-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A9vcuxgp7ALRqY4qWqtrnqx7PU43iX87cVi6+SmI92m2cy0r5OLDkJww0HJuOnhg 2Y5fcUSXrJ8ZI1Y/2UjYPg== 0000033213-99-000014.txt : 19990817 0000033213-99-000014.hdr.sgml : 19990817 ACCESSION NUMBER: 0000033213-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITABLE RESOURCES INC /PA/ CENTRAL INDEX KEY: 0000033213 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 250464690 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03551 FILM NUMBER: 99690300 BUSINESS ADDRESS: STREET 1: 301 GRANT STREET SUITE 3300 CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4125535700 MAIL ADDRESS: STREET 1: 301 GRANT STREET SUTIE 3300 CITY: PITTSBURGH STATE: PA ZIP: 15219 FORMER COMPANY: FORMER CONFORMED NAME: EQUITABLE GAS CO DATE OF NAME CHANGE: 19841120 10-Q 1 JUNE 1999 FORM 10-Q FOR EQUITABLE RESOURCES UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 1-3551 EQUITABLE RESOURCES, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0464690 (State of incorporation or organization) (IRS Employer Identification No.) One Oxford Centre, Suite 3300, 301 Grant Street, Pittsburgh, Pennsylvania 15219 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (412) 553-5700 ------------ NONE (Former name, former address and former fiscal year, if changed since last report) ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of issuer's classes of common stock, as of the latest practicable date. Outstanding at Class July 31, 1999 Common stock, no par value 33,889,000 shares EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Index Page No. Part I. Financial Information: Item 1. Financial Statements (Unaudited): Statements of Consolidated Income for the Three And Six Months Ended June 30, 1999 and 1998 1 Statements of Condensed Consolidated Cash Flows for the Three and Six Months Ended June 30, 1999 and 1998 2 Condensed Consolidated Balance Sheets, June 30, 1999, and December 31, 1998 3 - 4 Notes to Condensed Consolidated Financial Statements 5 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 22 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 Part II. Other Information: Item 4. Submission of Matters to a Vote of Security Holders 23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 23 Signature 24 Index to Exhibits 25
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Statements of Consolidated Income (Unaudited) (Thousands Except Per Share Amounts) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 -------------------------------- -------------------------------- Operating revenues $ 189,631 $ 180,764 $ 609,686 $ 464,213 Cost of sales 82,301 96,966 375,246 254,695 -------------- --------------- --------------- -------------- Net operating revenues 107,330 83,798 234,440 209,518 -------------- --------------- --------------- -------------- Operating expenses: Operation and maintenance 21,238 18,983 44,241 41,787 Exploration 3,795 1,431 4,297 2,413 Production 6,538 7,702 12,450 14,566 Selling, general and administrative 24,330 24,049 44,857 52,457 Depreciation, depletion and amortization 31,060 19,460 52,000 39,199 -------------- --------------- --------------- -------------- Total operating expenses 86,961 71,625 157,845 150,422 -------------- --------------- --------------- -------------- Operating income 20,369 12,173 76,595 59,096 Equity in nonconsolidated subsidiaries 577 541 1,250 960 -------------- --------------- --------------- -------------- Earnings from continuing operations, before interest & taxes 20,946 12,714 77,845 60,056 Interest charges 8,965 9,236 18,228 18,403 -------------- --------------- --------------- -------------- Income before income taxes 11,981 3,478 59,617 41,653 Income taxes 4,743 1,203 22,638 14,727 -------------- --------------- --------------- -------------- Net income from continuing operations 7,238 2,275 36,979 26,926 Income (loss) from discontinued operations - net of tax - - - (4,604) -------------- --------------- --------------- -------------- Net income $ 7,238 $ 2,275 $ 36,979 $ 22,322 ============== =============== =============== ============== Average common shares outstanding 33,960 37,050 34,692 36,953 Earnings (loss) per share of common stock: Basic: Continuing operations $ 0.21 $ 0.06 $ 1.07 $ 0.72 Discontinued operations - - - (0.12) -------------- --------------- --------------- -------------- Net income $ 0.21 $ 0.06 $ 1.07 $ 0.60 ============== =============== =============== ============== Diluted: Continuing operations $ 0.21 $ 0.06 $ 1.06 $ 0.72 Discontinued operations - - - (0.12) -------------- --------------- --------------- -------------- Net income $ 0.21 $ 0.06 $ 1.06 $ 0.60 ============== =============== =============== ============== The accompanying notes are an integral part of these condensed consolidated financial statements.
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (Thousands) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 ----------------------------- --------------------------- Cash flows from operating activities: Net income from continuing operations $ 7,238 $ 2,275 $ 36,979 $ 26,926 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 31,060 19,460 52,000 39,199 Amortization of net contract costs 438 836 1,330 3,154 Deferred income taxes (benefits) 4,909 (1,199) 4,876 3,053 Changes in other assets and liabilities 29,891 48,456 14,469 50,356 ----------- ------------ ----------- ----------- Net cash provided by continuing operations 73,536 69,828 109,654 122,688 Net cash used in discontinued operations - (1,233) - (3,623) ----------- ------------ ----------- ----------- Net cash provided by operating activities 73,536 68,595 109,654 119,065 ----------- ------------ ----------- ----------- Cash flows from investing activities: Capital expenditures (24,794) (52,018) (46,283) (77,674) Increase in investment in unconsolidated partnerships (3,248) (1,284) (18,788) (4,098) Proceeds from sale of property 4,661 - 4,661 - Increase in net noncurrent assets held for sale - (9,730) - (13,741) Proceeds from sale of short-term investments 293,761 - 430,091 - Purchases of short-term investments (199,148) - (336,621) - ----------- ------------ ----------- ----------- Net cash provided by (used in) investing activities 71,232 (63,032) 33,060 (95,513) ----------- ------------ ----------- ----------- Cash flows from financing activities: Retirement of long-term debt - (5,880) - (10,880) Increase (decrease) in short-term loans (48,405) (118,001) 9,591 (146,791) Dividends paid (10,311) - (20,855) (21,878) Proceeds from issuance of long-term debt 17,000 - 17,000 - Proceeds from preferred trust securities - 125,000 - 125,000 Proceeds from issuance of common stock 11 350 11 1,755 Purchase of treasury stock (10,815) - (55,418) - ----------- ------------ ----------- ----------- Net cash provided by (used in) financing activities (52,520) 1,469 (49,671) (52,794) ----------- ------------ ----------- ----------- Net increase (decrease) in cash and cash equivalents 92,248 7,032 93,043 (29,242) Cash and cash equivalents at beginning of period 9,768 33,168 8,973 69,442 ----------- ------------ ----------- ----------- Cash and cash equivalents at end of period $ 102,016 $ 40,200 $ 102,016 $ 40,200 =========== ============ =========== =========== Cash paid during the period for: Interest (net of amount capitalized) $ 2,690 $ 1,860 $ 14,372 $ 18,710 =========== ============ =========== =========== Income taxes $ 1,233 $ 8,345 $ 517 $ 9,854 =========== ============ =========== =========== The accompanying notes are an integral part of these condensed consolidated financial statements.
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) ASSETS June 30, December 31, 1999 1998 ------------------------------------------------ (Thousands) ------------------------------------------------ Current assets: Cash and short-term investments $ 102,016 $ 102,444 Accounts receivable 128,040 199,363 Unbilled revenues 27,298 41,616 Inventory 26,026 33,743 Deferred purchased gas cost 17,600 39,445 Prepaid expenses and other 40,666 34,831 ------------------ ---------------- Total current assets 341,646 451,442 ------------------ ---------------- Property, plant and equipment 1,990,988 1,956,763 Less accumulated depreciation and depletion (810,328) (762,320) ------------------ ---------------- Net property, plant and equipment 1,180,660 1,194,443 ------------------ ---------------- Other assets 222,579 214,971 ------------------ ---------------- Total $ 1,744,885 $ 1,860,856 ================== ================ The accompanying notes are an integral part of these condensed consolidated financial statements.
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) LIABILITIES AND STOCKHOLDERS EQUITY June 30, December 31, 1999 1998 --------------------------------------------- (Thousands) --------------------------------------------- Current liabilities: Current portion long-term debt $ 75,000 $ 74,136 Short-term loans 125,295 115,703 Accounts payable 58,334 147,951 Other current liabilities 92,307 104,170 ----------------- ---------------- Total current liabilities 350,936 441,960 ----------------- ---------------- Long-term debt 298,350 281,350 Deferred and other credits 301,435 304,127 Commitments and contingencies - - Preferred trust securities 125,000 125,000 Capitalization: Common stockholders' equity: Common stock, no par value, authorized 80,000 shares; shares issued June 30, 1999, 37,252; December 31, 1998, 37,252 278,995 280,400 Treasury stock, shares at cost June 30, 1999, 3,415; December 31, 1998, 1,396 (93,313) (39,298) Retained earnings 483,450 467,326 Accumulated other comprehensive income (loss) 32 (9) ----------------- ---------------- Total common stockholders' equity 669,164 708,419 ----------------- ---------------- Total $ 1,744,885 $ 1,860,856 ================= ================ The accompanying notes are an integral part of these condensed consolidated financial statements.
Equitable Resources, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) A. The accompanying financial statements should be read in conjunction with the Company's 1998 Annual Report and Form 10-K. B. In the opinion of Company's management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position as of June 30, 1999 and 1998, and the results of operations and cash flows for the three and six months then ended. All adjustments are of a normal, recurring nature unless otherwise indicated. C. The results of operations for the three- and six-month periods ended June 30, 1999 and 1998, are not indicative of results for a full year because of the seasonal nature of the Company's natural gas distribution and energy marketing operations. D. In April 1998 management adopted a formal plan to sell the Company's natural gas midstream operations. The operations include an integrated gas gathering, processing and storage system in Louisiana and a natural gas and electricity marketing business based in Houston. The condensed consolidated financial statements include these as discontinued operations. In December 1998, the Company completed the sale of these operations to various parties for $338.3 million, which included working capital adjustments. Net loss from discontinued operations was $4.6 million for the six months ended June 30, 1998. These results were reported net of income tax benefit of $2.3 million. Interest expense allocated to discontinued operations was $4.0 million in the first six months of 1998. E. In April 1998, $125 million of 7.35% Trust Preferred Capital Securities were issued. The capital securities were issued through a subsidiary trust, Equitable Resources Capital Trust I, established for the purpose of issuing the capital securities and investing the proceeds in 7.35% Junior Subordinated Debentures issued by the Company. The capital securities have a mandatory redemption date of April 15, 2038; however, at the Company's option, the securities may be redeemed on or after April 15, 2013. Proceeds were used to reduce short-term debt outstanding. Interest expense for the three-and six months ended June 30, 1999, includes $4.6 million of preferred dividends related to the trust preferred capital securities. Equitable Resources, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) F. In May 1999, Company shareholders approved the establishment of the 1999 Equitable Resources, Inc. Long-Term Incentive Plan and the 1999 Equitable Resources, Inc. Non-Employee Directors' Stock Incentive Plan. These plans provide for the grant of up to 3,000,000 and 300,000 shares, respectively, of common stock awards to key employees and directors. The awards can be in the form of stock options, restricted stock grants or other performance-based awards, as determined by the Compensation Committee of the Board of Directors. Under the terms of these plans and the predecessor plan, 128,000 shares of restricted stock and options to purchase 1,009,000 shares of common stock at the then current market price of approximately $30 per share were granted to employees and directors of the Company on May 26, 1999. The awards vest three years from the date of grant and expire 5 to 10 years from the grant date. G. As more fully described in Management's Discussion and Analysis of Financial Condition and Results of Operations, the Company's Equitrans subsidiary settled its rate case with the Federal Energy Regulatory Commission (FERC) in April 1999. The net impact of the settlement on the three- and six-month periods ending June 30, 1999 recorded in the second quarter was an increase in earnings before interest and taxes of $3.9 million. H. Segment Disclosure - The Equitable Utilities segment's activities comprise the operations of the Company's state-regulated local distribution company, in addition to gas transportation, storage and marketing activities involving the Company's interstate natural gas pipelines. The Equitable Production segment's activities comprise the exploration, development, production, gathering and sale of natural gas and oil, and extraction and sale of natural gas liquids. NORESCO's activities comprise cogeneration and power plant development, the development and implementation of energy and water efficiency programs, performance contracting and central facility plant operations. The Equitable Energy segment provides marketing, supply and transportation services for the natural gas market. Equitable Resources, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Operating segments are evaluated on their contribution to the Company's consolidated results, based on earnings before interest and taxes. Interest charges and income taxes are managed on a consolidated basis and allocated pro forma to operating segments. Headquarters costs are billed to operating segments based on a fixed allocation of the annual headquarters' operating budget. Differences between budget and actual headquarters expenses are not allocated to operating segments, but included as a reconciling item to consolidated earnings from continuing operations.
Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 ------------------------------------ ------------------------------------ (Thousands) Revenues from external customers: Equitable Utilities $ 65,806 $ 62,176 $ 217,139 $ 202,978 Equitable Production 43,761 43,540 82,085 83,438 Equitable Services: NORESCO 40,986 22,157 78,963 40,442 Equitable Energy 39,078 52,891 231,499 137,355 ---------------- ---------------- --------------- --------------- Total $ 189,631 $ 180,764 $ 609,686 $ 464,213 ================ ================ =============== =============== Intersegment revenues: Equitable Utilities $ 3,579 $ 4,069 $ 6,789 $ 15,255 Equitable Production 7,526 3,197 10,559 15,848 Equitable Services: Equitable Energy 24,582 20,106 42,121 34,203 ---------------- ---------------- --------------- --------------- Total $ 35,687 $ 27,372 $ 59,469 $ 65,306 ================ ================ =============== =============== Segment profit (loss): Equitable Utilities $ 8,168 $ 4,669 $ 52,392 $ 39,110 Equitable Production 10,814 8,323 18,903 22,412 Equitable Services: NORESCO 3,587 1,691 6,936 1,699 Equitable Energy 817 (1,530) 2,240 (3,315) ---------------- ---------------- --------------- --------------- Total operating segments 23,386 13,153 80,471 59,906 Less: reconciling items Headquarters operating expenses (gains) not allocated to operating segments 2,440 439 2,626 (150) Interest expense 8,965 9,236 18,228 18,403 Income tax expenses 4,743 1,203 22,638 14,727 ---------------- ---------------- --------------- --------------- Net income from continuing operations $ 7,238 $ 2,275 $ 36,979 $ 26,926 ================ ================ =============== ===============
Equitable Resources, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) I. Derivative Instruments and Hedging Activities - In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company has not yet determined when it will adopt the provisions of this statement, which may be implemented at the beginning of any fiscal quarter. SFAS No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133." This statement delays the required implementation for the Company until 2001. The Company has not yet determined what the effect of SFAS No. 133 will be on the earnings and financial position of the Company. J. Reclassification - Certain previously reported amounts have been reclassified to conform with the 1999 presentation. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Equitable's consolidated net income for the quarter ended June 30, 1999, was $7.2 million, or $0.21 per share, compared with net income of $2.3 million, or $0.06 per share, for the quarter ended June 30, 1998. The earnings improvement for the 1999 quarter is primarily attributable to increased natural gas production in the offshore Gulf of Mexico region, the continuing benefit from last year's cost structure improvements, a favorable rate settlement at the Company's Equitrans pipeline subsidiary, increased construction activity in the NORESCO segment and improved margins in the Equitable Energy natural gas marketing business. These improvements were partially offset by one-time expenses for the consolidation of commercial activities and streamlining administrative functions in the Company's utility businesses, increased exploration costs in the Production segment, weak natural gas prices in 1999, and an increased provision for performance-related bonuses, reflecting the Company's strong first half and anticipated full-year results. In the six months ended June 30, 1999, Equitable's consolidated net income was $37.0 million, or $1.07 per share, compared to $22.3 million, or $0.60 per share, for the six months ended June 30, 1998. The 1998 period included a loss on the Company's discontinued midstream operations of $4.6 million, or $0.12 per share. These operations were sold in December 1998. The 1999 six months net income of $1.07 per share represents a 50% increase over earnings per share from continuing operations of $0.72 for the first half of 1998. Excluding one-time items, the 1999 improvement for the six-month period is due to higher production volumes, increased NORESCO construction activity, improved gas marketing margins, higher first quarter weather-related sales in the distribution operations and lower selling, general and administrative expenses across all of the Company's businesses. These improvements were partially offset by year-to-date wellhead prices for natural gas that were 18 percent below the average for the first six months of 1998. RESULTS OF OPERATIONS EQUITABLE UTILITIES Equitable Utilities' operations comprise the sale and transportation of natural gas to retail customers at state-regulated rates, interstate transportation and storage of natural gas subject to federal regulation and the marketing of natural gas. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) EQUITABLE UTILITIES (Continued)
Three Months Ended Six Months Ended June 30, June 30, EQUITABLE UTILITIES 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ (Thousands, except prices & degree days) Operating revenues: Residential gas sales $ 28,309 $ 35,974 $ 118,833 $ 140,775 Commercial gas sales 4,041 3,423 16,490 14,073 Industrial and utility gas sales 10,997 10,745 18,386 22,357 Marketed gas sales 2,244 2,698 4,035 5,297 Transportation service 18,702 9,405 54,864 27,948 Storage service 2,678 2,530 5,139 4,975 Other 2,415 1,470 6,181 2,808 -------------- --------------- --------------- ------------- Total revenues 69,386 66,245 223,928 218,233 Cost of energy purchased 15,934 27,382 87,103 102,980 Revenue related taxes 1,540 1,810 6,412 7,190 -------------- --------------- --------------- ------------- Net operating revenues 51,912 37,053 130,413 108,063 Operating expenses: Operations and maintenance 18,664 16,318 38,004 34,935 Selling, general and administrative 10,108 10,937 18,916 23,570 Depreciation, depletion and amortization 14,972 5,129 21,101 10,448 -------------- --------------- --------------- ------------- Total operating expenses 43,744 32,384 78,021 68,953 -------------- --------------- --------------- ------------- Earnings before interest and taxes $ 8,168 $ 4,669 $ 52,392 $ 39,110 ============== =============== =============== ============= Sales quantities (Mcf): Residential gas sales 2,524 3,050 12,040 13,720 Commercial gas sales 365 342 1,687 1,454 Industrial and utility gas sales 4,738 4,048 8,313 8,666 Marketed gas sales 1,083 1,160 2,116 2,377 Transportation deliveries 9,282 11,808 27,564 22,743 Average selling prices (per Mcf): Residential gas sales $ 11.216 $ 11.795 $ 9.870 $ 10.261 Commercial gas sales 11.071 10.009 9.775 9.679 Industrial and gas sales 2.321 2.654 2.212 2.580 Marketed gas sales 2.072 2.326 1.907 2.228 Heating degree days (normal: QTR - 712, YTD - 3,728) 562 572 3,476 2,882
Three Months Ended June 30, 1999 vs. Three Months Ended June 30, 1998 The pipeline operations of Equitrans, L.P. (Equitrans) and Three Rivers Pipeline Corporation are subject to rate regulation by the FERC. Equitrans filed a rate case in April 1997, which addressed the recovery of certain stranded plant costs related to the implementation of Order 636. The requested rates were placed into effect in August 1997, subject to refund, pending the final FERC order. On April 29, 1999, the FERC approved, without modification, the joint stipulated settlement agreement resolving all issues in its proceeding. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) EQUITABLE UTILITIES (Continued) The approved settlement provides for prospective collection of increased gathering charges. In addition, the settlement provides Equitrans the opportunity to retain all revenues associated with interruptible transportation and negotiated rate agreements as well as moving its gathering charge toward a cost-based rate. In the second quarter of 1999, Equitrans recorded the final settlement of the rate case, including adjustment of the prior provisions for refund and recognition of the previously deferred revenues and costs related to the stranding of certain gathering plant. Equitable Utilities had earnings before interest and taxes (EBIT) for the June 1999 quarter of $8.2 million compared to $4.7 million for the 1998 period. The segment's results for the 1999 quarter include income of $3.9 million from recognition of the settlement of Equitrans' rate case described above. Results also include charges of $2.6 million for further reorganization of utility segment operating functions and consolidation of facilities. EBIT, excluding these items, of $6.9 million increased $2.2 million, or 47%, attributed to lower operating expenses from restructuring initiatives, which began in the fourth quarter of 1998, and higher margins from distribution operations. The higher distribution margins are the result of increases in throughput and revenues from nontraditional services, including balancing and pooling services, and services provided to marketers on the distribution system. Net operating revenues for the three months ended June 30, 1999, of $51.9 million include $12.3 million related to recognition of the rate settlement described above and $0.5 million for the pass-through of products extraction costs to customers. Net operating revenues of $39.1 million for the quarter, excluding the impact of the rate settlement and extraction revenues, increased $2.0 million, or 5%, over the $37.1 million for the 1998 period due primarily to higher distribution throughput and increased revenues from nontraditional services for distribution operations. Operating expenses of $43.7 million for the three months ended June 30, 1999, include $8.7 million of amortization expense related to the stranded plant from recognition of the rate settlement, products extraction costs of $0.5 million and $2.6 million for reorganization as more fully described above. Operating expenses of $31.9 million, excluding the effect of the rate settlement, extraction charges and one-time expenses, decreased $0.5 million from the 1998 amount of $32.4 million due primarily to restructuring initiatives, which began in the fourth quarter of 1998. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) EQUITABLE UTILITIES (Continued) Six Months Ended June 30, 1999 vs. Six Months Ended June 30, 1998 Equitable Utilities had EBIT of $52.4 million for the six months ended June 30, 1999. The segment's results for the 1999 period of $51.1 million, excluding the impact of the Equitrans' rate case settlement and charges described above, increased $12.0 million, or 31%, over the $39.1 million for the six months ended June 30, 1999. The increase in EBIT is a result of higher net revenues due principally to colder weather during the heating season and increased revenues from nontraditional services by the distribution operations. Net operating revenues for the six months ended June 30, 1999, of $130.4 million include $12.3 million related to recognition of the rate settlement described above and $0.7 million for the pass-through of products extraction costs to customers. Net operating revenues of $117.4 million for the period, excluding the impact of the rate settlement and extraction revenues, increased $9.3 million, or 9%, over the $108.1 million for the 1998 period. The increase in net revenues is due primarily to higher throughput and increased revenues from nontraditional services for distribution operations. Operating expenses of $78.0 million for the six months ended June 30, 1999, include $8.7 million of amortization expense related to the stranded plant from recognition of the rate settlement, $0.7 million of products extraction costs and $2.6 million for reorganization as more fully described above. Operating expenses of $66.0 million, excluding the effect of the rate settlement, extraction costs and reserves, decreased $3.0 million from the 1998 amount of $69.0 million due primarily to the benefit of restructuring initiatives, which began in the fourth quarter of 1998, substantially offset by higher depreciation expense. EQUITABLE PRODUCTION The Production operations comprise the exploration and production of natural gas, natural gas liquids and crude oil through operations focused in the Appalachian and Gulf of Mexico regions. In 1998, the managerial responsibility for the operations conducted by two subsidiaries, Kentucky West Virginia Gas Company and Nora Transmission Company, were transferred from Equitable Utilities to Equitable Production under a services agreement. The financial results for both periods are reclassified to reflect the new structure. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) EQUITABLE PRODUCTION (Continued)
Three Months Ended Six Months Ended June 30, June 30, EQUITABLE PRODUCTION 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ (Thousands, except prices) Operating revenues: Produced natural gas $ 31,541 $ 28,257 $ 57,761 $ 60,023 Transportation 6,331 6,397 12,940 13,015 Natural gas liquids 4,461 4,110 8,464 9,939 Crude oil 4,336 3,690 6,008 7,856 Marketed natural gas 2,530 2,573 4,473 4,530 Other 2,088 1,709 2,998 3,922 -------------- -------------- -------------- -------------- Total revenues 51,287 46,736 92,644 99,285 Cost of energy purchased 6,632 7,078 10,964 12,100 -------------- -------------- -------------- -------------- Net operating revenues 44,655 39,658 81,680 87,185 Operating expenses: Operating and maintenance 2,574 2,665 6,237 6,852 Production 6,538 7,702 12,450 14,566 Dry hole 1,247 11 1,277 115 Other exploration 2,548 1,420 3,020 2,298 Selling, general and administration 6,057 7,240 11,281 16,446 Depreciation, depletion and amortization 14,877 12,297 28,512 24,496 -------------- -------------- -------------- -------------- Total operating expenses 33,841 31,335 62,777 64,773 Earnings from continuing operations, before interest and taxes $ 10,814 $ 8,323 $ 18,903 $ 22,412 ============== ============== ============== ============== Sales quantities: Produced natural gas (Mcf) 15,401 13,305 30,784 26,299 Transportation deliveries (Mcf) 9,056 11,439 18,671 22,161 Natural gas liquids (gallons) 16,938 16,021 35,712 34,232 Crude oil (Bbls) 304 271 468 535 Marketed gas sales (Mcf) 1,115 1,345 2,517 2,332 Average selling prices: Produced natural gas (per Mcf) $ 2.048 $ 2.124 $ 1.876 $ 2.282 Natural gas liquids (per gallon) 0.263 0.257 0.237 0.290 Crude oil (per barrel) 14.263 13.616 12.838 14.684 Marketed gas sales (per Mcf) 2.269 1.913 1.777 1.943
Three Months Ended June 30, 1999 vs. Three Months Ended June 30, 1998 Equitable Production's EBIT for the June 1999 quarter was $10.8 million, which was $2.5 million higher than the June 1998 quarter. The segment's positive results were primarily due to increased natural gas production offset in part by lower natural gas prices and higher total operating expenses. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) EQUITABLE PRODUCTION (Continued) Net operating revenues for the three months ended June 30, 1999, increased $5.0 million, or 13%, compared with the second quarter of 1998. Natural gas volumes increased 2.1 Bcf, which positively impacted revenues by $4.3 million. The higher gas production volumes are related to production increases in the Gulf of Mexico region from drilling activities at West Cameron 180/198, West Cameron 540 and South Marsh Island 39. Also crude oil production increased by 33 MBbls in the current quarter compared with the same quarter last year due to the drilling activities at South Marsh Island 39. The increase in oil production as well as higher sales quantities of natural gas liquids contributed $0.7 million to revenues. Partially offsetting the production increases in the current quarter was a $.076 per Mcf decline in Equitable Production's average natural gas price, which negatively impacted revenues by $1.0 million. Total operating expenses for the current quarter increased $2.5 million compared with the same quarter in 1998. Depreciation, depletion and amortization (DD&A) was $2.6 million higher because of increased natural gas production. During the second quarter of 1999, the Gulf region drilled one dry hole at West Cameron 575, which accounted for the current quarter dry hole costs of $1.2 million. Also other exploration costs were $1.1 million higher for the June 1999 quarter due to a lease impairment taken in the Appalachian region. These operating expense increases were partially offset by a $1.2 million decline in selling, general and administrative (SG&A) expenses as a result of management and staff headcount reductions and corporate restructuring activities, which occurred in the fourth quarter of 1998. Also production costs decreased $1.2 million due to operating efficiencies and decreased well-tending staff. Six Months Ended June 30, 1999 vs. Six Months Ended June 30, 1998 For the six months ended June 30, 1999, Equitable Production had EBIT of $18.9 million compared with $22.4 million for the first six months of 1998. The decrease in the segment's EBIT was attributable to lower average market prices for natural gas, crude oil and natural gas liquids partially offset by increased natural gas production and lower total operating expenses. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) EQUITABLE PRODUCTION (Continued) For the first six months of 1999, net operating revenues decreased to $81.7 million from $87.2 million for the comparable period last year. This decrease was primarily due to reductions of 18%, 13% and 18% in Equitable Production's average prices for natural gas, crude oil and natural gas liquids, respectively. The total revenue impact of these 1999 price declines was $13.5 million, of which $10.7 million was due to lower gas prices. Partially mitigating the effect of lower prices, natural gas production increased 4.5 Bcf, or 17%, in the first half of 1999 compared with the same period in 1998. This production increase contributed $8.4 million to current year revenues. The increased production volume is related to the drilling activities in the Gulf region discussed above under second quarter results. The decline in crude oil production in the six-month period reflects the depletion of West Cameron 580 and certain West Cameron 180/198 wells offset in part by new production at South Marsh Island 39. Total operating expenses for the six-month period of 1999 decreased by $2.0 compared with the first half of 1998. The decline in expenses reflects lower SG&A and production costs partially offset by higher DD&A due to increased gas production and the dry hole drilled in the second quarter of 1999. The savings in SG&A as well as production costs were primarily due to the reasons noted above under second quarter results. In addition, prior year SG&A includes $1.4 million of expenses recorded in the first quarter of 1998 related to the sales of the Company's Colombian operations and Western properties. Also first quarter 1998 production costs for the Gulf region were $0.6 million higher due to initial costs for certain properties acquired at the end of 1997. EQUITABLE SERVICES Equitable Services provides energy and energy related products and services that are designed to reduce its customers' operating costs and improve their productivity. The majority of Equitable Services' revenue and earnings is derived from energy saving performance contracting services and natural gas marketing activities. Equitable Services is comprised of two distinct business segments: NORESCO and Equitable Energy. The NORESCO segment includes ERI Services, a specialized business unit providing performance contracting services exclusively to the Federal Government. The financial results of the NORESCO segment include ERI Services. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) NORESCO NORESCO's customers include commercial, governmental, institutional and industrial end-users. The majority of NORESCO's revenue and earnings comes from energy saving performance contracting services. NORESCO provides the following integrated energy management services: project development and engineering analysis; construction; management; financing; equipment operation and maintenance; and energy savings metering, monitoring and verification. NORESCO also manages the segment's facilities management division, which develops and operates private power, cogeneration and central plant facilities in the U.S. and selected international markets.
Three Months Ended Six Months Ended June 30, June 30, NORESCO 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ (Thousands) Energy service contracting revenues $ 40,986 $ 22,157 $ 78,963 $ 40,442 Energy service contract cost 32,470 15,529 61,972 28,560 -------------- -------------- -------------- ----------- Gross margin 8,516 6,628 16,991 11,882 -------------- -------------- -------------- ------------- Operating expenses: Selling, general and administrative 4,368 4,403 9,057 8,983 Depreciation, depletion and amortization 1,138 1,075 2,248 2,160 -------------- -------------- -------------- ------------- Total operating expenses 5,506 5,478 11,305 11,143 Other income 577 541 1,250 960 -------------- -------------- -------------- ------------- Earnings before interest and taxes $ 3,587 $ 1,691 $ 6,936 $ 1,699 ============== ============== ============== =============
Three Months Ended June 30, 1999 vs. Three Months Ended June 30, 1998 NORESCO's gross margin increased by 28% to $8.5 million for the quarter ended June 30, 1999, compared to $6.6 million for the same period in 1998. The increase in gross margin reflects the continued expansion of this segment's operations and the implementation of larger value contracts. Construction completed during the quarter of $40.0 million was more than double the $19.5 million completed during the second quarter of 1998. The gross margin rate as a percent of sales declined to 21% compared to 30% during 1998, primarily due to the increase in revenues from the federal government market, which contributes lower gross margins than the company's other core markets. At June 30, 1999, construction backlog totaled approximately $85 million, an increase of $13 million over backlog at June 30, 1998. Operating expenses for this segment remained relatively unchanged, as increased marketing and development expenses were offset by lower direct labor costs and a reduction in allocated corporate overhead expense. Other income represents equity-in-earnings for the company's investments in unconsolidated entities, primarily power generation assets. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) NORESCO (Continued) Six Months Ended June 30, 1999 vs. Six Months Ended June 30, 1998 NORESCO's gross margin increased by 43% to $17.0 million for the six months ended June 30, 1999, compared to $11.9 million for the same period in 1998. The increase in gross margin reflects the continued expansion of this segment's operations and the implementation of larger value contracts. Construction completed during the six months of $73.6 million was up 166% from the $27.6 million completed during the same period in 1998. The gross margin rate as a percent of sales declined to 22% compared to 29% during 1998, primarily due to the increase in revenues from the federal government market, which contributes lower gross margins than the company's other core markets. Increased competition in the energy services industry has also contributed to the decline in average gross margins. Operating expenses for this segment remained relatively unchanged for the six-month period, as increased marketing and project development expenses were offset by lower administrative expenses and a reduction in allocated corporate overhead expense. Other income represents equity-in-earnings for the company's investments in unconsolidated entities, primarily power generation assets. EQUITABLE ENERGY Equitable Energy is a non-regulated residential, commercial and industrial marketer of natural gas. Services and products offered by Equitable Energy include commodity procurement and delivery, physical gas management operations and control, financial risk management and customer support services.
Three Months Ended Six Months Ended June 30, June 30, Equitable Energy 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- (Thousands) Operating revenues: Marketed natural gas $ 61,693 $ 72,998 $ 271,528 $ 171,559 Crude oil 1,804 - 1,804 - Other 163 - 288 - -------------- -------------- -------------- ------------- Total revenues 63,660 72,998 273,620 171,559 Cost of energy purchased 61,414 72,539 268,267 169,171 -------------- -------------- -------------- ------------- Net operating revenues 2,246 459 5,353 2,388 -------------- -------------- -------------- ------------- Operating expenses: Selling, general and administrative 1,379 2,011 3,014 5,428 Depreciation, depletion and amortization 50 (22) 99 275 -------------- -------------- -------------- ------------- Total operating expenses 1,429 1,989 3,113 5,703 -------------- -------------- -------------- ------------- Earnings (loss) before interest and taxes $ 817 $ (1,530) $ 2,240 $ (3,315) ============== ============== ============== =============
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) EQUITABLE ENERGY (Continued) Three Months Ended June 30, 1999 vs. Three Months Ended June 30, 1998 Net operating revenues increased to $2.2 million for the quarter ended June 30, 1999, compared to $0.5 million for the same period in 1998. Equitable Energy recognized a $0.3 million positive transportation settlement in the second quarter of 1999. Margins on a per-unit basis for the second quarter were higher than the same period in 1998 due to an increased emphasis in the residential and industrial markets. Equitable Energy operating expenses for the quarter were 30% lower than those of the second quarter of 1998, reflecting more cost control plus a significant staff reduction and office closing completed as part of the corporate-wide restructuring in the fourth quarter of 1998. Six Months Ended June 30, 1999 vs. Six Months Ended June 30, 1998 Net operating revenues increased to $5.4 million for the six month period ended June 30, 1999, compared to $2.4 million for the same period in 1998. During the first six months, Equitable Energy marketed 110 billion cubic feet (bcf) of natural gas compared to 66 bcf for the same period last year. The increased volume is a result of the addition of residential customer choice programs in Pennsylvania and Ohio (3 bcf) and increased utility/marketing company volumes transported during the 1999 winter heating season (32 bcf). Effective June 1, 1999, Equitable Energy discontinued its participation in the residential customer choice program in Pennsylvania and transferred those customers back to Equitable Gas Company. The utility/marketing company business represents high volume, comparatively low margin transactions, which complement the higher margin, lower volume base commercial and residential sales. Many of these utility/marketing company contracts expired at the end of March 1999 and were not renewed. Equitable Energy operating expenses for the six month period ended June 30, 1999, were 45% below those of the same period of 1998, again reflecting cost control, a significant staff reduction and office closing completed as part of the corporate-wide restructuring in the fourth quarter of 1998. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) CAPITAL RESOURCES AND LIQUIDITY Cash Flows Cash required for operations is impacted primarily by the seasonal nature of Equitable Resources' natural gas distribution operations and the volatility of oil and gas commodity prices. Cash provided by operating activities totaled $73.5 million in the three months ended June 30, 1999, compared to cash provided by continuing operations of $68.6 million in the 1998 period. Cash flows from operations increased in 1999 primarily as a result of the increase in earnings and improved collections of accounts receivable, offset in part by an increase in gas in storage in the current year. During the six months ended June 30, 1999, cash provided by operating activities decreased to $109.7 million, compared to $119.1 million from continuing operations for the first six months of 1998. The $9.4 million decrease is primarily a result of a decrease of $16 million in accounts payable and accrued expenses in production due to decreased capital expenditures for drilling in the Gulf and final payment on working capital adjustments for the December 1998 sale of the Company's midstream operations, decreased production receipts due to lower commodity prices, and the payment of $5 million of severance accrued at December 31, 1998 under the corporate restructuring program. The 1999 decrease was partially offset by increased distribution division collections due to colder winter weather and lower gas cost, and lower expenses throughout the Company. During the first six months of 1999, there were no material changes in the restructuring charge accrued in prior periods. During the three months and six months ended June 30, 1999, the Company repurchased 0.3 million and 2.1 million shares of common stock at average prices of $34.10 and $27.17, respectively, per share. Including shares repurchased in the fourth quarter of 1998, the Company has repurchased 3.4 million shares. Equitable Resources' financial objectives require ongoing capital expenditures for growth projects in continuing operations of the Equitable Production segment, as well as replacements, improvements and additions to plant assets in the Equitable Utilities segment. Such capital expenditures during the first half of 1999 were approximately $46.3 million, including $23.5 million and $11.8 million for exploration and production projects in the Gulf of Mexico and Appalachian regions, respectively. A total of $119 million has been authorized for the 1999 capital expenditure program. The Company expects to continue to finance its 1999 capital expenditure program with cash generated from operations and with short-term loans. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) CAPITAL RESOURCES AND LIQUIDITY (Continued) On June 1, 1999 the Company announced an agreement to purchase Carnegie Natural Gas Company and affiliated subsidiaries (Carnegie) from USX-Marathon Group. Management anticipates the purchase will be completed during the fourth quarter 1999. The purchase of Carnegie will be funded by cash from operations or existing sources of short-term debt. The purchase will not have a material effect on the Company's financial position or results of operations. Capital Resources Equitable Resources has adequate borrowing capacity to meet its financing requirements. Bank loans and commercial paper, supported by available credit, are used to meet short-term financing requirements. Interest rates on these short-term loans averaged 4.86% during the first six months of 1999. Equitable Resources maintains a revolving credit agreement with a group of banks providing $500 million of available credit. Adequate credit is expected to continue to be available in the future. In the fourth quarter of 1998, the Company completed the sale of its midstream operations for $338 million. A portion of the proceeds to the Company were used to retire a portion of the Company's outstanding long- and short-term debt and to fund the repurchase of common stock. At June 30, 1999, $95 million of proceeds is included in cash and cash equivalents, of which $75 million was used to retire additional long-term debt maturing on July 1, 1999. The Company has completed the evaluation of its Gulf region production operations, previously identified as a non-core business. Management is actively exploring alternatives to maximize the shareholder value from these operations. Year 2000 State of Readiness The Company initiated an enterprise-wide project in 1996 to address the Year 2000 issue. A management team was put in place to manage this project and a detailed project plan has been developed to address the three identified primary risk areas: process controls and facilities, business information systems applications and issues relative to third party product and service providers. This plan is continuously updated and reviewed regularly with senior management and the Board of Directors. The Company is on schedule to complete remediation and testing of all critical components as planned. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) CAPITAL RESOURCES AND LIQUIDITY (Continued) To date the Company has completed the inventory and assessment phases covering all process controls (embedded chips), facilities and systems applications. The remediation and testing of process controls, using both internal resources and contracted engineers, is well underway (98% complete) and on schedule. The testing and remediation of systems applications are on schedule with approximately 96% of the critical applications remediated and tested. Equitable anticipates that all critical systems will be Y2K compliant by September 1999. Additionally, the Company has developed a formal communications process with external parties with whom it does business to determine the extent to which they have addressed their Year 2000 compliance. The Company will continue to evaluate responses as they are received. Actions to remediate potential problems (up to and including shifting business to Year 2000 compliant vendors from those with problems) will take place in 1999. Costs The total cost to date of the Company's Year 2000 project is $3.4 million and the total cost estimate for the balance of the project is an additional $1.6 million. All of the costs have been or will be charged to operating expense except $.5 million of systems upgrades, which will be capitalized and charged to expense over the estimated useful life of the associated hardware and software. Additional costs could be incurred if significant remediation activities are required with third party suppliers (see below). The estimated costs to convert remaining systems is not expected to be material to results of operations in any future period. Risks and Contingencies The Company continues to evaluate risks associated with the potential inability of outside parties to successfully complete their Year 2000 effort, and contingency plans are being developed and/or adapted as appropriate. While the Company believes it has taken the necessary steps to provide for the continued safe and reliable operation of its natural gas delivery system into the Year 2000, monitoring the progress of critical suppliers is an ongoing process. A worst-case scenario would involve the failure of one or more of the gas marketers or pipelines supplying the Company's distribution operations. If this occurs, the Company would either supply its customers from existing internal supply sources or attempt to purchase supply on the "spot" market, probably at somewhat higher prices. Unless supply shortfalls were of a long duration or occurred during a period of extreme weather conditions when spot supplies might not be as readily available, it would be unlikely that the distribution company would have to curtail deliveries to its customers. If it appears that this scenario is more than a remote possibility additional contingency plans will be put into place. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) INFORMATION REGARDING FORWARD LOOKING STATEMENTS Disclosures in this report may include forward-looking statements related to such matters as anticipated financial performance, business prospects, capital projects, new products and operational matters. The Company notes that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company business include, but are not limited to, the following: weather conditions, the pace of deregulation of retail natural gas markets, the timing and extent of changes in commodity prices for natural gas and crude oil, changes in interest rates, the timing and extent of the Company's success in acquiring natural gas and crude oil properties and in discovering, developing and producing reserves, the inability of the Company or others to remediate Year 2000 concerns in a timely fashion, delays in obtaining necessary governmental approvals, the impact of competitive factors on profit margins in various markets in which the Company competes and other factors detailed in the Company's filings with the Securities and Exchange Commission. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have not been any material changes regarding quantitative and qualitative disclosures about market risk from the information reported in the Company's 1998 Annual Report on Form 10-K. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held on May 26, 1999. (c) Brief description of matters voted upon: (1) Elected the named directors to serve three-year terms as follows: Shares Shares Director Voted For Withheld Phyllis A. Domm, Ed.D. 30,360,767 564,569 James E. Rohr 30,399,907 507,429 David S. Shapira 30,366,263 541,073 (2) Ratified appointment of Ernst & Young, LLP, as independent auditors for the year ended December 31, 1999. Vote was 30,696,426 shares for; 143,450 shares against and 67,460 shares abstained. (3) Approved the 1999 Equitable Resources, Inc. Non-Employee Directors' Stock Incentive Plan. Vote was 16,421,275 shares for; 11,018,155 shares against and 67,460 shares abstained. (4) Approved the 1999 Equitable Resources, Inc. Long-Term Incentive Plan. Vote was 14,728,651 shares for; 12,711,487 shares against and 297,693 shares abstained. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.1 The 1999 Equitable Resources, Inc. Non-Employee Directors' Stock Incentive Plan (As Amended May 26, 1999). 10.2 The 1999 Equitable Resources, Inc. Long-Term Incentive Plan (As Amended May 26, 1999). (b) Reports on Form 8-K during the quarter ended June 30, 1999: Form 8-K Current report dated June 1, 1999, announcing agreement between the Registrant, Equitable Resources, Inc., (EQT) and USX-Marathon Group (MRO) wherein EQT and/or its subsidiaries will acquire from MRO 100 percent of the stock of Carnegie Natural Gas Company and affiliated subsidiaries of USX Corporation. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EQUITABLE RESOURCES, INC. -------------------------------------------------- (Registrant) /s/ David L. Porges -------------------------------------------------- David L. Porges Senior Vice President and Chief Financial Officer Date: August 13, 1999 INDEX TO EXHIBITS Exhibit No. Document Description 10.1 The 1999 Equitable Resources, Inc. Filed Herewith Non-Employee Directors' Stock Incentive Plan (As Amended May 26, 1999). 10.2 The 1999 Equitable Resources, Inc. Filed Herewith Long-Term Incentive Plan (As Amended May 26, 1999). 27 Financial Data Schedule for the Period Filed Herewith Ended June 30, 1999 EX-10.1 2 1999 NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN 1999 EQUITABLE RESOURCES, INC. NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN (As amended May 26, 1999) SECTION 1. PURPOSE 1.01 The purpose of the 1999 Equitable Resources, Inc. Non-Employee Directors' Stock Incentive Plan (the "Plan") is to assist the Company in attracting and retaining the services of non-employee directors who exhibit a high degree of business responsibility, personal integrity and professionalism. SECTION 2. DEFINITIONS; CONSTRUCTION 2.01 Definitions. In addition to the terms defined elsewhere in the Plan, the following terms as used in the Plan shall have the following meanings when used with initial capital letters: 2.01.1 "Award" means any Option or Other Stock-Based Award granted under the Plan. 2.01.2 "Award Agreement" means any written agreement, contract or other instrument or document evidencing an Award. 2.01.3 "Board" means the Company's Board of Directors. 2.01.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time, together with rules, regulations and interpretations promulgated thereunder. References to particular sections of the Code shall include any successor provisions. 2.01.5 "Change of Control" has the meaning provided in Section 9.03. 2.01.6 "Committee" means the Compensation Committee or such other Committee of the Board as may be designated by the Board to administer the Plan, as referred to in Section 3.01 hereof; provided however, that any member of the Committee participating in the taking of any action under the Plan shall qualify as a "non-employee director" as then defined under Rule 16b-3. 2.01.7 "Common Stock" means shares of the common stock, without par value, and such other securities of the Company as may be substituted for Shares pursuant to Section 8.01 hereof. 2.01.8 "Disability" means that a Participant is disabled within the meaning of Section 422(c)(6) of the Code. 2.01.9 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.01.10 "Fair Market Value" of shares of any stock, including but not limited to Common Stock, or units of any other securities (herein "shares"), shall be the closing price for the date as of which Fair Market Value is to be determined in the principal market in which such shares are traded, as quoted in The Wall Street Journal (or in such other reliable publication as the Committee, in its discretion, may determine to rely upon). If the Fair Market Value of shares on any date cannot be determined on the basis set forth in the preceding sentence, or if a determination is required as to the Fair Market Value on any date of property other than shares, the Committee shall in good faith determine the Fair Market Value of such shares or other property on such date. Fair Market Value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. 2.01.11 "Option" means a right granted under Section 6.02 hereof to purchase Shares at a specified price during specified time periods as provided in Section 6.02. Each Option shall be a nonstatutory stock option, which is an Option not intended to meet the requirements of Section 422 of the Code. 2.01.12 "Other Stock-Based Award" means an Award, granted under Section 6.04 hereof, that is denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares. 2.01.13 "Participant" means at any time any person who is a member of the Board, but who is not at the time a full-time employee of the Company or any Subsidiary nor has been a full-time employee during the preceding 12-month period. The term "Participant" does not include advisory, emeritus or honorary directors. 2.01.14 "Reload Option Rights" and "Reload Option" have the meanings provided in Section 6.02.2(v). 2.01.15 "Retirement" means that a Participant ceases to be a member of the Board for any reason on or after reaching the age of fifty-eight (58) years with at least sixty (60) months of service as a director. Service shall include the time a director was an employee director. 2.01.16 "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor to such Rule promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. 2.01.17 "Shares" means the common stock of the Company, without par value, and such other securities of the Company as may be substituted for Shares pursuant to Section 8.01 hereof. 2.01.18 "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the chain owns stock possessing at least 50% of the total combined voting power of all classes of stock in one of the other corporations in the chain. 2.02 Construction. For purposes of the Plan, the following rules of construction shall apply: 2.02.1 The word "or" is disjunctive but not necessarily exclusive. 2.02.2 Words in the singular include the plural; words in the plural include the singular; words in the neuter gender include the masculine and feminine genders, and words in the masculine or feminine gender include the other and neuter genders. SECTION 3. ADMINISTRATION 3.01 The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan: (i) to interpret and administer the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (ii) to adopt, amend, suspend, waive and rescind such rules and regulations as the Committee may deem necessary or advisable to administer the Plan; (iii) to correct any defect or supply any omission or reconcile any inconsistency, and to construe and interpret the Plan, the rules and regulations, any Award Agreement or other instrument entered into or Award granted under the Plan; (iv) to determine the type or types of Other Stock-Based Awards to be granted to each Participant; (v) to determine the number of Other Stock-Based Awards to be granted, the number of Shares or amount of cash or other property to which an Other Stock-Based Award will relate, the terms and conditions of any Other Stock-Based Award (including, but not limited to, any exercise price, grant price or purchase price, any limitation or restriction, any schedule for lapse of limitations, forfeiture restrictions or restrictions on exercisability or transferability, and accelerations or waivers thereof, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Other Stock-Based Award; (vi) to determine whether, to what extent and under what circumstances an Other Stock-Based Award may be settled in, or the exercise price of an Other Stock-Based Award may be paid in cash, Shares, other Awards or other property, or an Other Stock-Based Award may be accelerated, vested, canceled, forfeited, exchanged or surrendered; (vii) to determine whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts payable with respect to an Other Stock-Based Award shall be deferred, whether automatically or at the election of the Committee or at the election of the Participant; (viii) to prescribe the form of each Award Agreement, which need not be identical for each Participant; (ix) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan; and (x) to make such filings and take such actions as may be required from time to time by appropriate state, regulatory and governmental agencies. Any action of the Committee with respect to the Plan shall be final, conclusive and binding on all Persons, including the Company, Participants, any Person claiming any rights under the Plan from or through any Participant and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company the authority, subject to such terms as the Committee shall determine, to perform administrative functions under the Plan. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer, manager or other employee of the Company, the Company's independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. Any and all powers, authorizations and discretions granted by the Plan to the Committee shall likewise be exercisable at any time by the Board. SECTION 4. SHARES SUBJECT TO THE PLAN 4.01 The maximum net number of Shares which may be issued and in respect of which Awards may be granted under the Plan shall be limited to 300,000 shares of Common Stock, subject to adjustment as provided in Section 8.01. For purposes of this Section 4.01, the number of Shares to which an Award relates shall be counted against the number of Shares available under the Plan at the time of grant of the Award, unless such number of Shares cannot be determined at that time, in which case the number of Shares actually distributed pursuant to the Award shall be counted against the number of Shares available under the Plan at the time of distribution; provided, however, that Awards related to or retroactively added to, or granted in tandem with, substituted for or converted into, other Awards shall be counted or not counted against the number of Shares reserved and available under the Plan in accordance with procedures adopted by the Committee so as to ensure appropriate counting but avoid double counting. If any Shares to which an Award relates are forfeited, or payment is made to the Participant in the form of cash, cash equivalents or other property other than Shares, or the Award otherwise terminates without payment being made to the Participant in the form of Shares, any Shares counted against the number of Shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture, alternative payment or termination, again be available for Awards under the Plan. If the exercise price of an Award is paid by delivering to the Company Shares previously owned by the Participant, the Shares covered by the Award equal to the number of Shares so delivered shall again be available for Awards under the Plan. Any Shares distributed pursuant to an Award may consist, in whole or part, of authorized and unissued Shares or of treasury Shares, including Shares repurchased by the Company for purposes of the Plan. SECTION 5. ELIGIBILITY 5.01 Awards shall be granted only to Participants as defined in Section 2.01.13. SECTION 6. SPECIFIC TERMS OF AWARDS 6.01 General. Subject to the terms of the Plan and any applicable Award Agreement, Awards may be granted as set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to the terms of Section 10.01), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine. Except as required by applicable law, Awards may be granted for no consideration other than prior and/or future services. 6.02 Automatic Option Grants. 6.02.1 Annual Option Grants. Subject to Section 12.01 hereof, on the first day of June (or if not a day on which the New York Stock Exchange is open for trading, then on the first such trading day thereafter) in each year during the term of the Plan, each Person who is then a Participant shall automatically be granted an Option for 500 Shares. 6.02.2 Terms of Options. The Options granted under Section 6.02.1 shall be granted to Participants on the following terms and conditions: (i) Exercise Price. The exercise price per Share of an Option shall be 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be five (5) years from the date of grant, provided however, that the Option shall expire upon the Participant's termination of service as a director of the Company for any reason other than Retirement, Disability or death. (iii) Exercisability. The Option shall become exercisable upon the expiration of three years from the date of grant or, if earlier, upon the Participant's termination of service as a director of the Company by reason of Retirement, Disability or death. (iv) Methods of Exercise. The exercise price of any Option may be paid in cash or Shares, or any combination thereof, having a Fair Market Value on the date of exercise equal to the exercise price, provided, however, that (1) any portion of the exercise price representing a fraction of a Share shall in any event be paid in cash and (2) no Shares which have been held for less than six months may be delivered in payment of the exercise price of an Option. Delivery of Shares in payment of the exercise price of an Option may be accomplished through the effective transfer to the Company of Shares held by a broker or other agent. The Company will also cooperate with any person exercising an Option who participates in a cashless exercise program of a broker or other agent under which all or part of the Shares received upon exercise of the Option are sold through the broker or other agent, or under which the broker or other agent makes a loan to such person, for the purpose of paying the exercise price of an Option. Notwithstanding the preceding sentence, the exercise of the Option shall not be deemed to occur, and no Shares will be issued by the Company upon exercise of an Option, until the Company has received payment in full of the exercise price. (v) Reload Option Rights. Options granted under this Section 6.02 shall have Reload Option Rights which shall entitle the holder of the Option, upon exercise of the Option or any portion thereof through delivery of previously owned Shares, to automatically be granted on the date of such exercise a new nonstatutory stock option (a "Reload Option") (1) for a number of Shares equal to the number of full Shares delivered in payment of the option price of the original Option, (2) having an option price equal to 100% of the Fair Market Value per Share of the Common Stock on such date of grant, (3) becoming exercisable six months from such date of grant, (4) having the same expiration date as the original Option so exercised and (5) having the same other terms and conditions as apply to an Option granted under Section 6.02.1. Subject to the preceding sentence and the other provisions of the Plan, Reload Option Rights and Reload Options shall have such additional terms and be subject to such additional restrictions and conditions, if any, as shall be determined, in its discretion, by the Committee. The Committee may, in its discretion, provide in an Award Agreement for such limitations on the number or frequency of exercises of Reload Option Rights, or the minimum numbers of Shares for which such rights may be exercised, as the Committee may deem advisable for the efficient administration of the Plan. Reload Option Rights granted under this Section 6.02 shall entitle the holder of an Option to be granted a Reload Option only if the underlying Option to which they relate is exercised during service as a director of the Company of the original grantee of the underlying Option. Except as otherwise specifically provided herein or required by the context, the term Option as used in this Plan shall include Reload Options granted under this paragraph. 