are net of treasury stock: 1999 -- 4,522,000 shares
($133,913,000); 1998--1,396,000 shares ($39,298,000); 1997 -- 56,000 shares
($1,551,000).
Retained earnings of $495,791,000 are available for dividends on, or purchase
of, common stock pursuant to restrictions imposed by indentures securing
long-term debt.
See notes to consolidated financial statements.
36
<PAGE> 37
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Equitable Resources, Inc. and all subsidiaries, ventures and
partnerships in which a controlling interest is held (Equitable or the Company).
Equitable also consolidates its interest in oil and natural gas partnerships.
Equitable uses the equity method of accounting for companies where its ownership
is between 20% and 50%.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents. These
investments are accounted for at cost. Interest earned on cash equivalents is
included in interest charges.
Inventories: Inventories, which consist of natural gas stored underground
and materials and supplies, are stated at average cost.
Properties, Depreciation and Depletion: Plant, property and equipment is
carried at cost. Depreciation is provided on the straight-line method based on
estimated service lives, ranging from 3 to 70 years except for most natural gas
and crude oil production properties as explained below.
The Company uses the successful efforts method of accounting for
exploration and production activities. Under this method, the cost of productive
wells and development dry holes, as well as productive acreage, are capitalized
and depleted on the unit-of-production method.
Deferred Purchased Natural Gas Cost and Other Regulatory Assets: The
Company's distribution and interstate pipelines are subject to rate regulation
by state and federal regulatory commissions. Accounting for these operations is
in accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation."
Where permitted by regulatory authority under purchased natural gas adjustment
clauses or similar tariff provisions, the Company defers the difference between
purchased natural gas cost, less refunds, and the billing of such cost and
amortizes the deferral over subsequent periods in which billings either recover
or repay such amounts.
Certain other costs, which will be passed through to customers under
ratemaking rules for regulated operations, are deferred by the Company as
regulatory assets when recovery through rates is expected. These amounts relate
primarily to the accounting for income taxes. The Company believes that it will
continue to be subject to rate regulation that will provide for the recovery of
deferred costs.
Derivative Commodity Instruments: The Company uses exchange-traded natural
gas and crude oil futures contracts and options and over-the-counter (OTC)
natural gas and crude oil swap agreements and options to hedge exposures to
fluctuations in oil and natural gas prices and for trading purposes.
At contract inception, the Company designates derivative commodity
instruments as hedging or trading activities. The Company uses the deferral
accounting method to account for exchange-traded derivative commodity
instruments designated and effective as hedges. Under this method, changes in
the market value of these hedge positions are deferred and included in other
current assets and other current liabilities. These deferred realized and
unrealized gains and losses are included in operating revenues when the hedged
transactions occur. In the event a hedge contract is terminated early, the
deferred gain or loss realized on early termination of the contract will be
recognized as the hedged production occurs. The Company uses the settlement
method to account for OTC swap agreements and options designated and effective
as hedges. Under this method, gains or losses associated with the contract are
recognized at the time the hedged production occurs. Premiums on option
contracts are deferred in other current assets and recognized in operating
revenues over the option term.
37
<PAGE> 38
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transactions that are not designated and effective as hedges are marked to
market. Cash flows from derivative contracts are considered operating
activities.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." 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 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.
The Company has not yet determined what the effect of SFAS No. 133 will be
on the earnings and financial position of the Company.
Capitalized Interest: Interest costs for the construction of certain
long-term assets are capitalized and amortized over the related assets'
estimated useful lives. Interest costs during 1999, 1998 and 1997 of $4.6
million, $2.7 million and $4.1 million, respectively, were capitalized as a
portion of the cost of the related long-term assets.
Goodwill: Goodwill is the excess of the acquisition cost of businesses over
the fair value of the identifiable net assets acquired. Goodwill is amortized on
a straight-line basis over a period of 20 years. The Company assesses the
impairment of goodwill related to consolidated subsidiaries whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. A determination of impairment (if any) is made based on estimates
of future cash flows. In instances where goodwill has been recorded for assets
that are subject to an impairment loss, the carrying amount of the goodwill is
eliminated before any reduction is made to the carrying amounts of impaired
long-lived assets and identifiable intangibles.
Stock-Based Compensation: The Company has elected to follow Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for stock options and
awards. Accordingly, compensation cost for stock options and awards is measured
as the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the exercise price of the stock option or award.
Revenue Recognition: Revenues for regulated natural gas sales to retail
customers are recognized as service is rendered, including an accrual for
unbilled revenues from the date of each meter reading to the end of the
accounting period. Revenue is recognized for exploration and production
activities when deliveries of natural gas, crude oil and natural gas liquids are
made. Revenues from natural gas transportation and storage activities are
recognized in the period service is provided. Revenues from energy marketing
activities are recognized when deliveries occur. Revenues from activities
classified as energy trading are recognized immediately.
The Company recognizes revenue from shared energy savings contracts as
energy savings are measured and verified. Revenue received from customer
contract termination payments is recognized when received. Revenue from other
long-term contracts, such as turnkey contracts, is recognized on a
percentage-of-completion basis, determined using the cost-to-cost method. Any
maintenance revenues are recognized as related services are performed.
38
<PAGE> 39
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Sales of Receivables: The Company sells some amounts due from customers to
financial institutions. At the time of the transfer, the amounts due from the
customer are recognized as revenue, the transfer is accounted for as the sale of
a receivable, the receivable is no longer reflected in the financial statements
and any related deferred costs are charged to operations.
Income Taxes: The Company files a consolidated federal income tax return.
The current provision for income taxes represents amounts paid or estimated to
be payable. Deferred income tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities.
Where deferred tax liabilities will be passed through to customers in regulated
rates, the Company establishes a corresponding regulatory asset for the increase
in future revenues that will result when the temporary differences reverse.
Investment tax credits realized in prior years were deferred and are being
amortized over the estimated service lives of the related properties where
required by ratemaking rules.
Earnings Per Share (EPS): "Basic" EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. "Diluted" EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted to common stock.
Segment Disclosures: Operating segments are revenue-producing components of
the enterprise for which separate financial information is produced internally
and are subject to evaluation by the Company's chief executive officer in
deciding how to allocate resources. Operating segments are evaluated on their
contribution to the Company's consolidated results, based on earnings before
interest and taxes. Interest charges, income taxes and certain corporate office
expenses are managed on a consolidated basis and are allocated pro forma to
operating segments.
Reclassification: Certain previously reported amounts have been
reclassified to conform with the 1999 presentation.
B. DERIVATIVE COMMODITY INSTRUMENTS
The Company uses exchange-traded natural gas, crude oil and propane futures
contracts, options and OTC natural gas, crude oil and propane swap agreements
and options (collectively, derivative contracts) to hedge exposures to
fluctuations in natural gas, oil and propane prices and for trading purposes.
Futures contracts obligate the Company to buy or sell a designated commodity at
a future date for a specified price. Swap agreements involve payments to or
receipts from counterparties based on the differential between a fixed and
variable price for the commodity. Exchange-traded instruments are generally
settled with offsetting positions but may be settled by delivery of commodities.
OTC arrangements require settlement in cash.
HEDGING ACTIVITIES
The Company is exposed to risk from fluctuations in energy prices in the
normal course of business. The Company uses derivative contracts to hedge
exposures to natural gas, oil and propane price changes.
The following table summarizes the absolute notional quantities of the
derivative contracts held for purposes other than trading at December 31, 1999
and 1998. The open futures and options contracts at year-end 1999 have
maturities extending through December 2000, while the swap agreements have
maturities extending through March of 2001. At December 31, 1998, the open
futures and options contracts had maturities extending through
39
<PAGE> 40
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
B. DERIVATIVE COMMODITY INSTRUMENTS (CONTINUED)
October 2000 and December 1999, respectively, while the swap agreements had
maturities extending through May of 2001.
<TABLE>
<CAPTION>
ABSOLUTE NOTIONAL DEFERRED
QUANTITY GAIN/LOSS
------------------ ----------------
1999 1998 1999 1998
------- ------- ------ ------
<S> <C> <C> <C> <C>
(BCF EQUIVALENT) (MILLIONS)
Natural gas
Futures............................................... 18.8 41.5 $ (0.8) $ (2.1)
Swaps................................................. 71.2 300.8 (2.9) (11.6)
Options............................................... 17.0 72.9 0.8 1.0
----- ----- ------ ------
Totals.............................................. 107.0 415.2 $ (2.9) $(12.7)
----- ----- ------ ------
(MBLS EQUIVALENT) (MILLIONS)
Oil
Futures............................................... 0.2 -- $ (0.7) $ --
Swaps................................................. 0.8 -- (0.5) --
Options............................................... 0.3 -- (0.9) --
----- ----- ------ ------
Totals.............................................. 1.3 -- $ (2.1) $ --
----- ----- ------ ------
(MBLS EQUIVALENT) (MILLIONS)
Propane
Futures............................................... -- -- $ -- $ --
Swaps................................................. 0.8 -- (0.3) --
Options............................................... 0.1 -- -- --
----- ----- ------ ------
0.9 -- $ (0.3) $ --
----- ----- ------ ------
</TABLE>
Deferred realized amounts from hedge transactions were a $.1 million gain
at December 31, 1999, and a $.6 million gain at December 31, 1998. The Company
recognized net losses on its hedging activities of $8.5 million, $3.0 million
and $9.8 million in 1999, 1998 and 1997, respectively. These losses are offset
when the underlying products are sold.
The Company is exposed to credit loss in the event of nonperformance by
counterparties to derivative contracts. This credit exposure is limited to
derivative contracts with a positive fair value. Futures contracts have minimal
credit risk because futures exchanges are the counterparties. The Company
manages the credit risk of the other derivative contracts by limiting dealings
to those counterparties who meet the Company's criteria for credit and liquidity
strength.
TRADING ACTIVITIES
The Company conducts trading activities through its deregulated marketing
group. The function of the Company's trading business is to contribute to the
Company's earnings by taking market positions within strictly defined trading
limits.
At December 31, 1999, the absolute notional quantities of the futures,
swaps and physical contracts held for trading purposes were 1.4 Bcfe, 9.2 Bcfe
and 17.0 Bcfe, respectively. There were no outstanding derivative contracts held
for trading purposes at December 31, 1998.
40
<PAGE> 41
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
B. DERIVATIVE COMMODITY INSTRUMENTS (CONTINUED)
The table below sets forth the end of period fair value and average fair
value during the year for all the derivative contracts held for trading
purposes.
<TABLE>
<CAPTION>
1999 1997
--------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------- -----------
(THOUSANDS) (THOUSANDS)
<S> <C> <C> <C> <C>
Fair value at December 31............... $2,695 $2,914 $82,912 $79,012
Average fair value...................... $2,583 $2,837 $12,161 $10,509
</TABLE>
Trading activity resulted in net losses of $.6 million for 1999. There was
no trading activity in 1998. In 1997 trading activity resulted in a net gain of
$1.1 million.
C. ASSET IMPAIRMENT AND OTHER NONRECURRING ITEMS
The Company's 1998 and 1997 results of operations include several
significant nonrecurring items which are included in operating expense.
In December 1998, as a result of a sustained decrease in natural gas and
crude oil prices and a change in management's objectives in the Gulf of Mexico,
the Company recognized a write-down in the carrying value of crude oil and
natural gas production assets of $36.9 million. To improve the efficiency of
Appalachian production operations, the Company obtained authority in 1999 from
the Federal Energy Regulatory Commission (FERC) to decertify the pipeline
facilities of Kentucky West Virginia Gas Company, LLC (Kentucky West). In
decertifying the pipeline, the Company determined that not all costs would be
collectible in rates and reduced regulatory and other assets by $9.2 million,
including $3.6 million in Equitable Utilities and $5.6 million in Equitable
Production. In addition, the Company implemented a fundamental restructuring of
its utility, nonregulated retail sales and headquarters groups. This process
included a voluntary workforce reduction incentive offer to reduce staff, the
closing or consolidation of several offices, reconfiguration of management
information systems, the realignment of many administrative functions to
specific operating segments and the curtailment of several auxiliary business
ventures. Expenses associated with these initiatives totaled $35.7 million
including $8.1 million in the utility group, $2.1 million in the production
group, $2.7 million in energy services, $3.0 million in the energy sales unit
and $19.8 million in headquarters.
In June 1997, an evaluation of the carrying value of long-lived assets
resulted in a write-down of the Utilities segment's investment in the Avoca
bedded salt natural gas storage project, for which the Company recognized a $13
million charge. In September 1997, the Company recorded an additional charge of
$10.7 million related to evaluation and reduction of headquarters and noncore
business functions.
D. DIRECT BILLING AND OTHER SETTLEMENTS
Kentucky West received FERC approval of settlement agreements with all
customers for direct billing to recover the higher Natural Gas Policy Act (NGPA)
prices, which the FERC had denied on natural gas produced from exploration and
production properties between 1978 and 1983. The portion of the settlement with
the Equitable Gas Company division was subject to Pennsylvania Public Utility
Commission (PUC) review. The PUC approved Equitable Gas Company's collection of
$2.6 million in September 1998 and $7.8 million in September 1997 related to the
direct billing settlement. These amounts are recognized as other operating
revenues in the production segment for 1998 and 1997.
41
<PAGE> 42
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
E. DISCONTINUED OPERATIONS
In April 1998, management adopted a formal plan to sell the Company's
natural gas midstream operations. The operations included an integrated natural
gas gathering, processing and storage system in Louisiana and a natural gas and
electricity trading and marketing business based in Houston. The financial
statements for all periods have been restated to classify these as discontinued
operations. In December 1998, the Company completed the sale of these operations
to various parties for $338.3 million, which included working capital
adjustments.
Net income (loss) from discontinued operations was $(8.8) million and $3.9
million for the years ended December 31, 1998 and 1997, respectively. The net
loss in 1998 reflects an after-tax gain on the sale of $10.1 million. The net
income (loss) for each year was reported net of income tax expense (benefit) of
$(0.2) million and $3.2 million in 1998 and 1997, respectively.
Interest expense allocated to discontinued operations was $7.4 million and
$7.2 million for the years ended December 31, 1998 and 1997, respectively.
F. SALE OF PROPERTY
In July 1997, the Company entered into agreements with five parties for the
sale of the Company's crude oil and natural gas properties in the western United
States and Canada. The sales were completed in September and October for an
aggregate cash sales price of $170 million. In October 1997, the Company sold
its Union Drilling division, a contract drilling company, for $7 million. These
sales resulted in gains of $52 million in 1997.
G. ACQUISITIONS
In December 1999, the Company acquired Carnegie Natural Gas Company and
subsidiaries (Carnegie) for $40 million, including transaction costs. The
Carnegie operations include natural gas distribution and pipeline businesses
which will be integrated into those divisions of the Company's Utilities
segment, as well as exploration and production businesses which will be
integrated into the Production segment. Carnegie operates more than 1,000
natural gas wells in Pennsylvania and West Virginia and supplies approximately
8,000 industrial, commercial and residential customers. No goodwill was recorded
in connection with the acquisition, which was accounted for under the purchase
method of accounting.
In July 1997, the Company acquired Northeast Energy Services, Inc.
(NORESCO) in exchange for a combination of 2.1 million shares of the Company's
stock valued at approximately $67 million and $10 million in cash, including
transaction costs. NORESCO is a provider of comprehensive energy efficiency
systems and services for commercial, industrial, government and institutional
customers. NORESCO's primary assets are accounts receivable from customers and
deferred contract costs, which are included in other assets in the consolidated
balance sheets. The transaction was treated as a purchase for accounting
purposes. The Company recorded goodwill of $57 million which is being amortized
over 20 years. The $67 million noncash portion of the acquisition is excluded
from capital expenditures in the 1997 cash flows statement.
In 1997, the NORESCO segment also acquired Scallop Thermal Industries
(Scallop) and Lighting Management, Inc. (LMI) for a total cost of $4 million.
These acquisitions were accounted for under the purchase method of accounting.
The effect of each of these acquisitions, individually and aggregated by
year of purchase, is not material to the results of operations or financial
position of Equitable, and therefore, pro forma financial information is not
presented.
42
<PAGE> 43
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
H. INCOME TAXES
The following table summarizes the source and tax effects of temporary
differences between financial reporting and tax bases of assets and liabilities.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
(THOUSANDS)
<S> <C> <C>
Deferred tax liabilities (assets):
Exploration and development costs expensed for income tax
reporting.............................................. $104,628 $ 86,742
Tax depreciation in excess of book depreciation........... 163,755 163,788
Regulatory temporary differences.......................... 25,069 26,095
Deferred purchased natural gas cost....................... 6,710 13,594
Deferred revenues/expenses................................ (14,507) (14,324)
Alternative minimum tax................................... (50,114) (58,517)
Investment tax credit..................................... (6,565) (6,998)
Uncollectible accounts.................................... (6,450) (5,583)
Postretirement benefits................................... (3,982) (3,971)
Other..................................................... (21,836) (13,750)
-------- --------
Total (including amounts classified as current
liabilities of $12,812 for 1999 and $14,602 for
1998)................................................ $196,708 $187,076
======== ========
</TABLE>
As of December 31, 1999 and 1998, $59.1 million and $62.1 million,
respectively, of the net deferred tax liabilities are related to rate-regulated
operations and have been deferred as regulatory assets.
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- -------- -------
(THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $23,758 $ 5,331 $10,333
State............................................... 916 339 717
Foreign............................................. 47 -- 232
------- -------- -------
Deferred:
Federal............................................. 14,756 (22,033) 27,756
State............................................... (121) (7,504) 3,252
Foreign............................................. -- 1,486 920
------- -------- -------
Total............................................ $39,356 $(22,381) $43,210
======= ======== =======
</TABLE>
43
<PAGE> 44
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
H. INCOME TAXES (CONTINUED)
Provisions for income taxes differ from amounts computed at the federal
statutory rate of 35% on pretax income. The reasons for the difference are
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- -------- -------
(THOUSANDS)
<S> <C> <C> <C>
Tax at statutory rate................................. $37,970 $(17,301) $41,089
State income taxes.................................... 517 (4,657) 2,580
Nonconventional fuels tax credit...................... (817) (1,199) (816)
Other................................................. 1,686 776 357
------- -------- -------
Income tax expense (benefit)........................ $39,356 $(22,381) $43,210
======= ======== =======
Effective tax rate (benefit).......................... 36.3% (45.3)% 36.8%
======= ======== =======
</TABLE>
The consolidated federal income tax liability of the Company has been
settled through 1994.
The Company has not provided any U.S. tax on undistributed earnings of
foreign subsidiaries or joint ventures that are reinvested indefinitely outside
the United States. At December 31, 1999, consolidated retained earnings of the
Company included approximately $5.1 million of undistributed earnings from these
investments.
I. INVESTMENTS IN NONCONSOLIDATED SUBSIDIARIES
The NORESCO segment, through its energy infrastructure division, has
investments in unconsolidated partnerships. These investments represent equity
ownership interests in independent power plant (IPP) projects located
domestically in the United States as well as in selected international
countries.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
EQUITY INVESTEES LOCATION OWNERSHIP 1999 1998
- ------------------------------- ---------- --------- ------- -------
(THOUSANDS)
<S> <C> <C> <C> <C>
IGC/ERI Pan-Am Thermal Panama 50% $14,863 $ 510
Capital Center Energy USA 50% 12,779 4,401
Petroelectrica de Panama Panama 45% 9,228 8,807
Dona Julia Costa Rica 24% 3,235 2,958
Other USA Various 768 761
------- -------
$40,873 $17,437
======= =======
</TABLE>
IPP projects which NORESCO and its partners develop, construct and operate
are the result of specific needs of private or governmental entities to secure
power that is more cost effective and reliable than the current source of power
as well as to meet the growing energy demands of many international countries.
Long-term power purchase agreements are signed with the customer whereby they
agree to purchase the energy generated by the plant. The length of these
contracts ranges from 5 to 30 years.
The Company has invested approximately $29.3 million in these operations
since January 1998 and the Company's ownership share of the earnings for this
same time period is approximately $5.5 million. All projects have been completed
within the NORESCO segment using nonrecourse financing at the subsidiary level.
Foreign investments represent $27.3 million, or 67%, of investments in
nonconsolidated subsidiaries. In addition, $20 million of fixed assets is
included in NORESCO's property, plant and equipment balance at December 31,
1999, related to an independent power project located in Jamaica, of which
NORESCO is a majority owner. Total Company investments located in foreign
countries was $47.3 million at December 31, 1999.
44
<PAGE> 45
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
J. INTANGIBLE ASSETS
From 1995 to 1998, the Company acquired several energy services companies.
These transactions were treated as purchases for accounting purposes, with
goodwill being recorded.
Amortization of the goodwill is provided on the straight-line method over a
life of 20 years. Accumulated amortization at December 31, 1999 and 1998 was
$10,011 and $6,265, respectively. For the years ended December 31, 1999, 1998
and 1997, amortization expense, included in depreciation, depletion and
amortization, was $3,746, $3,858 and $2,214, respectively.
K. SHORT-TERM LOANS
Maximum lines of credit available to the Company were $500 million during
1999, 1998 and 1997. The Company is not required to maintain compensating bank
balances. Commitment fees averaging one-tenth of one percent were paid to
maintain credit availability.
At December 31, 1999, short-term loans consisted of $207.2 million of
commercial paper at a weighted average annual interest rate of 5.95% and the
subsidiary note for project financing described below. At December 31, 1998,
short-term loans consisted of $115.7 million of commercial paper at a weighted
average annual interest rate of 5.02%. The maximum amount of outstanding
short-term loans was $208 million in 1999, $315.7 million in 1998, and $302.5
million in 1997. The average daily total of short-term loans outstanding was
approximately $127.9 million during 1999, $191.7 million during 1998, and $229.6
million during 1997; weighted average annual interest rates applicable thereto
were 5.26% in 1999, 5.0% in 1998, and 5.7% in 1997.
L. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
(THOUSANDS)
<S> <C> <C>
7 1/2% debentures, due July 1, 1999
($75,000 principal amount, net of unamortized original
issue discount)........................................ $ -- $ 74,136
7 3/4% debentures, due July 15, 2026........................ 115,000 115,000
Medium-term notes:
8.0% to 9.0% Series A, due 2001 thru 2021................. 72,850 72,850
6.5% to 7.6% Series B, due 2003 thru 2023................. 75,500 75,500
6.8% to 7.6% Series C, due 2007 thru 2018................. 18,000 18,000
-------- --------
281,350 355,486
Less debt payable within one year........................... -- 74,136
-------- --------
Total debentures and medium-term notes................. 281,350 281,350
Nonrecourse note for project financing...................... 17,000 --
-------- --------
Total long-term debt................................... $298,350 $281,350
======== ========
</TABLE>
In 1998, as a result of the sale of the Company's natural gas midstream
operations, the Company repurchased and retired $35.0 million of 7 3/4%
debentures and $22.2 million of Series A Medium-Term Notes. Premiums paid were
$12.7 million, recognized net of income tax benefits, as an extraordinary loss
on early extinguishment of debt in 1998 of $8.3 million.
During 1999, a subsidiary of the Company issued a $17 million 9.25%
nonrecourse note for project financing. The proceeds of this note were used to
fund the operations of an independent power plant located in St. Catherine,
Jamaica. Interest payments related to this note are due quarterly.
45
<PAGE> 46
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
L. LONG-TERM DEBT (CONTINUED)
At December 31, 1999, the Company has the ability to issue $150 million of
additional long-term debt under the provisions of shelf registrations filed with
the Securities and Exchange Commission.
Interest expense on long-term debt amounted to $35.2 million in 1999, $34.9
million in 1998, and $35.1 million in 1997. Aggregate maturities of long-term
debt will be none in 2000, $10.1 million in 2001, none in 2002, $24.3 million in
2003 and $20.5 million in 2004.
M. DEFERRED REVENUE
In 1995, the Company sold an interest in certain Appalachian natural gas
properties, the production from which qualifies for nonconventional fuels tax
credit. The Company retained an interest in the properties that will increase
based on performance. As such, the proceeds of $133.5 million were recorded as
deferred revenues and are being recognized in income as financial targets are
achieved.
N. TRUST PREFERRED CAPITAL SECURITIES
In April 1998, $125 million of 7.35% Trust Preferred Capital Securities
were issued. The capital securities were issued through a subsidiary trust,
Equitable Resources Capital Trust I, established for the purpose of issuing the
capital securities and investing the proceeds in 7.35% Junior Subordinated
Debentures issued by the Company. The capital securities have a mandatory
redemption date of April 15, 2038; however, at the Company's option, the
securities may be redeemed on or after April 23, 2003. Proceeds were used to
reduce short-term debt outstanding. Interest expense for the years ended
December 31, 1999 and December 31, 1998 includes $9.2 million and $6.3 million,
respectively, of preferred dividends related to the trust preferred capital
securities.
O. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company has pension and other postretirement benefit plans covering
certain Utilities segment employees. Plans covering union members generally
provide benefits of stated amounts for each year of service. Plans covering
salaried utility employees use a benefit formula which is based upon employee
compensation and years of service.
46
<PAGE> 47
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
O. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
The following table sets forth the pension and other benefit plans' funded
status and amounts recognized for those plans in the Company's consolidated
balance sheets:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------- ------------------
1999 1998 1999 1998
-------- -------- ------- -------
(THOUSANDS)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year........ $148,493 $143,440 $43,491 $40,077
Service cost................................... 2,294 2,177 297 334
Interest cost.................................. 9,488 9,933 3,002 2,759
Amendments..................................... 5,038 323 582 --
Actuarial (gain) loss.......................... (9,513) 10,017 (577) 2,983
Benefits paid.................................. (9,726) (9,319) (4,866) (4,168)
Expenses paid.................................. (558) (205) -- --
Curtailments................................... (12) 2,519 -- --
Settlements.................................... (22,267) (11,362) -- --
Special termination benefits................... -- 970 -- 1,506
-------- -------- ------- -------
Benefit obligation at end of year........... 123,237 148,493 41,929 43,491
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of
year........................................ 177,205 164,801 8,454 6,274
Actual return on plan assets................... 13,958 31,867 407 368
Employer contribution.......................... 91 1,632 219 1,812
Benefits paid.................................. (9,726) (9,319) (3,632) --
Expenses paid.................................. (558) (205) -- --
Settlements.................................... (22,151) (11,571) -- --
-------- -------- ------- -------
Fair value of plan assets at end of year.... 158,819 177,205 5,448 8,454
-------- -------- ------- -------
Funded status.................................... 35,582 28,712 (36,481) (35,037)
Unrecognized net actuarial (gain) loss........... (31,733) (26,885) 14,988 16,595
Unrecognized prior service cost (credit)......... 14,825 13,125 410 (140)
Unrecognized initial net (asset) obligation...... (436) (819) 12,420 13,376
-------- -------- ------- -------
Net asset (liability) recognized............ $ 18,238 $ 14,133 $(8,663) $(5,206)
======== ======== ======= =======
Weighted-average assumptions as of December 31:
Discount rate.................................. 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets................. 10.00% 10.00% 10.00% 7.50%
Rate of compensation increase.................. 4.50% 4.50% 4.50% 4.50%
</TABLE>
For measurement purposes, a 5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was assumed
to decrease gradually to 4% for 2002 and remain at that level thereafter. The
pension asset of $18,238 at December 31, 1999 and $14,133 at December 31, 1998
is included in prepaid expenses and other current assets in the consolidated
balance sheets. The accrued liability for other postretirement benefits of
$8,663 at December 31, 1999 and $5,206 at December 31, 1998 is included in other
current liabilities.
47
<PAGE> 48
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
O. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
The Company's costs related to defined benefit pension and other benefit
plans comprised the following:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------------ ------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- ------ ------ ------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit
cost:
Service cost........................ $ 2,294 $ 2,177 $ 2,227 $ 297 $ 334 $ 254
Interest cost....................... 9,488 9,933 10,280 3,002 2,759 2,898
Expected return on plan assets...... (13,048) (13,377) (13,254) (898) (522) (483)
Amortization of prior service
cost............................. 1,823 1,579 1,441 31 (15) (214)
Amortization of initial net (asset)
obligation....................... (333) (390) (422) 955 986 985
Recognized net actuarial (gain)
loss............................. 90 3 (30) 921 749 617
Divestitures........................ -- -- -- -- (1,719) --
Special termination benefits........ -- 970 1,139 -- 1,506 --
Settlement (gain) loss.............. (5,781) (2,295) (4,016) -- -- --
Curtailment loss.................... 1,453 319 587 -- 419 --
-------- -------- -------- ------ ------ ------
Net periodic benefit cost........ $ (4,014) $ (1,081) $ (2,048) $4,308 $4,497 $4,057
======== ======== ======== ====== ====== ======
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $1,336, $1,336 and $0, respectively, as of
December 31, 1999 and $31,695, $31,695 and $28,426, respectively, as of December
31, 1998.
Assumed health care cost trend rates have an effect on the amounts reported
for the health care plans. A one-percentage point change in assumed health care
cost trend rates would have the following effects:
<TABLE>
<CAPTION>
ONE-PERCENTAGE POINT ONE-PERCENTAGE POINT
INCREASE DECREASE
------------------------ ------------------------
1999 1998 1997 1999 1998 1997
------ ------ ------ ------- ------- ----
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Effect on total of service and interest
cost components.......................... $ 218 $ 188 $ 247 $ (207) $ (177) $--
Effect on postretirement benefit
obligation............................... 2,105 2,316 2,983 (2,815) (2,238) --
</TABLE>
As of December 31, 1999, approximately $1.5 million of the accrued
postretirement benefits related to rate-regulated operations have been deferred
as regulatory assets. Rate recovery requires the Company to place agreed upon
amounts in trust when collected in rates until such time as they are applied to
retiree benefits or returned to ratepayers. Trust assets consist principally of
equity and debt securities.
As of January 1, 1997, the Company amended its 401(k) employee savings plan
for salaried employees to provide a base Company contribution to that plan for
employees no longer eligible for defined benefit plans. In addition, during 1997
the present value of these employees' future retirement benefits under the
defined benefit plans could be rolled over to the 401(k) plan, at the employee's
option, or used to purchase an annuity. Expense recognized by the Company
related to this and other 401(k) savings plans totaled $2.3 million in 1999,
$3.5 million in 1998, and $3.9 million in 1997.
48
<PAGE> 49
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
P. COMMON STOCK AND EARNINGS PER SHARE
COMMON STOCK RESERVE
At December 31, 1999, shares of Equitable's authorized and unissued common
stock were reserved as follows:
<TABLE>
<CAPTION>
(THOUSANDS)
<S> <C>
Possible future acquisitions............................. 6,607
Stock compensation plans................................. 4,892
------
Total............................................... 11,499
======
</TABLE>
EARNINGS PER SHARE
Basic EPS is computed by dividing income (loss) from continuing operations
before extraordinary loss by the weighted average number of common shares
outstanding during the period, without considering any dilutive items. Diluted
EPS is computed by dividing income (loss) from continuing operations before
extraordinary loss, adjusted for the assumed conversion of debt, by the weighted
average number of common shares and potentially dilutive securities, net of
shares assumed to be repurchased using the treasury stock method. Purchases of
treasury shares are calculated using the average share price for the Company's
common stock during the period. Potentially dilutive securities arise from the
assumed conversion of outstanding stock options and awards and, in years prior
to 1998, the assumed conversion of then-outstanding convertible debentures.
The computation of basic and diluted earnings (loss) per common share from
continuing operations is shown in the table below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
--------- ---------- ---------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Net income (loss) from continuing operations, before
extraordinary item, applicable to common stock......... $69,130 $(27,052) $74,187
Average common shares outstanding......................... 34,044 36,833 36,003
Basic earnings (loss) per common share from continuing
operations, before extraordinary item.................. $ 2.03 $ (0.73) $ 2.06
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Net income (loss) from continuing operations, before
extraordinary item, applicable to common stock (a)..... $69,130 $(27,052) $74,190
Average common shares outstanding......................... 34,044 36,833 36,003
Potentially dilutive securities:
Stock options and awards (b)........................... 293 -- 109
Common shares issuable upon conversion of
9 1/2% convertible debentures........................ -- -- 4
------- -------- -------
Total................................................ 34,337 36,833 36,116
Diluted earnings (loss) per common share from continuing
operations, before extraordinary item.................. $ 2.01 $ (0.73) $ 2.05
</TABLE>
- ---------------
(a) The after-tax benefit of interest expense on the assumed conversion of the
9 1/2% convertible debentures was $3,000 in 1997.
49
<PAGE> 50
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
P. COMMON STOCK AND EARNINGS PER SHARE (CONTINUED)
(b) Options to purchase 12,000 and 284,000 shares of common stock were not
included in the computation of diluted earnings per common share because the
options' exercise prices were greater than the average market prices of the
common shares for 1999 and 1997, respectively.
Q. STOCK-BASED COMPENSATION PLANS
LONG-TERM INCENTIVE PLANS
The Company's 1994 and 1999 Long-Term Incentive Plans provide for the
granting of shares of common stock to officers and key employees of the Company.
These grants may be made in the form of stock options, restricted stock, stock
appreciation rights and other types of stock-based or performance-based awards
as determined by the Compensation Committee of the Board of Directors at the
time of each grant. Stock awarded under the plan, or purchased through the
exercise of options, and the value of stock appreciation units are restricted
and subject to forfeiture should an optionee terminate employment prior to
specified vesting dates. In no case may the number of shares granted under the
plan exceed 1,725,500 and 3,000,000 shares, respectively. Options granted under
the plans expire 5 to 10 years from the date of grant and some contain vesting
provisions which are based upon Company performance.
Also reflected in the option tables below are options assumed in
conjunction with the NORESCO acquisition in July 1997. All outstanding options
granted under NORESCO's 1990 Incentive Stock Option Plan were converted by
Equitable to nonqualified stock options with the right to receive, upon exercise
of the option, the same Equitable stock and cash that shareholders of NORESCO
received in the acquisition. As a result of this conversion, 872,000 NORESCO
stock options were converted to 256,400 Equitable stock options with the
exercise price per share proportionately adjusted. The adjusted exercise prices
of these stock options range from $5.1012 to $5.9516 per share. The acquisition
also accelerated the vesting period of these options, the latest of which expire
in 2006. During 1999, 11,000 stock options were exercised under this plan, with
13,000 outstanding at December 31, 1999.
Pro forma information regarding net income and earnings per share for
options granted is required by SFAS No. 123, "Accounting for Stock-Based
Compensation," and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS No. 123. The fair
value for these option grants was estimated at the dates of grant using a
Black-Scholes option pricing model with the following assumptions for 1999, 1998
and 1997, respectively.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Risk-free interest rate (range).......... 4.75% to 6.41% 4.80% to 5.63% 5.71% to 5.79%
Dividend yield........................... 3.35% 4.06% 3.96%
Volatility factor........................ .216 0.173 0.132
Weighted average expected life of
options................................ 7 years 4 years 1.25 years
Options granted.......................... 1,050,200 1,014,900 339,100
Weighted average fair market value of
options granted during the year........ $7.16 $3.91 $1.93
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's
50
<PAGE> 51
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Q. STOCK-BASED COMPENSATION PLANS (CONTINUED)
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. The amount of estimated
expense that would have been recognized under SFAS No. 123 is not considered
material to the financial statements in any of the years presented.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Options outstanding January 1............................ 1,258,185 758,534 948,650
Granted.................................................. 1,050,200 1,014,900 339,100
Forfeitures.............................................. (452,900) (453,257) (348,800)
Exercised................................................ (165,922) (61,992) (180,416)
--------- --------- ---------
Options outstanding December 31.......................... 1,689,563 1,258,185 758,534
========= ========= =========
</TABLE>
Options outstanding at December 31, 1999 include 544,863 exercisable at that
date.
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
At December 31:
Prices of options outstanding........... $5.10 to $37.88 $5.10 to $34.63 $5.10 to $36.50
Average option price.................... $29.58 $29.26 $28.02
</TABLE>
On September 5, 1997, the Company granted 106,127 stock awards from the
1994 Long-Term Incentive Plan for the Executive Retention Program. This program
was established to provide additional incentive benefits to retain senior
executive employees of the Company. The vesting of these awards is contingent on
attainment of specific stock price targets and the continued employment of the
participants until January 1, 2001. In 1998 and 1999, the Company granted 25,000
and 128,000 additional stock awards, respectively, from this Long-Term Incentive
Plan to key executives. The fair value of these awards was estimated at the date
of grant utilizing a Black-Scholes pricing model and the same assumptions as
listed above and would result in compensation expense not materially different
from that recorded by the Company under APB Opinion No. 25. Compensation expense
recorded by the Company related to stock awards was $4.6 million in 1999, $1.0
million in 1998 and $0.3 million in 1997.
NONEMPLOYEE DIRECTORS' STOCK INCENTIVE PLANS
The Company's 1994 and 1999 Nonemployee Directors' Stock Incentive Plans
provide for the granting of up to 80,000 and 300,000 shares, respectively, of
common stock in the form of stock option grants and restricted stock awards to
non-employee directors of the Company. The exercise price for each share is
equal to market price of the common stock on the date of grant. Each option is
subject to time-based vesting provisions and expires 5-10 years after date of
grant. At December 31, 1999, 70,000 options were outstanding at prices ranging
from $28.38 to $34.63 per share and 6,000 options had been exercised under these
plans.
R. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, as well as short-term
loans, approximates fair value due to the short maturity of the instruments.
The estimated fair value of long-term debt described in Note L at December
31, 1999 and 1998 is $294.4 million and $391.2 million, respectively. The fair
value was estimated based on discounted values using a current discount rate
reflective of the remaining maturity.
51
<PAGE> 52
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
R. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair value of liabilities for derivative commodity
instruments described in Note B, excluding trading activities which are
marked-to-market, was $(5.3) million and $(12.7) million at December 31, 1999
and 1998, respectively.
S. CONCENTRATIONS OF CREDIT RISK
Revenues and related accounts receivable from the Equitable Production
segment's operations are generated primarily from the sale of produced natural
gas to utility and industrial customers located mainly in the Appalachian area,
the sale of crude oil to refinery customers in the Appalachian area, the sale of
produced natural gas liquids to a refinery customer in Kentucky and
transportation of natural gas in Kentucky and Virginia.
The Equitable Utilities segment's operating revenues and related accounts
receivable are generated from state-regulated utility natural gas sales and
transportation to more than 278,000 residential, commercial and industrial
customers located in southwest Pennsylvania and parts of West Virginia and
Kentucky; FERC-regulated interstate pipeline transportation and storage service
for the affiliated utility, Equitable Gas, as well as other utility and end-user
customers located in nine mid-Atlantic and northeastern states; and the
nationwide marketing of natural gas to brokers and large volume utility and
industrial customers. Under state regulations, the utility is required to
provide continuous natural gas service to residential customers during the
winter heating season.
The NORESCO segment's operating revenues and related accounts receivable
are generated from cogeneration and power plant development facilities in
several U.S. and Latin American markets, and performance contracting for
commercial, industrial and institutional customers and various government
facilities including military facilities throughout the United States.
The Company is not aware of any significant credit risks which have not
been recognized in provisions for doubtful accounts.
T. FINANCIAL INFORMATION BY BUSINESS SEGMENT
The Company reports operations in three segments which reflect its lines of
business. The Equitable Utilities segment's activities are comprised of the
operations of the Company's state-regulated local distribution company, natural
gas transportation, storage and marketing activities involving the Company's
interstate natural gas pipelines, and supply and transportation services for the
natural gas and electricity markets. The Equitable Production segment's
activities are comprised of the exploration, development, production, gathering
and sale of natural gas and oil, and the extraction and sale of natural gas
liquids. NORESCO segment's activities are comprised of cogeneration and power
plant development, the development and implementation of energy and water
efficiency programs, performance contracting and central facility plant
operations. During 1999, the structure of the Company's internal organization
changed, causing the composition of the reportable segments to change. Segment
information for prior periods has been restated to conform to this change.
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.
52
<PAGE> 53
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
T. FINANCIAL INFORMATION BY BUSINESS SEGMENT (CONTINUED)
Substantially all of the Company's operating revenues, net income from
continuing operations and assets are generated or located in the United States
of America. The financial information by business segment in the following
tables excludes amounts related to discontinued operations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
(THOUSANDS)
<S> <C> <C> <C>
REVENUES FROM EXTERNAL CUSTOMERS:
Equitable Utilities................................. $ 703,969 $ 580,767 $ 668,806
Equitable Production................................ 189,136 180,368 191,473
NORESCO............................................. 169,633 109,493 52,790
---------- ---------- ----------
Total.......................................... $1,062,738 $ 870,628 $ 913,069
========== ========== ==========
INTERSEGMENT REVENUES:
Equitable Utilities................................. $ 107,906 $ 71,257 $ 46,077
Equitable Production................................ 22,685 20,111 59,923
---------- ---------- ----------
Total.......................................... $ 130,591 $ 91,368 $ 106,000
========== ========== ==========
DEPRECIATION, DEPLETION AND AMORTIZATION:
Equitable Utilities................................. $ 35,596 $ 20,570 $ 19,778
Equitable Production................................ 58,565 56,380 50,418
NORESCO............................................. 6,078 4,300 2,775
Headquarters........................................ 483 3,920 3,061
---------- ---------- ----------
Total.......................................... $ 100,722 $ 85,170 $ 76,032
========== ========== ==========
SEGMENT PROFIT (LOSS):
Equitable Utilities................................. $ 80,641 $ 32,174 $ 39,507
Equitable Production................................ 54,616 (24,344) 122,962
NORESCO............................................. 13,441 5,126 (2,647)
---------- ---------- ----------
Total operating segments....................... 148,698 12,956 159,822
LESS: RECONCILING ITEMS
Headquarters operating expenses (gains) not
allocated to operating segments:
Impairments of investments and other assets.... -- 19,756 8,655
Other.......................................... 3,080 2,331 (1,133)
---------- ---------- ----------
145,618 (9,131) 152,300
Interest expense.................................... 37,132 40,302 34,903
Income tax expenses (benefit)....................... 39,356 (22,381) 43,210
---------- ---------- ----------
Net income (loss) from continuing operations,
before extraordinary item................... $ 69,130 $ (27,052) $ 74,187
========== ========== ==========
</TABLE>
53
<PAGE> 54
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
T. FINANCIAL INFORMATION BY BUSINESS SEGMENT (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
(THOUSANDS)
<S> <C> <C> <C>
OTHER SIGNIFICANT NONCASH EXPENSE ITEMS:
Equitable Utilities:
Increase (decrease) in deferred purchased natural
gas cost....................................... $ (10,370) $ 4,608 $ 16,026
Noncash restructuring charges.................... -- 12,009 12,700
Equitable Production:
Lease impairments................................ 3,518 36,908 --
Noncash restructuring charges.................... -- 6,812 2,200
NORESCO:
Cost of contracts in excess of billings.......... 2,771 8,271 7,925
Noncash restructuring charges.................... -- 1,764 --
---------- ---------- ----------
Total.......................................... $ (4,081) $ 70,372 $ 38,851
========== ========== ==========
SEGMENT ASSETS:
Equitable Utilities................................. $ 914,630 $ 998,674
Equitable Production................................ 670,828 604,862
NORESCO............................................. 145,925 169,370
---------- ----------
Total operating segments....................... 1,731,383 1,772,906
Headquarters assets, including cash and short-term
investments and net intercompany accounts
receivable....................................... 58,191 87,950
---------- ----------
Total.......................................... $1,789,574 $1,860,856
========== ==========
EXPENDITURES FOR SEGMENT ASSETS (A):
Equitable Utilities................................. $ 43,979 $ 20,860
Equitable Production................................ 92,099 126,752
NORESCO............................................. 6,041 11,102
---------- ----------
Total.......................................... $ 142,119 $ 158,714
========== ==========
</TABLE>
- ---------------
(a) 1999 expenditures include $40 million for the acquisition of Carnegie
Natural Gas Company, including $17.7 million in Equitable Utilities and
$22.3 million in Equitable Production. See Note G.
U. COMMITMENTS AND CONTINGENCIES
There are various claims and legal proceedings against the Company arising
from the normal course of business. Although counsel is unable to predict with
certainty the ultimate outcome, management and counsel believe the Company has
significant and meritorious defenses to any claims and intends to pursue them
vigorously.
Management believes that the ultimate outcome of any matter currently
pending against the Company will not materially affect the financial position of
the Company although they could be material to the reported results of
operations for the period in which they occur.
The Company has annual commitments of approximately $32.3 million for
demand charges under existing long-term contracts with pipeline suppliers for
periods extending up to 12 years at December 31, 1999, which relate to natural
gas distribution operations. However, substantially all of these costs are
recoverable in customer rates.
54
<PAGE> 55
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
U. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is subject to federal, state and local environmental laws and
regulations. These laws and regulations, which are constantly changing, can
require expenditures for remediation and may in certain instances result in
assessment of fines. The Company has established procedures for ongoing
evaluation of its operations to identify potential environmental exposures and
assure compliance with regulatory policies and procedures. The estimated costs
associated with identified situations that require remedial action are accrued.
However, certain of these costs are deferred as regulatory assets when
recoverable through regulated rates. Ongoing expenditures for compliance with
environmental laws and regulations, including investments in plant and
facilities to meet environmental requirements, have not been material.
Management believes that any such required expenditures will not be
significantly different in either their nature or amount in the future and does
not know of any environmental liabilities that will have a material effect on
the Company's financial position or results of operations.
V. SUBSEQUENT EVENTS (UNAUDITED)
In February 2000, the Company acquired the Appalachian production assets of
Statoil Energy Inc. (Statoil) for $630 million, subject to customary closing
adjustments. Statoil's operations consist of approximately 1.2 trillion cubic
feet of proven natural gas reserves and 6,500 natural gas wells in West
Virginia, Kentucky, Virginia, Pennsylvania and Ohio. Statoil's operations will
be integrated into the Company's Production segment. No goodwill was recorded in
connection with the acquisition, which was accounted for under the purchase
method of accounting.
In March 2000, the Company agreed to merge its Equitable Production - Gulf
business with Westport, Inc., an oil and natural gas exploration and production
company based in Denver, Colorado, for a 49% interest in the combined entity.
The combined company intends to repay approximately $50 million of Equitable
Production - Gulf intercompany debt and replace it with third party debt.
55
<PAGE> 56
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
W. INTERIM FINANCIAL INFORMATION (UNAUDITED)
The following quarterly summary of operating results reflects variations
due primarily to the seasonal nature of the Company's utility business and
volatility of oil and natural gas commodity prices:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1999
Operating revenues.......................... $420,053 $189,631 $191,605 $261,449
Operating income............................ 56,224 20,369 17,309 48,853
Net income from continuing operations before
extraordinary items....................... 29,739 7,238 5,732 26,421
Earnings per share from continuing
operations before extraordinary items:
Basic.................................. $ 0.84 $ 0.21 $ 0.17 $ 0.80
Assuming dilution...................... $ 0.84 $ 0.21 $ 0.17 $ 0.79
1998
Operating revenues.......................... $283,449 $180,764 $157,971 $248,444
Operating income (loss)..................... 48,321 12,173 11,400 (83,692)
Net income (loss) from continuing operations
before extraordinary items................ 24,652 2,275 2,035 (56,014)
Earnings (loss) per share from continuing
operations before extraordinary items:
Basic.................................. $ 0.66 $ 0.06 $ 0.06 $ (1.53)
Assuming dilution...................... $ 0.66 $ 0.06 $ 0.06 $ (1.53)
</TABLE>
X. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED)
The supplementary information summarized below presents the results of
natural gas and oil activities for the Equitable Production segment in
accordance with SFAS No. 69, "Disclosures About Oil and Natural Gas Producing
Activities."
The information presented for 1998 and 1999 excludes data associated with
natural gas reserves related to rate-regulated and other utility operations. In
1999, the exploration and production operations conducted by Equitrans were
transferred from Equitable Utilities to Equitable Production. Accordingly, the
1999 oil and natural gas information presented below reflects this transfer.
These reserves (proved developed) are less than 5% of total Company proved
reserves for the years presented.
56
<PAGE> 57
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
X. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
PRODUCTION COSTS
The following table presents the costs incurred relating to natural gas and
oil production activities:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
At December 31:
Capitalized costs................................ $947,803 $861,035 $779,936
Accumulated depreciation and depletion........... 410,921 355,535 293,594
-------- -------- --------
Net capitalized costs.............................. $536,882 $505,500 $486,342
======== ======== ========
Costs incurred:
Property acquisition:
Proved properties............................. $ 23,165 $ 4,799 $ 68,334
Unproved properties........................... 722 18,069 15,813
Exploration........................................ 7,143 27,144 22,665
Development........................................ 59,647 76,762 40,982
</TABLE>
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
The following table presents the results of operations related to natural
gas and oil production, including the effect in 1998 of impairment of assets as
described in Note C:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
(THOUSANDS)
<S> <C> <C> <C>
Revenues:
Affiliated....................................... $ 14,067 $39,553 $52,956
Nonaffiliated.................................... 158,369 99,437 97,493
Production costs................................... 26,206 30,390 31,777
Exploration expenses............................... 4,001 30,982 8,950
Depreciation and depletion......................... 52,009 49,348 41,153
Impairment of assets............................... 5,018 29,230 --
Income tax expense (benefit)....................... 32,911 (1,166) 26,303
-------- ------- -------
Results of operations from producing activities
(excluding corporate overhead)................... $ 52,291 $ 206 $42,266
======== ======= =======
</TABLE>
RESERVE INFORMATION
The information presented below represents estimates of proved natural gas
and oil reserves prepared by Company engineers. Proved developed reserves
represent only those reserves expected to be recovered from existing wells and
support equipment. In 1999, the Company decreased its estimate of the annual
production decline from 4% to 3%, to be more representative of the region. This
revision increased 1999 proved developed natural gas and crude oil reserves by
85,574 million cubic feet equivalent. Also during 1999, the exploration and
production operations conducted by Equitrans were transferred to Equitable
Production and reflected in the reserve information for 1999 as other additions
to proved reserves of 43,829 million cubic feet equivalent. In 1997, the Company
increased its Appalachian reserve life from 35 to 50 years to more closely
reflect actual production experience. This revision increased 1997 proved
developed natural gas and crude oil reserves by 78,607 million cubic feet
equivalent. Proved undeveloped reserves represent proved reserves expected to be
recovered from new wells after substantial development costs are incurred. As of
December 31, 1999 and 1998,
57
<PAGE> 58
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
X. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
all of the Company's proved reserves are in the United States. During 1997, the
Company sold its Canadian properties, which accounted for less than 10% of the
Company's proved reserves.
