-----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, FWv30wkUbDimqBznJ02jVnLc3h/EKyBB2ZWI3aIfNxBKBpoghhyzzOFPYpMI7A0a O5Ca13cqbaK3OixN6EjMRQ== 0000033213-96-000004.txt : 19960327 0000033213-96-000004.hdr.sgml : 19960327 ACCESSION NUMBER: 0000033213-96-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: NYSE SROS: PHLX 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03551 FILM NUMBER: 96538740 BUSINESS ADDRESS: STREET 1: 420 BLVD OF THE ALLIES CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4122613000 MAIL ADDRESS: STREET 1: 420 BOULEVARD OF THE ALLIES CITY: PITTSBURGH STATE: PA ZIP: 15219 FORMER COMPANY: FORMER CONFORMED NAME: EQUITABLE GAS CO DATE OF NAME CHANGE: 19841120 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 [ ] 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 or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 420 BOULEVARD OF THE ALLIES 15219 PITTSBURGH, PENNSYLVANIA (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (412) 261-3000 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, no par value New York Stock Exchange Philadelphia Stock Exchange 7 1/2% Debentures due July 1, 1999 New York Stock Exchange 9 1/2% Convertible Subordinated Debentures due 2006 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by nonaffiliates of the registrant as of February 29, 1996: $1,002,415,784 The number of shares outstanding of the issuer's classes of common stock as of February 29, 1996: 35,018,892 DOCUMENTS INCORPORATED BY REFERENCE Part III, a portion of Item 10 and Items 11, 12, and 13 are incorporated by reference to the Proxy Statement for the Annual Meeting of Stockholders on May 23, 1996, to be filed with the Commission within 120 days after the close of the Company's fiscal year ended December 31, 1995. Index to Exhibits - Page 60 TABLE OF CONTENTS PART I PAGE Item 1 Business 1 Item 2 Properties 9 Item 3 Legal Proceedings 11 Item 4 Submission of Matters to a Vote of Security Holders 11 Item 10 Directors and Executive Officers of the Registrant 12 PART II Item 5 Market for Registrant's Common Equity and Related Stockholder Matters 14 Item 6 Selected Financial Data 15 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 8 Financial Statements and Supplementary Data 25 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 PART III Item 10 Directors and Executive Officers of the Registrant 56 Item 11 Executive Compensation 56 Item 12 Security Ownership of Certain Beneficial Owners and Management 56 Item 13 Certain Relationships and Related Transactions 56 PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 57 Index to Financial Statements and Financial Statement Schedules Covered by Report of Independent Auditors 58 Index to Exhibits 60 Signatures 64 PART I ITEM 1. BUSINESS (a) Equitable Resources, Inc. ("Equitable" or the "Company") was formed under the laws of Pennsylvania by the consolidation and merger in 1925 of two constituent companies, the older of which was organized in 1888. The Company directly, or through other wholly-owned subsidiaries, owns all the capital stock of the following principal operating subsidiaries: Equitable Resources Energy Company ("Equitable Resources Energy"), Kentucky West Virginia Gas Company, LLC ("Kentucky West"), Equitrans, LP ("Equitrans"), Nora Transmission Company ("Nora"), Equitable Resources Marketing Company ("ERMCO"), Andex Energy, Inc. ("Andex"), Louisiana Intrastate Gas Company LLC ("LIG"), Equitable Storage Company ("Equitable Storage"), and Independent Energy Corporation ("IEC"). The Company and all such subsidiaries are referred to as the "Company and its Subsidiaries" or the "Companies." The Companies operate in the Appalachian area and, to a lesser extent, in the Rocky Mountain, Southwest, Louisiana and Gulf Coast offshore areas, the Canadian Rockies and have interests in Colombia, South America. The Companies engage primarily in the exploration for, development, production, purchase, transmission, storage, distribution and marketing of natural gas, the extraction of natural gas liquids, the exploration for, development, production and sale of oil, contract drilling, and the marketing of electricity and cogeneration development. (b) The Company's business is comprised of four business segments: exploration and production, energy marketing, natural gas distribution and natural gas transmission. Financial information by business segment is presented in Note N to the consolidated financial statements contained in Part II. (b) (1) and (2) Not applicable. (c) (1) EXPLORATION AND PRODUCTION. Exploration and production activities are conducted by Equitable Resources Energy Company through its divisions, and Andex. Its activities are principally in the Appalachian area where it explores for, develops, produces and sells natural gas and oil, extracts and markets natural gas liquids and performs contract drilling and well maintenance services. The exploration and production segment also conducts operations in the Rocky Mountain area including the Canadian Rockies where it explores for, develops and produces oil, and to a lesser extent natural gas. In the Southwest and Gulf Coast offshore areas, this segment participates in exploration and development of gas and oil projects. The exploration and production segment also owns an interest in two natural gas liquids plants in Texas. Andex participates in ventures to explore for and develop oil in Colombia, South America. ITEM 1. BUSINESS (CONTINUED) ENERGY MARKETING. Energy marketing activities are conducted by ERMCO and its subsidiaries, and IEC. Its activities include marketing of natural gas and electricity, extraction and sale of natural gas liquids, intrastate transportation, cogeneration development and central facility plant operations. ERMCO operates nationwide as a full-service natural gas marketing and supply company providing a full range of energy services, including monthly "spot" and longer-term contracts, peak shaving and transportation arrangements. In 1994, ERMCO was granted a Federal Energy Regulatory Commission (FERC) certificate for electricity wholesaling. In Louisiana, LIG provides intrastate transportation of gas and extracts and markets natural gas liquids and Equitable Storage provides underground gas storage services. IEC, which was acquired in July 1995, is engaged in the development, construction, operation and ownership of private power and cogeneration projects. NATURAL GAS DISTRIBUTION. Natural gas distribution activities comprise the operations of Equitable Gas Company, the Company's state-regulated local distribution company. Equitable Gas is regulated by state public utility commissions in Pennsylvania, West Virginia and Kentucky and is engaged in the purchase, distribution, marketing and transportation of natural gas. The territory served by Equitable Gas embraces principally the city of Pittsburgh and surrounding municipalities in southwestern Pennsylvania, a few municipalities in northern West Virginia and field line sales in eastern Kentucky. Natural gas distribution services are provided to more than 266,000 customers located mainly in the city of Pittsburgh and its environs. Residential and commercial sales volumes reflect annual variations which are primarily related to weather. NATURAL GAS TRANSMISSION. Natural gas transmission activities are conducted by three FERC-regulated gas pipelines: Kentucky West, Equitrans, and Nora. Activities include gas transportation, gathering, storage, and marketing activities. Kentucky West is an open access natural gas pipeline company which provides transportation service to Equitable Gas, the exploration and production segment, and other industrial end-users. Marketed gas sales are to the exploration and production segment and nonaffiliated customers. Kentucky West's pipelines are not physically connected with those of Equitrans or Equitable Gas and deliveries are made to Columbia Gas Transmission Corporation, a nonaffiliate, which in turn delivers like quantities to Equitrans in West Virginia and Pennsylvania under a Transportation and Exchange Agreement. Equitrans has production, storage and transmission facilities in Pennsylvania and West Virginia. Equitrans provides transportation service for Equitable Gas Company and nonaffiliates including customers in off-system markets. Storage services are provided for Equitable Gas Company and nine nonaffiliated customers. Marketed gas sales are to Equitable Gas Company and nonaffiliated customers. Nora transports the exploration and production segment's gas produced in Virginia and Kentucky. ITEM 1. BUSINESS (CONTINUED) (c) (1) (i) Operating revenues as a percentage of total operating revenues for each of the four business segments during the years 1993 through 1995 are as follows: 1995 1994 1993 ---- ---- ---- Exploration and Production: Natural gas production 6% 9% 10% Oil 2 2 3 Natural gas liquids 1 1 2 Contract drilling 1 1 1 Other 3 - 1 --- ---- --- Total Exploration and Production 13 13 17 --- ---- --- Energy Marketing: Natural gas marketing 53 51 45 Natural gas liquids 4 4 2 Transportation 1 1 1 --- ---- --- Total Energy Marketing 58 56 48 --- ---- --- Natural Gas Distribution: Residential 19 19 23 Commercial 3 5 5 Industrial and utility 1 2 1 Transportation 2 2 2 --- ---- --- Total Natural Gas Distribution 25 28 31 --- ---- --- Natural Gas Transmission: Marketed gas 1 1 1 Transportation 1 1 2 Storage 1 1 1 Other 1 - - --- ---- --- Total Natural Gas Transmission 4 3 4 --- ---- --- Total Revenues 100% 100% 100% === ==== === See Note N to the consolidated financial statements in Part II regarding financial information by business segment. (c) (1) (ii)Not applicable. (c) (1) (iii) The following pages (4, 5 and 6) summarize gas supply and disposition, gas transportation, and sales of oil and natural gas liquids for the years 1993 through 1995.
ITEM 1. BUSINESS (CONTINUED) 1995 Exploration Energy Natural Gas Natural Gas Intersegment and Production Marketing Distribution Transmission Eliminations Consolidated Gas Produced, Purchased and Sold (MMcf): Produced 64,984 140 2,560 67,684 --------- -------- ------- -------- -------- -------- Purchased: Other producers 463,551 41,926 8,036 513,513 Inter-segment purchases 3,146 53,556 13,549 (70,251) --------- -------- ------- -------- -------- -------- Total purchases 3,146 517,107 55,475 8,036 (70,251) 513,513 --------- -------- ------- -------- -------- -------- Total produced and purchased 68,130 517,107 55,615 10,596 (70,251) 581,197 Deduct: Net increase (decrease) in gas in storage (1,395) (276) (1,671) Extracted natural gas liquids (equivalent gas volumes) 1,871 6,540 8,411 System use and unaccounted for 557 1,650 5,031 (275) 6,963 --------- -------- ------- --------- -------- -------- Total 65,702 508,917 51,979 11,147 (70,251) 567,494 ========= ======== ======= ======== ======== ======== Gas Sales (MMcf): Residential 29,494 29,494 Commercial 4,494 4,494 Industrial and Utility 17,991 (10,349) 7,642 Production 64,984 (465) 64,519 Marketing 718 508,917 11,147 (59,437) 461,345 --------- -------- ------- -------- -------- -------- Total 65,702 508,917 51,979 11,147 (70,251) 567,494 ========= ======== ======= ======== ======== ======== Natural Gas Transported (MMcf) 122,405 16,103 119,090 (98,398) 159,200 ======== ======= ======== ======== ======== Oil Produced and Sold (thousands of bls) 1,932 1,932 ========= ======== Natural Gas Liquids Sold (thousands of gallons) 63,047 197,940 260,987 ========= ======== ======== Average Selling Price: Residential Gas Sales (per Mcf) $9.048 Commercial Gas Sales 8.857 Industrial and Utility Gas Sales 2.069 Produced Natural Gas $1.587 Marketed Natural Gas 1.604 $1.623 $2.001 Oil (per barrel) 16.435 Natural Gas Liquids (per gallon) .327 .268
ITEM 1. BUSINESS (CONTINUED) 1994 Exploration Energy Natural Gas Natural Gas Intersegment and Production Marketing Distribution Transmission Eliminations Consolidated Gas Produced, Purchased and Sold (MMcf): Produced 62,507 143 1,871 64,521 --------- -------- -------- -------- --------- -------- Purchased: Other producers 389,710 45,632 7,263 442,605 Inter-segment purchases 2,523 47,920 12,963 472 (63,878) --------- -------- -------- -------- --------- -------- Total purchases 2,523 437,630 58,595 7,735 (63,878) 442,605 --------- -------- -------- -------- --------- -------- Total produced and purchased 65,030 437,630 58,738 9,606 (63,878) 507,126 Deduct: Net increase (decrease) in gas in storage 241 (181) 60 Extracted natural gas liquids (equivalent gas volumes) 1,546 6,377 7,923 System use and unaccounted for 480 1,602 6,391 268 8,741 --------- -------- -------- -------- --------- -------- Total 63,004 429,651 52,106 9,519 (63,878) 490,402 ========= ======== ======== ======== ========= ======== Gas Sales (MMcf): Residential 29,570 29,570 Commercial 9,681 9,681 Industrial and Utility 12,855 388 (3,576) 9,667 Production 62,507 (7,237) 55,270 Marketing 497 429,651 9,131 (53,065) 386,214 --------- -------- -------- -------- --------- -------- Total 63,004 429,651 52,106 9,519 (63,878) 490,402 ========= ======== ======== ======== ========= ======== Natural Gas Transported (MMcf) 103,726 8,611 123,472 (100,472) 135,337 ======== ======== ======== ========= ======== Oil Produced and Sold (thousands of bls) 1,986 1,986 ========= ======== Natural Gas Liquids Sold (thousands of gallons) 51,032 194,493 245,525 ========= ======== ======== Average Selling Price: Residential Gas Sales (per Mcf) $8.974 Commercial Gas Sales 6.916 Industrial and Utility Gas Sales 2.478 $5.951 Produced Natural Gas $ 1.949 Marketed Natural Gas 1.873 $1.932 2.327 Oil (per barrel) 14.723 Natural Gas Liquids (per gallon) .299 .263
ITEM 1. BUSINESS (CONTINUED) 1993 Exploration Energy Natural Gas Natural Gas Intersegment and Production Marketing Distribution Transmission Eliminations Consolidated Gas Produced, Purchased and Sold (MMcf): Produced 53,550 144 1,828 55,522 --------- -------- -------- ------ -------- -------- Purchased: Other producers 221,948 21,583 30,287 273,818 Inter-segment purchases 3,598 35,531 24,773 6,227 (70,129) --------- -------- ------- ------ -------- -------- Total purchases 3,598 257,479 46,356 36,514 (70,129) 273,818 --------- -------- ------- ------ -------- -------- Total produced and purchased 57,148 257,479 46,500 38,342 (70,129) 329,340 Deduct: Net increase (decrease) in gas in storage 3,904 2,300 6,204 Extracted natural gas liquids (equivalent gas volumes) 3,005 3,162 6,167 System use and unaccounted for 294 801 2,614 5,645 9,354 --------- -------- ------- ------ -------- -------- Total 53,849 253,516 39,982 30,397 (70,129) 307,615 ========= ======== ======= ====== ======== ======== Gas Sales (MMcf): Residential 29,980 29,980 Commercial 8,235 8,235 Industrial and Utility 1,767 25,387 (23,872) 3,282 Production 53,550 (3,719) 49,831 Marketing 299 253,516 4,052 (41,580) 216,287 --------- -------- ------- ------ -------- -------- Total gas sales 53,849 253,516 39,982 29,439 (69,171) 307,615 Processed gas extracted 958 (958) --------- -------- ------- ------ -------- -------- Total 53,849 253,516 39,982 30,397 (70,129) 307,615 ========= ======== ======= ====== ======== ======== Natural Gas Transported (MMcf) 50,659 10,986 88,550 (67,892) 82,303 ======== ======= ====== ======== ======== Oil Produced and Sold (thousands of bls) 2,112 2,112 ========= ======== Natural Gas Liquids Sold (thousands of gallons) 60,973 101,218 162,191 ========= ======== ======== Average Selling Price: Residential Gas Sales (per Mcf) $8.247 Commercial Gas Sales 7.171 Industrial and Utility Gas Sales 4.537 $4.237 Produced Natural Gas $ 2.236 Marketed Natural Gas 2.659 $2.231 2.517 Oil (per barrel) 16.182 Natural Gas Liquids (per gallon) .321 .272
ITEM 1. BUSINESS (CONTINUED) During 1995, a total of 581,197 MMcf of gas was produced and purchased by the Companies compared with 507,126 MMcf in 1994. The increase reflects greater marketing activity and increased production. GAS PURCHASES. Total purchases in 1995 amounted to 513,513 MMcf, of which 461,345 MMcf was applicable to marketing operations and 52,168 MMcf was for system supply, compared with 386,214 MMcf for marketing operations and 56,391 MMcf for system supply in 1994. Through gas purchase contracts for system supply, the Company controls proved reserves on acreage developed by independent producers. The majority of these contracts cover the productive lives of the wells. NATURAL GAS AND OIL PRODUCTION. Natural gas production by the exploration and production segment in 1995 of 64,984 MMcf increased 2,477 MMcf over the 1994 total of 62,507 MMcf. Other production by transmission and distribution segments in 1995 was 2,700 MMcf compared with the 1994 total of 2,014 MMcf. Production of crude oil in 1995 was 1,932,000 barrels, compared with 1,986,000 barrels in 1994. In 1995, the Company drilled 70 gross wells (46.1 net wells). The primary focus of drilling activity was in Virginia for gas and coalbed methane and in the Rockies for oil. The Company has been able to develop gas reserves at costs which make it very competitive in marketing its gas to pipeline and commercial buyers. As a result, even in periods of surplus gas supply, the Company has been able to sell all gas production at a profit. NATURAL GAS AND OIL RESERVES. The Company's estimate of proved developed and undeveloped gas reserves for the exploration and production segment comprised 845.8 Bcf as of December 31, 1995. These reserves included 739.2 Bcf of proved developed reserves. The Company's oil reserves at December 31, 1995 consisted of 18.2 million barrels of proved developed and undeveloped reserves; proved developed oil reserves amounted to 16.8 million barrels. Of the total reserves, 79 percent is in the Appalachian area, 19 percent in the Rockies and 2 percent in the Gulf. See Note T to the consolidated financial statements in Part II for details of gas and oil producing activities. STORAGE. Net storage withdrawals for system use during the 1994-95 heating season were 5.9 Bcf, compared with 7.1 Bcf the previous heating season. Net withdrawals for storage service customers of 12.1 Bcf were made during the 1994-95 heating season compared with 14.1 Bcf the previous heating season. SUPPLY OUTLOOK. The Company's near-term gas supply for distribution operations is excellent. The long-range gas supply outlook also is very favorable. Annual gas supply is forecasted to exceed demand at least for the next decade. ITEM 1. BUSINESS (CONTINUED) The energy marketing segment has also been in a favorable supply position and reserves for the exploration and production segment have continued to increase. However, the rate of purchase of future supplies or development of reserves will depend largely on energy prices. (c) (1) (iv) Equitable Gas is regulated by the Pennsylvania Public Utility Commission and the Public Service Commissions of West Virginia and Kentucky; LIG is regulated by the Louisiana Public Service Commission; Kentucky West, Equitrans, Nora, LIG and Equitable Resources Energy are regulated by the Federal Energy Regulatory Commission under the Natural Gas Act and the Natural Gas Policy Act. Equitable Gas, Kentucky West, Equitrans, Nora, LIG and Equitable Resources Energy are also subject to regulation by the Department of Transportation under the Natural Gas Pipeline Safety Act of 1968 with respect to safety requirements in the design, construction, operation and maintenance of pipelines and related facilities. (c) (1) (v) and (vi) Approximately 65 percent of natural gas distribution revenue is recorded during the winter heating season from November through March. Significant quantities of purchased gas are placed in underground storage inventory during the off-peak season to accommodate high customer demands during the winter heating season. Funds required to finance this inventory are obtained through short-term loans. The exploration and production and energy marketing segments' revenues are not subject to seasonal variation to the same degree as natural gas distribution revenues. However, they are subject to price fluctuations, particularly during the summer months. (c) (1) (vii) Not applicable. (c) (1) (viii) Not applicable. (c) (1) (ix) Not applicable. (c) (1) (x) Equitable Gas is in competition with others for the purchase of natural gas and Equitable Resources Energy is in competition with others for the acquisition of gas and oil leases. Equitable Gas competes for gas sales with other utilities in its service area, as well as with other fuels and forms of energy and other sources of marketed natural gas available to existing or potential customers. The natural gas distribution segment has been successful in meeting competition with aggressive marketing which retained load and added new residential, commercial and off-system customers in areas served by two or more energy suppliers. This has been achieved by responding to market requirements with a portfolio of firm and interruptible services at competitive prices. (c) (1) (xi) Not material. ITEM 1. BUSINESS (CONTINUED) (c) (1) (xii) The Company and its Subsidiaries are subject to federal, state and local environmental laws and regulations. Principal concerns are with respect to oil and thermal pollution of waterways, storage and disposal of hazardous wastes and liquids, and erosion and sedimentation control in pipeline construction work. For further discussion of environmental matters, see Management's Discussion and Analysis of Financial Condition and Results of Operations and Note R to the consolidated financial statements in Part II. (c) (1) (xiii) The Companies had 2,054 regular employees at the end of 1995. (d) Not material. ITEM 2. PROPERTIES Principal facilities are owned by the Company's business segments with the exception of several office locations and warehouse buildings. The terms of the leases on these facilities expire at various times from 1996 through 2014. All leases contain adequate renewal options for various periods. A minor portion of equipment is also leased. With few exceptions, transmission, storage and distribution pipelines are located on or under (1) public highways under franchises or permits from various governmental authorities, or (2) private properties owned in fee, or occupied under perpetual easements or other rights acquired for the most part without examination of underlying land titles. The Company's facilities have adequate capacity, are well maintained and, where necessary, are replaced or expanded to meet operating requirements. NATURAL GAS DISTRIBUTION. Equitable Gas owns and operates natural gas distribution properties as well as other general property and equipment in Pennsylvania, West Virginia and Kentucky. NATURAL GAS TRANSMISSION. Equitrans owns and operates production, underground storage and transmission facilities as well as other general property and equipment in Pennsylvania and West Virginia. Kentucky West owns and operates gathering and transmission properties as well as other general property and equipment in Kentucky. ENERGY MARKETING. This segment owns an intrastate pipeline system and four hydrocarbon extraction plants in Louisiana. It also has completed construction of a high-deliverability gas storage facility in Louisiana and a 15-mile interchange system that interconnects the storage facility to LIG. EXPLORATION AND PRODUCTION. This business segment owns or controls and operates substantially all of the Company's gas and oil production properties, the majority of which are located in the Appalachian area. This segment also owns hydrocarbon extraction facilities in Kentucky with a 100-mile liquid products pipeline which extends into West Virginia and an interest in two hydrocarbon extraction plants in Texas. ITEM 2. PROPERTIES (CONTINUED) This business segment owns or controls acreage of proved developed and undeveloped gas and oil lands located principally in the Appalachian area and, to a lesser extent, in the Rocky Mountain area including the Canadian Rockies, the Southwest and Gulf Coast offshore areas and in Colombia, South America. The acquisition of Canadian properties in 1993 is described in Note Q to the consolidated financial statements contained in Part II. Information relating to Company estimates of natural gas and oil reserves and future net cash flows is summarized in Note T to the consolidated financial statements in Part II. No report has been filed with any Federal authority or agency reflecting a five percent or more difference from the Company's estimated total reserves. Gas and Oil Production (Exploration and Production): 1995 1994 1993 ------ ------ ----- Gas - MMcf 64,984 62,507 53,550 Oil - Thousands of Barrels 1,932 1,986 2,112 Natural Gas: Average field sales price of natural gas produced during 1995, 1994 and 1993 was $1.59, $1.95 and $2.24 per Mcf, respectively. Average production cost (lifting cost) of natural gas during 1995, 1994 and 1993 was $.389, $.424 and $.458 per Mcf, respectively. Oil: Average sales price of oil produced during 1995, 1994 and 1993 was $16.44,$14.72 and $16.18 per barrel, respectively. Average production cost (lifting cost) of oil during 1995, 1994 and 1993 was $3.30, $3.73 and $4.30 per barrel, respectively. Gas Oil Total productive wells at December 31, 1995: Total gross productive wells 4,359 677 Total net productive wells 3,901 433 Total acreage at December 31, 1995: Total gross productive acres 604,000 Total net productive acres 504,000 Total gross undeveloped acres 2,680,000 Total net undeveloped acres 1,903,000 ITEM 2. PROPERTIES (CONTINUED) Number of net productive and dry exploratory wells and number of net productive and dry development wells drilled: 1995 1994 1993 ------ ------ ----- Exploratory wells: Productive 1.6 7.0 12.0 Dry 2.8 5.7 6.7 Development wells: Productive 39.1 126.9 123.4 Dry 2.6 5.3 10.6 As of December 31, 1995, the Company had 1 gross well (.06 net wells) in the process of being drilled. ITEM 3. LEGAL PROCEEDINGS LIG is a party to certain claims involving its gas purchase contracts, including take-or-pay liabilities. As more fully described in Note Q to the consolidated financial statements in Part II, the seller, and/or the previous owner of LIG, have provided indemnifications for the Company. There are no other material pending legal proceedings, other than those which are adequately covered by insurance, to which the Company or any of its subsidiaries is a party, or to which any of their property is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the last quarter of its fiscal year ended December 31, 1995. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (b) Identification of executive officers - -------------------------- ------------------------ =========================== Name and Age Title Business Experience - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== Frederick H. Abrew (58) President and Chief First elected to present Executive Officer position January 1, 1995; President and Chief Operating Officer from December 17, 1993; Executive Vice President and Chief Operating Officer from June 1, 1992; Executive Vice President from June 1, 1991; Executive Vice President - Utility Services from June 1, 1988. - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== A. Mark Abramovic (47) Vice President and First elected to present Chief Financial Officer position November 1, 1994; Vice President Corporate Development from June 1, 1994; Assistant to the President from November 1993; Vice President Finance and Chief Financial Officer of Connecticut Natural Gas Corporation, Hartford, CT, from January 1991; Vice President - Finance of the Peoples Natural Gas Company, Pittsburgh, PA, from September 1986. - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== Robert E. Daley (56) Vice President and First elected to position Treasurer (Retired May 22, 1986. 