6.02.3 Allocation of Shares. If on any date on which Options would otherwise be granted under this Section 6.02 the number of Shares remaining available under Section 4.01 is not sufficient for each Participant otherwise entitled to the grant of an Option to be granted an Option for the full number of Shares provided in this Section 6.02, then each such Participant shall automatically be granted an Option for the number of whole Shares (if any) equal to (a) the number of Shares then remaining available under the Plan, multiplied by (b) a fraction of which (1) the numerator is the number of Shares for which such Participant would otherwise be granted an Option on such date and (2) the denominator is the number of Shares for which all Participants would otherwise be granted Options on such date, with any fractional shares being disregarded. 6.03. Nature of Automatic Award Grants; Award Agreements. The grant of the Awards provided for in Section 6.02 shall be automatic and not subject to the discretion of the Committee or any other Person. However, the Committee may condition the right of a Participant to be granted any such Award upon the execution and delivery by the Participant of an Award Agreement setting forth the terms and conditions of the Award as provided herein and such other terms, conditions and restrictions, not inconsistent with the provisions of the Plan, as the Committee in its discretion may determine. 6.04 Other Stock-Based Awards. In addition to the automatic Awards provided for in Section 6.02, the Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, stock options or purchase rights having terms and conditions similar to or different from Options granted under 6.02, Shares awarded subject to restrictions, Shares awarded which are not subject to any restrictions or conditions, convertible securities, exchangeable securities or other rights convertible or exchangeable into Shares, as the Committee in its discretion may determine. In the discretion of the Committee, such Other Stock-Based Awards, including Shares, or other types of Awards authorized under the Plan, may be used in connection with, or to satisfy obligations of the Company under, other compensation or incentive plans, programs or arrangements of the Company for eligible Participants. The Committee shall determine the terms and conditions of Other Stock-Based Awards. Except as provided in the next paragraph, Shares or securities delivered pursuant to a stock option or other purchase right granted under this Section 6.04 shall be purchased for such consideration, paid for by such methods and in such forms, including, without limitation, cash, Shares, outstanding Awards or other property or any combination thereof, as the Committee shall determine, but the value of such consideration shall not be less than the Fair Market Value of such Shares or other securities on the date of grant of such purchase right. Delivery of Shares or other securities in payment of a purchase right, if authorized by the Committee, may be accomplished through the effective transfer to the Company of Shares or other securities held by a broker or other agent. Unless otherwise determined by the Committee, the Company will also cooperate with any person exercising a purchase right who participates in a cashless exercise program of a broker or other agent under which all or part of the Shares or securities received upon exercise of a purchase right are sold through the broker or other agent, or under which the broker or other agent makes a loan to such person, for the purpose of paying the exercise price of a purchase right. Notwithstanding the preceding sentence, unless the Committee, in its discretion, shall otherwise determine, the exercise of the purchase right shall not be deemed to occur, and no Shares or other securities will be issued by the Company upon exercise of a purchase right, until the Company has received payment in full of the exercise price. Awards granted under this Section 6.04 may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for, any other Award granted under the Plan or any award granted under any other plan, program or arrangement of the Company (subject to the terms of Section 10.01) or any business entity acquired or to be acquired by the Company or a Subsidiary. If an Award is granted in substitution for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. Awards granted in addition to or in tandem with other Awards or awards may be granted either at the same time as or at a different time from the grant of such other Awards or awards. The exercise price of an Award conferring a right to purchase Shares: (i) granted in substitution for an outstanding Award or award shall be not less than the Fair Market Value of Shares at the date such substitute Award is granted; provided, however, that (1) the exercise, grant or purchase price per share of the substituted Award may be reduced to reflect the Fair Market Value of the Award or award required to be surrendered by the Participant as a condition to receipt of such substitute Award, and (2) in the case of any Participant, the Committee may, in lieu of such price reduction, make an additional Award or payment to the Participant reflecting the Fair Market Value of the Award or award required to be surrendered; or (ii) retroactively granted in tandem with an outstanding Award or award shall be not less than the lesser of the Fair Market Value of Shares at the date of grant of the later Award or the Fair Market Value of Shares at the date of grant of the earlier Award. 6.05 Exchange Provisions. The Committee may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Shares, another Award or other property, based on such terms and conditions as the Committee shall determine and communicate to the Participant at the time that such offer is made. SECTION 7. GENERAL TERMS OF AWARDS 7.01 Certain Restrictions Under Rule 16b-3. Upon the effectiveness of any amendment to Rule 16b-3, this Plan and any Award Agreement for an outstanding Award held by a Participant then subject to Section 16 of the Exchange Act shall be deemed to be amended, without further action on the part of the Committee, the Board or the Participant, to the extent necessary for Awards under the Plan or such Award Agreement to qualify for the exemption provided by Rule 16b-3, as so amended, except to the extent any such amendment requires shareholder approval. 7.02 Decisions Required to be Made by the Committee. Other provisions of the Plan and any Award Agreement notwithstanding, if any decision regarding an Award or the exercise of any right by a Participant, at any time such Participant is subject to Section 16 of the Exchange Act, is required to be made or approved by the Committee in order that a transaction by such Participant will be exempt under Rule 16b-3, then the Committee shall retain full and exclusive power and authority to make such decision or to approve or disapprove any such decision by the Participant. 7.03 Limits on Transfer of Awards; Beneficiaries. No right or interest of a Participant in any Award shall be pledged, encumbered or hypothecated to or in favor of any Person other than the Company, or shall be subject to any lien, obligation or liability of such Participant to any Person other than the Company or a Subsidiary. Except to the extent otherwise determined by the Committee, no Award and no rights or interests therein shall be assignable or transferable by a Participant otherwise than by will or the laws of descent and distribution, and any Option or other right to purchase or acquire Shares granted to a Participant under the Plan shall be exercisable during the Participant's lifetime only by such Participant. A beneficiary, guardian, legal representative or other Person claiming any rights under the Plan from or through any Participant shall be subject to all the terms and conditions of the Plan and any Award Agreement applicable to such Participant as well as any additional restrictions or limitations deemed necessary or appropriate by the Committee. 7.04 Registration and Listing Compliance. No Award shall be paid and no Shares shall be distributed with respect to any Award in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any state securities law or subject to a listing requirement under any listing agreement between the Company and any national securities exchange, and no Award shall confer upon any Participant rights to such payment or distribution until such laws and contractual obligations of the Company have been complied with in all material respects. Neither the grant of any Award nor anything else contained herein shall obligate the Company to take any action to comply with any requirements of any such securities laws or contractual obligations relating to the registration (or exemption therefrom) or listing of any Shares or other securities, whether or not necessary in order to permit any such delivery or distribution. 7.05 Stock Certificates. All certificates for Shares delivered under the terms of the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under federal or state securities laws, rules and regulations thereunder, and the rules of any national securities exchange or automated quotation system on which Shares are listed or quoted. The Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions or any other restrictions or limitations that may be applicable to Shares. SECTION 8. ADJUSTMENT PROVISIONS 8.01 In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, exchange of Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of Participants' rights under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of Shares which may thereafter be issued in connection with Awards; (ii) the number and kind of Shares issued or issuable in respect of outstanding Awards; and (iii) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award. SECTION 9. CHANGE OF CONTROL PROVISIONS 9.01 Acceleration of Exercisability and Lapse of Restrictions. Unless otherwise determined by the Committee at the time of grant of an Award or unless otherwise provided in the applicable Award Agreement, if the shareholders of the Company shall approve a transaction which upon consummation would constitute a Change of Control of the Company, or if any Change of Control of the Company not subject to shareholder approval shall occur: (i) all outstanding Awards pursuant to which the Participant may have rights, the exercise of which is restricted or limited, shall become fully exercisable; (ii) all restrictions or limitations (including risks of forfeiture and deferrals) on outstanding Awards subject to restrictions or limitations under the Plan shall lapse unless prior to such lapse the right to lapse of restrictions or limitations is waived or deferred by the Participant; and (iii) all conditions to payment of Awards under which payments of cash, Shares or other property are subject to conditions shall be deemed to be achieved or fulfilled and shall be waived by the Company. 9.02 Termination of Service Following Change of Control. If within three years following the date of any Change of Control the service of a Participant as a director of the Company shall be terminated voluntarily or involuntarily for any reason, then unless otherwise provided in the applicable Award Agreement, and in addition to any other rights of post-termination exercise which the Participant (or other holder of the Award) may have under the Plan or the applicable Award Agreement, any Option or other Award granted to the Participant and outstanding on the date of the Change of Control, the payment or receipt of which is dependent upon exercise by the Participant (or other holder of the Award) shall be exercisable for a period of 90 days following the date of such termination of service but not later than the expiration date of the Award. 9.03 Definition of Change of Control. For purposes of this Section 9, a "Change of Control" of the Company shall mean any of the following events: (a) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a corporation with respect to which, following such sale or disposition, more than eighty percent of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of the Board is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively of the outstanding Common Stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Common Stock and voting power immediately prior to such sale or disposition; (b) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty percent or more of the outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the Board; provided, however, that any acquisition by (x) the Company or any of its Subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries or (y) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as in effect on the effective date of the Plan) to file a statement on Schedule 13G with respect to its beneficial ownership of Common Stock and other voting securities, whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of fifteen percent or more of the Company's voting securities, shall not constitute a Change of Control; (c) The Company's termination of its business and liquidation of its assets; (d) There is consummated a merger, consolidation, reorganization, share exchange, or similar transaction involving the Company (including a triangular merger), in any case, unless immediately following such transaction: (i) all or substantially all of the persons who were the beneficial owners of the outstanding Commons Stock and outstanding voting securities of the Company immediately prior to the transaction beneficially own, directly or indirectly, more than 60% of the outstanding shares of Commons Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such transaction (including a corporation or other person which as a result of such transaction owns the Company or all or substantially all of the Company's assets through one or more subsidiaries (a "Parent Company")) in substantially the same proportion as their ownership of the Common Stock and other voting securities of the Company immediately prior to the consummation of the transaction, (ii) no person (other than the Company, any employee benefit plan sponsored or maintained by the Company or, if reference was made to equity ownership of any Parent Company for purposes of determining whether clause (i) above is satisfied in connection with the transaction, such Parent Company) beneficially owns, directly or indirectly, 20% or more of the outstanding shares of Common Stock or the combined voting power of the voting securities entitled to vote generally in the election of directors of the corporation resulting from such transaction and (iii) individuals who were members of the Board immediately prior to the consummation of the transaction constitute at least a majority of the members of the board of directors resulting from such transaction (or, if reference was made to equity ownership of any Parent Company for purposes of determining whether clause (i) above is satisfied in connection with the transaction, such Parent Company); or (e) The following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the entire Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the effective date of the Plan or whose appointment, election or nomination for election was previously so approved. SECTION 10. AMENDMENTS TO AND TERMINATION OF THE PLAN 10.01 The Board may amend, alter, suspend, discontinue or terminate the Plan without the consent of shareholders or Participants, except that, without the approval of the shareholders of the Company, no amendment, alteration, suspension, discontinuation or termination shall be made if shareholder approval is required by any federal or state law or regulation or by the rules of any stock exchange on which the Shares may then be listed, or if the Board determines that obtaining such shareholder approval is for any reason advisable; provided, however, that except as provided in Section 7.01, without the consent of the Participant, no amendment, alteration, suspension, discontinuation or termination of the Plan may materially and adversely affect the rights of such Participant under any Award theretofore granted to him. 10.02 Notwithstanding any of the provision of this Plan to the contrary, except as provided in Section 8.01 of the Plan, the exercise price of any outstanding Option or the exercise price or minimum purchase price of any Other Stock-Based Award may not be reduced, whether through amendment, cancellation or replacement, unless such reduction is approved by the shareholders of the Company. SECTION 11. GENERAL PROVISIONS 11.01 No Shareholder Rights. No Award shall confer on any Participant any of the rights of a shareholder of the Company unless and until Shares are in fact issued to such Participant in connection with such Award. 