<TABLE>
<CAPTION>
1999 1998 1997
--------- ------- --------
(MILLIONS OF CUBIC FEET)
<S> <C> <C> <C>
NATURAL GAS
Proved developed and undeveloped reserves:
Beginning of year......................................... 899,881 889,828 849,530
Revision of previous estimates............................ 134,576 6,502 80,264
Purchase of natural gas in place.......................... 46,124 8,474 62,485
Sale of natural gas in place.............................. -- -- (107,138)
Extensions, discoveries and other additions............... 132,180 54,970 61,380
Production................................................ (66,328) (59,893) (56,693)
--------- ------- --------
End of year............................................... 1,146,433 899,881 889,828
========= ======= ========
Proved developed reserves:
Beginning of year......................................... 780,817 769,312 732,158
End of year............................................... 965,969 780,817 769,312
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ -------
(THOUSANDS OF BARRELS)
<S> <C> <C> <C>
OIL
Proved developed and undeveloped reserves:
Beginning of year......................................... 9,826 10,100 19,517
Revision of previous estimates............................ (23) (966) 849
Purchase of oil in place.................................. 44 5 2,592
Sale of oil in place...................................... -- -- (12,392)
Extensions, discoveries and other additions............... 1,155 1,661 1,045
Production................................................ (1,070) (974) (1,511)
------ ------ -------
End of year............................................... 9,932 9,826 10,100
====== ====== =======
Proved developed reserves:
Beginning of year......................................... 8,331 8,941 18,482
End of year............................................... 7,996 8,331 8,941
</TABLE>
STANDARD MEASURE OF DISCOUNTED FUTURE CASH FLOW
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Future cash inflows.................................. $ 2,877,829 $1,870,002 $ 2,607,077
Future production costs.............................. (808,115) (606,777) (680,405)
Future development costs............................. (139,626) (84,454) (80,965)
----------- ---------- -----------
Future net cash flow before income taxes............. 1,930,088 1,178,771 1,845,707
10% annual discount for estimated timing of cash
flows.............................................. (1,098,185) (635,296) (1,027,826)
----------- ---------- -----------
Discounted future net cash flows before income
taxes.............................................. 831,903 543,475 817,881
Future income tax expenses, discounted at 10%
annually........................................... (251,467) (118,602) (276,887)
----------- ---------- -----------
Standardized measure of discounted future net cash
flows.............................................. $ 580,436 $ 424,873 $ 540,994
=========== ========== ===========
</TABLE>
58
<PAGE> 59
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
X. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
Management cautions that the standard measure of discounted future cash
flows should not be viewed as an indication of the fair market value of natural
gas and oil producing properties, nor of the future cash flows expected to be
generated therefrom. The information presented does not give recognition to
future changes in estimated reserves, selling prices or costs and has been
discounted at an arbitrary rate of 10%. Estimated future net cash flows from
natural gas and oil reserves based on selling prices and costs at year-end price
levels are as follows:
Summary of changes in the standardized measure of discounted future net
cash flows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Sales and transfers of natural gas and oil
produced -- net........................................ $(146,230) $(108,600) $(118,672)
Net changes in prices, production and development
costs.................................................. 156,020 (343,061) (447,251)
Extensions, discoveries, and improved recovery, less
related costs.......................................... 140,402 67,986 58,205
Development costs incurred............................... 30,479 32,497 13,634
Purchase (sale) of minerals in place -- net.............. 26,152 6,439 (73,099)
Revisions of previous quantity estimates................. 101,778 (260) 16,913
Accretion of discount.................................... 42,487 84,463 108,935
Net change in income taxes............................... (128,301) 158,285 143,429
Other.................................................... (67,224) (13,870) (45,814)
--------- --------- ---------
Net increase (decrease).................................. 155,563 (116,121) (343,720)
Beginning of year........................................ 424,873 540,994 884,714
--------- --------- ---------
End of year.............................................. $ 580,436 $ 424,873 $ 540,994
========= ========= =========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
59
<PAGE> 60
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 with respect to directors is incorporated
herein by reference to the section describing "Election of Directors" in the
Company's definitive proxy statement relating to the annual meeting of
stockholders to be held on May 17, 2000, which will be filed with the Commission
within 120 days after the close of the Company's fiscal year ended December 31,
1999.
Information required by Item 10 with respect to compliance with Section
16(a) of the Exchange Act is incorporated by reference to the section describing
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
definitive proxy statement relating to the annual meeting of stockholders to be
held on May 17, 2000.
Information required by Item 10 with respect to executive officers is
included herein after Item 4 at the end of Part I under the heading "Executive
Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 11 is incorporated herein by reference to the
sections describing "Executive Compensation," "Employment Contracts and
Change-In-Control Arrangements" and "Pension Plan" in the Company's definitive
proxy statement relating to the annual meeting of stockholders to be held on May
17, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 is incorporated herein by reference to the
section describing "Voting Securities and Record Date" in the Company's
definitive proxy statement relating to the annual meeting of stockholders to be
held on May 17, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
60
<PAGE> 61
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<C> <S>
(a) 1. Financial Statements
The financial statements listed in the accompanying index to
financial statements are filed as part of this annual
report.
2. Financial Statement Schedule
The financial statement schedule listed in the accompanying
index to financial statements and financial schedule is
filed as part of this annual report.
3. Exhibits
The exhibits listed on the accompanying index to exhibits
(pages 63 through 66) are filed as part of this annual
report.
</TABLE>
(b) Reports on Form 8-K filed during the quarter ended December 31, 1999.
None
EQUITABLE RESOURCES, INC.
INDEX TO FINANCIAL STATEMENTS COVERED
BY REPORT OF INDEPENDENT AUDITORS
(ITEM 14 (a))
<TABLE>
<S> <C>
1. The following consolidated financial statements of Equitable Resources,
Inc. and Subsidiaries are included in Item 8:
PAGE REFERENCE
Statements of Consolidated Income for each of the three
years in the period ended December 31, 1999 32
Statements of Consolidated Cash Flows for each of the
three years in the period ended December 31, 1999 33
Consolidated Balance Sheets December 31, 1999 and 1998 34 - 35
Statements of Common Stockholders' Equity for each of
the three years in the period ended December 31, 1999 36
Notes to Consolidated Financial Statements 37 - 59
2. Schedule for the Years Ended December 31, 1999, 1998 and 1997 included in
Part IV:
II -- Valuation and Qualifying Accounts and Reserves 62
</TABLE>
All other schedules are omitted since the subject matter thereof is either not
present or is not present in amounts sufficient to require submission of the
schedules.
61
<PAGE> 62
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ----------- ---------------------------- ---------- ----------
ADDITIONS
BALANCE AT CHARGED BALANCE
BEGINNING TO COSTS AT END
DESCRIPTION OF PERIOD AND EXPENSES ACQUISITIONS DEDUCTIONS OF PERIOD
----------- ----------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
1999
Accumulated Provisions for
Doubtful Accounts............ $ 9,818 $11,917 $108(b) $ (8,819)(a) $13,024
1998
Accumulated Provisions for
Doubtful Accounts............ $10,284 $15,634 $ 21(c) $ 16,121 (a) $ 9,818
1997
Accumulated Provisions for
Doubtful Accounts............ $10,930 $16,386 $243(d) $ 17,275 (a) $10,284
</TABLE>
Note:
(a) Customer accounts written off, less recoveries.
(b) Addition to the Provision for Doubtful Accounts relates to the acquisition
of Carnegie Distribution.
(c) Addition to the Provision for Doubtful Accounts relates to the acquisition
of LMI and Scallop.
(d) Addition to the Provision for Doubtful Accounts relates to the acquisition
of NORESCO.
62
<PAGE> 63
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION METHOD OF FILING
-------- --------------------------------------- ---------------------------------------
<S> <C> <C>
3.01 Restated Articles of Incorporation of Filed herewith as Exhibit 3.01
the Company dated May 18, 1999
3.02 Bylaws of the Company (amended through Filed as Exhibit 3.02 to Form 10-Q for
April 28, 1999) the quarter ended March 31, 1999
4.01 (a) Indenture dated as of April 1, 1983 Filed as Exhibit 4.01 (Revised) to
between the Company and Pittsburgh Post- Effective Amendment No. 1 to
National Bank relating to Debt Registration Statement (Registration
Securities No. 2-80575)
4.01 (b) Instrument appointing Bankers Trust Filed as Exhibit 4.01 (b) to Form 10-K
Company as successor trustee to for the year ended December 31, 1998
Pittsburgh National Bank
4.01 (c) Resolutions adopted June 22, 1987 by Filed as Exhibit 4.01 (c) to Form 10-K
the Finance Committee of the Board of for the year ended December 31, 1998
Directors of the Company establishing
the terms of the 75,000 units
(debentures with warrants) issued July
1, 1987
4.01 (d) Supplemental indenture dated March 15, Filed as Exhibit 4.01 (f) to Form 10-K
1991 with Bankers Trust Company for the year ended December 31, 1996
eliminating limitations on liens and
additional funded debt
4.01 (e) Resolution adopted August 19, 1991 by Filed as Exhibit 4.01 (g) to Form 10-K
the Ad Hoc Finance Committee of the for the year ended December 31, 1996
Board of Directors of the Company
Addenda Nos. 1 through 27, establishing
the terms and provisions of the Series
A Medium-Term Notes
4.01 (f) Resolutions adopted July 6, 1992 and Refiled as Exhibit 4.01 (h) to Form
February 19, 1993 by the Ad Hoc Finance 10-K for the year ended December 31,
Committee of the Board of Directors of 1997
the Company and Addenda Nos. 1 through
8, establishing the terms and
provisions of the Series B Medium-Term
Notes
4.01 (g) Resolution adopted July 14, 1994 by the Filed as Exhibit 4.01 (i) to Form 10-K
Ad Hoc Finance Committee of the Board for the year ended December 31, 1995
of Directors of the Company and Addenda
Nos. 1 and 2, establishing the terms
and provisions of the Series C
Medium-Term Notes
4.01 (h) Resolution adopted January 18 and July Filed as Exhibit 4.01(j) to Form 10-K
18, 1996 by the Board of Directors of for the year ended December 31, 1996
the Company and Resolutions adopted
July 18, 1996 by the Executive
Committee of the Board of Directors of
the Company, establishing the terms and
provisions of the 7.75% Debentures
issued July 29, 1996
</TABLE>
Each management contract and compensatory arrangement in which any director or
any named executive officer
participates has been marked with an asterisk (*).
63
<PAGE> 64
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION METHOD OF FILING
-------- --------------------------------------- ---------------------------------------
<S> <C> <C>
4.01 (i) Junior Subordinated Indenture Between Filed as Exhibit 4.1 to Form 10-Q for
Equitable Resources, Inc. and Bankers the quarter ended June 30, 1998
Trust Company
4.01 (j) Amended and Restated Trust Agreement Filed as Exhibit 4.2 to Form 10-Q for
Between Equitable Resources, Inc. and the quarter ended June 30, 1998
Bankers Trust Company
4.01 (k) Equitable Resources, Inc. 7.35% Junior Filed as Exhibit 4.3 to Form 10-Q for
Subordinated Deferrable Interest the quarter ended June 30, 1998
Debentures Certificate
4.01 (l) Rights Agreement dated as of April 1, Filed as Exhibit 1 to Registration
1996 between the Company and Chemical Statement on Form 8-A filed April 16,
Mellon Shareholder Services, L.L.C., 1996
setting forth the terms of the
Company's Preferred Stock Purchase
Rights Plan
10.01 Trust Agreement with Pittsburgh Refiled herewith as Exhibit 10.01 to
National Bank to act as Trustee for Form 10-K pursuant to Item 10 (d) of
Supplemental Pension Plan, Supplemental Regulation S-K
Deferred Compensation Benefits,
Retirement Program for Board of
Directors and Supplemental Executive
Retirement Plan
* 10.02 Equitable Resources, Inc. Directors' Filed as Exhibit 10.4 to Form 10-Q for
Deferred Compensation Plan the quarter ended September 30, 1999
* 10.03 1999 Equitable Resources, Inc. Filed as Exhibit 10.2 to Form 10-Q for
Long-Term Incentive Plan (as amended the quarter ended June 30, 1999
May 26, 1999)
* 10.04 1999 Equitable Resources, Inc. Filed herewith as Exhibit 10.04
Short-Term Incentive Plan
* 10.05 1999 Equitable Resources, Inc. Non- Filed as Exhibit 10.1 to Form 10-Q for
Employee Directors' Stock Incentive the quarter ended June 30, 1999
Plan (as amended May 26, 1999)
* 10.06 Equitable Resources, Inc. 1994 Refiled herewith as Exhibit 10.06
Long-Term Incentive Plan pursuant to Item 10 (d) of Regulation
S-K
* 10.07 Equitable Resources, Inc. Deferred Filed herewith as Exhibit 10.07
Compensation Plan (Amended and Restated
Effective October 27, 1999)
* 10.08 Equitable Resources, Inc. Breakthrough Filed herewith as Exhibit 10.08
Long-Term Incentive Plan with certain
executives of the Company (as amended
through November 30, 1999)
* 10.09 (a) Employment Agreement dated as of May 4, Filed as Exhibit 10.2 to Form 10-Q for
1998 with Murry S. Gerber the quarter ended June 30, 1998
* 10.09 (b) Amendment No. 1 to Employment Agreement Filed herewith as Exhibit 10.09 (b)
with Murry S. Gerber
</TABLE>
Each management contract and compensatory arrangement in which any director or
any named executive officer
participates has been marked with an asterisk (*).
64
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION METHOD OF FILING
-------- --------------------------------------- ---------------------------------------
<S> <C> <C>
* 10.10 Change in Control Agreement dated Filed herewith as Exhibit 10.10
December 1, 1999 with Murry S. Gerber
* 10.11 Supplemental Executive Retirement Filed as Exhibit 10.4 to Form 10-Q for
Agreement dated as of May 4, 1998 with the quarter ended June 30, 1998
Murry S. Gerber
* 10.12 Amended and Restated Post-Termination Filed herewith as Exhibit 10.12
Confidentiality and Non-Competition
Agreement dated December 1, 1999 with
Murry S. Gerber
* 10.13 (a) Employment Agreement dated as of July Filed as Exhibit 10.1 to Form 10-Q for
1, 1998 with David L. Porges the quarter ended September 30, 1998
* 10.13 (b) Amendment No. 1 to Employment Agreement Filed herewith as Exhibit 10.13 (b)
with David L. Porges
* 10.14 Change of Control Agreement dated Filed herewith as Exhibit 10.14
December 1, 1999 with David L. Porges
* 10.15 Amended and Restated Post-Termination Filed herewith as Exhibit 10.15
Confidentiality and Non-Competition
Agreement dated December 1, 1999 with
David L. Porges
* 10.16 Change of Control Agreement dated Filed herewith as Exhibit 10.16
December 1, 1999 with Gregory R.
Spencer
* 10.17 Non-compete Agreement dated December 1, Filed herewith as Exhibit 10.17
1999 with Gregory R. Spencer
* 10.18 Change of Control Agreement dated Filed herewith as Exhibit 10.18
December 1, 1999 with Johanna G.
O'Loughlin
* 10.19 Non-compete Agreement dated December 1, Filed herewith as Exhibit 10.19
1999 with Johanna G. O'Loughlin
* 10.20 (a) Agreement dated May 29, 1996 with Paul Filed as Exhibit 10.04 (a) to Form 10-K
Christiano for deferred payment of 1996 for the year ended December 31, 1996
director fees beginning May 29, 1996
* 10.20 (b) Agreement dated November 26, 1996 with Filed as Exhibit 10.04 (b) to Form 10-K
Paul Christiano for deferred payment of for the year ended December 31, 1996
1997 director fees
* 10.20 (c) Agreement dated December 1, 1997 with Filed as Exhibit 10.04 (c) to Form 10-K
Paul Christiano for deferred payment of for the year ended December 31, 1997
1998 director fees
* 10.20 (d) Agreement dated December 15, 1998 with Filed as Exhibit 10.19 (d) to Form 10-K
Paul Christiano for deferred payment of for the year ended December 31, 1998
1999 director fees
* 10.20 (e) Agreement dated November 29, 1999 with Filed herewith as Exhibit 10.20 (e)
Paul Christiano for deferred payment of
2000 director fees
</TABLE>
Each management contract and compensatory arrangement in which any director or
any named executive officer
participates has been marked with an asterisk (*).
65
<PAGE> 66
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION METHOD OF FILING
-------- --------------------------------------- ---------------------------------------
<S> <C> <C>
* 10.21 (a) Agreement dated May 24, 1996 with Filed as Exhibit 10.14 (a) to Form 10-K
Phyllis A. Domm for deferred payment of for the year ended December 31, 1996
1996 director fees beginning May 24,
1996
* 10.21 (b) Agreement dated November 27, 1996 with Filed as Exhibit 10.14 (b) to Form 10-K
Phyllis A. Domm for deferred payment of for the year ended December 31, 1996
1997 director fees
* 10.21 (c) Agreement dated November 30, 1997 with Filed as Exhibit 10.14 (c) to Form 10-K
Phyllis A. Domm for deferred payment of for the year ended December 31, 1997
1998 director fees
* 10.21 (d) Agreement dated December 5, 1998 with Filed as Exhibit 10.20 (d) to Form 10-K
Phyllis A. Domm for deferred payment of for the year ended December 31, 1998
1999 director fees
* 10.21 (e) Agreement dated November 30, 1999 with Filed herewith as Exhibit 10.21 (e)
Phyllis A. Domm for deferred payment of
2000 director fees
* 10.22 (a) Agreement dated December 31, 1987 with Filed as Exhibit 10.21 (a) to Form 10-K
Malcolm M. Prine for deferred payment for the year ended December 31, 1998
of 1988 director fees
* 10.22 (b) Agreement dated December 30, 1988 with Filed as Exhibit 10.21 (b) to Form 10-K
Malcolm M. Prine for deferred payment for the year ended December 31, 1998
of 1989 director fees
* 10.23 Release Agreement dated December 8, Filed herewith as Exhibit 10.23
1999 with John C. Gongas, Jr.
10.24 Purchase Agreement by and among Filed as Exhibit 10.5 to Form 10-Q for
Equitable Resources Energy Company, ET the quarter ended September 30, 1998
Bluegrass Company, EREC Nevada, Inc.
and ERI Services, Inc. and AEP
Resources, Inc. dated September 12,
1998 for the purchase of midstream
assets
21 Schedule of Subsidiaries Filed herewith as Exhibit 21
23.01 Consent of Independent Auditors Filed herewith as Exhibit 23.01
27.01 (a) Financial Data Schedule for Year 1999 Filed electronically
27.01 (b) Restated Financial Data Schedule for Filed electronically
Year 1998
27.01 (c) Restated Financial Data Schedule for Filed electronically
Year 1997
</TABLE>
- ---------------
The Company agrees to furnish to the Commission, upon request, copies of
instruments with respect to long-term debt which have not previously been filed.
Each management contract and compensatory arrangement in which any director or
any named executive officer
participates has been marked with an asterisk (*).
66
<PAGE> 67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ MURRY S. GERBER
-------------------------------------
Murry S. Gerber
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ MURRY S. GERBER President and Chief Executive Officer March 15, 2000
- ------------------------------------- and Director
Murry S. Gerber
(Principal Executive Officer)
/s/ DAVID L. PORGES Executive Vice President and March 15, 2000
- ------------------------------------- Chief Financial Officer
David L. Porges
(Principal Financial Officer)
/s/ JOHN A. BERGONZI Corporate Controller and March 15, 2000
- ------------------------------------- Assistant Treasurer
John A. Bergonzi
(Principal Accounting Officer)
/s/ PAUL CHRISTIANO Director March 15, 2000
- -------------------------------------
Paul Christiano
/s/ PHYLLIS A. DOMM Director March 15, 2000
- -------------------------------------
Phyllis A. Domm
/s/ E. LAWRENCE KEYES, JR. Director March 15, 2000
- -------------------------------------
E. Lawrence Keyes, Jr.
/s/ THOMAS A. MCCONOMY Director March 15, 2000
- -------------------------------------
Thomas A. McConomy
/s/ DONALD I. MORITZ Director March 15, 2000
- -------------------------------------
Donald I. Moritz
/s/ GUY W. NICHOLS Director March 15, 2000
- -------------------------------------
Guy W. Nichols
/s/ MALCOLM M. PRINE Director March 15, 2000
- -------------------------------------
Malcolm M. Prine
/s/ JAMES E. ROHR Director March 15, 2000
- -------------------------------------
James E. Rohr
/s/ DAVID S. SHAPIRA Director March 15, 2000
- -------------------------------------
David S. Shapira
/s/ J. MICHAEL TALBERT Director March 15, 2000
- -------------------------------------
J. Michael Talbert
</TABLE>
67
<PAGE> 1
Exhibit 3.01
RESTATED ARTICLES OF EQUITABLE RESOURCES, INC.
(As Amended Through May 18, 1999)
------------------------------------------------
The following is a Composite Copy of the Articles of Equitable
Resources, Inc., as restated effective August 7, 1981, and as amended effective
June 23, 1982, January 13, 1984, October 1, 1984, June 12, 1987, May 27, 1993,
May 8, 1996, and May 18, 1999.
FIRST: The name of the Company is EQUITABLE RESOURCES, INC.
SECOND: The location and post office address of its current registered office in
the Commonwealth of Pennsylvania is One Oxford Centre, Suite 3300, 301 Grant
Street, City of Pittsburgh, 15219, County of Allegheny.
THIRD: The purposes for which the Company is incorporated under the Business
Corporation Law of the Commonwealth of Pennsylvania are to engage in, and to do
any lawful act concerning, any or all lawful business for which corporations may
be incorporated under said Business Corporation Law, including but not limited
to:
A. the supply of heat, light and power to the public by any
means;
B. the production, purchase, generation, manufacture,
transmission, transportation, storage, distribution and supplying of
natural or artificial gas, steam or air conditioning, electricity, or
any combination thereof to or for the public; and
C. manufacturing, processing, owning, using and dealing in
personal property of every class and description, engaging in research
and development, the furnishing of services, and acquiring, owning,
using and disposing of real property of every nature whatsoever.
FOURTH: The term of the Company's existence shall be perpetual.
FIFTH: The aggregate number of shares which the Company shall have authority to
issue shall be:
(a) 3,000,000 shares of Preferred Stock, without par value;
and
(b) 80,000,000 shares of Common Stock, without par value.
The designations, preferences, qualifications, limitations, restrictions, and
the special or relative rights in respect of the Preferred Stock and of the
Common Stock of the Company, and a statement of the authority hereby vested in
the Board of Directors of the Company to fix and determine the designations,
preferences, qualifications, limitations, restrictions, and special or relative
rights in respect of all series of the Preferred Stock shall be as follows:
1
<PAGE> 2
DIVISION A THE PREFERRED STOCK
1.1 PREFERRED STOCK. The Preferred Stock may be divided into and issued
in series. The Board of Directors is hereby expressly authorized, at any time or
from time to time, to divide any or all of the shares of the Preferred Stock
into series, and in the resolution or resolutions establishing a particular
series, before issuance of any of the shares thereof, to fix and determine the
designation and the relative rights and preferences of the series so
established, to the fullest extent now or hereafter permitted by the laws of the
Commonwealth of Pennsylvania, including, but not limited to, the variations
between different series in the following respects:
(a) the distinctive serial designation of such series;
(b) the annual dividend rate for such series, and the date or
dates from which dividends shall commence to accrue;
(c) the redemption price or prices, if any, for shares of such
series and the terms and conditions on which such shares may be
redeemed;
(d) the provisions for a sinking, purchase or similar fund, if
any, for the redemption or purchase of shares of such series;
(e) the preferential amount or amounts payable upon shares of
such series in the event of the voluntary or involuntary liquidation of
the Company;
(f) the voting rights, if any, of shares of such series;
(g) the terms and conditions, if any, upon which shares of
such series may be converted and the class or classes or series of
securities of the Company into which such shares may be converted;
(h) the relative seniority, parity or junior rank of such
series with respect to other series of Preferred Stock then or
thereafter to be issued; and
(i) such other terms, limitations and relative rights and
preferences, if any, of shares of such series as the Board of Directors
may, at the time of such resolutions, lawfully fix and determine under
the laws of the Commonwealth of Pennsylvania.
DIVISION B PROVISIONS APPLICABLE TO BOTH THE
PREFERRED STOCK AND THE COMMON STOCK
2.1 VOTING RIGHTS. Except as provided in this Section 2.1, the holders
of the Common Stock shall have exclusive voting rights for the election of
Directors and for all other purposes and shall be entitled to one vote for each
share held.
The holders of the Preferred Stock shall have no voting rights except
as may be provided with respect to any particular series of the Preferred Stock
by the Board of Directors pursuant to Subdivision 1.1 of Division A hereof. On
any matter on which the holders of the Preferred Stock shall be entitled to
2
<PAGE> 3
vote, they shall be entitled to vote as established by the Board of Directors
pursuant to Subdivision 1.1 of Division A hereof.
In all elections for Directors, every stockholder entitled to vote
shall have the right, in person or by proxy, to multiply the number of votes to
which such stockholder may be entitled by the number of Directors for the
election of whom he is entitled to vote at such meeting, and such stockholder
may cast the whole number of such votes for one candidate or may distribute them
among any two or more candidates. The candidates receiving the highest number of
votes up to the number of Directors to be elected shall be elected. The
foregoing provisions of this paragraph shall not be changed with respect to any
class of stock unless the holders of record of not less than two-thirds of the
number of shares of such class of stock then outstanding shall consent thereto
in writing or by voting therefor in person or by proxy at the meeting of
stockholders at which any such change is considered.
2.2 PRE-EMPTIVE RIGHTS. Upon any issue for money or other consideration
of any stock of the Company that may be authorized from time to time, no holder
of stock, irrespective of the kind of such stock, shall have any pre-emptive or
other right to subscribe for, purchase, or receive any proportionate or other
share of the stock so issued, but the Board of Directors may dispose of all or
any portion of such stock as and when it may determine, free of any such rights,
whether by offering the same to stockholders or by sale or other disposition as
said Board may deem advisable; provided, however, that if the Board of Directors
shall determine to offer any new or additional shares of Common Stock, or any
security convertible into Common Stock, for money, other than (i) by a public
offering of all of such shares or offering of all of such shares to or through
underwriters or investment bankers who shall have agreed promptly to make a
public offering of such shares, or (ii) pursuant to any employee compensation,
incentive or other benefit program adopted by the Board of Directors, the same
shall first be offered pro rata to the holders of the then outstanding shares of
Common Stock of the Company at a price not less favorable than the price at
which the Board of Directors issues and disposes of such stock or securities to
other than such holders of Common Stock before deducting reasonable commissions
or compensation that may be paid by the Company in connection with the sale of
any such stock and securities; and provided, further, that the time within which
such pre-emptive rights shall be exercised may be limited by the Board of
Directors to such time as the said Board may deem proper, not less, however,
than ten days after mailing of notice that such stock rights are available and
may be exercised. The foregoing provisions of this Subdivision 2.2 shall not be
changed unless the holders of record of not less than two-thirds of the number
of shares of the Common Stock then outstanding shall consent thereto in writing
or by voting therefor in person or by proxy at the meeting of stockholders at
which any such change is considered.
2.3 AMENDMENTS TO BY-LAWS. The Board of Directors may make, amend and
repeal the By-Laws with respect to those matters which are not, by statute,
reserved exclusively to the shareholders, subject always to the power of the
shareholders to change such action as provided herein. No By-Law may be made,
amended or repealed by the shareholders unless such action is approved by the
affirmative vote of the holders of not less than 80% of the voting power of the
then outstanding shares of capital stock of the Company entitled to vote in an
annual election of directors, voting together as a single class, unless such
action has been previously approved by a two-thirds vote of the whole Board of
Directors, in which event (unless otherwise expressly provided in the Articles
or the By-Laws) the affirmative vote of not less than a majority of the votes
which all shareholders are entitled to cast thereon shall be required.
3
<PAGE> 4
2.4 AMENDMENTS TO ARTICLES. Subject to the voting rights given to any
particular series of the Preferred Stock by the Board of Directors pursuant to
Subdivision 1.1 of Division A hereof, and except as may be specifically provided
to the contrary in any other provision in the Articles with respect to amendment
or repeal of such provision, the affirmative vote of the holders of not less
than 80% of the voting power of the then outstanding shares of capital stock of
the Company entitled to vote in an annual election of directors, voting together
as a single class, shall be required to amend the Articles of the Company or
repeal any provision thereof, unless such action has been previously approved by
a two-thirds vote of the whole Board of Directors, in which event (unless
otherwise expressly provided in the Articles) the affirmative vote of not less
than a majority of the votes which all shareholders are entitled to cast thereon
shall be required.
2.5 GENERAL. The Company may issue and dispose of any of its authorized
shares for such consideration as may be fixed by the Board of Directors subject
to the laws then applicable and to the provisions of Subdivision 2.2 of this
Division B.
DIVISION C BOARD OF DIRECTORS;
CLASSIFICATION; REMOVAL; VACANCIES
3.1 The business and affairs of the Company shall be managed by a Board
of Directors comprised as follows:
(a) The Board of Directors shall consist of not less than 5
nor more than 12 persons, the exact number to be fixed from time to
time by the Board of Directors pursuant to a resolution adopted by a
majority vote of the directors then in office.
(b) Directors of the Company shall be classified with respect
to the time for which they shall severally hold office by dividing them
into three classes: Class 1; Class 2; and Class 3, as nearly equal in
number as possible. At the special meeting of shareholders at which the
amendment adding this Division C shall be adopted, the then current
directors shall be assigned to the three classes in accordance with
resolutions adopted by the Board of Directors. Class 1 directors shall
not be elected at such special meeting but shall continue to hold
office until the annual meeting of shareholders in 1984. Class 2
directors shall be elected by shareholders at such special meeting to
extended terms of office, to serve until the annual meeting in 1985.
Class 3 directors shall be elected by shareholders at such special
meeting to extended terms of office, to serve until the annual meeting
in 1986. Each class of directors to be elected at such special meeting
shall be elected in a separate election. At each succeeding annual
meeting of shareholders, the class of directors then being elected
shall be elected to hold office for a term of three years. Each
director shall hold office for the term for which elected and until his
or her successor shall have been elected and qualified.
(c) Any director, any class of directors or the entire Board
of Directors may be removed from office by shareholder vote at any
time, without assigning any cause, but only if shareholders entitled to
cast at least 80% of the votes which all shareholders would be entitled
to cast at an annual election of directors or of such class of
directors shall vote in favor of such removal; PROVIDED, HOWEVER, that
no individual director shall be removed without cause (unless the
entire Board of Directors or any class of directors be removed) in case
the votes cast against such removal would be sufficient, if voted
cumulatively for such director, to elect him or her to the class of
directors of which he or she is a member.
4
<PAGE> 5
(d) Vacancies in the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall be filled
only by a majority vote of the remaining directors then in office,
though less than a quorum, except that vacancies resulting from removal
from office by a vote of the shareholders may be filled by the
shareholders at the same meeting at which such removal occurs. All
directors elected to fill vacancies shall hold office for a term
expiring at the annual meeting of shareholders at which the term of the
class to which they have been elected expires. No decrease in the
number of directors constituting the Board of Directors shall shorten
the term of any incumbent director.
(e) Whenever the holders of any class or series of preferred
stock shall have the right, voting separately as a class, to elect one
or more directors of the Company, none of the foregoing provisions of
this Section 3.1 shall apply with respect to the director or directors
elected by such holders of preferred stock.
3.2 Notwithstanding any other provisions of law, the Articles or the
By-Laws of the Company, the affirmative vote of the holders of not less than 80%
of the voting power of the then outstanding shares of capital stock of the
Company entitled to vote in an annual election of directors, voting together as
a single class, shall be required to amend, alter, change or repeal, or adopt
any provision inconsistent with, this Division C, unless such action has been
previously approved by a two-thirds vote of the whole Board of Directors.
3.3 No Director shall be personally liable for monetary damages as such
(except to the extent otherwise provided by law) for any action taken, or any
failure to take any action, unless such Director has breached or failed to
perform the duties of his or her office under Title 42, Chapter 83, Subchapter F
of the Pennsylvania Consolidated Statutes (or any successor statute relating to
Directors' standard of care and justifiable reliance); and the breach or failure
to perform constitutes self-dealing, willful misconduct or recklessness.
If the Pennsylvania Consolidated Statutes are amended after May 22,
1987, the date this section received shareholder approval, to further eliminate
or limit the personal liability of Directors, then a Director shall not be
liable, in addition to the circumstances set forth in this section, to the
fullest extent permitted by the Pennsylvania Consolidated Statutes, as so
amended.
The provisions of this section shall not apply to any actions filed
prior to January 27, 1987 nor to any breach of performance of duty, or any
failure of performance of duty, by any Director occurring prior to January 27,
1987.
DIVISION D PROCEDURES RELATING
TO CERTAIN BUSINESS COMBINATIONS
4.1 VOTES REQUIRED; EXCEPTIONS.
(a) The affirmative vote of the holders of not less than 80%
of the voting power of the then outstanding shares of capital stock of
the Company entitled to vote in an annual election of directors (the
"Voting Stock"), voting together as a single class, shall be required
for the approval or authorization of any "Business Combination" (as
hereinafter defined) involving a "Related Person" (as hereinafter
defined); provided, however, that the 80% voting requirement shall not
be applicable if:
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<PAGE> 6
(1) The "Continuing Directors" (as hereinafter
defined) of the Company by a two-thirds vote have expressly
approved such Business Combination either in advance of or
subsequent to such Related Person's having become a Related
Person; or
(2) both the following conditions are satisfied:
(A) the aggregate amount of the cash and the
"Fair Market Value" (as hereinafter defined) of the
property, securities and "Other Consideration" (as
hereinafter defined) to be received per share by
holders of capital stock of the Company in the
Business Combination, other than the Related Person,
is not less than the "Highest Equivalent Price" (as
hereinafter defined) of such shares of capital stock;
and
(B) a proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934, as amended, whether or not the
Company is then subject to such requirements, shall
have been mailed to all shareholders of the Company.
The proxy or information statement shall contain at
the front thereof, in a prominent place, the position
of the Continuing Directors as to the advisability
(or inadvisability) of the Business Combination and,
if deemed advisable by a majority of the Continuing
Directors, the opinion of an investment banking firm
selected by the Continuing Directors as to the
fairness of the terms of the Business Combination,
from the point of view of the holders of the
outstanding shares of capital stock of the Company
other than any Related Person.
(b) Such 80% vote shall in any such instance be required
notwithstanding the fact that no vote may be required or that a lesser
percentage may be specified by law or in any agreement with any
national securities exchange or otherwise.
4.2 DEFINITIONS. For purposes of this Division D:
(a) A "Person" shall mean any individual, partnership,
corporation or other entity. As used herein, the pronouns "which" and
"it" in relation to Persons which are individuals shall be construed to
mean "who" or "whom", "he" or "she", and "him" or "her", as
appropriate.
(b) The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on November 10, 1983 (the term "registrant" in said Rule 12b-2
meaning in this case the Company).
(c) The term "Beneficial Owner" (and variations thereof) shall
have the meaning ascribed to such term in Rule 13d-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on November 10, 1983; provided, however, that notwithstanding
any provision of Rule 13d-3 to the contrary, an entity shall be deemed
to be the Beneficial Owner of any share of capital stock of the Company
that such entity has the right to acquire at any time pursuant to any
agreement, or upon exercise of conversion rights, warrants or options,
or otherwise.
(d) The term "Voting Stock" shall have the meaning set forth
at the beginning of Section 4.1(a) of this Division D.
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(e) The term "Subsidiary" of any Person shall mean any
corporation of which a majority of the capital stock entitled to vote
for the election of directors is Beneficially Owned by such Person
directly or indirectly though other Subsidiaries of such Person.
(f) The term "Substantial Part" of the assets of any person
shall mean more than 10% of the Fair Market Value, as determined by a
two-thirds vote of the Continuing Directors, of the total consolidated
assets of such Person and its Subsidiaries as of the end of its most
recent fiscal year ended prior to the time the determination is being
made.
(g) The term "Other Consideration" shall include, without
limitation, shares of Common Stock or other capital stock of the
Company retained by the holders of such shares in the event of a
Business Combination in which the Company is the surviving corporation.
(h) The term "Continuing Director" shall mean a director of
the Company who is unaffiliated with any Related Person and either (1)
was a director of the Company immediately prior to the time the Related
Person involved in a Business Combination became a Related Person or
(2) is a successor to a Continuing Director and is recommended to
succeed a continuing Director by a majority of the then Continuing
Directors. Where this Division D contains provisions for a
determination, recommendation or approval by the Continuing Directors,
if there is at any particular relevant time no Continuing Director in
office, then such provision shall be deemed to be satisfied if the
Board, by a two-thirds vote of the whole Board of Directors, makes or
gives such determination, recommendation or approval.
(i) The term "Business Combination" shall mean
(1) any merger, consolidation or share exchange of
the Company or a Subsidiary of the Company with a Related
Person, in each case without regard to which entity is the
surviving entity;
(2) any sale, lease, exchange, transfer or other
disposition, including without limitation a mortgage or any
other security device, of all or any Substantial Part of the
assets of the Company (including without limitation any voting
securities of a Subsidiary of the Company) or a Subsidiary of
the Company to or with a Related Person (whether in one
transaction or series of transactions), or of all or any
Substantial Part of the assets of a Related Person to the
Company or a Subsidiary of the Company;
(3) the issuance, transfer or delivery of any
securities of the Company or a Subsidiary of the Company by
the Company or any of its Subsidiaries to a Related Person, or
of any securities of a Related Person to the Company or a
Subsidiary of the Company (other than an issuance or transfer
of securities which is effected on a pro rata basis to all
shareholders of the Company or of the Related Person, as the
case may be);
(4) any recapitalization, reorganization or
reclassification of securities (including any reverse stock
split) or other transaction that would have the effect,
directly or indirectly, of increasing the voting power of a
Related Person;
(5) the adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on
behalf of a Related Person; or
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<PAGE> 8
(6) any agreement, plan, contract or other
arrangement providing for any of the transactions described in
this definition of Business Combination.
(j) The term "Related Person" at any particular time shall
mean any Person if such Person, its Affiliates, its Associates, and all
Persons of which it is an Affiliate or Associate Beneficially Own in
the aggregate 10% or more of the outstanding Voting Stock of the
Company, and any Affiliate or Associate of any such Person, and any
Person of which such Person is an Affiliate or Associate. With respect
to any particular Business Combination, the term "Related Person" means
the Related Person involved in such Business Combination, any Affiliate
or Associate of such Related Person, and any Person of which such
Related Person is an Affiliate or Associate. Where in this Division D
any reference is made to a transaction involving, or ownership of
securities by, a Related Person, it shall mean and include one or more
transactions involving different Persons all included within the
definition of "Related Person", or ownership of securities by any or
all of such Persons. Each Person who is an Affiliate or Associate of a
Related Person shall be deemed to have become a Related Person at the
earliest time any of such Persons becomes a Related Person.
(k) The term "highest Equivalent Price" with respect to shares
of capital stock of the Company of any class or series shall mean the
following:
(1) with respect to shares of Common Stock, the
highest price that can be determined to have been paid at any
time by a Related Person for any shares of Common Stock; and
(2) with respect to any class or series of shares of
capital stock other than Common Stock, the higher of the
following:
(A) if any shares of such class or series
are Beneficially Owned by a Related Person, the
highest price that can be determined to have been
paid at any time by a Related Person for such shares;
or
(B) the amount determined by the Continuing
Directors, on whatever basis they believe is
appropriate, to be the per share price equivalent of
the highest price that can be determined to have been
paid at any time by a Related Person for any shares
of any other class or series of capital stock of the
Company.
In determining the Highest Equivalent Price, all purchases by a Related Person
shall be taken into account regardless of whether the shares were purchased
before or after the Related Person became a Related Person. Also, the Highest
Equivalent Price shall include any brokerage commissions, transfer taxes,
soliciting dealers' fees and other expenses paid by the Related Person with
respect to the shares of capital stock of the Company acquired by the Related
Person. In the case of any Business Combination with a Related Person, the
Continuing Directors by a two-thirds vote shall determine the Highest Equivalent
Price for each class and series of capital stock of the Company.
(l) The term "Fair Market Value" shall mean (1) in the case of stock,
the highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the New York Stock Exchange's
consolidated transaction reporting system, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
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<PAGE> 9
Automated Quotation System or any system then in use, or if no such quotations
are available, the fair market value on the date in question of a share of such
stock as determined by the Continuing Directors; and (2) in the case of property
other than stock or cash, the fair market value of such property on the date in
question as determined by a two-thirds vote of the Continuing Directors.
4.3 MISCELLANEOUS.
(a) The Continuing Directors, by a two-thirds vote, are
authorized to determine for purposes of this Division D on the basis of
information known to them after reasonable inquiry: (1) whether a
Person is a Related Person, (2) the number of shares of Voting Stock
Beneficially Owned by any Person, (3) whether a Person is an Affiliate
or Associate of another, (4) whether certain assets constitute a
Substantial Part of the assets of any Person, (5) the amounts of prices
paid, market prices, and other factors relative to fixing the Highest
Equivalent Price of shares of capital stock of the Company and (6) the
Fair Market Value of property, securities and Other Consideration
received in a Business Combination. Any such determination made in good
faith shall be binding and conclusive on all parties.
(b) Nothing contained in this Division D shall be construed to
relieve any Related Person from any fiduciary obligation imposed by
law.
(c) The fact that any Business Combination complies with the
conditions set forth in Subsection (a)(2) of Section 4.1 of this
Division D shall not be construed to impose any fiduciary duty,
obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption
or approval to the shareholders of the Company, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to evaluations
of or actions and responses taken with respect to such Business
Combination.
(d) Notwithstanding any other provisions of law, the Articles
or the By-Laws of the Company, the affirmative vote of the holders of
not less than 80% of the voting power of the Voting Stock of the
Company, voting together as a single class, shall be required to amend,
alter, change or repeal, or adopt any provision inconsistent with, this
Division D.
SIXTH: Henceforth, these Articles of the Company shall not include any prior
documents.
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<PAGE> 10
RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS
OF EQUITABLE RESOURCES, INC. ON MARCH 21, 1996
ESTABLISHING THE SERIES ONE PREFERRED STOCK
RESOLVED, That pursuant to the authority conferred upon the Board of
Directors by Article Fifth, Division A, section 1.1 of the Restated Articles of
Incorporation of the Company, as amended, there is hereby established a series
of the Preferred Stock of the Company to consist initially of 500,000 shares
with the designation and relative rights and preferences thereof to be as
follows:
DESIGNATION. The shares of such series shall be designated as "Series
One Preferred Stock." Shares of this series shall be issued pursuant to
the exercise of rights to purchase Series One Preferred Stock
distributed to the holders of Common Stock, without par value, of the
Company (the "Common Stock").
DIVIDENDS AND DISTRIBUTIONS. Subject to the rights and preferences of
the holders of any shares of any series of Preferred Stock ranking
senior as to dividends to this Series One Preferred Stock, as such may
be established by the Board of Directors, the holders of shares of
Series One Preferred Stock, in preference to the holders of Common
Stock and shares of stock ranking junior as to dividends to the Series
One Preferred Stock, shall be entitled to receive, when and if declared
by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the 15th day of March,
June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series One Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of
(a) $29.50 or (b) subject to the provision for adjustment hereinafter
set forth, 100 times the aggregate per share amount of all cash
dividends plus 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock, or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
paid on the Common Stock at any time during the quarter year
immediately preceding the quarter year ending on the day immediately
preceding such Quarterly Dividend Payment Date. In the event the
Company shall at any time after April 1, 1996 (the "Rights Distribution
Date") during any quarter year immediately preceding the quarter year
ending on the day immediately preceding a Quarterly Dividend Payment
Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, or (ii) subdivide the outstanding Common Stock or combine
the outstanding Common Stock into a greater or lesser number of shares
of Common Stock, then in each such case the amounts to which holders of
shares of Series One Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be adjusted
by multiplying each such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
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Dividends shall begin to accrue and be cumulative on outstanding shares
of Series One Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series One Preferred
Stock, unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of
shares of Series One Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series One
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series One Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
VOTING RIGHTS. Except as otherwise provided by law, holders of shares
of Series One Preferred Stock shall have no voting rights.
CERTAIN RESTRICTIONS. Whenever quarterly dividends or other dividends
or distributions payable on the Series One Preferred Stock are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series One
Preferred Stock outstanding shall have been paid in full, the Company
shall not: (i) declare or pay dividends on, make any distributions on,
or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or as to assets) to the
Series One Preferred Stock; (ii) declare or pay dividends on or make
any other distributions on any shares of stock ranking on a parity
(either as to dividends or as to assets) with the Series One Preferred
Stock, except dividends paid ratably on the Series One Preferred Stock
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled; (iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior (either as to
dividends or as to assets) to the Series One Preferred Stock, provided
that the Company may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of
the Company ranking junior (either as to dividends or as to assets) to
the Series One Preferred Stock; or (iv) purchase or otherwise acquire
for consideration any shares of Series One Preferred Stock, or any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series One Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes. The Company shall not
permit any subsidiary of the Company to purchase or otherwise acquire
for consideration any shares of stock of the Company unless the Company
could, under this paragraph, purchase or otherwise acquire such shares
at such time and in such manner.
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<PAGE> 12
REACQUIRED SHARES. Any shares of Series One Preferred Stock purchased
or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on
issuance set forth herein.
LIQUIDATION, DISSOLUTION OR WINDING UP. Subject to the rights and
preferences of the holders of any shares of any series of Preferred
Stock ranking senior as to assets to this Series One Preferred Stock,
as such may be established by the Board of Directors, upon any
involuntary or voluntary liquidation, dissolution or winding up of the
Company, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or as to assets) to the
Series One Preferred Stock unless, prior thereto, the holders of shares
of Series One Preferred Stock shall have received an amount per share
equal to the Per Share Series One Liquidation Preference. The Per Share
Series One Liquidation Preference shall be equal to the sum of (x)
$100.00 plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment, plus (y) the Participation Preference. The "Participation
Preference" is an amount per each share of Series One Preferred Stock
outstanding equal to the product of (A) the Excess Distribution Amount,
as hereinafter defined, times (B) a fraction whose numerator is 100 and
whose denominator is the sum of (i) the product of 100 times the number
of outstanding shares of Series One Preferred Stock, plus (ii) the
product of 100 times a fraction whose numerator is the number of
outstanding shares of Common Stock and whose denominator is the
Adjustment Number; provided, however, if the foregoing computation
results in a negative number, then the Participation Preference shall
be 0. Following the payment of the full amount of the Series One
Liquidation Preference, holders of shares of Common Stock shall receive
the remaining assets to be distributed.
The "Excess Distribution Amount" is an amount equal to the amount
available for distribution to shareholders of the Company after payment
of all debts and liabilities less the sum of (i) the liquidation
preferences in respect of all shares of preferred stock of the Company
other than the Series One Preferred Stock, (ii) the product of 100
times the number of outstanding shares of Series One Preferred Stock,
and (iii) the product of the number of outstanding shares of Common
Stock times a fraction whose numerator is 100 and whose denominator is
the Adjustment Number.
The Adjustment Number shall initially be 100 and shall be subject to
adjustment as provided below. In the event the Company shall at any
time after the Rights Distribution Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
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<PAGE> 13
CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the
shares of Series One Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company
shall at any time (i) declare any dividend on Common Stock payable in
shares of Common Stock, or (ii) subdivide the outstanding Common Stock
or combine the outstanding Common Stock into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of
shares of Series One Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
REDEMPTION. The outstanding shares of Series One Preferred Stock may be
redeemed at the option of the Board of Directors as a whole, but not in
part, at ny time or from time to time, at a cash price per share equal
to (i) the product of the Adjustment Number times the Average Market
Value, as such term is hereinafter defined, of the Common Stock, plus
(ii) all dividends which on the redemption date have accrued on the
shares to be redeemed and have not been paid or declared and a sum
sufficient for the payment thereof set apart, without interest;
provided, however, that if and whenever any quarter-yearly dividend
shall have accrued on the Series One Preferred Stock which has not been
paid or declared and a sum sufficient for the payment thereof set
apart, the Company may not purchase or otherwise acquire any shares of
Series One Preferred Stock unless all shares of such stock at the time
outstanding are so purchased or otherwise acquired. The "Average Market
Value" is the average of the closing sale prices of the Common Stock
during the 30-day period immediately preceding the date before the
redemption date on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as
amended, on which such stock is listed, or, if such stock is not listed
on any such exchange, the average of the closing bid quotations with
respect to a share of Common Stock during such 30-day period on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or, if no such quotations are
available, the fair market value of the Common Stock as determined by
the Board of Directors in good faith.
FRACTIONAL SHARES. Series One Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, if
applicable, receive dividends, participate in distributions and to have
the benefit of all other rights of holders of Series One Preferred
Stock.
4
<PAGE> 1
Exhibit 10.01
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EQUITABLE RESOURCES, INC. TRUST AGREEMENT
- --------------------------------------------------------------------------------
<PAGE> 2
EQUITABLE RESOURCES, INC. TRUST AGREEMENT
THIS AGREEMENT made this 1st day of November, 1997 by and between
EQUITABLE RESOURCES, INC. ("Company") and PNC BANK, NATIONAL
ASSOCIATION ("Trustee").
WHEREAS, Company has adopted the nonqualified deferred compensation
plan listed in Appendix A (the "Plan");
WHEREAS, Company has incurred or expects to incur liability under the
terms of the Plan with respect to the individuals participating in the Plan (the
"Participants");
WHEREAS, Company wishes to establish a trust (the "Trust") and to
contribute to the Trust the assets that shall be held therein, subject to the
claims of Company's creditors in the event of Company's insolvency, as herein
defined, until paid to Participants and their beneficiaries in such manner and
at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan.
NOW THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows.
SECTION 1. ESTABLISHMENT OF TRUST.
(a) Company hereby deposits with Trustee in Trust an amount which shall
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust. The Trust hereby established shall be
irrevocable upon acceptance of the initial contribution by the Trustee.
<PAGE> 3
(b) The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(c) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of the Participants and general creditors as herein set
forth. The Participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of the Participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of insolvency, as defined in
Section 3(a) herein.
(d) Company shall be required to irrevocably deposit cash or other
property to the Trust on a quarterly basis in an amount equal to the amount
deferred by the Participants, plus the amount, if any, of additional amounts
credited to the Participants pursuant to the terms of the Plan. In addition, in
the event of a "change of control" of Company (as defined in Section 13(e) of
this Trust), Company shall, as soon as possible, but in no event longer than 30
days following the change of control, make an irrevocable cash contribution in
an amount equal to the amount deferred by the Participants as of the date of the
change in control minus amounts previously contributed, plus the amounts, if
any, of additional amounts credited to the Participants which have not yet been
contributed pursuant to the terms of the Plan.