11/30/95) - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== Dan C. Eaton (47) Vice President - First elected to present Strategic and position May 26, 1995; Financial Planning Director - Finance Analysis, H.J. Heinz, Pittsburgh, PA, from April 1994; Vice President - Finance of Weight Watchers Foods, Pittsburgh, PA, from August 1992; Vice President - Finance of Heinz Canada LTD, Toronto, Canada, from June 1991; Vice President - Finance of the Hubinger Co., Keokuk, IA, from May 1990 (a subsidiary of H.J. Heinz). - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== Joseph L.Giebel (65) Vice President - First elected to position Accounting and February 1, 1991; Vice Administration President - Accounting (Retired 6/30/95) from May 1, 1981. - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== Name and Age Title Business Experience - -------------------------- ------------------------ =========================== John C. Gongas, Jr. (51) Vice President - First elected to present Corporate Operations position May 26, 1995; Vice President - Utility Group from January 1, 1994; Vice President Utility Services from June 1, 1992; President of Kentucky West Virginia Gas Company since April 20, 1992; President of Equitrans, Inc., from February 26, 1988. - -------------------------- ------------------------ =========================== Augustine A. Mazzei, Jr. Senior Vice President First elected to present (59) and Chief Legal Officer position May 26, 1995; Senior Vice President and General Counsel from June 1, 1988. - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== Audrey C. Moeller (60) Vice President and First elected to present Corporate Secretary position May 22, 1986. - -------------------------- ------------------------ =========================== - -------------------------- ------------------------ =========================== Richard Riazzi (41) Vice President - First elected to position Corporate Marketing May 26, 1995; Vice (Resigned 12/31/95) President - Energy Group from January 1, 1994; Vice President - Corporate Development from August 1, 1991; Director - Special Projects from October 1, 1990; President - Equitable Resources Marketing Company from February 27, 1989. - -------------------------- ------------------------ =========================== ------------------------- ------------------------ =========================== Gregory R. Spencer (47) Vice President - Human First elected to present Resources and position May 26, 1995; Administration Vice President - Human Resources from October 10, 1994; Vice President of Human Resources Administration of AMSCO International, Inc., Pittsburgh, PA, from May 1993 (integrated manufacturer of sterilization and decontamination equipment for health care and scientific customers); General Manager - Human Resources of U.S. Steel Group of USX Corporation, Pittsburgh, PA, from October 1991; Director Personnel, U.S. Steel Group of USX Corporation, Pittsburgh, PA, from July 1987. ------------------------- ------------------------ =========================== ------------------------- ------------------------ =========================== Jeffrey C. Swoveland Treasurer First elected to present (40) position December 15, 1995; Director of Alternative Finance from September 27, 1994; Vice President - Global Corporate Banking of Mellon Bank, Pittsburgh, PA, from June 1993; Assistant Vice President - Global Corporate Banking of Mellon Bank, Pittsburgh, PA, from June, 1989. ------------------------- ------------------------ =========================== =============================================================================== Officers are elected annually to serve during the ensuing year or until their successors are chosen and qualified. Except as indicated, the officers listed above were elected on May 26, 1995. =============================================================================== PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS a) The Company's common stock is listed on the New York Stock Exchange and the Philadelphia Stock Exchange. The high and low sales prices reflected in the New York Stock Exchange Composite Transactions as reported by The Wall Street Journal and the dividends declared and paid per share are summarized as follows: 1995 1994 ------------------------ ------------------------- High Low Dividend High Low Dividend 1st Quarter 29 5/8 26 7/8 $.295 38 3/4 34 $.285 2nd Quarter 31 1/4 27 5/8 .295* 37 32 1/4 .285* 3rd Quarter 30 3/4 25 7/8 .295 35 5/8 29 .285 4th Quarter 31 3/8 28 3/4 .295 31 1/8 25 1/2 .295 * Actually declared near the end of the preceding quarter. (b) As of December 31, 1995, there were 8,338 shareholders of record of the Company's common stock. (c)(1) The indentures under which the Company's long-term debt is outstanding contain provisions limiting the Company's right to declare or pay dividends and make certain other distributions on, and to purchase any shares of, its common stock. Under the most restrictive of such provisions, $369,357,000 of the Company's consolidated retained earnings at December 31, 1995, was available for declarations or payments of dividends on, or purchases of, its common stock. (c)(2) The Company anticipates dividends will continue to be paid on a regular quarterly basis. =============================================================================== ITEM 6. SELECTED FINANCIAL DATA =============================================================================== 1995 1994 1993 1992 1991 (Thousands Except Per Share Amounts) Operating revenues $1,425,990 $1,397,280 $1,094,794 $ 812,374 $ 679,631 ========== ========== ========== ========== ========== Net income $ 1,548(a) $ 60,729 $ 73,455 $ 60,026 $ 64,168 ========== ========== ========= ========= ========= Earnings per share of common stock $.04 $1.76 $2.27 $1.92 $2.05 ==== ===== ===== ===== ===== Total assets $1,961,808 $2,019,122 $1,946,907 $1,468,424 $1,440,593 Long-term debt $ 415,527 $ 398,282 $ 378,845 $ 346,693 $ 346,818 Cash dividends paid per share of common stock $1.18 $1.15 $1.10 $1.04 $1.00 (a) Includes charge for impairment of assets and nonrecurring gains. See Notes B, C and D to the consolidated financial statements. =============================================================================== ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS =============================================================================== OVERVIEW Equitable's consolidated net income for 1995 was $1.5 million or $.04 per share, compared with $60.7 million or $1.76 per share for 1994, and $73.5 million or $2.27 per share for 1993. Earnings for 1995 include an after-tax charge of $74.2 million or $2.12 per share due to the recognition of impairment of assets of $121.1 million pursuant to the methodology of Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", as more fully described in Note B to the consolidated financial statements. The results for 1995 also include a nonrecurring after-tax gain of $29.1 million or $.83 per share related to the Columbia Gas Transmission (Columbia) bankruptcy settlement and $6.6 million or $.19 per share, resulting from regulatory approval for accelerated recovery of future gas costs as described in Notes D and C, respectively, to the consolidated financial statements. The decrease in earnings for 1995 compared to 1994, excluding the charge for impairment of assets and the effect of the settlements, is due primarily to a 19 percent decline in the average wellhead price for produced natural gas, increased operating expenses and higher interest costs. The decrease in earnings for 1994 compared to 1993 is due to a 13% decline in average wellhead prices for natural gas, increased operating and interest expense, and lower margins from the Company's Louisiana Intrastate Gas subsidiary, partially offset by a 17% increase in natural gas production. RESULTS OF OPERATIONS This discussion supplements the detailed financial information by business segment presented in Note N to the consolidated financial statements. EXPLORATION AND PRODUCTION Operating revenues, which are derived primarily from the sale of produced natural gas, oil and natural gas liquids and from contract drilling, were $234.9 million in 1995 compared with $195.8 million in 1994 and $202.4 million in 1993. The 1995 revenues include $40.2 million of nonrecurring amounts from the Columbia bankruptcy settlement, and $11.0 million of additional revenue from direct bill settlements as described in Notes D and C, respectively, to the consolidated financial statements. The decrease in revenues for 1995 compared to 1994, excluding the nonrecurring amounts, is due primarily to a 19 percent decline in average wellhead prices for natural gas which was partially offset by increased production of natural gas, higher oil prices and increased production and prices for natural gas liquids. The decrease in revenues for 1994 compared to 1993 is due primarily to lower wellhead prices for natural gas and oil, and lower selling prices and production of natural gas liquids which were partially offset by increased gas production. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EXPLORATION AND PRODUCTION 1995 1994 1993 OPERATING REVENUES (THOUSANDS): Natural Gas......................... $ 103,113 $ 121,810 $ 119,746 Oil................................. 31,753 29,239 34,176 Natural Gas Liquids................. 20,601 15,244 19,545 Contract Drilling................... 14,324 15,427 14,611 Direct Billing Settlements.......... 32,582 7,815 7,815 Other............................... 32,492 6,260 6,529 ---------- ---------- ---------- Total Revenues.................... $ 234,865 $ 195,795 $ 202,422 ========== ========== ========== SALES QUANTITIES: Natural Gas (MMcf).................. 64,984 62,507 53,550 Oil (MBls).......................... 1,932 1,986 2,112 Natural Gas Liquids (thousands of gallons)............. 63,047 51,032 60,973 Gas purchased amounted to $10.9 million in 1995 compared with $10.6 million in 1994 and $17.0 million in 1993. The increase in gas purchased for 1995 compared to 1994 is due to higher requirements, reflecting increased production of natural gas liquids, offset by lower prices. The decrease in gas purchased for 1994 compared to 1993 is due to the lower requirements attributed to decreased production of natural gas liquids. Other operating expenses were $237.8 million in 1995, $154.4 million in 1994, and $142.9 million in 1993. Other operating expenses for 1995 include a charge of $73.9 million for impairment of assets. The increase in other operating expenses for 1995 compared to 1994, excluding the charge, and the increase for 1994 compared to 1993 is due to increased depreciation and depletion reflecting higher production. Operating results were a loss of $13.8 million in 1995, income of $30.8 million in 1994, and income of $42.5 million in 1993. The decrease in operating income for 1995 compared to 1994, excluding the effect of nonrecurring items, reflects lower wellhead prices for natural gas which was partially offset by increased production of natural gas, higher oil prices and increased prices and production of natural gas liquids. The decrease in operating income for 1994 compared to 1993 reflects lower wellhead prices for natural gas and oil, and lower selling prices and production of natural gas liquids which were partially offset by increased gas production. Average wellhead natural gas prices for 1995 decreased 19% from the 1994 level while prices for oil and natural gas liquids increased over the 1994 average prices. Natural gas production increased to a record level in 1995 reflecting the on-going development of Appalachian properties, which are the foundation of the segment's activities, as well as a 45% increase in production from the offshore Gulf Coast area. The 1996 capital expenditure program of $63.8 million for exploration and production includes $15.2 million for development of Appalachian holdings, $17.8 million for the Rocky Mountain area, $29.2 million for offshore drilling in the Gulf of Mexico, and $1.6 million for exploration in South America. Market and price trends will continue to be the principal factors for the economic justification of drilling investments under the 1996 program. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ENERGY MARKETING Operating revenues, which are derived primarily from the marketing of natural gas, sale of produced natural gas liquids, and intrastate transportation of natural gas in Louisiana, were $889.3 million in 1995 compared with $890.8 million in 1994 and $599.6 million in 1993. Operating revenues for 1995 compared to 1994 remained substantially the same. A 16% decrease in the average price of marketed gas was offset by an increase in marketed gas volumes and higher production and prices for natural gas liquids. The increase in revenues for 1994 compared to 1993 is attributed primarily to the acquisition of Louisiana Intrastate Gas Company (LIG) on June 30, 1993, as more fully described in Note Q to the consolidated financial statements. ENERGY MARKETING 1995 1994 1993 OPERATING REVENUES (THOUSANDS): Natural Gas Marketing............... $ 826,143 $ 830,082 $ 565,605 Natural Gas Liquids................. 53,019 51,113 27,576 Transportation...................... 9,405 9,266 6,247 Other............................... 736 317 196 ---------- ---------- ---------- Total Revenues.................... $ 889,303 $ 890,778 $ 599,624 ========== ========== ========== SALES QUANTITIES: Marketed Natural Gas (MMcf)......... 508,917 429,651 253,516 Natural Gas Liquids (thousands of gallons)............ 197,940 194,493 101,218 Gas purchased amounted to $854.4 million in 1995 compared with $857.4 million in 1994 and $575.7 million in 1993. The decrease in purchased gas for 1995 compared to 1994 reflects lower prices for purchased gas partially offset by higher volumes of marketed gas and requirements for the higher production of natural gas liquids. The increased cost for 1994 compared to 1993 reflects the increase in volume of marketed natural gas and higher requirements for liquids production. Other operating expenses were $53.7 million in 1995, $29.3 million in 1994, and $12.2 million in 1993. Other operating expenses for 1995 include a charge of $21.2 million for impairment of assets. The increase in other operating expenses for 1995 compared to 1994, excluding the charge, reflects marketing operations in Canada which began in October 1994 and marketing and administrative expenses in 1995 associated with the gas storage service that began in early 1996. The increase for 1994 compared to 1993 reflects the acquisition of LIG. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Operating results for 1995 were a loss of $18.8 million in 1995, income of $4.1 million in 1994, and income of $11.7 million in 1993. The decrease in operating income for 1995 compared to 1994, excluding the charge for impairment of assets, is due to lower margins for marketed gas sales, partially offset by higher prices and production of natural gas liquids. The decrease in operating income for 1994 compared to 1993 reflects lower prices for natural gas liquids. The 1996 capital expenditure program of $30.7 million for marketing operations includes $3.2 million for completion of the gas storage system, $4.5 million for improvement of LIG's pipeline and gathering system, and $23.0 million for development of new business. NATURAL GAS DISTRIBUTION Operating revenues, which are derived from the sale and transportation of natural gas primarily to retail customers at state-regulated rates, were $381.1 million in 1995 compared with $390.5 million in 1994 and $335.1 million in 1993. The decrease in revenues for 1995 compared to 1994 is due to the effect of commercial customers switching from gas sales to transportation service and a change in the mix of industrial and utility gas sales. The increase in revenues for 1994 compared to 1993 is due primarily to higher retail rates to pass through increased purchased gas costs to customers, increased sales to utilities, and increased commercial and industrial sales reflecting some transportation customers switching service. NATURAL GAS DISTRIBUTION 1995 1994 1993 OPERATING REVENUES (THOUSANDS): Residential Gas Sales.............. $ 266,855 $ 265,356 $ 247,238 Commercial Gas Sales............... 39,804 66,956 59,057 Industrial and Utility Gas Sales... 37,228 31,853 8,017 Transportation Service............. 31,730 21,750 16,526 Other.............................. 5,433 4,560 4,311 --------- ---------- ---------- Total Revenues................... $ 381,050 $ 390,475 $ 335,149 ========= ========== ========== SALES QUANTITIES (MMCF): Residential Gas Sales.............. 29,494 29,570 29,980 Commercial Gas Sales............... 4,494 9,681 8,235 Industrial and Utility Gas Sales... 17,991 12,855 1,767 Transportation Deliveries.......... 16,103 8,611 10,986 Heating Degree Days (Normal - 5,968) ................ 5,748 5,607 5,628 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NATURAL GAS DISTRIBUTION (CONTINUED) Gas purchased amounted to $221.7 million in 1995, $232.9 million in 1994, and $182.8 million in 1993. The decrease in gas costs for 1995 compared to 1994 is due to the effect of commercial customers switching from gas sales to transportation service, partially offset by the pass-through of higher costs in rates to retail customers. The increase in gas costs for 1994 compared to 1993 reflects the pass-through of higher costs in rates to retail customers and the increase in sales to commercial, industrial, and utility customers. Other operating expenses amounted to $135.9 million in 1995, $114.4 million in 1994, and $106.6 million in 1993. Other operating expenses for 1995 include a charge of $20.8 million for impairment of assets. Other operating expenses for 1995 compared to 1994, excluding the charge, remained substantially the same. The increase in 1994 compared to 1993 is due principally to increased labor, sales and marketing, distribution, and uncollectible account expenses. Operating income was $23.5 million in 1995 compared with $43.2 million in 1994 and $45.7 million in 1993. Operating income for 1995 compared to 1994, excluding the charge for impairment of assets, remained substantially the same. The decrease in operating income in 1994 compared to 1993 is due primarily to increased operating expenses, which more than offset the higher margins being realized. The operating results of the distribution operations continue to be impacted by the effects of weather on gas sales, primarily to residential customers. However, increased sales to utility customers and the continuing expansion of new gas-using technologies such as cogeneration, natural gas vehicles, and natural gas-fired cooling have served to retain system throughput. The 1996 capital expenditure program of $24.6 million for distribution operations includes $18.7 million for the distribution system and $5.9 million for other items. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NATURAL GAS TRANSMISSION Operating revenues, which are derived from the interstate transportation and storage of natural gas subject to federal regulation, and the marketing of natural gas, were $118.9 million in 1995 compared with $116.8 million in 1994 and $188.9 million in 1993. Operating revenues for 1995 include $4.8 million related to the Columbia bankruptcy settlement, as described in Note D to the consolidated financial statements. The decrease in revenues for 1995 compared to 1994, excluding the effect of the settlement, is due primarily to lower selling prices for marketed natural gas. The decrease in revenues between 1994 and 1993 reflects the impact of FERC Order 636 restructuring which took effect in the middle of 1993. NATURAL GAS TRANSMISSION 1995 1994 1993 OPERATING REVENUES (THOUSANDS): Industrial and Utility Gas Sales.... $ 1,451 $ 2,309 $ 114,867 Marketed Gas Sales.................. 22,308 21,244 10,200 Transportation Service.............. 67,966 69,958 47,534 Storage Service..................... 15,909 16,993 10,014 Other............................... 11,227 6,265 6,267 ---------- ---------- ---------- Total Revenues.................... $ 118,861 $ 116,769 $ 188,882 ========== ========== ========== SALES QUANTITIES (MMCF): Industrial and Utility Gas Sales.... - 388 26,345 Marketed Gas Sales.................. 11,147 9,131 4,052 Transportation Deliveries........... 119,090 123,472 88,550 Gas purchased amounted to $17.4 million in 1995, $18.2 million in 1994, and $95.9 million in 1993. The decrease in gas purchased for 1995 compared to 1994 reflects lower prices for marketed gas. The decrease in gas costs between 1994 and 1993 reflects the elimination of pipeline gas sales pursuant to FERC Order 636 restructuring. Other operating expenses amounted to $70.6 million in 1995, $66.4 million in 1994, and $62.3 million in 1993. Other operating expenses for 1995 include a charge of $5.2 million for impairment of assets. Other operating expenses for 1995 compared to 1994, excluding the charge, remained substantially the same. The increase in expenses between 1994 and 1993 is due primarily to provisions for possible refunds to customers. Operating income was $30.9 million in 1995 compared with $32.2 million in 1994 and $30.7 million in 1993. Operating income of $33.0 million for 1995, excluding the effect of the Columbia settlement and the charge for impairment of assets, remained substantially the same as 1994. The increase in operating income between 1994 and 1993 is due primarily to the restructuring of tariff rates pursuant to FERC Order 636 whereby all fixed costs are now recovered in the demand portion of pipeline rates. The 1996 capital expenditure program of $10.4 million for transmission operations includes $6.6 million for maintaining and expanding the transmission system, $1.5 million for expansion of gas storage facilities, and $2.3 million for other items. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CAPITAL RESOURCES AND LIQUIDITY OPERATING ACTIVITIES Cash required for operations is impacted primarily by the seasonal nature of the Company's distribution operations. Gas purchased for storage during the nonheating season is financed with short-term loans, which are repaid as gas is withdrawn from storage and sold during the heating season. In addition, short-term loans are used to provide other working capital requirements during the nonheating season. INVESTING ACTIVITIES The Company's business requires major ongoing expenditures for replacements, improvements, and additions to its distribution and transmission plant and continuing development and expansion of its resource production activities. Such expenditures during 1995 were $118.1 million. A total of $129.5 million has been authorized for the 1996 capital expenditure program. Short-term loans are also used as interim financing for a portion of capital expenditures. The Company expects to finance its 1996 capital expenditures with cash generated from operations and temporarily with short-term loans. Capital expenditures, including acquisitions, totaled about $939 million during the five-year period ended December 31, 1995, of which 61 percent was financed from operations. FINANCING ACTIVITIES The Company 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 ranged from 5.44 percent to 6.75 percent during 1995. At December 31, 1995, $135.0 million of commercial paper was outstanding at an average interest rate of 5.68 percent. In January 1995, the Company established a five-year revolving Credit Agreement with a group of banks providing $500 million of available credit. The agreement requires a facility fee of one-tenth of one percent. Adequate credit is expected to continue to be available in the future. In October 1995, the Company sold most of its gas and oil properties in the northern Appalachian basin areas of New York, Pennsylvania and West Virginia. The properties comprised less than four percent of the exploration and production segment's total gas and oil production reserves. The Company previously operated the majority of these properties, with its working interest averaging approximately 25 percent. Proceeds from the sale were approximately $17.3 million. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) FINANCING ACTIVITIES (CONTINUED) In November 1995, the Company sold an interest in its Appalachian gas properties which produce nonconventional fuels. The Company will retain an interest in the properties that will increase based on performance. Proceeds to the Company were $133.5 million. In November 1995, the Company received $45.0 million in Columbia's bankruptcy settlement related to various claims the Company had against Columbia for abrogation of contracts to purchase gas from the Company, collection of FERC Order 636 transition costs and the direct billing settlements. The after-tax proceeds received from the sale of properties and the Columbia bankruptcy settlement described above were used to repay short-term debt. The Company intends to file a shelf registration with the Securities and Exchange Commission in April 1996 to issue $250 million of long-term debt. The proceeds from issuance of this debt is expected to be used to retire the 8 1/4% Debentures and provide funds for the possible tender or defeasance of the 9.9% Debentures. FEDERAL INCOME TAX PROVISIONS Cash flow has been affected by the Alternative Minimum Tax (AMT) since 1988. Despite the availability of nonconventional fuels tax credit, the Company has incurred an AMT liability in each of the years 1988 through 1995. Although AMT payments can be carried forward indefinitely and applied to income tax liabilities in future periods, they reduce cash generated from operations. At December 31, 1995, the Company has available $74.8 million of AMT credit carryforwards. The impact of AMT on future cash flow will depend on the level of taxable income. AMT is not expected to affect the Company's ability to finance future capital requirements. Under current law, wells drilled after 1992 do not qualify for the nonconventional fuels tax credit. While production from qualified wells drilled in the Appalachian area will generate tax credits through the year 2002, it is anticipated that the amount of such credits will decline as the related reserves are depleted. The credits recorded in 1995, 1994, and 1993 reduced the Company's federal income tax provisions by $13.1 million, $16.4 million, and $20.6 million, respectively. The sale of an interest in properties producing nonconventional fuels, as described above, will significantly reduce the generation of credits in the future. Therefore, the Company expects accelerated utilization of AMT credit carryforwards. ENVIRONMENTAL MATTERS Management does not know of any environmental liabilities that will have a material effect on the Company's financial position or results of operations. The Company has identified situations that require remedial action for which $2.7 million is accrued at December 31, 1995. Environmental matters are described in Note R to the consolidated financial statements. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) BALANCE SHEET CHANGES The increase in accounts receivable is due to the higher sales of marketed and produced gas. The increase in other assets is due primarily to the approval for accelerated collection of gas costs as described in Note C to the consolidated financial statements. The increase in accounts payable reflects higher gas purchased for marketing. The decrease in deferred income taxes is due primarily to the recognition of the impairment of assets as described in Note B to the consolidated financial statements. The change in deferred revenues is described in Note P to the consolidated financial statements. AUDIT COMMITTEE The Audit Committee, composed entirely of outside directors, meets periodically with the Company's independent auditors, its internal auditor, and management to review the Company's financial statements and the results of audit activities. The Audit Committee, in turn, reports to the Board of Directors on the results of its review and recommends the selection of independent auditors. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PAGE REFERENCE Report of Independent Auditors 26 Statements of Consolidated Income for each of the three years in the period ended December 31, 1995 27 Statements of Consolidated Cash Flows for each of the three years in the period ended December 31, 1995 28 Consolidated Balance Sheets December 31, 1995 and 1994 29 & 30 Statements of Common Stockholders' Equity for each of the three years in the period ended December 31, 1995 31 Long-term Debt, December 31, 1995 and 1994 32 Notes to Consolidated Financial Statements 33 - 54 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Equitable Resources, Inc. We have audited the accompanying consolidated balance sheets and statements of long-term debt of Equitable Resources, Inc., and Subsidiaries at December 31, 1995 and 1994, and the related consolidated statements of income, common stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equitable Resources, Inc., and Subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. s/ Ernst & Young LLP Ernst & Young LLP Pittsburgh, Pennsylvania February 13, 1996
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 ------------------------------------------------ (Thousands Except Per Share Amounts) Operating Revenues $ 1,425,990 $ 1,397,280 $ 1,094,794 Cost of Energy Purchased 911,357 926,905 644,157 --------------- -------------- -------------- Net operating revenues 514,633 470,375 450,637 --------------- -------------- -------------- Operating Expenses: Operation 198,502 192,799 174,420 Maintenance 26,635 31,737 29,024 Depreciation and depletion 104,625 93,347 76,894 Impairment of assets 121,081 - - Taxes other than income 41,838 42,244 39,802 --------------- -------------- -------------- Total operating expenses 492,681 360,127 320,140 --------------- -------------- -------------- Operating Income 21,952 110,248 130,497 Other Income 387 3,163 1,706 Interest Charges 50,098 43,905 38,728 --------------- -------------- -------------- Income (Loss) Before Income Taxes (27,759) 69,506 93,475 Income Taxes (Benefits) (29,307) 8,777 20,020 ---------------- -------------- -------------- Net Income $ 1,548 $ 60,729 $ 73,455 =============== ============== ============== Average Common Shares Outstanding 34,793 34,509 32,359 =============== ============== ============== Earnings Per Share of Common Stock $ .04 $ 1.76 $ 2.27 =============== ============== ============== See notes to consolidated financial statements Pages 33 to 54, inclusive
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 ----------- ---------- ---------- (Thousands) Cash Flows from Operating Activities: Net income $ 1,548 $ 60,729 $ 73,455 ---------- ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Impairment of assets 121,081 - - Depreciation and depletion 104,625 93,347 76,894 Deferred income taxes (benefits) (74,348) (5,059) 756 Other - net (767) 1,566 1,319 Changes in other assets and liabilities: Accounts receivable and unbilled revenues (74,275) 723 (22,352) Gas stored underground 5,179 2,958 (5,076) Material and supplies 154 (615) (709) Deferred purchased gas cost 14,730 (7,742) (14,024) Regulatory assets 1,810 (1,363) (18,657) Accounts payable 58,791 (20,414) 18,747 Accrued taxes (1,481) 4,230 1,024 Refunds due customers (6,252) 8,049 2,537 Deferred revenue 129,874 - - Other - net (867) (1,274) (4,588) ---------- ---------- ---------- Total adjustments 278,254 74,406 35,871 ---------- ---------- ---------- Net cash provided by operating activities 279,802 135,135 109,326 ---------- ---------- ---------- Cash Flows from Investing Activities: Capital expenditures (118,112) (146,174) (339,411) Proceeds from sale of property 24,610 1,195 1,270 ---------- ---------- ---------- Net cash used in investing activities (93,502) (144,979) (338,141) ---------- ---------- ---------- Cash Flows from Financing Activities: Issuance of common stock 2,756 1,791 112,412 Purchase of treasury stock (240) (395) (28) Dividends paid (41,098) (39,686) (35,279) Proceeds from issuance of long-term debt 17,836 43,083 31,702 Repayments and retirements of long-term debt (24,500) (1,971) (16,445) Increase (decrease) in short-term loans (134,300) 15,400 139,900 -------- ---------- ---------- Net cash provided (used) by financing activities (179,546) 18,222 232,262 -------- ---------- ---------- Net Increase in Cash and Cash Equivalents 6,754 8,378 3,447 Cash and Cash Equivalents at Beginning of Year 23,415 15,037 11,590 ---------- ---------- ---------- Cash and Cash Equivalents at End of Year $ 30,169 $ 23,415 $ 15,037 ========== ========== ========== Cash Paid During the Year for: Interest (net of amount capitalized) $ 46,359 $ 40,105 $ 34,592 ========== ========== ========== Income taxes $ 41,272 $ 13,098 $ 27,547 ========== ========== ========== See notes to consolidated financial statements Pages 33 to 54, inclusive
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1995 AND 1994 ASSETS 1995 1994 ------------------------------- (Thousands) Current Assets: Cash and cash equivalents $ 30,169 $ 23,415 Accounts receivable (less accumulated provision for doubtful accounts: 1995, $10,539; 1994, $10,890) 240,846 172,178 Unbilled revenues 31,752 25,794 Gas stored underground - current inventory 9,922 15,101 Material and supplies 12,577 12,876 Deferred purchased gas cost 10,160 24,890 Prepaid expenses and other 42,323 33,569 ------------- ------------- Total current assets 377,749 307,823 ------------- ------------- Property, Plant and Equipment: Exploration and production (successful efforts method) 869,329 983,328 Energy marketing 295,061 309,579 Natural gas distribution 568,272 552,789 Natural gas transmission 388,986 387,921 ------------- ------------- Total property, plant and equipment 2,121,648 2,233,617 Less accumulated depreciation and depletion 664,065 637,951 ------------- ------------- Net property, plant and equipment 1,457,583 1,595,666 ------------- ------------- Other Assets: Regulatory assets 85,241 88,387 Other 41,235 27,246 -------------- ------------- Total other assets 126,476 115,633 ------------- ------------- Total $ 1,961,808 $ 2,019,122 ============= ============= See notes to consolidated financial statements Pages 33 to 54, inclusive
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1995 AND 1994 CAPITALIZATION AND LIABILITIES 1995 1994 ------------------------------- (Thousands) Current Liabilities: Long-term debt payable within one year $ - $ 24,500 Short-term loans 135,000 269,300 Accounts payable 182,185 123,394 Accrued taxes 18,107 19,588 Accrued interest 14,842 13,032 Refunds due customers 16,003 22,255 Customer credit balances 9,759 10,427 Other 13,383 16,399 ------------- ------------- Total current liabilities 389,279 498,895 ------------- ------------- Long-Term Debt 415,527 398,282 ------------- ------------- Deferred and Other Credits: Deferred income taxes 265,737 326,597 Deferred investment tax credits 20,991 22,082 Deferred revenue 129,874 - Other 25,321 23,264 ------------- ------------- Total deferred and other credits 441,923 371,943 ------------- ------------- Commitments and Contingencies - - ------------- ------------- Common Stockholders' Equity 715,079 750,002 ------------- ------------- Total $ 1,961,808 $ 2,019,122 ============= ============= See notes to consolidated financial statements Pages 33 to 54, inclusive