11.02 No Right to Directorship. Nothing contained in the Plan or any Award Agreement shall confer, and no grant of an Award shall be construed as conferring, upon any Participant any right to continue as a director of the Company or interfere in any way with the rights of the shareholders of the Company or the Board to elect and remove directors. 11.03 Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any Shares not yet issued or payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan to deliver cash, Shares or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines. 11.04 No Limit on Other Compensatory Arrangements. Nothing contained in the Plan shall prevent the Company from adopting other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. To the extent consistent with the Plan, the terms of each Award shall be construed so as to be consistent with such other arrangements in effect at the time the Award is granted. 11.05 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated. 11.06 Governing Law. The validity, interpretation, construction and effect of the Plan and any rules and regulations relating to the Plan shall be governed by the laws of the Commonwealth of Pennsylvania (without regard to the conflicts of laws thereof), and applicable federal law. 11.07 Severability. If any provision of the Plan or any Award is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or Award, it shall be deleted and the remainder of the Plan or Award shall remain in full force and effect; provided, however, that, unless otherwise determined by the Committee, the provision shall not be construed or deemed amended or deleted with respect to any Participant whose rights and obligations under the Plan are not subject to the law of such jurisdiction or the law deemed applicable by the Committee. SECTION 12. EFFECTIVE DATE AND TERM OF THE PLAN 12.01 The effective date and date of adoption of the Plan shall be March 17, 1999, the date of adoption of the Plan by the Board, provided that such adoption of the Plan is approved by a majority of the votes cast at a duly held meeting of shareholders held on or prior to March 16, 2000 at which a quorum representing a majority of the outstanding voting stock of the Company is, either in person or by proxy, present and voting. Notwithstanding anything else contained in the Plan or in any Award Agreement, no Option or other purchase right granted under the Plan may be exercised, and no certificates for Shares may be delivered pursuant to any Award granted under the Plan, prior to such shareholder approval or prior to any required approval or consent from those governmental agencies having jurisdiction in these matters. In the event such shareholder or regulatory approval is not obtained, all Awards granted under the Plan shall automatically be deemed void and of no effect. EX-10.2 3 1999 LONG-TERM INCENTIVE PLAN 1999 EQUITABLE RESOURCES, INC. LONG-TERM INCENTIVE PLAN (As amended May 26, 1999) SECTION 1. PURPOSES 1.01 The purpose of the 1999 Equitable Resources, Inc. Long-Term Incentive Plan (the "Plan") is to assist the Company in attracting, retaining and motivating employees of outstanding ability and to align their interests with those of the shareholders of the Company. SECTION 2. DEFINITIONS; CONSTRUCTION 2.01 Definitions. In addition to the terms defined elsewhere in the Plan, the following terms as used in the Plan shall have the following meanings when used with initial capital letters: 2.01.1 "Award" means any Option, Restricted Stock, Performance Award or Other Stock-Based Award, or any other right or interest relating to Shares or cash granted under the Plan. 2.01.2 "Award Agreement" means any written agreement, contract or other instrument or document evidencing an Award. 2.01.3 "Board" means the Company's Board of Directors. 2.02.4 "Cause," when used with respect to the termination of employment of a Participant, means: (a) the willful and continued failure by the Participant to substantially perform his duties with the Company or a Subsidiary (other than any such failure resulting from the Participant's disability), after a written demand for substantial performance is delivered to the Participant by the Board which specifically identifies the manner in which the Board believes that the Participant has not substantially performed his duties, and which failure has not been cured within 30 days after such written demand; or (b) the willful and continued engaging by the Participant in conduct which is demonstrably and materially injurious to the Company or a Subsidiary, monetarily or otherwise, or (c) the breach by the Participant of any obligation of confidentiality owed to the Company or a Subsidiary. For purposes of this Section 2.02.4, no act, or failure to act, on the Participant's part shall be considered "willful" unless done, or omitted to be done, by the Participant in bad faith and without reasonable belief that such action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with his counsel, to be heard before the Board) finding that in the good faith opinion of the Board the Participant is guilty of the conduct set forth above in clauses (a), (b) or (c) of this Section 2.02.4 and specifying the particulars thereof in detail. 2.01.5 "Code" means the Internal Revenue Code of 1986, as amended from time to time, together with rules, regulations and interpretations promulgated thereunder. References to particular sections of the Code shall include any successor provisions. 2.01.6 "Change of Control" has the meaning provided in Section 9.03. 2.01.7 "Committee" means the Compensation Committee or such other Committee of the Board as may be designated by the Board to administer the Plan, as referred to in Section 3.01 hereof; provided however, that any member of the Committee participating in the taking of any action under the Plan shall qualify as a "non-employee director" as then defined under Rule 16b-3 and an "outside director" as then defined under Section 162(m) of the Code. 2.01.8 "Common Stock" means shares of the common stock, without par value, and such other securities of the Company as may be substituted for Shares pursuant to Section 8.01 hereof. 2.01.9 "Covered Employee" shall have the meaning provided in Section 162(m)(3) of the Code. 2.01.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.01.11 "Fair Market Value" of shares of any stock, including but not limited to Common Stock, or units of any other securities (herein "shares"), shall be the closing price for the date as of which Fair Market Value is to be determined in the principal market in which such shares are traded, as quoted in The Wall Street Journal (or in such other reliable publication as the Committee, in its discretion, may determine to rely upon). If the Fair Market Value of shares on any date cannot be determined on the basis set forth in the preceding sentence, or if a determination is required as to the Fair Market Value on any date of property other than shares, the Committee shall in good faith determine the Fair Market Value of such shares or other property on such date. Fair Market Value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. 2.01.12 "Incentive Stock Option" means an Option that is intended to meet the requirements of Section 422 of the Code and is designated as such in the Award Agreement relating thereto. 2.01.13 "Option" means a right, granted under Section 6.02 hereof, to purchase Shares at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a nonstatutory stock option, which is an Option not intended to be an Incentive Stock Option. 2.01.14 "Other Stock-Based Award" means an Award, granted under Section 6.05 hereof, that is denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares. 2.01.15 "Participant" means an employee of the Company or any Subsidiary, including, but not limited to, Covered Employees, who is granted an Award under the Plan. 2.01.16 "Performance Award," "Performance Goal" and "Performance Period" shall have the meanings provided in Section 6.04. 2.01.17 "Reload Option Rights" and "Reload Option" have the meanings provided in Section 6.02(v). 2.01.18 "Restricted Stock" means Shares, granted under Section 6.03 hereof, that are subject to certain restrictions. 2.01.19 "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor to such Rule promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. 2.01.20 "Shares" means the common stock of the Company, without par value, and such other securities of the Company as may be substituted for Shares pursuant to Section 8.01 hereof. 2.01.21 "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the chain owns stock possessing at least 50% of the total combined voting power of all classes of stock in one of the other corporations in the chain. 2.02 Construction. For purposes of the Plan, the following rules of construction shall apply: 2.02.1 The word "or" is disjunctive but not necessarily exclusive. 2.02.2 Words in the singular include the plural; words in the plural include the singular; words in the neuter gender include the masculine and feminine genders, and words in the masculine or feminine gender include the other and neuter genders. SECTION 3. ADMINISTRATION 3.01 The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan: (i) to designate Participants; (ii) to determine the type or types of Awards to be granted to each Participant; (iii) to determine the number of Awards to be granted, the number of Shares or amount of cash or other property to which an Award will relate, the terms and conditions of any Award (including, but not limited to, any exercise price, grant price or purchase price, any limitation or restriction, any schedule for lapse of limitations, forfeiture restrictions or restrictions on exercisability or transferability, and accelerations or waivers thereof, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award; (iv) to determine whether, to what extent and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards or other property, or an Award may be accelerated, vested, canceled, forfeited, exchanged or surrendered; (v) to determine whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts payable with respect to an Award shall be deferred, whether automatically or at the election of the Committee or at the election of the Participant; (vi) to interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (vii) to prescribe the form of each Award Agreement, which need not be identical for each Participant; (viii) to adopt, amend, suspend, waive and rescind such rules and regulations as the Committee may deem necessary or advisable to administer the Plan; (ix) to correct any defect or supply any omission or reconcile any inconsistency, and to construe and interpret the Plan, the rules and regulations, any Award Agreement or other instrument entered into or Award made under the Plan; (x) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan; and (xi) to make such filings and take such actions as may be required from time to time by appropriate state, regulatory and governmental agencies. Any action of the Committee with respect to the Plan shall be final, conclusive and binding on all Persons, including the Company, Subsidiaries, Participants, any Person claiming any rights under the Plan from or through any Participant, employees and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any Subsidiary the authority, subject to such terms as the Committee shall determine, to perform administrative functions under the Plan and, with respect to Participants who are not subject to Section 16 of the Exchange Act, to take such actions and perform such functions under the Plan as the Committee may specify. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by an officer, manager or other employee of the Company or a Subsidiary, the Company's independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. SECTION 4. SHARES SUBJECT TO THE PLAN 4.01 The maximum net number of Shares which may be issued and in respect of which Awards may be granted under the Plan shall be limited to 3,000,000 shares of Common Stock, subject to adjustment as provided in Section 8.01. For purposes of this Section 4.01, the number of Shares to which an Award relates shall be counted against the number of Shares available under the Plan at the time of grant of the Award, unless such number of Shares cannot be determined at that time, in which case the number of Shares actually distributed pursuant to the Award shall be counted against the number of Shares available under the Plan at the time of distribution; provided, however, that Awards related to or retroactively added to, or granted in tandem with, substituted for or converted into, other Awards shall be counted or not counted against the number of Shares reserved and available under the Plan in accordance with procedures adopted by the Committee so as to ensure appropriate counting but avoid double counting. If any Shares to which an Award relates are forfeited, or payment is made to the Participant in the form of cash, cash equivalents or other property other than Shares, or the Award otherwise terminates without payment being made to the Participant in the form of Shares, any Shares counted against the number of Shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture, alternative payment or termination, again be available for Awards under the Plan. If the exercise price of an Award is paid by delivering to the Company Shares previously owned by the Participant, the Shares covered by the Award equal to the number of Shares so delivered shall again be available for Awards under the Plan. Any Shares distributed pursuant to an Award may consist, in whole or part, of authorized and unissued Shares or of treasury Shares, including Shares repurchased by the Company for purposes of the Plan. SECTION 5. ELIGIBILITY 5.01 Awards may be granted only to individuals who are full-time employees (including, without limitation, employees who also are directors or officers and Covered Employees) of the Company or any Subsidiary; provided, however, that no Award shall be granted to any member of the Committee. SECTION 6. SPECIFIC TERMS OF AWARDS 6.01 General. Subject to the terms of the Plan and any applicable Award Agreement, Awards may be granted as set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to the terms of Section 10.01), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including separate escrow provisions and terms requiring forfeiture of Awards in the event of termination of employment by the Participant. Except as provided in Section 7.01, or as required by applicable law, Awards may be granted for no consideration other than prior and/or future services. 