SECTION 2. PAYMENTS TO THE PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable, the form in which
such amount is to be paid (as provided for or available under the Plan), and the
time of commencement for payment of such amounts. Except as otherwise provided
herein, Trustee shall make payments to the Participants and their beneficiaries
in accordance with such Payment Schedule. With respect to benefits attributable
to
2
<PAGE> 4
Participants and beneficiaries, Company shall be solely responsible for
determining the amounts of income that are taxable and reportable, determining
the nature and amounts of taxes to be withheld and for withholding, remitting
and reporting all such income and taxes to the applicable government entities.
Trustee shall have no duties with respect thereto.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it shall
designate under the Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan. Company shall notify the
Trustee of such determination and shall direct commencement of payments of such
benefits.
(c) Company may make payment of benefits directly to the Participants
or their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Company shall immediately make up the balance of each such payment as it
falls due. Trustee shall notify Company when principal and earnings are not
sufficient to make benefit payments.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN
COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to the Participants and
their beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, or (ii) Company is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges in writing
to Trustee that Company has become Insolvent, Trustee shall
3
<PAGE> 5
determine whether Company is Insolvent and, pending such determination, Trustee
shall discontinue payment of benefits to the Participants or their
beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor alleging
that Company is Insolvent, Trustee shall have no duty to inquire whether Company
is Insolvent. Trustee may in all events rely on such evidence concerning
Company's solvency as may be furnished to Trustee and that provides Trustee with
a reasonable basis for making a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to the Participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of the Participants or their beneficiaries to pursue their
rights as general creditors of Company with respect to benefits due under the
Plan or otherwise.
(4) Trustee shall resume the payment of benefits to the
Participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that Company is not Insolvent (or is
no longer Insolvent)
(c) Provided that there are sufficient assets, if Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Participants or their beneficiaries under the terms of the Plan as certified to
the Trustee by the Company for the period of such discontinuance, less the
aggregate amount of any payments made to the Participants or their beneficiaries
by Company in lieu of the payments provided for hereunder during any such period
of discontinuance.
SECTION 4. PAYMENTS TO COMPANY.
Except as provided in Section 3 hereof, Company shall have no right or
power to direct Trustee to return to Company or to divert to others any of the
Trust assets before all payment of benefits have been made to the Participants
and their beneficiaries pursuant to the terms of the Plan.
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<PAGE> 6
SECTION 5. INVESTMENT AND ADMINISTRATIVE AUTHORITY.
(a) The assets OF the Trust may be invested and reinvested in common
and preferred stocks, shares, or certificates of participation issued by
registered investment companies including registered investment companies for
which the Trustee or an affiliate thereof receives compensation for providing
custodial, transfer agency, investment advisory or other services, investment
trusts, common or pooled investment funds, bonds, debentures, insurance and
annuity contracts, limited partnership interests, obligations of governmental
bodies, both domestic and foreign, notes, commercial paper, certificates of
deposit, and other securities or evidences of indebtedness, secured or
unsecured, including variable amount notes, convertible securities of all types
and kinds, interest--bearing savings or deposit accounts with any federally
insured bank or trust company (including Trustee), or any federally insured
savings and loan association, and any other property permitted as trust
investments under applicable law. The Company acknowledges that interests in
registered investment companies are not bank deposits and are not incurred by,
guaranteed by, obligations of, or otherwise supported by the United States of
America, The Federal Deposit Insurance Corporation, PNC Bank, National
Association, or any bank or government entity. Notwithstanding anything to the
contrary, the Company may reserve to itself the right to direct the Trustee as
to the acquisition, retention or disposition of all or any portion of the assets
of the Trust. Upon receipt of a written notice from the Company advising the
Trustee that the Company has reserved such authority, the Trustee shall,
pursuant to such notice, invest all or any portion of the Trust assets
designated in such notice only in accordance with the instructions of the
Company. The Trustee shall be under no duty to question any instruction of the
Company. Any such instruction may be of a continuing nature or otherwise and may
be changed or revoked in writing by the Company at any time. In the absence of
such a written direction, the Trustee shall have the full authority as to the
acquisition, retention or disposition of the assets of the Trust. The Company
may revoke or amend the investment powers that it reserves to itself provided
such revocation or amendment is in writing and is consented to in advance by the
Trustee.
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<PAGE> 7
(b) Trustee has the power to hold any or all securities or property in
Trustee's name, as Trustee, or in the name of a nominee or nominee of an
affiliate, and in accounts or deposits administered in any location by Trustee
or any affiliate of Trustee. In the event the same are held in its own name or
in the name of a nominee or nominees, suitable designation is to be made upon
the books and records of Trustee that said securities or property are so held as
part of any trusts hereunder.
(c) In no event may Trustee invest in securities (including stock or
rights to acquire stock) or obligations issued by Company, other than a de
minimis amount held in common investment vehicles in which Trustee invests. All
rights associated with assets of the Trust shall be exercised by Trustee or the
person designated by Trustee, and shall in no event be exercisable by or rest
with the Participant.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within 60 days following the close of each calendar year
and within 60 days after the removal or resignation of Trustee, Trustee shall
deliver to Company a written account of its administration of the Trust during
such year or during the period from the close of the last preceding year to the
date of such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a description of
all securities and investments purchased and sold with the cost or net proceeds
of such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or resignation,
as the case may be.
The Company may approve the account either by written notice of
approval delivered to the Trustee or by failure to object in writing to the
Trustee within 90 days from the date on which the account was delivered to the
Trustee.
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<PAGE> 8
Upon receipt of written approval of the account, or upon the expiration of the
90-day period without written objections, the account shall be approved, and the
Trustee shall be released and discharged with respect to the account as if the
account had been settled and allowed by a decree of a court of competent
jurisdiction. Nothing herein contained, however, shall be deemed to preclude the
Trustee of its right to have its account settled by a court of competent
jurisdiction.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plan or this Trust and is given in writing
by Company, and provided further, that the Trustee shall incur no liability to
any person for any action or failure to act taken pursuant to a determination of
the existence or non-existence of an event of Insolvency pursuant to Section 3
hereunder. In the event of a dispute between Company and a party, Trustee may
apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes, defends or settles any litigation
arising in connection with this Trust, Company agrees to indemnify the Trustee
against the Trustee's costs, expenses and liabilities (including, without
limitation, reasonable attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments, except to the extent it is judicially
determined that any loss or damage is directly attributable to the Trustee's
(i) failure to exercise the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and like aims, (ii) negligence or willful misconduct or (iii)
violation of applicable law. The Trustee shall provide the Company with advance
written notice of any such litigation. If Company does not pay such cost,
expenses and liabilities in a reasonably timely manner, Trustee may obtain
payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be counsel for
Company or the Trustee generally) with
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<PAGE> 9
respect to any of its duties or obligations hereunder at the Company's expense
and shall have no liability for any action or failure to act in reasonable
reliance upon advice of such counsel.
(d) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
Trustee shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(e) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(f) Trustee, its affiliates, their officers, directors, employees and
agents, shall not be liable for any act or omission of Company, any investment
manager (other than an investment manager affiliated with Trustee), or any
officer, director, employee or agent of any of them (other than an officer,
director, employee or agent of an investment manager affiliated with Trustee).
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
Company shall pay all administrative and Trustee's fees and expenses as
shall be agreed upon. If not so paid, the fees and expenses shall be paid from
the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective 60 days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company on 60 days notice or upon shorter
notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may not be
removed by Company for three years.
8
<PAGE> 10
(d) If Trustee resigns within three years of a Change of Control, as
defined herein, Trustee shall select a successor Trustee in accordance with the
provisions of Section 11(b) hereof prior to the effective date of Trustee
resignation or removal.
(e) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 60 days after receipt of notice
of resignation, removal or transfer, unless Company extends the time limit.
(f) If Trustee resigns or is removed, a successor shall be appointed in
accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraph(s) (a) or (b) of this section. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section 10(a)
or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company or the successor Trustee
to evidence the transfer.
(b) If Trustee resigns pursuant to the provisions of Section 10(d)
hereof and selects a successor Trustee, Trustee may appoint any third party such
as a bank trust department or other party that may be granted corporate trustee
powers under state law. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee. In the event that the
Trustee is required to appoint a successor trustee hereunder, the Company agrees
that the Trustee shall be held harmless from all liability and expenses relating
to such appointment, the indemnification provision in Section 13(d) specifically
shall apply, and if a successor trustee requires indemnification or hold
harmless protection, such
9
<PAGE> 11
indemnification or protection will be provided by the Company or any successor
thereto and not the Trustee. Nothing herein contained, however, shall be deemed
to preclude the Trustee from applying to a court of competent jurisdiction for
the appointment of a successor trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, following a
change of control of the Company, no amendment may be made by the Company which
adversely affects the rights of Participants to benefits under the Plan unless
the amendment is agreed to in writing by more than 75% of the Participants
entitled to the payment of benefits under the Plan as of the date of the
amendment.
(b) The Trust shall not terminate until the date on which the
Participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan. Upon termination of the Trust, any assets remaining in
the Trust shall be returned to Company.
(c) Upon written approval of more than 75% of the Participants entitled
to the payment of benefits under the Plan, Company may terminate this Trust
prior to the time all benefit payments under the Plan have been made. All assets
in the Trust at termination shall be returned to Company.
(d) Notwithstanding any other provision in this Trust Agreement, this
Trust Agreement may not be amended within one year after the occurrence of a
Change of Control.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
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<PAGE> 12
(d) The Trustee shall be indemnified and saved harmless by the Company
from and against any and all liability to which the Trustee may be subjected in
carrying out its duties under this Agreement (including any liability incurred
as a result of compliance with instructions of the Company, its agents or
employees), except to the extent it is judicially determined that any loss or
damage is directly attributable to the Trustee's (i) failure to exercise the
care, skill, prudence and diligence under the circumstances then prevailing that
a prudent person acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and like aims, (ii)
negligence or willful misconduct or (iii) violation of applicable law. The
indemnification provided to the Trustee shall also apply to any liability
arising from the actions or nonactions or any predecessor trustee or fiduciary
or other fiduciaries of the Plan.
(e) For purposes of this Trust, Change of Control shall mean any of the
following events (each of such events being herein referred to as a "Change of
Control"):
(1) The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a group of
purchasers, other than to a corporation with respect to which, following such
sale or disposition, more than eighty percent (80%) of, respectively, the then
outstanding shares of Company common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
the Board of Directors is then owned beneficially, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Company common stock and the combined
voting power of the then outstanding voting securities immediately prior to such
sale or disposition in substantially the same proportion as their ownership of
the outstanding Company common stock and voting power immediately prior to such
sale or disposition;
(2) 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 the Company common stock or the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of the Board of Directors; provided, however,
that any acquisition by (1) the Company or any of its subsidiaries, or any
employee benefit plan (or related
11
<PAGE> 13
trust) sponsored or maintained by the Company or any of its subsidiaries or (2)
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;
(3) The Company's termination of its business and liquidation of
its assets;
(4) There is consummated a merger, consolidation, reorganization,
share exchange, or similar transaction involving the Company, (including a
triangular merger), in any case, unless immediately following such transaction:
(i) all or substantially all of the persons who were the beneficial owners of
the outstanding common stock and outstanding voting securities of the Company
immediately prior to the transaction beneficially own, directly or indirectly,
more than 60% of the outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such transaction
(including a corporation or other person which, as a result of such transaction,
owns the Company or all or substantially all of the Company's assets through one
or more subsidiaries (a "Parent Company")) in substantially the same proportion
as their ownership of the common stock and other voting securities of the
Company immediately prior to the consummation of the transaction, (ii) no person
(other than the Company, any employee benefit plan sponsored or maintained by
the Company or, if reference was made to equity ownership of any Parent Company
for purposes of determining whether clause (i) above is satisfied in connection
with the transaction, such Parent Company) beneficially owns, directly or
indirectly, 20% or more of the outstanding shares of common stock or the
combined voting power of the voting securities entitled to vote generally in the
election of directors of the corporation resulting from such transaction and
(iii) individuals who were members of the Company's Board of Directors
immediately prior to the consummation of the transaction constitute at least a
majority of the members of the board of directors resulting from such
transaction (or, if reference was made to equity ownership of any Parent Company
for purposes of determining whether clause (i) above is satisfied in connection
with the transaction, such Parent Company); or
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<PAGE> 14
(5) The following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the date
hereof, constitute the entire Board of Directors and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
shareholders was approved by a vote of a least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be November 1, 1997.
<TABLE>
<S> <C>
EQUITABLE RESOURCES, INC.
Attest: /s/ David J. Smith By: /s/ Gregory R. Spencer
--------------------------- --------------------------------------------
Name: Gregory R. Spencer
------------------------------------------
Title: Sr. V.P. & Chief Administrative Officer
-----------------------------------------
PNC BANK,
NATIONAL ASSOCIATION
Attest: /s/ Valerie Washington By: /s/ Richard S. Larimer
--------------------------- --------------------------------------------
Name: Richard S. Larimer
------------------------------------------
Title: Sr. Vice President
-----------------------------------------
</TABLE>
13
<PAGE> 1
Exhibit 10.4
EQUITABLE RESOURCES, INC.
SHORT-TERM BONUS PLAN
EQUITABLE RESOURCES, INC. (the "Company") hereby establishes this
EQUITABLE RESOURCES, INC. SHORT-TERM BONUS PLAN (the "Plan") as of this 23rd day
of February, 1999, in accordance with the terms provided herein.
WHEREAS, the Company has maintained various bonus programs for the
benefit of its employees; and
WHEREAS, the Company desires to consolidate the structure of the bonus
programs to a single, focused initiative which describes the goals of the
Company and the methodology for awarding bonus amounts under the programs; and
WHEREAS, the terms of this Plan will replace and supersede the relevant
terms of the various bonus programs that exist throughout the Company.
NOW, THEREFORE, the Company hereby adopts the terms of the Plan as
follows:
SECTION 1. BONUS PROGRAM STRATEGY. The Company's main purposes in providing
bonus programs are to maintain a competitive level of total cash compensation
and to align the interests of the Company's employees with those of the
Company's shareholders, customers, and with the strategic objectives of the
Company. By placing a portion of employee compensation at risk, the Company can
reward performance based on the overall performance of the Company, the business
segment and the individual contribution of each employee.
SECTION 2. EFFECTIVE DATE. The Effective Date of this Plan is
January 1, 1999. The plan will remain in effect until formally amended or
terminated in writing by the Company's Chief Executive Officer.
SECTION 3. ELIGIBILITY. Specific eligibility requirements for each program
under this Plan are proposed by the assigned Business Segment President or
Company Officer and approved by the Corporate Chief Administrative Officer.
Employees that are eligible to participate in a program are notified in writing
of their participation and given a Plan document for their reference.
SECTION 4. ADMINISTRATION OF THE PLAN. Any program that covers the officers
of the Company shall be administered by the Company's Chief Administrative
Officer, under the general direction of the Company's President and Chief
Executive Officer. The Company's Director of Compensation and Benefits shall
administer all other programs under the general direction of the Company's Chief
Administrative Officer.
<PAGE> 2
On an annual basis, the Compensation Committee of the Board of Directors must
review and approve the Equitable Resources Corporate Short - Term Bonus Program,
its participants, their bonus targets, the methodology for funding the bonus
pool, and the projected payout under the program. They must also review and
approve all bonus payouts under this program, as well as any proposed amendments
throughout the plan year. Further, all other bonus programs and projected payout
amounts by program must be reviewed by the Compensation Committee on an annual
basis.
SECTION 5. EFFECT ON INDIVIDUAL PROGRAMS. This Plan shall serve to provide
specific direction to the following bonus programs (collectively referred to as
the "Bonus Programs"):
o Equitable Resources Corporate Short-Term Bonus Program
o Equitable Utilities Short-Term Bonus Program
o Equitable Production - East Short-Term Bonus Program
o Equitable Production - Gulf Short-Term Bonus Program
o Equitable Services Short-Term Bonus Program
This list is exhaustive of bonus programs throughout the Company. All bonus
programs not listed above are terminated effective December 31, 1998 unless
otherwise approved in writing by the Company's Chief Executive Officer.
SECTION 6. DEFINITIONS. The following provides the definition of financial
and operational measures used in all Bonus Programs
(a) Net Income After Tax. This measure shall be determined by the
Chief Financial Officer of the Company. The formula for Net
Income After Tax for the Corporate Short Term Bonus Program is
as follows:
TOTAL REVENUE OF THE COMPANY MINUS TOTAL EXPENSES OF
THE COMPANY FOR THE PLAN YEAR.
For purposes of this paragraph, Total Revenue shall mean
revenue from continuing operations. Income from unusual items
as determined by the Company's Chief Financial Officer will be
excluded. Expenses shall include interest, taxes, corporate
overhead and the accrual charge for the incentive program
funding, all of which are also determined by the Chief
Financial Officer of the Company. Expenses from unusual items
as determined by the Company's Chief Financial Officer will
also be excluded. The Chief Executive Officer is responsible
for reviewing all unusual items and may recommend their
inclusion from financial calculations to the Compensation
Committee of the Board of Directors for final approval as
he/she may determine to maintain the spirit of the Plan.
2
<PAGE> 3
The formula for Net Income After Tax for all other Bonus
Programs is total revenue of the business segment minus total
expenses using the same methodology described above. An
exception, however, is made when calculating the expenses
associated with business segment interest and taxes. The
process for calculating this exception is described below:
In determining Business Segment Net Income, pro forma
financials below the Business Segment Earnings Before Interest
and Taxes ("EBIT") line will be used. For purposes of
calculating Interest and Taxes, the Segment capital structure,
tax rate, and interest rate will be fixed at the capital
structure, tax rate and interest rate reflected in the
respective Segment's final 1999 business plan. Interest will
be determined by multiplying 1) the predetermined interest
rate, 2) predetermined % debt in the capital structure and 3)
the 12-month average actual total capital employed during the
year. Taxes will be determined by multiplying the
predetermined effective tax rate by the Segment's pre-tax
income and then deducting a predetermined amount of investment
tax credit amortization. This calculation will be done by the
business segment presidents and submitted to the Company's
Chief Financial Officer for review and approval. The Company's
Chief Financial Officer will determine, for purposes of this
Plan, the final business segment Net Income After Tax to be
used in determining bonus awards.
(b) Company return on total capital as compared to a selected peer
group. The return on total capital shall be expressed in
quartiles and shall be compared against the return on total
capital of a peer group. The corporate peer group shall be
selected by the President and Chief Executive Officer of the
Company, and the comparison shall be made by the Chief
Financial Officer of the Company. The corporate peer group for
1999 is as follows: Columbia Energy Group, Consolidated
Natural Gas, Energen, KN Energy, MCN Energy Group, National
Fuel Gas, Oneok, Questar, Sonat, and Southwestern. The source
for return on total capital data for the peer group is
published by Value Line.
The corporate return on total capital shall be determined in
accordance with the following formula:
NET INCOME AFTER TAX + (INTEREST X (1 - EFFECTIVE TAX RATE))
------------------------------------------------------------
(SHORT AND LONG TERM DEBT + PREFERRED STOCK + BOOK EQUITY)
For purposes of this paragraph, all factors in the denominator
of the calculation described above shall be calculated by
determining each specific factor at the end of December of the
previous year and each specific factor at the end of December
in the Plan year. The actual number used is calculated by
averaging the resulting two numbers for each factor.
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<PAGE> 4
(c) Production. For purposes of this Plan, Production is the
operation of delivering crude gas from the bottom of the well
bore to separators or field gas processing equipment.
(d) Net Income Ratio. The Net Income Ratio is calculated by
dividing the actual Net Income, determined as specified in
paragraph (a) above, by the Net Income forecasted in the
approved business plan.
SECTION 7. DETERMINATION OF BONUS POOLS. All Bonus Programs shall hereafter
provide bonus amounts that are funded based on bonus pools. The bonus pools
shall be determined by a specific and defined financial measure. An additional,
defined, operational measure may be added at the discretion of the Company's
Chief Executive Officer. The following chart provides the specific financial and
operational measures for each of the approved programs.
- ------------------------------------------------------------------------------
Short - Term Bonus Program Financial Measure Operational Measure
- ------------------------------------------------------------------------------
Equitable Resources Corporate Net Income After Tax Competitive Return on
Total Capital
- ------------------------------------------------------------------------------
Equitable Utilities Net Income After Tax Not Applicable
- ------------------------------------------------------------------------------
Equitable Production - East Net Income After Tax Production Goals
- ------------------------------------------------------------------------------
Equitable Production - Gulf Net Income After Tax Production Goals
- ------------------------------------------------------------------------------
Equitable Services Net Income After Tax Not Applicable
- ------------------------------------------------------------------------------
Each bonus pool is funded based on the criteria listed above. The funding of
each program is included in the attachments to this document.
The Compensation Committee of the Board of Directors reserves the right to
adjust the funding of any pool created under this Plan by any amount up to
twenty-five (25%) percent. This adjustment will be based on the impact of
weather and gas, oil and liquids prices. This adjustment may be either positive
or negative.
SECTION 8. BONUS TARGETS. Each participant under the Plan shall be given a
bonus target that shall be determined based on market competitive levels. Bonus
targets for all Company Officers shall be determined at the beginning of each
plan year and approved by the Compensation Committee of the Board of Directors.
All other bonus targets shall be determined, in consultation with the
appropriate business segment president or corporate officer at the beginning of
each plan year by Compensation and Benefits, and approved by the Chief
Administrative Officer. Actual bonus payments shall be based on overall bonus
pool funding and, for designated participants with specified individual
performance goals, on individual performance.
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<PAGE> 5
SECTION 9. PERFORMANCE GOALS. Each exempt level participant must have
specific performance goals developed for his/her position for the subject bonus
year. These performance goals must support the approved business plan and should
identify how the participant will support the specific value drivers established
by executive management. A copy of each participant's performance goals and
objectives must be developed and on file with the appropriate business segment
Human Resources Department by February 15 of the Plan year.
For those participants with specified individual performance goals, any bonus
payment will be determined based on an evaluation of that participant's actual
performance relative to those goals. Performance can be rated as Outstanding,
Successful or Unsatisfactory. The definition of each rating is as follows:
Performance Level Performance Definition
----------------- ----------------------
Outstanding Performance consistently exceeds
established expectations. Performance at
this level creates new standards
of performance.
Successful Performance meets and often exceeds
established performance expectations.
Unsatisfactory Performance is not meeting expectations in
one or more of the performance criteria
listed above. Performance at this level is a
serious problem and will result in no bonus
payout.
Based on the employee's performance relative to their objectives,
individual bonus adjustments can be made by the business segment president or
appropriate corporate officer ranging from no bonus to 150% of the bonus target.
The Company's Chief Executive Officer must approve any recommendation to make an
adjustment in excess of 150%. He/she has the final approval of all bonus
adjustments and awards to participants under this Plan.
5
<PAGE> 6
SECTION 10. DISTRIBUTING THE BONUS POOL. Bonuses are distributed based on
bonus pool funding and individual performance. The distribution is a four-step
process.
(1) The bonus pool is funded as described in Section 7. If the bonus
pool is not funded, the process to calculate bonus awards is
terminated.
(2) The performance of each employee is reviewed by the business segment
president and the performance factor described in Section 9 is applied
to the employee's original bonus target.
(3) The bonus targets after performance adjustments for each employee are
totaled. The percent of each employee's adjusted bonus target is
calculated as a percent of the total bonus targets for all employees.
(4) The percent assigned to each employee in step 3 is multiplied by the
total pool generated, resulting in the employee's actual bonus award.
SECTION 11. POOL DISTRIBUTION FOR SELECTED EMPLOYEES. The distribution of the
pool for selected employees is calculated as follows:
Employees that are direct reports to the Company's Chief Executive Officer and
are Presidents of Equitable business segments will have eighty percent (80%) of
their bonus tied to the performance of the Corporate bonus pool and twenty
percent (20%) of their bonus tied to the performance of their specific business
segment bonus pool. Employees that are direct reports to Business Segment
Presidents will have twenty percent (20%) of their bonus target tied to the
performance of the Corporate bonus pool and eighty percent (80%) of their bonus
tied to the performance of the appropriate business segment bonus pool.
In addition, employees that are direct reports to the Company's Chief Executive
Officer will be required to defer at least twenty percent (20%) of their bonus
into the Company's common stock fund in the Company's Deferred Compensation
Plan. Employees that are direct reports to executives that report directly to
the Company's Chief Executive Officer will be required to defer at least ten
(10%) of their bonus into the Company's common stock fund in the Company's
Deferred Compensation Plan. This deferral will vest equally over a two-year
period beginning one year after the date of deferral. The employee will be asked
to give specific distribution elections as provided under the Deferred
Compensation Plan for all deferrals.
Employees required to defer a percentage of their bonus will be given the
opportunity to defer and invest in Company common stock an additional amount
over the minimum required amount described above. All deferrals over the
required minimum will be matched by the Company with .25 shares of stock
contributed to the employee's account for each share of stock purchased by the
deferral of bonus over the required minimum. These shares vest equally over a
three-year period beginning one year after the date of deferral. The employee
will be asked to give specific distribution elections as provided
6
<PAGE> 7
under the Deferred Compensation Plan for all deferrals. There is no limit on the
number of matching shares.
All shares that are deferred and matched will have dividends applied and
reinvested as appropriate throughout the year. Employees that resign from the
Company forfeit all unvested shares.
Shares described in this section will be used when determining an executive's
overall status regarding meeting their specific stock ownership guidelines. For
purposes of this section, executives are corporate officers that report directly
to the President and Chief Executive Officer.
SECTION 12. IMPACT ON BENEFIT PLAN. Payments under the Plan shall not be
considered as earnings for purposes of the Company's qualified retirement plans
or any such retirement or benefit plan unless specifically provided for and
defined under the plan.
SECTION 13. TAX CONSEQUENCES. It is intended that nothing in this Plan shall
change the tax consequences of the Bonus Programs under Federal or State law and
specifically shall not cause the participants in the Bonus Programs to be taxed
currently under the Constructive Receipt or Economic Benefit Doctrines and as
expressed in Sections 451 and 83 of the Internal Revenue Code of 1986, as
amended.
SECTION 14. CHANGE OF STATUS. The President and Chief Executive Officer may
decide to include or exclude an employee from the Plan under this section at
his/her complete and sole discretion. In making such decisions, he/she may
consider any factors that he/she may consider relevant. The recommendation to
include an employee in the plan must be done by the business segment president
or appropriate corporate officer upon the occurrence of the event described
below. The following guidelines are provided as general information regarding
employee status changes:
(a) New Hire, Transfer, Promotion. A newly hired employee or an
employee promoted or transferred during the performance year
to a position qualifying for participation MAY be recommended
for a pro rata award based on the level of participation in
his/her previous program and the percentage of the performance
year the employee is in the participating position. This
includes employees that leave positions that qualify for bonus
payments in other Company business segments. These potential
payments shall be considered when calculating the employee's
bonus target under this Plan.
(b) Demotion. No award shall be made to an employee who has been
demoted during the performance year because of performance. If
the demotion is due to an organizational change, a pro rata
award MAY be made, provided the employee otherwise qualifies
for an incentive payment.
7
<PAGE> 8
(c) Termination. Any employee whose services are terminated during
the performance year for reasons of misconduct, failure to
perform, or other cause, shall not be considered for an award.
If the termination is due to reasons such as reorganization,
and not due to the fault of the employee, the employee MAY be
considered for a pro rata award.
(d) Resignation. An employee who resigns to accept employment
elsewhere (including self-employment) before bonuses are paid
shall not be considered for an award. If the resignation is
due to other reasons (e.g., ill health, disability), the
employee MAY be considered for a pro rata award.
(e) Death, Disability, Retirement, Leave of Absence and Layoff. An
employee whose status as an active employee is changed during
the performance year for any reason other than the reasons
cited above MAY be considered for a pro rata award. In the
event of an employee's death, earned awards for previous plan
years ended prior to the employee's death shall be paid to the
employee's estate.
SECTION 15. DISPUTE RESOLUTION. The following is the exclusive procedure to
be followed by all participants in resolving disputes arising from payments made
under this Plan. All disputes relative to a given plan year must be presented to
the Chief Administrative Officer of the Company within thirty (30) days
following the award date for that plan year, or the participant's right to
dispute a payment will be irrevocably waived. Once the Chief Administrative
Officer has been notified of a dispute, he/she will assemble a Compensation
Review Committee (CRC) to review the issue. The CRC will consist of the
following: the Chief Administrative Officer, the manager of the employee with
the dispute, the business segment head, and a peer chosen by the employee with
the dispute. The employee with the concern will be given an opportunity to
present his/her issues to the CRC. A decision will be rendered by the CRC within
ten (10) business days of the meeting. The Chief Administrative Officer will be
responsible for preparing a written version of the decision. This decision may
be appealed to the President and Chief Executive Officer of the Company.
Appealed decisions will be reviewed by the President and Chief Executive Officer
with information requested from appropriate parties as he/she may determine in
his/her sole discretion. The decision made by the President and Chief Executive
Officer regarding the matter is final and binding on all Plan participants.
8
<PAGE> 9
SECTION 16. AMENDMENT OR TERMINATION OF THIS PLAN. The Company shall have the
right to amend or terminate the Plan at any time by written action approved by
the Company's President and Chief Executive Officer in his/her complete and sole
discretion. The Company shall notify affected employees in writing of any
amendment or Plan termination.
IN WITNESS WHEREOF, the Company hereby adopts the Plan as of the date
first written above,
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Jean F. Marks By: /s/ Murry S. Gerber
- ------------------------ --------------------------------------
Jean F. Marks Murry S. Gerber
Title: President and Chief Executive Officer
-------------------------------------
9
<PAGE> 10
Equitable Corporate Short - Term Bonus Program Funding
Bonus Pool Funding Multiple
- -----------------------------------------------------------------------
Competitive ROTC Performance
- -----------------------------------------------------------------------
Net Income 4th Quartile 3rd Quartile 2nd Quartile 1st Quartile
Ratio (1)
- -----------------------------------------------------------------------
< 100% 0 0 0 0
- -----------------------------------------------------------------------
100% .75 1.00 1.25 1.50
- -----------------------------------------------------------------------
105% .83 1.25 1.50 1.75
- -----------------------------------------------------------------------
110% .92 1.50 1.75 2.00
- -----------------------------------------------------------------------
115% 1.00 1.75 2.00 2.25
- -----------------------------------------------------------------------
120% 1.00 2.00 2.25 2.50
- -----------------------------------------------------------------------
125% 1.00 2.25 2.50 2.75
- -----------------------------------------------------------------------
(1) Company Actual Net Income divided by Business Plan Net Income
(2) For 1st, 2nd and 3rd quartile performance, the bonus pool multiple continues
to increase by .25 times for each additional 5% of Net Income Ratio.
10
<PAGE> 11
Equitable Utilities Short - Term Bonus Program Funding
---------------------------------------------------
Net Income Ratio (1) Bonus Pool Funding
Multiple (2)
---------------------------------------------------
< 100% 0
---------------------------------------------------
100% 1.00
---------------------------------------------------
105% 1.25
---------------------------------------------------
110% 1.50
---------------------------------------------------
115% 1.75
---------------------------------------------------
120% 2.00
---------------------------------------------------
125% 2.25
---------------------------------------------------
(1) Business Segment Actual Net Income divided by Business Plan Net Income
(2) The bonus pool multiple continues to increase by .25 times for each
additional 5% of Net Income Ratio.
11
<PAGE> 12
Equitable Production - East Short-Term Bonus Program Funding
Bonus Pool Funding Multiple
--------------------------------------------------------------
Production
Net Income Ratio (1) 41.4bcf to < 43.5 bcf 43.5 bcf + (2)
--------------------------------------------------------------
< 100% 0 0
--------------------------------------------------------------
100% 1.00 1.50
--------------------------------------------------------------
105% 1.16 1.75
--------------------------------------------------------------
110% 1.33 2.00
--------------------------------------------------------------
115% 1.50 2.25
--------------------------------------------------------------
120% 1.50 2.50
--------------------------------------------------------------
125% 1.50 2.75
--------------------------------------------------------------
(1) Business Segment Actual Net Income divided by Business Plan Net Income
(2) For production performance above 43.5 bcf, the bonus pool multiple continues
to increase by .25 times for each additional 5% of Net Income Ratio.
12
<PAGE> 13
Equitable Production - Gulf Short - Term Bonus Program Funding
Bonus Pool Funding Multiple
---------------------------------------------
Production
---------------------------------------------
Business Segment
Net Income < 26.1 bcf 26.1 bcf +
---------------------------------------------
$ 1 0 1.00
---------------------------------------------
$1,000,000 0 1.50
---------------------------------------------
$2,000,000 + 0 2.00
---------------------------------------------
Note: For production performance above 26.1 bcf, the bonus pool
will be funded at the discretion of the President and Chief
Executive Officer.
13
<PAGE> 14
Equitable Services Short - Term Bonus Program Funding
---------------------------------------------------
Net Income Ratio (1) Bonus Pool Funding
Multiple
---------------------------------------------------
< 100% 0
---------------------------------------------------
100% 1.00
---------------------------------------------------
122% 1.25
---------------------------------------------------
144% 1.50
---------------------------------------------------
166% 1.75
---------------------------------------------------
188% 2.00
---------------------------------------------------
210% 2.25
---------------------------------------------------
(1) Actual Net Income divided by Business Plan Net Income.
14
<PAGE> 15
EQUITABLE RESOURCES, INC.
SHORT-TERM BONUS PLAN
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 to the Equitable Resources Short-Term Bonus Plan
(the "Plan") is hereby made this 27th day of October 1999, as provided below.
WHEREAS, the Plan, as established by the Company effective February 23,
1999, provided for certain calculations to be made in connection with peer group
comparisons; and
WHEREAS, on October 27, 1999, the Compensation Committee of the
Company's Board of Directors authorized amendment of the Plan to modify certain
aspects of such calculations.
NOW, THEREFORE, the Plan shall be amended, effective October 27, 1999,
as follows:
1. The Plan be and hereby is amended by deleting the last two sentences
of the first paragraph of Section 6(b) thereof and substituting the following in
lieu thereof:
The corporate peer group is as follows: Columbia Energy Group,
Consolidated Natural Gas, Energen, KN Energy, MCN Energy
Group, National Fuel Gas, Oneok, Questar, Sonat and
Southwestern, to be adjusted by the Chief Financial Officer as
he deems appropriate in the event of transactions involving
any of the named peer group companies.
2. The Plan be and hereby is amended by deleting the second and third
sentences of the second paragraph of Section 6(b) thereof (following the
formula) and substituting the following lieu thereof:
For purposes of this paragraph, all factors in the denominator
of the calculation described above shall be calculated by
determining each specific factor at the end of December of the
previous year and at the end of each of the four quarters of
the Plan year. The actual number used is calculated by
averaging the resulting five numbers for each factor.
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to be
executed by its officers thereunto authorized as of the day and year first
written above.
EQUITABLE RESOURCES, INC.
/s/ Gregory R. Spencer
------------------------------------
Gregory R. Spencer
Senior Vice President
and Chief Administrative Officer
ATTEST:
/s/ Jean F. Marks
- --------------------------------------
Jean F. Marks
16
<PAGE> 1
Exhibit 10.06
- --------------------------------------------------------------------------------
EQUITABLE
RESOURCES
1994 LONG-TERM INCENTIVE PLAN
(Adopted January 21, 1994)
and
PROSPECTUS
(Dated May 27, 1999)
- --------------------------------------------------------------------------------
<PAGE> 2
1994 EQUITABLE RESOURCES, INC.
LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSES
1.01 The purpose of the 1994 Equitable Resources, Inc. Long-Term Incentive
Plan (the "Plan") is to enable Equitable Resources, Inc. (together with
any successor thereto, the "Company") to focus key executives' efforts
on performance which will increase the value of the Company for its
shareholders. The Plan is intended to align the interests of key
executives with those of the shareholders by encouraging share
ownership. The Plan is also intended to help to attract and retain key
executives.
SECTION 2. DEFINITIONS; CONSTRUCTION
2.01 DEFINITIONS. In addition to the terms defined elsewhere in the Plan,
the following terms as used in the Plan shall have the following
meanings when used with initial capital letters:
2.01.1 "Award" means any Option, Stock Appreciation Right, Restricted
Stock, Deferred Stock, Performance Award, Dividend Equivalent,
or Other Stock-Based Award, or any other right or interest
relating to Shares or cash granted under the Plan.
2.01.2 "Award Agreement" means any written agreement, contract or
other instrument or document evidencing an Award.
2.01.3 "Board" means the Company's Board of Directors.
2.01.4 "Code" means the Internal Revenue Code of 1986, as amended
from time to time, together with rules, regulations and
interpretations promulgated thereunder.
2.01.5 "Committee" means the Compensation Committee or such other
Committee of the Board as may be designated by the Board to
administer the Plan, as referred to in Section 3.01 hereof;
provided however, that the Committee shall qualify to
administer the Plan as contemplated by Rule 16b-3(c)(2)(i) of
the Exchange Act or any successor and by Section 162(m)(4)(C)
of the Code or any successor.
2.01.6 "Common Stock" means shares of the common stock without par
value, and such other securities of the Company as may be
substituted for Shares pursuant to Section 8.01 hereof.
2.01.7 "Covered Employee" shall have the meaning provided in Section
162(m)(3) of the Code.
1
<PAGE> 3
2.01.8 "Deferred Stock" means Shares, granted under Section 6.05
hereof, receipt of which is deferred for a specified deferral
period.
2.01.9 "Dividend Equivalent" means a right, granted under Section
6.07 hereof, to receive interest or dividends, or interest or
dividend equivalents.
2.01.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.01.11 "Fair Market Value" of shares of any stock, including but not
limited to Common Stock, or units of any other securities
(herein "shares"), shall be the mean between the following
prices, as applicable, for the date as of which Fair Market
Value is to be determined as quoted in The Wall Street Journal
(or in such other reliable publication as the Committee, in
its discretion, may determine to rely upon): (a) if the shares
are listed on the New York Stock Exchange, the highest and
lowest sales prices per share as quoted in the NYSE-Composite
Transactions listing for such date, (b) if the shares not
listed on such exchange, the highest and lowest sales prices
per share for such date on (or on any composite index
including) the principal United States securities exchange
registered under the Exchange Act on which the shares are
listed, or (c) if the shares are not listed on any such
exchange, the highest and lowest sales prices per share for
such date on the National Association of Securities Dealers
Automated Quotations System or any successor system then in
use ("NASDAQ"). If there are no such sale price quotations for
the date as of which Fair Market Value is to be determined but
there are such sale price quotations within a reasonable
period both before and after such date, then Fair Market Value
shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share as so
quoted on the nearest date before and the nearest date after
the date as of which Fair Market Value is to be determined.
The average should be weighted inversely by the respective
numbers of trading days between the selling dates and the date
as of which Fair Market Value is to be determined. If there
are no such sale price quotations on or within a reasonable
period both before and after the date as of which Fair Market
Value is to be determined, then Fair Market Value of the
shares shall be the mean between the bona fide bid and asked
prices per share as so quoted for such date on NASDAQ, or if
none, the weighted average of the means between such bona fide
bid and asked prices on the nearest trading date before and
the nearest trading date after the date as of which Fair
Market Value is to be determined, if both such dates are
within a reasonable period. The average is to be determined in
the manner described above in this Section 2.01.10. If the
Fair Market Value of shares on the date as of which Fair
Market Value is to be determined cannot be determined on the
basis previously set forth in this Section 2.01.10, or if a
determination is required as to the Fair Market Value on any
2
<PAGE> 4
date of property other than shares, the Committee shall in
good faith determine the Fair Market Value of such shares or
other property on such date. Fair Market Value shall be
determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
2.01.12 "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422 of the Code or any
successor provision thereto and is designated as such in the
Award Agreement relating thereto.
2.01.13 "Option" means a right, granted under Section 6.02 hereof, to
purchase Shares at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or
a nonstatutory stock option, which is an Option not intended
to be an Incentive Stock Option.
2.01.14 "Other Stock-Based Award" means an Award, granted under
Section 6.08 hereof, that is denominated or payable in, valued
in whole or in part by reference to, or otherwise based on, or
related to, Shares.
2.01.15 "Participant" means a key employee of the Company or any
Subsidiary, including, but not limited to, Covered Employees,
who is granted an Award under the Plan.
2.01.16 "Performance Award" means a right, granted under Section 6.06
hereof, to receive Awards based upon performance criteria
specified by the Committee.
2.01.17 "Person" shall have the meaning assigned in the Exchange Act.
2.01.18 "Restricted Stock" means Shares, granted under Section 6.04
hereof, that are subject to certain restrictions.
2.01.19 "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor to such Rule
promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
2.01.20 "Shares" means the common stock of the Company, without par
value, and such other securities of the Company as may be
substituted for Shares pursuant to Section 8.01 hereof.
2.01.21 "Stock Appreciation Right" means a right, granted under
Section 6.03 hereof, to be paid an amount measured by the
appreciation in the Fair Market Value of Shares from the date
of grant to the date of exercise.
2.01.22 "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company, if each of the
corporations
3
<PAGE> 5
other than the last corporation in the chain owns stock
possessing at least 50% of the total combined voting power of
all classes of stock in one of the other corporations in the
chain.
Definitions of the terms "Change of Control," "Change of Control
Price," "Potential Change of Control," "Related Party," "Voting
Securities or Security" and "Beneficial Ownership" are set forth in
Section 9.03 hereof.
2.02 CONSTRUCTION. For purposes of the Plan, the following rules of
construction shall apply:
2.02.1 The word "or" is disjunctive but not necessarily exclusive.
2.02.2 Words in the singular include the plural; words in the plural
include the singular; words in the neuter gender include the
masculine and feminine genders, and words in the masculine or
feminine gender include the other and neuter genders.
SECTION 3. ADMINISTRATION
3.01 The Plan shall be administered by the Committee. The Committee shall
have full and final authority to take the following actions, in each
case subject to and consistent with the provisions of the Plan:
(i) to designate Participants;
(ii) to determine the type or types of Awards to be granted to each
Participant;
(iii) to determine the number of Awards to be granted, the number of
Shares or amount of cash or other property to which an Award
will relate, the terms and conditions of any Award (including,
but not limited to, any exercise price, grant price or
purchase price, any limitation or restriction, any schedule
for lapse of limitations, forfeiture restrictions or
restrictions on exercisability or transferability, and
accelerations or waivers thereof, based in each case on such
considerations as the Committee shall determine), and all
other matters to be determined in connection with an Award;
(iv) to determine whether, to what extent and under what
circumstances an Award may be settled in, or the exercise
price of an Award may be paid in cash, Shares, other Awards or
other property, or an Award may be accelerated, vested,
canceled, forfeited, exchanged or surrendered;
(v) to determine whether, to what extent and under what
circumstances cash, Shares, other Awards, other property and
other amounts payable with respect to an Award shall be
deferred, whether
4
<PAGE> 6
automatically or at the election of the Committee or at the
election of the Participant;
(vi) to interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan;
(vii) to prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(viii) to adopt, amend, suspend, waive and rescind such rules and
regulations as the Committee may deem necessary or advisable
to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any
inconsistency, and to construe and interpret the Plan, the
rules and regulations, any Award Agreement or other instrument
entered into or Award made under the Plan;
(x) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may
deem necessary or advisable for the administration of the
Plan;
(xi) to submit for shareholder approval or not as may be
appropriate and to take such other actions and make such other
decisions as may be required by the Revenue Reconciliation Act
of 1993 with respect to the definition of performance-based
compensation as it may from time to time be defined; and
(xii) to make such filings and take such actions as may be required
from time to time by appropriate state, regulatory and
governmental agencies.
Any action of the Committee with respect to the Plan shall be final,
conclusive and binding on all Persons, including the Company,
Subsidiaries, Participants, any Person claiming any rights under the
Plan from or through any Participant, employees and shareholders. The
express grant of any specific power to the Committee, and the taking of
any action by the Committee, shall not be construed as limiting any
power or authority of the Committee. The Committee may delegate to
officers or managers of the Company or any Subsidiary the authority,
subject to such terms as the Committee shall determine, to perform
administrative functions under the Plan and, with respect to
Participants who are not subject to Section 16 of the Exchange Act, to
take such actions and perform such functions under the Plan as the
Committee may specify. Each member of the Committee shall be entitled
to, in good faith, rely or act upon any report or other information
furnished to him by an officer, manager or other employee of the
Company or a Subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of
the Plan.
5
<PAGE> 7
SECTION 4. SHARES SUBJECT TO THE PLAN
4.01 The maximum number of shares of Common Stock in respect of which Awards
may be granted under the Plan in any calendar year, subject to
adjustment as provided in Section 8.01 of the Plan, shall be (a) in
1994 the sum of (1) one percent (1%) of the total number of issued and
outstanding shares of Common Stock as of December 31, 1993 and (2) the
number of shares of Common Stock which are reserved but not subject to
grants under the Company's Key Employee Restricted Stock Option and
Stock Appreciation Rights Incentive Compensation Plan as of the date
this Plan is approved by the shareholders of the Company and (b) in
each succeeding calendar year the sum of (1) one percent (1%) of the
total number of issued and outstanding shares of Common Stock as of the
close of the preceding calendar year, (2) the number of shares of
Common Stock which were available for Awards under this Section 4.01 as
of the close of the preceding calendar year and (3) any shares of
Common Stock which are subject to an outstanding Award at the beginning
of such year but which thereafter again become available for Awards
under the Plan as provided in the fourth paragraph of this Section
4.01; provided, however, that in no event may:
(i) the sum of (x) the number of Shares subject to all outstanding
Awards under the Plan and (y) the number of Shares previously
issued under the Plan at any time equal or exceed 5% of the
total number of shares of Common Stock outstanding on the date
of shareholder approval of the Plan; or
(ii) the sum of (x) the number of Shares subject to all outstanding
Options and Stock Appreciation Rights granted under the Plan
and held by any single Participant and (y) the number of
shares previously issued to such Participant upon exercise of
Options and Stock Appreciation Rights granted under the Plan
at any time exceed 25% of the sum of (A) the total number of
Shares subject to all outstanding Awards under the Plan, (B)
the total number of Shares previously issued under the Plan
and (C) the total number of Shares then available for the
grant of additional Awards under the Plan.
Subject to subparagraphs (i) and (ii) above, but notwithstanding
anything else contained above in this Section 4.01, in the event of a
Change of Control, the maximum number of shares of Common Stock
available for Awards under the Plan shall be 5% of the total number of
shares of Common Stock issued and outstanding on the date of
shareholder approval of the Plan, less (1) the number of Shares subject
to outstanding Awards under the Plan and (2) the number of Shares
previously issued under the Plan.
For purposes of this Section 4.01, the number of Shares to which an
Award relates shall be counted against the number of Shares reserved
and available under the Plan at the time of grant of the Award, unless
such number of Shares cannot be determined at that time, in which case
the number of Shares actually distributed pursuant to the Award shall
be counted against the number of Shares reserved and available under
the Plan at the time of distribution; provided,
6
<PAGE> 8
however, that Awards related to or retroactively added to, or granted
in tandem with, substituted for or converted into, other Awards shall
be counted or not counted against the number of Shares reserved and
available under the Plan in accordance with procedures adopted by the
Committee so as to ensure appropriate counting but avoid double
counting.
If any Shares to which an Award relates are forfeited, or payment is
made to the Participant in the form of cash, cash equivalents or other
property other than Shares, or the Award otherwise terminates without
payment being made to the Participant in the form of Shares, any Shares
counted against the number of Shares reserved and available under the
Plan with respect to such Award shall, to the extent of any such
forfeiture, alternative payment or termination, again be available for
Awards under the Plan provided, however, forfeited Shares may not again
be made available to the extent the Participant received dividends or
other benefits of ownership (not including voting rights) prior to such
forfeiture. The payment of the exercise price of an Award in Shares
shall not increase the number of Shares available under the Plan.
Any Shares distributed pursuant to an Award may consist, in whole or
part, of authorized and unissued Shares or of treasury Shares,
including Shares repurchased by the Company for purposes of the Plan.
SECTION 5. ELIGIBILITY
5.01 Awards may be granted only to individuals who are key full-time
employees (including, without limitation, employees who also are
directors or officers and Covered Employees) of the Company or any
Subsidiary; provided, however, that no Award shall be granted to any
member of the Committee.
SECTION 6. SPECIFIC TERMS OF AWARDS
6.01 GENERAL. Subject to the terms of the Plan and any applicable Award
Agreement, Awards may be granted as set forth in this Section 6. In
addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to the terms of
Section 10.01), such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine,
including separate escrow provisions and terms requiring forfeiture of
Awards in the event of termination of employment by the Participant.
Except as provided in Section 7.01, or as required by applicable law,
Awards may be granted for no consideration other than prior and/or
future services.
6.02 OPTIONS. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per Share of an Option
shall be 100% of the Fair Market Value of a Share on the date
of grant of such Option, except as otherwise provided in
Section 7.01, and except that in the case of an Incentive
Stock Option granted to an employee who, immediately prior to
such grant, owns stock possessing more than
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10% of the total combined voting power of all classes of stock
of the Company or any Subsidiary (a "Ten Percent Employee")
such exercise price shall be 110% of the Fair Market Value of
a Share on the date of grant. For purposes of the preceding
sentence, an individual (A) shall be considered as owning not
only shares of stock owned individually but also all shares of
stock that are at the time owned, directly or indirectly, by
or for the spouse, ancestors, lineal descendants and brothers
and sisters (whether by the whole or half blood) of such
individual and (B) shall be considered as owning
proportionately any shares owned, directly or indirectly, by
or for any corporation, partnership, estate or trust in which
such individual is a shareholder, partner or beneficiary.
(ii) OPTION TERM. The term of each Option shall be determined by
the Committee, except that no Incentive Stock Option shall be
exercisable after the expiration of ten years from the date of
grant, and no Incentive Stock Option granted to a Ten Percent
Employee shall be exercisable after the expiration of five
years from the date of grant.