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES STATEMENTS OF COMMON STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 Common Stock (a) Foreign Common Shares No Retained Currency Stockholders' Outstanding Par Value Earnings Translation Equity ------------------------------------------------------------------- (Thousands) Balance, January 1, 1993 31,386 $ 95,300 $ 482,257 $ - $ 577,557 Net income for the year 1993 73,455 Dividends ($1.10 per share) (35,279) Foreign currency translation (581) Stock issued: New stock issuance 3,000 111,570 Conversion of 9 1/2% debentures 51 564 Restricted stock option plan 29 850 Cash paid in lieu of fractional shares (78) Treasury stock (1) (28) ------ --------- --------- -------- Balance, December 31, 1993 (b) 34,465 208,178 520,433 (581) 728,030 Net income for the year 1994 60,729 Dividends ($1.15 per share) (39,686) Foreign currency translation (923) Stock issued: Conversion of 9 1/2% debentures 31 345 Restricted stock option plan 8 313 Dividend reinvestment plan 47 1,504 Treasury stock (10) (310) ------ --------- --------- -------- Balance, December 31, 1994 (b) 34,541 210,030 541,476 (1,504) 750,002 Net income for the year 1995 1,548 Dividends ($1.18 per share) (41,098) Foreign currency translation 366 Adjustment for Independent Energy Corporation pooling of interests 233 26 110 Stock issued: Conversion of 9 1/2% debentures 146 1,611 Restricted stock option plan 43 1,232 Dividend reinvestment plan 52 1,524 Treasury stock (8) (242) ------ --------- --------- -------- Balance, December 31, 1995 (b)(c)(d) 35,007 $ 214,181 $ 502,036 $ (1,138) $715,079 ====== ========= ========= ======== ======== (a) Shares authorized: Common - 80,000,000 shares, Preferred - 3,000,000 shares. (b) Net of treasury stock: 1995 - 407,000 shares ($9,673,000); 1994 - 632,000 shares ($14,933,000); 1993 - 622,000 shares ($14,623,000). (c) A total of 2,618,000 shares of authorized but unissued common stock was reserved for the conversion of the 9 1/2% convertible subordinated debentures, for issuance under the key employee restricted stock option and stock appreciation rights incentive compensation plan, the long-term incentive plan, the non-employee directors' stock incentive plan, and for issuance under the Company's dividend reinvestment and stock purchase plan. (d) Retained earnings of $369,357,000 is available for dividends on, or purchase of, common stock pursuant to restrictions imposed by indentures securing long-term debt. See notes to consolidated financial statements Pages 33 to 54, inclusive
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES LONG-TERM DEBT DECEMBER 31, 1995 AND 1994 Annual Debt Maturities After Maturities One Year 1995 1994 1995 1994 (Thousands) 8 1/4% Debentures, due July 1, 1996 (a) $ - $ - $ 75,000 $ 75,000 7 1/2% Debentures, due July 1, 1999 ($75,000 principal amount, net of unamortized original issue discount) (b) - - 71,322 70,466 9 1/2% Convertible subordinated debentures, due January 15, 2006 - - 705 2,316 9.9% Debentures, due April 15, 2013 (c) - - 75,000 75,000 Medium-term notes: 7.2% to 9.0% Series A, due 1998 thru 2021 - - 100,000 100,000 5.1% to 7.6% Series B, due 2003 thru 2023 - 24,500 75,500 75,500 6.8% to 7.6% Series C, due 2007 thru 2018 - - 18,000 - ---------- ---------- ----------- ------------ Total $ - $ 24,500 $ 415,527 $ 398,282 ========== ========== =========== ============ (a) 8 1/4% Debentures will be retired with proceeds from issuance of new long-term debt. See Note J to the consolidated financial statements. (b) Not redeemable prior to maturity. (c) Annual sinking fund payments of $3,750,000 are required beginning in 1999. See notes to consolidated financial statements Pages 33 to 54, inclusive
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 A. Summary of Significant Accounting Policies (1) PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of Equitable Resources, Inc., and Subsidiaries (the "Company" or "Companies"). All subsidiaries are 100% owned. (2) PROPERTIES, DEPRECIATION AND DEPLETION: The cost of property additions, replacements and improvements capitalized includes labor, material and overhead. The cost of property retired, plus removal costs less salvage, is charged to accumulated depreciation. Depreciation for financial reporting purposes is provided on the straight-line method at composite rates based on estimated service lives, except for most gas and oil production properties as explained below. Depreciation rates are based on periodic studies. The Company uses the successful efforts method of accounting for exploration and production activities. Under this method, the cost of productive wells and development dry holes, as well as productive acreage, are capitalized and depleted on the unit-of-production method. (3) ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION: The Federal Energy Regulatory Commission (FERC) prescribes a formula to be used for computing overhead allowances for funds used during construction (AFC). AFC applicable to equity funds capitalized is included in other income and amounted to $1.0 million in 1995, $.9 million in 1994 and $1.0 million in 1993. AFC applicable to borrowed funds, as well as other interest capitalized for the nonregulated companies, is applied as a reduction of interest charges and amounted to $2.5 million in 1995, $2.1 million in 1994 and $1.8 million in 1993. (4) INVENTORIES: Inventories are stated at cost which is below market. Gas stored underground--current inventory is stated at cost under the average cost method. Material and supplies are stated generally at average cost. (5) INCOME TAXES: The Companies file a consolidated federal income tax return. The current provision for income taxes represents amounts paid or payable. Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Where deferred tax liabilities will be passed through to customers in regulated rates, the Companies establish a corresponding regulatory asset for the increase in future revenues that will result when the temporary differences reverse. Investment tax credits realized in prior years were deferred and are being amortized over the estimated service lives of the related properties where required by ratemaking rules. A. Summary of Significant Accounting Policies (Continued) (6) DEFERRED PURCHASED GAS COST: Where permitted by regulatory authority under purchased gas adjustment clauses or similar tariff provisions, the Company defers the difference between purchased gas cost, less refunds, and the billing of such cost and amortizes the deferral over subsequent periods in which billings either recover or repay such amounts. (7) REGULATORY ASSETS: Certain costs, which will be passed through to customers under ratemaking rules for regulated operations, are deferred by the Company as regulatory assets. The amounts deferred relate primarily to the accounting for income taxes. (8) DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses exchange-traded natural gas and crude oil futures contracts and options and over-the-counter (OTC) natural gas and crude oil swap agreements and options to hedge exposures to energy price changes. Exchange-traded instruments are generally settled with off-setting positions but may be settled by delivery of commodities. OTC arrangements require settlement in cash. The margin accounts for exchange-traded futures contracts, which reflect daily settlements as market values change, are recorded in other current assets.Premiums on all options contracts are initially recorded in other current assets based on the amount exchanged. The Company sells options to reduce the overall cost of hedging. Unrealized losses on sold options are deferred to the extent of unamortized premiums. The fair values of swap agreements are generally recognized only when settled. Changes in market value of derivative financial instruments which qualify as hedges of firm commitments or anticipated transactions are deferred and recognized in net operating revenues when hedged transactions occur. Cash flows from derivatives accounted for as hedges are considered operating activities. The Company also uses exchange-traded natural gas futures contracts for speculative trading purposes. Realized and unrealized gains and losses on these contracts are recorded in other income in the period in which the changes occur. (9) STOCK OPTIONS: The Company follows Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for stock options. No compensation expense is recognized on stock options because the exercise price equals the market price of the underlying stock on the date of grant. (10) USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (11) CASH FLOWS: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. B. Impairment of Assets In 1995, the Company evaluated the carrying value of long-lived assets for impairment of value pursuant to the methodology prescribed in Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." Primarily as a result of the sustained decrease in gas and oil prices, the Company recognized a write-down in the carrying value of assets of $121.1 million which decreased net income by $74.2 million. The write-down includes $73.9 million for exploration and production properties, $21.2 million for intrastate transmission facilities included in the energy marketing segment, $20.8 million for information systems and other assets reflected in the natural gas distribution segment and $5.2 million for storage development projects and other assets reflected in the natural gas transmission segment. The fair value of the assets was determined based upon estimated future net cash flows or an evaluation of recoverability of amounts invested. C. Direct Billing Settlements Kentucky West Virginia Gas Company received FERC approval of settlement agreements with all customers for the direct billing to recover the higher Natural Gas Policy Act (NGPA) prices, which the FERC had denied on natural gas produced from exploration and production properties between 1978 and 1983. The portion of the settlement with Equitable Gas Division has been subject to Pennsylvania Public Utility Commission (PUC) review. The PUC approved Equitable Gas Company's collection of $18.8 million in September 1995 and $7.8 million in September 1994 and 1993 related to the direct billing settlement. The 1995 amount includes $11.0 million for accelerated collection of amounts that would have otherwise been subject to approval by the PUC, and recognized in income, in later years. As a result of the PUC approvals, net income for 1995 includes approximately $11.3 million and net income for 1994 and 1993 includes approximately $4.7 million related to the settlement. Approximately $18 million from the settlement remains to be recovered in future gas costs filings with the PUC over the next three years. In November 1995, Kentucky West Virginia Gas Company received $13.8 million from Columbia Gas Transmission Company (Columbia) as settlement, in Columbia's bankruptcy proceeding, of Kentucky West's claim for $19 million related to the direct billing settlements. Net income for 1995 includes $8.9 million related to the settlement. D. Columbia Gas Transmission Bankruptcy Settlement In addition to the direct billing settlement described above, the Company had various claims against Columbia for abrogation of contracts to purchase gas from the Company and collection of FERC Order 636 transition costs. In November 1995, the Company received $31.2 million in Columbia's bankruptcy settlement related to these items which increased net income for 1995 by $20.2 million. E. Income Taxes The following table summarizes the source and tax effects of temporary differences between financial reporting and tax bases of assets and liabilities: December 31, 1995 1994 (Thousands) Deferred tax liabilities (assets): Exploration and development costs expensed for income tax reporting........ $ 59,321 $ 141,479 Tax depreciation in excess of book depreciation ....................... 257,642 255,683 Regulatory temporary differences........... 33,815 37,319 Deferred purchased gas cost................ 1,308 6,397 Alternative minimum tax.................... (74,829) (82,925) Investment tax credit...................... (8,438) (9,306) Other...................................... (4,587) (17,606) --------- --------- Total (including amounts classified as current liabilities of $(1,505) for 1995 and $4,444 for 1994)................... $ 264,232 $ 331,041 ========= ========= As of December 31, 1995 and 1994, $76.1 million and $76.2 million, respectively, of the net deferred tax liabilities are related to rate-regulated operations and have been deferred as regulatory assets. Income tax expense (benefit) is summarized as follows: Years Ended December 31, 1995 1994 1993 (Thousands) Current: Federal........................ $ 36,681 $ 11,196 $ 15,577 State.......................... 8,360 2,640 3,687 Deferred: Federal........................ (56,953) (6,848) (2,758) State.......................... (17,395) 1,789 3,514 ------- -------- ------- Total........................ $(29,307) $ 8,777 $ 20,020 ======== ========= ======== E. Income Taxes (Continued) Provisions for income taxes are less than amounts computed at the federal statutory rate of 35% on pretax income. The reasons for the difference are summarized as follows: Years Ended December 31, 1995 1994 1993 (Thousands) Tax at statutory rate........... $ (9,716) $ 24,327 $ 32,716 State income taxes.............. (5,866) 3,069 4,332 Increase in federal income tax rate - - 5,070 Nonconventional fuels tax credit (13,114) (16,442) (20,600) Other........................... (611) (2,177) (1,498) -------- -------- -------- Income tax expense (benefit)... $(29,307) $ 8,777 $ 20,020 ======== ======== ======== Effective tax (benefit) rate.... (105.6)% 12.6% 21.4% ====== ==== ==== In August 1993, the Omnibus Budget Reconciliation Act of 1993 (Act) was signed into law. One of the provisions of the Act was to raise the maximum corporate income tax rate from 34% to 35%. The effect of this tax rate change increased deferred tax liabilities by approximately $11 million and increased regulatory assets by approximately $6 million. The consolidated federal income tax liability of the Companies has been settled through 1992. The Company has available $74.8 million of alternative minimum tax credit carryforward which has no expiration date. In addition, the Company has net operating loss carryforwards for federal income tax purposes of $11.0 million which begin to expire in 2006. The net operating loss carryforwards apply to Louisiana Intrastate Gas. Amortization of deferred investment tax credits amounted to $1.1 million for 1995 and 1994, and $1.4 million for 1993. F. Employee Pension Benefits The Companies have several trusteed retirement plans covering substantially all employees. The Companies' annual contributions to the plans are based on a 25-year funding level. Plans covering union members generally provide benefits of stated amounts for each year of service. Plans covering salaried employees use a benefit formula which is based upon employee compensation and years of service to determine benefits to be provided. Plan assets consist principally of equity and debt securities. F. Employee Pension Benefits (Continued) The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheets: December 31, 1995 1994 (Thousands) Actuarial present value of benefit obligations: Vested benefit obligation.................. $ 127,758 $ 120,763 ========== ========== Accumulated benefit obligation............. $ 131,405 $ 123,877 ========== ========== Market value of plan assets................. $ 159,607 $ 143,121 Projected benefit obligation................ 146,078 134,111 ---------- ---------- Excess of plan assets over projected benefit obligation......................... 13,529 9,010 Unrecognized net asset...................... (2,208) (2,905) Unrecognized net gain....................... (20,194) (15,606) Unrecognized prior service cost............. 9,864 9,512 ---------- ---------- Prepaid pension cost recognized in the consolidated balance sheets............ $ 991 $ 11 ========== ========== At year-end the discount rate used in determining the actuarial present value of benefit obligations was 7 1/2% for 1995, 8 1/4% for 1994 and 7 1/4% for 1993. The assumed rate of increase in compensation levels was 4 1/2% for all three years. The Companies' pension cost, using a 9% average rate of return on plan assets, comprised the following: Years Ended December 31, 1995 1994 1993 (Thousands) Service cost benefits earned during the period.............. $ 3,452 $ 3,916 $ 2,806 Interest cost on projected benefit obligation..................... 11,165 10,752 10,472 Actual loss (return) on assets.. (34,054) 2,757 (17,224) Net amortization and deferral... 19,806 (14,680) 5,486 -------- -------- -------- Net periodic pension cost...... $ 369 $ 2,745 $ 1,540 ======== ======== ======== G. Other Postretirement Benefits In addition to providing pension benefits, the Companies provide certain health care and life insurance benefits for retired employees and their dependents. Substantially all employees are eligible for these benefits upon retirement from the Companies. The Company's transition obligation is being amortized through 2012. In determining the accumulated postretirement benefit obligation at December 31, 1995, the Company used a beginning inflation factor of 10% decreasing gradually to 4 3/4% after 14 years and a discount rate of 7 1/2%. At December 31, 1994, the beginning inflation factor was 10 1/2% decreasing gradually to 4 3/4% after 15 years and the discount rate was 8 1/4%. The following summarizes the status of the Company's accrued postretirement benefit costs (OPEBS): December 31, 1995 1994 (Thousands) Accumulated postretirement benefit obligation: Retired employees....................... $ 31,555 $ 21,269 Active employees: Fully eligible........................ 10,902 9,158 Other................................. 14,728 13,459 --------- --------- Total obligation .................... 57,185 43,886 Trust assets ............................. 2,632 - --------- --------- Obligation in excess of trust assets...... 54,553 43,886 Unrecognized net gain (loss) ............. (6,298) 5,160 Unrecognized transition obligation........ (39,195) (41,501) --------- --------- Accrued postretirement benefit cost $ 9,060 $7,545 ========= ========= The net periodic cost for postretirement health care and life insurance benefits includes the following: Years Ended December 31, 1995 1994 1993 (Thousands) Service cost.......................... $ 993 $ 1,049 $ 1,065 Interest cost......................... 4,200 3,423 3,936 Amortization of transition obligation. 2,306 2,305 2,306 --------- -------- --------- Periodic cost....................... $ 7,499 $ 6,777 $ 7,307 ========= ======== ========= As of December 31, 1995 and 1994, $4.0 million and $3.5 million, respectively, of the accrued OPEBS related to rate-regulated operations have been deferred as regulatory assets. Rate recovery has begun in several jurisdictions which require the Company to place agreed upon accrual amounts in trust when collected in rates until such time as they are applied to retiree benefits or returned to ratepayers. Trust assets consist principally of equity and debt securities. G. Other Postretirement Benefits (Continued) An increase of one percent in the assumed medical cost inflation rate would increase the accumulated postretirement benefit obligation by 5% and would increase the periodic cost by 4%. H. Common Stock (1) COMMON STOCK ISSUANCE On September 29, 1993, the Company issued 3 million shares of common stock at a price of $38.50 per share. Net proceeds after underwriters' commissions and other issuance costs were approximately $111.6 million. The proceeds were used to repay a portion of the short-term debt incurred to purchase the stock of Louisiana Intrastate Gas Company as described in Note Q. (2)LONG-TERM INCENTIVE PLAN The Equitable Resources, Inc. Long-Term Incentive Plan provides for the granting of shares of common stock to officers and key employees of the Company. These grants may be made in the form of stock options, restricted stock, stock appreciation rights and other types of stock-based or performance-based awards as determined by the Compensation Committee of the Board of Directors at the time of each grant. Stock awarded under the Plan, or purchased through the exercise of options, and the value of stock appreciation units, are restricted and subject to forfeiture should an optionee terminate employment prior to specified vesting dates. The maximum number of shares which could have been granted under the Plan during 1994 was 763,500 shares. In each subsequent year, an additional number of shares equal to 1% of the total outstanding shares as of the preceding December 31 will be available for grant. In no case may the number of shares granted under the Plan exceed 1,725,500 shares. No awards may be made under the Plan after May 27, 1999. In May 1994, 363,400 stock options were granted to purchase common stock at $33.81 per share, which was the mean of the high and the low trading prices of the common stock on the date of grant. These options expire five years from the date of grant. In July 1995, 739,000 stock options were granted to purchase common stock at $28.563 per share, which was the mean of the high and the low trading price on the date of grant. These options expire ten years from the date of grant but contain vesting provisions which are based upon Company performance. At December 31, 1995, 1,725,500 shares of common stock were reserved for issuance under the Plan. H. Common Stock (Continued) (3) KEY EMPLOYEE RESTRICTED STOCK OPTION PLAN The Equitable Resources, Inc., Key Employee Restricted Stock Option and Stock Appreciation Rights Incentive Compensation Plan is nonqualified and provided for the granting of restricted stock awards or options to purchase common stock of the Company at prices ranging from 75% to 100% of market value on the date of grant. Options expire five years from the date of grant. Stock awarded under the Plan or purchased through the exercise of options, and the value of certain stock appreciation units, are restricted and subject to risk of forfeiture should an optionee terminate employment prior to specified vesting dates. The following schedule summarizes the stock option activity: Years Ended December 31, 1995 1994 1993 Options outstanding January 1........... 241,818 253,068 139,725 Granted................................. - - 148,543 Exercised............................... (54,100) (7,650) (33,325) Canceled, forfeited, surrendered or expired............................. (43,593) (3,600) (1,875) -------- ------ -------- Options outstanding December 31......... 144,125 241,818 253,068 ======== ======= ======== Average price of options exercised during the year.............. $20.01 $22.48 $18.97 At December 31: Prices of options outstanding.......... $20.13 $18.81 $17.50 to to to $36.50 $36.50 $36.50 Average option price................... $31.57 $29.82 $29.69 Shares reserved for issuance .......... 610,226 663,699 671,349 No future grants may be made under the Plan which was replaced by the Long-Term Incentive Plan effective May 27, 1994 as described above. H. Common Stock (Continued) (4)NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN The Equitable Resources, Inc. Non-Employee Directors' Stock Incentive Plan provides for the granting of up to 80,000 shares of common stock in the form of stock option grants and restricted stock awards to non-employee directors of the Company. Each Director received 450 shares of restricted stock on February 3, 1994. On June 1, 1994 and 1995, each director was granted an option for 500 shares of common stock at $34.625 and $29.875 per share, respectively. On the first business day of June, in each year from 1996 through 1998, each Director will be granted an option for 500 additional shares of common stock. The exercise price for each share is 100% of the mean of the high and the low trading prices of the common stock on the date of grant. Each option is exercisable upon the earlier of three years from the date of grant or a Director's retirement, disability or death. No option may be exercised more than five years after date of grant. At December 31, 1995, 76,400 shares of common stock were reserved for issuance under the Plan. (5)EMPLOYEE STOCK PURCHASE PLAN In October 1995, the Company implemented an Employee Stock Purchase Plan, subject to shareholder approval at the annual meeting to be held in May 1996. The Plan provides for employees to purchase shares of the Company's common stock at a 10 percent discount through payroll deductions. (6)DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Pursuant to this Plan, stockholders may reinvest dividends and make limited additional cash investments to purchase shares of common stock. Shares issued through the Plan may be acquired on the open market or by issuance of previously unissued shares. At December 31, 1995, 141,714 shares of common stock were reserved for issuance under the Plan. (7)STOCK REPURCHASE PROGRAM In 1995, the Board of Directors of the Company authorized the repurchase of up to one million shares of outstanding common stock. Through December 31, 1995, no shares have been repurchased. I. Short-Term Loans Maximum lines of credit available to the Company were $500 million during 1995, $325 million during 1994 and $360 million during 1993. The Company is not required to maintain compensating bank balances. Commitment fees averaging one-tenth of one percent were paid to maintain credit availability. In January 1995, the Company established a five-year revolving Credit Agreement with a group of banks providing $500 million of available credit. The agreement requires a facility fee of one-tenth of one percent. At December 31, 1995, short-term loans consisted of $135.0 million of commercial paper at a weighted average annual interest rate of 5.68%; and at December 31, 1994, $256.0 million of commercial paper and $13.3 million of bank loans, at a weighted average annual interest rate of 5.94%. The maximum amount of outstanding short-term loans was $314.6 million in 1995, $269.3 million in 1994 and $339.0 million in 1993. The average daily total of short-term loans outstanding was approximately $214.2 million during 1995, $204.6 million during 1994 and $174.9 million during 1993; weighted average annual interest rates applicable thereto were 6.0% in 1995, 4.4% in 1994 and 3.3% in 1993. J. Long-Term Debt The Company filed a shelf registration with the Securities and Exchange Commission effective June 9, 1994 to issue $100 million of Medium-Term Notes--Series C to be used to retire short-term loans. As of December 31, 1995, $18 million of Series C Notes have been issued. The 9 1/2% Convertible Subordinated Debentures are convertible at any time into common stock at a conversion price of $11.06 per share. During 1995, 1994 and 1993, $1,611,000, $345,000 and $564,000 of these debentures were converted into 145,635 shares, 31,187 shares and 50,983 shares of common stock, respectively. At December 31, 1995, 64,096 shares of common stock were reserved for conversions. Interest expense on long-term debt amounted to $36.5 million in 1995, $35.5 million in 1994 and $33.2 million in 1993. Aggregate maturities of long-term debt will be $75.0 million in 1996, none in 1997, $5.0 million in 1998, $78.8 million in 1999, and $3.8 million in 2000. The 1996 maturities will be retired with proceeds from issuance of long-term debt. K. Derivative Financial Instruments The Company is exposed to risk from fluctuations in energy prices in the normal course of business. The Company uses exchange-traded natural gas and crude oil futures contracts and options and over-the-counter (OTC) natural gas and crude oil swap agreements and options to hedge exposures to energy price changes, primarily relating to its gas marketing operations. The Company also trades in energy futures. Exchange-traded energy futures contracts are commitments to either purchase or sell a designated commodity, generally natural gas or crude oil, at a future date for a specified price. These instruments are generally settled with off-setting positions, but may be settled by delivery of commodities. OTC arrangements require settlement in cash. The exchange-traded contracts used by the Company cover one-month periods from one to eighteen months in the future. The OTC agreements cover one-month periods for up to five years in the future. Initial margin requirements are met in cash or other instruments, and changes in contract values are settled daily. Energy futures contracts have minimal credit risk because futures exchanges are the counterparties. The Company manages the credit risk of the other financial instruments by limiting dealings to those counterparties who meet the Company's criteria for credit and liquidity strength. The following table summarizes the outstanding derivative financial instruments: Notional Unrealized Quantity Deferred Purchase Sale Gain/(Loss) -------- ------ ------------ (Bcf Equivalent) ($ Millions) DECEMBER 31, 1995 Exchange traded Futures................. 4.8 1.9 $ .4 Options................. 18.2 11.4 (1.4) ------ ------ ------ Total................. 23.0 13.3 $ (1.0) ====== ====== ====== OTC Swaps................... 27.3 52.8 $ (.3) Options................. 13.5 21.1 1.0 ------ ------ ------ Total................. 40.8 73.9 $ .7 ====== ====== ====== DECEMBER 31, 1994 Exchange traded Futures................. 10.8 3.7 $ (1.5) Options................. .5 .4 .1 ------ ------ ------ Total................. 11.3 4.1 $ (1.4) ====== ====== ====== K. Derivative Financial Instruments (Continued) Deferred realized gains (losses) from hedging firm commitments and anticipated transactions were $(2.8) million and $(.5) million at December 31, 1995 and 1994, respectively. These amounts are included in other current assets and recognized in earnings when the future transactions occur. At December 31, 1995 and 1994, there were no outstanding energy futures contracts held for trading purposes. During 1995 and 1994, the average fair value of traded contracts was $(40,000) and $30,000, respectively. Trading activity resulted in a net loss of $1.9 million for 1995 and a net gain of $1.5 million for 1994. The value of these financial instruments is subject to fluctuations in market prices for natural gas. Exposure to this risk is managed by maintaining open positions within defined trading limits. L. Fair Value of Financial Instruments The carrying value of cash and cash equivalents as well as short-term loans approximates fair value due to the short maturity of the instruments. The estimated fair value of long-term debt, including the portion due within one year, at December 31, 1995 and 1994 would be $465.1 million and $430.2 million, respectively. The fair value was estimated based on the quoted market prices as well as the discounted values using a current discount rate reflective of the remaining maturity. The Company's 8 1/4% Debentures and 7 1/2% Debentures may not be redeemed prior to maturity. The 9.9% Debentures require payment of premiums for early redemption, exclusive of annual sinking fund requirements. The derivative financial instruments described in Note K are reflected in other current assets at fair value of $(3.3) million and $(1.5) million at December 31, 1995 and 1994, respectively. M. Concentrations of Credit Risk Revenues and related accounts receivable from exploration and production operations are generated primarily from the sale of produced natural gas to utility and industrial customers located mainly in the Appalachian area; the sale of produced oil to refinery customers in the Rocky Mountain and Appalachian areas; and the sale of produced natural gas liquids to a refinery customer in Kentucky. Energy marketing operating revenues and related accounts receivable are generated from the nationwide marketing of natural gas to brokers and large volume utility and industrial customers; and the sale of produced natural gas liquids and intrastate transportation of natural gas in Louisiana. M. Concentrations of Credit Risk (Continued) Natural gas distribution operating revenues and related accounts receivable are generated from state-regulated utility natural gas sales and transportation to more than 266,000 residential, commercial and industrial customers located in southwest Pennsylvania and parts of West Virginia and Kentucky. Under state regulations, the utility is required to provide continuous gas service to residential customers during the winter heating season. Natural gas transmission operating revenues and related accounts receivable are generated from FERC-regulated interstate pipeline transportation and storage service for the affiliated utility, Equitable Gas, as well as other utility and end-user customers located in nine mid-Atlantic and northeastern states. The Company is not aware of any significant credit risks which have not been recognized in provisions for doubtful accounts. N. Financial Information by Business Segment The Company reports it operations in four segments. Exploration and production activities comprise the exploration, development, production and sale of natural gas and oil, extraction and sale of natural gas liquids and contract drilling. Energy marketing activities comprise marketing of natural gas and electricity, extraction and sale of natural gas liquids, intrastate transportation, cogeneration development and central facility plant operations. Natural gas distribution activities comprise the operations of the Company's state-regulated local distribution company. Natural gas transmission activities comprise gas transportation, gathering, storage and marketing activities involving the Company's three FERC-regulated gas pipelines. N. Financial Information by Business Segment (Continued) The following table sets forth financial information for each of the business segments: Years Ended December 31, 1995 1994 1993 (Thousands) OPERATING REVENUES: Exploration and production......... $ 234,865 $ 195,795 $ 202,422 Energy marketing................... 