6.02 Options. The Committee is authorized to grant Options to Participants on the following terms and conditions: (i) Exercise Price. The exercise price per Share of an Option shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option, except as otherwise provided in Section 7.01. (ii) Option Term. The term of each Option shall be determined by the Committee, except that no Incentive Stock Option shall be exercisable after the expiration of ten years from the date of grant. (iii) Times and Methods of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, the methods by which the exercise price may be paid or deemed to be paid, and the form of such payment, including, without limitation, cash (including notes or other contractual obligations of Participants to make payment on a deferred basis, to the extent permitted by law), Shares, other outstanding Awards or other property or any combination thereof, having a Fair Market Value on the date of exercise equal to the exercise price, provided, however, that (1) in the case of a Participant who is at the time of exercise subject to Section 16 of the Exchange Act, any portion of the exercise price representing a fraction of a Share shall in any event be paid in cash or in property other than any equity security (as defined by the Exchange Act) of the Company and (2) except as otherwise determined by the Committee, in its discretion, at the time the Option is granted, no shares which have been held for less than six months may be delivered in payment of the exercise price of an Option. Delivery of Shares in payment of the exercise price of an Option, if authorized by the Committee, may be accomplished through the effective transfer to the Company of Shares held by a broker or other agent. Unless otherwise determined by the Committee, the Company will also cooperate with any person exercising an Option who participates in a cashless exercise program of a broker or other agent under which all or part of the Shares received upon exercise of the Option are sold through the broker or other agent, or under which the broker or other agent makes a loan to such person, for the purpose of paying the exercise price of an Option. Notwithstanding the preceding sentence, unless the Committee, in its discretion, shall otherwise determine, the exercise of the Option shall not be deemed to occur, and no Shares will be issued by the Company upon exercise of an Option, until the Company has received payment in full of the exercise price. Notwithstanding any other provision contained in the Plan or in any Award Agreement, but subject to the possible exercise of the Committee's discretion contemplated in the last sentence of this Section 6.02(iii), the aggregate Fair Market Value, determined as of the date of grant, of the Shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under all plans of the corporation employing such employee, any parent or subsidiary corporation of such corporation and any predecessor corporation of any such corporation shall not exceed $100,000. If the date on which one or more of such Incentive Stock Options could first be exercised would be accelerated pursuant to any provision of the Plan or any Award Agreement, and the acceleration of such exercise date would result in a violation of the restriction set forth in the preceding sentence, then, notwithstanding any such provision, but subject to the provisions of the next succeeding sentence, the exercise dates of such Incentive Stock Options shall be accelerated only to the date or dates, if any, that do not result in a violation of such restriction and, in such event, the exercise dates of the Incentive Stock Options with the lowest option prices shall be accelerated to the earliest such dates. The Committee may, in its discretion, authorize the acceleration of the exercise date of one or more Incentive Stock Options even if such acceleration would violate the $100,000 restriction set forth in the first sentence of this paragraph and even if such Incentive Stock Options are thereby converted in whole or in part to nonstatutory stock options. (iv) Termination of Employment. Unless otherwise determined by the Committee and reflected in the Award Agreement: (A) if a Participant shall die while employed by the Company or a Subsidiary or during a period following termination of employment during which an Option otherwise remains exercisable under this Section 6.02(iv), Options granted to the Participant, to the extent exercisable at the time of the Participant's death, may be exercised within one year after the date of the Participant's death, but not later than the expiration date of the Option, by the executor or administrator of the Participant's estate or by the Person or Persons to whom the Participant shall have transferred such right by will, by the laws of descent and distribution or, if permitted by the Committee, by inter vivos transfer. (B) if the employment of a Participant with the Company or a Subsidiary shall be involuntarily terminated under circumstances which would qualify the Participant for benefits under the Company's Separation Allowance Plan, or if a Participant shall retire under the terms of any retirement plan of the Company or a Subsidiary or shall terminate his or her employment with the written consent of the Company or a Subsidiary specifically permitting such exercise, Options granted to the Participant, to the extent exercisable at the date of the Participant's termination of employment, may be exercised within 90 days after the date of termination of employment, but not later than the expiration date of the Option. (C) except to the extent an Option remains exercisable under paragraph (A) or (B) above or under Section 9.02, any Option granted to a Participant shall terminate immediately upon the termination of all employment of the Participant with the Company or a Subsidiary. (v) Reload Option Rights. Reload Option Rights if awarded with respect to an Option shall entitle the holder of the Option, upon exercise of the Option or any portion thereof through delivery of previously owned Shares, to automatically be granted on the date of such exercise a new nonstatutory stock option (a "Reload Option") (1) for a number of Shares not exceeding the number of full Shares delivered in payment of the option price of the original Option and any withholding taxes related thereto, (2) having an option price not less than 100% of the Fair Market Value per Share of the Common Stock on such date of grant, (3) having an expiration date not later than the expiration date of the original Option so exercised and (4) otherwise having terms permissible for the grant of an Option under the Plan. Subject to the preceding sentence and the other provisions of the Plan, Reload Option Rights and Reload Options shall have such terms and be subject to such restrictions and conditions, if any, as shall be determined, in its discretion, by the Committee. In granting Reload Option Rights, the Committee, may, in its discretion, provide for successive Reload Option grants upon the exercise of Reload Options granted thereunder. Unless otherwise determined, in its discretion, by the Committee, Reload Option Rights shall entitle the holder of an Option to be granted a Reload Option only if the underlying Option to which they relate is exercised during employment with the Company or a Subsidiary of the original grantee of the underlying Option. Except as otherwise specifically provided herein or required by the context, the term Option as used in this Plan shall include Reload Options granted hereunder. (vi) Individual Option Limit. The aggregate number of Shares for which Options may be granted under the Plan to any single Participant shall not exceed 750,000 Shares. The limitation in the preceding sentence shall be interpreted and applied in a manner consistent with Section 162(m) of the Code and, to the extent consistent with Section 162(m) of the Code, in accordance with Section 4.01 hereof. To the extent consistent with Section 162(m) of the Code, in applying this limitation a Reload Option shall not be deemed to increase the number of Shares covered by the original underlying Option grant. 6.03 Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions: (i) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends thereon), which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments or otherwise, as the Committee shall determine at the time of grant or thereafter. (ii) Forfeiture. Except as otherwise determined by the Committee at the time of grant or thereafter, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, that restrictions on Restricted Stock shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions on Restricted Stock. (iii) Certificates for Shares. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine, including, without limitation, issuance of certificates representing Shares. Certificates representing Shares of Restricted Stock shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock. 6.04 Performance Awards. The Committee is authorized to grant Performance Awards to Participants on the following terms and conditions: (i) Right to Payment. A Performance Award shall represent a right to receive Shares, cash, other property or any combination thereof based on the achievement, or the level of achievement, during a specified Performance Period of one or more Performance Goals established by the Committee at the time of the Award. (ii) Terms of Performance Awards. At the time a Performance Award is granted, the Committee shall cause to be set forth in the Award Agreement or otherwise in writing (1) the Performance Goals applicable to the Award and the Performance Period during which the achievement of the Performance Goals shall be measured, (2) the amount which may be earned by the Participant based on the achievement, or the level of achievement, of the Performance Goals or the formula by which such amount shall be determined and (3) such other terms and conditions applicable to the Award as the Committee may, in its discretion, determine to include therein. The terms so established by the Committee shall be objective such that a third party having knowledge of the relevant facts could determine whether or not any Performance Goal has been achieved, or the extent of such achievement, and the amount, if any, which has been earned by the Participant based on such performance. The Committee may retain the discretion to reduce (but not to increase) the amount of a Performance Award which will be earned based on the achievement of Performance Goals. (iii) Performance Goals. "Performance Goals" shall mean one or more preestablished, objective measures of performance during a specified Performance Period by the Company, a Subsidiary or Subsidiaries, any branch, department or other portion thereof or the Participant individually, selected by the Committee in its discretion to determine whether Performance Award has been earned in whole or in part. Performance Goals may be based on earnings per share, net income, revenue growth, revenues, expenses, return on equity, return on total capital or return on assets. Performance Goals based on such performance measures may be based either on the performance of the Company, Subsidiary or portion thereof under such measure for the Performance Period and/or upon a comparison of such performance with the performance of a peer group of corporations selected or defined by the Committee at the time of making a Performance Award. The Committee may in its discretion also determine to use other objective performance measures as Performance Goals. (iv) Committee Certification. Following completion of the applicable Performance Period, and prior to any payment of a Performance Award to the Participant, the Committee shall determine in accordance with the terms of the Performance Award and shall certify in writing whether the applicable Performance Goal or Goals were achieved, or the level of such achievement, and the amount, if any, earned by the Participant based upon such performance. For this purpose, approved minutes of the meeting of the Committee at which certification is made shall be sufficient to satisfy the requirement of a written certification. (v) Maximum Individual Performance Award Payments. With respect to all Performance Periods ending in any one calendar year, the maximum amount which may be earned by any single Participant under all Performance Awards granted under the Plan shall be limited to $1,000,000. In applying this limit, the amount of any cash or the Fair Market Value of any Shares or other property earned by a Participant shall be measured as of the close of the applicable Performance Period, regardless of the fact that certification by the Committee and actual payment to the Participant may occur in a subsequent calendar year or years. 6.05 Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, Shares awarded which are not subject to any restrictions or conditions, convertible securities, exchangeable securities or other rights convertible or exchangeable into Shares, as the Committee in its discretion may determine. In the discretion of the Committee, such Other Stock-Based Awards, including Shares, or other types of Awards authorized under the Plan, may be used in connection with, or to satisfy obligations of the Company or a Subsidiary under, other compensation or incentive plans, programs or arrangements of the Company or any Subsidiary for eligible Participants, including without limitation the Short-Term Incentive Compensation Plan, the Deferred Compensation Plan and executive contracts. The Committee shall determine the terms and conditions of Other Stock-Based Awards. Except as provided in Section 7.01, Shares or securities delivered pursuant to a purchase right granted under this Section 6.05 shall be purchased for such consideration, paid for by such methods and in such forms, including, without limitation, cash, Shares, outstanding Awards or other property or any combination thereof, as the Committee shall determine, but the value of such consideration shall not be less than the Fair Market Value of such Shares or other securities on the date of grant of such purchase right. Delivery of Shares or other securities in payment of a purchase right, if authorized by the Committee, may be accomplished through the effective transfer to the Company of Shares or other securities held by a broker or other agent. Unless otherwise determined by the Committee, the Company will also cooperate with any person exercising a purchase right who participates in a cashless exercise program of a broker or other agent under which all or part of the Shares or securities received upon exercise of a purchase right are sold through the broker or other agent, or under which the broker or other agent makes a loan to such person, for the purpose of paying the exercise price of a purchase right. Notwithstanding the preceding sentence, unless the Committee, in its discretion, shall otherwise determine, the exercise of the purchase right shall not be deemed to occur, and no Shares or other securities will be issued by the Company upon exercise of a purchase right, until the Company has received payment in full of the exercise price. 6.06 Exchange Provisions. The Committee may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Shares, another Award or other property, based on such terms and conditions as the Committee shall determine and communicate to the Participant at the time that such offer is made. SECTION 7. GENERAL TERMS OF AWARDS 7.01 Stand-Alone, Tandem and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for, any other Award granted under the Plan or any award granted under the Management Incentive Compensation Plan, or any other plan, program or arrangement of the Company or any Subsidiary (subject to the terms of Section 10.01) or any business entity acquired or to be acquired by the Company or a Subsidiary, except that an Incentive Stock Option may not be granted in tandem with other Awards or awards. If an Award is granted in substitution for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. Awards granted in addition to or in tandem with other Awards or awards may be granted either at the same time as or at a different time from the grant of such other Awards or awards. The exercise price of any Option or the purchase price of any other Award conferring a right to purchase Shares: (i) granted in substitution for an outstanding Award or award shall be not less than the Fair Market Value of Shares at the date such substitute Award is granted; provided, however, that (1) except in the case of (a) an Incentive Stock Option or (b) an Option granted to a Covered Employee, the exercise, grant or purchase price per share of the substituted Award may be reduced to reflect the Fair Market Value of the Award or award required to be surrendered by the Participant as a condition to receipt of such substitute Award, and (2) in the case of any Participant, the Committee may, in lieu of such price reduction, make an additional Award or payment to the Participant reflecting the Fair Market Value of the Award or award required to be surrendered; or (ii) retroactively granted in tandem with an outstanding Award or award shall be not less than the lesser of the Fair Market Value of Shares at the date of grant of the later Award or the Fair Market Value of Shares at the date of grant of the earlier Award. 7.02 Certain Restrictions Under Rule 16b-3. Upon the effectiveness of any amendment to Rule 16b-3, this Plan and any Award Agreement for an outstanding Award held by a Participant then subject to Section 16 of the Exchange Act shall be deemed to be amended, without further action on the part of the Committee, the Board or the Participant, to the extent necessary for Awards under the Plan or such Award Agreement to qualify for the exemption provided by Rule 16b-3, as so amended, except to the extent any such amendment requires shareholder approval. 7.03 Decisions Required to be Made by the Committee. Other provisions of the Plan and any Award Agreement notwithstanding, if any decision regarding an Award or the exercise of any right by a Participant, at any time such Participant is subject to Section 16 of the Exchange Act, is required to be made or approved by the Committee in order that a transaction by such Participant will be exempt under Rule 16b-3, then the Committee shall retain full and exclusive power and authority to make such decision or to approve or disapprove any such decision by the Participant. 7.04 Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any Incentive Stock Option exceed a period of ten years from the date of its grant. 7.05 Form of Payment of Awards. Subject to the terms of the Plan and any applicable Award Agreement, payments or substitutions to be made by the Company upon the grant, exercise or other payment or distribution of an Award may be made in such forms as the Committee shall determine at the time of grant or thereafter (subject to the terms of Section 10.01), including, without limitation, cash, Shares, other Awards or other property or any combination thereof, and may be made in a single payment or substitution, in installments or on a deferred basis, in each case in accordance with rules and procedures established, or as otherwise determined, by the Committee. Such rules and procedures or determinations may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of dividend equivalents in respect of installment or deferred payments. 