(iii) TIMES AND METHODS OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole
or in part, the methods by which such exercise price may be
paid or deemed to be paid, and the form of such payment,
including, without limitation, cash, Shares, other outstanding
Awards or other property (including notes or other contractual
obligations of Participants to make payment on a deferred
basis, to the extent permitted by law) or any combination
thereof, having a Fair Market Value on the date of exercise
equal to the exercise price, provided, however, that (1) in
the case of a Participant who is at the time of exercise
subject to Section 16 of the Exchange Act, any portion of the
exercise price representing a fraction of a Share shall in any
event be paid in cash or in property other than any equity
security (as defined by the Exchange Act) of the Company and
(2) except as otherwise determined by the Committee, in its
discretion, at the time the Option is granted, no shares which
have been held for less than six months may be delivered in
payment of the exercise price of an Option.
Delivery of Shares in payment of the exercise price of an
Option, if authorized by the Committee, may be accomplished
through the effective transfer to the Company of Shares held
by a broker or other agent. Unless otherwise determined by the
Committee, the Company will also cooperate with any person
exercising an Option who participates in a cashless exercise
program of a broker or other agent under which all or part of
the Shares received upon exercise of the Option are sold
through the broker or other agent, or under which the broker
or other agent makes a loan to such person, for the purpose of
paying the exercise price of an Option. Notwithstanding the
preceding sentence, unless the Committee, in its discretion,
shall otherwise determine, the exercise of the Option shall
not be deemed to occur,
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and no Shares will be issued by the Company upon exercise of
an Option, until the Company has received payment in full of
the exercise price.
Notwithstanding any other provision contained in the Plan or in any Award
Agreement, but subject to the possible exercise of the Committee's discretion
contemplated in the last sentence of this Section 6.02(iii), the aggregate Fair
Market Value, determined as of the date of grant, of the Shares with respect to
which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year under all plans of the corporation
employing such employee, any parent or subsidiary corporation of such
corporation and any predecessor corporation of any such corporation shall not
exceed $100,000. If the date on which one or more of such Incentive Stock
Options could first be exercised would be accelerated pursuant to any provision
of the Plan or any Award Agreement, and the acceleration of such exercise date
would result in a violation of the restriction set forth in the preceding
sentence, then, notwithstanding any such provision, but subject to the
provisions of the next succeeding sentence, the exercise dates of such Incentive
Stock Options shall be accelerated only to the date or dates, if any, that do
not result in a violation of such restriction and, in such event, the exercise
dates of the Incentive Stock Options with the lowest option prices shall be
accelerated to the earliest such dates. The Committee may, in its discretion,
authorize the acceleration of the exercise date of one or more Incentive Stock
Options even if such acceleration would violate the $100,000 restriction set
forth in the first sentence of this paragraph and even if such Incentive Stock
Options are thereby converted in whole or in part to nonstatutory stock options.
6.03 STOCK APPRECIATION RIGHTS. The Committee is authorized to grant Stock
Appreciation Rights to Participants on the following terms and
conditions:
(i) RIGHT TO PAYMENT. A Stock Appreciation Right shall confer on
the Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (a) the Fair Market Value of a
Share on the date of exercise or, if the Committee shall so
determine in the case of any such right other than one related
to any Incentive Stock Option, at any time during a specified
period before or after the date of exercise, over (b) the
grant price of the Stock Appreciation Right as determined by
the Committee as of the date of grant of the Stock
Appreciation Right, which, except as provided in Section 7.01,
shall be equal to the Fair Market Value of a Share on the date
of grant.
(ii) OTHER TERMS. The term, methods of exercise, methods of
settlement and any other terms and conditions of any Stock
Appreciation Right shall be determined by the Committee.
6.04 RESTRICTED STOCK. The Committee is authorized to grant Restricted Stock
to Participants on the following terms and conditions:
(i) ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject
to such restrictions on transferability and other restrictions
as the Committee may impose (including, without limitation,
limitations on the right to vote Restricted Stock or the right
to receive dividends thereon), which
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restrictions may lapse separately or in combination at such
times, under such circumstances, in such installments or
otherwise, as the Committee shall determine at the time of
grant or thereafter.
(ii) FORFEITURE. Except as otherwise determined by the Committee at
the time of grant or thereafter, upon termination of
employment (as determined under criteria established by the
Committee) during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions
shall be forfeited and reacquired by the Company; provided,
however, that the Committee may provide, by rule or regulation
or in any Award Agreement, that restrictions on Restricted
Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part
restrictions on Restricted Stock.
(iii) CERTIFICATES FOR SHARES. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall
determine, including, without limitation, issuance of
certificates representing Shares. Certificates representing
Shares of Restricted Stock shall be registered in the name of
the Participant and shall bear an appropriate legend referring
to the terms, conditions and restrictions applicable to such
Restricted Stock.
6.05 DEFERRED STOCK. The Committee is authorized to grant Deferred Stock to
Participants on the following terms and conditions:
(i) ISSUANCE AND LIMITATIONS. Delivery of Shares shall occur upon
expiration of the deferral period specified for the Award of
Deferred Stock by the Committee. In addition, an Award of
Deferred Stock shall be subject to such limitations as the
Committee may impose, which limitations may lapse at the
expiration of the deferral period or at other specified times,
separately or in combination, in installments or otherwise as
the Committee shall determine at the time of grant or
thereafter. A Participant awarded Deferred Stock shall have no
voting rights and shall have no rights to receive dividends in
respect of Deferred Stock, unless and only to the extent that
the Committee shall award Dividend Equivalents in respect of
such Deferred Stock.
(ii) FORFEITURE. Except as otherwise determined by the Committee
upon termination of employment (as determined under criteria
established by the Committee) during the applicable deferral
period, Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided, however, that the
Committee may provide, by rule or regulation or in any Award
Agreement, that forfeiture of Deferred Stock shall be waived
in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of Deferred Stock.
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<PAGE> 12
6.06 PERFORMANCE AWARDS. The Committee is authorized to grant Performance
Awards to Participants on the following terms and conditions:
(i) RIGHT TO PAYMENT. A Performance Award shall confer upon the
Participant rights, valued as determined by the Committee, and
payable to, or exercisable by, the Participant to whom the
Performance Award is granted, in whole or in part, as the
Committee shall establish. The performance criteria and all
other terms and conditions of the Performance Award shall be
determined by the Committee upon the grant of each Performance
Award or thereafter.
(ii) OTHER TERMS. A Performance Award may be denominated or payable
in cash, deferred cash, Shares, other Awards or other
property, and other terms and conditions of Performance Awards
shall be as determined by the Committee.
6.07 DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents to Participants. Dividend Equivalents shall confer upon the
Participant rights to receive, currently or on a deferred basis,
interest or dividends, or interest or dividend equivalents, with
respect to a number of Shares, or otherwise, as determined by the
Committee. The Committee may provide that Dividend Equivalents shall be
paid or distributed when accrued or shall be deemed to have been
reinvested in additional Shares or additional Awards or otherwise
reinvested.
6.08 OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Awards that are denominated or payable in, valued in whole or in part
by reference to, or otherwise based on, or related to, Shares, as
deemed by the Committee to be consistent with the purposes of the Plan
and, with respect to Participants who are subject to Section 16 of the
Exchange Act, to comply with Rule 16b-3 and applicable law including,
without limitation, purchase rights, Shares awarded which are not
subject to any restrictions or conditions, convertible securities,
exchangeable securities or other rights convertible or exchangeable
into Shares, as the Committee in its discretion may determine. In the
discretion of the Committee, such Other Stock-Based Awards, including
Shares, or other types of Awards authorized under the Plan, may be used
in connection with, or to satisfy obligations of the Company or a
Subsidiary under, other compensation or incentive plans, programs or
arrangements of the Company or any Subsidiary for eligible
Participants, including without limitation the Short-Term Incentive
Compensation Plan, the Supplemental Executive Retirement Plan (SERP)
and executive contracts.
The Committee shall determine the terms and conditions of Other
Stock-Based Awards. Except as provided in Section 7.01, Shares or
securities delivered pursuant to a purchase right granted under this
Section 6.08 shall be purchased for such consideration, paid for by
such methods and in such forms, including, without limitation, cash,
Shares, outstanding Awards or other property or any hereof, as the
Committee shall determine, but the value of such consideration shall
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<PAGE> 13
not be less than the Fair Market Value of such Shares or other
securities on the date of grant of such purchase right. Delivery of
Shares or other securities in payment of a purchase right, if
authorized by the Committee, may be accomplished through the effective
transfer to the Company of Shares or other securities held by a broker
or other agent. Unless otherwise determined by the Committee, the
Company will also cooperate with any person exercising a purchase right
who participates in a cashless exercise program of a broker or other
agent under which all or part of the Shares or securities received upon
exercise of a purchase right are sold through the broker or other
agent, or under which the broker or other agent makes a loan to such
person, for the purpose of paying the exercise price of a purchase
right. Notwithstanding the preceding sentence, unless the Committee, in
its discretion, shall otherwise determine, the exercise of the purchase
right shall not be deemed to occur, and no Shares or other securities
will be issued by the Company upon exercise of a purchase right, until
the Company has received payment in full of the exercise price.
6.09 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange or
buy out any previously granted Award for a payment in cash, Shares,
another Award or other property, based on such terms and conditions as
the Committee shall determine and communicate to the Participant at the
time that such offer is made.
SECTION 7. GENERAL TERMS OF AWARDS
7.01 STAND-ALONE, TANDEM AND SUBSTITUTE AWARDS. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with or in substitution for, any other
Award granted under the Plan or any award granted under the Management
Incentive Compensation Plan, or any other plan, program or arrangement
of the Company or any Subsidiary (subject to the terms of Section
10.01) or any business entity acquired or to be acquired by the Company
or a Subsidiary. If an Award is granted in substitution for another
Award or award, the Committee shall require the surrender of such other
Award or award in consideration for the grant of the new Award. Awards
granted in addition to or in tandem with other Awards or awards may be
granted either at the same time as or at a different time from the
grant of such other Awards or awards, except that Awards may be granted
in tandem with an Incentive Stock Option only at the time the Incentive
Stock Option is granted. The exercise price of any Option, the grant
price of any Stock Appreciation Right or the purchase price of any
other Award conferring a right to purchase Shares:
(i) granted in substitution for an outstanding Award or award
shall be not less than the Fair Market Value of Shares at the
date such substitute Award is granted; provided, however, that
(1) except in the case of (a) an Incentive Stock Option or (b)
an Option or Stock Appreciation Right granted to a Covered
Employee, the exercise, grant or purchase price per share of
the substituted Award may be reduced to reflect the Fair
Market Value of the Award or award required to be surrendered
by the Participant as a condition to receipt of such
substitute Award, and (2) in the case of any Participant, the
Committee may, in lieu of such price reduction, make an
additional Award or payment to the
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Participant reflecting the Fair Market Value of the Award or
award required to be surrendered; or
(ii) retroactively granted in tandem with an outstanding Award or
award shall be not less than the lesser of the Fair Market
Value of Shares at the date of grant of the later Award or the
Fair Market Value of Shares at the date of grant of the
earlier Award.
7.02 CERTAIN RESTRICTIONS UNDER RULE 16b-3. Upon the effectiveness of any
amendment to Rule 16b-3, this Plan and any Award Agreement for an
outstanding Award held by a Participant then subject to Section 16 of
the Exchange Act shall be deemed to be amended, without further action
on the part of the Committee, the Board or the Participant, to the
extent necessary for Awards under the Plan or such Award Agreement to
qualify for the exemption provided by Rule 16b-3, as so amended,
except to the extent any such amendment requires shareholder approval.
7.02.1 SIX-MONTH LIMITATIONS ON SALES AND EXERCISES. Any equity
security (as defined by the Exchange Act), other than a
derivative security, granted or awarded pursuant to the Plan
to a Participant who is at the time of grant or award subject
to Section 16 of the Exchange Act must be held by the
Participant for at least six months after grant (or, if later,
after the date of shareholder approval of the Plan), except in
the case of death. If a derivative security is granted or
awarded to a Participant who is at the time of grant or award
subject to Section 16 of the Exchange Act, (1) the
Participant may not dispose of the derivative security (other
than through exercise or conversion or upon death) or of any
equity security acquired upon its exercise or conversion
(other than upon death) until six months have elapsed from the
date of grant or award of the derivative security (or, if
later, from the date of shareholder approval of the Plan) and
(2) except with respect to an Option, the derivative security
may not be exercised or converted within such six-month period
(other than upon death) unless such exercise would not cause
the grant or award of the derivative security to cease to be
exempt under Rule 16b-3. The limitations in this Section
7.02.1 shall not apply to the extent such limitations are not
at the time required for the grant of the Award to continue to
qualify for the exemption provided by Rule 16b-3.
Certificates issued for Shares subject to limitations under
this Section 7.02.1 may be made subject to stop-transfer
orders, legended and/or made subject to a custodial
arrangement as provided in Section 7.07.
7.02.2 NONTRANSFERABILITY. Awards which constitute derivative
securities shall not be transferable by a Participant except
by will or the laws of descent and distribution and shall be
exercisable during a Participant's lifetime only by such
Participant; provided, however, that, if so determined by the
Committee, a Participant may, in the manner established by the
Committee, designate a beneficiary or beneficiaries to
exercise the rights of the Participant, and to receive any
distribution with respect to any Award (other than an
Incentive Stock Option),
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upon the death of the Participant; and provided, further, that
the Committee may determine that these restrictions on
transferability shall not apply to Awards (other than an
Incentive Stock Option) granted to any Participant who, at the
time of the initial grant and the transfer, is not subject to
Section 16 of the Exchange Act or shall not apply to Awards
(other than an Incentive Stock Option) granted to a
Participant subject to Section 16 to the extent such
restrictions are not at the time required for the Plan to
continue to meet the requirements of Rule 16b-3.
7.02.3 DECISIONS REQUIRED TO BE MADE BY THE COMMITTEE. Other
provisions of the Plan and any Award Agreement
notwithstanding, if any decision regarding an Award or the
exercise of any right by a Participant, at any time such
Participant is subject to Section 16 of the Exchange Act, is
required to be made or approved by the Committee in order that
the Plan will continue to meet the requirements of Rule 16b-3
or in order that a transaction by such Participant will be
exempt under Rule 16b-3, then the Committee shall retain full
and exclusive power and authority to make such decision or to
approve or disapprove any such decision by the Participant.
7.03 TERM OF AWARDS. The term of each Award shall be for such period as may
be determined by the Committee; provided, however, that in no event
shall the term of any Incentive Stock Option, or a Stock Appreciation
Right granted in tandem therewith, exceed a period of ten years from
the date of its grant.
7.04 FORM OF PAYMENT OF AWARDS. Subject to the terms of the Plan and any
applicable Award Agreement, payments or substitutions to be made by the
Company upon the grant, exercise or other payment or distribution of an
Award may be made in such forms as the Committee shall determine at the
time of grant or thereafter (subject to the terms of Section 10.01),
including, without limitation, cash, Shares, other Awards or other
property or any combination thereof, and may be made in a single
payment or substitution, in installments or on a deferred basis, in
each case in accordance with rules and procedures established, or as
otherwise determined, by the Committee. Such rules and procedures or
determinations may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents in respect
of installment or deferred payments.
7.05 LIMITS ON TRANSFER OF AWARDS; BENEFICIARIES. No right or interest of a
Participant in any Award shall be pledged, encumbered or hypothecated
to or in favor of any Person other than the Company, or shall be
subject to any lien, obligation or liability of such Participant to any
Person other than the Company or a Subsidiary. Unless otherwise
determined by the Committee (subject to the requirements of Section
7.02.2), no Award and no rights or interests therein shall be
assignable or transferable by a Participant otherwise than by will or
the laws of descent and distribution except to the Company or a
Subsidiary under the terms of the Plan; provided, however, that, if so
determined by the Committee, a Participant may, in the manner
established by the Committee, designate a beneficiary or beneficiaries
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<PAGE> 16
to exercise the rights of the Participant, and to receive any
distribution with respect to any Award, upon the death of the
Participant. A beneficiary, guardian, legal representative or other
Person claiming any rights under the Plan from or through any
Participant shall be subject to all the terms and conditions of the
Plan and any Award Agreement applicable to such Participant as well as
any additional restrictions or limitations deemed necessary or
appropriate by the Committee.
7.06 REGISTRATION AND LISTING COMPLIANCE. No Award shall be paid and no
Shares or other securities shall be distributed with respect to any
Award in a transaction subject to the registration requirements of the
Securities Act of 1933, as amended, or any state securities law or
subject to a listing requirement under any listing agreement between
the Company and any national securities exchange, and no Award shall
confer upon any Participant rights to such payment or distribution
until such laws and contractual obligations of the Company have been
complied with in all material respects. Except to the extent required
by the terms of an Award Agreement or another contract between the
Company and the Participant, neither the grant of any Award nor
anything else contained herein shall obligate the Company to take any
action to comply with any requirements of any such securities laws or
contractual obligations relating to the registration (or exemption
therefrom) or listing of any Shares or other securities, whether or not
necessary in order to permit any such payment or distribution.
7.07 STOCK CERTIFICATES. All certificates for Shares delivered under the
terms of the Plan shall be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under federal or
state securities laws, rules and regulations thereunder, and the rules
of any national securities exchange or automated quotation system on
which Shares are listed or quoted. The Committee may cause a legend or
legends to be placed on any such certificates to make appropriate
reference to such restrictions or any other restrictions or limitations
that may be applicable to Shares. In addition, during any period in
which Awards or Shares are subject to restrictions or limitations under
the terms of the Plan or any Award Agreement, or during any period
during which delivery or receipt of an Award or Shares has been
deferred by the Committee or a Participant, the Committee may require
any Participant to enter into an agreement providing that certificates
representing Shares issuable or issued pursuant to an Award shall
remain in the physical custody of the Company or such other Person as
the Committee may designate.
SECTION 8. ADJUSTMENT PROVISIONS
8.01 In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, exchange of Shares or other securities of the
Company, or other similar corporate transaction or event affects the
Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of
Participants' rights under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of (i) the number
and kind of Shares which may thereafter be
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<PAGE> 17
issued in connection with Awards; (ii) the number and kind of Shares
issued or issuable in respect of outstanding Awards; and (iii) the
exercise price, grant price or purchase price relating to any Award or,
if deemed appropriate, make provision for a cash payment with respect
to any outstanding Award; provided, however, in each case, that (1)
with respect to Incentive Stock Options, no such adjustment shall be
authorized to the extent that such authority would cause the Plan to
violate Section 422(b)(1) of the Code or any successor provision
thereto and (2) with respect to Options and Stock Appreciation Rights
held by a Covered Employee, no such adjustment shall be authorized to
the extent that such authority would cause such Awards to fail to
qualify as "performance-based compensation" under Section 162(m)(4)(C)
of the Code. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria of, Awards
in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the
Company or the financial statements of the Company, or in response to
changes in applicable laws, regulations or accounting principles;
provided, however, that (1) with respect to Incentive Stock Options, no
such adjustment shall be authorized to the extent that such authority
would cause the Plan to violate Section 422(b)(1) of the Code or any
successor provision thereto and (2) with respect to Options and Stock
Appreciation Rights held by a Covered Employee, no such adjustment
shall be authorized to the extent that such authority would cause such
Awards to fail to qualify as "performance-based compensation" under
Section 162(m)(4)(C) of the Code.
SECTION 9. CHANGE OF CONTROL PROVISIONS
9.01 ACCELERATION OF EXERCISABILITY AND LAPSE OF RESTRICTIONS; AUTOMATIC
CASH-OUT OF AWARDS. In the event of a Change of Control, the following
acceleration and cash-out provisions shall apply unless otherwise
provided by the Committee at the time of the Award grant:
(i) All outstanding Awards pursuant to which the Participant may
have rights, the exercise of which is restricted or limited,
shall become fully exercisable, except as may be otherwise
provided in Section 7.02.1; unless the right to lapse of
restrictions or limitations is waived or deferred by a
Participant prior to such lapse, all restrictions or
limitations (including risks of forfeiture and deferrals) on
outstanding Awards subject to restrictions or limitations
under the Plan shall lapse, except as may be otherwise
provided in Section 7.02.1; and all performance criteria and
other conditions to payment of Awards under which payments of
cash, Shares or other property are subject to conditions shall
be deemed to be achieved or fulfilled and shall be waived by
the Company, except as may be otherwise (required to comply
with Rule 16b-3.
(ii) All outstanding Awards not subject to limitations under
Section 7.02.1 shall be automatically surrendered, and the
Participants shall receive, in full satisfaction therefor,
cash payments equal to the value of such outstanding Awards
calculated on the basis of the Change of Control
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<PAGE> 18
Price of any Shares or the Fair Market Value of any property
other than Shares relating to such Award; provided, however,
that (a) in the case of a nonstatutory stock option, or a
Stock Appreciation Right granted in tandem therewith, the cash
payment shall be equal to the Change of Control Price of the
Shares subject to the Option reduced by the exercise price
thereof, (b) in the case of an Incentive Stock Option, or a
Stock Appreciation Right granted in tandem therewith, the cash
payment shall be equal to the Fair Market Value of the Shares
subject to the Option on the date on which the Change of
Control occurred reduced by the exercise price thereof, (c) in
the case of a Stock Appreciation Right not granted in tandem
with another award, the cash payment shall be equal to the
Change of Control Price of the Shares subject to the Stock
Appreciation Right reduced by the grant price thereof, and (d)
in the case of any other purchase right, the cash payment
shall be reduced by the Fair Market Value of the consideration
otherwise required to exercise such purchase right. In the
event that an Award is granted in tandem with another Award
such that the Participant's right to payment for such Award is
an alternative to payment of another Award, the Participant
shall surrender all alternative Awards and receive payment for
the Award which produces the highest payment to the
Participant. In no event will an Award be automatically
surrendered or a Participant have the right to receive cash
under this Section 9.02(ii) with respect to an Award (1) if
the Participant is subject to Section 16 of the Exchange Act
(or was subject to Section 16 of the Exchange Act at the date
of grant of the Award) and at least six months shall not have
elapsed from the date on which the Participant was granted the
Award (or, if later, from the date of shareholder approval of
the Plan) before the date of the Change of Control (unless
this restriction is not at such time required under Rule
16b-3(c)(1) or Rule 16b-3(e)) or (2) if the Participant is
subject to Section 16 of the Exchange Act and had the power to
control the occurrence or timing of the Change of Control such
that the surrender and right to receive cash under this
Section 9.01(ii) would fail to be exempt pursuant to Rule
16b-3(e).
(iii) In the event that any Award is subject to limitations under
Section 7.02.1 at the time of a Change of Control, then,
solely for the purpose of determining the rights of the
Participant under Section 9.02(ii) with respect to such Award,
a Change of Control shall be deemed to occur at the close of
business on the first business day following the date on which
the limitations on such Award under Section 7.02.1 have
expired; provided, however, that this Section 9.01 (iii) shall
not apply if its application would cause the surrender of the
Award and the receipt of cash under Section 9.01 (ii) to fail
to be exempt pursuant to Rule 16b-3(e).
(iv) In the discretion of the Committee, the Committee may permit
any Participant not subject to Section 16 of the Exchange Act
on the date of a Change of Control to elect, in such manner
and at such time or
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times or within such periods as the Committee may determine
(whether before or after a Change of Control), and subject to
such other terms, conditions or restrictions, if any, as the
Committee may determine to impose, not to surrender for cash
pursuant to Section 9.02(ii) all or any portion of any Award
or Awards held by the Participant.
9.02 CREATION AND FUNDING OF TRUST. Upon the occurrence of a Potential
Change of Control, the Company shall deposit with the trustee of a
trust for the benefit of Participants monies or other property having a
Fair Market Value at least equal to the value of the cash, Shares and
other property to be paid or distributed in connection with Awards
outstanding at that date. The trust shall be a grantor trust which
shall preserve the "unfunded" status of Awards under the Plan.
Subsequent to a Potential Change of Control which is no longer
continuing and prior to a Change of Control and termination of the
trust, upon the request of the Company the trustee shall deliver the
monies or other property held in the trust to the Company. In the
discretion of the Committee, monies or other property may also be
deposited in the trust created under this Section 9.02 for the benefit
of participants in any other compensation or benefit plan, program,
contract or arrangement of the Company or any Subsidiary.
9.03 DEFINITION OF CERTAIN TERMS. For purposes of this Section 9, the
following definitions, in addition to those set forth in Section 2.01,
shall apply:
9.03.1 "Change of Control" means and shall be deemed to have occurred
if (i) any Person, other than the Company or a Related Party,
purchases or otherwise acquires, under a tender offer or
otherwise, Beneficial Ownership of any Voting Securities
which, when combined with other Voting Securities then
Beneficially Owned by such Person, represent twenty percent
(20%) or more of the total voting power of all the then
outstanding Voting Securities; or (ii) the individuals (a) who
as of the effective date of the Plan constitute the Board or
(b) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was
approved by a vote of at least two-thirds of the directors
then still in office who either were directors as of the
effective date of the Plan or whose election or nomination for
election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute a majority of
the members of the Board; or (iii) the Company is a party to a
merger, consolidation, share exchange, recapitalization or
reorganization of the Company or an acquisition of securities
or assets by the Company, other than any such transaction (a)
which would result in the Voting Securities outstanding
immediately prior thereto continuing to represent either by
remaining outstanding or by being converted into voting
securities of the surviving or acquiring entity, at least
fifty percent (50%) of the total voting power represented by
the voting securities of such surviving or acquiring entity
outstanding immediately after such transaction and (b) in or
as a result of which the voting rights of each Voting Security
relative to the voting rights of all other Voting Securities
are not altered other than
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<PAGE> 20
through the exercise of dissenters' rights; or (iv) the
shareholders of the Company approve a plan of complete
liquidation of the Company; or (v) the Company shall sell or
otherwise dispose of, other than to a Related Party, in a
single or a series of related transactions otherwise than in
the ordinary course of business, assets of the Company and/or
stock or assets of any Subsidiary, having a book value equal
to 50% or more of the consolidated total assets of the
Company, in each case measured as the date of the most recent
quarterly or annual balance sheet of the Company required to
be included or incorporated by reference in any proxy or
information statement of the Company furnished to the
shareholders of the Company in connection with such
transaction, or if no such proxy or information statement is
furnished to shareholders or no such balance sheet is required
to be included or incorporated by reference therein, as of the
date of the most recent quarterly or annual balance sheet of
the Company required to be filed with the Securities and
Exchange Commission prior to the date of any such transaction;
9.03.2 "Change of Control Price" means, with respect to a Share, the
higher of (i) the highest reported sales price of Shares on
the New York Stock Exchange's consolidated transaction
reporting system (or if the Common Stock is not then listed on
such Exchange, on or on any composite index including the
principal United States securities exchange on which the
Common Stock is then listed, or if none, on NASDAQ or any
similar system then in use, and in the absence of any such
reported sales prices, the highest publicly reported bid price
for Shares) during the 30 calendar days preceding the date of
a Change of Control or (ii) the highest price paid or offered
in a transaction which either (a) results in a Change of
Control or (b) would be consummated but for another
transaction which results in a Change of Control and, if it
were consummated, would result in a Change of Control. With
respect to clause (ii) in the preceding sentence, the "price
paid or offered" will be equal to the sum of (a) the face
amount of any portion of the consideration consisting of cash
or cash equivalents and (b) the fair market value of any
portion of the consideration consisting of real or personal
property other than cash or cash equivalents, as established
by an independent appraiser selected by the Committee.
9.03.3 "Potential Change of Control" means and shall be deemed to
have arisen if (i) the Company enters into an agreement, the
consummation of which would result in the occurrence of the
Change of Control; or (ii) any Person (including the Company)
publicly announces an intention to take or to consider taking
actions which if consummated would constitute a Change of
Control; or (iii) any Person, other than a Related Party,
files with the Securities and Exchange Commission a Schedule
13D pursuant to Rule 13d-1 under the Exchange Act with
respect to Voting Securities; or (iv) any Person, other than
the Company or a Related Party, files with the Federal Trade
Commission a notification and report form pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 with
respect to any Voting Securities or any assets of the Company
or a Subsidiary; or (v)
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<PAGE> 21
the Board or a committee thereof adopts a resolution to the
effect that, for purposes of the Plan, a Potential Change of
Control has arisen. A Potential Change of Control will be
deemed to continue (a) with respect to an agreement within the
purview of clause (i) of the preceding sentence, until the
agreement is canceled or terminated; or (b) with respect to an
announcement within the purview of clause (ii) of the
preceding sentence, until the Person making the announcement
publicly abandons the stated intention or fails to act on such
intention for a period of 12 calendar months; or (c) with
respect to the filing of a Schedule 13D within the purview of
clause (iii) of the preceding sentence, until the Person
involved publicly announces that its ownership or acquisition
of the Voting Securities is for investment purposes only and
not for the purpose of seeking a Change of Control or such
Person disposes of all Voting Securities exceeding 5% of the
outstanding shares of any class; or (d) with respect to the
filing of a notification and report form within the purview of
clause (iv) of the preceding sentence with respect to Voting
Securities or assets, until the Person publicly abandons the
transaction which was the subject of such filing or fails to
act thereon for a period of 12 calendar months or, in the
case of a filing with respect to Voting Securities, until the
Person involved (1) publicly announces that its ownership or
acquisition of the Voting Securities is for investment
purposes only and not for the purpose of seeking a Change of
Control or (2) following completion of such transaction
disposes of all Voting Securities exceeding 5% of the
outstanding shares of any class; or (e) until a Change of
Control has occurred if the majority of the Continuing
Directors, on reasonable belief after due investigation,
adopts a resolution that either (1) the Potential Change of
Control has ceased to exist or (2) the Potential Change of
Control is believed to be not reasonably likely to result in a
Change of Control.
9.03.4 "Related Party" means (i) a Subsidiary; or (ii) a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company or any Subsidiary; or (iii) a Company
owned directly or indirectly by the shareholders of the
Company in substantially the same proportion as their
ownership of Voting Securities.
9.03.5 "Voting Securities or Security" means any securities of the
Company which carry the right to vote generally in the
election of directors.
9.03.6 "Beneficial Ownership" shall be determined in accordance with
Regulation 13D-G under the Exchange Act, as in effect on the
effective date of the Plan.
SECTION 10. AMENDMENTS TO AND TERMINATION OF THE PLAN
10.01 The Board may amend, alter, suspend, discontinue or terminate the Plan
without the consent of shareholders or Participants, except that,
without the approval of the shareholders of the Company, no amendment,
alteration, suspension, discontinuation or termination shall be made if
shareholder approval is required by
20
<PAGE> 22
any federal or state law or regulation, or if the Board in its
discretion determines that obtaining such shareholder approval is for
any reason advisable; provided, however, that except as provided in
Section 7.02, without the consent of the Participant, no amendment,
alteration, suspension, discontinuation or termination of the Plan may
materially and adversely affect the rights of such Participant under
any Award theretofore granted to him. The Committee may waive any
conditions or rights under, amend any terms of, or amend, alter,
suspend, discontinue or terminate, any Award theretofore granted,
prospectively or retrospectively; provided, however, that except as
provided in Section 7.02, without the consent of a Participant, no
amendment, alteration, suspension, discontinuation or termination of
any Award may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him.
SECTION 11. GENERAL PROVISIONS
11.01 NO RIGHT TO AWARDS; NO SHAREHOLDER RIGHTS. No Participant or employee
shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Participants and
employees, except as provided in any other compensation arrangement. No
Award shall confer on any Participant any of the rights of a
shareholder of the Company unless and until Shares are in fact issued
to such Participant in connection with such Award.
11.02 WITHHOLDING. To the extent required by applicable Federal, state, local
or foreign law, the Participant or his successor shall make
arrangements satisfactory to the Company, in its discretion, for the
satisfaction of any withholding tax obligations that arise in
connection with an Award. The Company shall not be required to issue
any Shares or make any cash or other payment under the Plan until such
obligations are satisfied.
The Company is authorized to withhold from any Award granted or any
payment due under the Plan, including from a distribution of Shares,
amounts of withholding taxes due with respect to an Award, its exercise
or any payment thereunder, and to take such other action as the
Committee may deem necessary or advisable to enable the Company and
Participants to satisfy obligations for the payment of such taxes. This
authority shall include authority to withhold or receive Shares, Awards
or other property and to make cash payments in respect thereof in
satisfaction of such tax obligations.
11.03 NO RIGHT TO EMPLOYMENT. Nothing contained in the Plan or any Award
Agreement shall confer, and no grant of an Award shall be construed as
conferring, upon any Participant any right to continue in the employ of
the Company or to interfere in any way with the right of the Company to
terminate his employment at any time or increase or decrease his
compensation from the rate in existence at the time of granting of an
Award, except as provided in any Award Agreement or other compensation
arrangement.
11.04 UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments not yet made to a Participant pursuant to
an Award, nothing contained
21
<PAGE> 23
in the Plan or any Award shall give any such Participant any rights
that are greater than those of a general unsecured creditor of the
Company; provided, however, that, in addition to the requirements of
Section 9.02, the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the
Plan to deliver cash, Shares or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise
determines.
11.05 NO LIMIT ON OTHER COMPENSATORY ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company from adopting other or additional
compensation arrangements (which may include, without limitation,
employment agreements with executives and arrangements which relate to
Awards under the Plan), and such arrangements may be either generally
applicable or applicable only in specific cases. Notwithstanding
anything in the Plan to the contrary (other than the provisions of
Section 7.02), the terms of each Award shall be construed so as to be
consistent with such other arrangements in effect at the time of the
Award.
11.06 NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in
lieu of fractional Shares or whether such fractional Shares or any
rights thereto shall be forfeited or otherwise eliminated.
11.07 GOVERNING LAW. The validity, interpretation, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be
governed by the laws of the Commonwealth of Pennsylvania (without
regard to the conflicts of laws thereof), and applicable Federal law.
11.08 SEVERABILITY. If any provision of the Plan or any Award is or becomes
or is deemed invalid, illegal or unenforceable in any jurisdiction, or
would disqualify the Plan or any Award under any law deemed applicable
by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially
altering the intent of the Plan or Award, it shall be deleted and the
remainder of the Plan or Award shall remain in full force and effect;
provided, however, that, unless otherwise determined by the Committee,
the provision shall not be construed or deemed amended or deleted with
respect to any Participant whose rights and obligations under the Plan
are not subject to the law of such jurisdiction or the law deemed
applicable by the Committee.
SECTION 12. EFFECTIVE DATE AND TERM OF THE PLAN
12.01 The effective date and date of adoption of the Plan shall be January
21, 1994, the date of adoption of the Plan by the Board, provided that
such adoption of the Plan is approved by the affirmative vote of a
majority of the shares of Common Stock present in person or represented
by proxy and entitled to vote at a duly held meeting of shareholders of
the Company held on or prior to December 31, 1994. Notwithstanding
anything else contained in the Plan or in any Award Agreement, no
Option, Stock Appreciation Right or other purchase right granted under
the Plan
22
<PAGE> 24
may be exercised, and no Shares may be distributed pursuant to any
Award granted under the Plan, prior to such shareholder approval or
prior to any required approval or consent from those governmental
agencies having jurisdiction in these matters. In the event such
shareholder or regulatory approval is not obtained, all Awards granted
under the Plan shall automatically be deemed void and of no effect. No
Award may be granted under the Plan subsequent to May 27, 1999.
23
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----------------------------------------------------------------------
PROSPECTUS
----------------------------------------------------------------------
<PAGE> 26
May 27, 1999
This document constitutes
part of a prospectus
covering securities that
have been registered under
the Securities Act of 1933.
1994 EQUITABLE RESOURCES, INC.
LONG-TERM INCENTIVE PLAN
1. GENERAL INFORMATION
This Plan covers shares of the common stock of Equitable Resources,
Inc. (together with any successor, the "Company") which may be issued pursuant
to awards of restricted stock, deferred stock and other stock-based awards; the
grant and exercise of stock options and stock appreciation rights; and the grant
of dividend equivalents and performance awards, under the 1994 Equitable
Resources, Inc. Long-Term Incentive Plan (the "Plan"). The Plan was adopted by
the Board of Directors of the Company on January 21, 1994 and was approved by a
vote of the shareholders of the Company on May 27, 1994.
The purpose of the Plan is to enable the Company to focus key
executives' efforts on performance which will increase the value of the Company
for its shareholders. The Plan is intended to align the interests of key
executives with those of the shareholders by encouraging share ownership. The
Plan is also intended to attract and retain key executives.
Additional information about the Plan and its administration may be
obtained by calling Johanna G. O'Loughlin, Vice President, General Counsel and
Corporate Secretary at (412) 553-7760. Alternatively, Ms. O'Loughlin can be
contacted by writing to Equitable Resources, Inc., One Oxford Centre, Suite
3300, Pittsburgh, Pennsylvania 15219, Attention: Johanna G. O'Loughlin, Vice
President, General Counsel and Corporate Secretary.
The Company's latest annual report on Form 10-K, all other reports
filed by the Company since December 31, 1993 pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, and the description of the
Company's common stock in
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<PAGE> 27
Registration Statement No. 33-49905 are incorporated by reference into this
prospectus. All such documents are available without charge, upon oral or
written request, at the telephone number and address stated above.
2. ELIGIBILITY, GRANT AND TERMS
Under the Plan, key employees of the Company or any of its subsidiaries
are selected by the Compensation Committee of the Board of Directors (the
"Committee") to receive stock-based and other types of awards. The types of
awards which may be granted include stock options, stock appreciation rights,
restricted stock, deferred stock, stock, non-stock performance awards, dividend
equivalents, and other stock-based awards. Following is a summary of these
awards:
a. STOCK OPTIONS - The exercise price of each share of an
option will be 100 percent of the mean of the high and
low New York Stock Exchange trading prices for the common
stock on the date of grant. The period during which each
option may be exercised will be determined by the
Committee. Options may be exercised upon such terms and
by such methods as may be designated by the Committee,
including payment by cash or common stock. Unless
permitted by the Committee, no shares of common stock
held for less than six (6) months may be used to pay for
the exercise of an option. Certain options may be
designated by the Compensation Committee as Incentive
Stock Options. The fair market value of Incentive Stock
Options exercisable by a Participant in any calendar year
may not exceed $100,000 (based on fair market value on
the date of grant).
b. STOCK APPRECIATION RIGHTS - Stock Appreciation Rights
("SAR") give a Participant the right to receive upon
exercise of the SAR the difference between the fair
market value of the number of shares covered by the SAR
on the date of exercise and the grant price of the SAR.
The grant price of the SAR is normally the fair market
value of the shares on the date of grant. Stock
Appreciation Rights will have such other terms as may be
determined by the Committee.
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<PAGE> 28
c. RESTRICTED STOCK - A key employee receiving a grant of
restricted stock will not be required to make any payment
to the Company for such stock. Restricted stock will be
subject to forfeiture for such periods, and upon such
terms, as the Committee may determine. Except as
otherwise provided by the Committee, termination of
employment during the applicable restriction period will
result in a forfeiture of the restricted shares.
d. DEFERRED STOCK - Deferred stock provides for the delivery
of shares upon expiration of a deferral period specified
by the Committee. A Participant awarded deferred stock
shall have no voting rights or rights to receive
dividends (unless the Committee awards dividend
equivalents in respect of such stock). Except as provided
by the Committee, a termination of employment during the
applicable deferral period will result in forfeiture of
the right to receive the shares.
e. PERFORMANCE AWARDS - The Compensation Committee may grant
Participants the right to receive cash, stock or other
property based upon the achievement of performance
criteria specified by the Committee.
f. DIVIDEND EQUIVALENTS - The Committee may grant
Participants the right to receive, on a current or
deferred basis, interest or dividends, or interest or
dividend equivalents, relating to a specified number of
shares of stock or otherwise.
g. OTHER STOCK-BASED AWARDS - The Committee may grant
Participants other types of awards based on the issuance
of stock to Participants.
Options may be exercised during a Participant's lifetime only by the
Participant or his legal representative and options or other awards may not be
transferred to any other party. However, the Committee may permit the
Participant to designate a beneficiary to exercise any rights of a Participant
and to receive any distribution upon the Participant's death (other than an
Incentive Stock Option). No interest in any option or restricted stock
3
<PAGE> 29
may be pledged or encumbered by any Participant except in favor of the Company
or shall otherwise by subject to any lien or liability.
No awards under this Plan shall be made after May 27, 1999. The maximum
aggregate number of shares of common stock that may be issued under the Plan is
equal to five (5) percent of the number of the outstanding shares of the
Company's common stock on the date of shareholder approval of the Plan (May 27,
1994). The number of shares which may be issued under the Plan and under
existing options, along with the exercise price of such options, is subject to
adjustment by the Committee in certain circumstances, including stock splits,
dividends, recapitalizations and major corporate changes.
3. AMENDMENT OF PLAN
The Board of Directors may amend, discontinue or terminate the Plan at
any time without shareholder approval except to the extent that Federal or state
law or regulation so requires or that the Board determines that shareholder
approval is advisable. Without the consent of the Participant, no such action
shall adversely affect the rights of any Participant in any award previously
granted to him.
4. ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors. The Committee shall have full and final authority to interpret and
administer the Plan; to adopt, amend and rescind regulations to administer the
Plan; to designate Participants; to determine the types, number and terms of
awards granted under the Plan; and to make all decisions that the Committee
deems necessary or advisable in the administration of the Plan.
5. SALES OF RESTRICTED OR OPTION STOCK
Because officers may be deemed "affiliates" of the Company as that term
is defined in the regulations adopted pursuant to the Securities Act of 1933,
the most prudent course for them is to resell restricted shares or shares
obtained upon the exercise of options only in accordance with the provisions of
Rule 144 (excluding the one year holding period) of the Securities Act of 1933.
Officers should notify the Corporate Secretary when selling such shares so that
the Form 144 filing requirements will be met.
4
<PAGE> 30
No sale of the Company's common stock should be made by officers within
six (6) months before or after any open market purchase of the Company's common
stock. Otherwise, any profit gained from such a sale would have to be disgorged
to the Company in accordance with the provisions of Section 16(b) of the
Securities Exchange Act of 1934.
No officer of the Company or other employee determined by the Company
to be subject to Section 16 of the Securities Exchange Act of 1934 may sell
stock received through the exercise of a stock option until six (6) months have
elapsed from the date of the grant of the option. In addition, no such person
may sell any stock granted through any other award until six (6) months have
elapsed from the date of grant.
6. CHANGE OF CONTROL
Upon the occurrence of certain specified events, all outstanding awards
shall become fully exercisable and all outstanding awards shall be surrendered
to the Company in exchange for a cash payment in accordance with a formula
specified under the Plan. The specified events are: the acquisition of 20
percent of the voting power in Equitable's stock by any unaffiliated party; the
existence of any Equitable Board of Directors less than 51 percent of whom were
Equitable Directors on January 21, 1994 or successors elected by at least
two-thirds of such Directors or by such elected successors; a merger or
reorganization of the Company or other transaction under which Equitable
shareholders would own less than 50 percent of a stock of the surviving
corporation; the shareholders approve a complete liquidation of the Company; or
the sale or disposal to an unrelated party other than in the ordinary course of
the business, of at least 50 percent of the book value of the Company.
7. APPLICABILITY OF ERISA PROVISIONS
The Plan is not a "qualified pension, profit-sharing or stock bonus
plan" within the meaning of Section 401(a) of the Internal Revenue Code and is
not subject to any provisions of the Employment Retirement Income Security Act
of 1974 ("ERISA").
8. FEDERAL INCOME TAX CONSEQUENCES
Participants should consult their personal tax advisers with specific
reference to their own tax situation and potential changes in the applicable law
as to all Federal, state,
5
<PAGE> 31
local, foreign and other tax matters in connection with the grant, exercise,
cancellation or expiration of a stock option or the grant of restricted stock
under the Plan and the disposition of shares of Equitable common stock acquired
under the Plan. The following is only a summary of some of the principal Federal
income tax considerations under present law:
a. GRANT OF STOCK OPTIONS - A Participant does not realize
any taxable income upon the grant of a stock option.
b. EXERCISE OF STOCK OPTIONS - In general, a Participant to
whom shares of common stock are issued upon exercise of a
nonstatutory stock option recognizes taxable income for
Federal income tax purposes in an amount equal to the
difference between the fair market value of the common
stock at the time the stock is exercised and the option
price paid for the common stock. In addition, no taxable
income is recognized during any six-month period in which
any profit from the sale of shares is subject to
disgorgement under Section 16(b) of the Securities
Exchange Act of 1934.
If the option price is paid in whole or in part
in shares of common stock, no income, gain or loss is
recognized to the Participant on the receipt of shares
equal in value on the date of exercise to the shares
delivered in payment of the option price. The fair market
value of the remainder of the shares received upon
exercise of the Stock Option (the "Additional Shares"),
less the amount of cash, if any, paid upon exercise, is
included in the optionee's taxable income when reportable
under the preceding paragraph.
If the option price is paid in cash, the
Participant's tax basis in the shares of common stock
received is the option price plus the amount included in
the Participant's taxable income. If the option price is
paid in whole or in part in shares of common stock,
shares of common stock received upon exercise equal in
value to the shares of common stock delivered in payment
of the option price have the same
6
<PAGE> 32
tax basis as the shares delivered. The tax basis of the
Additional Shares is the amount of cash, if any, paid
upon exercise of the Stock Option plus the amount
included in the Participant's taxable income.
The Company or one of its subsidiaries is
entitled to a Federal income tax deduction in an amount
equal to the taxable income recognized by the Participant
in each instance described above.
In general, a Participant will not recognize
taxable income at the time an incentive stock option is
exercised except that the excess of the fair market value
of the common stock acquired upon exercise of an
incentive stock option over the exercise price is
potentially subject to the alternative minimum tax. If
the Participant holds the shares acquired pursuant to an
incentive stock option for at least two years from the
date of grant and for at least one year from the date of
exercise, the Participant's gain will be taxed as a
long-term capital gain. The amount of the gain shall be
equal to the difference between the exercise price and
the sales price. In that case, the Company is not
entitled to a tax deduction. If the Participant disposes
of the stock before the end of these holding periods, he
will recognize ordinary income upon sale of the stock and
the Company will be entitled to a corresponding tax
deduction.
c. RESTRICTED STOCK - Absent making an election under
Section 83(b) of the Internal Revenue Code within thirty
(30) days of the grant, in general, a Participant who
receives a grant of restricted stock does not recognize
taxable income for federal income tax purposes until the
shares are released from escrow. At that time, the tax is
based on the then current market value of the stock. If a
Participant makes a Section 83(b) election, the market
value of the restricted stock at the time it is granted
(i.e., the mean of the high and low trading prices) is
included in the Participant's taxable income in the year
of such grant.
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<PAGE> 33
d. DIVIDENDS ON ESCROWED SHARES - Cash dividends paid to an
optionee with respect to the shares of Equitable common
stock subject to escrow, prior to the lapse of the
escrow, constitute taxable income when paid.
e. SALE OF EQUITABLE COMMON STOCK - The difference between
the amount realized on any sale of the common stock and
the optionee's tax basis in the shares sold is taxable
income of the optionee. The taxable income will be
subject to a tax at capital gains rates, generally not in
excess of 20 percent if held for twelve months or more.
f. EXCESS PARACHUTE PAYMENTS - In certain circumstances the
exercise of an option upon a "Change in Control", as
defined in the Plan, may result in (1) a 20 percent
Federal excise tax to the Participant on certain payments
of stock resulting from the exercise of such options and
(2) the loss of a compensation deduction which would
otherwise be allowable to the Company or one of its
subsidiaries.
8
<PAGE> 1
Exhibit 10.07
EQUITABLE RESOURCES, INC.
DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED EFFECTIVE OCTOBER 27, 1999
<PAGE> 2
EQUITABLE RESOURCES, INC.
DEFERRED COMPENSATION PLAN
Table of Contents
ARTICLE I......................................................................5
1.1 STATEMENT OF PURPOSE..................................................5
ARTICLE II.....................................................................6
DEFINITIONS....................................................................6
2.1 ACCOUNT............................................................6
2.2 BASE SALARY........................................................6
2.3 BENEFICIARY........................................................6
2.4 BOARD..............................................................6
2.5 BONUS..............................................................6
2.6 CHANGE IN CONTROL..................................................6
2.7 CODE...............................................................7
2.8 COMMITTEE..........................................................7
2.9 COMPANY............................................................7
2.10 COMPENSATION.......................................................7
2.11 CREDITED SERVICE...................................................7
2.12 DEFERRAL ACCOUNT...................................................8
2.13 DEFERRAL AMOUNT....................................................8
2.14 DEFERRAL BENEFIT...................................................8
2.15 DEFERRAL ELECTION..................................................8
2.16 DISABILITY.........................................................8
2.17 EARLY RETIREMENT...................................................8
2.18 ELIGIBLE EMPLOYEE..................................................8
2.19 EMPLOYER...........................................................8
2.20 HARDSHIP WITHDRAWAL................................................8
2.21 INVESTMENT RETURN RATE.............................................8
2.22 MATCHING ACCOUNT...................................................9
2.23 MATCHING AMOUNT....................................................9
2.24 PARTICIPANT........................................................9
2.25 PARTICIPATION AGREEMENT............................................9
2.26 PLAN...............................................................9
2.27 PLAN YEAR..........................................................9
2.28 REGULAR DEFERRAL AMOUNT............................................9
2.29 REGULAR MATCHING AMOUNT............................................9
2.30 RETIREMENT.........................................................9
2.31 SELECTED AFFILIATE................................................10
2.32 SPECIAL BONUS DEFERRAL AMOUNT.....................................10
2.33 SPECIAL BONUS MATCHING AMOUNT.....................................10
2.34 VALUATION DATE....................................................10
ARTICLE III...................................................................11
ELIGIBILITY AND PARTICIPATION.................................................11
3.1 ELIGIBILITY.......................................................11
3.2 PARTICIPATION.....................................................11
3.3 CHANGE IN PARTICIPATION STATUS....................................11
3.4 INELIGIBLE PARTICIPANT............................................11
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ARTICLE IV....................................................................12
DEFERRAL OF COMPENSATION......................................................12
4.1 DEFERRAL AMOUNTS...................................................12
4.2 MATCHING AMOUNTS...................................................12
4.3 CREDITING OF DEFERRAL AMOUNTS AND MATCHING AMOUNTS.................13
ARTICLE V.....................................................................14
BENEFIT ACCOUNTS..............................................................14
5.1 VALUATION OF ACCOUNT...............................................14
5.2 CREDITING OF INVESTMENT RETURN.....................................14
5.3 STATEMENT OF ACCOUNTS..............................................14
5.4 VESTING OF AMOUNTS.................................................14
5.5 INVESTMENT OF REGULAR DEFERRAL AMOUNTS.............................15
5.6 INVESTMENT OF SPECIAL BONUS DEFERRAL AMOUNTS AND MATCHING AMOUNTS..15
ARTICLE VI....................................................................16
PAYMENT OF BENEFITS...........................................................16
6.1 PAYMENT OF DEFERRAL BENEFIT UPON DEATH, DISABILITY OR RETIREMENT...16
6.2 PAYMENT OF DEFERRAL BENEFIT UPON TERMINATION.......................16
6.3 PAYMENTS TO BENEFICIARIES..........................................16
6.4 IN-SERVICE DISTRIBUTION............................................16
6.5 HARDSHIP WITHDRAWAL................................................16
6.6 FORM OF PAYMENT....................................................17
6.7 COMMENCEMENT OF PAYMENTS...........................................17
6.8 SMALL BENEFIT......................................................17
ARTICLE VII...................................................................18
BENEFICIARY DESIGNATION.......................................................18
7.1 BENEFICIARY DESIGNATION............................................18
7.2 CHANGE OF BENEFICIARY DESIGNATION..................................18
7.3 NO DESIGNATION.....................................................18
7.4 EFFECT OF PAYMENT..................................................18
ARTICLE VIII..................................................................19
ADMINISTRATION................................................................19
8.1 COMMITTEE..........................................................19
8.2 AGENTS.............................................................19
8.3 BINDING EFFECT OF DECISIONS........................................19
8.4 INDEMNIFICATION OF COMMITTEE.......................................19
ARTICLE IX....................................................................20
AMENDMENT AND TERMINATION OF PLAN.............................................20
9.1 AMENDMENT..........................................................20
9.2 TERMINATION........................................................20
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ARTICLE X.....................................................................21
MISCELLANEOUS.................................................................21
10.1 FUNDING.........................................................21
10.2 NONASSIGNABILITY................................................21
10.3 LEGAL FEES AND EXPENSES.........................................21
10.4 CAPTIONS........................................................22
10.5 GOVERNING LAW...................................................22
10.6 SUCCESSORS......................................................22
10.7 RIGHT TO CONTINUED SERVICE......................................22
EXHIBIT A.....................................................................23
EXHIBIT B.....................................................................24
EXHIBIT C.....................................................................25
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ARTICLE I
1.1 STATEMENT OF PURPOSE
This is the Equitable Resources, Inc. Deferred Compensation
Plan (the "Plan") made in the form of this Plan and in related agreements
between the Employer and certain management or highly compensated employees. The
purpose of the Plan is to provide management and highly compensated employees of
the Employer with the option to defer the receipt of portions of their
compensation payable for services rendered to the Employer. It is intended that
the Plan will assist in attracting and retaining qualified individuals to serve
as officers and managers of the Employer. The Plan originally was effective as
of January 1, 1996, and subsequently was amended and restated effective as of
October 27, 1999.