889,303 890,778 599,624 Natural gas distribution........... 381,050 390,475 335,149 Natural gas transmission........... 118,861 116,769 188,882 Sales between segments............. (198,089) (196,537) (231,283) ---------- ---------- ---------- Total............................ $1,425,990 $1,397,280 $1,094,794 ========== ========== ========== OPERATING INCOME (LOSS): Exploration and production......... $ (13,823) $ 30,843 $ 42,453 Energy marketing................... (18,845) 4,089 11,700 Natural gas distribution........... 23,521 43,180 45,714 Natural gas transmission........... 31,099 32,136 30,630 ---------- ---------- ---------- Total............................ $ 21,952 $ 110,248 $ 130,497 ========== ========== ========== IDENTIFIABLE ASSETS: Exploration and production......... $ 596,478 $ 724,144 $ 699,322 Energy marketing................... 465,262 396,166 386,040 Natural gas distribution........... 685,912 690,068 660,889 Natural gas transmission........... 268,993 297,140 302,102 Eliminations....................... (54,837) (88,396) (101,446) ---------- ---------- ---------- Total............................ $1,961,808 $2,019,122 $1,946,907 ========== ========== ========== DEPRECIATION AND DEPLETION: Exploration and production......... $ 66,893 57,196 $ 47,645 Energy marketing................... 11,551 11,702 5,778 Natural gas distribution........... 16,442 15,196 14,624 Natural gas transmission........... 9,739 9,253 8,847 ---------- ---------- ---------- Total............................ $ 104,625 $ 93,347 $ 76,894 ========== ========== ========== CAPITAL EXPENDITURES: Exploration and production......... $ 44,786 $ 84,460 $ 101,203 Energy marketing................... 24,164 15,765 195,042 Natural gas distribution........... 42,195 32,712 26,077 Natural gas transmission........... 6,967 13,237 17,089 ---------- ---------- ---------- Total............................ $ 118,112 $ 146,174 $ 339,411 ========== ========== ========== O. Sale Of Property In October 1995, the Company sold most of its gas and oil properties in the northern Appalachian basin areas of New York, Pennsylvania and West Virginia. The properties comprised less than four percent of the exploration and production segment's total gas and oil production and reserves. The Company previously operated the majority of these properties with its working interest averaging approximately 25 percent. Proceeds from the sale were approximately $17.3 million. P. Deferred Revenue In November 1995, the Company sold an interest in certain Appalachian gas properties, the production from which qualifies for nonconventional fuels tax credit. The Company retained an interest in the properties that will increase based on performance. As such, the proceeds of $133.5 million were recorded as deferred revenues and will be recognized in income as financial targets are met. Q. Acquisitions In July 1995, the Company acquired all of the outstanding stock of Independent Energy Corporation (IEC) in exchange for 232,564 shares of the Company's common stock held in treasury. IEC is engaged in the development, construction, operation and ownership of private power and cogeneration projects. The acquisition is being accounted for as a pooling of interests. The effect on the Company's financial statements is not material. On June 30, 1993, the Company purchased the outstanding common stock of Louisiana Intrastate Gas Company (LIG) for $191 million. LIG owns a 1,900 mile intrastate pipeline system in Louisiana, four natural gas processing plants and is also engaged in gas marketing. The purchase was funded initially with short-term debt, a portion of which was repaid with the proceeds from the issuance of common stock as described in Note H to the consolidated financial statements. Under terms of the purchase agreement, the seller, and/or the previous owner of LIG, have indemnified the Company against any losses resulting from claims of liability under the gas purchase contracts and substantially all environmental liabilities attributable to operation of LIG prior to June 30, 1993. On July 8, 1993, the Company purchased all of the outstanding stock of Hershey Oil Corporation (Hershey) for approximately $18 million. Hershey's assets consist primarily of approximately 68 billion cubic feet of proved natural gas reserves and 17,000 net undeveloped acres in Alberta, Canada. The 1993 acquisitions were accounted for under the purchase method and are included in the energy marketing segment and exploration and production segment, respectively. Had the purchases occurred as of the beginning of 1993, unaudited proforma consolidated results for the Company would have been: revenues of $1,119 million; net income of $74.0 million; and earnings per share of $2.29. R. Commitments and Contingencies Rent expense was $9.9 million in 1995, $9.7 million in 1994 and $9.8 million in 1993. Long-term leases are principally for division operating headquarters and warehouse buildings and computer hardware and have renewal options ranging to 18 years from December 31, 1995. Future minimum rentals for all noncancelable long-term leases at December 31, 1995 are as follows: 1996, $5.6 million; 1997, $5.2 million; 1998, $3.9 million; 1999, $3.0 million; 2000, $2.2 million and $15.0 million thereafter for a total of $34.9 million. The Company has annual commitments of approximately $35 million for demand charges under existing long-term contracts with pipeline suppliers for periods extending up to 17 years at December 31, 1995, which relate to gas distribution operations. However, substantially all of these costs are recoverable in customer rates. The Company is subject to federal, state and local environmental laws and regulations. These laws and regulations, which are constantly changing, can require expenditures for remediation and may in certain instances result in assessment of fines. The Company has established procedures for on-going evaluation of its operations to identify potential environmental exposures and assure compliance with regulatory policies and procedures. The estimated costs associated with identified situations that require remedial action are accrued. However, certain of these costs are deferred as regulatory assets when recoverable through regulated rates. On-going expenditures for compliance with environmental laws and regulations, including investments in plant and facilities to meet environmental requirements, have not been material. Management believes that any such required expenditures will not be significantly different in either their nature or amount in the future and does not know of any environmental liabilities that will have a material effect on the Company's financial position or results of operations. S. Interim Financial Information (Unaudited) The following quarterly summary of operating results reflects variations due primarily to the seasonal nature of the Company's business: March June September December 31 30 30 31 (Thousands except per share amounts) 1995 Operating revenues $ 404,691 $ 316,534 $ 270,992 $ 433,773 Operating income (loss) 48,312 5,032 14,458 (45,850) Net income (loss) 27,754 (1,162) 1,684 (26,728) Earnings (loss) per share $.80 $(.03) $.05 $(.76) 1994 Operating revenues $ 439,538 $ 316,122 $ 297,712 $ 343,908 Operating income 60,979 10,054 12,847 26,368 Net income 36,359 6,057 2,381 15,932 Earnings per share $1.05 $.18 $.07 $.46 T. Natural Gas and Oil Producing Activities The supplementary information summarized below presents the results of natural gas and oil activities for the exploration and production segment in accordance with Statement of Financial Accounting Standards No. 69, "Disclosures About Oil and Gas Producing Activities." The information presented excludes data associated with natural gas reserves related to rate-regulated operations. These reserves (proved developed) are less than 5% of total Company proved reserves for the years presented. T. Natural Gas and Oil Producing Activities (Continued) (1)PRODUCTION COSTS The following table presents the costs incurred relating to natural gas and oil production activities: 1995 1994 1993 (Thousands) At December 31: Capitalized costs.............. $ 803,124 $ 909,443 $ 836,638 Accumulated depreciation and depletion................ 311,524 304,835 256,508 --------- --------- --------- Net capitalized costs........... $ 491,600 $ 604,608 $ 580,130 ========= ========= ========= Costs incurred : Property acquisition........... $ 222 $ 8,335 $ 29,345 Exploration.................... 14,844 22,783 13,928 Development.................... 31,802 60,690 62,336 (2) RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES The following table presents the results of operations related to natural gas and oil production, including the effect in 1995 of impairment of assets as described in Note B: 1995 1994 1993 (Thousands) Revenues: Affiliated..................... $ 20,619 $ 16,564 $ 15,467 Nonaffiliated ................. 114,247 136,029 140,380 Production costs................ 31,626 33,891 33,620 Exploration expenses............ 13,312 16,634 13,559 Depreciation and depletion...... 62,212 52,505 43,841 Impairment of assets............ 65,563 - - Income tax expense (benefit).... (27,992) 3,602 5,039 --------- --------- --------- Results of operations from producing activities (excluding corporate overhead) $ (9,855) $ 45,961 $ 59,788 ========== ========== ========== T. Natural Gas and Oil Producing Activities (Continued) (3) RESERVE INFORMATION (UNAUDITED) The information presented below represents estimates of proved gas and oil reserves prepared by Company engineers. Proved developed reserves represent only those reserves expected to be recovered from existing wells and support equipment. Proved undeveloped reserves represent proved reserves expected to be recovered from new wells after substantial development costs are incurred. Substantially all reserves are located in the United States. NATURAL GAS 1995 1994 1993 (Millions of Cubic Feet) Proved developed and undeveloped reserves: Beginning of year.................... 874,964 822,583 720,032 Revision of previous estimates....... 16,999 18,663 9,399 Purchase (sale) of natural gas in place - net (a) (31,729) 6,307 86,113 Extensions, discoveries and other additions 50,521 89,918 60,589 Production........................... (64,984) (62,507) (53,550) -------- -------- -------- End of year (b)...................... 845,771 874,964 822,583 ======== ======== ======== Proved developed reserves: Beginning of year.................... 771,635 759,282 665,194 End of year (c)...................... 739,249 771,635 759,282 (a) Includes purchases in Canada of 68,000 MMcf in 1993. (b) Includes proved reserves in Canada of 70,000 MMcf in 1995, 67,000 MMcf in 1994and 70,000 MMcf in 1993. (c) Includes proved developed reserves in Canada of 46,000 MMcf in 1995, 43,000 MMcf in 1994 and 46,000 MMcf in 1993. T. Natural Gas and Oil Producing Activities (Continued) OIL 1995 1994 1993 (Thousands of Barrels) Proved developed and undeveloped reserves: Beginning of year.................... 18,283 16,468 20,023 Revision of previous estimates....... (356) 2,601 (4,876) Purchase (sale) of oil in place - net (a) (1,071) (169) 418 Extensions, discoveries and other additions 3,278 1,369 3,015 Production........................... (1,933) (1,986) (2,112) ------- ------ ------ End of year (b)...................... 18,201 18,283 16,468 ======= ====== ====== Proved developed reserves: Beginning of year.................... 18,110 16,442 18,540 End of year (c)...................... 16,834 18,110 16,442 (a) Includes purchases in Canada of 68,000 barrels in 1993. (b) Includes proved reserves in Canada of 91,000 barrels in 1995, 75,000 barrels in 1994 and 65,000 barrels in 1993. (c) Includes proved developed reserves in Canada of 64,000 barrels in 1995, 50,000 barrels in 1994 and 39,000 barrels in 1993. T. Natural Gas and Oil Producing Activities (Continued) (4) STANDARD MEASURE OF DISCOUNTED FUTURE CASH FLOW (UNAUDITED) Management cautions that the standard measure of discounted future cash flows should not be viewed as an indication of the fair market value of gas and oil producing properties, nor of the future cash flows expected to be generated therefrom. The information presented does not give recognition to future changes in estimated reserves, selling prices or costs and has been discounted at an arbitrary rate of 10%. Estimated future net cash flows from natural gas and oil reserves based on selling prices and costs at year-end price levels are as follows: 1995 1994 1993 (Thousands) Future cash inflows................. $ 2,279,509 $ 1,983,757 $ 2,140,151 Future production costs............. (635,540) (562,841) (598,707) Future development costs............ (51,081) (46,985) (24,579) Future income tax expenses.......... (539,106) (361,486) (434,362) ------------ ----------- ----------- Future net cash flow................ 1,053,782 1,012,445 1,082,503 10% annual discount for estimated timing of cash flows.............. (535,921) (471,778) (515,023) ------------ ----------- ----------- Standardized measure of discounted future net cash flows (a)......... $ 517,861 $ 540,667 $ 567,480 ============ =========== =========== (a) Includes $11,293,000 in 1995, $10,043,000 in 1994 and $31,267,000 in 1993 related to Canada. Summary of changes in the standardized measure of discounted future net cash flows: 1995 1994 1993 (Thousands) Sales and transfers of gas and oil produced - net............ $ (103,240) $ (118,702) $ (122,227) Net changes in prices, production and development costs............. 54,806 (135,742) (80,256) Extensions, discoveries, and improved recovery, less related costs 65,603 74,900 90,035 Development costs incurred.......... 18,620 16,037 18,482 Purchase (sale) of minerals in place - net (22,990) 9,627 62,843 Revisions of previous quantity estimates 5,278 19,189 (14,910) Accretion of discount............... 64,875 72,058 69,284 Net change in income taxes.......... (97,808) 45,012 (8,584) Other .............................. (7,950) (9,192) 4,491 ------------ ----------- ----------- Net increase (decrease)............. (22,806) (26,813) 19,158 Beginning of year................... 540,667 567,480 548,322 ------------ ----------- ----------- End of year......................... $ 517,861 $ 540,667 $ 567,480 ============ =========== =========== ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by Item 10 with respect to directors is incorporated herein by reference to the section describing "Election of Directors" in the Company's definitive proxy statement relating to the annual meeting of stockholders to be held on May 23, 1996, which will be filed with the Commission within 120 days after the close of the Company's fiscal year ended December 31, 1995. Information required by Item 10 with respect to executive officers is included herein after Item 4 at the end of Part I. ITEM 11. EXECUTIVE COMPENSATION Information required by Item 11 is incorporated herein by reference to the section describing "Executive Compensation", "Employment Contracts and Change-In-Control Arrangements" and "Pension Plan" in the Company's definitive proxy statement relating to the annual meeting of stockholders to be held on May 23, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required by Item 12 is incorporated herein by reference to the section describing "Voting Securities and Record Date" in the Company's definitive proxy statement relating to the annual meeting of stockholders to be held on May 23, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by Item 13 is incorporated herein by reference to the section describing "Certain Relationships and Related Transactions" in the Company's definitive proxy statement relating to the annual meeting of stockholders to be held on May 23, 1996. PART IV ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K (a) 1. Financial statements The financial statements listed in the accompanying index to financial statements (see below) are filed as part of this annual report. 2. Financial Statement Schedule The financial statement schedule listed in the accompanying index to financial statements and financial schedule (see below) is filed as part of this annual report. 3. Exhibits The exhibits listed on the accompanying index to exhibits (pages 60 through 63) are filed as part of this annual report. (b) Reports on Form 8-K filed during the quarter ended December 31, 1995. None (c) Each management contract and compensatory arrangement in which any director or any named executive officer participates has been marked with an asterisk (*) in the Index to Exhibits. EQUITABLE RESOURCES, INC. INDEX TO FINANCIAL STATEMENTS COVERED BY REPORT OF INDEPENDENT AUDITORS (ITEM 14 (A)) 1. The following consolidated financial statements of Equitable Resources, Inc. and Subsidiaries are included in Item 8: PAGE REFERENCE Statements of Consolidated Income for each of the three years in the period ended December 31, 1995 27 Statements of Consolidated Cash Flows for each of the three years in the period ended December 31, 1995 28 Consolidated Balance Sheets December 31, 1995 and 1994 29 & 30 Statements of Common Stockholders' Equity for each of the three years in the period ended December 31, 1995 31 Long-term Debt, December 31, 1995 and 1994 32 Notes to Consolidated Financial Statements 33 thru 54 2. Schedule for the Years Ended December 31, 1995, 1994 and 1993 included in Part IV: II - Valuation and Qualifying Accounts and Reserves 59 All other schedules are omitted since the subject matter thereof is either not present or is not present in amounts sufficient to require submission of the schedules. EQUITABLE RESOURCES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE THREE YEARS ENDED DECEMBER 31, 1995 Column A Column B Column C Column D Column E - ------------------------------------------------------------------------------- Balance At Additions Charged Balance Beginning To Costs At End Description Of Period and Expenses Deductions Of Period - ------------------------------------------------------------------------------- (Thousands) 1995 Accumulated Provision for Doubtful Accounts $ 10,890 $ 10,810 $11,161(A) $ 10,539 1994 Accumulated Provision for Doubtful Accounts $ 10,106 $ 10,010 $ 9,226(A) $ 10,890 1993 Accumulated Provision for Doubtful Accounts $ 9,503 $ 9,352 $ 8,749(A) $ 10,106 Note: (A) Customer accounts written off, less recoveries. INDEX TO EXHIBITS EXHIBITS DESCRIPTION METHOD OF FILING - -------------- -------------------------------- =============================== 3.01 Restated Articles of Filed as Exhibit 3.01 to Form Incorporation of the Company 10-K for the year ended dated May 21, 1993 (effective December 31, 1993 May 27, 1993) - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 3.02 By-Laws of the Company Filed as Exhibit 3.02 to form (amended through December 16, 10-K for the year ended 1994) December 31, 1994 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (a) Indenture dated as of April 1, Filed as Exhibit 4.01 1983 between the Company and (Revised) to Post-Effective Pittsburgh National Bank Amendment No. 1 to relating to Debt Securities Registration Statement (Registration No. 2-80575) - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (b) Instrument appointing Bankers Filed as Exhibit 4.01 (b) to Trust Company as successor Form 10-K for the year ended trustee to Pittsburgh National December 31, 1993 Bank - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (c) Resolution adopted June 26, Filed as Exhibit 4.01 (c) to 1986 by the Finance Committee Form 10-K for the year ended of the Board of Directors of December 31, 1993 the Company establishing the term of the $75,000,000 of debentures, 8 1/4% Series due July 1, 1996 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (d) Resolutions adopted June 22, Filed as Exhibit 4.01 (d) to 1987 by the Finance Committee Form 10-K for the year ended of the Board of Directors of December 31, 1993 the Company establishing the terms of the 75,000 units (debentures with warrants) issued July 1, 1987 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (e) Resolution adopted April 6, Filed as Exhibit 4.01 (e) to 1988 by the Ad Hoc Finance Form 10-K for the year ended Committee of the Board of December 31, 1993 Directors of the Company establishing the terms and provisions of the 9.9% Debentures issued April 14, 1988 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (f) Supplemental indenture dated Filed as Exhibit 4.3 to Form March 15, 1991 with Bankers S-3 (Registration Statement Trust Company eliminating 33-39505) filed August 21, limitations on liens and 1991 additional funded debt - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (g) Resolution adopted August 19, Filed as Exhibit 4.05 to Form 1991 by the Ad Hoc Finance 10-K for the year ended Committee of the Board of December 31, 1991 Directors of the Company Addenda Nos. 1 thru 27, establishing the terms and provisions of the Series A Medium-Term Notes - -------------- -------------------------------- =============================== 4.01 (h) Resolutions adopted July 6, Filed as Exhibit 4.05 to Form 1992 and February 19, 1993 by 10-K for the year ended the Ad Hoc Finance Committee December 31, 1992 of the Board of Directors of the Company and Addenda Nos. 1 thru 8, establishing the terms and provisions of the Series B Medium-Term Notes - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 4.01 (i) Resolution adopted July 14, Filed herewith as Exhibit 1994 by the Ad Hoc Finance 4.01(i) Committee of the Board of Directors of the Company and Addenda Nos. 1 and 2, establishing the terms and provisions of the Series C Medium-Term Notes - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.01 Equitable Resources, Inc. Key Filed as Exhibit 10.01 to Employee Restricted Stock Form 10-K for the year ended Option and Stock Appreciation December 31, 1994 Rights Incentive Compensation Plan (as amended through March 17, 1989) - -------------- -------------------------------- =============================== * 10.02 Employment Agreement dated as Filed herewith as Exhibit of March 18, 1988 and restated 10.02 as of March 15, 1996, with Frederick H. Abrew - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.03 Employment Agreement dated as Filed herewith as Exhibit of March 18, 1988 and restated 10.03 as of March 15, 1996, with Augustine A. Mazzei, Jr. - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.04 (a) Agreement dated December 15, Filed as Exhibit 10.04 (a) to 1989 with Barbara B. Sullivan Form 10-K for the year ended for deferred payment of 1990 December 31, 1994 director fees - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.04 (b) Agreement dated December 21, Refiled herewith as Exhibit 1990 with Barbara B. Sullivan 10.04 (b) pursuant to Rule 24 for deferred payment of 1991 of SEC's Rules of Practice director fees - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.04 (c) Agreement dated December 13, Filed as Exhibit 10.16 to 1991 with Barbara B. Sullivan Form 10-K for the year ended for deferred payment of 1992 December 31, 1991 director fees - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.04 (d) Agreement dated December 16, Filed as Exhibit 10.04 (e) to 1994 with Barbara B. Sullivan Form 10-K for the year ended for deferred payment of 1995 December 31, 1994 director fees - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.04 (e) Agreement dated December 15, Filed herewith as Exhibit 1995 with Barbara B. Sullivan 10.04 (e) for deferred payment of 1996 director fees - -------------- -------------------------------- =============================== * 10.05 Supplemental Executive Filed herewith as Exhibit Retirement Plan (as amended 10.05 and restated through October 20, 1995) - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.06 Retirement Program for the Filed as Exhibit 10.06 to Board of Directors of Form 10-K for the year ended Equitable Resources, Inc. (as December 31, 1994 amended through August 1, 1989) - -------------- -------------------------------- =============================== * 10.07 Supplemental Pension Plan (as Filed as Exhibit 10.07 to amended and restated through Form 10-K for the year ended December 16, 1994) December 31, 1994 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.08 Policy to Grant Supplemental Filed as Exhibit 10.08 to Deferred Compensation Benefits Form 10-K for the year ended in Selected Instances to a December 31, 1994 Select Group of Management or Highly Compensated Employees (as amended and restated through August 1, 1989) - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.09 Equitable Resources, Inc. and Filed as Exhibit 10.22 to Subsidiaries Short-Term Form 10-K for the year ended Incentive Compensation Plan as December 31, 1992 amended February 17, 1993 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.10 (a) Agreement dated December 31, Filed as Exhibit 10.10 (a) to 1987 with Malcolm M. Prine for Form 10-K for the year ended deferred payment of 1988 December 31, 1993 director fees - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.10 (b) Agreement dated December 30, Filed as Exhibit 10.10 (b) to 1988 with Malcolm M. Prine for Form 10-K for the year ended deferred payment of 1989 December 31, 1993 director fees - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 10.11 Trust Agreement with Filed as Exhibit 10.12 to Pittsburgh National Bank to Form 10-K for the year ended act as Trustee for December 31, 1994 Supplemental Pension Plan, Supplemental Deferred Compensation Benefits, Retirement Program for Board of Directors, and Supplemental Executive Retirement Plan - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.12 Equitable Resources, Inc. Filed as Exhibit 10.13 to Non-Employee Directors' Stock Form 10-K for the year ended Incentive Plan December 31, 1994 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.13 Equitable Resources, Inc. Filed as Exhibit 10.14 to Long-Term Incentive Plan Form 10-K for the year ended December 31, 1994 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.14 (a) Agreement dated December 31, Filed as Exhibit 10.15 to 1994 with Donald I. Moritz for Form 10-K for the year ended consulting services December 31, 1994 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.14 (b) Letter agreement dated Filed herewith as Exhibit December 15, 1995 amending 10.14 (b) agreement with Donald I. Moritz for consulting services - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.15 Change in Control Agreement Filed herewith as Exhibit executed with certain key 10.15 employees - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== * 10.16 Equitable Resources, Inc. and Filed herewith as Exhibit Subsidiaries Deferred 10.16 Compensation Plan - -------------- -------------------------------- =============================== 11.01 Statement re Computation of Filed herewith as Exhibit Earnings Per Share 11.01 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 21 Schedule of Subsidiaries Filed herewith as Exhibit 21 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 23.01 Consent of Independent Auditors Filed herewith as Exhibit 23.01 - -------------- -------------------------------- =============================== 99.01 (a) Equitable Resources, Inc. Filed herewith as Exhibit Employees Savings Plan Form 99.01 (a) 11-K Annual Report for the year ended October 31, 1995 - -------------- -------------------------------- =============================== - -------------- -------------------------------- =============================== 99.01 (b) Equitable Resources, Inc. Filed herewith as Exhibit Employees Savings Plan Form 99.01 (b) 11-K Annual Report for the period ended December 31, 1995 - -------------- -------------------------------- =============================== 99.02 Equitable Resources, Inc. Filed herewith as Exhibit Employees Stock Purchase Plan 99.02 Form 11-K Annual Report - -------------- -------------------------------- =============================== The Company agrees to furnish to the Commission, upon request, copies of instruments with respect to long-term debt which have not previously been filed. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EQUITABLE RESOURCES, INC. (Registrant) By: s/ Frederick H. Abrew Frederick H. Abrew President and Chief Executive Officer Date: March 21, 1996 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. President and Chief Executive Officer and Director s/ Frederick H. Abrew (Principal Executive Officer) March 21, 1996 - --------------------------- Frederick H. Abrew Vice President and s/ A. Mark Abramovic Chief Financial Officer March 21, 1996 - --------------------------- A. Mark Abramovic Vice President Strategic and Financial Planning s/ Dan C. Eaton (Chief Accounting Officer) March 21, 1996 - --------------------------- Dan C. Eaton Director Merle E. Gilliand s/ E. Lawrence Keyes, Jr. Director March 21, 1996 - --------------------------- E. Lawrence Keyes, Jr. SIGNATURES (Continued) s/ Thomas A. McConomy Director March 21, 1996 - --------------------------- Thomas A. McConomy s/ Donald I. Moritz Director March 21, 1996 - --------------------------- Donald I. Moritz s/ Malcolm M. Prine Director March 21, 1996 - --------------------------- Malcolm M. Prine s/ David S. Shapira Director March 21, 1996 - --------------------------- David S. Shapira s/ Barbara Boyle Sullivan Director March 21, 1996 Barbara Boyle Sullivan s/ J. Michael Talbert Director March 21, 1996 - -------------------------------- J. Michael Talbert EX-4.01 2 EQUITABLE RESOURCES, INC. Ad Hoc Finance Committee Meeting Pittsburgh, PA July 14, 1994 A meeting of the Ad Hoc Finance Committee of the Board of Directors of Equitable Resources, Inc., was held at Farmington, Pennsylvania, on Thursday, July 14, 1994, at 7:10 a.m., Eastern Daylight Time. Committee members present: Messrs. Merle E. Gilliand, E. Lawrence Keyes, Jr., Malcolm M. Prine, Daniel M. Rooney and Mrs. Barbara B. Sullivan. Mr. Rooney attended via conference telephone. Also present: Messrs. Donald I. Moritz, Chairman and Chief Executive Officer; Frederick H. Abrew, President and Chief Operating Officer; Robert E. Daley, Vice President and Treasurer; and Ms. Audrey C. Moeller, Vice President and Corporate Secretary. Mr. Malcolm M. Prine, Chairman of the Committee, acted as Chairman of the meeting and Ms. Audrey C. Moeller acted as Secretary of the meeting. Mr. Moritz stated that the purpose of the meeting was to adopt resolutions establishing certain terms and provisions of an additional series of securities of the Company to be issued from time to time under the Indenture dated as of April 1, 1983, from Equitable Resources, Inc., to Bankers Trust Company, as successor Trustee, as amended by the 1991 Supplemental Indenture dated as of March 15, 1991; and as contemplated by resolutions adopted by the Board of Directors on March 18, 1994, to authorize the Vice President and Treasurer of the Company to take certain other action on the Committee's behalf. A draft of the resolutions was distributed to the Committee members. Mr. Daley was then asked to review the text of the resolutions. Prior to reviewing the material, Mr. Daley distributed a report of the issuance of the Medium-Term Notes, Series B, the principal amount being $100,000,000 issued at an average interest rate of 6.60 percent at an average maturity of 12.61 years. He also distributed material showing multiple historic yield curves. Mr. Daley then distributed a Prospectus dated June 10, 1994 covering the new Notes which would be issued from time to time and designated Medium-Term Notes, Series C. He pointed out that the Prospectus and all necessary governmental and regulatory approvals authorized the issuance of up to $100,000,000 of the Notes but that management currently is requesting authorization to issue only $50,000,000 within the next six to nine months. He said maturities could range from nine (9) months to forty (40) years from the date of issue; that the Notes may be redeemed prior to maturity; shall not be convertible; that the Company has no obligation to repay the Notes prior to maturity; and that management would be negotiating with Agents, Morgan Stanley & Co. Incorporated and Lehman Brothers in fixing the interest rate on each issue of Notes, although the Company has reserved the right to issue Notes without the par-ticipation of the Agents. Mr. Daley said the proceeds would be used to retire short-term debt. After full discussion, on motion duly made and seconded, the following resolution was unanimously adopted: RESOLVED, That, in accordance with Section 301 of the Indenture dated as of April 1, 1983 (the "Original Indenture") from Equitable Resources, Inc. (the "Company") to Bankers Trust Company, as successor Trustee (the "Trustee"), as amended by the 1991 Supplemental Indenture dated as of March 15, 1991 (the Original Indenture as so amended, the "Indenture"), and as authorized by those certain resolutions of the Board of Directors of the Company dated March 18, 1994, there is hereby established for authentication and delivery by the Trustee an additional series of Securities of the Company (such series being referred to herein as the "Notes") to be issued from time to time under the Indenture, having the following terms and provisions in addition to the terms and provisions established by the Indenture, and to be in substantially the form annexed to this Board resolution: 1. Title. The title of the Notes shall be "Medium-Term Notes, Series C." 2. Principal Amount. The aggregate principal amount of Notes which may be authenticated and delivered (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture) shall initially be limited to $50,000,000. Notes may be issued at any time or from time to time in such principal amounts as shall be specified in one or more Addenda hereto (individually an "Addendum" and collectively Addenda") which may be executed at any time or from time to time by the Chairman, the President or the Vice President and Treasurer of the Company. Each Addendum shall be in substantially the form annexed to this Board resolution and shall be deemed to have been, and hereby is, adopted by this Committee, and may be certified by the Secretary or Assistant Secretary of the Company as a part of this Board resolution. For purposes of each issue of Notes established pursuant to any Addendum, all references in Sections 304, 305, 306, 906 and 1107 of the Indenture to the Securities of any "series" shall be deemed to be references solely to the issue of Notes so established. 