Exhibit 10.6
EQUITABLE RESOURCES,
INC.
2008 EXECUTIVE PERFORMANCE
INCENTIVE PROGRAM
EQUITABLE RESOURCES, INC. (the
“Company”) hereby establishes this EQUITABLE RESOURCES,
INC. 2008 EXECUTIVE PERFORMANCE INCENTIVE PROGRAM (the
“Program”), in accordance with the terms provided
herein.
WHEREAS, the Company maintains
certain long-term incentive award plans including the 1999
Equitable Resources, Inc. Long-Term Incentive Plan (the
“1999 Plan”) for the benefit of its employees and
executives, of which the Program is a subset; and
WHEREAS, in order to further align
the interests of executives with the interests of the shareholders,
the Company desires to provide additional long-term incentive
benefits through the Program, in the form of awards qualifying as
“Performance Awards” under the 1999 Plan.
NOW, THEREFORE, the Company hereby
provides for additional incentive benefits for certain executive
employees of the Company and adopts the terms of the Program on the
following terms and conditions:
Section 1. Incentive
Program Purpose.
The main purpose of the Program is to provide additional long-term
incentive opportunities to key executives to further align their
interests with those of the Company’s shareholders and
customers and with the strategic objectives of the Company.
Awards granted hereunder may be earned by achieving relative
performance levels against a pre-determined peer group, are
forfeited if defined performance levels are not achieved and are
subject to negative adjustment if other absolute and relative
performance measures are not attained. By placing a portion
of the executive’s compensation at risk, the Company has an
opportunity to reward exceptional performance or reduce the
compensation opportunity when performance does not meet
expectations. The Program shall be construed consistent with
the provisions of the 1999 Plan with respect to awards to Covered
Employees, as such term is defined in the 1999 Plan, and the
deductibility of such awards under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the
“Code”).
Section 2. Effective
Date. The
effective date of this Program is July 1, 2008. The
Program will remain in effect until the earlier of
December 31, 2011 or the closing date of a Change of Control
event defined in Section 5 unless otherwise amended or
terminated as provided in Section 18 (“Termination
Date”).
Section 3.
Eligibility. The
Chief Executive Officer of the Company (the “CEO”)
shall, in his or her sole discretion, select the employees of the
Company who shall be eligible to participate in the Program from
those individuals eligible to participate in the 1999 Plan.
The CEO’s selections will become participants in the Program
(the “Participants”) only upon approval by the
Compensation Committee of the Board of
Directors (the “Committee”),
comprised in accordance with the requirements of the 1999 Plan, to
the extent such individuals are, or are expected to be,
“covered employees” as defined in
Section 162(m) of the Code (“Covered
Employees”). In the event that an employee is hired by
the Company during the Performance Period, as defined below, the
CEO shall, in his or her sole discretion, determine whether the
employee will be eligible to participate in the Program, provided
that the Committee must approve all new participants to the Program
who are Covered Employees; provided further that, individuals who
are Covered Employees may only become eligible during the first 90
days of the Performance Period.
Section 4. Performance
Incentive Share Unit Awards. Upon being selected to participate in the
Program, each Participant shall be awarded a number of performance
incentive share units (the “Target Share Units”), which
may be expressed as a dollar amount and converted into share units
using the closing price of the Company’s stock on the date of
grant. The awards shall be proposed by the CEO and approved
by the Committee in the case of individuals who are Covered
Employees. For a new Participant, the Target Share Units
shall be proposed by the CEO and approved by the Committee and will
be pro-rated based on the employee’s hire date and the
contemplated ending date of the Program, which is December 31,
2011. The Target Share Units, plus accrued dividends
(“Total Target Share Units”) may be increased by as
much as three (3.0) times the number awarded based solely on the
achievement of the objective performance criteria as described in
Section 5, and the Committee shall have no discretion to
increase the Total Target Share Units that would otherwise be due
upon attainment of the Performance Condition. The maximum
number of Target Share Units that may be awarded under the Program
is 150,000, subject to adjustment as provided in the preceding
sentence and in Section 13.
The Target Share Units shall be held in escrow
by the Company subject to satisfaction of the terms and conditions
described below. A Participant shall have no right to
exchange the Target Share Units for cash, stock or any other
benefit and shall be a mere unsecured creditor of the Company with
respect to such share units and any future rights to
benefits.