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ARTICLE II
DEFINITIONS
-----------
When used in this Plan and initially capitalized, the
following words and phrases shall have the meanings indicated:
2.1 ACCOUNT.
"Account" means the sum of a Participant' s Deferral Account
and Matching Account.
2.2 BASE SALARY.
"Base Salary" means a Participant's base earnings paid by the
Employer to a Participant without regard to any increases or decreases in base
earnings as a result of an election to defer base earnings under this Plan or
(ii) an election between benefits or cash provided under a Plan of an Employer
maintained pursuant to Section 125 or 401(k) of the Code, and as limited in
Exhibit B attached hereto.
2.3 BENEFICIARY.
"Beneficiary" means the person or persons designated or deemed
to be designated by the Participant pursuant to Article VII to receive benefits
payable under the Plan in the event of the Participant's death.
2.4 BOARD.
"Board" means the Board of Directors of the Company.
2.5 BONUS.
"Bonus" means a Participant's bonus or sales commission paid
by the Employer to a Participant under the plans listed in Exhibit B attached
hereto and to the degree limited in Exhibit B, as applicable, without regard to
any decreases as a result of an election to defer all or any portion of a bonus
under this Plan or (ii) an election between benefits or cash provided under a
plan of the Employer maintained pursuant to Section 401(k) of the Code.
2.6 CHANGE IN CONTROL.
"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.
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(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.
2.7 CODE.
"Code" means the Internal Revenue Code of 1986, as amended.
2.8 COMMITTEE.
"Committee " has the meaning set forth in Section 8.1.
2.9 COMPANY.
"Company" means Equitable Resources, Inc. and any successor
thereto.
2.10 COMPENSATION.
"Compensation" means the Base Salary and Bonus payable with
respect to an Eligible Employee for each plan year.
2.11 CREDITED SERVICE.
"Credited Service" means the sum of all periods of a
Participant's employment by the Company or a Selected Affiliate for which
service credit is given under the Equitable Resources Pension Plan.
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2.12 DEFERRAL ACCOUNT.
"Deferral Account" means the account maintained on the books
of the Employer for the purpose of accounting for the amount of Compensation
that each Participant elects to defer under the Plan and for the amount of
investment return credited thereto for each Participant pursuant to Article V.
2.13 DEFERRAL AMOUNT.
"Deferral Amount" means the Regular Deferral Amounts and
Special Bonus Deferral Amounts deferred by a Participant under Section 4.1.
2.14 DEFERRAL BENEFIT.
"Deferral Benefit" means the benefit payable to a Participant
or his or her Beneficiary pursuant to Article VI.
2.15 DEFERRAL ELECTION.
"Deferral Election" means the written election made by a
Participant to defer Compensation pursuant to Article IV.
2.16 DISABILITY.
"Disability" means a Participant's Disability as defined under
the Company's Long Term Disability Plan or its successors.
2.17 EARLY RETIREMENT.
"Early Retirement" will be granted by the Committee at its
sole discretion.
2.18 ELIGIBLE EMPLOYEE.
"Eligible Employee" means a highly compensated or management
employee of the Employer who is designated by the Committee, by name or group or
description, in accordance with Section 3.1 as, eligible to participate in the
Plan.
2.19 EMPLOYER.
"Employer" means, with respect to a Participant, the Company
or the Selected Affiliate which pays such Participant's Compensation.
2.20 HARDSHIP WITHDRAWAL.
"Hardship Withdrawal" has the meaning set forth in
Section 6.5.
2.21 INVESTMENT RETURN RATE.
"Investment Return Rate" means:
(a) In the case of an investment named in Exhibit C 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");
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<PAGE> 9
(b) In the case of an investment named in Exhibit C of an
equity investment nature, the increase or decrease in deemed value and 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.
2.22 MATCHING ACCOUNT.
"Matching Account" means the account maintained on the books
of the Employer for the purpose of accounting for the Matching Amount and for
the amount of investment return credited thereto for each Participant pursuant
to Article V.
2.23 MATCHING AMOUNT.
"Matching Amount" means the Regular Matching Amounts and
Special Bonus Matching Amounts credited to a Participant's Matching Account
under Section 4.2.
2.24 PARTICIPANT.
"Participant" means any Eligible Employee who elects to
participate by filing a Participation Agreement or who is automatically enrolled
with respect to a Minimum Bonus Deferral Amount as provided in Section 3.2.
2.25 PARTICIPATION AGREEMENT.
"Participation Agreement" means the agreement filed by a
Participant, in the form prescribed by the Committee, pursuant to Section 3.2.
2.26 PLAN.
"Plan" means the Equitable Resources, Inc. Deferred
Compensation Plan, as amended from time to time.
2.27 PLAN YEAR.
"Plan Year" means a twelve-month period commencing January 1
and ending the following December 31.
2.28 REGULAR DEFERRAL AMOUNT.
"Regular Deferral Amount" means the amount of Compensation
deferred by a Participant under Section 4.1(a).
2.29 REGULAR MATCHING AMOUNT.
"Regular Matching Amount" means the amount credited to a
Participant's Company Matching Account under Section 4.2(a).
2.30 RETIREMENT.
"Retirement" means the termination of a Participant who has
reached age 65.
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2.31 SELECTED AFFILIATE.
"Selected Affiliate" means (1) any company in an unbroken
chain of companies beginning with the Company if each of the companies other
than the last company in the chain owns or controls, directly or indirectly,
stock possessing not less than 50 percent of the total combined voting power of
all classes of stock in one of the other companies, or (2) any partnership or
joint venture in which one or more of such companies is a partner or venturer,
each of which shall be selected by the Committee.
2.32 SPECIAL BONUS DEFERRAL AMOUNT.
"Special Bonus Deferral Amount" means the sum of the Minimum
Bonus Deferral Amounts and the Discretionary Bonus Deferral Amounts deferred by
certain direct and indirect reports to the Chief Executive Officer of the
Company ("CEO") described in Section 4.1(b). "MINIMUM BONUS DEFERRAL AMOUNT"
shall refer to the 20% and 10%, as applicable, bonus deferrals described in
Section 4.1(b) which must be made by such direct and indirect reports to the
CEO. "DISCRETIONARY BONUS DEFERRAL AMOUNTS" shall refer to any additional bonus
deferrals made by such direct and indirect reports to the CEO in excess of the
Minimum Bonus Deferral Amount.
2.33 SPECIAL BONUS MATCHING AMOUNT.
"Special Bonus Matching Amount" means the amount credited to a
Participant's Matching Account under Section 4.2(b).
2.34 VALUATION DATE.
"Valuation Date" means a date on which the amount of a
Participant's Account is valued as provided in Article V. The Valuation Date
shall be the last day of each calendar quarter and any other date determined by
the Committee.
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ARTICLE III
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY.
Eligibility to participate in the Plan is limited to Eligible
Employees. From time to time, and subject to Section 3.4, the Committee shall
prepare, and attach to the Plan as Exhibit A, a complete list of the Eligible
Employees, by individual name or by reference to an identifiable group of
persons or by descriptions of the components of compensation of an individual
which would qualify individuals who are eligible to participate, and all of whom
shall be a select group of management or highly compensated employees.
3.2 PARTICIPATION.
(a) Regular Deferrals. Except as otherwise provided in (b),
participation in the Plan shall be limited to Eligible Employees who elect to
participate in the Plan by filing a Participation Agreement with the Committee.
An Eligible Employee shall commence participation in the Plan upon the first day
of his or her first payroll period following the receipt of his or her
Participation Agreement by the Committee.
(b) Minimum Bonus Deferral Amounts. Notwithstanding (a), an
Eligible Employee who is required to defer a Minimum Bonus Deferral Amount into
the Plan under Section 4.1(b) shall automatically become a Participant in the
Plan regardless of whether the Participant files a Participation Agreement.
3.3 CHANGE IN PARTICIPATION STATUS.
(a) Regular Deferral Amounts. Except as otherwise provided in
Section 3.2(b) and (b), below, a Participant may elect to terminate his or her
participation in the Plan at any time by filing a written notice thereof with
the Committee. A termination of participation with respect to Regular Deferral
Amounts will become effective as of the beginning of the next payroll period in
the month following receipt of the termination election by the Committee and in
accordance with the Committee's prevailing administrative procedures.
(b) Special Bonus Deferral Amounts. A termination of
participation with respect to Discretionary Bonus Deferral Amounts will become
effective as of the start of the next Bonus measurement period. A Participant
shall not be permitted to terminate the deferral of Minimum Bonus Deferral
Amounts.
(c) Amounts credited to such Participant's Account with
respect to periods prior to the effective date of a termination described in (a)
or (b) shall continue to be payable pursuant to, receive investment credit on,
and otherwise be governed by, the terms of the Plan.
3.4 INELIGIBLE PARTICIPANT.
Notwithstanding any other provisions of this Plan to the
contrary, if the Committee determines that any Participant may not qualify as a
"management or highly compensated employee" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or regulations
thereunder, the Committee may determine, in its sole discretion, that such
Participant shall cease to be eligible to participate in this Plan. Upon such
determination, the Employer shall distribute (in cash and/or in kind, as
applicable) to the Participant an amount equal to the vested amount credited to
his Account as soon as administratively practicable. Upon such payment, no
benefit shall thereafter be payable under this Plan either to the Participant or
any Beneficiary, and all of the Participant's elections as to the time and
manner of payment of his Account will be deemed to be canceled.
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ARTICLE IV
DEFERRAL OF COMPENSATION
------------------------
4.1 DEFERRAL AMOUNTS.
(a) Regular Deferral Amount. Subject to paragraph (b), below,
with respect to each Plan Year, a Participant may elect to defer a specified
percentage of his or her Compensation as provided in Exhibit B. A Participant
may change the percentage of his or her Compensation to be deferred by filing a
new Regular Deferral Election with the Committee. Any such change shall be
effective as of the first day of the Plan Year immediately following the Plan
Year in which such Deferral Election is filed with the Committee.
(b) Special Bonus Deferral Amount. Notwithstanding paragraph
(a), above, a Participant who reports directly to the Company's Chief Executive
Officer is required to defer at least twenty percent (20%) of his or her Bonus
and a Participant who reports directly to an executive who reports directly to
the Company's Chief Executive Officer is required to defer at least ten percent
(10%) of his or her Bonus, into the Plan (the "Minimum Bonus Deferral Amount").
(c) A Participant may change the percentage of his or her
Compensation to be deferred by filing a new Deferral Election with the
Committee. Notwithstanding anything in the preceding sentence to the contrary, a
Participant required to make a Minimum Bonus Deferral Amount shall not be
permitted to elect to make a change in a Special Bonus Deferral Election below
the Minimum Bonus Deferral Amount. Any permitted changes in deferral elections
shall be effective as of the first day of the Plan Year immediately following
the Plan Year in which such Deferral Election is filed with the Committee.
4.2 MATCHING AMOUNTS.
(a) Regular Matching Amount. Subject to paragraph (b), below,
if the Committee authorizes a Regular Matching Amount with respect to, and
preceding, any Plan Year(s), the Employer shall provide Regular Matching Amounts
under this Plan with respect to each Participant who is eligible to be allocated
matching contributions under the Savings Plan. The total Regular Matching
Amounts under this Plan on behalf of a Participant for each Plan Year shall not
exceed the difference between the matching percentage of the Compensation
deferred by a Participant under this Plan and of the Participant's pre-tax
elective deferrals for the Plan Year under the Savings Plan, less (ii) the
Employer matching contributions allocated to the Participant under the Savings
Plan for such Plan Year.
(b) Special Bonus Matching Amount. Notwithstanding paragraph
(a), above, a Participant who is required to defer a Minimum Bonus Deferral
Amount under Section 4.1(b) and who elects to defer a Discretionary Bonus
Deferral Amount shall be credited with a Special Bonus Matching Amount equal to
twenty-five one hundredths (.25) of one (1) share of the Common Stock of the
Company for every one (1) share of the Common Stock of the Company deemed to be
purchased under the Plan pursuant to Section 5.6 with the Discretionary Bonus
Deferral Amount. There shall be no limit on a Participant's Special Bonus
Matching Amount. Only Participants subject to the requirement to defer a Minimum
Bonus Deferral Amount shall be eligible to defer a Discretionary Bonus Deferral
Amount.
(c) Minimum Bonus Deferral Amounts shall not be credited with
any matching contributions under the Plan.
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4.3 CREDITING OF DEFERRAL AMOUNTS AND MATCHING AMOUNTS.
Participant's Deferral Amounts shall be credited by the
Employer to the Participant's Deferral Account periodically, the frequency of
which will be determined by the Committee. To the extent that the Employer is
required to withhold any taxes or other amounts from a Participant's Deferral
Amounts pursuant to any state, federal or local law, such amounts shall be
withheld only from the Participant's Deferral Amounts before such amounts are
credited. The Matching Amounts under the Plan for each Participant shall be
credited by the Employer to the Participant's Matching Account periodically, the
frequency of which will be determined by the Committee.
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ARTICLE V
BENEFIT ACCOUNTS
----------------
5.1 VALUATION OF ACCOUNT.
As of each Valuation Date, a Participant's Account shall
consist of the balance of the Participant's Account as of the immediately
preceding Valuation Date, plus the Participant's Deferral Amounts and Matching
Amounts credited pursuant to Sections 4.1 and 4.2 since the immediately
preceding Valuation Date, plus or minus investment gain or loss credited as of
such Valuation Date pursuant to Section 5.2, minus the aggregate amount of
distributions, if any, made from such Account since the immediately preceding
Valuation Date.
5.2 CREDITING OF INVESTMENT RETURN.
As of each Valuation Date, each Participant's Deferral Account
and Matching Account shall be increased or decreased by the amount of investment
gain or loss earned since the immediately preceding Valuation Date. Investment
return shall be credited at the Investment Return Rate as of such Valuation Date
based on the average balance of the Participant's Deferral Account and Matching
Account, respectively, since the immediately preceding Valuation Date, but after
such Accounts have been adjusted for any contributions or distributions to be
credited or deducted for such period. Investment return for the period prior to
the first Valuation Date applicable to a Deferral Account or a Matching Account
shall be deemed earned ratably over such period. Until a Participant or his or
her Beneficiary receives his or her entire Account, the unpaid balance thereof
shall earn an investment return as provided in this Section 5.2.
5.3 STATEMENT OF ACCOUNTS.
The Committee shall provide to each Participant, within 30
days after the close of each calendar quarter, a statement setting forth the
balance of such Participant's Account as of the last day of the preceding
calendar quarter and showing all adjustments made thereto during such calendar
quarter.
5.4 VESTING OF AMOUNTS.
Except as provided in Sections 10.1 and 10.2, a Participant
shall be 100% vested in the amounts credited to his or her Account in the event
of a Change in Control. Prior to a Change in Control, amounts credited to a
Participant's Deferral Account or Matching Account shall vest in accordance with
the following paragraphs of this Section 5.4.
(a) Regular Deferral Amounts. A Participant shall be 100%
vested in the Regular Deferral Amounts credited to his or her Deferral Account
at all times.
(b) Special Bonus Deferral Amounts. The Special Bonus Deferral
Amounts credited to a Participant's Deferral Account with respect to each Plan
Year shall vest in increments of fifty percent (50%); with the first 50% vesting
upon the completion of the first year of Credited Service following the Plan
Year to which the Special Bonus Deferral Amount relates and the remaining 50%
vesting upon the completion of the second year of Credited Service following
such Plan Year. Any nonvested portion of a Participant's Special Bonus Deferral
Amount shall be forfeited if the Participant voluntarily resigns from the
Company. Nonvested portions of a Participant's Bonus Deferral Amount shall be
paid to the Participant if the Participant is involuntarily terminated by the
Company.
(c) Regular Matching Amounts. A Participant's Regular Matching
Amounts shall vest in accordance with the vesting schedule for Company
Contributions under the Equitable 401(k) Plan.
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(d) Special Bonus Matching Amounts. The Special Bonus Matching
Amounts credited to a Participant's Matching Account with respect to each Plan
Year shall vest in increments of thirty-three and one-third percent (33.3%);
with the first 33.3% vesting upon the completion of the first year of Credited
Service following the Plan Year to which the Special Bonus Matching Amount
relates and the two remaining portions vesting upon the completion of the second
and third years, respectively, of Credited Service following the Plan Year to
which the Special Bonus Matching Amount relates. Any nonvested portion of a
Participant's Special Bonus Matching Amount shall be forfeited if the
Participant terminates employment with the Company for any reason.
(e) Application of Forfeitures. Forfeitures under the Plan
shall be for the benefit of the Company and shall not be credited to other
Participants.
5.5 INVESTMENT OF REGULAR DEFERRAL AMOUNTS.
A Participant may direct that the portion of his or her
Deferral Account attributable to Regular Deferral Amounts under Section 4.1(a)
be deemed to be invested in one or more of the investment options listed in
Exhibit C, in increments of ten percent (10%) of the value of his or her Regular
Deferral Amount (a "New Money Election"). A Participant also may direct once
every month that Regular Deferral Amounts previously credited to his or her
Deferral Account and deemed to be invested in one or more of the investment
options listed in Exhibit C, be transferred in increments of ten percent (10%)
of the value of his or her Regular Deferral Amount between and among the then
available investment options listed in Exhibit C (a "Reallocation Election");
provided that a Participant may not reallocate Regular Deferral Amounts
previously credited to his or her Deferral Account and deemed to be invested in
the Equitable Resources Common Stock Fund. A New Money Election or a
Reallocation Election must be filed with the Committee in accordance with
uniform rules established by the Committee. A Reallocation Election shall not
change a Participant's existing New Money election.
The effective date of any New Money Election or Reallocation
Election shall be the date on which such election is received by the Committee
in accordance with uniform rules established by the Committee. The Company
reserves the right to refuse to honor any Participant direction related to
investments or withdrawals, including transfers among investment options, where
necessary or desirable to assure compliance with applicable law including U.S.
and other securities laws. However, the Company does not assume any
responsibility for compliance by officers or others with any such laws, and any
failure by the Company to delay or dishonor any such direction shall not be
deemed to increase the Company's legal exposure to the Participant or third
parties.
5.6 INVESTMENT OF SPECIAL BONUS DEFERRAL AMOUNTS AND
MATCHING AMOUNTS.
Notwithstanding anything in Section 5.5 to the contrary, a
Participant's Special Bonus Deferral Amounts under Section 4.1(b) and all
amounts credited to a Participant's Matching Account under Section 4.2 shall be
deemed to be invested in the Equitable Resources Common Stock Fund. A
Participant shall have no right to direct the investment of his Special Bonus
Deferral Amounts and the amounts to be credited to his Matching Account.
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ARTICLE VI
PAYMENT OF BENEFITS
-------------------
6.1 PAYMENT OF DEFERRAL BENEFIT UPON DEATH, DISABILITY OR
RETIREMENT.
Upon the death, Disability, Early Retirement, or Retirement of
a Participant, the Employer shall pay to the Participant or his Beneficiary a
Deferral Benefit equal to the balance of his or her vested Account determined
pursuant to Article V, less any amounts previously distributed, based on his
written election pursuant to Section 6.6.
6.2 PAYMENT OF DEFERRAL BENEFIT UPON TERMINATION.
Upon the termination of service of the Participant as an
employee of the Employer and all Selected Affiliates for reasons other than
death, Disability, or Retirement, the Employer shall pay to the Participant a
Deferral Benefit in a lump sum equal to the balance of his or her vested Account
determined pursuant to Article V, less any amounts previously distributed, as
soon as administratively practical.
6.3 PAYMENTS TO BENEFICIARIES.
In the event of the Participant's death prior to his or her
receipt of all elected annual installments, his or her Beneficiary will receive
the remaining annual installments at such times as such installments would have
become distributable to the Participant.
6.4 IN-SERVICE DISTRIBUTION.
A Participant may elect to receive an in-service distribution
of a portion or all of his or her vested Deferral Account only, beginning at any
time not less than one year after the end of the Plan Year in which such
Compensation was deferred. A Participant's election for an in-service
distribution shall be filed annually in writing with the Committee at the same
time his or her Deferral Election is made. The Participant may elect to receive
such in-service distribution in a lump sum only, the amount of which will be the
lesser of the distribution election for that year or the Deferral Account
balance attributable to that year's deferral. Any benefits paid to the
Participant as an in-service distribution shall reduce the amount of Deferral
Benefit otherwise payable to the Participant under the Plan.
6.5 HARDSHIP WITHDRAWAL.
In the event that the Committee, upon the written request of a
Participant, determines, in its sole discretion, that the Participant has
suffered an unforeseeable financial emergency, the Company shall pay to the
Participant, as soon as practicable following such determination, an amount
necessary to meet the emergency (the "Hardship Withdrawal"), but not exceeding
the aggregate balance of such Participant's vested Deferral Account as of the
date of such payment. For purposes of this Section 6.5, 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 amount of the Deferral
Benefit otherwise payable under the Plan to such Participant shall be adjusted
to reflect the early payment of the Hardship Withdrawal.
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<PAGE> 17
6.6 FORM OF PAYMENT.
The Deferral Benefit payable pursuant to Section 6.1 shall be
paid in one of the following forms, as elected by the Participant in his or her
Participation Agreement on file as of one (1) year and one (1) day prior to the
date of termination or death:
(a) Annual payments of a fixed amount which shall amortize the
vested Account balance as of the payment commencement date over a period not to
exceed ten (10) years (together, in the case of each annual payment, with
interest thereon credited after the payment commencement date pursuant to
Section 5.2).
(b) A lump sum.
In the event a Participant fails to make a distribution
election, his or her vested Account balance shall be distributed in a lump sum.
Notwithstanding the foregoing, that portion of a Participant's Account
attributable to Special Bonus Deferral Amounts and all Matching Amounts shall be
paid in Common Stock of the Company, with any fractional shares paid in cash in
a lump sum.
6.7 COMMENCEMENT OF PAYMENTS.
Commencement of payments under Section 6.1 of the Plan shall
begin within 60 days following receipt of written notice by the Committee of an
event which entitles a Participant (or a Beneficiary) to payments under the
Plan.
6.8 SMALL BENEFIT.
In the event the Committee determines that the balance of a
Participant's vested Account is less than $3,500 at the time of commencement of
payments, or the portion of the balance of the Participant's vested Account
payable to any Beneficiary is less than $3,500 at the time of commencement of
payments, the Committee may inform the Employer and the Employer, in its
discretion, may choose to pay the benefit in the form of a lump sum payment,
notwithstanding any provision of the Plan or a Participant election to the
contrary. Such lump sum payment shall be equal to the balance of the
Participants vested Account or the portion thereof payable to a Beneficiary.
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<PAGE> 18
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 Beneficiary to whom payment under the
Plan shall be made in the event of his or her death prior to complete
distribution to the Participant of his or her Account. Any Beneficiary
designation shall be made in a written instrument provided by the Committee. All
Beneficiary designations must be filed with the Committee and shall be effective
only when received in writing by the Committee. In the event that a Beneficiary
form has not been filed, the Beneficiary to whom payment has been designated
under the Savings Plan shall be used.
7.2 CHANGE OF BENEFICIARY DESIGNATION.
Any Beneficiary designation may be changed by a Participant by
the filing of a new Beneficiary designation, which will cancel all Beneficiary
designations previously filed. The designation of a Beneficiary may be made or
changed at any time without the consent of any person.
7.3 NO DESIGNATION.
If a Participant fails to designate a Beneficiary as provided
above, or if all designated Beneficiaries predecease the Participant, then the
Participant's designated Beneficiary shall be deemed to be the Participant's
estate.
7.4 EFFECT OF PAYMENT.
Payment to a Participant's Beneficiary (or, upon the death of
a primary Beneficiary, to the contingent Beneficiary or, if none, to the
Participant's estate) shall completely discharge the Employer's obligations
under the Plan.
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<PAGE> 19
ARTICLE VIII
ADMINISTRATION
--------------
8.1 COMMITTEE.
The administrative committee for the Plan (the "Committee")
shall be those members of the Employee Pension Committee as long as there are at
least three such members. If there are not at least three such non-participating
persons on the Committee, the Chief Executive Officer of the Company shall
appoint other Company officers to serve on the Committee. The Committee shall
have complete discretion to i) supervise the administration and operation of the
Plan, ii) adopt rules and procedures governing the Plan from time to time and
iii) shall have authority to give interpretive rulings with respect to the Plan.
8.2 AGENTS.
The Committee may appoint an individual, who may be an
employee of the Company, to be the Committee's agent with respect to the
day-to-day administration of the Plan. In addition, the Committee may, from time
to time, employ other agents and delegate to them such administrative duties as
it sees fit, and may from time to time consult with counsel who may be counsel
to 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 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, loss, damage, expense or liability 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.
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<PAGE> 20
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
9.1 AMENDMENT.
The Company, on behalf of itself and of each Selected
Affiliate may at any time amend, suspend or reinstate any or all of the
provisions of the Plan, except that no such amendment, suspension or
reinstatement may adversely affect any Participant's Account, as it existed as
of the day before the effective date of such amendment, suspension or
reinstatement, without such Participant's prior written consent. Written notice
of any amendment or other action with respect to the Plan shall be given to each
Participant.
9.2 TERMINATION.
The Company, on behalf of itself and of each Selected
Affiliate, in its sole discretion, may terminate this Plan at any time and for
any reason whatsoever. Upon termination of the Plan, Participants shall be 100%
vested in all amounts credited to their Accounts. On and after Plan termination,
the Committee shall take those actions necessary to administer any Accounts
existing prior to the effective date of such termination; provided, however,
that a termination of the Plan shall not adversely affect the value of a
Participants Account, the crediting of investment return under Section 5.2 or
the timing or method of distribution of a Participant' s Account, without the
Participant's prior written consent.
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<PAGE> 21
ARTICLE X
MISCELLANEOUS
-------------
10.1 FUNDING.
Participants, their Beneficiaries, and their heirs, successors
and assigns, shall have no secured interest or claim in any property or assets
of the Employer. The Employer's obligation under the Plan shall be merely that
of an unfunded and unsecured promise of the Employer to pay money in the future.
Notwithstanding the foregoing, in the event of a Change in Control, the Company
shall create an irrevocable trust, or before such time the Company may create an
irrevocable or revocable trust, to hold funds to be used in payment of the
obligations of Employers under the Plan. In the event of a Change in Control or
prior thereto, the Employers shall fund such trust in an amount equal to not
less than the total value of the Participants' Accounts under the Plan as of the
Valuation Date immediately preceding the Change in Control, provided that any
funds contained therein shall remain liable for the claims of the respective
Employer's general creditors.
10.2 NONASSIGNABILITY.
No right or interest under the Plan of a Participant or his or
her Beneficiary (or any person claiming through or under any of them) shall be
assignable or transferable in any manner or be 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. If any Participant or Beneficiary shall attempt to or shall
transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his
or her benefits hereunder or any part thereof, or if by reason of his or her
bankruptcy or other event happening at any time such benefits would devolve upon
anyone else or would not be enjoyed by him or her, then the Committee, in its
discretion, may terminate his or her interest in any such benefit (including the
Deferral Account) to the extent the Committee considers necessary or advisable
to prevent or limit the effects of such occurrence. Termination shall be
effected by filing a written "termination declaration" with the Clerk of the
Company and making reasonable efforts to deliver a copy to the Participant or
Beneficiary whose interest is adversely affected (the "Terminated Participant").
As long as the Terminated Participant is alive, any benefits
affected by the termination shall be retained by the Employer and, in the
Committee's sole and absolute judgment, may be paid to or expended for the
benefit of the Terminated Participant, his or her spouse, his or her children or
any other person or persons in fact dependent upon him or her in such a manner
as the Committee shall deem proper. Upon the death of the Terminated
Participant, all benefits withheld from him or her and not paid to others in
accordance with the preceding sentence shall be disposed of according to the
provisions of the Plan that would apply if he or she died prior to the time that
all benefits to which he or she was entitled were paid to him or her.
10.3 LEGAL FEES AND EXPENSES.
It is the intent of the Company and each Selected Affiliate
that no Eligible Employee or former Eligible Employee 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 an Eligible
Employee hereunder. Accordingly, if after a Change in Control it should appear
that the Employer has failed to comply with any of its obligations under this
Plan or in the event that the Employer 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 Eligible Employee the benefits intended to be
provided to such Eligible Employee hereunder, the Employer irrevocably
authorizes such Eligible Employee from time to time to retain counsel of his or
her choice, at the
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<PAGE> 22
expense of the Employer as hereafter provided, to represent such Eligible
Employee in connection with the initiation or defense of any litigation or other
legal action, whether by or against the Employer or any director, officer,
stockholder or other person affiliated with the Employer in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Employer and such counsel, the Employer irrevocably consents to such Eligible
Employee's entering into an attorney-client relationship with such counsel, and
in that connection the Employer and such Eligible Employee agree that a
confidential relationship shall exist between such Eligible Employee and such
counsel, The Employer shall pay and be solely responsible for any and all
attorneys' and related fees and expenses incurred by such Eligible Employee as a
result of the Employer's failure to perform under this Plan or any provision
thereof; or as a result of the Employer 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 Selected 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 Selected Affiliate and successors of any such Company or other
business entity.
10.7 RIGHT TO CONTINUED SERVICE.
Nothing contained herein shall be construed to confer upon any
Eligible Employee the right to continue to serve as an Eligible Employee of the
Employer or in any other capacity.
EXECUTED THIS 1ST DAY OF JANUARY, 1996.
EQUITABLE-RESOURCES INC.
BY: GREGORY R. SPENCER
TITLE VICE PRESIDENT HUMAN RESOURCES
AND ADMINISTRATION
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<PAGE> 23
EXHIBIT A
---------
RE: SECTION 3.1 - DESCRIPTION OF ELIGIBLE EMPLOYEES
- ----------------------------------------------------
Date: January 1, 1996.
THE COMMITTEE HAS DETERMINED THAT THE FOLLOWING NAMED INDIVIDUALS OR GROUPS OF
PERSONS OR DESCRIPTIONS OF THE COMPONENTS OF COMPENSATION OF AN INDIVIDUAL WHICH
WOULD QUALIFY INDIVIDUALS WHICH ARE ELIGIBLE TO PARTICIPATE IN THE PLAN AS
ELIGIBLE EMPLOYEES:
Employees classified in Company salary grade 19 and above
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<PAGE> 24
EXHIBIT B
---------
RE: SECTION 4.1 - AMOUNT OF DEFERRAL
- -------------------------------------
Dated: January 1, 1996
AS OF THE DATE ABOVE, AND EFFECTIVE UNTIL THIS EXHIBIT IS MODIFIED BY THE
COMMITTEE, THE TABLE BELOW INDICATES THE TYPES OF COMPENSATION WHICH ARE
ELIGIBLE FOR INCOME DEFERRAL AT THE ASSIGNED PERCENTAGES AS NOTED:
TYPE OF COMPENSATION MAXIMUM PERCENTAGE OTHER LIMITATIONS
THAT CAN BE DEFERRED
Base Salary N/A Any amount over IRS limit
- --------------------------------------------------------------------------------
Bonus 100% In increments of 10% or the
entire amount of the Bonus
awarded in excess of a
stated dollar amount.
- --------------------------------------------------------------------------------
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<PAGE> 25
EXHIBIT C
---------
RE: SECTION 2.21 - INVESTMENT RETURN RATE
- ------------------------------------------
The investment account equivalents to be used in determining the Investment Rate
of Return shall be those investment options provided under the Equitable
Resources, Inc. Employee Savings Plan ("Equitable 401(k) Plan") during any
period of reference.
<PAGE> 1
Exhibit 10.08
EQUITABLE RESOURCES, INC.
BREAKTHROUGH LONG TERM INCENTIVE PLAN
EQUITABLE RESOURCES, INC. (the "Company") hereby establishes the
Equitable Resources, Inc. Breakthrough Long Term Incentive Plan (the "Plan") for
the benefit of certain executives of the Company effective as of the 16th day of
July, 1998.
WHEREAS, the Company maintains certain incentive award plans, including
the Equitable Resources Inc. 1994 Long Term Incentive Plan, pursuant to which
stock-based incentive awards are granted to selected executive employees; and
WHEREAS, in order to further align the interests of the persons
primarily responsible for the success of the Company with the interest of the
shareholders, the Company desires to provide additional long term incentive
benefits through the Plan.
NOW THEREFORE, the Company hereby provides for additional incentive
benefits for certain executive employees of the Company on the following terms
and conditions:
SECTION 1. ELIGIBILITY. The Chief Executive Officer of the Company (the
"CEO") shall, in his sole discretion, select the executive employees of the
Company who shall be eligible to participate in the Plan. The CEO's selections
will become participants in the Plan (the "Participants") only upon approval by
the Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee").
SECTION 2. INCENTIVE AWARDS. Each Participant shall be awarded a number of
units (the "Award") (subject to the conditions provided herein) which shall be
determined by dividing four times his or her current annual base salary as of
the effective date of the Plan by $28.50, which is the average of the high and
low stock prices of Company common stock on July 16, 1998 (the "Award Date") as
reported on the New York Stock Exchange Composite Transactions System in the
Wall Street Journal ("NYSE"). The value of each unit shall equal the closing
price of the Company's common stock on the NYSE for that day. A Participant's
base salary shall be determined by the Compensation Committee, but shall in any
event exclude bonuses, commissions, car allowances, Company reimbursements,
relocation payments, and any gain from the exercise of stock options or the
grant of stock to Participants.
The Award shall be made to the Participant on the Award Date but will be held by
the Company subject to the terms and conditions described below. A Participant
shall have
<PAGE> 2
no current right to exchange the Award for cash, stock or any other benefit and
shall be a mere unsecured creditor of the Company with respect to future rights
to benefits.
SECTION 3. PERFORMANCE CONDITION OF THE AWARD. The Award shall have value
only if the closing price of the Company's common stock on the NYSE equals or
exceeds fifty-dollars ($50.00) per share on twenty or more consecutive trading
days ("Performance Condition"), in which event, subject to the terms of the
Plan, a Participant shall be entitled to receive an amount of cash equal to the
value of the Award.
SECTION 4. FORFEITURE OF THE AWARD.
(a) The number of units constituting a Participant's Award shall be
reduced by 50% if the Performance Condition is not satisfied on or before
December 31, 2001. If the Performance Condition is not satisfied on or before
December 31, 2002, the Participant's Award shall be forfeited.
(b) A Participant's Award shall be forfeited if, prior to the
satisfaction of the Performance Condition, the Participant's employment with the
Company terminates for any reason other than the following:
(i) the Company terminates the employment of the Participant
for reasons other than for Cause (as defined in Section 10
below) prior to a Change in Control;
(ii) the Participant's death; or
(iii) the Participant terminates his or her employment with
the Company for Good Reason (as defined in Section 10 below)
at any time within twenty-four months following a Change in
Control of the Company (as defined in Section 9 below).
(c) If a Participant's employment with the Company terminates for a
reason described in paragraphs (i) or (ii) of Section 4(b) above, then the
number of units constituting the Participant's Award shall be reduced as
follows:
(i) If the Participant's employment with the Company
terminates on or before March 31, 1999, then 100% of the
Participant's Award shall be forfeited.
(ii) If the Participant's employment with the Company
terminates after March 31, 1999 and on or before March 31,
2000, then the number of units constituting the Participant's
Award shall be reduced by 50%.
2
<PAGE> 3
(iii) If the Participant's employment with the Company
terminates after March 31, 2000, then the number of units
constituting the Participant's Award shall be reduced by 25%.
(d) If a Participant's employment with the Company terminates for a
reason described in Section 4(b)(iii) above, then the number of units
constituting the Participant's Award shall not be reduced.
SECTION 5. DIVIDENDS. Each unit will be credited with dividends which are
paid on the Company's common stock in the form of additional units. These
additional units shall be subject to the same conditions and restrictions as
provided in this Plan.
SECTION 6. DISTRIBUTION. Upon notification from the Company of participation
in the Plan, each Participant must make a written election as to the time and
form in which his or her Award will be paid as provided in this Section 6. This
election must be made on or before September 1, 1998.
(a) A Participant may elect to have the payment of his or her Award
commence either upon termination of employment with the Company or upon a
specified date in the future. The Participant's election as to when the Award
will be paid shall be irrevocable.
(b) A Participant may elect to have his or her Award paid in either a
lump-sum cash payment or annual installment cash payments over one, five or ten
year periods. A Participant may also change his or her original election as to
the method of payment by making a subsequent written election with the Company,
except that such election shall not be effective until the one-year anniversary
after the election is made. Consequently, if the Participant makes a subsequent
election and becomes entitled to payment of the Award before the expiration of
the one-year period, the original election shall apply.
(c) If a Participant elects to receive payment of his or her Award, or
any portion thereof, at any time after the satisfaction of the Performance
Condition, then the units constituting the Award shall be credited to and
maintained in accordance with the terms of the Company's Deferred Compensation
Plan as then in effect.
(d) If a Participant elects to receive the payment of his or her Award
at a specified date and on such date, he or she is still employed by the
Company, then the Award shall be paid to the Participant only to the extent that
the deductibility of such payment to the Company is not limited by reason of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). In
the event that the payment of all or a part of the Award exceeds the Code
Section 162(m) limit, the amount in excess of the limit shall automatically be
deferred to the next subsequent year in which it can be paid to the Participant
without exceeding the Code Section 162(m) limit.
(e) A Participant's Award under this Plan shall actually be paid to the
Participant within 30 days or as soon as practicable thereafter following the
benefit commencement
3
<PAGE> 4
date as described in paragraph (a) above. The Participant shall receive all
benefits in cash payments and shall have no right to receive a distribution of
Company stock.
(f) In the event of the Participant's death, the Participant's
beneficiary (as listed on the most recent election form which is delivered to
the Company) shall receive an immediate lump-sum cash payment without regard to
the Participant's elections as to the time and form of payment as described in
paragraphs (a) and (b) above.
SECTION 7. TAX CONSEQUENCES TO PARTICIPANTS. It is intended that: (i) until
the Performance Condition is satisfied, a Participant's right to an Award under
this Plan shall be subject to a substantial risk of forfeiture in accordance
with Code Sections 83(a) and 3121(v)(2); (ii) the Award shall be subject to
employment taxes upon the satisfaction of the Performance Condition; and (iii)
until the Award is actually paid to the Participant, the Participant shall have
merely an unfunded, unsecured promise to be paid the benefit, and such unfunded
promise shall not consist of a transfer of "property" within the meaning of Code
Section 83. It is further intended that, because a Participant may only change
the method of payment of the Award at a time when he or she cannot actually or
constructively receive the Award, and such election will not become effective
for a one-year period after it is made, the Participant will not be in actual or
constructive receipt of the Award within the meaning of Code Section 451 until
it is actually received.
SECTION 8. NONASSIGNMENT. A Participant shall not be permitted to assign,
alienate or otherwise transfer his Award and any attempt to do so shall be void.
SECTION 9. CHANGE IN CONTROL.
(a) Upon a Change in Control (as defined in paragraph (b) below), the
Company must transfer an amount of cash to the grantor trust which is created by
the attached Trust Plan for the benefit of the Participants (the "Rabbi Trust").
The amount that must be transferred to the Rabbi Trust shall equal the value of
all of the Awards made pursuant to the Plan (which have not been forfeited
pursuant to Section 4 hereof as of the date of the Change in Control) assuming
the Performance Condition is satisfied as of the date of the Change of Control.
The Rabbi Trust shall provide that following a Change in Control of the Company,
the amount transferred to the Rabbi Trust may not be returned to the Company
(subject to its use for creditors in the event of bankruptcy or insolvency);
provided, however, that (i) the value of any award forfeited pursuant to Section
4 hereof subsequent to a Change in Control shall be returned to the Company; and
(ii) all amounts in the Rabbi Trust shall be returned to the Company if the
Performance Condition is not satisfied as of December 31, 2002. In such event
the Rabbi Trust shall provide that the transferred amount shall be returned to
the Company.
(b) A Change in Control of the Company shall mean any of the following
events:
4
<PAGE> 5
(i) The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a
group of purchasers, other than to a corporation with respect
to which, following such sale or disposition, more than eighty
percent of, respectively, the then outstanding shares of
Company common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of the Board of Directors is then owned
beneficially, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial
owners, respectively of the outstanding Company common stock
and the combined voting power of the then outstanding voting
securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the
outstanding Company common stock and voting power immediately
prior to such sale or disposition;
(ii) The acquisition in one or more transactions by any person
or group, directly or indirectly, of beneficial ownership of
twenty percent or more of the outstanding shares of Company
common stock or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of the Board of Directors; provided,
however, that 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 or more of
the Company's voting securities, shall not constitute a Change
in Control;
(iii) The Company's termination of its business and
liquidation of its assets;
(iv) There is consummated a merger, consolidation,
reorganization, share exchange, or similar transaction
involving the Company, (including a triangular merger), in any
case, unless immediately following such transaction: (x) all
or substantially all of the persons who were the beneficial
owners of the outstanding common stock and outstanding voting
securities of the Company immediately prior to the transaction
beneficially own, directly or indirectly, more than 60% of the
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors of the corporation
resulting from such transaction (including a corporation or
other person which as a result of such transaction owns the
5
<PAGE> 6
Company or all or substantially all of the Company's assets
through one or more subsidiaries (a "Parent Company")) in
substantially the same proportion as their ownership of the
common stock and other voting securities of the Company
immediately prior to the consummation of the transaction, (y)
no person (other than the Company, any employee benefit plan
sponsored or maintained by the Company or, if reference was
made to equity ownership of any Parent Company for purposes of
determining whether clause (x) above is satisfied in
connection with the transaction, such Parent Company)
beneficially owns, directly or indirectly, 20% or more of the
outstanding shares of common stock or the combined voting
power of the voting securities entitled to vote generally in
the election of directors of the corporation resulting from
such transaction and (z) individuals who were members of the
Company's Board of Directors immediately prior to the
consummation of the transaction constitute at least a majority
of the members of the board of directors resulting from such
transaction (or, if reference was made to equity ownership of
any Parent Company for purposes of determining whether clause
(x) above is satisfied in connection with the transaction,
such Parent Company); or
(v) The following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the entire
Board of Directors and any new director (other than a director
whose initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved.
SECTION 10. GOOD REASON FOR TERMINATION. For purposes of the Forfeiture
Provision of Section 4, a Participant shall have terminated employment with the
Company for "Good Reason" if any one of the following applies:
(a) The removal of the Participant from the position he held
immediately prior to the Change in Control (other than by reason of death,
disability or Cause);
(b) The assignment to the Participant of any duties inconsistent with
those performed by the Participant immediately prior to the Change in Control or
a substantial alteration in the nature or status of the Participant's
responsibilities which renders the Participant's position to be of less dignity,
responsibility or scope;
(c) A reduction by the Company in the Participant's level of overall
compensation (including annual incentive opportunity at target award levels) as
in effect on the effective
6
<PAGE> 7
date of this Plan or as the same may be increased from time to time except for
proportional across-the-board reductions similarly affecting all executives of
the Company and all executives of any person in control of the Company,
provided, however, that the exception for across-the-board reductions shall not
apply in the event the Participant's annual base salary is reduced by an amount
equal to ten percent or more of the Participant's annual base salary as of the
end of the calendar year immediately preceding the year in which the Change in
Control occurs, without the Participant's consent;
(d) The failure to grant the Participant an annual salary increase
reasonably necessary to maintain such salary as reasonably comparable to
salaries of senior executives holding positions equivalent to the Participant's
in the industry in which the Company's then principal business activity is
conducted;
(e) The Company requiring the Participant to be based anywhere other
than the Company's principal executive offices in the city in which the
Participant is principally located immediately prior to the Change in Control,
except for required travel on the Company's business to an extent substantially
consistent with the Participant's present business travel obligations; or
(f) Any material reduction by the Company of the benefits enjoyed by
the Participant under any of the Company's pension, retirement, profit sharing,
savings, life insurance, medical, health and accident, disability or other
employee benefit plans, programs or arrangements; the taking of any action by
the Company which would directly or indirectly materially reduce any of such
benefits or deprive the Participant of any material fringe benefits or
perquisites; or the failure by the Company to provide the Participant with the
number of paid vacation days to which he is entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation
policy, provided that this paragraph (f) shall not apply to any proportional
across-the-board reduction or action similarly affecting all executives of the
Company and all executives of any person in control of the Company.
SECTION 11. TERMINATION OF PARTICIPANT FOR CAUSE. For purposes of the
Forfeiture Provision of Section 4, a Participant shall have a termination of
employment from the Company for "Cause" upon:
(a) The willful and continued failure by the Participant to
substantially perform his duties with the Company (other than (i) any such
failure resulting from the Participant's disability, or (ii) any such actual or
anticipated failure resulting from the Participant's termination of his
employment for Good Reason), after a written demand for substantial performance
is delivered to the Participant by the CEO of the Company which specifically
identifies the manner in which the CEO believes that the Participant has not
substantially performed his duties and which failure has not been cured within
thirty days after such written demand; or
7
<PAGE> 8
(b) The willful and continued engaging by the Participant in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise.
For purposes of this Section 11, no act, or failure to act on the
Participant's part shall be considered "willful" unless done, or omitted to be
done, by the Participant in bad faith and without reasonable belief that such
action or omission was in the best interest of the Company. Notwithstanding the
foregoing, the Participant shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board of Directors at a meeting of the Board of
Directors called and held for that purpose (after reasonable notice to the
Participant and an opportunity for the Participant, together with his counsel,
to be heard before the Board of Directors) finding that in the good faith
opinion of the Board of Directors the Participant is guilty of the conduct set
forth above and specifying the particulars thereof in detail.
SECTION 12. SUCCESSORS; CHANGES IN STOCK. The obligation of the Company under
the Plan shall be binding upon the successors and assigns of the Company. In the
event of a stock split, stock dividend or other recapitalization of the Company
affecting the Company's common stock, then the number of units constituting a
Participant's Award and the Performance Condition shall be appropriately and
equitably adjusted. In the event that the Company's common stock is exchanged
for or converted solely into the common stock of another Company, then the value
of the units constituting the Award shall equal the closing price of such common
stock on the principal market on which such common stock is traded and the Award
shall continue to be subject to the terms of the Plan. In the event that the
Company's common stock is exchanged for or converted into the right to receive
cash or other property [including debt securities and/or other securities (other
than solely common stock)], then the Performance Condition shall be deemed to
have been satisfied if the fair market value of such cash and/or property equals
or exceeds $50.00 per share of the Company's common stock.
SECTION 13. DISPUTE RESOLUTION. The Participant may make a claim to the
Compensation Committee with regard to a payment of benefits provided herein. If
the Compensation Committee receives a claim in writing, the Compensation
Committee must advise the Participant of its decision on the claim in writing in
a reasonable period of time after receipt of the claim, (not to exceed 120
days). The notice shall set forth the following information:
(a) The specific basis for its decision;
(b) Specific reference to pertinent Plan provisions on which the
decision is based;
(c) A description of any additional material or information
necessary for the Participant to perfect a claim and an
explanation of why such material or information is necessary;
and
(d) An explanation of the Plan's claim review procedure.
8
<PAGE> 9
If the Participant does not receive a notice of decision within 120 days after
receipt of the claim, the claim will be deemed to have been denied. The
Participant may request a review of a decision (or deemed denial) by filing with
the Compensation Committee a written request for such review. The request must
be filed within 60 days after the notice of decision is received, or within 60
days after the denial is deemed to have occurred. The Participant may review
pertinent documents and submit issues and comments in writing within the same 60
day period. If a request for review is filed, such review shall be made by the
Compensation Committee within 120 days after receipt of such request. Upon
completion of the review, the Participant shall be given written notice of the
decision resulting from such review, which notice shall include specific reasons
for the decision and specific references to the pertinent Plan provisions on
which the decision is based.
In the event that the Participant continues to disagree with the decision of the
Compensation Committee, the Participant may seek to resolve the dispute by
referring the matter to an impartial arbitrator who shall be selected from a
list of names provided by the Federal Mediation and Conciliation Service in
Washington DC, provided that the costs for such proceeding shall be borne by the
party determined by the arbitrator.