7.06 Limits on Transfer of Awards; Beneficiaries. No right or interest of a Participant in any Award shall be pledged, encumbered or hypothecated to or in favor of any Person other than the Company, or shall be subject to any lien, obligation or liability of such Participant to any Person other than the Company or a Subsidiary. Except to the extent otherwise determined by the Committee, no Award and no rights or interests therein shall be assignable or transferable by a Participant otherwise than by will or the laws of descent and distribution, and any Option or other right to purchase or acquire Shares granted to a Participant under the Plan shall be exercisable during the Participant's lifetime only by such Participant. A beneficiary, guardian, legal representative or other Person claiming any rights under the Plan from or through any Participant shall be subject to all the terms and conditions of the Plan and any Award Agreement applicable to such Participant as well as any additional restrictions or limitations deemed necessary or appropriate by the Committee. 7.07 Registration and Listing Compliance. No Award shall be paid and no Shares or other securities shall be distributed with respect to any Award in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any state securities law or subject to a listing requirement under any listing agreement between the Company and any national securities exchange, and no Award shall confer upon any Participant rights to such payment or distribution until such laws and contractual obligations of the Company have been complied with in all material respects. Except to the extent required by the terms of an Award Agreement or another contract between the Company and the Participant, neither the grant of any Award nor anything else contained herein shall obligate the Company to take any action to comply with any requirements of any such securities laws or contractual obligations relating to the registration (or exemption therefrom) or listing of any Shares or other securities, whether or not necessary in order to permit any such payment or distribution. 7.08 Stock Certificates. All certificates for Shares delivered under the terms of the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under federal or state securities laws, rules and regulations thereunder, and the rules of any national securities exchange or automated quotation system on which Shares are listed or quoted. The Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions or any other restrictions or limitations that may be applicable to Shares. In addition, during any period in which Awards or Shares are subject to restrictions or limitations under the terms of the Plan or any Award Agreement, or during any period during which delivery or receipt of an Award or Shares has been deferred by the Committee or a Participant, the Committee may require any Participant to enter into an agreement providing that certificates representing Shares issuable or issued pursuant to an Award shall remain in the physical custody of the Company or such other Person as the Committee may designate. SECTION 8. ADJUSTMENT PROVISIONS 8.01 In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, exchange of Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of Participants' rights under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of Shares which may thereafter be issued in connection with Awards; (ii) the number and kind of Shares issued or issuable in respect of outstanding Awards; and (iii) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award; provided, however, in each case, that (1) with respect to Incentive Stock Options, no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code and (2) with respect to Options or Performance Awards held by a Covered Employee, no such adjustment shall be authorized to the extent that such authority would cause such Awards to fail to qualify as "performance-based compensation" under Section 162(m)(4)(C) of the Code. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria of, Awards in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence) affecting the Company or the financial statements of the Company, or in response to changes in applicable laws, regulations or accounting principles; provided, however, that (1) with respect to Incentive Stock Options, no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code and (2) with respect to Options or Performance Awards held by a Covered Employee, no such adjustment shall be authorized to the extent that such authority would cause such Awards to fail to qualify as "performance-based compensation" under Section 162(m)(4)(C) of the Code. SECTION 9. CHANGE OF CONTROL PROVISIONS 9.01 Acceleration of Exercisability and Lapse of Restrictions. Unless otherwise determined by the Committee at the time of grant of an Award or unless otherwise provided in the applicable Award Agreement, if the shareholders of the Company shall approve a transaction which upon consummation would constitute a Change of Control of the Company, or if any Change of Control of the Company not subject to shareholder approval shall occur: (i) all outstanding Awards pursuant to which the Participant may have rights, the exercise of which is restricted or limited, shall become fully exercisable; (ii) all restrictions or limitations (including risks of forfeiture and deferrals) on outstanding Awards subject to restrictions or limitations under the Plan shall lapse unless prior to such lapse the right to lapse of restrictions or limitations is waived or deferred by the Participant; and (iii) all performance criteria and other conditions to payment of Awards under which payments of cash, Shares or other property are subject to conditions shall be deemed to be achieved or fulfilled and shall be waived by the Company. 9.02 Termination of Employment Following Change of Control. If within three years following the date of any Change of Control the employment of a Participant shall be terminated voluntarily or involuntarily for any reason other than for Cause, then unless otherwise provided in the applicable Award Agreement, and in addition to any other rights of post-termination exercise which the Participant (or other holder of the Award) may have under the Plan or the applicable Award Agreement, any Option or other Award granted to the Participant and outstanding on the date of the Change of Control, the payment or receipt of which is dependent upon exercise by the Participant (or other holder of the Award) shall be exercisable for a period of 90 days following the date of such termination of employment but not later than the expiration date of the Award. 9.03 Definition of Change of Control. For purposes of this Section 9, a "Change of Control" of the Company shall mean any of the following events: (a) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a corporation with respect to which, following such sale or disposition, more than eighty percent of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of the Board is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively of the outstanding Common Stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Common Stock and voting power immediately prior to such sale or disposition; (b) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty percent or more of the outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the Board; provided, however, that any acquisition by (x) the Company or any of its Subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries or (y) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as in effect on the effective date of the Plan) to file a statement on Schedule 13G with respect to its beneficial ownership of Common Stock and other voting securities, whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of fifteen percent or more of the Company's voting securities, shall not constitute a Change of Control; (c) The Company's termination of its business and liquidation of its assets; (d) There is consummated a merger, consolidation, reorganization, share exchange, or similar transaction involving the Company (including a triangular merger), in any case, unless immediately following such transaction: (i) all or substantially all of the persons who were the beneficial owners of the outstanding Commons Stock and outstanding voting securities of the Company immediately prior to the transaction beneficially own, directly or indirectly, more than 60% of the outstanding shares of Commons Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such transaction (including a corporation or other person which as a result of such transaction owns the Company or all or substantially all of the Company's assets through one or more subsidiaries (a "Parent Company")) in substantially the same proportion as their ownership of the Common Stock and other voting securities of the Company immediately prior to the consummation of the transaction, (ii) no person (other than the Company, any employee benefit plan sponsored or maintained by the Company or, if reference was made to equity ownership of any Parent Company for purposes of determining whether clause (i) above is satisfied in connection with the transaction, such Parent Company) beneficially owns, directly or indirectly, 20% or more of the outstanding shares of Common Stock or the combined voting power of the voting securities entitled to vote generally in the election of directors of the corporation resulting from such transaction and (iii) individuals who were members of the Board immediately prior to the consummation of the transaction constitute at least a majority of the members of the board of directors resulting from such transaction (or, if reference was made to equity ownership of any Parent Company for purposes of determining whether clause (i) above is satisfied in connection with the transaction, such Parent Company); or (e) The following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the entire Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the effective date of the Plan or whose appointment, election or nomination for election was previously so approved. SECTION 10. AMENDMENTS TO AND TERMINATION OF THE PLAN 10.01 The Board may amend, alter, suspend, discontinue or terminate the Plan without the consent of shareholders or Participants, except that, without the approval of the shareholders of the Company, no amendment, alteration, suspension, discontinuation or termination shall be made if shareholder approval is required by any federal or state law or regulation or by the rules of any stock exchange on which the Shares may then be listed, or if the Board in its discretion determines that obtaining such shareholder approval is for any reason advisable; provided, however, that except as provided in Section 7.02, without the consent of the Participant, no amendment, alteration, suspension, discontinuation or termination of the Plan may materially and adversely affect the rights of such Participant under any Award theretofore granted to him. The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate, any Award theretofore granted, prospectively or retrospectively; provided, however, that except as provided in Section 7.02, without the consent of a Participant, no amendment, alteration, suspension, discontinuation or termination of any Award may materially and adversely affect the rights of such Participant under any Award theretofore granted to him; and provided further that, except as provided in Section 8.01 of the Plan, the exercise price of any outstanding Option may not be reduced, whether through amendment, cancellation or replacement, unless such reduction is approved by the shareholders of the Company. SECTION 11. GENERAL PROVISIONS 11.01 No Right to Awards; No Shareholder Rights. No Participant or employee shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants and employees, except as provided in any other compensation arrangement. No Award shall confer on any Participant any of the rights of a shareholder of the Company unless and until Shares are in fact issued to such Participant in connection with such Award. 11.02 Withholding. To the extent required by applicable Federal, state, local or foreign law, the Participant or his successor shall make arrangements satisfactory to the Company, in its discretion, for the satisfaction of any withholding tax obligations that arise in connection with an Award. The Company shall not be required to issue any Shares or make any cash or other payment under the Plan until such obligations are satisfied. The Company is authorized to withhold from any Award granted or any payment due under the Plan, including from a distribution of Shares, amounts of withholding taxes due with respect to an Award, its exercise or any payment thereunder, and to take such other action as the Committee may deem necessary or advisable to enable the Company and Participants to satisfy obligations for the payment of such taxes. This authority shall include authority to withhold or receive Shares, Awards or other property and to make cash payments in respect thereof in satisfaction of such tax obligations. 11.03 No Right to Employment. Nothing contained in the Plan or any Award Agreement shall confer, and no grant of an Award shall be construed as conferring, upon any Participant any right to continue in the employ of the Company or to interfere in any way with the right of the Company to terminate his employment at any time or increase or decrease his compensation from the rate in existence at the time of granting of an Award, except as provided in any Award Agreement or other compensation arrangement. 11.04 Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan to deliver cash, Shares or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines. 11.05 No Limit on Other Compensatory Arrangements. Nothing contained in the Plan shall prevent the Company from adopting other or additional compensation arrangements (which may include, without limitation, employment agreements with executives and arrangements which relate to Awards under the Plan), and such arrangements may be either generally applicable or applicable only in specific cases. Notwithstanding anything in the Plan to the contrary, the terms of each Award shall be construed so as to be consistent with such other arrangements in effect at the time of the Award. 11.06 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated. 11.07 Governing Law. The validity, interpretation, construction and effect of the Plan and any rules and regulations relating to the Plan shall be governed by the laws of the Commonwealth of Pennsylvania (without regard to the conflicts of laws thereof), and applicable Federal law. 11.08 Severability. If any provision of the Plan or any Award is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or Award, it shall be deleted and the remainder of the Plan or Award shall remain in full force and effect; provided, however, that, unless otherwise determined by the Committee, the provision shall not be construed or deemed amended or deleted with respect to any Participant whose rights and obligations under the Plan are not subject to the law of such jurisdiction or the law deemed applicable by the Committee. SECTION 12. EFFECTIVE DATE AND TERM OF THE PLAN 12.01 The effective date and date of adoption of the Plan shall be March 17, 1999, the date of adoption of the Plan by the Board, provided that such adoption of the Plan is approved by a majority of the votes cast at a duly held meeting of shareholders held on or prior to March 16, 2000 at which a quorum representing a majority of the outstanding voting stock of the Company is, either in person or by proxy, present and voting. Notwithstanding anything else contained in the Plan or in any Award Agreement, no Option or other purchase right granted under the Plan may be exercised, and no Shares may be distributed pursuant to any Award granted under the Plan, prior to such shareholder approval or prior to any required approval or consent from those governmental agencies having jurisdiction in these matters. In the event such shareholder or regulatory approval is not obtained, all Awards granted under the Plan shall automatically be deemed void and of no effect. Absent additional shareholder approval, (1) no Performance Award may be granted under the Plan subsequent to the Company's Annual Meeting of Shareholders in 2004, (2) no Performance Period for any Performance Award granted under the Plan may end later than December 31, 2007 and (3) no other Award may be granted under the Plan subsequent to March 16, 2009, except that Reload Options may be granted pursuant to Reload Option Rights then outstanding. EX-27 4 FDS FOR EQUITABLE RESOURCES
5 1000 6-MOS DEC-31-1998 JUN-30-1999 102,016 0 140,489 12,449 26,026 341,646 1,990,988 810,328 1,744,885 350,936 298,350 0 0 185,682 483,482 1,744,885 0 609,686 0 375,246 150,971 6,874 18,228 59,617 22,638 36,979 0 0 0 36,979 1.07 1.06
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