3. Maturity. The principal of the Notes shall be payable on such date as shall be nine (9) months to forty (40) years from the date of issue, as shall be specified in any applicable Addendum. 4.1 Interest Rate. The Notes shall bear interest at such fixed rate per annum as shall be specified in any applicable Addendum, in each case until the principal thereof is paid or made available for payment and (to the extent that the payment of such interest shall be legally enforceable) at the same rate per annum on any overdue principal and premium and on any overdue installment of interest. 4.2 Interest Accrual. Interest on the Notes shall accrue from the date of the original issue of such Notes or from the most recent Interest Payment Date (as specified in Section 4.3 below) to which interest has been paid or duly provided for. 4.3 Interest Payment Dates. Unless otherwise specified in any applicable Addendum, the Interest Payment Dates on which interest on the Notes shall be paid or duly provided for shall be semiannually on July 15 and January 15 in each year, commencing on such date as shall be specified in any applicable Addendum. 4.4 Regular Record Dates. Unless otherwise specified in any applicable Addendum, the Regular Record Dates for the interest on the Notes so payable on any Interest Payment Date (as specified in Section 4.3 above) shall be the July 1 or January 1 (whether or not a Business Day), as the case may be, preceding such Interest Payment Date. 5. Place of Payment. Principal of, and premium, if any, on, and interest payable upon maturity or earlier redemption of, the Notes shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City of New York, New York (the "Paying Agent"). Interest on the Notes, other than interest payable at maturity or earlier redemption, shall be payable by check mailed to the registered address of the holder of record on the Regular Record Date for such interest payment. Unless otherwise designated by the Company in a written notice to the Trustee, the office or agency in the Borough of Manhattan for the above purpose shall be the Corporate Trust Office of the Trustee. Notwithstanding the foregoing, (a) interest on any Note held in the name of a nominee of the Depositary (as defined in Section 13.2 below) shall be payable by wire transfer of immediately available funds and (b) interest on any Certificated Note (as defined in Section 13.2 below) held by a holder of $10,000,000 or more in aggregate principal amount of Certificated Notes having the same Interest Payment Dates shall be entitled to receive payments of interest by wire transfer of immediately available funds upon written request to the Paying Agent not later than 15 calendar days prior to the applicable Interest Payment Date. 6. Redemption. The Notes may be subject to redemption prior to Maturity at the option of the Company, as a whole at any time or in part from time to time, otherwise than through operation of a sinking fund, at such Redemption Prices (expressed as per- centages of the principal amount) prevailing during such periods of time as shall be specified in any applicable Addendum, in each case together with accrued interest to the Redemption Date. 7. Sinking Fund. The Notes may be entitled to the benefit of a sinking fund requiring payments by the Company to the Trustee at such times, in amounts sufficient to redeem such principal amount of the Notes at such sinking fund redemption price, with such right of the Company to increase such payments or to deliver Notes or to apply Notes previously delivered in satisfaction of such sinking fund requirements, and with such credit to the Company for previously increased sinking fund payments, in each case as shall be specified in any applicable Addendum. 8. Denominations. Unless otherwise specified in any applicable Addendum, the Notes shall be issuable in denominations of $100,000 or any amount in excess thereof which is an integral multiple of $1,000. 9. Convertibility. The Notes shall not be convertible into shares of capital stock or other securities of the Company. 10. Repayment. Except as provided in Sections 7 and 11 hereof, the Company shall have no obligation to repay the Notes (at the option of Holders or otherwise) prior to the Maturity of the Notes (as specified in Section 3 above). 11. Acceleration. The entire principal amount of the Notes (and not a portion thereof) shall be payable upon declaration of acceleration of the Maturity of any Note pursuant to Section 502 of the Indenture. 12. Section 403 of Indenture. Section 403 of the Indenture shall apply to the Notes. 13.1 Additional Covenants. No additional covenants shall be applicable in respect of the Notes. 13.2 Notes Issuable as Global Securities. Each Note will be represented (i) either by a "Global Note" registered in the name of a nominee of, and deposited with, The Depository Trust Company, New York, New York, as Depositary (the "Depositary"), and representing "Book-Entry Notes", (ii) or by a certificate issued in definitive or temporary form (a "Certificated Note"), in each case as specified in the applicable Addendum. Certificated Notes will not be exchangeable for Book-Entry Notes and, except under the circumstances described below, Book-Entry Notes will not be exchangeable for Certificated Notes and will not otherwise be issuable as Certificated Notes. So long as the Depositary's nominee is the registered owner of a Global Note, such nominee will be considered to be the sole owner or Holder of the Notes represented by such Global Note for all purposes of the Indenture. Except as set forth below, owners of beneficial interests in a Global Note will not be entitled to have the Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of such Notes in definitive form, and will not be considered to be the owners or Holders thereof under the Indenture. If the Depositary is at any time unwilling or unable to continue to act as Depositary, and a successor depositary is not appointed by the Company within 90 days, the Company will issue Certificated Notes in definitive form in exchange for the Global Note or Notes previously deposited with the Depositary. In addition, the Company may at any time in its sole discretion determine not to have the Notes represented by one or more Global Notes and, in such event, will issue Certificated Notes in defin- itive form in exchange for such Global Note or Notes. 13.3 Other Provisions. The Notes shall have no other terms than as set forth in this Board resolution (including any Addenda) and the Indenture or as may be set forth in any indenture or indentures supplemental to the Indenture. 13.4 Indemnification. The Company agrees to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the duties set forth in those certain Administrative Procedures, which comprise a part of that certain Distribution Agreement dated June 10, 1994, between the Company and the Agents named therein (the "Administrative Procedures"), relating to the Notes, as though such Administrative Procedures were set forth in the Indenture. Capitalized terms used in this Board resolution have the meanings set forth in the Indenture unless otherwise indicated or the context otherwise requires. On motion duly made and seconded, the following reso- lutions were unanimously adopted: RESOLVED, That Robert E. Daley, Vice President and Treasurer, is hereby appointed as this Committee's agent to act in its name, place and stead with regard to the determination of all the terms and conditions of the $50,000,000 aggregate principal amount of the Notes to be issued under the Indenture dated as of April 1, 1983, as amended, from Equitable Resources, Inc. to Bankers Trust Company, as Trustee, and under this Company's Form S-3 Registration Statement No. 33-53703, including without limitation, the interest rates and maturity dates and other terms of sale thereof, so long as the maturity period of any such Notes is no less than nine (9) months nor more than forty (40) years from the date of issuance. RESOLVED FURTHER, That the issuance of such Notes on the terms established by Robert E. Daley is hereby authorized, and, in furtherance of the foregoing, Mr. Daley is hereby authorized, empowered and directed to complete the text of a resolution of this Committee establishing the terms of any such Note as provided by Section 301 of the said Indenture, and any such resolution when so completed shall be deemed to have been, and hereby is, adopted by this Committee, and the Secretary or any Assistant Secretary of the Company is hereby authorized, empowered and directed to certify the adoption of any such resolution as though the same were presented to and adopted at a duly convened meeting of this Committee, any such resolution to be inserted in the minute book of the Company as part of the minutes of the Company. The meeting adjourned at 7:20 a.m. s/ Audrey C. Moeller Secretary EQUITABLE RESOURCES, INC. ADDENDUM NO. 1 TO BOARD RESOLUTION Establishing Certain Terms and Provisions of an Issue of Medium-Term Notes, Series C Pursuant to the Board Resolution Adopted March 18, 1994 and the Ad Hoc Finance Committee Resolution dated July 14, 1994 RESOLVED, That, as contemplated by the Board Resolution adopted March 18, 1994 and the Ad Hoc Finance Committee Resolution dated July 14, 1994, there is hereby established for authentication and delivery by the Trustee an issue of the Medium-Term Notes, Series C of the Company having the following terms and provisions in addition to the terms and provisions established by the Indenture and the aforesaid Board Resolution: 1. Principal Amount. $8,000,000. 2. Maturity Date. January 15, 2018. 3.1. Interest Rate. 7.60% per annum. 3.2. Interest Payment Dates. January 15 and July 15, commencing July 15, 1995. 4. Notes Issuable as Global Securities. The Notes of this issue shall be issuable only as Global Notes, except under the circumstances described in the Board Resolution. 5. Price to the Public. 99.25%. Capitalized terms used in this Addendum to Board Resolution have the meanings set forth in the Board Resolution unless otherwise indicated or the context otherwise requires. In response to certain provisions of the Orders of the Pennsylvania Public Utility Commission and the Kentucky Public Service Commission, it is noted that the interest rate set forth above represents a premium of 62.5 basis points over the corres-ponding Treasury rate. WITNESS the due execution hereof this 19th day of May, 1995. Robert E. Daley Vice President & Treasurer EQUITABLE RESOURCES, INC. ADDENDUM NO. 2 TO BOARD RESOLUTION Establishing Certain Terms and Provisions of an Issue of Medium-Term Notes, Series C Pursuant to the Board Resolution Adopted March 18, 1994 and the Ad Hoc Finance Committee Resolution dated July 14, 1994 RESOLVED, That, as contemplated by the Board Resolution adopted March 18, 1994 and the Ad Hoc Finance Committee Resolution dated July 14, 1994, there is hereby established for authentication and delivery by the Trustee an issue of the Medium-Term Notes, Series C of the Company having the following terms and provisions in addition to the terms and provisions established by the Indenture and the aforesaid Board Resolution: 1. Principal Amount. $10,000,000. 2. Maturity Date. July 5, 2007. 3.1. Interest Rate. 6.78% per annum. 3.2. Interest Payment Dates. January 15 and July 15, commencing July 15, 1995. 4. Notes Issuable as Global Securities. The Notes of this issue shall be issuable only as Global Notes, except under the circumstances described in the Board Resolution. 5. Price to the Public. 99.375%. Capitalized terms used in this Addendum to Board Resolution have the meanings set forth in the Board Resolution unless otherwise indicated or the context otherwise requires. In response to certain provisions of the Orders of the Pennsylvania Public Utility Commission and the Kentucky Public Service Commission, it is noted that the interest rate set forth above represents a premium of 70 basis points over the corres-ponding Treasury rate. WITNESS the due execution hereof this 7th day of June, 1995. Robert E. Daley Vice President & Treasurer EXCERPT FROM THE MINUTES OF A MEETING OF THE FINANCE COMMITTEE OF THE BOARD OF DIRECTORS OF EQUITABLE RESOURCES, INC. HELD OCTOBER 19, 1995 WHEREAS, on July 14, 1994, The Finance Committee, pursuant to authority granted by the Board of Directors of the Company on March 18, 1994, authorized the issuance of $50 million of Medium Term Notes, Series C, and appointed Robert E. Daley, Vice President and Treasurer, to act as the Committee's Agent in determining the terms and conditions pursuant to which such Notes would be issued; and WHEREAS, the Committee wishes to extend such previous authorizations to cover all of the Series C Notes which the Company has registered with the Securities and Exchange Commission. NOW, THEREFORE, BE IT RESOLVED, That the aggregate principal amount of Medium Term Notes, Series C, which the Company may authenticate and deliver is $100 million. RESOLVED FURTHER, That Robert E. Daley, Vice President and Treasurer, is appointed the Committee's Agent to determine the terms and conditions pursuant to which the entire $100 million of such Notes will be issued. RESOLVED FURTHER, That all other provisions of the Committee's July 14, 1994 resolutions shall remain in full force and effect. EX-10.02A 3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of the day of March 18, 1988, and amended and restated as of March 15, 1996 (the "Effective Date") between Equitable Resources, Inc., a Pennsylvania corporation, with its principal executive offices at 420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219 (the "Company"), and Frederick H. Abrew, an individual and resident of Bridgeville, Pennsylvania (the "Executive"). WHEREAS, the Company desires to secure the continued employment of the Executive in accordance with the provisions of the Agreement; WHEREAS, the Executive desires and is willing to accept continued employment with the Company in accordance herewith, and WHEREAS, this Agreement has been amended in certain respects as of the Effective Date and restated in its entirety, and the parties hereto expressly acknowledge the adequacy of the mutual consideration for such amendments, with the intention to be bound by them; NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound, the Company and the Executive hereby amend and restate their agreement relating to the Executive's employment with the Company as follows: Position and Duties. The Company hereby agrees to, and hereby does, continue to employ the Executive, for the term of this Agreement, to render services to the Company as President and Chief Executive Officer of the Company and in connection therewith to perform such duties as the Executive is now performing and such other duties, commensurate with such position, as the Executive may reasonably be directed to perform by the Board of Directors of the Company provided, however, that without the prior written consent of the Executive there shall be no geographic change from Pittsburgh, Pennsylvania or its environs or transfer of the office or place of performance of the Executive's service or duties. Except to the extent that the Board of Directors of the Company delegates the duties and assigns the positions described below with respect to subsidiaries of the Company to such other person or persons as the Board of Directors of the Company, in its discretion, shall determine, the Executive will continue to serve as the President and Chief Executive Officer of such of the subsidiaries of the Company and in connection therewith to perform such duties as the Executive is now performing and such other duties, commensurate with such position as President and Chief Executive Officer of such subsidiaries, as the Executive may reasonably be directed to perform by the Board of Directors of the Company. The Executive shall have the right to devote a reasonable amount of time and effort to industry, community or charity organizations, and, subject to the provisions of Section 11 and Section 12 hereof, the Executive may serve as a director of other companies with the consent of the Board of Directors which consent case shall not be unreasonably withheld. The Executive hereby accepts such employment and agrees faithfully to perform to the best of his ability the duties described in Section l(a). Term. Subject to Section 4 hereof, the term of the employment of the Executive under this Agreement shall commence on the Effective Date and shall terminate on the last day of the calendar month in which occurs the earlier of (i) the date of the Executive's retirement in accordance with the provisions of the Company's retirement policy as set forth in its Management Manual or (ii) unless further extended as hereinafter set forth, the date which is 36 calendar months after the Effective Date. Commencing on the last day of the first full calendar month after the Effective Date and on the last day of each succeeding calendar month, the term of this Agreement shall be automatically extended without further action by either party (but not beyond the Executive's 65th birthday) for one additional calendar month unless one party notifies the other in writing that such party does not wish to extend the term of this Agreement. In the event that such notice shall have been delivered, the term hereof shall no longer be subject to automatic extension and the term hereof shall expire on the date which is 36 calendar months after the last day of the month in which such written notice is received. (The last day of the calendar month in which the term hereof, as extended from time to time, shall end is hereinafter referred to as the "Expiration Date"). Compensation. In consideration of the Executive's agreements contained herein and as compensation to the Executive for the performance of the services required hereunder, the Company shall pay or grant to him the following salary and other compensation and benefits: a base salary, payable in equal installments not less frequently than monthly, at such annual rate, not less than the current salary per year, as is determined from time to time by the Board or an appropriate committee thereof, provided, however, that the Executive's base salary shall be periodically reviewed by the Board and shall be increased if the Board determines that an increase is appropriate on the basis of the types of factors it generally takes into account in increasing the salaries of executive officers of the Company; an annual incentive compensation payment equal to the amount, if any, payable to the Executive under the terms and conditions of the Company's Short-Term Incentive Compensation Plan as in effect for each annual period during the term of this Agreement; such other awards under the Company's Key Employee Restricted Stock Option and Stock Appreciation Rights Incentive Compensation Plan (the "Option Plan") or under any other stock option, incentive compensation or other compensation plan, program or arrangement, now existing or hereafter adopted as applicable to executive officers of the Company, as the Board, or an appropriate committee thereof administering such plan, program or arrangement, may determine appropriate in light of the duties and responsibilities of the Executive in respect to other executive officers; participation on the same terms and conditions as all other employees in all employee benefit plans, whether or not qualified within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as may be amended from time to time (the "Code"), as may be now or hereafter sponsored or maintained for all employees of the Company and participation on the same terms and conditions as other executive officers in such other plan, program or arrangement as may be now or hereafter sponsored or maintained for executive officers of the Company; reimbursement for reasonable travel and other expenses incurred by Executive in performing his obligations hereunder pursuant to the terms and conditions of the Company's policy in respect thereto; and reasonable vacations, absences on account of temporary illness and fringe benefits customarily enjoyed by employees or executive officers of the Company under the terms and conditions of the Company's policy in respect thereto. Nothing contained in this Agreement shall prevent the Board from amending or otherwise altering the Short-Term Incentive Plan, the Option Plan or any other plan, program or arrangement so long as such amendment or alteration (i) is accomplished pursuant to the terms thereof as in effect on the Effective Date or on the date such is adopted, if later, and (ii) equitably affects all employees, executive or otherwise, previously covered thereunder. Termination of Employment. This Agreement shall terminate upon the Expiration Date or upon the death of the Executive. Prior to the occurrence of a Change of Control and the Expiration Date, the Company may terminate this Agreement and the Executive's employment hereunder for "Disability" or "Cause" and the Executive may terminate the Agreement prior to the Expiration Date and his employment hereunder pursuant to his "Resignation for Good Reason" or "Retirement for Good Reason" as such terms are hereinafter defined. Following the occurrence of a Change of Control and prior to the Expiration Date, the Company may terminate this Agreement and the Executive's employment hereunder for "Disability", "Cause" or without "Cause" and Executive may terminate this Agreement and his employment hereunder pursuant to Retirement for Good Reason or Resignation for Good Reason. Termination of this Agreement for any reason not set forth above shall not be deemed a permitted termination and shall be deemed a breach of this Agreement. In the event of any termination of this Agreement prior to the Expiration Date, whether a permitted termination or otherwise, the provisions of Section 5 of this Agreement shall determine the amount, if any, of any compensation thereafter due the Executive in respect to such termination. As used in this Agreement, the following terms shall have the meanings set forth: Disability. The Executive shall be entitled to leaves of absence from the Company in accordance with the Company's policy generally applicable to executives for illness or other temporary disabilities for a period or periods not exceeding an aggregate of six months in any calendar year, and his compensation and status as an employee hereunder shall continue during any such period or periods. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties with the Company on a full-time basis for six consecutive months, and within thirty days after written notice of termination is given by the Company, the Executive shall not have returned to the full-time daily performance of his duties, the Executive shall be deemed to have experienced a Disability and the Company may terminate the Executive's employment hereunder. Cause. Termination by the Company of employment for "Cause" shall mean termination upon: the willful and continued failure by the Executive to substantially perform his duties with the Company (other than (A) any such failure resulting from his incapacity due to physical or mental illness or (B) any such actual or anticipated failure resulting from his Resignation for Good Reason or Retirement for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his duties, and which failure has not been cured within thirty days after such written demand; or the willful and continued engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or the breach by the Executive of the Noncompetition clause in Section 11 hereof or the Confidentiality clause in Section 12 hereof. For purposes of this Subsection (b), no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by the Executive in bad faith and without reasonable belief that such action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive 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 Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth above in clauses (i), (ii) or (iii) of the first sentence of this Subsection (b) and specifying the particulars thereof in detail. Retirement for Good Reason. For purposes of this Agreement "Retirement for Good Reason" shall mean the Executive's election to retire under the terms of the Company's Pension Plan for Salaried Employees as a result of the occurrence of one of the events referred to in Subsection (e) below. Resignation for Good Reason. For purposes of this Agreement, "Resignation for Good Reason" shall mean the Executive's election to resign as a result of the occurrence of one of the events referred to in Subsection (e) below. Good Reason. For purposes of this Agreement, "Good Reason" shall, absent the Executive's prior express written consent to the contrary, mean: removal of the Executive as President and Chief Executive Officer of the Company, (by reason other than death, Disability or Cause), or any other material breach by the Company of its obligations contained in this Agreement; the assignment to the Executive of any duties inconsistent with his status as President and Chief Executive Officer of the Company or a substantial alteration in the nature or status of the Executive's responsibilities which renders the Executive's position to be of less dignity, responsibility or scope; a reduction by the Company in the Executive's annual base salary as in effect on the Effective Date or as the same may be increased from time to time, except for proportional across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company, provided, however, that in no event shall the Executive's annual base salary be reduced by an amount equal to ten percent or more of the Executive's annual base salary as of the end of the calendar year immediately preceding the year in which the Executive's employment with the Company is terminated without the Executive's prior written consent; the failure to grant the Executive an annual salary increase reasonably necessary to maintain such salary as reasonably comparable to salaries of senior executives holding positions equivalent to the Executive's in the industry in which the Company's then principal business activity is conducted; the relocation of the Company's principal executive offices to a location outside the Pittsburgh, Pennsylvania Metropolitan Area or the Company's requiring the Executive to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations; the failure by the Company to continue in effect any compensation plan, program or arrangement in which the Executive participates, unless an equitable arrangement reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan, program or arrangement) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein; any material reduction by the Company of the benefits enjoyed by the Executive under any of the Company's pension, retirement, profit sharing, savings, life insurance, medical, health-and-accident, disability or other employee benefit plans, programs or arrangements, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefits, or the failure by the Company to provide the Executive with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy, provided that this Section (vii) shall not apply to any proportional across-the-board reduction or action similarly affecting all executives of the Company and all executives of any person in control of the Company; the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 15(b)(ii) hereof; or any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (f) below and, if applicable, Subsection (b) above, and for purposes of this Agreement, no such purported termination shall be effective. Notice of Termination. Any purported termination of this Agreement by the Company or the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination, resignation or retirement provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination, resignation or retirement under the provision so indicated. Date of Termination, Etc. "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of the Executive's duties on a full-time daily basis during such thirty-day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which shall not be less than thirty days nor more than sixty days, from the date such Notice of Termination is given); provided that if within thirty days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). Any party giving notice of a dispute shall pursue the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, employee benefit and insurance plans, programs and arrangements in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection (g). Compensation Upon Termination. Death. If the Executive's employment hereunder terminates by reason of his death, the Company shall be obligated to pay to his surviving widow, or to his legal representatives if he leaves no surviving widow or if his surviving widow dies prior to fulfillment of the Company's obligations, (i) the Executive's then current base salary for a six-month period commencing on the first day of the month following the Executive's death, or until the Expiration Date, whichever shall be the first to occur, and (ii) any benefits to which the Executive is entitled under any insurance policies on the