SECTION 14. IMPACT ON BENEFIT PLANS. Payments made under this Plan will not
be considered as earnings for purposes of the Deferred Compensation Plan.
SECTION 15. NO CONTRACT OF EMPLOYMENT. This Plan shall not be construed as a
contract of employment for the Participant during the term of this Plan.
SECTION 16. APPLICABLE LAW. This Plan shall be governed by and construed
under the laws of the Commonwealth of Pennsylvania without regard to its
conflict of law provisions.
SECTION 17. SEVERABILITY. In the event that any one or more of the provisions
of this Plan shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 18. HEADINGS. The descriptive headings of the Sections of this Plan
are inserted for convenience of reference only and shall not constitute a part
of this Plan.
SECTION 19. AMENDMENT AND TERMINATION. This Plan may be amended by the
Company, in its sole discretion at any time by a written action authorized by
its Board of Directors except that no amendment shall adversely affect a
Participant's rights to his Award after the Award Date and no amendment can be
made following a Change in Control as defined in Section 9. This Plan shall
terminate upon the earlier of the satisfaction of the Performance Condition or
December 31, 2002. The Compensation Committee shall be responsible for
administering the Plan.
9
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its
officers thereunto duly authorized as of the day and year first written above.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Audrey C. Moeller /s/ Murry S. Gerber
- -------------------------------- ----------------------------------
Audrey C. Moeller Murry S. Gerber
10
<PAGE> 11
EQUITABLE RESOURCES, INC.
BREAKTHROUGH LONG TERM INCENTIVE PLAN
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 to the Breakthrough Long Term Incentive Plan (the
"Plan") is hereby made this 30th day of November 1999, as provided below.
WHEREAS, The Plan, as approved by the Board of Directors at its meeting
on July 16, 1998, was intended, among other things, to protect against
forfeiture of a Participant's account in the event of involuntary termination of
employment without Cause following a Change of Control (as defined in the Plan);
and
WHEREAS, on November 30, 1999, the Compensation Committee of the
Company's Board of Directors authorized amendment of the Plan to include such a
provision.
NOW, THEREFORE, the Plan shall be amended, effective November 30, 1999
as follows:
1. Section 4(b)(iii) of the Plan be and hereby is amended by
deleting the section and substituting the following therefor: "the Company
terminates the employment of the Participant for reasons other than for Cause
(as defined in Section 10 below) or the Participant terminates his or her
employment with the Company for Good Reason (as defined in Section 10 below) at
any time within twenty-four months following a Change in Control of the Company
(as defined in Section 9 below)."
2. In all other respects the Plan shall remain unchanged.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to be
executed by its officers thereunto authorized as of the day and year first
written above.
EQUITABLE RESOURCES, INC.
/s/ Gregory R. Spencer
------------------------------------
Gregory R. Spencer
Senior Vice President
and Chief Administrative Officer
ATTEST:
/s/ Jean F. Marks
- -------------------------------------
Jean F. Marks
11
<PAGE> 1
Exhibit 10.09 (b)
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement ("Amendment No. 1"), dated
as of December 1, 1999, amends that certain Employment Agreement (the
"Employment Agreement") dated May 4, 1998, by and between Equitable Resources,
Inc., a Pennsylvania corporation (the "Company"), and Murry S. Gerber, an
individual (the "Executive");
WITNESSETH:
WHEREAS, in connection with the Executive's employment pursuant to the
Employment Agreement, the Company and Executive entered into a Change of Control
Agreement dated May 4, 1998 ("Change of Control Agreement") and a
Post-Termination Confidentiality and Non-Competition Agreement dated May 4, 1998
("Non-Competition Agreement"), copies of which are attached to the Employment
Agreement as Appendix A and Appendix B, respectively; and
WHEREAS, the Company and the Executive desire to enter into a new
Change of Control Agreement, substantially in the form attached hereto as
Exhibit A (the "New Change of Control Agreement") and an amended Non-Competition
Agreement, substantially in the form attached hereto as Exhibit B (the "Amended
Non-Competition Agreement"); and
WHEREAS, in order to coordinate the terms of the Employment Agreement
with the execution of the New Change of Control Agreement and the Amended
Non-Competition Agreement, the Company and the Executive desire to enter into
this Amendment No. 1;
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound, the Company and the Executive agree as follows:
1. Section 3(e) of the Employment Agreement is amended by deleting
the Change of Control Agreement referred to therein and attached thereto as
Appendix A, and substituting the New Change of Control Agreement attached hereto
as Exhibit A. All references in the Employment Agreement to the "Change of
Control Agreement" shall, from the date of this Amendment No. 1 and thereafter,
refer to the New Change of Control Agreement attached hereto as Exhibit A.
2. Section 3(f) of the Employment Agreement is amended by deleting
the Post-Termination Confidentiality and Non-Competition Agreement referred to
therein and attached thereto as Appendix B, and substituting the Amended and
Restated Post-Termination Confidentiality and Non-Competition Agreement attached
hereto as Exhibit B. All references in this Employment Agreement to the
"Post-Termination Confidentiality and Non-Competition Agreement" shall, from the
date of this Amendment No. 1 and thereafter, refer to the Amended and Restated
Post-Termination Confidentiality and Non-Competition Agreement attached hereto
as Exhibit B.
<PAGE> 2
3. Section 8(e) of the Employment Agreement is amended by deleting
the first sentence thereof and substituting the following therefor: If the
Executive receives payment of benefits under the Change of Control Agreement (as
set forth in Appendix A hereto) following his termination of employment, then
its terms shall control and he shall not receive the base salary compensation
benefits provided under paragraph (a) of this Section 8 nor shall he receive
benefits under the Post-Termination Confidentiality and Non-Competition
Agreement which shall thereupon terminate and be of no further force or effect.
4. All other terms of the Employment Agreement shall be unaffected
by this Amendment No. 1 and shall remain in full force and effect.
5. This Amendment No. 1 shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 as of the date first above set forth.
EQUITABLE RESOURCES, INC.:
By: /s/ Gregory R. Spencer
-------------------------------------------------------
Name: Gregory R. Spencer
-----------------------------------------------------
Title: Sr. Vice President and Chief Administrative Officer
----------------------------------------------------
/s/ Murry S. Gerber
----------------------------------------------------------
Murry S. Gerber
-2-
<PAGE> 1
Exhibit 10.10
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the 30th day of November,
1999 (the "Effective Date") by and between EQUITABLE RESOURCES, INC., a
Pennsylvania corporation with its principal place of business at Pittsburgh,
Pennsylvania (the "Company"), and, Murry S. Gerber, an individual (the
"Employee");
WHEREAS, the Company and the Employee, pursuant to an Employment
Agreement dated May 4, 1998, are parties to a Change of Control Agreement dated
May 4, 1998, which provides for the payment of certain benefits to the Employee
if the Employee's employment terminates in certain circumstances following a
change of control of the Company (the "Existing Agreement"); and
WHEREAS, the Board of Directors of the Company (the "Board"), continues
to believe that it is in the best interest of the Company and its shareholders
to assure that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company; that it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control; and that it is appropriate
to provide the Employee with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Employee will be satisfied and which are competitive with those of other
corporations in the industry in which the Company's principal business activity
is conducted; and
WHEREAS, in order to more fully accomplish the foregoing objectives,
the Company and the Employee desire to terminate the Existing Agreement and to
enter into this Agreement, which, among other things, clarifies and enhances in
certain respects the benefits payable to the Employee if the Employee's
employment terminates in certain circumstances following a Change in Control of
the Company and have agreed to amend the Employment Agreement accordingly;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The term of this Agreement shall commence on the Effective Date
hereof and, subject to Sections 3(f), 5 and 8, shall terminate on the
earlier of (i) the date of the termination of Employee's employment by
the Company for any reason prior to a Change of Control; or (ii) unless
further extended as hereinafter set forth, the date which is thirty-six
(36) months after the Effective Date; provided, that, commencing on the
last day of the first full calendar month after the Effective Date and
on the last day of each succeeding calendar month, the term of this
Agreement shall be automatically extended without further action by
either party (but not beyond the date of the termination of Employee's
employment prior to a Change of Control) for one (1) additional month
unless one party provides written notice to the other party that such
party does not wish to extend the term of this Agreement. In the event
that such notice shall have been delivered, the term of this Agreement
shall no longer be subject to automatic extension
<PAGE> 2
and the term hereof shall expire on the date which is thirty-six (36)
calendar months after the last day of the month in which such written
notice is received.
2. Change of Control. Change of Control shall mean any of the following
events (each of such events being herein referred to as a "Change of
Control"):
(a) The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a
group of purchasers, other than to a corporation with respect
to which, following such sale or disposition, more than eighty
percent (80%) of, respectively, the then outstanding shares of
Company common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of the Board of Directors is then owned
beneficially, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial
owners, respectively of the outstanding Company common stock
and the combined voting power of the then outstanding voting
securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the
outstanding Company common stock and voting power immediately
prior to such sale or disposition;
(b) The acquisition in one or more transactions by any person or
group, directly or indirectly, of beneficial ownership of
twenty percent (20%) or more of the outstanding shares of
Company common stock or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of the Board of Directors; provided,
however, that 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 or more of
the Company's voting securities, shall not constitute a Change
of Control;
(c) The Company's termination of its business and liquidation of
its assets;
(d) There is consummated a merger, consolidation, reorganization,
share exchange, or similar transaction involving the Company
(including a triangular merger), in any case, unless
immediately following such transaction: (i) all or
substantially all of the persons who were the beneficial
owners of the outstanding common stock and outstanding voting
securities of the Company immediately prior to the transaction
beneficially own, directly or indirectly, more than 60% of the
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors of the corporation
resulting from such transaction (including a corporation or
other person which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
through one or more subsidiaries (a "Parent Company")) in
-2-
<PAGE> 3
substantially the same proportion as their ownership of the
common stock and other voting securities of the Company
immediately prior to the consummation of the transaction, (ii)
no person (other than the Company, any employee benefit plan
sponsored or maintained by the Company or, if reference was
made to equity ownership of any Parent Company for purposes of
determining whether clause (i) above is satisfied in
connection with the transaction, such Parent Company)
beneficially owns, directly or indirectly, 20% or more of the
outstanding shares of common stock or the combined voting
power of the voting securities entitled to vote generally in
the election of directors of the corporation resulting from
such transaction and (iii) individuals who were members of the
Company's Board of Directors immediately prior to the
consummation of the transaction constitute at least a majority
of the members of the board of directors resulting from such
transaction (or, if reference was made to equity ownership of
any Parent Company for purposes of determining whether clause,
(i) above is satisfied in connection with the transaction,
such Parent Company); or
(e) The following individuals cease for any reasons to constitute
a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the entire
Board of Directors and any new director (other than a director
whose initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved.
3. Salary and Benefits Continuation.
(a) "Salary and Benefits Continuation" shall be defined to mean
the following: (i) payment of an amount of cash equal to three
(3) times the Employee's annual base salary in effect
immediately prior to the Change of Control or the termination
of Employee's employment, whichever is higher; (ii) payment of
an amount of cash equal to three (3) times the highest annual
incentive (bonus) payment earned by the Employee for any year
in the three years prior to the termination of Employee's
employment; (iii) provision to Employee and his/her eligible
dependents of medical, long-term disability, dental and life
insurance coverage (to the extent such coverage was in effect
immediately prior to the Change of Control) for thirty-six
(36) months; (iv) contribution by the Company to Employee's
account under the Company's defined contribution retirement
plan (known as the Equitable Resources, Inc. Employee Savings
Plan) of an amount of cash equal to the amount that the
Company would have contributed to such plan had the Employee
continued to be employed by the Company for an additional
thirty-six (36) months at a base salary equal to the
Employee's base salary immediately prior to the Change of
Control or the termination of Employee's employment, whichever
is higher, such contribution being deemed to be made
immediately prior to the termination of Employee's employment;
provided, that to
-3-
<PAGE> 4
the extent that the amount of such contribution exceeds the
amount then allowed to be contributed to the plan under the
applicable rules relating to tax qualified retirement plans,
then the excess shall be paid to the Employee in cash; (vii)
reimbursement to Employee of reasonable costs incurred by
Employee for outplacement services in the twenty-four (24)
month period following termination of Employee's employment.
(b) All amounts payable by the Company to the Employee in cash
pursuant to Section 3(a) shall be made in a lump sum unless
the Employee otherwise elects and notifies the Company in
writing prior to the termination of Employee's employment of
Employee's desire to have all payments made in accordance with
the Company's regular salary and benefit payment practices,
provided that (i) the lump sum payment or first payment shall
be made within thirty (30) days after the Employee's
termination hereunder, and (ii) the Employee may elect to
defer such payments pursuant to the Company's then-existing
deferred compensation plan(s). All other amounts payable by
the Company to the Employee pursuant to Section 3 shall be
paid or provided in accordance with the Company's standard
payroll and reimbursement procedures, as in effect immediately
prior to the Change of Control.
(c) In the event that medical, long-term disability, dental and
life insurance benefits cannot be provided under appropriate
Company group insurance policies, an amount equal to the
premium necessary for the Employee to purchase directly the
same level of coverage in effect immediately prior to the
Change of Control shall be added to the Company's payments to
Employee pursuant to Section 3(a) (payable in the manner
elected by the Employee pursuant to Section 3(b)).
(d) If there is a Change of Control as defined above, the Company
will provide Salary and Benefits Continuation if at any time
during the first twenty-four (24) months following the Change
of Control, either (i) the Company terminates the Employee's
employment other than for Cause as defined in Section 4 below
or (ii) the Employee terminates his/her employment for "Good
Reason" as defined below.
(e) For purposes of this Agreement, "Good Reason" is defined as:
(i) Removal of the Employee from the position he/she held
immediately prior to the Change of Control (by reason
other than death, disability or Cause);
(ii) The assignment to the Employee of any duties
inconsistent with those performed by the Employee
immediately prior to the Change of Control or a
substantial alteration in the nature or status of the
Employee's responsibilities which renders the
Employee's position to be of less dignity,
responsibility or scope;
(iii) A reduction by the Company in the Employee's annual
base salary as in effect on the date hereof or as the
same may be increased from time to
-4-
<PAGE> 5
time, except for proportional across-the-board salary
reductions similarly affecting all executives of the
Company and all executives of any person in control
of the Company, provided, however, that in no event
shall the Employee's annual base salary be reduced by
an amount equal to ten percent or more of the
Employee's annual base salary as of the end of the
calendar year immediately preceding the year in which
the Change of Control occurs, without the Employee's
consent;
(iv) The failure to grant the Employee an annual salary
increase reasonably necessary to maintain such salary
as reasonably comparable to salaries of senior
executives holding positions equivalent to the
Employee's in the industry in which the Company's
then principal business activity is conducted;
(v) The Company requiring the Employee to be based
anywhere other than the Company's principal executive
offices in the city in which the Employee is
principally located immediately prior to the Change
of Control, except for required travel on the
Company's business to an extent substantially
consistent with the Employee's business travel
obligations prior to the Change of Control;
(vi) Any material reduction by the Company of the benefits
enjoyed by the Employee under any of the Company's
pension, retirement, profit sharing, savings, life
insurance, medical, health and accident, disability
or other employee benefit plans, programs or
arrangements, the taking of any action by the Company
which would directly or indirectly materially reduce
any of such benefits or deprive the Employee of any
material fringe benefits, or the failure by the
Company to provide the Employee with the number of
paid vacation days to which he/she is entitled on the
basis of years of service with the Company in
accordance with the Company's normal vacation policy,
provided that this paragraph (f) shall not apply to
any proportional across-the-board reduction or action
similarly affecting all executives of the Company and
all executives of any person in control of the
Company; or
(vii) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 15
hereof, or any other material breach by the Company
of its obligations contained in this Agreement.
(f) The Employee's right to Salary and Benefits Continuation shall
accrue upon the occurrence of either of the events specified
in (i) or (ii) of Section 3(d) and shall continue as provided,
notwithstanding the termination or expiration of this
Agreement pursuant to Section 1 hereof. The Employee's
subsequent employment, death or disability within the
thirty-six (36) month period following the Employee's
termination of employment in connection with a Change of
Control shall not affect the Company's obligation to continue
making Salary and
-5-
<PAGE> 6
Benefits Continuation payments. The Employee shall not be
required to mitigate the amount of any payment provided for in
this Section 3 by seeking employment or otherwise. The rights
to Salary and Benefits Continuation shall be in addition to
whatever other benefits the Employee may be entitled to under
any other agreement or compensation plan, program or
arrangement of the Company; provided, that the Employee shall
not be entitled to any separate or additional severance
payments pursuant to the Company's severance plan as then in
effect and generally applicable to similarly situated
employees. The Company shall be authorized to withhold from
any payment to the Employee, his/her estate or his/her
beneficiaries hereunder all such amounts, if any, that the
Company may reasonably determine it is required to withhold
pursuant to any applicable law or regulation.
4. Termination of Employee for Cause.
(a) Upon or following a Change of Control, the Company may at any
time terminate the Employee's employment for Cause.
Termination of employment by the Company for "Cause" shall
mean termination upon: (i) the willful and continued failure
by the Employee to substantially perform his/her duties with
the Company (other than (A) any such failure resulting from
Employee's disability or (B) any such actual or anticipated
failure resulting from Employee's termination of his/her
employment for Good Reason), after a written demand for
substantial performance is delivered to the Employee by the
Board of Directors which specifically identifies the manner in
which the Board of Directors believes that the Employee has
not substantially performed his/her duties, and which failure
has not been cured within thirty days (30) after such written
demand; or (ii) the willful and continued engaging by the
Employee in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise, or (iii)
the breach by the Employee of the confidentiality provision
set forth in Section 8 hereof.
(b) For purposes of this Section 4, no act, or failure to act, on
the Employee's part shall be considered "willful" unless done,
or omitted to be done, by the Employee in bad faith and
without reasonable belief that such action or omission was in
the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to him/her a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board of Directors at a meeting of
the Board of Directors called and held for that purpose (after
reasonable notice to the Employee and an opportunity for the
Employee, together with his/her counsel, to be heard before
the Board of Directors) finding that in the good faith opinion
of the Board of Directors the Employee is guilty of the
conduct set forth above in clauses (a)(i), (ii) or (iii) of
this Section 4 and specifying the particulars thereof in
detail.
5. Prior Termination. Anything in this Agreement to the contrary
notwithstanding, if the Employee's employment with the Company is
terminated prior to the date on which a Change of Control occurs either
(i) by the Company other than for Cause or (ii) by the
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<PAGE> 7
Employee for Good Reason, and it is reasonably demonstrated by Employee
that such termination of employment (a) was at the request of a third
party who has taken steps reasonably calculated to effect the Change of
Control, or (b) otherwise arose in connection with or anticipation of
the Change of Control, then for all purposes of this Agreement the
termination shall be deemed to have occurred upon a Change of Control
and the Employee will be entitled to Salary and Benefits Continuation
as provided for in Section 3 hereof.
6. Employment at Will. Subject to the provisions of any other agreement
between the Employee and the Company, the Employee shall remain an
employee at will and nothing herein shall confer upon the Employee any
right to continued employment and shall not affect the right of the
Company to terminate the Employee for any reason not prohibited by law;
provided, however, that any such removal shall be without prejudice to
any rights the Employee may have to Salary and Benefits Continuation
hereunder.
7. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania
without regard to its conflict of law provisions.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
8. Covenant as to Confidential Information.
(a) Confidentiality of Information and Nondisclosure. The Employee
acknowledges and agrees that his/her employment by the Company
under this Agreement necessarily involves his/her knowledge of
and access to confidential and proprietary information
pertaining to the business of the Company and its
subsidiaries. Accordingly, the Employee agrees that at all
times during the term of this Agreement and for a period of
two (2) years after the termination of the Employee's
employment hereunder, he/she will not, directly or indirectly,
without the express written authority of the Company, unless
directed by applicable legal authority having jurisdiction
over the Employee, disclose to or use, or knowingly permit to
be so disclosed or used, for the benefit of himself/herself,
any person, corporation or other entity other than the
Company, (i) any information concerning any financial matters,
customer relationships, competitive status, supplier matters,
internal organizational matters, current or future plans, or
other business affairs of or relating to the Company and its
subsidiaries, (ii) any management, operational, trade,
technical or other secrets or any other proprietary
-7-
<PAGE> 8
information or other data of the Company or its subsidiaries,
or (iii) any other information related to the Company or its
subsidiaries or which the Employee subsidiaries which has not
been published and is not generally known outside of the
Company. The Employee acknowledges that all of the foregoing,
constitutes confidential and proprietary information, which is
the exclusive property of the Company.
(b) Company Remedies. The Employee acknowledges and agrees that
any breach of this Agreement by him/her will result in
immediate irreparable harm to the Company, and that the
Company cannot be reasonably or adequately compensated by
damages in an action at law. In the event of an actual or
threatened breach by the Employee of the provisions of this
Section 8, the Company shall be entitled, to the extent
permissible by law, immediately to cease to pay or provide the
Employee or his/her dependents any compensation or benefit
being, or to be, paid or provided to him pursuant to Section 3
of this Agreement, and also to obtain immediate injunctive
relief restraining the Employee from conduct in breach or
threatened breach of the covenants contained in this Section
8. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of
damages from the Employee.
9. Reimbursement of Fees. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest by the Company, Internal
Revenue Service or others regarding the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 3 of this
Agreement) or in connection with any dispute arising from this
Agreement, regardless of whether Employee prevails in any such contest
or dispute.
10. Tax Gross-Up.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax
imposed by section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to the
excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and
Excise Tax imposed on the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
-8-
<PAGE> 9
(b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 10, including whether
and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by a nationally recognized
accounting firm designated by the Company (the "Accounting
Firm") which shall provide detailed supporting calculations
both to the Company and the Employee within fifteen (15)
business days after there has been a Payment, or such earlier
time as requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control,
the Company shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 10,
shall be paid by the Company to the Employee within five days
of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Employee. As a result of the uncertainty in
the application of section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies
pursuant to Section 10(c) and the Employee thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Employee is
informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such
claim is requested to be paid. The Employee shall not pay such
claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such
shorter period ending on the date any payment of taxes with
respect to such claim is due). If the Company notifies the
Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company;
-9-
<PAGE> 10
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 10(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Employee, on an interest-free basis, and shall
indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 10(c), the Employee becomes
entitled to receive any refund with respect to such claim, the
Employee shall (subject to the Company's complying with the
requirements of Section 10) promptly pay to the Company the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after
the receipt by the Employee of an amount advanced by the
Company pursuant to Section 10(c), a determination is made
that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Employee in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
-10-
<PAGE> 11
(e) The payments provided for in this Section 10 hereof shall be
made not later than the tenth (10th) day following the
termination of the Employee's employment; provided, however,
that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the
Employee on such day an estimate, as determined in good faith
by the Employee of the minimum amount of such payments to
which the Employee is clearly entitled and shall pay the
remainder of such payments (together with interest at 120% of
the rate provided in section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the termination of
the Employee's employment. In the event that the amount of the
estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Employee, payable on the fifth (5th) business
day after demand by the Company (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the
Code). In the event the Company should fail to pay when due
the amounts described in this Section 10, the Employee shall
also be entitled to receive from the Company an amount
representing interest on any unpaid or untimely paid amounts
from the due date, as determined under this Section 10, to the
date of payment at a rate equal to 120% of the rate provided
in section 1274(b)(2)(B) of the Code.
11. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, in the event of any controversy, dispute or
claim arising out of, or relating to this Agreement, or the breach
thereof, or arising out of any other matter relating to the Employee's
employment with the Company or the termination of such employment, the
parties may seek recourse only for temporary or preliminary injunctive
relief to the courts having jurisdiction thereof and if any relief
other than injunctive relief is sought, the Company and the Employee
agree that such underlying controversy, dispute or claim shall be
settled by arbitration conducted in Pittsburgh, Pennsylvania in
accordance with this Section 11 of this Agreement and the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). The
matter shall be heard and decided, and awards rendered by a panel of
three (3) arbitrators (the "Arbitration Panel"). The Company and the
Employee shall each select one arbitrator from the AAA National Panel
of Commercial Arbitrators (the "Commercial Panel") and AAA shall select
a third arbitrator from the Commercial Panel. The award rendered by the
Arbitration Panel shall be final and binding as between the parties
hereto and their heirs, executors, administrators, successors and
assigns, and judgment on the award may be entered by any court having
jurisdiction thereof.
12. Treatment of Certain Incentive Awards. All "Awards" held by the
Employee under the Company's 1994 Long-Term Incentive Plan (the "1994
Plan"), the Company's 1999 Long-Term Incentive Plan (the "1999 Plan")
or the Company's Breakthrough Long-Term Incentive Plan (the
"Breakthrough Plan") shall, upon a Change of Control, be treated in
accordance with the terms of those Plans as in effect on the date of
this Agreement, without regard to the subsequent amendment of those
Plans. For purposes of this Section 12, the terms "Award" and "Change
of Control" shall have the meanings ascribed to them in the 1999 Plan,
the 1994 Plan and the Breakthrough Plan, as the case may be.
-11-
<PAGE> 12
13. Release. The Employee hereby acknowledges and agrees that prior to the
Employee's or his/her dependents' right to receive from the Company any
compensation or benefit to be paid or provided to him/her or his/her
dependents pursuant to Section 3 of this Agreement, the Employee may be
required by the Company, in its sole discretion, to execute a release
in a form reasonably acceptable to the Company, which releases any and
all claims (other than amounts to be paid to Employee as expressly
provided for under this Agreement) the Employee has or may have against
the Company or its subsidiaries, agents, officers, directors,
successors or assigns arising under any public policy, tort or common
law or any provision of state, federal or local law, including, but not
limited to, the Pennsylvania Human Relations Act, the Americans with
Disabilities Act, Title VII of the Civil Rights Act of 1964, the Civil
Rights Protection Act, Family and Medical Leave Act, the Fair Labor
Standards Act, or the Age Discrimination in Employment Act of 1967.
14. Waiver. The waiver by a party hereto of any breach by the other party
hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
15. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. The Company shall
be obligated to require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the Company's business or assets, by a written agreement in form
and substance satisfactory to the Employee, to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no succession
had taken place. This Agreement shall inure to the extent provided
hereunder to the benefit of and be enforceable by the Employee or
his/her legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. The Employee may not
delegate any of his/her duties, responsibilities, obligations or
positions hereunder to any person and any such purported delegation by
him shall be void and of no force and effect with respect to matters
relating to his/her employment and termination of employment. Without
limiting the foregoing, the Employee's rights to receive payments and
benefits hereunder shall not be assignable or transferable, other than
a transfer by Employee's will or by the laws of descent and
distribution.
16. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally
delivered or when sent by first class certified or registered mail,
postage prepaid, return receipt requested -- in the case of the
Employee, to his/her residence address as set forth below, and in the
case of the Company, to the address of its principal place of business
as set forth below, in care of the Chairman of the Board -- or to such
other person or at such other address with respect to each party as
such party shall notify the other in writing.
17. Pronouns. Pronouns stated in either the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
-12-
<PAGE> 13
18. Entire Agreement. This Agreement contains the entire agreement of the
parties concerning the matters set forth herein and all promises,
representations, understandings, arrangements and prior agreements
regarding the subject matter hereof (including the Existing Agreement,
which the parties agree shall terminate as of the Effective Date
hereof) are merged herein and superseded hereby; provided that the
Employment Agreement, as amended, the Post-Termination Confidentiality
& Non-Competition Agreement, dated May 4, 1998, and the Supplemental
Executive Retirement Agreement shall not be merged or superseded but
shall remain in full force and effect. The provisions of this Agreement
may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom
enforcement of any amendment, modification, repeal, waiver, extension
or discharge is sought. No person acting other than pursuant to a
resolution of the Board of Directors shall have authority on behalf of
the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference
thereto or to exercise any of the Company's rights to terminate or to
fail to extend this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his/her hand, all as of the day and year first above written.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Jean F. Marks By: /s/ Gregory R. Spencer
- ---------------------------- ----------------------------
Jean F. Marks Gregory R. Spencer
Senior Vice President and Chief
Administrative Officer
Address:
One Oxford Centre
Suite 3300
Pittsburgh, PA 15219
WITNESS:
/s/ David J. Smith /s/ Murry S. Gerber
- ---------------------------- ----------------------------
David J. Smith Murry S. Gerber
Address:
1301 Inverness Avenue
----------------------------
Pittsburgh, PA 15217
----------------------------
-13-
<PAGE> 1
Exhibit 10.12
AMENDED AND RESTATED POST-TERMINATION CONFIDENTIALITY
AND NON-COMPETITION AGREEMENT
This Agreement made this 1st day of December, 1999 (the "Effective
Date"), by and between EQUITABLE RESOURCES, INC., having a business address at
One Oxford Centre, Pittsburgh, Pennsylvania 15219 (Equitable Resources, Inc. and
its subsidiary companies hereinafter collectively known as the "Company") and
MURRY S. GERBER, an individual and resident of Pittsburgh, Pennsylvania (the
"Executive").
WHEREAS, the Company and Executive, pursuant to an Employment Agreement
dated May 4, 1998 (the "Employment Agreement"), are parties to a
Post-Termination Confidentiality and Non-Competition Agreement dated May 4, 1998
(the "Existing Agreement");
WHEREAS, the parties continue to be willing to exchange certain
severance benefits for the Executive's agreement to comply with specific
post-employment confidentiality and non-competition requirements contained
herein; and
WHEREAS, in connection with amendment of the Employment Agreement and
the substitution of a new Change of Control Agreement dated December 1, 1999
(the "Change of Control Agreement"), the Company and the Executive desire also
to amend and restate the Existing Agreement.
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:
SECTION 1. CONFIDENTIALITY:
Recognizing (1) that trade secrets or confidential information in any way
related to the business activities of the Company, such as, but not limited to:
marketing plans, business plans, technical information, market information,
customer lists, pricing data and strategies, financial information, business
methods or practices, programs, hardware and software (referred to hereinafter
collectively as "Confidential Information"), constitute valuable assets of the
Company, and (2) that such Confidential Information is the property of the
Company, Executive covenants, in consideration of Executive's access to and use
of Confidential Information, to hold such Confidential Information in trust for
the Company, and successors and assigns, and not to disclose or use the same
other than in the business of the Company, specifically agreeing:
(a) not to, directly or indirectly, disclose or make available to
anyone or use outside of the Company's organization during or after the term of
employment, any Confidential Information unless such disclosure or availability
or use is approved by the Company;
<PAGE> 2
(b) to use reasonable efforts to safeguard all Confidential
Information within the possession or control of Executive at all times so it is
not exposed to, or taken by, any unauthorized person (including unauthorized
employees and agents of the Company);
(c) upon termination of employment, to deliver to the Company all
papers, photographs, photoreproductions, computer tapes, tape recordings and
other materials, including but not limited to Confidential Information,
including personal notes and reproductions, relating to the business of the
Company, its subsidiaries and affiliates in the Executive's possession or
control.
This Section 1 shall not apply to any Confidential Information that the
Company has voluntarily disclosed to the public or that has otherwise legally
entered the public domain or which was known by the Executive prior to his
employment with the Company or which is required by law to be disclosed.
SECTION 2. NON-COMPETITION:
For a period of two years from the termination date of his employment, the
Executive will not (i) engage, directly or indirectly, whether as principal or
as agent, officer, director, employee, consultant, owner, partner, shareholder,
or otherwise, alone or in association with any other person, corporation or
other entity, in any business which produces, markets, or sells any product or
service in competition with products or services which the Company, produces,
markets, or sells in any geographic market where the Company is engaged in
business; (ii) solicit, directly or indirectly, either for himself or any other
person, any business related to the business of any customer, supplier, licensee
or other person having a business relationship with the Company, or induce or
attempt to induce any such person to cease doing business with the Company;
(iii) interfere, or attempt to interfere, with any contemplated business project
which representatives of the Company have discussed with any potential
participant in such project; or (iv) induce, or attempt to induce, any employee
of the Company to leave the employ of the Company or to violate the terms of his
contract with the Company, or employ or otherwise engage as an employee,
independent contractor or otherwise any such person. Notwithstanding the
provisions of Section 2(a)(i), the Executive may purchase or otherwise acquire
up to (but not more than) 1% of any class of securities of any enterprise (but
without otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934. The
Executive agrees that this covenant is reasonable with respect to duration,
geographical area and scope. The two year period described in the first sentence
of this Section, shall be replaced with a one year period in the event the
Executive is involuntarily terminated by the Company or has a termination date
within twenty-four (24) months of a Change of Control as defined in the Change
of Control Agreement between the Executive and the Company.
2
<PAGE> 3
SECTION 3. CONSIDERATION:
If the employment of the Executive with the Company is terminated by the Company
for any reason (other than for Cause as defined below), the Executive shall
receive, from the date of termination, in addition to any payments he may be
entitled to under other agreements with the Company (in accordance with their
terms), 24 months of base salary payments at the salary level in effect at the
time of such termination. For purposes of this Agreement, "Cause" shall include:
(i) the conviction of a felony, a crime of moral turpitude or fraud or having
committed fraud, misappropriation or embezzlement in connection with the
performance of his duties hereunder, (ii) willful and repeated failures to
substantially perform his assigned duties, or (iii) a material violation of any
other provisions of this Agreement or express significant policies of the
Company. The purpose of this Agreement is to obtain the Executive's agreement to
the covenants contained herein and 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.
SECTION 4. TERM:
The term of this Agreement shall commence on the Effective Date and shall remain
in effect unless amended or terminated by mutual written agreement or as
provided in Section 8(e) of the Employment Agreement, as amended; provided,
however, that upon the occurrence of a Change of Control as such term is defined
in the Change of Control Agreement, this Agreement may be terminated upon
written notice by Executive to the Company.
SECTION 5. CERTAIN REMEDIES:
Without limiting the remedies available to the Company, the Executive
acknowledges that damages at law will be an insufficient remedy to the Company
in the event that the Executive violates the terms of this Agreement and that
the Company may apply for, and obtain, injunctive relief to restrain the breach
or threatened breach of, or otherwise to specifically enforce, such covenants.
If it should become desirable or necessary for the Company to seek compliance
with this Agreement by judicial proceedings, the period of time during which
Executive is restricted under Section 2 shall be extended by the amount of time
remaining under the original restriction on the date Executive first breached
this Agreement, commencing on the date of the trial court order or settlement
requiring such compliance. If litigation should develop between the parties
regarding this Agreement or the obligations undertaken hereby, the party
prevailing in such litigation may recover from the other such costs and
expenses, including reasonable attorneys' fees, if any, as a court of competent
jurisdiction may determine or award.
3
<PAGE> 4
SECTION 6. GOVERNING LAW:
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
SECTION 7. BINDING AGREEMENT:
The obligations of Executive under this Agreement shall continue after the
termination of his employment with the Company for any reason, with or without
cause, and shall be binding on Executive's heirs, executors and legal
representatives and shall inure to the benefit of any successors by merger or
purchase of substantially all of the assets of the Company.
SECTION 8. COMPANY VIOLATION NOT A DEFENSE:
The existence of any claim or cause of action against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
enforcement by the Company of this Agreement.
SECTION 9. AUTHORIZATION TO MODIFY RESTRICTIONS:
It is the intention of the parties that the provisions of this Agreement shall
be enforceable to the fullest extent permissible under applicable law, but that
the unenforceability (or modification to conform to such law) of any provision
or provisions hereof shall not render unforeseeable, or impair the remaining
provisions of this Agreement. If any provision or provisions of this Agreement
shall be deemed illegal, invalid or otherwise unenforceable, either in whole or
in part, this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds thereof
to render it valid and enforceable.
SECTION 10. CONSENT TO JURISDICTION AND VENUE:
Any action or proceeding arising out of or relating to this Agreement shall be
commenced by either party in any state or federal court in Allegheny County,
Pennsylvania and the parties hereby irrevocably agree that all claims in respect
of any such action or proceeding may be heard and determined in any such court.
Executive and the Company acknowledge that the forum designated herein present
the most convenient forum for both parties. In any action commenced in any of
these courts, Executive and the Company waive any objections to inconvenience of
forum, venue and personal jurisdiction of the Court.
4
<PAGE> 5
SECTION 11. NOTICES:
Notices hereunder shall be in writing and shall be deemed effective when
received by the Company or the Executive at their respective addresses above
given.
SECTION 12. WAIVER:
A waiver by the Company of a breach of any of the provisions of this Agreement
shall not operate or be construed as a waiver or excuse of any subsequent or
different breach.
SECTION 13. INTEGRATION AND MODIFICATION:
This Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof (except for the Employment Agreement and
its appendices executed as of even date herewith between the Executive and the
Company) and supersedes all prior agreements and understandings, oral or
written. This Agreement may not be changed, amended, or modified, except by a
written instrument signed by the parties and shall survive the expiration or
termination of the Employment Agreement.
Executive acknowledges that he has read and understands the provisions of this
Agreement, that he has been given an opportunity for his legal counsel to review
this Agreement and that the provisions of this Agreement are reasonable.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Johanna G. O'Loughlin By /s/ Gregory R. Spencer
- ------------------------------------ ------------------------------------
Johanna G. O'Loughlin Gregory R. Spencer
Vice President, General Counsel Senior Vice President and
and Corporate Secretary Chief Administrative Officer
WITNESS:
/s/ David J. Smith /s/ Murry S. Gerber
- ------------------------------------ -------------------------------------
David J. Smith Murry S. Gerber
5
<PAGE> 1
Exhibit 10.13 (b)
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement ("Amendment No. 1"), dated
as of December 1, 1999, amends that certain Employment Agreement (the
"Employment Agreement") dated July 1, 1998, by and between Equitable Resources,
Inc., a Pennsylvania corporation (the "Company"), and David L. Porges, an
individual (the "Executive");
WITNESSETH:
WHEREAS, in connection with the Executive's employment pursuant to the
Employment Agreement, the Company and Executive entered into a Change of Control
Agreement dated July 1, 1998 ("Change of Control Agreement") and a
Post-Termination Confidentiality and Non-Competition Agreement dated July 1,
1998 ("Non-Competition Agreement"), copies of which are attached to the
Employment Agreement as Appendix A and Appendix B, respectively; and
WHEREAS, the Company and the Executive desire to enter into a new
Change of Control Agreement, substantially in the form attached hereto as
Exhibit A (the "New Change of Control Agreement") and an amended Non-Competition
Agreement, substantially in the form attached hereto as Exhibit B (the "Amended
Non-Competition Agreement"); and
WHEREAS, in order to coordinate the terms of the Employment Agreement
with the execution of the New Change of Control Agreement and the Amended
Non-Competition Agreement, the Company and the Executive desire to enter into
this Amendment No. 1;
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound, the Company and the Executive agree as follows:
1. Section 3(e) of the Employment Agreement is amended by deleting
the Change of Control Agreement referred to therein and attached thereto as
Appendix A, and substituting the New Change of Control Agreement attached hereto
as Exhibit A. All references in the Employment Agreement to the "Change of
Control Agreement" shall, from the date of this Amendment No. 1 and thereafter,
refer to the New Change of Control Agreement attached hereto as Exhibit A.
2. Section 3(f) of the Employment Agreement is amended by deleting
the Post-Termination Confidentiality and Non-Competition Agreement referred to
therein and attached thereto as Appendix B, and substituting the Amended and
Restated Post-Termination Confidentiality and Non-Competition Agreement attached
hereto as Exhibit B. All references in this Employment Agreement to the
"Post-Termination Confidentiality and Non-Competition Agreement" shall, from the
date of this Amendment No. 1 and thereafter, refer to the Amended and Restated
Post-Termination Confidentiality and Non-Competition Agreement attached hereto
as Exhibit B.
<PAGE> 2
3. Section 8(e) of the Employment Agreement is amended by deleting
the first sentence thereof and substituting the following therefor: If the
Executive receives payment of benefits under the Change of Control Agreement (as
set forth in Appendix A hereto) following his termination of employment, then
its terms shall control and he shall not receive the base salary compensation
benefits provided under paragraph (a) of this Section 8 nor shall he receive
benefits under the Post-Termination Confidentiality and Non-Competition
Agreement which shall thereupon terminate and be of no further force or effect.
4. All other terms of the Employment Agreement shall be unaffected
by this Amendment No. 1 and shall remain in full force and effect.
5. This Amendment No. 1 shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
1 as of the date first above set forth.
EQUITABLE RESOURCES, INC.:
By: /s/ Gregory R. Spencer
----------------------------------------------------------
Name: Gregory R. Spencer
--------------------------------------------------------
Title: Senior Vice President and Chief Administrative Officer
-------------------------------------------------------
/s/ David L. Porges
-------------------------------------------------------------
David L. Porges
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<PAGE> 1
Exhibit 10.14
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the 30th day of November,
1999 (the "Effective Date") by and between EQUITABLE RESOURCES, INC., a
Pennsylvania corporation with its principal place of business at Pittsburgh,
Pennsylvania (the "Company"), and David L. Porges, an individual (the
"Employee");
WHEREAS, the Company and the Employee, pursuant to an Employment
Agreement dated July 1, 1998, are parties to a Change of Control Agreement dated
July 1, 1998, which provides for the payment of certain benefits to the Employee
if the Employee's employment terminates in certain circumstances following a
change of control of the Company (the "Existing Agreement"); and
WHEREAS, the Board of Directors of the Company (the "Board"), continues
to believe that it is in the best interest of the Company and its shareholders
to assure that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company; that it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control; and that it is appropriate
to provide the Employee with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Employee will be satisfied and which are competitive with those of other
corporations in the industry in which the Company's principal business activity
is conducted; and
WHEREAS, in order to more fully accomplish the foregoing objectives,
the Company and the Employee desire to terminate the Existing Agreement and to
enter into this Agreement, which, among other things, clarifies and enhances in
certain respects the benefits payable to the Employee if the Employee's
employment terminates in certain circumstances following a Change in Control of
the Company and have agreed to amend the Employment Agreement accordingly;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The term of this Agreement shall commence on the Effective Date
hereof and, subject to Sections 3(f), 5 and 8, shall terminate on the
earlier of (i) the date of the termination of Employee's employment by
the Company for any reason prior to a Change of Control; or (ii) unless
further extended as hereinafter set forth, the date which is thirty-six
(36) months after the Effective Date; provided, that, commencing on the
last day of the first full calendar month after the Effective Date and
on the last day of each succeeding calendar month, the term of this
Agreement shall be automatically extended without further action by
either party (but not beyond the date of the termination of Employee's
employment prior to a Change of Control) for one (1) additional month
unless one party provides written notice to the other party that such
party does not wish to extend the term of this Agreement. In the event
that such notice shall have been delivered, the term of this Agreement
shall no longer be subject to automatic extension
<PAGE> 2
and the term hereof shall expire on the date which is thirty-six (36)
calendar months after the last day of the month in which such written
notice is received.
2. Change of Control. Change of Control shall mean any of the following
events (each of such events being herein referred to as a "Change of
Control"):
(a) The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a
group of purchasers, other than to a corporation with respect
to which, following such sale or disposition, more than eighty
percent (80%) of, respectively, the then outstanding shares of
Company common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of the Board of Directors is then owned
beneficially, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial
owners, respectively of the outstanding Company common stock
and the combined voting power of the then outstanding voting
securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the
outstanding Company common stock and voting power immediately
prior to such sale or disposition;
(b) The acquisition in one or more transactions by any person or
group, directly or indirectly, of beneficial ownership of
twenty percent (20%) or more of the outstanding shares of
Company common stock or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of the Board of Directors; provided,
however, that 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 or more of
the Company's voting securities, shall not constitute a Change
of Control;
(c) The Company's termination of its business and liquidation of
its assets;
(d) There is consummated a merger, consolidation, reorganization,
share exchange, or similar transaction involving the Company
(including a triangular merger), in any case, unless
immediately following such transaction: (i) all or
substantially all of the persons who were the beneficial
owners of the outstanding common stock and outstanding voting
securities of the Company immediately prior to the transaction
beneficially own, directly or indirectly, more than 60% of the
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors of the corporation
resulting from such transaction (including a corporation or
other person which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
through one or more subsidiaries (a "Parent Company")) in
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<PAGE> 3
substantially the same proportion as their ownership of the
common stock and other voting securities of the Company
immediately prior to the consummation of the transaction, (ii)
no person (other than the Company, any employee benefit plan
sponsored or maintained by the Company or, if reference was
made to equity ownership of any Parent Company for purposes of
determining whether clause (i) above is satisfied in
connection with the transaction, such Parent Company)
beneficially owns, directly or indirectly, 20% or more of the
outstanding shares of common stock or the combined voting
power of the voting securities entitled to vote generally in
the election of directors of the corporation resulting from
such transaction and (iii) individuals who were members of the
Company's Board of Directors immediately prior to the
consummation of the transaction constitute at least a majority
of the members of the board of directors resulting from such
transaction (or, if reference was made to equity ownership of
any Parent Company for purposes of determining whether clause,
(i) above is satisfied in connection with the transaction,
such Parent Company); or
(e) The following individuals cease for any reasons to constitute
a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the entire
Board of Directors and any new director (other than a director
whose initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved.
3. Salary and Benefits Continuation.
(a) Salary and Benefits Continuation" shall be defined to mean the
following: (i) payment of an amount of cash equal to three (3)
times the Employee's annual base salary in effect immediately
prior to the Change of Control or the termination of
Employee's employment, whichever is higher; (ii) payment of an
amount of cash equal to three (3) times the highest annual
incentive (bonus) payment earned by the Employee for any year
in the three years prior to the termination of Employee's
employment; (iii) provision to Employee and his/her eligible
dependents of medical, long-term disability, dental and life
insurance coverage (to the extent such coverage was in effect
immediately prior to the Change of Control) for thirty-six
(36) months; (iv) contribution by the Company to Employee's
account under the Company's defined contribution retirement
plan (known as the Equitable Resources, Inc. Employee Savings
Plan) of an amount of cash equal to the amount that the
Company would have contributed to such plan had the Employee
continued to be employed by the Company for an additional
thirty-six (36) months at a base salary equal to the
Employee's base salary immediately prior to the Change of
Control or the termination of Employee's employment, whichever
is higher, such contribution being deemed to be made
immediately prior to the termination of Employee's employment;
provided, that to
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<PAGE> 4
the extent that the amount of such contribution exceeds the
amount then allowed to be contributed to the plan under the
applicable rules relating to tax qualified retirement plans,
then the excess shall be paid to the Employee in cash; (vii)
reimbursement to Employee of reasonable costs incurred by
Employee for outplacement services in the twenty-four (24)
month period following termination of Employee's employment.
(b) All amounts payable by the Company to the Employee in cash
pursuant to Section 3(a) shall be made in a lump sum unless
the Employee otherwise elects and notifies the Company in
writing prior to the termination of Employee's employment of
Employee's desire to have all payments made in accordance with
the Company's regular salary and benefit payment practices,
provided that (i) the lump sum payment or first payment shall
be made within thirty (30) days after the Employee's
termination hereunder, and (ii) the Employee may elect to
defer such payments pursuant to the Company's then-existing
deferred compensation plan(s). All other amounts payable by
the Company to the Employee pursuant to Section 3 shall be
paid or provided in accordance with the Company's standard
payroll and reimbursement procedures, as in effect immediately
prior to the Change of Control.
(c) In the event that medical, long-term disability, dental and
life insurance benefits cannot be provided under appropriate
Company group insurance policies, an amount equal to the
premium necessary for the Employee to purchase directly the
same level of coverage in effect immediately prior to the
Change of Control shall be added to the Company's payments to
Employee pursuant to Section 3(a) (payable in the manner
elected by the Employee pursuant to Section 3(b)).
(d) If there is a Change of Control as defined above, the Company
will provide Salary and Benefits Continuation if at any time
during the first twenty-four (24) months following the Change
of Control, either (i) the Company terminates the Employee's
employment other than for Cause as defined in Section 4 below
or (ii) the Employee terminates his/her employment for "Good
Reason" as defined below.
(e) For purposes of this Agreement, "Good Reason" is defined as:
(i) Removal of the Employee from the position he/she held
immediately prior to the Change of Control (by reason
other than death, disability or Cause);
(ii) The assignment to the Employee of any duties
inconsistent with those performed by the Employee
immediately prior to the Change of Control or a
substantial alteration in the nature or status of the
Employee's responsibilities which renders the
Employee's position to be of less dignity,
responsibility or scope;
(iii) A reduction by the Company in the Employee's annual
base salary as in effect on the date hereof or as the
same may be increased from time to
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<PAGE> 5
time, except for proportional across-the-board salary
reductions similarly affecting all executives of the
Company and all executives of any person in control
of the Company, provided, however, that in no event
shall the Employee's annual base salary be reduced by
an amount equal to ten percent or more of the
Employee's annual base salary as of the end of the
calendar year immediately preceding the year in which
the Change of Control occurs, without the Employee's
consent;
(iv) The failure to grant the Employee an annual salary
increase reasonably necessary to maintain such salary
as reasonably comparable to salaries of senior
executives holding positions equivalent to the
Employee's in the industry in which the Company's
then principal business activity is conducted;
(v) The Company requiring the Employee to be based
anywhere other than the Company's principal executive
offices in the city in which the Employee is
principally located immediately prior to the Change
of Control, except for required travel on the
Company's business to an extent substantially
consistent with the Employee's business travel
obligations prior to the Change of Control;
(vi) Any material reduction by the Company of the benefits
enjoyed by the Employee under any of the Company's
pension, retirement, profit sharing, savings, life
insurance, medical, health and accident, disability
or other employee benefit plans, programs or
arrangements, the taking of any action by the Company
which would directly or indirectly materially reduce
any of such benefits or deprive the Employee of any
material fringe benefits, or the failure by the
Company to provide the Employee with the number of
paid vacation days to which he/she is entitled on the
basis of years of service with the Company in
accordance with the Company's normal vacation policy,
provided that this paragraph (f) shall not apply to
any proportional across-the-board reduction or action
similarly affecting all executives of the Company and
all executives of any person in control of the
Company; or
(vii) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 15
hereof, or any other material breach by the Company
of its obligations contained in this Agreement.