Section 5. Performance
Condition of the Target Share Units. Subject to Section 8, the total
number of Target Share Units that will be issued (“Awarded
Share Units”) to a Participant will be based on the
Company’s total shareholder return relative to the peer
group’s (Attachment A) total shareholder return calculated as
described in (a) below (the “Performance
Condition”), for the Performance Period of July 1, 2008
to the Termination Date (the “Performance Period”), and
subject to the Committee’s negative discretion based upon the
Company’s revenues calculated as described in
(b) below. The Performance Condition with respect to the
Performance Period shall be established by the Committee within 90
days after its commencement, but in no event later than the date on
which 25% of the Performance Period has elapsed, and before the
outcome of the Performance Condition is no longer substantially
uncertain.
(a)
Total Shareholder
Return. For
purposes of this Program, total shareholder return will be
calculated as follows:
2
Step 1
A “Beginning Point” will
be established for the Company and each company in the peer
group. This Beginning Point will be defined as one share of
stock with a value equal to the average closing stock price as
reported in The Wall Street Journal for the ten
(10) business day period immediately prior to commencement of
the Performance Period ending on and including the date of the
commencement of the Performance Period, for each
company.
Step 2
Dividends paid for each company from
the beginning of the Performance Period will be cumulatively added
to the Beginning Point as additional shares of such company’s
stock. The closing price on the last business day of the
month in which the record date for the dividend occurs will be used
as the basis for determining the number of shares to be
added. The resulting total number of shares accumulated
during the Performance Period will be referred to as the Total
Shares Held at Ending Point.
Step 3
Except as provided in the following
sentence, an “Ending Point” will be defined as Total
Shares Held at Ending Point for each company times the average
closing stock price as reported in The Wall Street Journal
for the last ten (10) business days of the Performance Period
for each company. In the event of a change of control as then
defined in the 1999 Plan (“Change of Control”), the
Ending Point will be defined as the Total Shares Held at Ending
Point times the average of the closing price as reported in The
Wall Street Journal for the ten (10) business days
preceding the closing of the Change of Control
transaction.
Step 4
Total Shareholder Return
(“TSR”) will be expressed as a percentage and is
calculated by dividing the Ending Point by the Beginning Point and
then subtracting 1 from the result. Each company including
the Company will be ranked in descending order by the TSR so
calculated.
In accordance with
rules established within 90 days of the commencement of the
Performance Period, the Committee may determine to exclude a member
of the peer group if such member ceases to exist during the
Performance Period due to a cash merger or tender offer, to the
extent such determination is consistent with Treas. Reg.
§1.162-27(e)(2).
3
(b)
Revenues. For purposes of this Program, revenues
shall be measured as the Sales Price multiplied by the aggregate
Total Sales Volume for the twelve (12) calendar quarters within the
Performance Period beginning October 1, 2008 and ending
September 30, 2011.
(i)
Sales Price shall equal
$4.82/mcf. Total
Sales Volume for each quarter equals the sum of the production
total sales volumes (mmcfe) reported in the applicable
Form 10-Q for each quarter and, in the case of the fourth
quarter of any year, the volumes calculated for the fourth quarter
by reducing the annual total sales volume reported in the
Form 10-K by the quarterly total sales volumes reported in the
Form 10-Q for the first three quarters of such year. For
the avoidance of doubt, (a) Total Sales Volume is determined
solely by the volumes reported, regardless of any subsequently
identified prior period adjustment, (b) Total Sales Volume
represents the Company’s interest in gas and oil sales during
the applicable period and (c) gathered volumes are not
included. Total Sales Volume shall be measured on a basis
consistent with current practice on the date of adoption of the
Program.
(c) Application of
Performance Condition and Negative Adjustment . The Total
Target Share Units for each Participant will be multiplied by the
payout factor (the “Payout Multiple”) identified on the
payout matrix (Attachment B) that corresponds to the
Company’s relative TSR ranking on the payout matrix for the
Performance Period, provided, however, that the Committee retains
the discretion to reduce the corresponding Payout Multiple by up to
.75 if the Company does not attain the revenue target specified on
the payout matrix; provided, however, that if the Company’s
relative TSR ranking is median or above, the Payout Multiple shall
not be decreased below 1.00. The result of the calculation is
the number of Awarded Share Units. Pursuant to such
calculation, Awarded Share Units will equal:
(i)
100 percent of the Total Target
Share Units for median relative TSR performance,
(ii)
300 percent of the Total Target
Share Units for TSR performance at the top 14.5% of all performers,
subject to negative adjustment attributable to the
Committee’s discretion as described herein,
(iii)
0 percent of the Total Target Share
Units for TSR performance at the bottom 14.5% of all
performers,
(iv)
for performance levels between those
performance levels identified above, the percent of Total
Targ