life of the Executive, under the Company's insurance programs and other employee benefit plans, programs and arrangements then in effect and under the Company's Pension Plan for Salaried Employees. Disability. If the Executive's employment hereunder terminates by reason of his Disability, the Company shall pay to the Executive, in monthly installments, such amount as shall aggregate 70% of the Executive's then current base salary for the lesser of a six-month period or until such time as the Executive has reached the age at which he would be entitled to retire under the Company's retirement policies and the Pension Plan for Salaried Employees. Benefits otherwise receivable by the Executive pursuant to this Subsection (b) shall be reduced to the extent other benefits are received by the Executive pursuant to any disability income or income protection plan, policy or arrangement, the premiums for which or benefits under which are paid by the Company. If the Executive dies prior to the date on which such additional amounts would have ceased to be payable under this Subsection (b), the amount that would have been payable by the Company had he lived shall continue to be paid by the Company to his surviving widow, for a period of 12 months following the Executive's death, at the same times and rates as it would have been payable to him. Cause. If the Executive's employment hereunder is terminated by the Company for Cause, the Company shall pay to the Executive his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligations to the Executive under this Agreement. Voluntary Resignation or Retirement. In the event the Executive voluntarily retires or resigns other than pursuant to his Retirement for Good Reason or Resignation for Good Reason, the Company shall pay to the Executive his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and, except as provided in Section 10, the Company shall have no further obligations to the Executive under this Agreement. Upon a Change of Control. Notwithstanding anything herein to the contrary, in the event that either the Company, without Cause, or the Executive, with Good Reason, shall terminate the Executive's employment hereunder by giving notice of termination in accordance with this Agreement within two years following the occurrence of a Change of Control, the Company shall pay the Executive the following: payment of sum equal to three times Executive's annual base salary; payment of an amount of cash equal to three (3) times the average incentive earned over the prior three year period; immediate vesting of all previously unvested cash awards and stock incentives; immediate delivery of Company stock or payment of an amount of cash equal to three (3) times the value of the average grants received by Executive over the preceding five (5) years under the applicable Company long term incentive plans; provision to Executive and his eligible dependents of medical, disability, dental and life insurance coverage (to the extent such coverage was in effect immediately prior to the Change of Control) for thirty-six (36) months; immediate granting to Executive of thirty-six (36) months of service and age credit for determining benefit amounts and any early retirement reductions with respect to all applicable Company retirement benefit plans; in addition, no early retirement reductions will be imposed on the retirement benefits if age at termination equals or exceeds 55; reimbursement to Executive of reasonable costs incurred by Executive for outplacment services in the thirty-six (36) month period following termination of Executive's employment in connection with a Change of Control (the foregoing amounts shall be hereinafter sometimes collectively referred to as the "Salary and Benefits Continuation Payments") All amounts payable by the Company to the Executive in cash pursuant to Section 5(e)(i), (ii), (iii) and (iv) shall be made in a lump sum unless the Executive otherwise elects and notifies the Company in writing prior to the termination of his employment of his desire to have all payments made in accordance with the Company's regular salary and benefit payment practices, provided that the lump sum payment or first payment is made within thirty (30) days after the Executive's termination hereunder. All other amounts payable by the Company to the Executive pursuant to this Section 5 (e) shall be paid or provided in accordance with the Company's standard payroll and reimbursement procedures, as in effect immediately prior to the Change of Control. In the event that medical, disability, dental and life insurance benefits cannot be provided under appropriate Company group insurance policies, an amount equal to the premium necessary for the Executive to purchase directly the same level of coverage in effect immediately prior to the Change of Control shall be added to the Company's salary payments to Executive. The Executive's right to receive Salary and Benefits Continuation Payments shall continue as provided, notwithstanding the subsequent expiration of this Agreement pursuant to Section 2 hereof. The Executive's subsequent death or disability within the thirty-six (36) month period following the termination of Executive's employment in connection with a Change of Control shall not affect the Company's obligation to continue making Salary and Benefits Continuation Payments. The right to Salary and Benefits Continuation Payments shall be in addition to whatever other benefits the Executive may be entitled to under any other agreement or compensation plan, program or arrangement of the Company. The Company shall be authorized to withhold from any payment to the Executive, his estate or his beneficiaries hereunder all such amounts, if any, that the Company may reasonably determine it is required to withhold pursuant to any applicable law or regulation. In the event the Executive obtains subsequent employment within the thirty-six (36) month period for which the Executive is receiving Salary and Benefits Continuation Payments, the Salary and Benefits Continuation Payments shall be reduced in amount equal to: (i) any compensation earned by the Executive as the result of employment by another employer and (ii) any comparable benefits actually received by the Executive from another employer. Notwithstanding anything herein to the contrary, if the Executive's employment with the Company is terminated prior to the date on which a Change of Control occurs either (i) by the Company other than for Cause or (ii) by the Executive for Good Reason, and it is reasonably demonstrated by Executive that such termination of employment (a) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control, or (b) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the termination shall be deemed to have occurred upon a Change of Control and the Executive will be entitled to Salary and Benefits Continuation Payments as provided for in this Section 5 hereof. For purposes of this Agreement, "Change of Control" shall mean any of the following events (each of such events being herein referred to as a "Change of Control"): (i) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a corporation with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of the Board of Directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting power immediately prior to such sale or disposition; (ii) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty percent (20%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the Board of Directors; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of November 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock and other voting securities whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of fifteen percent (15%) or more of the Company's voting securities, shall not constitute a Change of Control; (iii). The Company's termination of its business and liquidation of its assets; (iv) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such reorganization, merger or consolidation receive or continue to hold less than sixty (60%) of the outstanding voting shares of the new or continuing corporation; or (v) If, during any two-year period, less than a majority of the members of the Board of Directors are persons who were either (i) nominated or recommended for election by at least two-thirds vote of the persons who were members of the Board of Directors or Nominating Committee of the Board of Directors at the beginning of the period, or (ii) elected by at least a two-thirds vote of the persons who were members of the Board of Directors at the beginning of the period. Other. If the Executive's employment hereunder is terminated prior to the occurrence of a Change of Control (1) by the Company other than for Cause or Disability or (2) by the Executive pursuant to his Retirement for Good Reason or Resignation for Good Reason, then the Executive shall be entitled to the benefits provided below: the Company shall pay the Executive his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay as severance pay to the Executive, not later than the fifteenth day following the Date of Termination, a lump sum severance payment equal to the Executive's full base salary for the then remaining term of this Agreement (without regard to the date of such Notice of Termination) at the rate then in effect, discounted to present value at a discount rate of 7% per annum applied to each future payment from the time it would have become payable; in lieu of shares of common stock issuable upon exercise of outstanding options ("Options"), if any, or any stock appreciation rights ("SAR"), if any, whether or not such Options or SARs are vested or then exercisable pursuant to their respective terms, granted to the Executive under the Company's stock option or stock appreciation rights plans or otherwise (which Options and SARs shall be canceled upon the making of the payment referred to below), the Executive shall receive, not later than the fifteenth day following the Date of Termination, an amount in cash equal to the product of (i) the difference (to the extent that such difference is a positive number) obtained by subtracting the per share exercise price of each Option and each SAR held by the Executive, whether or not then fully exercisable, from the closing price of the Common Stock (the "Closing Price") as reported on the New York Stock Exchange on the Date of Termination (or if not traded on the Date of Termination, the closing price on the next preceding business day on which the Common Stock traded), and (ii) the number of shares of Common Stock covered by each such Option or SAR; for a period of time remaining until the Expiration Date, the Company shall arrange to provide the Executive with and shall pay the cost or premiums when due for life, disability and health-and-accident insurance benefits substantially similar to those which the Executive is receiving immediately prior to the Notice of Termination. The payments provided for in this Subsection (f), shall be made not later than the fifteenth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). Reimbursement of Certain Fees and Expenses The Company shall also pay to the Executive all legal and accounting fees and expenses incurred by the Executive in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Contest of Certain Payments. In the event that it is asserted by any governmental agency, in any tax audit, administrative proceeding or otherwise, that any payments (the "Severance Payments") provided under Section 5(e) are or will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code and/or that a federal income tax deduction for amounts paid as Severance Payments will not be allowed to the Company for any year by reason of Section 28OG of the Code, the Executive may contest or refute such assertion with respect to the Excise Tax in any appropriate forum (the "Executive's Contest") and the Company shall diligently and vigorously contest or refute such assertion with respect to the disallowance of such deduction in all administrative proceedings and in the federal district court or the Tax Court, whichever shall have jurisdiction (the "Company's Contest"). The Executive's Contest and the Company's Contest shall be conducted and presented separately unless the Executive, in his discretion but with the consent of the Company, joins in the Company's Contest. In any event, the Executive shall be entitled to retain attorneys and other experts deemed necessary or appropriate by the Executive to the proper presentation of the Executive's Contest and shall not be compelled by the Company to compromise, settle or otherwise terminate the Executive's Contest without his written consent thereto. The Company and the Executive shall cooperate one with the other and each shall provide to the other copies of all documents relevant to or useful in connection with either the Executive's Contest or the Company's Contest as may reasonably be requested by the other. The Executive shall attend any hearing, deposition or other proceeding at which his attendance in person is material to the Company's Contest. The Company shall cause the appropriate authorized officer or officers of the Company to attend any hearing, deposition or other matter at which the Company's appearance is requested by any party. Executive's Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 5(a), (b), (c), (d) and (f) by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 5(a), (b), (c), (d) and (f) be reduced by any compensation earned by the Executive as the result of employment by another employer, or otherwise. Benefits otherwise receivable by the Executive pursuant to Section 5(f)(iv) above shall be reduced to the extent comparable benefits are actually received by the Executive during the period of time remaining until the Expiration Date from the plan or plans of any subsequent employer or from any program maintained by any governmental body not requiring contribution by the Executive, and any such benefits actually received by the Executive shall be reported to the Company. Right to Additional Benefits. In addition to all other amounts payable to the Executive under Section 5, the Executive shall be entitled to receive all benefits payable to him under the Company's Pension Plan for Salaried Employees, the Employee Savings Plan, and any other plan, program or arrangement relating to retirement, profit sharing, or other benefits including, without limitation, any employee stock ownership plan or any plan established as a supplement to any of the aforenamed plans. No amount payable to the Executive under Sections 5(e) or 5(f) shall be considered for any benefit calculation under the Company's Pension Plan for Salaried Employees. Retirement Under Circumstances Not Constituting Retirement For Good Reason. Nothing contained in this Agreement shall be deemed to limit the Executive's ability to retire under the Company's retirement policies and Pension Plan for Salaried Employees under circumstances not constituting Retirement for Good Reason and to receive all benefits payable to him under the Company's Pension Plan for Salaried Employees, the Company's Employee Savings Plan and any other plan, program or arrangement relating to retirement. Non-Competition. During the term of this Agreement and for one year thereafter, the Executive shall refrain from competing with the Company or any subsidiary of the Company except with the Company's prior written consent. The phrase "refrain from competing with the Company or any subsidiary of the Company" shall mean that the Executive will not engage, directly or indirectly (including, by way of example only, as a principal, partner, venture, employee or agent) nor have any direct or indirect interest in any enterprise (a "Competing Enterprise") which competes with the Company or any subsidiary thereof by engaging in the production, transmission, storage or distribution of natural gas or natural gas liquids or the ownership or operation of a central plant heating system in the Company's distribution area or in substantial and direct competition with any other business operation actively conducted by the Company or its subsidiaries at the date of termination. It is agreed that the foregoing provisions shall not restrict the Executive from either (i) subject to the provisions of Subsection 12(a) hereof, being a director of or having any investments or other interests in an enterprise which is not a competing enterprise or (ii) having any investments in any competing enterprise the stock of which is listed on a national securities exchange or traded publicly over-the-counter so long as such investment does not give the Executive more than one percent (1%) of the voting stock of such company. Confidentiality. The Executive agrees: To keep secret all confidential matters of the Company and its subsidiaries and affiliates specifically indicated to be such by the Company or established as such by written Company policy, and not to disclose them to any one outside the Company or its subsidiaries and affiliates, either during or after his employment with the Company, except with the Company's prior written consent or as required by law; and To deliver promptly to the Company on termination of employment of the Executive by the Company all memoranda, notes, records, reports and other documents (and all copies thereof) with respect to any such confidential matters and other proprietary information (such as customers lists, suppliers lists, etc.) which the Executive may then possess or have under his control. Arbitration. Any disputes hereunder shall be settled by arbitration in Pittsburgh, Pennsylvania under the auspices of, and in accordance with the rules of, the American Arbitration Association, and the decision in such arbitration shall be final and conclusive on the parties and judgment upon such decision may be entered in any court having jurisdiction thereof. Notices. All notices and other communications which are required or may be given under this Agreement shall be in writing and shall be delivered personally or by registered or certified mail addressed to the party concerned at the following addresses: If to the Company: Equitable Resources, Inc. 420 Boulevard of Allies Pittsburgh, PA 15219 If to the Executive: Mr. Frederick H. Abrew 107 Links View Drive Bridgeville, PA 15017 or to such other address as shall be designated by notice in writing to the other party in accordance herewith. Notices and other communications hereunder shall be deemed effectively given when personally delivered, or, if mailed, 48 hours after deposit in the United States mail. Miscellaneous. This Agreement supersedes all prior agreements, arrangements and undertakings, written or oral, relating to the subject matter hereof. (i) This arrangement shall inure to the benefit of the Executive's heirs, representatives or estate to the extent stated herein. (ii) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as defined in the preamble to this Agreement and any successor to its business or assets which executes and delivers the agreement provided for in this Subsection 15 (b) (ii) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived, only by a written instrument executed by both of the parties hereto, or in the case of a waiver, by the party waiving compliance. The failure of either party at any time or times to require performance of any provisions hereof shall in no manner affect the right at a later time to enforce such provisions thereafter. No waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement. In the event any one or more of the covenants, terms or provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity of the remaining covenants, terms and provisions contained herein shall be in no way affected, prejudiced or disturbed thereby. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, except as provided in Subsection 15(b) above. Without limiting the foregoing, the Executive's right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by his will or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this Subsection 15(e) the Company shall have no liability to pay any amount so attempted to be assigned or transferred. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered. ATTEST: EQUITABLE RESOURCES, INC. ----------------------------- By:________________________ By: E. Lawrence Keyes Secretary Title: Chairman, Compensation Committee Board of Directors WITNESS: By_________________________ ______________________________ Frederick H. Abrew EX-10.03A 4 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of the day of March 18, 1988, and amended and restated as of March 15, 1996 (the "Effective Date") between Equitable Resources, Inc., a Pennsylvania corporation, with its principal executive offices at 420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219 (the "Company"), and Augustine A. Mazzei, Jr., an individual and resident of Monroeville, Pennsylvania (the "Executive"). WHEREAS, the Company desires to secure the continued employment of the Executive in accordance with the provisions of the Agreement; WHEREAS, the Executive desires and is willing to accept continued employment with the Company in accordance herewith, and WHEREAS, this Agreement has been amended in certain respects as of the Effective Date and restated in its entirety, and the parties hereto expressly acknowledge the adequacy of the mutual consideration for such amendments, with the intention to be bound by them; NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound, the Company and the Executive hereby amend and restate their agreement relating to the Executive's employment with the Company as follows: Position and Duties. The Company hereby agrees to, and hereby does, continue to employ the Executive, for the term of this Agreement, to render services to the Company as Senior Vice President and General Counsel of the Company and in connection therewith to perform such duties as the Executive is now performing and such other duties, commensurate with such position, as the Executive may reasonably be directed to perform by the President and Chief Executive Officer of the Company provided, however, that without the prior written consent of the Executive there shall be no geographic change from Pittsburgh, Pennsylvania or its environs or transfer of the office or place of performance of the Executive's service or duties. Except to the extent that the President and Chief Executive Officer of the Company delegates the duties and assigns the positions described below with respect to subsidiaries of the Company to such other person or persons as the President and Chief Executive Officer of the Company, in his discretion, shall determine, the Executive will continue to serve as the Senior Vice President and General Counsel of such of the subsidiaries of the Company and in connection therewith to perform such duties as the Executive is now performing and such other duties, commensurate with such position as Senior Vice President and General Counsel of such subsidiaries, as the Executive may reasonably be directed to perform by the President and Chief Executive Officer of the Company. The Executive shall have the right to devote a reasonable amount of time and effort to industry, community or charity organizations, and, subject to the provisions of Section 11 and Section 12 hereof, the Executive may serve as a director of other companies with the consent of the President and Chief Executive Officer of the Company and of the Board which consent in either case shall not be unreasonably withheld. The Executive hereby accepts such employment and agrees faithfully to perform to the best of his ability the duties described in Section l(a). Term. Subject to Section 4 hereof, the term of the employment of the Executive under this Agreement shall commence on the Effective Date and shall terminate on the last day of the calendar month in which occurs the earlier of (i) the date of the Executive's retirement in accordance with the provisions of the Company's retirement policy as set forth in its Management Manual or (ii) unless further extended as hereinafter set forth, the date which is 36 calendar months after the Effective Date. Commencing on the last day of the first full calendar month after the Effective Date and on the last day of each succeeding calendar month, the term of this Agreement shall be automatically extended without further action by either party (but not beyond the Executive's 65th birthday) for one additional calendar month unless one party notifies the other in writing that such party does not wish to extend the term of this Agreement. In the event that such notice shall have been delivered, the term hereof shall no longer be subject to automatic extension and the term hereof shall expire on the date which is 36 calendar months after the last day of the month in which such written notice is received. (The last day of the calendar month in which the term hereof, as extended from time to time, shall end is hereinafter referred to as the "Expiration Date"). Compensation. In consideration of the Executive's agreements contained herein and as compensation to the Executive for the performance of the services required hereunder, the Company shall pay or grant to him the following salary and other compensation and benefits: a base salary, payable in equal installments not less frequently than monthly, at such annual rate, not less than the current salary per year, as is determined from time to time by the Board or an appropriate committee thereof, provided, however, that the Executive's base salary shall be periodically reviewed by the Board and shall be increased if the Board determines that an increase is appropriate on the basis of the types of factors it generally takes into account in increasing the salaries of executive officers of the Company; an annual incentive compensation payment equal to the amount, if any, payable to the Executive under the terms and conditions of the Company's Short-Term Incentive Compensation Plan as in effect for each annual period during the term of this Agreement; such other awards under the Company's Key Employee Restricted Stock Option and Stock Appreciation Rights Incentive Compensation Plan (the "Option Plan") or under any other stock option, incentive compensation or other compensation plan, program or arrangement, now existing or hereafter adopted as applicable to executive officers of the Company, as the Board, or an appropriate committee thereof administering such plan, program or arrangement, may determine appropriate in light of the duties and responsibilities of the Executive in respect to other executive officers; participation on the same terms and conditions as all other employees in all employee benefit plans, whether or not qualified within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as may be amended from time to time (the "Code"), as may be now or hereafter sponsored or maintained for all employees of the Company and participation on the same terms and conditions as other executive officers in such other plan, program or arrangement as may be now or hereafter sponsored or maintained for executive officers of the Company; reimbursement for reasonable travel and other expenses incurred by Executive in performing his obligations hereunder pursuant to the terms and conditions of the Company's policy in respect thereto; and reasonable vacations, absences on account of temporary illness and fringe benefits customarily enjoyed by employees or executive officers of the Company under the terms and conditions of the Company's policy in respect thereto. Nothing contained in this Agreement shall prevent the Board from amending or otherwise altering the Short-Term Incentive Plan, the Option Plan or any other plan, program or arrangement so long as such amendment or alteration (i) is accomplished pursuant to the terms thereof as in effect on the Effective Date or on the date such is adopted, if later, and (ii) equitably affects all employees, executive or otherwise, previously covered thereunder. Termination of Employment. This Agreement shall terminate upon the Expiration Date or upon the death of the Executive. Prior to the occurrence of a Change of Control and the Expiration Date, the Company may terminate this Agreement and the Executive's employment hereunder for "Disability" or "Cause" and the Executive may terminate the Agreement prior to the Expiration Date and his employment hereunder pursuant to his "Resignation for Good Reason" or "Retirement for Good Reason" as such terms are hereinafter defined. Following the occurrence of a Change of Control and prior to the Expiration Date, the Company may terminate this Agreement and the Executive's employment hereunder for "Disability", "Cause" or without "Cause" and Executive may terminate this Agreement and his employment hereunder pursuant to Retirement for Good Reason or Resignation for Good Reason. Termination of this Agreement for any reason not set forth above shall not be deemed a permitted termination and shall be deemed a breach of this Agreement. In the event of any termination of this Agreement prior to the Expiration Date, whether a permitted termination or otherwise, the provisions of Section 5 of this Agreement shall determine the amount, if any, of any compensation thereafter due the Executive in respect to such termination. As used in this Agreement, the following terms shall have the meanings set forth: Disability. The Executive shall be entitled to leaves of absence from the Company in accordance with the Company's policy generally applicable to executives for illness or other temporary disabilities for a period or periods not exceeding an aggregate of six months in any calendar year, and his compensation and status as an employee hereunder shall continue during any such period or periods. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties with the Company on a full-time basis for six consecutive months, and within thirty days after written notice of termination is given by the Company, the Executive shall not have returned to the full-time daily performance of his duties, the Executive shall be deemed to have experienced a Disability and the Company may terminate the Executive's employment hereunder. Cause. Termination by the Company of employment for "Cause" shall mean termination upon: the willful and continued failure by the Executive to substantially perform his duties with the Company (other than (A) any such failure resulting from his incapacity due to physical or mental illness or (B) any such actual or anticipated failure resulting from his Resignation for Good Reason or Retirement for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his duties, and which failure has not been cured within thirty days after such written demand; or the willful and continued engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or the breach by the Executive of the Noncompetition clause in Section 11 hereof or the Confidentiality clause in Section 12 hereof. For purposes of this Subsection (b), no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by the Executive in bad faith and without reasonable belief that such action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive 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 Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth above in clauses (i), (ii) or (iii) of the first sentence of this Subsection (b) and specifying the particulars thereof in detail. Retirement for Good Reason. For purposes of this Agreement "Retirement for Good Reason" shall mean the Executive's election to retire under the terms of the Company's Pension Plan for Salaried Employees as a result of the occurrence of one of the events referred to in Subsection (e) below. Resignation for Good Reason. For purposes of this Agreement, "Resignation for Good Reason" shall mean the Executive's election to resign as a result of the occurrence of one of the events referred to in Subsection (e) below. Good Reason. For purposes of this Agreement, "Good Reason" shall, absent the Executive's prior express written consent to the contrary, mean: removal of the Executive as Senior Vice President and General Counsel of the Company, (by reason other than death, Disability or Cause), or any other material breach by the Company of its obligations contained in this Agreement; the assignment to the Executive of any duties inconsistent with his status as Senior Vice President and General Counsel of the Company or a substantial alteration in the nature or status of the Executive's responsibilities which renders the Executive's position to be of less dignity, responsibility or scope; a reduction by the Company in the Executive's annual base salary as in effect on the Effective Date or as the same may be increased from time to time, except for proportional across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company, provided, however, that in no event shall the Executive's annual base salary be reduced by an amount equal to ten percent or more of the Executive's annual base salary as of the end of the calendar year immediately preceding the year in which the Executive's employment with the Company is terminated without the Executive's prior written consent; the failure to grant the Executive an annual salary increase reasonably necessary to maintain such salary as reasonably comparable to salaries of senior executives holding positions equivalent to the Executive's in the industry in which the Company's then principal business activity is conducted; the relocation of the Company's principal executive offices to a location outside the Pittsburgh, Pennsylvania Metropolitan Area or the Company's requiring the Executive to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations; the failure by the Company to continue in effect any compensation plan, program or arrangement in which the Executive participates, unless an equitable arrangement reasonably acceptable to the Executive (embodied in an ongoing substitute or alternative plan, program or arrangement) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein; any material reduction by the Company of the benefits enjoyed by the Executive under any of the Company's pension, retirement, profit sharing, savings, life insurance, medical, health-and-accident, disability or other employee benefit plans, programs or arrangements, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefits, or the failure by the Company to provide the Executive with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy, provided that this Section (vii) shall not apply to any proportional across-the-board reduction or action similarly affecting all executives of the Company and all executives of any person in control of the Company; the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 15(b)(ii) hereof; or any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (f) below and, if applicable, Subsection (b) above, and for purposes of this Agreement, no such purported termination shall be effective. Notice of Termination. Any purported termination of this Agreement by the Company or the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination, resignation or retirement provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination, resignation or retirement under the provision so indicated. Date of Termination, Etc. "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of the Executive's duties on a full-time daily basis during such thirty-day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which shall not be less than thirty days nor more than sixty days, from the date such Notice of Termination is given); provided that if within thirty days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). Any party giving notice of a dispute shall pursue the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, employee benefit and insurance plans, programs and arrangements in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection (g). Compensation Upon Termination. Death. If the Executive's employment hereunder terminates by reason of his death, the Company shall be obligated to pay to his surviving widow, or to his legal representatives if he leaves no surviving widow or if his surviving widow dies prior to fulfillment of the Company's obligations, (i) the Executive's then current base salary for a six-month period commencing on the first day of the month following the Executive's death, or until the Expiration Date, whichever shall be the first to occur, and (ii) any benefits to which the Executive is entitled under any insurance policies on the life of the Executive, under the Company's insurance programs and other employee benefit plans, programs and arrangements then in effect and under the Company's Pension Plan for Salaried Employees. Disability. If the Executive's employment hereunder terminates by reason of his Disability, the Company shall pay to the Executive, in monthly installments, such amount as shall aggregate 70% of the Executive's then current base salary for the lesser of a six-month period or until such time as the Executive has reached the age at which he would be entitled to retire under the Company's retirement policies and the Pension Plan for Salaried Employees. Benefits otherwise receivable by the Executive pursuant to this Subsection (b) shall be reduced to the extent other benefits are received by the Executive pursuant to any disability income or income protection plan, policy or arrangement, the premiums for which or benefits under which are paid by the Company. If the Executive dies prior to the date on which such additional amounts would have ceased to be payable under this Subsection (b), the amount that would have been payable by the Company had he lived shall continue to be paid by the Company to his surviving widow, for a period of 12 months following the Executive's death, at the same times and rates as it would have been payable to him. Cause. If the Executive's employment hereunder is terminated by the Company for Cause, the Company shall pay to the Executive his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligations to the Executive under this Agreement. Voluntary Resignation or Retirement. In the event the Executive voluntarily retires or resigns other than pursuant to his Retirement for Good Reason or Resignation for Good Reason, the Company shall pay to the Executive his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and, except as provided in Section 10, the Company shall have no further obligations to the Executive under this Agreement. Upon a Change of Control. Notwithstanding anything herein to the contrary, in the event that either the Company, without Cause, or the Executive, with Good Reason, shall terminate the Executive's employment hereunder by giving notice of termination in accordance with this Agreement within two years following the occurrence of a Change of Control, the Company shall pay the Executive the following: payment of sum equal to two times Executive's annual base salary; payment of an amount of cash equal to two (2) times the average incentive earned over the prior three year period; immediate vesting of all previously unvested cash awards and stock incentives; immediate delivery of Company stock or payment of an amount of cash equal to two (2) times the value of the average grants received by Executive over the preceding five (5) years under the applicable Company long term incentive plans; provision to Executive and his eligible dependents of medical, disability, dental and life insurance coverage (to the extent such coverage was in effect immediately prior to the Change of Control) for twenty-four (24) months; immediate granting to Executive of twenty-four (24) months of service and age credit for determining benefit amounts and any early retirement reductions with respect to all applicable Company retirement benefit plans; in addition, no early retirement reductions will be imposed on the retirement benefits if age at termination equals or exceeds 55; reimbursement to Executive of reasonable costs incurred by Executive for outplacment services in the twenty-four (24) month period following termination of Executive's employment in connection with a Change of Control (the foregoing amounts shall be hereinafter sometimes collectively referred to as the "Salary and Benefits Continuation Payments") All amounts payable by the Company to the Executive in cash pursuant to Section 5(e)(i), (ii), (iii) and (iv) shall be made in a lump sum unless the Executive otherwise elects and notifies the Company in writing prior to the termination of his employment of his desire to have all payments made in accordance with the Company's regular salary and benefit payment practices, provided that the lump sum payment or first payment is made within thirty (30) days after the Executive's termination hereunder. All other amounts payable by the Company to the Executive pursuant to this Section 5 (e) shall be paid or provided in accordance with the Company's standard payroll and reimbursement procedures, as in effect immediately prior to the Change of Control. In the event that medical, disability, dental and life insurance benefits cannot be provided under appropriate Company group insurance policies, an amount equal to the premium necessary for the Executive to purchase directly the same level of coverage in effect immediately prior to the Change of Control shall be added to the Company's salary payments to Executive. The Executive's right to receive Salary and Benefits Continuation Payments shall continue as provided, notwithstanding the subsequent expiration of this Agreement pursuant to Section 2 hereof. The Executive's subsequent death or disability within the twenty-four (24) month period following the termination of Executive's employment in connection with a Change of Control shall not affect the Company's obligation to continue making Salary and Benefits Continuation Payments. The right to Salary and Benefits Continuation Payments shall be in addition to whatever other benefits the Executive may be entitled to under any other agreement or compensation plan, program or arrangement of the Company. The Company shall be authorized to withhold from any payment to the Executive, his estate or his beneficiaries hereunder all such amounts, if any, that the Company may reasonably determine it is required to withhold pursuant to any applicable law or regulation. In the event the Executive obtains subsequent employment within the twenty-four (24) month period for which the Executive is receiving Salary and Benefits Continuation Payments, the Salary and Benefits Continuation Payments shall be reduced in amount equal to: (i) any compensation earned by the Executive as the result of employment by another employer and (ii) any comparable benefits actually received by the Executive from another employer. Notwithstanding anything herein to the contrary, if the Executive's employment with the Company is terminated prior to the date on which a Change of Control occurs either (i) by the Company other than for Cause or (ii) by the Executive for Good Reason, and it is reasonably demonstrated by Executive that such termination of employment (a) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control, or (b) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the termination shall be deemed to have occurred upon a Change of Control and the Executive will be entitled to Salary and Benefits Continuation Payments as provided for in this Section 5 hereof. For purposes of this Agreement, "Change of Control" shall mean any of the following events (each of such events being herein referred to as a "Change of Control"): (i) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a corporation with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of the Board of Directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting power immediately prior to such sale or disposition; (ii) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty percent (20%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the Board of Directors; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of November 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock and other voting securities whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of fifteen percent (15%) or more of the Company's voting securities, shall not constitute a Change of Control; (iii). The Company's termination of its business and liquidation of its assets; (iv) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such reorganization, merger or consolidation receive or continue to hold less than sixty (60%) of the outstanding voting shares of the new or continuing corporation; or (v) If, during any two-year period, less than a majority of the members of the Board of Directors are persons who were either (i) nominated or recommended for election by at least two-thirds vote of the persons who were members of the Board of Directors or Nominating Committee of the Board of Directors at the beginning of the period, or (ii) elected by at least a two-thirds vote of the persons who were members of the Board of Directors at the beginning of the period. Other. If the Executive's employment hereunder is terminated prior to the occurrence of a Change of Control (1) by the Company other than for Cause or Disability or (2) by the Executive pursuant to his Retirement for Good Reason or Resignation for Good Reason, then the Executive shall be entitled to the benefits provided below: the Company shall pay the Executive his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay as severance pay to the Executive, not later than the fifteenth day following the Date of Termination, a lump sum severance payment equal to the Executive's full base salary for the then remaining term of this Agreement (without regard to the date of such Notice of Termination) at the rate then in effect, discounted to present value at a discount rate of 7% per annum applied to each future payment from the time it would have become payable; in lieu of shares of common stock issuable upon exercise of outstanding options ("Options"), if any, or any stock appreciation rights ("SAR"), if any, whether or not such Options or SARs are vested or then exercisable pursuant to their respective terms, granted to the Executive under the Company's stock option or stock appreciation rights plans or otherwise (which Options and SARs shall be canceled upon the making of the payment referred to below), the Executive shall receive, not later than the fifteenth day following the Date of Termination, an amount in cash equal to the product of (i) the difference (to the extent that such difference is a positive number) obtained by subtracting the per share exercise price of each Option and each SAR held by the Executive, whether or not then fully exercisable, from the closing price of the Common Stock (the "Closing Price") as reported on the New York Stock Exchange on the Date of Termination (or if not traded on the Date of Termination, the closing price on the next preceding business day on which the Common Stock traded), and (ii) the number of shares of Common Stock covered by each such Option or SAR; for a period of time remaining until the Expiration Date, the Company shall arrange to provide the Executive with and shall pay the cost or premiums when due for life, disability and health-and-accident insurance benefits substantially similar to those which the Executive is receiving immediately prior to the Notice of Termination. The payments provided for in this Subsection (f), shall be made not later than the fifteenth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). Reimbursement of Certain Fees and Expenses The Company shall also pay to the Executive all legal and accounting fees and expenses incurred by the Executive in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Contest of Certain Payments. In the event that it is asserted by any governmental agency, in any tax audit, administrative proceeding or otherwise, that any payments (the "Severance Payments") provided under Section 5(e) are or will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code and/or that a federal income tax deduction for amounts paid as Severance Payments will not be allowed to the Company for any year by reason of Section 28OG of the Code, the Executive may contest or refute such assertion with respect to the Excise Tax in any appropriate forum (the "Executive's Contest") and the Company shall diligently and vigorously contest or refute such assertion with respect to the disallowance of such deduction in all administrative proceedings and in the federal district court or the Tax Court, whichever shall have jurisdiction (the "Company's Contest"). The Executive's Contest and the Company's Contest shall be conducted and presented separately unless the Executive, in his discretion but with the consent of the Company, joins in the Company's Contest. In any event, the Executive shall be entitled to retain attorneys and other experts deemed necessary or appropriate by the Executive to the proper presentation of the Executive's Contest and shall not be compelled by the Company to compromise, settle or otherwise terminate the Executive's Contest without his written consent thereto. The Company and the Executive shall cooperate one with the other and each shall provide to the other copies of all documents relevant to or useful in connection with either the Executive's Contest or the Company's Contest as may reasonably be requested by the other. The Executive shall attend any hearing, deposition or other proceeding at which his attendance in person is material to the Company's Contest. The Company shall cause the appropriate authorized officer or officers of the Company to attend any hearing, deposition or other matter at which the Company's appearance is requested by any party. Executive's Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 5(a), (b), (c), (d) and (f) by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 5(a), (b), (c), (d) and (f) be reduced by any compensation earned by the Executive as the result of employment by another employer, or otherwise. Benefits otherwise receivable by the Executive pursuant to Section 5(f)(iv) above shall be reduced to the extent comparable benefits are actually received by the Executive during the period of time remaining until the Expiration Date from the plan or plans of any subsequent employer or from any program maintained by any governmental body not requiring contribution by the Executive, and any such benefits actually received by the Executive shall be reported to the Company. Right to Additional Benefits. In addition to all other amounts payable to the Executive under Section 5, the Executive shall be entitled to receive all benefits payable to him under the Company's Pension Plan for Salaried Employees, the Employee Savings Plan, and any other plan, program or arrangement relating to retirement, profit sharing, or other benefits including, without limitation, any employee stock ownership plan or any plan established as a supplement to any of the aforenamed plans. No amount payable to the Executive under Sections 5(e) or 5(f) shall be considered for any benefit calculation under the Company's Pension Plan for Salaried Employees. Retirement Under Circumstances Not Constituting Retirement For Good Reason. Nothing contained in this Agreement shall be deemed to limit the Executive's ability to retire under the Company's retirement policies and Pension Plan for Salaried Employees under circumstances not constituting Retirement for Good Reason and to receive all benefits payable to him under the Company's Pension Plan for Salaried Employees, the Company's Employee Savings Plan and any other plan, program or arrangement relating to retirement. Non-Competition. During the term of this Agreement and for one year thereafter, the Executive shall refrain from competing with the Company or any subsidiary of the Company except with the Company's prior written consent. The phrase "refrain from competing with the Company or any subsidiary of the Company" shall mean that the Executive will not engage, directly or indirectly (including, by way of example only, as a principal, partner, venture, employee or agent) nor have any direct or indirect interest in any enterprise (a "Competing Enterprise") which competes with the Company or any subsidiary thereof by engaging in the production, transmission, storage or distribution of natural gas or natural gas liquids or the ownership or operation of a central plant heating system in the Company's distribution area or in substantial and direct competition with any other business operation actively conducted by the Company or its subsidiaries at the date of termination. It is agreed that the foregoing provisions shall not restrict the Executive from either (i) subject to the provisions of Subsection 12(a) hereof, being a director of or having any investments or other interests in an enterprise which is not a competing enterprise or (ii) having any investments in any competing enterprise the stock of which is listed on a national securities exchange or traded publicly over-the-counter so long as such investment does not give the Executive more than one percent (1%) of the voting stock of such company. Confidentiality. The Executive agrees: To keep secret all confidential matters of the Company and its subsidiaries and affiliates specifically indicated to be such by the Company or established as such by written Company policy, and not to disclose them to any one outside the Company or its subsidiaries and affiliates, either during or after his employment with the Company, except with the Company's prior written consent or as required by law; and To deliver promptly to the Company on termination of employment of the Executive by the Company all memoranda, notes, records, reports and other documents (and all copies thereof) with respect to any such confidential matters and other proprietary information (such as customers lists, suppliers lists, etc.) which the Executive may then possess or have under his control. Arbitration. Any disputes hereunder shall be settled by arbitration in Pittsburgh, Pennsylvania under the auspices of, and in accordance with the rules of, the American Arbitration Association, and the decision in such arbitration shall be final and conclusive on the parties and judgment upon such decision may be entered in any court having jurisdiction thereof. Notices. All notices and other communications which are required or may be given under this Agreement shall be in writing and shall be delivered personally or by registered or certified mail addressed to the party concerned at the following addresses: If to the Company: Equitable Resources, Inc. 420 Boulevard of Allies Pittsburgh, PA 15219 If to the Executive: Mr. Augustine A. Mazzei, Jr. 119 Trotwood Drive Monroeville, PA 15146 or to such other address as shall be designated by notice in writing to the other party in accordance herewith. Notices and other communications hereunder shall be deemed effectively given when personally delivered, or, if mailed, 48 hours after deposit in the United States mail. Miscellaneous. This Agreement supersedes all prior agreements, arrangements and undertakings, written or oral, relating to the subject matter hereof. (i) This arrangement shall inure to the benefit of the Executive's heirs, representatives or estate to the extent stated herein. (ii) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as defined in the preamble to this Agreement and any successor to its business or assets which executes and delivers the agreement provided for in this Section 15 (b) (ii) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived, only by a written instrument executed by both of the parties hereto, or in the case of a waiver, by the party waiving compliance. The failure of either party at any time or times to require performance of any provisions hereof shall in no manner affect the right at a later time to enforce such provisions thereafter. No waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement. In the event any one or more of the covenants, terms or provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity of the remaining covenants, terms and provisions contained herein shall be in no way affected, prejudiced or disturbed thereby. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, except as provided in Subsection 15(b) above. Without limiting the foregoing, the Executive's right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by his will or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this Section 15(e) the Company shall have no liability to pay any amount so attempted to be assigned or transferred. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered. ATTEST: EQUITABLE RESOURCES, INC. By:________________________ By:_________________________ Secretary Frederick H. Abrew President and Chief Executive Officer WITNESS: By_________________________ ___________________________ Augustine A. Mazzei, Jr. EX-10.04B 5 EQUITABLE RESOURCES, INC. Board of Directors Deferred Compensation Agreement THIS AGREEMENT, made and executed this 21st day of December, 1990, by and between Equitable Resources, Inc., herein designated as "Equitable", and Barbara B. Sullivan, herein designated as the "Participant." WITNESSETH: WHEREAS, the Participant is currently a member of the Board of Directors of Equitable as a Director or an Advisory Director; and WHEREAS, Equitable and the Participant desire to defer all of the fees arising from the above-stated relationship. NOW, THEREFORE, the parties hereby agree as follows: Section 1 - Account 1.1) Effective January 1, 1991, the Participant herein elects to defer, under the terms of this Agreement, all compensation earned for his/her service as a Director or an Advisory Director of Equitable for the calendar year 1991. 1.2) Equitable shall establish a bookkeeping account, hereinafter referred to as the "Account", and shall credit to the Account the amounts of the deferred fees. 1.3) Interest shall be credited to the Account monthly. The rate of interest shall be the same as the yield for 30-day Treasury Bills applicable to the first day of such month. Section 2 - Payment 2.1) All amounts credited to the Account on the Participant's behalf shall be payable in one lump sum by Equitable to the Participant on _________________ (date selected by the Participant) but in no event later than sixty (60) days after the Participant ceases to be a Director or an Advisory Director of Equitable. Unless a date specific is selected by the Participant, the distribution will be made within sixty (60) days after the Participant ceases to be a Director or an Advisory Director of Equitable; provided, however, that nothing contained in this Section 2.1 shall negate the provisions of Section 2.3 below. 2.2) In the event of the death of the Participant, such payment shall be made to the Participant's beneficiary. For purposes of the Agreement, "beneficiary" means any person(s) or trust(s) or combination of these, last designated by the Participant to receive benefits provided under this Agreement. Such designation shall be in writing filed with the Compensation Committee of the Board of Directors (the "Committee") and shall be revocable at any time through written instrument similarly filed without consent of any beneficiary. In the absence of any designation, the beneficiary shall be the Participant's spouse, if surviving, otherwise, all amounts payable hereunder shall be delivered by Equitable to the executors and administrators of the Participant's estate for administration as a part thereof. 2.3) For financial reasons, the Participant may apply to the Committee for withdrawal from the Agreement prior to the Payment Date. Such early withdrawal shall lie within the absolute discretion of the Committee. Upon approval from the Committee, and within fifteen (15) days thereafter, the Participant will be deemed to have withdrawn from the Agreement and a distribution, in the amount necessary, will be made in a one-time payment. Amounts still payable to the Participant after the application of this Paragraph 2.3 shall be distributed pursuant to the foregoing Paragraphs of this Section 2. Section 3 - Miscellaneous Provisions 3.1) Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between Equitable and the Participant, his/her designated beneficiary or any other person. Any fees deferred under the provisions of this Agreement shall continue for all purposes to be a part of the general funds of Equitable. To the extent that any person acquires a right to receive payment from Equitable under this Agreement, such right shall be no greater than the right of any unsecured general creditor of Equitable. 3.2) The right of the Participant or any other person to the payment of deferred fees under this Agreement shall not be assigned, transferred, pledged or encumbered except by will or by the laws of descent and distribution. 3.3) If the Committee shall find that any person to whom any payment is payable under this Agreement is unable to care for his/her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, child, a parent, or a brother or sister, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Committee may determine. Any such payment shall be a complete discharge of the liabilities of Equitable under this Agreement. 3.4) Nothing contained herein shall be construed as conferring upon the Participant the right to continue in the service of Equitable as a member of the Board of Directors. 3.5) This Agreement shall be binding upon and inure to the benefit of Equitable, its successors and assigns and the Participant and his/her heirs, executors, administrators and legal representatives. 3.6) Equitable may terminate this Plan at any time. Upon such termination, the Committee shall dispose of any benefits of the Participant as provided in Section 2. Equitable may also amend the provisions of this Plan at any time; provided, however, that no amendment shall affect the rights of the Participant, or his/her beneficiaries, to the receipt of payment of benefits to the extent of any compensation deferred before the time of the amendment. This Agreement shall terminate when the payment due under this Agreement is made. 3.7) This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania. Section 4 - Committee 4.1) The Committee's interpretation and construction of the Agreement, and the actions thereunder, including the amount or recipient of the payment to be made therefrom, shall be binding and conclusive on all persons for all purposes. The Committee members shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement unless attributable to his/her own willful misconduct or lack of good faith. IN WITNESS WHEREOF, Equitable has caused this Agreement to be executed by its duly authorized officers and the Participant has hereunto set his/her hand as of the date first above written. ATTEST: EQUITABLE RESOURCES, INC. s/ Audrey C. Moeller s/ Frederick H. Abrew Vice President and President and Corporate Secretary Chief Executive Officer WITNESS: (Participant) s/ Janice A. Haas s/ Barbara B.Sullivan EX-10.04E 6 EQUITABLE RESOURCES, INC. Board of Directors Deferred Compensation Agreement THIS AGREEMENT, made and executed this 15th day of December, 1995, by and between Equitable Resources, Inc., herein designated as "Equitable", and Barbara B. Sullivan, herein designated as the "Participant." WITNESSETH: WHEREAS, the Participant is currently a member of the Board of Directors of Equitable as a Director or an Advisory Director; and WHEREAS, Equitable and the Participant desire to defer all of the fees arising from the above-stated relationship. NOW, THEREFORE, the parties hereby agree as follows: Section 1 - Account 1.1) Effective January 1, 1996, the Participant herein elects to defer, under the terms of this Agreement, all compensation earned for his/her service as a Director or an Advisory Director of Equitable for the calendar year 1996. 