(f) The Employee's right to Salary and Benefits Continuation shall
accrue upon the occurrence of either of the events specified
in (i) or (ii) of Section 3(d) and shall continue as provided,
notwithstanding the termination or expiration of this
Agreement pursuant to Section 1 hereof. The Employee's
subsequent employment, death or disability within the
thirty-six (36) month period following the Employee's
termination of employment in connection with a Change of
Control shall not affect the Company's obligation to continue
making Salary and
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<PAGE> 6
Benefits Continuation payments. The Employee shall not be
required to mitigate the amount of any payment provided for in
this Section 3 by seeking employment or otherwise. The rights
to Salary and Benefits Continuation shall be in addition to
whatever other benefits the Employee may be entitled to under
any other agreement or compensation plan, program or
arrangement of the Company; provided, that the Employee shall
not be entitled to any separate or additional severance
payments pursuant to the Company's severance plan as then in
effect and generally applicable to similarly situated
employees. The Company shall be authorized to withhold from
any payment to the Employee, his/her estate or his/her
beneficiaries hereunder all such amounts, if any, that the
Company may reasonably determine it is required to withhold
pursuant to any applicable law or regulation.
4. Termination of Employee for Cause.
(a) Upon or following a Change of Control, the Company may at any
time terminate the Employee's employment for Cause.
Termination of employment by the Company for "Cause" shall
mean termination upon: (i) the willful and continued failure
by the Employee to substantially perform his/her duties with
the Company (other than (A) any such failure resulting from
Employee's disability or (B) any such actual or anticipated
failure resulting from Employee's termination of his/her
employment for Good Reason), after a written demand for
substantial performance is delivered to the Employee by the
Board of Directors which specifically identifies the manner in
which the Board of Directors believes that the Employee has
not substantially performed his/her duties, and which failure
has not been cured within thirty days (30) after such written
demand; or (ii) the willful and continued engaging by the
Employee in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise, or (iii)
the breach by the Employee of the confidentiality provision
set forth in Section 8 hereof.
(b) For purposes of this Section 4, no act, or failure to act, on
the Employee's part shall be considered "willful" unless done,
or omitted to be done, by the Employee in bad faith and
without reasonable belief that such action or omission was in
the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to him/her a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board of Directors at a meeting of
the Board of Directors called and held for that purpose (after
reasonable notice to the Employee and an opportunity for the
Employee, together with his/her counsel, to be heard before
the Board of Directors) finding that in the good faith opinion
of the Board of Directors the Employee is guilty of the
conduct set forth above in clauses (a)(i), (ii) or (iii) of
this Section 4 and specifying the particulars thereof in
detail.
5. Prior Termination. Anything in this Agreement to the contrary
notwithstanding, if the Employee's employment with the Company is
terminated prior to the date on which a Change of Control occurs either
(i) by the Company other than for Cause or (ii) by the
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<PAGE> 7
Employee for Good Reason, and it is reasonably demonstrated by Employee
that such termination of employment (a) was at the request of a third
party who has taken steps reasonably calculated to effect the Change of
Control, or (b) otherwise arose in connection with or anticipation of
the Change of Control, then for all purposes of this Agreement the
termination shall be deemed to have occurred upon a Change of Control
and the Employee will be entitled to Salary and Benefits Continuation
as provided for in Section 3 hereof.
6. Employment at Will. Subject to the provisions of any other agreement
between the Employee and the Company, the Employee shall remain an
employee at will and nothing herein shall confer upon the Employee any
right to continued employment and shall not affect the right of the
Company to terminate the Employee for any reason not prohibited by law;
provided, however, that any such removal shall be without prejudice to
any rights the Employee may have to Salary and Benefits Continuation
hereunder.
7. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania
without regard to its conflict of law provisions.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
8. Covenant as to Confidential Information.
(a) Confidentiality of Information and Nondisclosure. The Employee
acknowledges and agrees that his/her employment by the Company
under this Agreement necessarily involves his/her knowledge of
and access to confidential and proprietary information
pertaining to the business of the Company and its
subsidiaries. Accordingly, the Employee agrees that at all
times during the term of this Agreement and for a period of
two (2) years after the termination of the Employee's
employment hereunder, he/she will not, directly or indirectly,
without the express written authority of the Company, unless
directed by applicable legal authority having jurisdiction
over the Employee, disclose to or use, or knowingly permit to
be so disclosed or used, for the benefit of himself/herself,
any person, corporation or other entity other than the
Company, (i) any information concerning any financial matters,
customer relationships, competitive status, supplier matters,
internal organizational matters, current or future plans, or
other business affairs of or relating to the Company and its
subsidiaries, (ii) any management, operational, trade,
technical or other secrets or any other proprietary
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<PAGE> 8
information or other data of the Company or its subsidiaries,
or (iii) any other information related to the Company or its
subsidiaries or which the Employee subsidiaries which has not
been published and is not generally known outside of the
Company. The Employee acknowledges that all of the foregoing,
constitutes confidential and proprietary information, which is
the exclusive property of the Company.
(b) Company Remedies. The Employee acknowledges and agrees that
any breach of this Agreement by him/her will result in
immediate irreparable harm to the Company, and that the
Company cannot be reasonably or adequately compensated by
damages in an action at law. In the event of an actual or
threatened breach by the Employee of the provisions of this
Section 8, the Company shall be entitled, to the extent
permissible by law, immediately to cease to pay or provide the
Employee or his/her dependents any compensation or benefit
being, or to be, paid or provided to him pursuant to Section 3
of this Agreement, and also to obtain immediate injunctive
relief restraining the Employee from conduct in breach or
threatened breach of the covenants contained in this Section
8. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of
damages from the Employee.
9. Reimbursement of Fees. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest by the Company, Internal
Revenue Service or others regarding the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 3 of this
Agreement) or in connection with any dispute arising from this
Agreement, regardless of whether Employee prevails in any such contest
or dispute.
10. Tax Gross-Up.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax
imposed by section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to the
excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and
Excise Tax imposed on the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
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<PAGE> 9
(b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 10, including whether
and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by a nationally recognized
accounting firm designated by the Company (the "Accounting
Firm") which shall provide detailed supporting calculations
both to the Company and the Employee within fifteen (15)
business days after there has been a Payment, or such earlier
time as requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control,
the Company shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 10,
shall be paid by the Company to the Employee within five days
of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Employee. As a result of the uncertainty in
the application of section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies
pursuant to Section 10(c) and the Employee thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Employee is
informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such
claim is requested to be paid. The Employee shall not pay such
claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such
shorter period ending on the date any payment of taxes with
respect to such claim is due). If the Company notifies the
Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company;
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<PAGE> 10
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 10(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Employee, on an interest-free basis, and shall
indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 10(c), the Employee becomes
entitled to receive any refund with respect to such claim, the
Employee shall (subject to the Company's complying with the
requirements of Section 10) promptly pay to the Company the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after
the receipt by the Employee of an amount advanced by the
Company pursuant to Section 10(c), a determination is made
that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Employee in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
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<PAGE> 11
(e) The payments provided for in this Section 10 hereof shall be
made not later than the tenth (10th) day following the
termination of the Employee's employment; provided, however,
that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the
Employee on such day an estimate, as determined in good faith
by the Employee of the minimum amount of such payments to
which the Employee is clearly entitled and shall pay the
remainder of such payments (together with interest at 120% of
the rate provided in section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the termination of
the Employee's employment. In the event that the amount of the
estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Employee, payable on the fifth (5th) business
day after demand by the Company (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the
Code). In the event the Company should fail to pay when due
the amounts described in this Section 10, the Employee shall
also be entitled to receive from the Company an amount
representing interest on any unpaid or untimely paid amounts
from the due date, as determined under this Section 10, to the
date of payment at a rate equal to 120% of the rate provided
in section 1274(b)(2)(B) of the Code.
11. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, in the event of any controversy, dispute or
claim arising out of, or relating to this Agreement, or the breach
thereof, or arising out of any other matter relating to the Employee's
employment with the Company or the termination of such employment, the
parties may seek recourse only for temporary or preliminary injunctive
relief to the courts having jurisdiction thereof and if any relief
other than injunctive relief is sought, the Company and the Employee
agree that such underlying controversy, dispute or claim shall be
settled by arbitration conducted in Pittsburgh, Pennsylvania in
accordance with this Section 11 of this Agreement and the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). The
matter shall be heard and decided, and awards rendered by a panel of
three (3) arbitrators (the "Arbitration Panel"). The Company and the
Employee shall each select one arbitrator from the AAA National Panel
of Commercial Arbitrators (the "Commercial Panel") and AAA shall select
a third arbitrator from the Commercial Panel. The award rendered by the
Arbitration Panel shall be final and binding as between the parties
hereto and their heirs, executors, administrators, successors and
assigns, and judgment on the award may be entered by any court having
jurisdiction thereof.
12. Treatment of Certain Incentive Awards. All "Awards" held by the
Employee under the Company's 1994 Long-Term Incentive Plan (the "1994
Plan"), the Company's 1999 Long-Term Incentive Plan (the "1999 Plan")
or the Company's Breakthrough Long-Term Incentive Plan (the
"Breakthrough Plan") shall, upon a Change of Control, be treated in
accordance with the terms of those Plans as in effect on the date of
this Agreement, without regard to the subsequent amendment of those
Plans. For purposes of this Section 12, the terms "Award" and "Change
of Control" shall have the meanings ascribed to them in the 1999 Plan,
the 1994 Plan and the Breakthrough Plan, as the case may be.
-11-
<PAGE> 12
13. Release. The Employee hereby acknowledges and agrees that prior to the
Employee's or his/her dependents' right to receive from the Company any
compensation or benefit to be paid or provided to him/her or his/her
dependents pursuant to Section 3 of this Agreement, the Employee may be
required by the Company, in its sole discretion, to execute a release
in a form reasonably acceptable to the Company, which releases any and
all claims (other than amounts to be paid to Employee as expressly
provided for under this Agreement) the Employee has or may have against
the Company or its subsidiaries, agents, officers, directors,
successors or assigns arising under any public policy, tort or common
law or any provision of state, federal or local law, including, but not
limited to, the Pennsylvania Human Relations Act, the Americans with
Disabilities Act, Title VII of the Civil Rights Act of 1964, the Civil
Rights Protection Act, Family and Medical Leave Act, the Fair Labor
Standards Act, or the Age Discrimination in Employment Act of 1967.
14. Waiver. The waiver by a party hereto of any breach by the other party
hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
15. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. The Company shall
be obligated to require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the Company's business or assets, by a written agreement in form
and substance satisfactory to the Employee, to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no succession
had taken place. This Agreement shall inure to the extent provided
hereunder to the benefit of and be enforceable by the Employee or
his/her legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. The Employee may not
delegate any of his/her duties, responsibilities, obligations or
positions hereunder to any person and any such purported delegation by
him shall be void and of no force and effect with respect to matters
relating to his/her employment and termination of employment. Without
limiting the foregoing, the Employee's rights to receive payments and
benefits hereunder shall not be assignable or transferable, other than
a transfer by Employee's will or by the laws of descent and
distribution.
16. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally
delivered or when sent by first class certified or registered mail,
postage prepaid, return receipt requested -- in the case of the
Employee, to his/her residence address as set forth below, and in the
case of the Company, to the address of its principal place of business
as set forth below, in care of the Chairman of the Board -- or to such
other person or at such other address with respect to each party as
such party shall notify the other in writing.
17. Pronouns. Pronouns stated in either the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
-12-
<PAGE> 13
18. Entire Agreement. This Agreement contains the entire agreement of the
parties concerning the matters set forth herein and all promises,
representations, understandings, arrangements and prior agreements
regarding the subject matter hereof (including the Existing Agreement,
which the parties agree shall terminate as of the Effective Date
hereof) are merged herein and superseded hereby; provided that the
Employment Agreement, as amended, and the Post-Termination
Confidentiality and Non-Competition Agreement, dated July 1, 1998,
shall not be merged or superseded but shall remain in full force and
effect. The provisions of this Agreement may not be amended, modified,
repealed, waived, extended or discharged except by an agreement in
writing signed by the party against whom enforcement of any amendment,
modification, repeal, waiver, extension or discharge is sought. No
person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto or to exercise any of the
Company's rights to terminate or to fail to extend this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his/her hand, all as of the day and year first above written.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Jean F. Marks By: /s/ Murry S. Gerber
- ---------------------------- ----------------------------
Jean F. Marks Murry S. Gerber
President and Chief Executive Officer
Address:
One Oxford Centre
Suite 3300
Pittsburgh, PA 15219
WITNESS:
/s/ David J. Smith /s/ David L. Porges
- ---------------------------- ----------------------------
David J. Smith David L. Porges
Address:
311 Olde Chapel Trail
----------------------------
Pittsburgh, PA 15238
----------------------------
-13-
<PAGE> 1
Exhibit 10.15
AMENDED AND RESTATED POST-TERMINATION CONFIDENTIALITY
AND NON-COMPETITION AGREEMENT
This Agreement made this 1st day of December 1, 1999 (the "Effective
Date"), by and between EQUITABLE RESOURCES, INC., having a business address at
One Oxford Centre, Pittsburgh, Pennsylvania 15219 (Equitable Resources, Inc. and
its subsidiary companies hereinafter collectively known as the "Company") and
DAVID L. PORGES, an individual and resident of Pittsburgh, Pennsylvania (the
"Executive").
WHEREAS, the Company and the Executive, pursuant to an Employment
Agreement dated July 1, 1998 (the "Employment Agreement"), are parties to a
Post-Termination Confidentiality and Non-Competition Agreement date July 1, 1998
(the "Existing Agreement");
WHEREAS, the parties continue to be willing to exchange certain
severance benefits for the Executive's agreement to comply with specific
post-employment confidentiality and non-competition requirements contained
herein; and
WHEREAS, in connection with amendment of the Employment Agreement and
the substitution of a new Change of Control Agreement dated December 1, 1999
(the "Change of control Agreement"), the Company and the Executive desire also
to amend and restate the Existing Agreement.
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:
SECTION 1. CONFIDENTIALITY:
Recognizing (1) that trade secrets or confidential information in any way
related to the business activities of the Company, such as, but not limited to:
marketing plans, business plans, technical information, market information,
customer lists, pricing data and strategies, financial information, business
methods or practices, programs, hardware and software (referred to hereinafter
collectively as "Confidential Information"), constitute valuable assets of the
Company, and (2) that such Confidential Information is the property of the
Company, Executive covenants, in consideration of Executive's access to and use
of Confidential Information, to hold such Confidential Information in trust for
the Company, and successors and assigns, and not to disclose or use the same
other than in the business of the Company, specifically agreeing:
(a) not to, directly or indirectly, disclose or make available to
anyone or use outside of the Company's organization during or after the term of
employment, any Confidential Information unless such disclosure or availability
or use is approved by the Company;
<PAGE> 2
(b) to use reasonable efforts to safeguard all Confidential Information
within the possession or control of Executive at all times so it is not exposed
to, or taken by, any unauthorized person (including unauthorized employees and
agents of the Company);
(c) upon termination of employment, to deliver to the Company all
papers, photographs, photoreproductions, computer tapes, tape recordings and
other materials, including but not limited to Confidential Information,
including personal notes and reproductions, relating to the business of the
Company, its subsidiaries and affiliates in the Executive's possession or
control.
This Section 1 shall not apply to any Confidential Information that
the Company has voluntarily disclosed to the public or that has otherwise
legally entered the public domain or which was known by the Executive prior to
his employment with the Company or which is required by law to be disclosed.
SECTION 2. NON-COMPETITION:
For a period of one year from the termination date of his employment, the
Executive will not (i) engage, directly or indirectly, whether as principal or
as agent, officer, director, employee, consultant, owner, partner, shareholder,
or otherwise, alone or in association with any other person, corporation or
other entity, in any business which produces, markets, or sells any product or
service in competition with products or services which the Company, produces,
markets, or sells in any geographic market where the Company is engaged in
business; (ii) solicit, directly or indirectly, either for himself or any other
person, any business related to the business of any customer, supplier, licensee
or other person having a business relationship with the Company, or induce or
attempt to induce any such person to cease doing business with the Company;
(iii) interfere, or attempt to interfere, with any contemplated business project
which representatives of the Company have discussed with any potential
participant in such project; or (iv) induce, or attempt to induce, any employee
of the Company to leave the employ of the Company or to violate the terms of his
contract with the Company, or employ or otherwise engage as an employee,
independent contractor or otherwise any such person. Notwithstanding the
provisions of Section 2(a)(i), the Executive may purchase or otherwise acquire
up to (but not more than) 1% of any class of securities of any enterprise (but
without otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934. The
Executive agrees that this covenant is reasonable with respect to duration,
geographical area and scope. This non-competition restriction shall not apply if
the Executive has a termination date within twenty-four (24) months of a Change
of Control as defined in the Change of Control Agreement between the Executive
and the Company.
2
<PAGE> 3
SECTION 3. CONSIDERATION:
If the employment of the Executive with the Company is terminated by the Company
for any reason (other than for Cause as defined below), the Executive shall
receive, from the date of termination, in addition to any payments he may be
entitled to under other agreements with the Company (in accordance with their
terms), 24 months of base salary payments at the salary level in effect at the
time of such termination and 24 months of medical benefits continuance. For
purposes of this Agreement, "Cause" shall include: (i) the conviction of a
felony, a crime of moral turpitude or fraud or having committed fraud,
misappropriation or embezzlement in connection with the performance of his
duties hereunder, (ii) willful and repeated failures to substantially perform
his assigned duties, or (iii) a material violation of any other provisions of
this Agreement or express significant policies of the Company. The purpose of
this Agreement is to obtain the Executive's agreement to the covenants contained
herein and 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.
SECTION 4. TERM:
The term of this Agreement shall commence on the Effective Date and shall remain
in effect unless amended or terminated by mutual written agreement or as
provided in Section 8(e) of the Employment Agreement, as amended; provided,
however, that upon the occurrence of a Change of Control as such term is defined
in the Change of Control Agreement, this Agreement may be terminated upon
written notice by Executive to the Company.
SECTION 5. CERTAIN REMEDIES:
Without limiting the remedies available to the Company, the Executive
acknowledges that damages at law will be an insufficient remedy to the Company
in the event that the Executive violates the terms of this Agreement and that
the Company may apply for, and obtain, injunctive relief to restrain the breach
or threatened breach of, or otherwise to specifically enforce, such covenants.
If it should become desirable or necessary for the Company to seek compliance
with this Agreement by judicial proceedings, the period of time during which
Executive is restricted under Section 2 shall be extended by the amount of time
remaining under the original restriction on the date Executive first breached
this Agreement, commencing on the date of the trial court order or settlement
requiring such compliance. If litigation should develop between the parties
regarding this Agreement or the obligations undertaken hereby, the party
prevailing in such litigation may recover from the other such costs and
expenses, including reasonable attorneys' fees, if any, as a court of competent
jurisdiction may determine or award.
3
<PAGE> 4
SECTION 6. GOVERNING LAW:
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
SECTION 7. BINDING AGREEMENT:
The obligations of Executive under this Agreement shall continue after the
termination of his employment with the Company for any reason, with or without
cause, and shall be binding on Executive's heirs, executors and legal
representatives and shall inure to the benefit of any successors by merger or
purchase of substantially all of the assets of the Company.
SECTION 8. COMPANY VIOLATION NOT A DEFENSE:
The existence of any claim or cause of action against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
enforcement by the Company of this Agreement.
SECTION 9. AUTHORIZATION TO MODIFY RESTRICTIONS:
It is the intention of the parties that the provisions of this Agreement shall
be enforceable to the fullest extent permissible under applicable law, but that
the unenforceability (or modification to conform to such law) of any provision
or provisions hereof shall not render unenforceable, or impair the remaining
provisions of this Agreement. If any provision or provisions of this Agreement
shall be deemed illegal, invalid or otherwise unenforceable, either in whole or
in part, this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds thereof
to render it valid and enforceable.
4
<PAGE> 5
SECTION 10. CONSENT TO JURISDICTION AND VENUE:
Any action or proceeding arising out of or relating to this Agreement shall be
commenced by either party in any state or federal court in Allegheny County,
Pennsylvania and the parties hereby irrevocably agree that all claims in respect
of any such action or proceeding may be heard and determined in any such court.
Executive and the Company acknowledge that the forum designated herein present
the most convenient forum for both parties. In any action commenced in any of
these courts, Executive and the Company waive any objections to inconvenience of
forum, venue and personal jurisdiction of the Court.
SECTION 11. NOTICES:
Notices hereunder shall be in writing and shall be deemed effective when
received by the Company or the Executive at their respective addresses above
given.
SECTION 12. WAIVER:
A waiver by the Company of a breach of any of the provisions of this Agreement
shall not operate or be construed as a waiver or excuse of any subsequent or
different breach.
SECTION 13. INTEGRATION AND MODIFICATION:
This Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof (except for the Employment Agreement and
its appendices executed as of even date herewith between the Executive and the
Company) and supersedes all prior agreements and understandings, oral or
written. This Agreement may not be changed, amended, or modified, except by a
written instrument signed by the parties and shall survive the expiration or
termination of the Employment Agreement.
5
<PAGE> 6
Executive acknowledges that he has read and understands the provisions of this
Agreement, that he has been given an opportunity for his legal counsel to review
this Agreement and that the provisions of this Agreement are reasonable.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Johanna G. O'Loughlin By /s/ Gregory R. Spencer
- ----------------------------------- ------------------------------------
Johanna G. O'Loughlin Gregory R. Spencer
Vice President, General Counsel Senior Vice President and
and Corporate Secretary Chief Administrative Officer
WITNESS:
/s/ David J. Smith /s/ David L. Porges
- ----------------------------------- ------------------------------------
David J. Smith David L. Porges
6
<PAGE> 1
Exhibit 10.16
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the 1st day of December,
1999 (the "Effective Date") by and between EQUITABLE RESOURCES, INC., a
Pennsylvania corporation with its principal place of business at Pittsburgh,
Pennsylvania (the "Company"), and Gregory R. Spencer, an individual (the
"Employee");
WHEREAS, the Company and certain of its employees, including possibly
the Employee, are parties to (i) a Change of Control Agreement, which provides
for the payment of certain benefits to the Employee if the Employee's employment
terminates in certain circumstances following a change of control of the Company
and/or (ii) an Employment Agreement, which provides for the payment of severance
benefits in certain circumstances (whether or not the Employee's termination of
employment is in connection with a Change of Control) and includes a provision
pursuant to which Employee agrees not to compete with the Company for a stated
period of time (to the extent the Employee is a party to one or both of such
agreements as of the date of this Agreement, they are referred to as the
"Existing Agreements"); and
WHEREAS, the Board of Directors of the Company (the "Board"), continues
to believe that it is in the best interest of the Company and its shareholders
to assure that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company; that it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control; and that it is appropriate
to provide the Employee with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Employee will be satisfied and which are competitive with those of other
corporations in the industry in which the Company's principal business activity
is conducted; and
WHEREAS, in order to more fully accomplish the foregoing objectives,
the Company and the Employee desire to terminate the Existing Agreements and to
enter into this Agreement, which, among other things, clarifies and enhances in
certain respects the benefits payable to the Employee if the Employee's
employment terminates in certain circumstances following a Change in Control of
the Company;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The term of this Agreement shall commence on the Effective Date
hereof and, subject to Sections 3(f), 5 and 8, shall terminate on the
earlier of (i) the date of the termination of Employee's employment by
the Company for any reason prior to a Change of Control; or (ii) unless
further extended as hereinafter set forth, the date which is thirty-six
(36) months after the Effective Date; provided, that, commencing on the
last day of the first full calendar month after the Effective Date and
on the last day of each succeeding calendar month, the term of this
Agreement shall be automatically extended
<PAGE> 2
without further action by either party (but not beyond the date of the
termination of Employee's employment prior to a Change of Control) for
one (1) additional month unless one party provides written notice to
the other party that such party does not wish to extend the term of
this Agreement. In the event that such notice shall have been
delivered, the term of this Agreement shall no longer be subject to
automatic extension and the term hereof shall expire on the date which
is thirty-six (36) calendar months after the last day of the month in
which such written notice is received.
2. Change of Control. Change of Control shall mean any of the following
events (each of such events being herein referred to as a "Change of
Control"):
(a) The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a
group of purchasers, other than to a corporation with respect
to which, following such sale or disposition, more than eighty
percent (80%) of, respectively, the then outstanding shares of
Company common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of the Board of Directors is then owned
beneficially, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial
owners, respectively of the outstanding Company common stock
and the combined voting power of the then outstanding voting
securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the
outstanding Company common stock and voting power immediately
prior to such sale or disposition;
(b) The acquisition in one or more transactions by any person or
group, directly or indirectly, of beneficial ownership of
twenty percent (20%) or more of the outstanding shares of
Company common stock or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of the Board of Directors; provided,
however, that 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 or more of
the Company's voting securities, shall not constitute a Change
of Control;
(c) The Company's termination of its business and liquidation of
its assets;
(d) There is consummated a merger, consolidation, reorganization,
share exchange, or similar transaction involving the Company
(including a triangular merger), in any case, unless
immediately following such transaction: (i) all or
substantially all of
-2-
<PAGE> 3
the persons who were the beneficial owners of the outstanding
common stock and outstanding voting securities of the Company
immediately prior to the transaction beneficially own,
directly or indirectly, more than 60% of the outstanding
shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such transaction (including a corporation or other person
which as a result of such transaction owns the Company or all
or substantially all of the Company's assets through one or
more subsidiaries (a "Parent Company")) in substantially the
same proportion as their ownership of the common stock and
other voting securities of the Company immediately prior to
the consummation of the transaction, (ii) no person (other
than the Company, any employee benefit plan sponsored or
maintained by the Company or, if reference was made to equity
ownership of any Parent Company for purposes of determining
whether clause (i) above is satisfied in connection with the
transaction, such Parent Company) beneficially owns, directly
or indirectly, 20% or more of the outstanding shares of common
stock or the combined voting power of the voting securities
entitled to vote generally in the election of directors of the
corporation resulting from such transaction and (iii)
individuals who were members of the Company's Board of
Directors immediately prior to the consummation of the
transaction constitute at least a majority of the members of
the board of directors resulting from such transaction (or, if
reference was made to equity ownership of any Parent Company
for purposes of determining whether clause, (i) above is
satisfied in connection with the transaction, such Parent
Company); or
(e) The following individuals cease for any reasons to constitute
a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the entire
Board of Directors and any new director (other than a director
whose initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved.
3. Salary and Benefits Continuation.
(a) Salary and Benefits Continuation" shall be defined to mean
the following: (i) payment of an amount of cash equal to three
(3) times the Employee's annual base salary in effect
immediately prior to the Change of Control or the termination
of Employee's employment, whichever is higher; (ii) payment of
an amount of cash equal to three (3) times the highest annual
incentive (bonus) payment earned by the Employee for any year
in the three years prior to the termination of Employee's
employment; (iii) provision to Employee and his/her eligible
-3-
<PAGE> 4
dependents of medical, long-term disability, dental and life
insurance coverage (to the extent such coverage was in effect
immediately prior to the Change of Control) for thirty-six
(36) months; (iv) contribution by the Company to Employee's
account under the Company's defined contribution retirement
plan (known as the Equitable Resources, Inc. Employee Savings
Plan) of an amount of cash equal to the amount that the
Company would have contributed to such plan had the Employee
continued to be employed by the Company for an additional
thirty-six (36) months at a base salary equal to the
Employee's base salary immediately prior to the Change of
Control or the termination of Employee's employment, whichever
is higher, such contribution being deemed to be made
immediately prior to the termination of Employee's employment;
provided, that to the extent that the amount of such
contribution exceeds the amount then allowed to be contributed
to the plan under the applicable rules relating to tax
qualified retirement plans, then the excess shall be paid to
the Employee in cash; (v) reimbursement to Employee of
reasonable costs incurred by Employee for outplacement
services in the twenty-four (24) month period following
termination of Employee's employment.
(b) All amounts payable by the Company to the Employee in cash
pursuant to Section 3(a) shall be made in a lump sum unless
the Employee otherwise elects and notifies the Company in
writing prior to the termination of Employee's employment of
Employee's desire to have all payments made in accordance with
the Company's regular salary and benefit payment practices,
provided that (i) the lump sum payment or first payment shall
be made within thirty (30) days after the Employee's
termination hereunder, and (ii) the Employee may elect to
defer such payments pursuant to the Company's then-existing
deferred compensation plan(s). All other amounts payable by
the Company to the Employee pursuant to Section 3 shall be
paid or provided in accordance with the Company's standard
payroll and reimbursement procedures, as in effect immediately
prior to the Change of Control.
(c) In the event that medical, long-term disability, dental and
life insurance benefits cannot be provided under appropriate
Company group insurance policies, an amount equal to the
premium necessary for the Employee to purchase directly the
same level of coverage in effect immediately prior to the
Change of Control shall be added to the Company's payments to
Employee pursuant to Section 3(a) (payable in the manner
elected by the Employee pursuant to Section 3(b)).
(d) If there is a Change of Control as defined above, the Company
will provide Salary and Benefits Continuation if at any time
during the first twenty-four (24) months following the Change
of Control, either (i) the Company terminates the Employee's
employment other than for Cause as defined in Section 4 below
or (ii) the Employee terminates his/her employment for "Good
Reason" as defined below.
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<PAGE> 5
(e) For purposes of this Agreement, "Good Reason" is defined as:
(i) Removal of the Employee from the position he/she held
immediately prior to the Change of Control (by reason
other than death, disability or Cause);
(ii) The assignment to the Employee of any duties
inconsistent with those performed by the Employee
immediately prior to the Change of Control or a
substantial alteration in the nature or status of the
Employee's responsibilities which renders the
Employee's position to be of less dignity,
responsibility or scope;
(iii) A reduction by the Company in the Employee's annual
base salary as in effect on the date hereof or as the
same may be increased from time to time, except for
proportional across-the-board salary reductions
similarly affecting all executives of the Company and
all executives of any person in control of the
Company, provided, however, that in no event shall
the Employee's annual base salary be reduced by an
amount equal to ten percent or more of the Employee's
annual base salary as of the end of the calendar year
immediately preceding the year in which the Change of
Control occurs, without the Employee's consent;
(iv) The failure to grant the Employee an annual salary
increase reasonably necessary to maintain such salary
as reasonably comparable to salaries of senior
executives holding positions equivalent to the
Employee's in the industry in which the Company's
then principal business activity is conducted;
(v) The Company requiring the Employee to be based
anywhere other than the Company's principal executive
offices in the city in which the Employee is
principally located immediately prior to the Change
of Control, except for required travel on the
Company's business to an extent substantially
consistent with the Employee's business travel
obligations prior to the Change of Control;
(vi) Any material reduction by the Company of the benefits
enjoyed by the Employee under any of the Company's
pension, retirement, profit sharing, savings, life
insurance, medical, health and accident, disability
or other employee benefit plans, programs or
arrangements, the taking of any action by the Company
which would directly or indirectly materially reduce
any of such benefits or deprive the Employee of any
material fringe benefits, or the failure by the
Company to provide the Employee with the number of
paid vacation days to which he/she is entitled on the
basis of years of service with the Company in
accordance with the Company's normal vacation policy,
provided that this paragraph (f) shall not apply to
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<PAGE> 6
any proportional across-the-board reduction or action
similarly affecting all executives of the Company and
all executives of any person in control of the
Company; or
(vii) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 15
hereof, or any other material breach by the Company
of its obligations contained in this Agreement.
(f) The Employee's right to Salary and Benefits Continuation shall
accrue upon the occurrence of either of the events specified
in (i) or (ii) of Section 3(d) and shall continue as provided,
notwithstanding the termination or expiration of this
Agreement pursuant to Section 1 hereof. The Employee's
subsequent employment, death or disability within the
thirty-six (36) month period following the Employee's
termination of employment in connection with a Change of
Control shall not affect the Company's obligation to continue
making Salary and Benefits Continuation payments. The Employee
shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking employment or
otherwise. The rights to Salary and Benefits Continuation
shall be in addition to whatever other benefits the Employee
may be entitled to under any other agreement or compensation
plan, program or arrangement of the Company; provided, that
the Employee shall not be entitled to any separate or
additional severance payments pursuant to the Company's
severance plan as then in effect and generally applicable to
similarly situated employees. The Company shall be authorized
to withhold from any payment to the Employee, his/her estate
or his/her beneficiaries hereunder all such amounts, if any,
that the Company may reasonably determine it is required to
withhold pursuant to any applicable law or regulation.
4. Termination of Employee for Cause.
(a) Upon or following a Change of Control, the Company may at any
time terminate the Employee's employment for Cause.
Termination of employment by the Company for "Cause" shall
mean termination upon: (i) the willful and continued failure
by the Employee to substantially perform his/her duties with
the Company (other than (A) any such failure resulting from
Employee's disability or (B) any such actual or anticipated
failure resulting from Employee's termination of his/her
employment for Good Reason), after a written demand for
substantial performance is delivered to the Employee by the
Board of Directors which specifically identifies the manner in
which the Board of Directors believes that the Employee has
not substantially performed his/her duties, and which failure
has not been cured within thirty days (30) after such written
demand; or (ii) the willful and continued engaging by the
Employee in conduct which is demonstrably and
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<PAGE> 7
materially injurious to the Company, monetarily or otherwise,
or (iii) the breach by the Employee of the confidentiality
provision set forth in Section 8 hereof.
(b) For purposes of this Section 4, no act, or failure to act, on
the Employee's part shall be considered "willful" unless done,
or omitted to be done, by the Employee in bad faith and
without reasonable belief that such action or omission was in
the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to him/her a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board of Directors at a meeting of
the Board of Directors called and held for that purpose (after
reasonable notice to the Employee and an opportunity for the
Employee, together with his/her counsel, to be heard before
the Board of Directors) finding that in the good faith opinion
of the Board of Directors the Employee is guilty of the
conduct set forth above in clauses (a)(i), (ii) or (iii) of
this Section 4 and specifying the particulars thereof in
detail.
5. Prior Termination. Anything in this Agreement to the contrary
notwithstanding, if the Employee's employment with the Company is
terminated prior to the date on which a Change of Control occurs either
(i) by the Company other than for Cause or (ii) by the Employee for
Good Reason, and it is reasonably demonstrated by Employee that such
termination of employment (a) was at the request of a third party who
has taken steps reasonably calculated to effect the Change of Control,
or (b) otherwise arose in connection with or anticipation of the Change
of Control, then for all purposes of this Agreement the termination
shall be deemed to have occurred upon a Change of Control and the
Employee will be entitled to Salary and Benefits Continuation as
provided for in Section 3 hereof.
6. Employment at Will. Subject to the provisions of any other agreement
between the Employee and the Company, the Employee shall remain an
employee at will and nothing herein shall confer upon the Employee any
right to continued employment and shall not affect the right of the
Company to terminate the Employee for any reason not prohibited by law;
provided, however, that any such removal shall be without prejudice to
any rights the Employee may have to Salary and Benefits Continuation
hereunder.
7. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania
without regard to its conflict of law provisions.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity,
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<PAGE> 8
legality or enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
8. Covenant as to Confidential Information.
(a) Confidentiality of Information and Nondisclosure. The Employee
acknowledges and agrees that his/her employment by the Company
under this Agreement necessarily involves his/her knowledge of
and access to confidential and proprietary information
pertaining to the business of the Company and its
subsidiaries. Accordingly, the Employee agrees that at all
times during the term of this Agreement and for a period of
two (2) years after the termination of the Employee's
employment hereunder, he/she will not, directly or indirectly,
without the express written authority of the Company, unless
directed by applicable legal authority having jurisdiction
over the Employee, disclose to or use, or knowingly permit to
be so disclosed or used, for the benefit of himself/herself,
any person, corporation or other entity other than the
Company, (i) any information concerning any financial matters,
customer relationships, competitive status, supplier matters,
internal organizational matters, current or future plans, or
other business affairs of or relating to the Company and its
subsidiaries, (ii) any management, operational, trade,
technical or other secrets or any other proprietary
information or other data of the Company or its subsidiaries,
or (iii) any other information related to the Company or its
subsidiaries or which the Employee subsidiaries which has not
been published and is not generally known outside of the
Company. The Employee acknowledges that all of the foregoing,
constitutes confidential and proprietary information, which is
the exclusive property of the Company.
(b) Company Remedies. The Employee acknowledges and agrees that
any breach of this Agreement by him/her will result in
immediate irreparable harm to the Company, and that the
Company cannot be reasonably or adequately compensated by
damages in an action at law. In the event of an actual or
threatened breach by the Employee of the provisions of this
Section 8, the Company shall be entitled, to the extent
permissible by law, immediately to cease to pay or provide the
Employee or his/her dependents any compensation or benefit
being, or to be, paid or provided to him pursuant to Section 3
of this Agreement, and also to obtain immediate injunctive
relief restraining the Employee from conduct in breach or
threatened breach of the covenants contained in this Section
8. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of
damages from the Employee.
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<PAGE> 9
9. Reimbursement of Fees. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest by the Company, Internal
Revenue Service or others regarding the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 3 of this
Agreement) or in connection with any dispute arising from this
Agreement, regardless of whether Employee prevails in any such contest
or dispute.
10. Tax Gross-Up.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") (i) would be subject to the excise
tax imposed by section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to the
excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax") or (ii) is made pursuant to a Change In Control,
then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any interest
or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed
on the payment and Gross-Up Payment, the Employee retains an
amount equal to (x) the Payment plus (y) the Excise Tax (if
any) imposed upon the Payment and Gross-Up Payment.
(b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 10, including whether
and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by a nationally recognized
accounting firm designated by the Company (the "Accounting
Firm") which shall provide detailed supporting calculations
both to the Company and the Executive within fifteen (15)
business days after there has been a Payment, or such earlier
time as requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control,
the Company shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 10,
shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in
the application of section 4999 of the Code at the time of the
initial
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<PAGE> 10
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to
Section 10(c) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the
Company (or such shorter period ending on the date any payment
of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 10(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in
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<PAGE> 11
respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 10(c), the Executive
becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company's complying
with the requirements of Section 10) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 10(c), a determination is made
that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
(e) The payments provided for in this Section 10 hereof shall be
made not later than the tenth (10th) day following the
termination of the Executive's employment; provided, however,
that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith
by the Executive of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the
remainder of such payments (together with interest at 120% of
the rate provided in section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the termination of
the Executive's employment. In the event that the amount of
the estimated payments exceeds the amount subsequently
determined to have been
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<PAGE> 12
due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at 120% of the
rate provided in section 1274(b)(2)(B) of the Code). In the
event the Company should fail to pay when due the amounts
described in this Section 10, the Executive shall also be
entitled to receive from the Company an amount representing
interest on any unpaid or untimely paid amounts from the due
date, as determined under this Section 10, to the date of
payment at a rate equal to 120% of the rate provided in
section 1274(b)(2)(B) of the Code.
11. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, in the event of any controversy, dispute or
claim arising out of, or relating to this Agreement, or the breach
thereof, or arising out of any other matter relating to the Employee's
employment with the Company or the termination of such employment, the
parties may seek recourse only for temporary or preliminary injunctive
relief to the courts having jurisdiction thereof and if any relief
other than injunctive relief is sought, the Company and the Employee
agree that such underlying controversy, dispute or claim shall be
settled by arbitration conducted in Pittsburgh, Pennsylvania in
accordance with this Section 11 of this Agreement and the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). The
matter shall be heard and decided, and awards rendered by a panel of
three (3) arbitrators (the "Arbitration Panel"). The Company and the
Employee shall each select one arbitrator from the AAA National Panel
of Commercial Arbitrators (the "Commercial Panel") and AAA shall select
a third arbitrator from the Commercial Panel. The award rendered by the
Arbitration Panel shall be final and binding as between the parties
hereto and their heirs, executors, administrators, successors and
assigns, and judgment on the award may be entered by any court having
jurisdiction thereof.
12. Treatment of Certain Incentive Awards. All "Awards" held by the
Employee under the Company's 1994 Long-Term Incentive Plan (the "1994
Plan"), the Company's 1999 Long-Term Incentive Plan (the "1999 Plan")
or the Company's Breakthrough Long-Term Incentive Plan (the
"Breakthrough Plan") shall, upon a Change of Control, be treated in
accordance with the terms of those Plans as in effect on the date of
this Agreement, without regard to the subsequent amendment of those
Plans. For purposes of this Section 12, the terms "Award" and "Change
of Control" shall have the meanings ascribed to them in the 1999 Plan,
the 1994 Plan and the Breakthrough Plan, as the case may be.
13. Release. The Employee hereby acknowledges and agrees that prior to the
Employee's or his/her dependents' right to receive from the Company any
compensation or benefit to be paid or provided to him/her or his/her
dependents pursuant to Section 3 of this Agreement, the Employee may be
required by the Company, in its sole discretion, to execute a release
in a form reasonably acceptable to the Company, which releases any and
all claims (other than amounts to be paid to Employee as expressly
provided for under this Agreement) the Employee has or may have against
the Company or its subsidiaries, agents, officers, directors,
successors or assigns arising under any public
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<PAGE> 13
policy, tort or common law or any provision of state, federal or local
law, including, but not limited to, the Pennsylvania Human Relations
Act, the Americans with Disabilities Act, Title VII of the Civil Rights
Act of 1964, the Civil Rights Protection Act, Family and Medical Leave
Act, the Fair Labor Standards Act, or the Age Discrimination in
Employment Act of 1967.
14. Waiver. The waiver by a party hereto of any breach by the other party
hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
15. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. The Company shall
be obligated to require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the Company's business or assets, by a written agreement in form
and substance satisfactory to the Employee, to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no succession
had taken place. This Agreement shall inure to the extent provided
hereunder to the benefit of and be enforceable by the Employee or
his/her legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. The Employee may not
delegate any of his/her duties, responsibilities, obligations or
positions hereunder to any person and any such purported delegation by
him shall be void and of no force and effect with respect to matters
relating to his/her employment and termination of employment. Without
limiting the foregoing, the Employee's rights to receive payments and
benefits hereunder shall not be assignable or transferable, other than
a transfer by Employee's will or by the laws of descent and
distribution.
16. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally
delivered or when sent by first class certified or registered mail,
postage prepaid, return receipt requested -- in the case of the
Employee, to his/her residence address as set forth below, and in the
case of the Company, to the address of its principal place of business
as set forth below, in care of the Chairman of the Board -- or to such
other person or at such other address with respect to each party as
such party shall notify the other in writing.
17. Pronouns. Pronouns stated in either the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
18. Entire Agreement. This Agreement contains the entire agreement of the
parties concerning the matters set forth herein and all promises,
representations, understandings, arrangements and prior agreements
regarding the subject matter hereof (including the Existing Agreements,
which the parties agree shall terminate as of the Effective Date
hereof) are merged herein and superseded hereby; provided that any
noncompetition agreement shall not be merged or superseded but shall
remain in full force and effect.
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<PAGE> 14
The provisions of this Agreement may not be amended, modified,
repealed, waived, extended or discharged except by an agreement in
writing signed by the party against whom enforcement of any amendment,
modification, repeal, waiver, extension or discharge is sought. No
person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto or to exercise any of the
Company's rights to terminate or to fail to extend this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his/her hand, all as of the day and year first above written.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Jean F. Marks By: /s/ Murry S. Gerber
- ---------------------------- ----------------------------
Jean F. Marks Murry S. Gerber
President and Chief Executive Officer
Address:
One Oxford Centre
Suite 3300
Pittsburgh, PA 15219
WITNESS:
/s/ Stephanie L. Macus /s/ Gregory R. Spencer
- ---------------------------- ----------------------------
Stephanie L. Macus Gregory R. Spencer
Address:
1020 Devonshire Road
----------------------------
Pittsburgh, PA 15213
----------------------------
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<PAGE> 1
Exhibit 10.17
NONCOMPETE AGREEMENT
This Agreement is made as of December 1, 1999 by and between Equitable
Resources, Inc., a Pennsylvania corporation (Equitable Resources, Inc. and its
majority-owned subsidiaries are hereinafter collectively referred to as the
"Company"), and Gregory R. Spencer (the "Employee").
WITNESSETH:
WHEREAS, in order to protect the business and goodwill of the Company,
the Company desires to obtain certain non-competition covenants from the
Employee and the Employee desires to agree to such covenants in exchange for the
Company's agreement to pay certain severance benefits in the event that the
Employee's employment with the Company is terminated in certain events; and
WHEREAS, the Employee is willing to enter into this Agreement, which
contains, among other things, specific non-competition agreements, in
consideration of the simultaneous execution by the Company and the Employee of a
new Change of Control Agreement (the "Change of Control Agreement"), which
enhances and clarifies in certain respects the benefits that the Company will
pay to the Employee if the Employee's employment with the Company is terminated
in certain events following a change of control of the Company.
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. If the employment of the Employee with the Company is terminated
by the Company for any reason other than Cause (as defined below) or if the
Employee terminates his or her employment with the Company for Good Reason (as
defined below), the Company shall pay the Employee, from the date of
termination, in addition to any payments to which the Employee is entitled under
the Company's severance pay plan, twenty-four (24) months of base salary at the
Employee's annual base salary level in effect at the time of such termination or
immediately prior to the salary reduction that serves as the basis for
termination for Good Reason. Employee will also be entitled to twenty-four (24)
months of health benefits continuation and outplacement assistance for a period
not to exceed twelve (12) months. Such base salary amount shall be paid by the
Company to the Employee in one lump sum payable within thirty (30) days after
the Employee's termination or resignation hereunder. Solely for purposes of this
Agreement, "Cause" shall mean (i) a conviction of a felony, a crime of moral
turpitude or fraud, (ii) the Employee's willful and continuous engagement in
conduct which is demonstrably and materially injurious to the Company, or (iii)
the willful and continued refusal by the Employee to perform the duties of his
or her position in a reasonable manner for thirty (30) days after written notice
is given to the Employee by the Company specifying in reasonable detail the
nature of the deficiency in the Employee's performance. Solely for purposes of
this Agreement, termination for "Good Reason" shall mean termination of
employment by the Employee within ninety (90) days after (i) being demoted, or
(ii) being given notice of a reduction in his or her annual base salary (other
than a reduction of not more than 10% applicable to all senior officers of the
Company).
<PAGE> 2
2. While the Employee is employed by the Company and for a period of
twelve (12) months after date of Employee's termination of employment with
Company for any reason, the Employee shall not (i) directly or indirectly
engage, whether as an employee, consultant, partner, owner, agent, stockholder,
officer, director or otherwise, alone or in association with any other person or
entity, in (A) the energy industry, including the production, transmission,
distribution and marketing of oil, natural gas or electricity and the provision
of related energy services (including project development and engineering
analysis, construction management, project financing, equipment operation and
maintenance, energy savings metering, monitoring and verification, and
facilities management (developing and operating private power, cogeneration and
central plant facilities)) anywhere in the continental United States (including
the Gulf of Mexico), Central America or South America, except that the
restriction as to the regulated distribution of oil, natural gas or electricity
shall be limited to the markets in which the Company conducted such business or
contemplated (with the Employee's knowledge) conducting such business at the
time of the termination of Employee's employment, or (B) any business activity
that competes with any project or proposed project which was discussed by or
with the Employee in the course of his or her employment with the Company or any
project or proposed project with respect to which the Company initiated any
business activity during the course of his or her employment (for purposes of
this subsection (i) employment or engagement by a customer of the Company to
provide or manage services that are provided by the Company shall be deemed to
violate this subsection (i)); (ii) directly or indirectly on his or her own
behalf or on behalf of any other person or entity contact (A) any customer of
the Company with whom he or she had contact while employed by the Company, or
(B) any person or entity to whom he or she attempted to market the Company's
products and services while employed by the Company, in either case, for the
purpose of soliciting the purchase of any product or service that competes with
any product or service offered by the Company or which was considered to be
offered by the Company while the Employee was employed by the Company; (iii)
take away or interfere, or attempt to interfere, with any custom, 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 (iv) directly or
indirectly on his or her own behalf or on behalf of any other person or entity
solicit or induce, or cause any other person or entity to solicit or induce, or
attempt to induce, any employee or consultant to leave the employ of or
engagement by the Company or its successors, assigns, or affiliates, or to
violate the terms of their contracts with the Company.
3. The Company may terminate this Agreement by giving twenty-four
(24) months' prior written notice to the Employee; provided that all provisions
of this Agreement shall apply if any event specified in sections 1 or 2 occurs
prior to the expiration of such twenty-four (24) month period. Notwithstanding
anything in this Agreement to the contrary, upon the occurrence of a Change of
Control as such term is defined in the Change of Control Agreement, this
Agreement shall remain in full force and effect and may not thereafter be
terminated (even if notice of termination has been given in the previous
twenty-four (24) months under the first sentence of this paragraph), except upon
written notice by Employee to the Company. If Employee receives payment of
benefits under the Change of Control Agreement, he shall not receive benefits
under this Agreement which shall thereupon terminate and be of no further force
or effect.
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<PAGE> 3
4. The provisions of this Agreement are severable. To the extent
that any provision of this Agreement is deemed unenforceable in any court of law
the parties intend that such provision be construed by such court in a manner to
make it enforceable.
5. The Employee acknowledges and agrees that: (i) this Agreement is
necessary for the protection of the legitimate business interests of the
Company; (ii) the restrictions contained in this Agreement are reasonable; (iii)
the Employee has no intention of competing with the Company within the
limitations set forth above; (iv) the Employee acknowledges and warrants that
Employee believes that Employee will be fully able to earn an adequate
likelihood for Employee and Employee's dependents if the covenant not to compete
contained in this Agreement is enforced against the Employee; and (v) the
Employee has received adequate and valuable consideration for entering into this
Agreement.
6. The Employee stipulates and agrees that any breach of this
Agreement by the Employee will result in immediate and irreparable harm to the
Company, the amount of which will be extremely difficult to ascertain, and that
the Company could not be reasonably or adequately compensated by damages in an
action at law. For these reasons, the Company shall have the right, without
objection from the Employee, to obtain such preliminary, temporary or permanent
mandatory or restraining injunctions, orders or decrees as may be necessary to
protect the Company against, or on account of, any breach by the Employee of the
provisions of Section 2 hereof. In the event the Company obtains any such
injunction, order, decree or other relief, in law or in equity, (i) the duration
of any violation of Section 2 shall be added to the 12 month restricted period
specified in Section 2, and (ii) the Employee shall be responsible for
reimbursing the Company for all costs associated with obtaining the relief,
including reasonable attorneys' fees and expenses and costs of suit. Such right
to equitable relief is in addition to the remedies the Company may have to
protect its rights at law, in equity or otherwise.
7. This Agreement (including the covenant not to compete contained
in Section 2) shall be binding upon and inure to the benefit of the successors
and assigns of the Company.
8. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania. For the purpose of any suit,
action or proceeding arising out of or relating to this Agreement, Employee
irrevocably consents and submits to the jurisdiction and venue of any state or
federal court located in Allegheny County, Pennsylvania. Employee agrees that
service of the summons and complaint and all other process which may be served
in any such suit, action or proceeding may be effected by mailing by registered
mail a copy of such process Employee at the addresses set forth below. Employee
irrevocably waives any objection which they may now or hereafter have to the
venue of any such suit, action or proceeding brought in such court and any claim
that such suit, action or proceeding brought in such court has been brought in
an inconvenient forum and agrees that service of process in accordance with this
Section will be deemed in every respect effective and valid personal service of
process upon Employee. Nothing in this Agreement will be construed to prohibit
service of process by any other method permitted by law. The provisions of this
Section will not limit or otherwise affect the right of the Company to institute
and conduct an action in any other appropriate manner, jurisdiction or court.
The Employee agrees that final judgment in such suit, action or proceeding will
be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law.
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<PAGE> 4
9. This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written (other than the Change of Control
Agreement). 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 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/ Jean F. Marks By: /s/ Murry S. Gerber
- ----------------------------- ----------------------------------
Jean F. Marks Murry S. Gerber
WITNESS: EMPLOYEE:
/s/ Stephanie L. Macus /s/ Gregory R. Spencer
- ----------------------------- -------------------------------------
Stephanie L. Macus Gregory R. Spencer
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<PAGE> 1
Exhibit 10.18
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the 1st day of December,
1999 (the "Effective Date") by and between EQUITABLE RESOURCES, INC., a
Pennsylvania corporation with its principal place of business at Pittsburgh,
Pennsylvania (the "Company"), and Johanna G. O'Loughlin, an individual (the
"Employee");
WHEREAS, the Company and certain of its employees, including possibly
the Employee, are parties to (i) a Change of Control Agreement, which provides
for the payment of certain benefits to the Employee if the Employee's employment
terminates in certain circumstances following a change of control of the Company
and/or (ii) an Employment Agreement, which provides for the payment of severance
benefits in certain circumstances (whether or not the Employee's termination of
employment is in connection with a Change of Control) and includes a provision
pursuant to which Employee agrees not to compete with the Company for a stated
period of time (to the extent the Employee is a party to one or both of such
agreements as of the date of this Agreement, they are referred to as the
"Existing Agreements"); and
WHEREAS, the Board of Directors of the Company (the "Board"), continues
to believe that it is in the best interest of the Company and its shareholders
to assure that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company; that it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control; and that it is appropriate
to provide the Employee with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Employee will be satisfied and which are competitive with those of other
corporations in the industry in which the Company's principal business activity
is conducted; and
WHEREAS, in order to more fully accomplish the foregoing objectives,
the Company and the Employee desire to terminate the Existing Agreements and to
enter into this Agreement, which, among other things, clarifies and enhances in
certain respects the benefits payable to the Employee if the Employee's
employment terminates in certain circumstances following a Change in Control of
the Company;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The term of this Agreement shall commence on the Effective
Date hereof and, subject to Sections 3(f), 5 and 8, shall terminate on
the earlier of (i) the date of the termination of Employee's employment
by the Company for any reason prior to a Change of Control; or (ii)
unless further extended as hereinafter set forth, the date which is
thirty-six (36) months after the Effective Date; provided, that,
commencing on the last day of the first full calendar month after the
Effective Date and on the last day of each succeeding calendar month,
the term of this Agreement shall be automatically extended
<PAGE> 2
without further action by either party (but not beyond the date of the
termination of Employee's employment prior to a Change of Control) for
one (1) additional month unless one party provides written notice to
the other party that such party does not wish to extend the term of
this Agreement. In the event that such notice shall have been
delivered, the term of this Agreement shall no longer be subject to
automatic extension and the term hereof shall expire on the date which
is thirty-six (36) calendar months after the last day of the month in
which such written notice is received.
2. Change of Control. Change of Control shall mean any of the following
events (each of such events being herein referred to as a "Change of
Control"):
(a) The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a
group of purchasers, other than to a corporation with respect
to which, following such sale or disposition, more than eighty
percent (80%) of, respectively, the then outstanding shares of
Company common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of the Board of Directors is then owned
beneficially, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial
owners, respectively of the outstanding Company common stock
and the combined voting power of the then outstanding voting
securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the
outstanding Company common stock and voting power immediately
prior to such sale or disposition;
(b) The acquisition in one or more transactions by any person
or group, directly or indirectly, of beneficial ownership of
twenty percent (20%) or more of the outstanding shares of
Company common stock or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of the Board of Directors; provided,
however, that 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 or more of
the Company's voting securities, shall not constitute a Change
of Control;
(c) The Company's termination of its business and liquidation of
its assets;
(d) There is consummated a merger, consolidation, reorganization,
share exchange, or similar transaction involving the Company
(including a triangular merger), in any case, unless
immediately following such transaction: (i) all or
substantially all of
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<PAGE> 3
the persons who were the beneficial owners of the outstanding
common stock and outstanding voting securities of the Company
immediately prior to the transaction beneficially own,
directly or indirectly, more than 60% of the outstanding
shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such transaction (including a corporation or other person
which as a result of such transaction owns the Company or all
or substantially all of the Company's assets through one or
more subsidiaries (a "Parent Company")) in substantially the
same proportion as their ownership of the common stock and
other voting securities of the Company immediately prior to
the consummation of the transaction, (ii) no person (other
than the Company, any employee benefit plan sponsored or
maintained by the Company or, if reference was made to equity
ownership of any Parent Company for purposes of determining
whether clause (i) above is satisfied in connection with the
transaction, such Parent Company) beneficially owns, directly
or indirectly, 20% or more of the outstanding shares of common
stock or the combined voting power of the voting securities
entitled to vote generally in the election of directors of the
corporation resulting from such transaction and (iii)
individuals who were members of the Company's Board of
Directors immediately prior to the consummation of the
transaction constitute at least a majority of the members of
the board of directors resulting from such transaction (or, if
reference was made to equity ownership of any Parent Company
for purposes of determining whether clause, (i) above is
satisfied in connection with the transaction, such Parent
Company); or
(e) The following individuals cease for any reasons to constitute
a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the entire
Board of Directors and any new director (other than a director
whose initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved.
3. Salary and Benefits Continuation.
(a) Salary and Benefits Continuation" shall be defined to mean the
following: (i) payment of an amount of cash equal to three (3)
times the Employee's annual base salary in effect immediately
prior to the Change of Control or the termination of
Employee's employment, whichever is higher; (ii) payment of an
amount of cash equal to three (3) times the highest annual
incentive (bonus) payment earned by the Employee for any year
in the three years prior to the termination of Employee's
employment; (iii) provision to Employee and his/her eligible
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<PAGE> 4
dependents of medical, long-term disability, dental and life
insurance coverage (to the extent such coverage was in effect
immediately prior to the Change of Control) for thirty-six
(36) months; (iv) contribution by the Company to Employee's
account under the Company's defined contribution retirement
plan (known as the Equitable Resources, Inc. Employee Savings
Plan) of an amount of cash equal to the amount that the
Company would have contributed to such plan had the Employee
continued to be employed by the Company for an additional
thirty-six (36) months at a base salary equal to the
Employee's base salary immediately prior to the Change of
Control or the termination of Employee's employment, whichever
is higher, such contribution being deemed to be made
immediately prior to the termination of Employee's employment;
provided, that to the extent that the amount of such
contribution exceeds the amount then allowed to be contributed
to the plan under the applicable rules relating to tax
qualified retirement plans, then the excess shall be paid to
the Employee in cash; (v) reimbursement to Employee of
reasonable costs incurred by Employee for outplacement
services in the twenty-four (24) month period following
termination of Employee's employment.
(b) All amounts payable by the Company to the Employee in cash
pursuant to Section 3(a) shall be made in a lump sum unless
the Employee otherwise elects and notifies the Company in
writing prior to the termination of Employee's employment of
Employee's desire to have all payments made in accordance with
the Company's regular salary and benefit payment practices,
provided that (i) the lump sum payment or first payment shall
be made within thirty (30) days after the Employee's
termination hereunder, and (ii) the Employee may elect to
defer such payments pursuant to the Company's then-existing
deferred compensation plan(s). All other amounts payable by
the Company to the Employee pursuant to Section 3 shall be
paid or provided in accordance with the Company's standard
payroll and reimbursement procedures, as in effect immediately
prior to the Change of Control.
(c) In the event that medical, long-term disability, dental and
life insurance benefits cannot be provided under appropriate
Company group insurance policies, an amount equal to the
premium necessary for the Employee to purchase directly the
same level of coverage in effect immediately prior to the
Change of Control shall be added to the Company's payments to
Employee pursuant to Section 3(a) (payable in the manner
elected by the Employee pursuant to Section 3(b)).
(d) If there is a Change of Control as defined above, the Company
will provide Salary and Benefits Continuation if at any time
during the first twenty-four (24) months following the Change
of Control, either (i) the Company terminates the Employee's
employment other than for Cause as defined in Section 4 below
or (ii) the Employee terminates his/her employment for "Good
Reason" as defined below.
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<PAGE> 5
(e) For purposes of this Agreement, "Good Reason" is defined
as:
(i) Removal of the Employee from the position he/she
held immediately prior to the Change of Control (by
reason other than death, disability or Cause);
(ii) The assignment to the Employee of any duties
inconsistent with those performed by the Employee
immediately prior to the Change of Control or a
substantial alteration in the nature or status of the
Employee's responsibilities which renders the
Employee's position to be of less dignity,
responsibility or scope;
(iii) A reduction by the Company in the Employee's annual
base salary as in effect on the date hereof or as the
same may be increased from time to time, except for
proportional across-the-board salary reductions
similarly affecting all executives of the Company and
all executives of any person in control of the
Company, provided, however, that in no event shall
the Employee's annual base salary be reduced by an
amount equal to ten percent or more of the Employee's
annual base salary as of the end of the calendar year
immediately preceding the year in which the Change of
Control occurs, without the Employee's consent;
(iv) The failure to grant the Employee an annual salary
increase reasonably necessary to maintain such salary
as reasonably comparable to salaries of senior
executives holding positions equivalent to the
Employee's in the industry in which the Company's
then principal business activity is conducted;
(v) The Company requiring the Employee to be based
anywhere other than the Company's principal executive
offices in the city in which the Employee is
principally located immediately prior to the Change
of Control, except for required travel on the
Company's business to an extent substantially
consistent with the Employee's business travel
obligations prior to the Change of Control;
(vi) Any material reduction by the Company of the benefits
enjoyed by the Employee under any of the Company's
pension, retirement, profit sharing, savings, life
insurance, medical, health and accident, disability
or other employee benefit plans, programs or
arrangements, the taking of any action by the Company
which would directly or indirectly materially reduce
any of such benefits or deprive the Employee of any
material fringe benefits, or the failure by the
Company to provide the Employee with the number of
paid vacation days to which he/she is entitled on the
basis of years of service with the Company in
accordance with the Company's normal vacation policy,
provided that this paragraph (f) shall not apply to
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<PAGE> 6
any proportional across-the-board reduction or action
similarly affecting all executives of the Company and
all executives of any person in control of the
Company; or
(vii) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 15
hereof, or any other material breach by the Company
of its obligations contained in this Agreement.
(f) The Employee's right to Salary and Benefits Continuation shall
accrue upon the occurrence of either of the events specified
in (i) or (ii) of Section 3(d) and shall continue as provided,
notwithstanding the termination or expiration of this
Agreement pursuant to Section 1 hereof. The Employee's
subsequent employment, death or disability within the
thirty-six (36) month period following the Employee's
termination of employment in connection with a Change of
Control shall not affect the Company's obligation to continue
making Salary and Benefits Continuation payments. The Employee
shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking employment or
otherwise. The rights to Salary and Benefits Continuation
shall be in addition to whatever other benefits the Employee
may be entitled to under any other agreement or compensation
plan, program or arrangement of the Company; provided, that
the Employee shall not be entitled to any separate or
additional severance payments pursuant to the Company's
severance plan as then in effect and generally applicable to
similarly situated employees. The Company shall be authorized
to withhold from any payment to the Employee, his/her estate
or his/her beneficiaries hereunder all such amounts, if any,
that the Company may reasonably determine it is required to
withhold pursuant to any applicable law or regulation.
4. Termination of Employee for Cause.
(a) Upon or following a Change of Control, the Company may at any
time terminate the Employee's employment for Cause.
Termination of employment by the Company for "Cause" shall
mean termination upon: (i) the willful and continued failure
by the Employee to substantially perform his/her duties with
the Company (other than (A) any such failure resulting from
Employee's disability or (B) any such actual or anticipated
failure resulting from Employee's termination of his/her
employment for Good Reason), after a written demand for
substantial performance is delivered to the Employee by the
Board of Directors which specifically identifies the manner in
which the Board of Directors believes that the Employee has
not substantially performed his/her duties, and which failure
has not been cured within thirty days (30) after such written
demand; or (ii) the willful and continued engaging by the
Employee in conduct which is demonstrably and
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<PAGE> 7
materially injurious to the Company, monetarily or otherwise,
or (iii) the breach by the Employee of the confidentiality
provision set forth in Section 8 hereof.
(b) For purposes of this Section 4, no act, or failure to act, on
the Employee's part shall be considered "willful" unless done,
or omitted to be done, by the Employee in bad faith and
without reasonable belief that such action or omission was in
the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to him/her a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board of Directors at a meeting of
the Board of Directors called and held for that purpose (after
reasonable notice to the Employee and an opportunity for the
Employee, together with his/her counsel, to be heard before
the Board of Directors) finding that in the good faith opinion
of the Board of Directors the Employee is guilty of the
conduct set forth above in clauses (a)(i), (ii) or (iii) of
this Section 4 and specifying the particulars thereof in
detail.
5. Prior Termination. Anything in this Agreement to the contrary
notwithstanding, if the Employee's employment with the Company is
terminated prior to the date on which a Change of Control occurs either
(i) by the Company other than for Cause or (ii) by the Employee for
Good Reason, and it is reasonably demonstrated by Employee that such
termination of employment (a) was at the request of a third party who
has taken steps reasonably calculated to effect the Change of Control,
or (b) otherwise arose in connection with or anticipation of the Change
of Control, then for all purposes of this Agreement the termination
shall be deemed to have occurred upon a Change of Control and the
Employee will be entitled to Salary and Benefits Continuation as
provided for in Section 3 hereof.
6. Employment at Will. Subject to the provisions of any other agreement
between the Employee and the Company, the Employee shall remain an
employee at will and nothing herein shall confer upon the Employee any
right to continued employment and shall not affect the right of the
Company to terminate the Employee for any reason not prohibited by law;
provided, however, that any such removal shall be without prejudice to
any rights the Employee may have to Salary and Benefits Continuation
hereunder.
7. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania
without regard to its conflict of law provisions.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity,
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<PAGE> 8
legality or enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of
reference only and shall not constitute a part of this
Agreement.
8. Covenant as to Confidential Information.
(a) Confidentiality of Information and Nondisclosure. The Employee
acknowledges and agrees that his/her employment by the Company
under this Agreement necessarily involves his/her knowledge of
and access to confidential and proprietary information
pertaining to the business of the Company and its
subsidiaries. Accordingly, the Employee agrees that at all
times during the term of this Agreement and for a period of
two (2) years after the termination of the Employee's
employment hereunder, he/she will not, directly or indirectly,
without the express written authority of the Company, unless
directed by applicable legal authority having jurisdiction
over the Employee, disclose to or use, or knowingly permit to
be so disclosed or used, for the benefit of himself/herself,
any person, corporation or other entity other than the
Company, (i) any information concerning any financial matters,
customer relationships, competitive status, supplier matters,
internal organizational matters, current or future plans, or
other business affairs of or relating to the Company and its
subsidiaries, (ii) any management, operational, trade,
technical or other secrets or any other proprietary
information or other data of the Company or its subsidiaries,
or (iii) any other information related to the Company or its
subsidiaries or which the Employee subsidiaries which has not
been published and is not generally known outside of the
Company. The Employee acknowledges that all of the foregoing,
constitutes confidential and proprietary information, which is
the exclusive property of the Company.
(b) Company Remedies. The Employee acknowledges and agrees that
any breach of this Agreement by him/her will result in
immediate irreparable harm to the Company, and that the
Company cannot be reasonably or adequately compensated by
damages in an action at law. In the event of an actual or
threatened breach by the Employee of the provisions of this
Section 8, the Company shall be entitled, to the extent
permissible by law, immediately to cease to pay or provide the
Employee or his/her dependents any compensation or benefit
being, or to be, paid or provided to him pursuant to Section 3
of this Agreement, and also to obtain immediate injunctive
relief restraining the Employee from conduct in breach or
threatened breach of the covenants contained in this Section
8. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of
damages from the Employee.
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<PAGE> 9
9. Reimbursement of Fees. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest by the Company, Internal
Revenue Service or others regarding the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 3 of this
Agreement) or in connection with any dispute arising from this
Agreement, regardless of whether Employee prevails in any such contest
or dispute.
10. Tax Gross-Up.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") (i) would be subject to the excise
tax imposed by section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to the
excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax") or (ii) is made pursuant to a Change In Control,
then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any interest
or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed
on the payment and Gross-Up Payment, the Employee retains an
amount equal to (x) the Payment plus (y) the Excise Tax (if
any) imposed upon the Payment and Gross-Up Payment.
(b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 10, including whether
and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by a nationally recognized
accounting firm designated by the Company (the "Accounting
Firm") which shall provide detailed supporting calculations
both to the Company and the Executive within fifteen (15)
business days after there has been a Payment, or such earlier
time as requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control,
the Company shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 10,
shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in
the application of section 4999 of the Code at the time of the
initial
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<PAGE> 10
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to
Section 10(c) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the
Company (or such shorter period ending on the date any payment
of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 10(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in
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<PAGE> 11
respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 10(c), the Executive
becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company's complying
with the requirements of Section 10) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 10(c), a determination is made
that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
(e) The payments provided for in this Section 10 hereof shall be
made not later than the tenth (10th) day following the
termination of the Executive's employment; provided, however,
that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith
by the Executive of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the
remainder of such payments (together with interest at 120% of
the rate provided in section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the termination of
the Executive's employment. In the event that the amount of
the estimated payments exceeds the amount subsequently
determined to have been
-11-
<PAGE> 12
due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at 120% of the
rate provided in section 1274(b)(2)(B) of the Code). In the
event the Company should fail to pay when due the amounts
described in this Section 10, the Executive shall also be
entitled to receive from the Company an amount representing
interest on any unpaid or untimely paid amounts from the due
date, as determined under this Section 10, to the date of
payment at a rate equal to 120% of the rate provided in
section 1274(b)(2)(B) of the Code.
11. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, in the event of any controversy, dispute or
claim arising out of, or relating to this Agreement, or the breach
thereof, or arising out of any other matter relating to the Employee's
employment with the Company or the termination of such employment, the
parties may seek recourse only for temporary or preliminary injunctive
relief to the courts having jurisdiction thereof and if any relief
other than injunctive relief is sought, the Company and the Employee
agree that such underlying controversy, dispute or claim shall be
settled by arbitration conducted in Pittsburgh, Pennsylvania in
accordance with this Section 11 of this Agreement and the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). The
matter shall be heard and decided, and awards rendered by a panel of
three (3) arbitrators (the "Arbitration Panel"). The Company and the
Employee shall each select one arbitrator from the AAA National Panel
of Commercial Arbitrators (the "Commercial Panel") and AAA shall select
a third arbitrator from the Commercial Panel. The award rendered by the
Arbitration Panel shall be final and binding as between the parties
hereto and their heirs, executors, administrators, successors and
assigns, and judgment on the award may be entered by any court having
jurisdiction thereof.
12. Treatment of Certain Incentive Awards. All "Awards" held by the
Employee under the Company's 1994 Long-Term Incentive Plan (the "1994
Plan"), the Company's 1999 Long-Term Incentive Plan (the "1999 Plan")
or the Company's Breakthrough Long-Term Incentive Plan (the
"Breakthrough Plan") shall, upon a Change of Control, be treated in
accordance with the terms of those Plans as in effect on the date of
this Agreement, without regard to the subsequent amendment of those
Plans. For purposes of this Section 12, the terms "Award" and "Change
of Control" shall have the meanings ascribed to them in the 1999 Plan,
the 1994 Plan and the Breakthrough Plan, as the case may be.
13. Release. The Employee hereby acknowledges and agrees that prior to the
Employee's or his/her dependents' right to receive from the Company any
compensation or benefit to be paid or provided to him/her or his/her
dependents pursuant to Section 3 of this Agreement, the Employee may be
required by the Company, in its sole discretion, to execute a release
in a form reasonably acceptable to the Company, which releases any and
all claims (other than amounts to be paid to Employee as expressly
provided for under this Agreement) the Employee has or may have against
the Company or its subsidiaries, agents, officers, directors,
successors or assigns arising under any public
-12-
<PAGE> 13
policy, tort or common law or any provision of state, federal or local
law, including, but not limited to, the Pennsylvania Human Relations
Act, the Americans with Disabilities Act, Title VII of the Civil Rights
Act of 1964, the Civil Rights Protection Act, Family and Medical Leave
Act, the Fair Labor Standards Act, or the Age Discrimination in
Employment Act of 1967.
14. Waiver. The waiver by a party hereto of any breach by the other party
hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
15. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. The Company shall
be obligated to require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the Company's business or assets, by a written agreement in form
and substance satisfactory to the Employee, to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no succession
had taken place. This Agreement shall inure to the extent provided
hereunder to the benefit of and be enforceable by the Employee or
his/her legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. The Employee may not
delegate any of his/her duties, responsibilities, obligations or
positions hereunder to any person and any such purported delegation by
him shall be void and of no force and effect with respect to matters
relating to his/her employment and termination of employment. Without
limiting the foregoing, the Employee's rights to receive payments and
benefits hereunder shall not be assignable or transferable, other than
a transfer by Employee's will or by the laws of descent and
distribution.
16. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally
delivered or when sent by first class certified or registered mail,
postage prepaid, return receipt requested -- in the case of the
Employee, to his/her residence address as set forth below, and in the
case of the Company, to the address of its principal place of business
as set forth below, in care of the Chairman of the Board -- or to such
other person or at such other address with respect to each party as
such party shall notify the other in writing.
17. Pronouns. Pronouns stated in either the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
18. Entire Agreement. This Agreement contains the entire agreement of the
parties concerning the matters set forth herein and all promises,
representations, understandings, arrangements and prior agreements
regarding the subject matter hereof (including the Existing Agreements,
which the parties agree shall terminate as of the Effective Date
hereof) are merged herein and superseded hereby; provided that any
noncompetition agreement shall not be merged or superseded but shall
remain in full force and effect.
-13-
<PAGE> 14
The provisions of this Agreement may not be amended, modified,
repealed, waived, extended or discharged except by an agreement in
writing signed by the party against whom enforcement of any amendment,
modification, repeal, waiver, extension or discharge is sought. No
person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto or to exercise any of the
Company's rights to terminate or to fail to extend this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his/her hand, all as of the day and year first above written.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Jean F. Marks By: /s/ Gregory R. Spencer
- ---------------------------- ----------------------------
Jean F. Marks Gregory R. Spencer
Senior Vice President and Chief
Administrative Officer
Address:
One Oxford Centre
Suite 3300
Pittsburgh, PA 15219
WITNESS:
/s/ M. Zatezalo /s/ Johanna G. O'Loughlin
- ---------------------------- ----------------------------
M. Zatezalo Johanna G. O'Loughlin
Address:
9 Dunmoyle Place
----------------------------
Pittsburgh, PA 15217
----------------------------
-14-
<PAGE> 1
Exhibit 10.19
NONCOMPETE AGREEMENT
This Agreement is made as of December 1, 1999 by and between Equitable
Resources, Inc., a Pennsylvania corporation (Equitable Resources, Inc. and its
majority-owned subsidiaries are hereinafter collectively referred to as the
"Company"), and Johanna G. O'Loughlin (the "Employee").
WITNESSETH:
WHEREAS, in order to protect the business and goodwill of the Company,
the Company desires to obtain certain non-competition covenants from the
Employee and the Employee desires to agree to such covenants in exchange for the
Company's agreement to pay certain severance benefits in the event that the
Employee's employment with the Company is terminated in certain events; and
WHEREAS, the Employee is willing to enter into this Agreement, which
contains, among other things, specific non-competition agreements, in
consideration of the simultaneous execution by the Company and the Employee of a
new Change of Control Agreement (the "Change of Control Agreement"), which
enhances and clarifies in certain respects the benefits that the Company will
pay to the Employee if the Employee's employment with the Company is terminated
in certain events following a change of control of the Company.
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. If the employment of the Employee with the Company is terminated
by the Company for any reason other than Cause (as defined below) or if the
Employee terminates his or her employment with the Company for Good Reason (as
defined below), the Company shall pay the Employee, from the date of
termination, in addition to any payments to which the Employee is entitled under
the Company's severance pay plan, twenty-four (24) months of base salary at the
Employee's annual base salary level in effect at the time of such termination or
immediately prior to the salary reduction that serves as the basis for
termination for Good Reason. Employee will also be entitled to twenty-four (24)
months of health benefits continuation and outplacement assistance for a period
not to exceed twelve (12) months. Such base salary amount shall be paid by the
Company to the Employee in one lump sum payable within thirty (30) days after
the Employee's termination or resignation hereunder. Solely for purposes of this
Agreement, "Cause" shall mean (i) a conviction of a felony, a crime of moral
turpitude or fraud, (ii) the Employee's willful and continuous engagement in
conduct which is demonstrably and materially injurious to the Company, or (iii)
the willful and continued refusal by the Employee to perform the duties of his
or her position in a reasonable manner for thirty (30) days after written notice
is given to the Employee by the Company specifying in reasonable detail the
nature of the deficiency in the Employee's performance. Solely for purposes of
this Agreement, termination for "Good Reason" shall mean termination of
employment by the Employee within ninety (90) days after (i) being demoted, or
(ii) being given notice of a reduction in his or her annual base salary (other
than a reduction of not more than 10% applicable to all senior officers of the
Company).
<PAGE> 2
2. While the Employee is employed by the Company and for a period of
twelve (12) months after date of Employee's termination of employment with
Company for any reason, the Employee shall not (i) directly or indirectly
engage, whether as an employee, consultant, partner, owner, agent, stockholder,
officer, director or otherwise, alone or in association with any other person or
entity, in (A) the energy industry, including the production, transmission,
distribution and marketing of oil, natural gas or electricity and the provision
of related energy services (including project development and engineering
analysis, construction management, project financing, equipment operation and
maintenance, energy savings metering, monitoring and verification, and
facilities management (developing and operating private power, cogeneration and
central plant facilities)) anywhere in the continental United States (including
the Gulf of Mexico), Central America or South America, except that the
restriction as to the regulated distribution of oil, natural gas or electricity
shall be limited to the markets in which the Company conducted such business or
contemplated (with the Employee's knowledge) conducting such business at the
time of the termination of Employee's employment, or (B) any business activity
that competes with any project or proposed project which was discussed by or
with the Employee in the course of his or her employment with the Company or any
project or proposed project with respect to which the Company initiated any
business activity during the course of his or her employment (for purposes of
this subsection (i) employment or engagement by a customer of the Company to
provide or manage services that are provided by the Company shall be deemed to
violate this subsection (i)); (ii) directly or indirectly on his or her own
behalf or on behalf of any other person or entity contact (A) any customer of
the Company with whom he or she had contact while employed by the Company, or
(B) any person or entity to whom he or she attempted to market the Company's
products and services while employed by the Company, in either case, for the
purpose of soliciting the purchase of any product or service that competes with
any product or service offered by the Company or which was considered to be
offered by the Company while the Employee was employed by the Company; (iii)
take away or interfere, or attempt to interfere, with any custom, 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 (iv) directly or
indirectly on his or her own behalf or on behalf of any other person or entity
solicit or induce, or cause any other person or entity to solicit or induce, or
attempt to induce, any employee or consultant to leave the employ of or
engagement by the Company or its successors, assigns, or affiliates, or to
violate the terms of their contracts with the Company.
3. The Company may terminate this Agreement by giving twenty-four
(24) months' prior written notice to the Employee; provided that all provisions
of this Agreement shall apply if any event specified in sections 1 or 2 occurs
prior to the expiration of such twenty-four (24) month period. Notwithstanding
anything in this Agreement to the contrary, upon the occurrence of a Change of
Control as such term is defined in the Change of Control Agreement, this
Agreement shall remain in full force and effect and may not thereafter be
terminated (even if notice of termination has been given in the previous
twenty-four (24) months under the first sentence of this paragraph), except upon
written notice by Employee to the Company. If Employee receives payment of
benefits under the Change of Control Agreement, she shall not receive benefits
under this Agreement which shall thereupon terminate and be of no further force
or effect.
-2-
<PAGE> 3
4. The provisions of this Agreement are severable. To the extent
that any provision of this Agreement is deemed unenforceable in any court of law
the parties intend that such provision be construed by such court in a manner to
make it enforceable.
5. The Employee acknowledges and agrees that: (i) this Agreement is
necessary for the protection of the legitimate business interests of the
Company; (ii) the restrictions contained in this Agreement are reasonable; (iii)
the Employee has no intention of competing with the Company within the
limitations set forth above; (iv) the Employee acknowledges and warrants that
Employee believes that Employee will be fully able to earn an adequate
likelihood for Employee and Employee's dependents if the covenant not to compete
contained in this Agreement is enforced against the Employee; and (v) the
Employee has received adequate and valuable consideration for entering into this
Agreement.
6. The Employee stipulates and agrees that any breach of this
Agreement by the Employee will result in immediate and irreparable harm to the
Company, the amount of which will be extremely difficult to ascertain, and that
the Company could not be reasonably or adequately compensated by damages in an
action at law. For these reasons, the Company shall have the right, without
objection from the Employee, to obtain such preliminary, temporary or permanent
mandatory or restraining injunctions, orders or decrees as may be necessary to
protect the Company against, or on account of, any breach by the Employee of the
provisions of Section 2 hereof. In the event the Company obtains any such
injunction, order, decree or other relief, in law or in equity, (i) the duration
of any violation of Section 2 shall be added to the 12 month restricted period
specified in Section 2, and (ii) the Employee shall be responsible for
reimbursing the Company for all costs associated with obtaining the relief,
including reasonable attorneys' fees and expenses and costs of suit. Such right
to equitable relief is in addition to the remedies the Company may have to
protect its rights at law, in equity or otherwise.
7. This Agreement (including the covenant not to compete contained
in Section 2) shall be binding upon and inure to the benefit of the successors
and assigns of the Company.
8. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania. For the purpose of any suit,
action or proceeding arising out of or relating to this Agreement, Employee
irrevocably consents and submits to the jurisdiction and venue of any state or
federal court located in Allegheny County, Pennsylvania. Employee agrees that
service of the summons and complaint and all other process which may be served
in any such suit, action or proceeding may be effected by mailing by registered
mail a copy of such process Employee at the addresses set forth below. Employee
irrevocably waives any objection which they may now or hereafter have to the
venue of any such suit, action or proceeding brought in such court and any claim
that such suit, action or proceeding brought in such court has been brought in
an inconvenient forum and agrees that service of process in accordance with this
Section will be deemed in every respect effective and valid personal service of
process upon Employee. Nothing in this Agreement will be construed to prohibit
service of process by any other method permitted by law. The provisions of this
Section will not limit or otherwise affect the right of the Company to institute
and conduct an action in any other appropriate manner, jurisdiction or court.
The Employee agrees that final judgment in such suit, action or proceeding will
be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law.
-3-
<PAGE> 4
9. This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written (other than the Change of Control
Agreement). 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 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/ Jean F. Marks By: /s/ Gregory R. Spencer
- ----------------------------- ----------------------------------
Jean F. Marks Gregory R. Spencer
WITNESS: EMPLOYEE:
/s/ M. Zatezalo /s/ Johanna G. O'Loughlin
- ----------------------------- -------------------------------------
M. Zatezalo Johanna G. O'Loughlin
-4-
<PAGE> 1
Exhibit 10.20(e)
[EQUITABLE RESOURCES LOGO]
DIRECTORS' DEFERRED COMPENSATION PLAN
2000 ENROLLMENT AND DISTRIBUTION ELECTION FORM
PERSONAL INFORMATION
Name: Paul Christiano SS #: ###-##-####
------------------------------- ---------------------------
Address: 2176 Truxton Drive
-------------------------------
Upper St. Clair, PA 15241-2230
-------------------------------
DEFERRAL ELECTION
In accordance with the Equitable Resources, Inc. Directors' Deferred
Compensation Plan, I hereby elect to defer:
a. 100% of retainer
------
b. 100% of board meeting fees
------
c. 100% of committee meeting fees
------
INVESTMENT ELECTION
I request that my deferrals in the Equitable Resources, Inc. Directors' Deferred
Compensation Plan be credited as follows:
Equitable Resources Common Stock
-------
Putnam International Growth 50%
-------
Putnam Voyager Fund 50%
-------
Putnam Fund for Growth & Income
-------
George Putnam Fund
-------
Putnam Stable Value Fund
-------
Putnam Income Fund
-------
Putnam Asset Alloc. Growth Fund
-------
Putnam Asset Alloc. Balanced Fund
-------
Putnam Asset Alloc. Conservative Fund
-------
Total (must equal 100%) 100%
-------
DISTRIBUTION OPTIONS
1. PHANTOM STOCK ACCOUNT
Post-Service Distribution: I understand that the Plan provides that I will
receive a one-time distribution from the Plan following termination of my
services on the Board of Directors of Equitable Resources unless I elect
another alternative. Any such election or change in a prior election must
be made at least one year before service as a Director actually ends. I
also understand that changes in tax regulations, or their interpretation,
could result in Plan changes which would eliminate my right to later file a
change of election. In that context, an election now is optional but I may
not later have an opportunity to make an election.
Optional - I elect that amounts credited to my Account under the Plan be
distributed to me:
[X] in a single distribution, or
[ ] in five (5) annual installments;
[ ] in ten (10) annual installments;
[ ] in fifteen (15) annual installments.
<PAGE> 2
2. DEFERRAL ACCOUNT
A. Post-Service Distribution: I understand that the Plan provides that I
will receive a lump sum payment from the Plan following termination of
my services on the Board of Directors of Equitable Resources unless I
elect another alternative. Any such election or change in a prior
election must be made at least one year before service as a Director
actually ends. I also understand that changes in tax regulations, or
their interpretation, could result in Plan changes which would
eliminate my right to later file a change of election. In that context,
an election now is optional but I may not later have an opportunity to
make an election.
Optional - I elect that amounts credited to my Account under the Plan
be paid to me:
[X] in a lump sum, or
[ ] in five (5) annual installments;
[ ] in ten (10) annual installments;
[ ] in fifteen (15) annual installments.
or
B. In-Service Distribution: I want an In-Service Distribution to commence
distribution of amounts credited to my account under the Plan as of
January, ______ (must be later than 2001), provided such date occurs
before by termination of service. I elect that amounts credited to my
Account under the Plan be paid to me:
[ ] in a lump sum, or
[ ] in five (5) annual installments;
[ ] in ten (10) annual installments;
[ ] in fifteen (15) annual installments.
ACKNOWLEDGMENT:
I hereby acknowledge that my election to defer Compensation under the Plan is
irrevocable with respect to amounts which are deferred under the Plan.
SIGNATURE
/s/ Paul Christiano 29 November 1999
- -------------------------------- -------------------------------
Signed Paul Christiano Date
Received by the Corporate Secretary on: December 2 , 1999
------------------------- ------
By: /s/ Jean F. Marks
----------------------------------------------
Jean F. Marks
<PAGE> 1
Exhibit 10.21(e)
[EQUITABLE RESOURCES LOGO]
DIRECTORS' DEFERRED COMPENSATION PLAN
2000 ENROLLMENT AND DISTRIBUTION ELECTION FORM
PERSONAL INFORMATION
Name: Phyllis A. Domm SS #: ###-##-####
------------------------------- ---------------
Address: 850 Coachway
-------------------------------
Annapolis, MD 21401
-------------------------------
DEFERRAL ELECTION
In accordance with the Equitable Resources, Inc. Directors' Deferred
Compensation Plan, I hereby elect to defer:
a. 100% of retainer
------
b. 100% of board meeting fees
------
c. 100% of committee meeting fees
------
INVESTMENT ELECTION
I request that my deferrals in the Equitable Resources, Inc. Directors' Deferred
Compensation Plan be credited as follows:
Equitable Resources Common Stock
-------
Putnam International Growth
-------
Putnam Voyager Fund
-------
Putnam Fund for Growth & Income
-------
George Putnam Fund
-------
Putnam Stable Value Fund 100%
-------
Putnam Income Fund
-------
Putnam Asset Alloc. Growth Fund
-------
Putnam Asset Alloc. Balanced Fund
-------
Putnam Asset Alloc. Conservative Fund
-------
Total (must equal 100%) 100%
-------
DISTRIBUTION OPTIONS
1. PHANTOM STOCK ACCOUNT
Post-Service Distribution: I understand that the Plan provides that I will
receive a one-time distribution from the Plan following termination of my
services on the Board of Directors of Equitable Resources unless I elect
another alternative. Any such election or change in a prior election must
be made at least one year before service as a Director actually ends. I
also understand that changes in tax regulations, or their interpretation,
could result in Plan changes which would eliminate my right to later file a
change of election. In that context, an election now is optional but I may
not later have an opportunity to make an election.
Optional - I elect that amounts credited to my Account under the Plan be
distributed to me:
[ ] in a single distribution, or
[X] in five (5) annual installments;
[ ] in ten (10) annual installments;
[ ] in fifteen (15) annual installments.
<PAGE> 2
2. DEFERRAL ACCOUNT
A. Post-Service Distribution: I understand that the Plan provides that I
will receive a lump sum payment from the Plan following termination of
my services on the Board of Directors of Equitable Resources unless I
elect another alternative. Any such election or change in a prior
election must be made at least one year before service as a Director
actually ends. I also understand that changes in tax regulations, or
their interpretation, could result in Plan changes which would
eliminate my right to later file a change of election. In that context,
an election now is optional but I may not later have an opportunity to
make an election.
Optional - I elect that amounts credited to my Account under the Plan
be paid to me:
[ ] in a lump sum, or
[X] in five (5) annual installments;
[ ] in ten (10) annual installments;
[ ] in fifteen (15) annual installments.
or
B. In-Service Distribution: I want an In-Service Distribution to commence
distribution of amounts credited to my account under the Plan as of
January, ______ (must be later than 2001), provided such date occurs
before by termination of service. I elect that amounts credited to my
Account under the Plan be paid to me:
[ ] in a lump sum, or
[ ] in five (5) annual installments;
[ ] in ten (10) annual installments;
[ ] in fifteen (15) annual installments.
ACKNOWLEDGMENT:
I hereby acknowledge that my election to defer Compensation under the Plan is
irrevocable with respect to amounts which are deferred under the Plan.
SIGNATURE
/s/ Phyllis A. Domm 11/30/99
- ----------------------------------- -------------------------------
Signed Phyllis A. Domm Date
Received by the Corporate Secretary on: December 2 , 1999
------------------------- ------
By: /s/ Jean F. Marks
-------------------------------------------------------
Jean F. Marks
<PAGE> 1
Exhibit 10.23
RELEASE AGREEMENT
This Release Agreement is made this 8th day of December, 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 John C. Gongas, Jr. ("the Employee").
WITNESSETH
WHEREAS, the Company and the Employee are parties to a Non-Competition
Agreement under which execution of this Release Agreement by Employee is a
condition to and consideration for payment by the Company of the amounts
referenced in Paragraph 2 of the Non-Competition Agreement; 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. The employment of the Employee will be terminated as set forth in the
Employment Agreement ("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. Except as otherwise provided in Paragraph 6 hereof, in return for the
consideration described in the preamble hereto, Employee, on behalf of himself
and his heirs, executors, representatives, estates and assigns, voluntarily and
irrevocably releases the Company, is 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
1
<PAGE> 2
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.
4. 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.
5. 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.
6. Notwithstanding the foregoing release and covenant not to sue,
Employee shall be entitled to receive those payments and benefits as described
in Paragraphs 3 through 6 of the Employment Agreement.
7. 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 had been given at least 21
calendar days in which to consider this Agreement and to make a decision as to
whether to accept it.
8. 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., 420 Boulevard of the
Allies, 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.
9. except for the Non-Competition Agreement and the Employment
Agreement, 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
2
<PAGE> 3
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.
10. 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.
11. 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.
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/ Vanessa J. Lombardo /s/ Gregory R. Spencer
- ------------------------- --------------------------
Vanessa J. Lombardo Gregory R. Spencer
Senior Vice President and
Chief Administrative Officer
WITNESS: EMPLOYEE:
/s/ Deborah Patterson /s/ John C. Gongas, Jr.
- ------------------------- --------------------------
Deborah Patterson John C. Gongas, Jr.
3
<PAGE> 1
Exhibit 21
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE REGISTRANT AS OF STATE OF ADDITIONAL NAMES UNDER WHICH SUCH
DECEMBER 31, 1999 INCORPORATION SUBSIDIARY DOES BUSINESS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 CARNEGIE GAS STORAGE, LLC Delaware
- ---------------------------------------------------------------------------------------------------------------
2 CARNEGIE INTERSTATE PIPELINE COMPANY Delaware
- ---------------------------------------------------------------------------------------------------------------
3 CARNEGIE NATURAL GAS COMPANY Pennsylvania
- ---------------------------------------------------------------------------------------------------------------
4 CARNEGIE NATURAL GAS SALES, INC. Delaware
- ---------------------------------------------------------------------------------------------------------------
5 CARNEGIE PRODUCTION COMPANY Pennsylvania
- ---------------------------------------------------------------------------------------------------------------
6 EQT CAPITAL CORPORATION Delaware
- ---------------------------------------------------------------------------------------------------------------
7 EQT CAPITAL CORPORATION III Delaware
- ---------------------------------------------------------------------------------------------------------------
8 EQUITABLE ENERGY, LLC Delaware Equitable Energy
Equitable Energy Enterprises
ERI Energy
- ---------------------------------------------------------------------------------------------------------------
9 EQUITABLE GAS COMPANY Pennsylvania
- ---------------------------------------------------------------------------------------------------------------
10 EQUITABLE PRODUCTION (GULF) COMPANY Delaware
- ---------------------------------------------------------------------------------------------------------------
11 EQUITABLE PRODUCTION COMPANY West Virginia
- ---------------------------------------------------------------------------------------------------------------
12 EQUITRANS, L.P. Pennsylvania
- ---------------------------------------------------------------------------------------------------------------
13 EREC NEVADA, INC. Nevada
- ---------------------------------------------------------------------------------------------------------------
14 ERI COSTA RICA LDC Cayman Islands
- ---------------------------------------------------------------------------------------------------------------
15 ERI GLOBAL PARTNERS, INC. Delaware
- ---------------------------------------------------------------------------------------------------------------
16 ERI GROUP LDC Cayman Islands
- ---------------------------------------------------------------------------------------------------------------
17 ERI HOLDINGS Cayman Islands
- ---------------------------------------------------------------------------------------------------------------
18 ERI HOLDINGS II Cayman Islands
- ---------------------------------------------------------------------------------------------------------------
19 ERI INVESTMENTS, INC. Delaware
- ---------------------------------------------------------------------------------------------------------------
20 ERI JAM, LLC Delaware
- ---------------------------------------------------------------------------------------------------------------
21 ERI PROVIDENCE, L.L.C. Delaware
- ---------------------------------------------------------------------------------------------------------------
22 ERI SERVICES (ST. LUCIA) LIMITED West Indies
- ---------------------------------------------------------------------------------------------------------------
23 ERI SERVICES CANADA LTD. Canada
- ---------------------------------------------------------------------------------------------------------------
24 ERI SERVICES, INC. Delaware Equitable Resources Services, Inc.
- ---------------------------------------------------------------------------------------------------------------
25 ERI-INDEPENDENT ENERGY GROUP-HONDURAS LDC Cayman Islands
- ---------------------------------------------------------------------------------------------------------------
26 ET AVOCA COMPANY Delaware
- ---------------------------------------------------------------------------------------------------------------
27 ET BLUE GRASS COMPANY Delaware
- ---------------------------------------------------------------------------------------------------------------
28 IEC HUNTERDON, INC. Connecticut
- ---------------------------------------------------------------------------------------------------------------
29 IEC MANAGEMENT SERVICES, INC. Connecticut
- ---------------------------------------------------------------------------------------------------------------
30 IEC MONTCLAIR, INC. Connecticut
- ---------------------------------------------------------------------------------------------------------------
31 IEC PLYMOUTH, INC. Connecticut
- ---------------------------------------------------------------------------------------------------------------
32 INDEPENDENT ENERGY CORPORATION Connecticut
- ---------------------------------------------------------------------------------------------------------------
33 INDEPENDENT ENERGY FINANCE CORPORATION Connecticut
- ---------------------------------------------------------------------------------------------------------------
34 INDEPENDENT ENERGY OPERATIONS, INC. Connecticut
- ---------------------------------------------------------------------------------------------------------------
35 KENTUCKY WEST VIRGINIA GAS COMPANY, L.L.C. Delaware
- ---------------------------------------------------------------------------------------------------------------
36 NORA TRANSMISSION COMPANY Delaware
- ---------------------------------------------------------------------------------------------------------------
37 NORTHEAST ENERGY SERVICES, INC. Delaware Noresco
- ---------------------------------------------------------------------------------------------------------------
38 THREE RIVERS PIPELINE CORPORATION Texas
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated February 14,
2000, with respect to the consolidated financial statements and schedule of
Equitable Resources, Inc. included in this Annual Report (Form 10-K) for the
year ended December 31, 1999 in the Prospectus part of the following
Registration Statements:
o Registration Statement No. 33-52151 on Form S-8 pertaining to the
1994 Equitable Resources, Inc. Long-Term Incentive Plan;
o Registration Statement No. 33-52137 on Form S-8 pertaining to the 1994
Equitable Resources, Inc. Non-Employee Directors' Stock Incentive
Plan;
o Registration Statement No. 33-53703 on Form S-3 pertaining to the
registration of $100,000,000 Medium-Term Notes, Series C of Equitable
Resources, Inc.;
o Post-effective Amendment No. 1 to Registration Statement No. 33-00252
on Form S-8 pertaining to the Equitable Resources, Inc. Employee
Savings Plan;
o Registration Statement No. 333-01879 on Form S-8 pertaining to the
Equitable Resources, Inc. Employee Stock Purchase Plan;
o Registration Statement No. 333-22529 on Form S-8 pertaining to the
Equitable Resources, Inc. Employee Savings and Protection Plan;
o Registration Statement No. 333-20323 on Form S-3 pertaining to the
registration of 164,345 shares of Equitable Resources, Inc. common
stock.
o Registration Statement No. 333-32197 on Form S-8 pertaining to the
Equitable Resources, Inc. Nonstatutory Stock Option Plan.
o Registration Statement No. 333-06839 on Form S-3 pertaining to the
registration of $168,000,000 of debt securities of Equitable
Resources, Inc.
o Registration Statement No. 333-82193 on Form S-8 pertaining to the
1999 Equitable Resources, Inc. Non-Employee Directors' Stock
Incentive Plan;
o Registration Statement No. 333-82189 on Form S-8 pertaining to the
1999 Equitable Resources, Inc. Long-Term Incentive Plan;
o Registration Statement No. 333-32410 on Form S-8 pertaining to the
Equitable Resources, Inc. Deferred Compensation Plan and Equitable
Resources, Inc. Directors' Deferred Compensation Plan.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 13, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 18,031
<SECURITIES> 0
<RECEIVABLES> 161,127
<ALLOWANCES> 13,024
<INVENTORY> 40,859
<CURRENT-ASSETS> 326,838
<PP&E> 2,052,528
<DEPRECIATION> 831,097
<TOTAL-ASSETS> 1,789,574
<CURRENT-LIABILITIES> 429,530
<BONDS> 298,350
0
0
<COMMON> 146,704
<OTHER-SE> 496,106
<TOTAL-LIABILITY-AND-EQUITY> 1,789,574
<SALES> 0
<TOTAL-REVENUES> 1,062,738
<CGS> 0
<TOTAL-COSTS> 610,659
<OTHER-EXPENSES> 297,407
<LOSS-PROVISION> 11,917
<INTEREST-EXPENSE> 37,132
<INCOME-PRETAX> 108,486
<INCOME-TAX> 39,356
<INCOME-CONTINUING> 69,130
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,130
<EPS-BASIC> 2.03
<EPS-DILUTED> 2.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 102,444
<SECURITIES> 0
<RECEIVABLES> 209,180
<ALLOWANCES> 9,818
<INVENTORY> 33,743
<CURRENT-ASSETS> 451,442
<PP&E> 1,956,763
<DEPRECIATION> 762,320
<TOTAL-ASSETS> 1,860,856
<CURRENT-LIABILITIES> 441,960
<BONDS> 281,350
0
0
<COMMON> 241,102
<OTHER-SE> 467,317
<TOTAL-LIABILITY-AND-EQUITY> 1,860,856
<SALES> 0
<TOTAL-REVENUES> 870,628
<CGS> 0
<TOTAL-COSTS> 471,609
<OTHER-EXPENSES> 395,183
<LOSS-PROVISION> 15,634
<INTEREST-EXPENSE> 40,302
<INCOME-PRETAX> (49,433)
<INCOME-TAX> (22,381)
<INCOME-CONTINUING> (27,052)
<DISCONTINUED> (8,804)
<EXTRAORDINARY> (8,263)
<CHANGES> 0
<NET-INCOME> (44,119)
<EPS-BASIC> (1.19)
<EPS-DILUTED> (1.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 69,442
<SECURITIES> 0
<RECEIVABLES> 364,106
<ALLOWANCES> 9,985
<INVENTORY> 37,156
<CURRENT-ASSETS> 684,734
<PP&E> 1,862,412
<DEPRECIATION> 675,410
<TOTAL-ASSETS> 2,328,051
<CURRENT-LIABILITIES> 745,701
<BONDS> 417,564
0
0
<COMMON> 268,328
<OTHER-SE> 555,192
<TOTAL-LIABILITY-AND-EQUITY> 2,328,051
<SALES> 0
<TOTAL-REVENUES> 913,069
<CGS> 0
<TOTAL-COSTS> 467,163
<OTHER-EXPENSES> 327,340
<LOSS-PROVISION> 16,386
<INTEREST-EXPENSE> 34,903
<INCOME-PRETAX> 117,397
<INCOME-TAX> 43,210
<INCOME-CONTINUING> 74,187
<DISCONTINUED> 3,870
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,057
<EPS-BASIC> 2.17
<EPS-DILUTED> 2.16
</TABLE>