1.2) Equitable shall establish a bookkeeping account, hereinafter referred to as the "Account", and shall credit to the Account the amounts of the deferred fees. 1.3) Interest shall be credited to the Account monthly. The rate of interest shall be the same as the yield for 30-day Treasury Bills applicable to the first day of such month. Section 2 - Payment 2.1) All amounts credited to the Account on the Participant's behalf shall be payable in one lump sum by Equitable to the Participant on January 1, 1997 (date selected by the Participant) but in no event later than sixty (60) days after the Participant ceases to be a Director or an Advisory Director of Equitable. Unless a date specific is selected by the Participant, the distribution will be made within sixty (60) days after the Participant ceases to be a Director or an Advisory Director of Equitable; provided, however, that nothing contained in this Section 2.1 shall negate the provisions of Section 2.3 below. 2.2) In the event of the death of the Participant, such payment shall be made to the Participant's beneficiary. For purposes of the Agreement, "beneficiary" means any person(s) or trust(s) or combination of these, last designated by the Participant to receive benefits provided under this Agreement. Such designation shall be in writing filed with the Compensation Committee of the Board of Directors (the "Committee") and shall be revocable at any time through written instrument similarly filed without consent of any beneficiary. In the absence of any designation, the beneficiary shall be the Participant's spouse, if surviving, otherwise, all amounts payable hereunder shall be delivered by Equitable to the executors and administrators of the Participant's estate for administration as a part thereof. 2.3) For financial reasons, the Participant may apply to the Committee for withdrawal from the Agreement prior to the Payment Date. Such early withdrawal shall lie within the absolute discretion of the Committee. Upon approval from the Committee, and within fifteen (15) days thereafter, the Participant will be deemed to have withdrawn from the Agreement and a distribution, in the amount necessary, will be made in a one-time payment. Amounts still payable to the Participant after the application of this Paragraph 2.3 shall be distributed pursuant to the foregoing Paragraphs of this Section 2. Section 3 - Miscellaneous Provisions 3.1) Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between Equitable and the Participant, his/her designated beneficiary or any other person. Any fees deferred under the provisions of this Agreement shall continue for all purposes to be a part of the general funds of Equitable. To the extent that any person acquires a right to receive payment from Equitable under this Agreement, such right shall be no greater than the right of any unsecured general creditor of Equitable. 3.2) The right of the Participant or any other person to the payment of deferred fees under this Agreement shall not be assigned, transferred, pledged or encumbered except by will or by the laws of descent and distribution. 3.3) If the Committee shall find that any person to whom any payment is payable under this Agreement is unable to care for his/her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, child, a parent, or a brother or sister, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Committee may determine. Any such payment shall be a complete discharge of the liabilities of Equitable under this Agreement. 3.4) Nothing contained herein shall be construed as conferring upon the Participant the right to continue in the service of Equitable as a member of the Board of Directors. 3.5) This Agreement shall be binding upon and inure to the benefit of Equitable, its successors and assigns and the Participant and his/her heirs, executors, administrators and legal representatives. 3.6) Equitable may terminate this Plan at any time. Upon such termination, the Committee shall dispose of any benefits of the Participant as provided in Section 2. Equitable may also amend the provisions of this Plan at any time; provided, however, that no amendment shall affect the rights of the Participant, or his/her beneficiaries, to the receipt of payment of benefits to the extent of any compensation deferred before the time of the amendment. This Agreement shall terminate when the payment due under this Agreement is made. 3.7) This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania. Section 4 - Committee 4.1) The Committee's interpretation and construction of the Agreement, and the actions thereunder, including the amount or recipient of the payment to be made therefrom, shall be binding and conclusive on all persons for all purposes. The Committee members shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement unless attributable to his/her own willful misconduct or lack of good faith. IN WITNESS WHEREOF, Equitable has caused this Agreement to be executed by its duly authorized officers and the Participant has hereunto set his/her hand as of the date first above written. ATTEST: EQUITABLE RESOURCES, INC. s/ Audrey C. Moeller s/ Frederick H. Abrew Vice President and President and Corporate Secretary Chief Executive Officer WITNESS: (Participant) s/ Janice A. Haas s/ Barbara B.Sullivan EX-10.05 7 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EQUITABLE RESOURCES, INC. Effective Date: January 1, 1989 As Amended and Restated Through October 20, 1995 I. EFFECTIVE DATE OF PLAN 1.1. EFFECTIVE DATE. The effective date of the Plan is January 1, 1989. II. DEFINITIONS 2.1 AFFILIATED COMPANY: Any company which is wholly- owned or less than wholly-owned but is controlled by the Company, and any other organization so designated by the Company. 2.2 BENEFICIARY: The spouse or other beneficiary entitled to a benefit under the applicable Qualified Plan in the event of the death of a participant in such Qualified Plan. 2.3 COMPANY: Equitable Resources, Inc., or any corporation which succeeds to the position of Equitable Resources, Inc. 2.4 INTERNAL REVENUE CODE: The Internal Revenue Code, as amended, or as it may be amended from time to time, and any regulations issued thereunder. 2.5 PARTICIPANT: All salaried employees of the Company or Affiliated Company who participate in a Qualified Plan, who are deemed part of a select group of management or highly compensated employees, and who are chosen to participate in the Plan by the Compensation Committee of the Company's Board of Directors. A Participant may be also referred to as "a Member" herein. 2.6 PLAN: The Equitable Resources, Inc. Supplemental Executive Retirement Plan as set forth herein, and as may be hereafter amended. 2.7 QUALIFIED PLAN: Any defined benefit pension plan of the Company or an Affiliated Company which is qualified under Section 401 of the Internal Revenue Code. 2.8 Capitalized terms not defined herein shall have the meaning given to such terms in the Retirement Plan for Non-Union Employees of Equitable Resources, Inc., Equitable Resources Energy Company, Equitrans, Inc. and Equitable Resources Marketing Company, as amended and restated. III. PLAN BENEFIT 3.1 The monthly benefit payable to any individual Participant shall be an amount equal to the sum of (a) [reduced by (b) and (c)] follows: (a) The amount of retirement benefit that would have been payable to the Participant under any Qualified Plan in which he participates if that Qualified Plan (1) had provided a retirement benefit without regard to any applicable maximum benefit limitations under Section 415 of the Internal Revenue Code or any limitation as to the maximum amount of annual compensation which may be taken into account under Section 401(a)(17) of the Internal Revenue Code or any limitation on the maximum number of years of a Participant's service for which an unrestricted amount of benefit accruals may be taken into account under Section 401(1) of the Internal Revenue Code; and (2) had included payments made under the Company's Short-Term Incentive Compensation Plan in its definition of Compensation. reduced by (b) The amount of retirement benefit payable to the Participant under any Qualified Plan in which he participates taking into account any applicable maximum benefit limitations under Sections 415, 401(a)(17) and 401(1) of the Internal Revenue Code; and (c) The amount of retirement benefit payable to the Participant under the Company's Supplemental Pension Plan. 3.2 The Company's Employee Pension Committee (the "Committee") may, in its sole discretion, award any Participant additional service under this Plan for periods of employment with prior employers, and any such additional service shall be counted under this Plan toward benefits otherwise payable under any Qualified Plan for both vesting and benefit accrual purposes. In determining whether or not to award additional service credit for periods of prior employment, the Committee shall consider the individual facts and circumstances and shall have no duty to arrive at the same or similar determination based on the Committee's action in a prior or subsequent case. IV. FORM OF PAYMENT OF BENEFITS 4.1 NORMAL FORM: The normal form of retirement benefit shall be a single life annuity, payable monthly, for the life of the Member. If a Member dies prior to the receipt of the full actuarial value of such annuity determined at the time of retirement, the remaining value of the annuity shall be paid in a lump sum to the Member's beneficiary or to the Member's estate if the beneficiary should predecease the Member. 4.2 QUALIFIED JOINT AND SURVIVOR ANNUITY: If a Member is married on the later of his applicable Retirement Date or the date his retirement benefit payments commence under the Plan, his retirement benefit payment shall be in the form of a Qualified Joint and Survivor Annuity which is the Actuarial Equivalent of the normal form of retirement benefit payment. A Member who would receive the Qualified Joint Survivor Annuity as provided herein may elect to receive his retirement benefit in the normal form or in one of the following survivorship optional forms and any such election shall be an affirmative election not to receive his benefit in the Qualified Joint and Survivor Annuity form; provided, however, that any such election shall be made prior to the commencement of a Member's services with the Company for which benefits are to be provided under this Plan; and provided that any such election (other than an election to make the spouse a Joint Annuitant pursuant to Section 4.3 to receive a monthly benefit after the death of the Member equal to 75% or 100% of the pension paid to the Member) made after December 31, 1984 shall be effective only if the Member obtains his spouse's consent thereto. If both the Member and his Beneficiary die prior to their joint receipt of the full actuarial value of such annuity determined at the time of retirement, the remaining value of the annuity shall be paid to the Member's estate. 4.3 SURVIVORSHIP OPTIONS: A Member may elect in the manner hereinafter provided to have the value of his retirement benefit payment apply to the payment of a reduced pension to him during his life, and after his death to his designated surviving Joint Annuitant in an amount equal to 100% of, or 75% of, or 50% of, or 25% of such reduced pension. The reduced pensions to be paid to the Member and to the surviving Joint Annuitant shall be determined on the basis of actuarial values selected by the Committee according to the ages of the Member and of the Member's designated Joint Annuitant at the time the Member retires. If both the Member and his Beneficiary die prior to their joint receipt of the full actuarial value of such annuity determined at the time of retirement, the remaining value of the annuity shall be paid to the Member's estate. In order for an effective election of an optional form of benefit to be made hereunder, the following requirements must be met. The present value of benefit payments to be made to the Member determined as of the date benefit payments will commence must exceed fifty percent (50%) of the present value of all payments to be made under the option, except where the designated Joint Annuitant is the Member's spouse. The Member must furnish all information requested by the Committee at the times and in the form and manner required by it, including specific designation of the percentage of the benefit payable to the Member under the option which is to be paid to the Joint Annuitant. A Member may designate only one Joint Annuitant with respect to his election of an option. Any election shall be made prior to the commencement of a Member's services with the Company for which benefits are to be provided under this Plan. 4.4 PRE-RETIREMENT SPOUSE'S BENEFIT: (a) DEATH ON OR AFTER AGE FIFTY-FIVE OR -------------------------------------------- COMPLETION OF TWENTY-FIVE YEARS: Effective ---------------------------------- on and after March 1, 1985, if a Member who is married on the date of his death and who has attained age fifty-five or completed twenty-five years of Continuous Service dies while actively employed by the Company, his spouse shall receive a benefit, payable in the form of a single life annuity, in an amount equal to fifty percent (50%) of the Member's Accrued Benefit determined as of the first day of the calendar month in which he died but without reduction for age due to benefit commencement prior to the date such Member would have attained age sixty-five, if applicable. (b) ELIGIBILITY FOR ALTERNATIVE BENEFITS: --------------------------------------------- Effective on and after August 23, 1984, if a Member who is credited with at least one hour of service (or one hour of paid leave) on or after August 23, 1984, is legally married on the date of his death (a "Qualified Spouse") and who has ten (10) or more years of Continuous Service and a nonforfeitable right to a benefit under the Plan, and who dies prior to said benefit's annuity starting date, his Qualified Spouse shall receive the Survivor's Benefit provided herein in an amount determined in paragraph (c). (c) AMOUNT: The amount of the Survivor's Benefit payable in the form of a life annuity to the surviving Qualified Spouse of Members satisfying (b) shall equal (1) or (2) whichever applies: (1) DEATH ON OR AFTER AGE FIFTY-FIVE OR COMPLETION OF TWENTY-FIVE YEARS OF SERVICE: An amount computed in accordance with Section 4.4(a) without regard to whether the Member dies while actively employed by the Company. (2) DEATH BEFORE AGE FIFTY-FIVE OR COMPLETION OF TWENTY-FIVE YEARS OF SERVICE: An amount equal to the survivor's portion of the Qualified Joint and Survivor Annuity which the Member would have received computed as if he had terminated employment with the Company on the date of his death with a Deferred Vested Benefit, survived to age Fifty-Five (55) and made an election under a Qualified Plan for immediate commencement of benefit payments subject to the reduction, if any, provided in such Qualified Plan for early commencement of benefit payments, commenced receipt of his Deferred Vested Benefit in the form of said Qualified Joint and Survivor Annuity on the first day of the next month and then died the next day. 4.5 COMMENCEMENT AND TERMINATION OF BENEFIT: Retirement benefits shall commence on the Member's Retirement Date. The Survivor Annuity payable to a spouse and the Survivor Annuity payable to the Member's designated Joint Annuitant shall commence on the first day of the month next succeeding the month in which the Member's death occurs. The pre-retirement spouse's benefit payable under Section 4.4 above shall commence on the first day of the month next succeeding the month in which the Member would have attained age fifty-five (55) or the month which he died, whichever is the later to occur. All benefit payments shall cease with payment due immediately preceding the date of death of the last person entitled to benefits under the form of benefit payment being made. Notwithstanding the foregoing, in the event no effective election of a date for commencement of benefits is made by a Member, the payment of benefits hereunder shall commence within thirty (30)days after the close of the Plan Year in which occurs the latest of: (a) attainment of the Member's Normal Retirement Date or if the Member is not an employee his sixty-fifth (65) birthday; (b) the Member's termination of employment with the Company; provided, however, the retirement benefit payments under the Plan shall commence no later than April 1 of the calendar year following the calendar year in which the Member retires. At the first day of the month succeeding the month in which such Member's sixty-fifth (65) birthday occurred, in the event the whereabouts of a Member whose only entitlement is to a Deferred Vested Benefit are not known, a reasonable effort will be made by the Committee to locate such Member. In the event the Member cannot be located, the Member's benefit payments shall be held by the Plan until the earlier of the time the whereabouts of the Member are made known to the Committee by the Member or his lawful agent or seven (7) years subsequent to his Normal Retirement Date, after which such Member shall be presumed dead and any other benefit which becomes payable by reason of such death under the rules of the Plan relating to form of benefit payment shall be paid thereafter. 4.6 PAYMENTS IN THE EVENT OF INCAPACITY: In the EVENT it is determined that a Member, retired Member or other person entitled to benefits under the Plan, in the judgement of the Committee, is unable to care for his affairs because of illness, accident, or incapacity (either mental or physical), or for any other reason, the Committee shall cause any payment of a benefit or refund of contributions to be paid in the form of a life annuity, payable monthly to a duly appointed guardian, committee, or other legal representative of such person, or, if there is no such legal representative, to his spouse or child or such other object of natural bounty as the Committee may determined, or to such person, persons or institutions as, in the judgement of the Committee, are then maintaining or have custody of such Member, retired Member or other person entitled to benefits. 4.7 NONFORFEITABILITY OF BENEFITS: Except as provided ------------------------------ by the Plan, all Member retirement benefits in pay status and all benefits after attainment of the Normal Retirement Age shall be nonforfeitable except in the event of death, which shall result in a forfeiture of all such Member's benefits. These provisions shall have no application to any survivorship annuities, including the Qualified Joint and Survivor Annuity which may be payable by reason of the operation of the rules of this Plan, which benefits shall terminate by reason of the death of the survivor annuitant. All benefits provided by the Plan are personal in nature and shall be payable only to and during the life of the applicable recipient and no other person shall inure to any right therein. For purposes of this Section, "Normal Retirement Age" shall mean the date on which the Member attains age sixty-five (65). 4.8 SPECIAL RULE FOR SMALL PAYMENTS: If a benefit otherwise payable under this Plan is ten dollars ($10.00) or less per month, it shall be paid annually in a lump sum equal to its commuted value. Where the present value of any benefit otherwise payable under the Plan, including without limiting the foregoing, any pre-retirement surviving spouse's benefit, does not exceed $3,500 (and payment of the benefit has not commenced) the Committee shall direct the Trustee to distribute the entire present value in one lump sum payment. As used herein, "present value" shall mean the value of a benefit determined as of the date of distribution utilizing an interest rate not greater than the interest rate which would be used (as of the date of the distribution) by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump sum distribution on Plan termination. 4.9 A Participant may request at any time to be granted his entire benefit under this Plan in a lump sum form (whether or not he has commenced receiving an annuity under the Plan). An election of a lump sum payment of benefits hereunder must be approved by the Compensation Committee of the Board of Directors at its sole discretion. However, if the Internal Revenue Service determines at any time that a Participant has constructively received, for any reason and under any rationale, the total value of his benefit payable under this Plan, the Participant shall have an absolute right to elect to receive his benefit in a lump sum form without any action required by the Compensation Committee of the Board of Directors. V. DEATH BENEFITS 5.1 The monthly death benefit payable to the Beneficiary of a Participant, if any, shall be determined in accordance with Section 3.1 above assuming that the term "Beneficiary" has been substituted for the term "Participant" each place it appears. 5.2 Any death benefit payable to the Beneficiary of a Participant under Section 5.1 shall be paid to the Beneficiary in the form of a monthly annuity for the life of the Beneficiary. VI. COST OF THE PLAN 6.1 The entire cost of benefits and administrative expenses for this Plan shall be paid for by the Company as incurred. No contributions by Participants will be permitted or required. VII. ADMINISTRATION 7.1 This Plan shall be administered by the Administrator appointed under the Qualified Plan. In addition, the terms of the Qualified Plan shall govern in situations not specifically provided for herein, but only to the extent such terms are not inconsistent with the provisions and intent of this Plan. VIII.GENERAL PROVISIONS 8.1 This Plan is intended to be a plan maintained by the Company for the purpose of providing deferred compensation to a select group of management or highly compensated employees. 8.2 This Plan is purely voluntary on the part of the Company. The Company expects and intends to continue the Plan indefinitely, but necessarily reserves the right to amend, alter, suspend or terminate the Plan in whole or in part, at any time. 8.3 All rights of a Participant or a Beneficiary under this Plan shall be mere unsecured creditors' rights against the Company, with no rights to the assets of the Company (or any trust in which assets are held for purposes of this Plan) superior to that of any other general unsecured creditor. 8.4 Participant's rights payable under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance. Such rights may not be subject to the debts, contracts, liabilities, engagements or torts of the Participants or the Participant's beneficiaries. eg\benefits\serp EX-10.15B 8 December 15, 1995 Mr. Donald I. Moritz Chairman of the Executive Committee Equitable Resources, Inc. 420 Boulevard of the Allies Pittsburgh, PA 15219 Dear Mr. Moritz: This is to advise you that on December 14, 1995, the Compensation Committee of the Board of Directors of the Company adopted a resolution authorizing the payment of $60,000 to you for consulting services for the period January 1, 1996 through June 30, 1996, such payment to be made in the amount of $10,000 monthly. The Agreement for Consulting Services dated December 31, 1994, between you and Equitable Resources, inc., is therefore amended by adoption of the resolution and said Agreement will terminate as of June 30, 1996. Please indicate your acceptance of this amendment by signing below. Very truly yours, EQUITABLE RESOURCES, INC. - ----------------------------------------------------------- By Frederick H. Abrew President and Chief Executive Officer APPROVED AND ACCEPTED - ---------------------------------------------------------- Donald I. Moritz EX-10.17 9 The Company has executed Change-in-Control Agreements with the following executive officers of the Company: A. Mark Abramovic, John C. Gongas, Jr., Dan C. Eaton, Audrey C. Moeller, Gregory R. Spencer and Jeffrey C. Swoveland. Mr. Abramovic's and Mr. Gongas' Agreements provide for 24 months of severance benefits while all other contracts provide for 18 months of severance benefits. CHANGE OF CONTROL AGREEMENT THIS AGREEMENT (the "Agreement") dated as of the ___ day of January, 1996 (the "Effective Date") by and between EQUITABLE RESOURCES, INC., a Pennsylvania corporation with its principal place of business at Pittsburgh, Pennsylvania (the "Company"), and____________________________, an individual (the "Employee"); WHEREAS, the Board of Directors of the Company (the "Board"), has determined that it is in the best interest of the Company and its shareholders to assure that the Company will have the continued dedication of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Employee by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Employee's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Employee with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Employee will be satisfied and which are competitive with those of other corporations in the industry in which the Company's principal business activity is conducted. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Term. The term of this Agreement shall commence on the Effective Date hereof and expire on the earlier of (i) the date of the Employee's retirement in accordance with the provisions of the Company's retirement policy as set forth in the Company Management Manual; or (ii) unless further extended as hereinafter set forth, the date which is thirty-six (36) months after the Effective Date. Commencing on the last day of the first full calendar month after the Effective Date and on the last day of each succeeding calendar month, the term of this Agreement shall be automatically extended without further action by either party (but not beyond the date of Employee's retirement in accordance with the provisions of the Company's retirement policy) for one (1) additional month unless one party provides written notice to the other party that such party does not wish to extend the term of this Agreement. In the event that such notice shall have been delivered, the term of this Agreement shall no longer be subject to automatic extension and the term hereof shall expire on the date which is thirty-six (36) calendar months after the last day of the month in which such written notice is received. Notwithstanding the foregoing, the Employee shall serve in said office(s) at the pleasure of the Board, and the Employee may be removed from said office(s) at any time with or without Cause (as hereinafter defined); provided, that such removal shall be without prejudice to any rights the Employee may have to Salary and Benefits Continuation (as hereinafter defined) hereunder. 2. Change of Control. Change of Control shall mean any of the following events (each of such events being herein referred to as a "Change of Control"): (a) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a corporation with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of the Board of Directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting power immediately prior to such sale or disposition; (b) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty percent (20%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the Board of Directors; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of November 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock and other voting securities whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of fifteen percent (15%) or more of the Company's voting securities, shall not constitute a Change of Control; (c) The Company's termination of its business and liquidation of its assets; (d) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such reorganization, merger or consolidation receive or continue to hold less than sixty percent (60%) of the outstanding voting shares of the new or continuing corporation; or (e) If, during any two-year period, less than a majority of the members of the Board of Directors are persons who were either (i) nominated or recommended for election by at least two-thirds vote of the persons who were members of the Board of Directors or Nominating Committee of the Board of Directors at the beginning of the period, or (ii) elected by at least a two-thirds vote of the persons who were members of the Board of Directors at the beginning of the period. 3. Salary and Benefits Continuation. "Salary and Benefits Continuation" shall be defined to mean the following: (i) payment of sum equal to Employee's base salary for a twenty-four (24) month period; (ii) payment of an amount of cash equal to two (2) times the average incentive earned over the prior three year period; (iii) immediate vesting of all previously unvested cash awards and stock incentives; (iv) immediate delivery of Company stock or payment of an amount of cash equal to two (2) times the value of the average grants received by Employee over the preceding five (5) years under the applicable Company long term incentive plans; (v) provision to Employee and his eligible dependents of medical, disability, dental and life insurance coverage (to the extent such coverage was in effect immediately prior to the Change of Control) for twenty-four (24) months; (vi) immediate granting to Employee of twenty-four (24) months of service and age credit for determining benefit amounts and any early retirement reductions with respect to all applicable Company retirement benefit plans; in addition, no early retirement reductions will be imposed on the retirement benefits if age at termination equals or exceeds 55; (vii) reimbursement to Employee of reasonable costs incurred by Employee for outplacement services in the twenty-four (24) month period following termination of Employee's employment in connection with a Change of Control. All amounts payable by the Company to the Employee in cash pursuant to Section 3(i), (ii), (iii) and (iv) shall be made in a lump sum unless the Employee otherwise elects and notifies the Company in writing prior to the termination of his employment of his desire to have all payments made in accordance with the Company's regular salary and benefit payment practices, provided that the lump sum payment or first payment is made within thirty (30) days after the Employee's termination hereunder. All other amounts payable by the Company to the Employee pursuant to Section 3 shall be paid or provided in accordance with the Company's standard payroll and reimbursement procedures, as in effect immediately prior to the Change of Control. In the event that medical, disability, dental and life insurance benefits cannot be provided under appropriate Company group insurance policies, an amount equal to the premium necessary for the Employee to purchase directly the same level of coverage in effect immediately prior to the Change of Control shall be added to the Company's salary payments to Employee. If there is a Change of Control as defined above, the Company will provide Salary and Benefits Continuation if at any time during the first twenty-four (24) months following the consummation of a Change of Control, either (i) the Company terminates the Employee's employment other than for Cause as defined in Section 4 below or (ii) the Employee terminates his/her employment for "Good Reason." For purposes of this Agreement, "Good Reason" is defined as: (a) Removal of the Employee from the position he held immediately prior to the Change of Control (by reason other than death, disability or Cause), or any other material breach by the Company of its obligations contained in this Agreement; (b) The assignment to the Employee of any duties inconsistent with those performed by the Employee immediately prior to the Change of Control or a substantial alteration in the nature or status of the Employee's responsibilities which renders the Employee's position to be of less dignity, responsibility or scope; (c) A reduction by the Company in the Employee's annual base salary as in effect on the date hereof or as the same may be increased from time to time, except for proportional across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company, provided, however, that in no event shall the Employee's annual base salary be reduced by an amount equal to ten percent or more of the Employee's annual base salary as of the end of the calendar year immediately preceding the year in which the Change of Control occurs, without the Employee's consent; (d) The failure to grant the Employee an annual salary increase reasonably necessary to maintain such salary as reasonably comparable to salaries of senior executives holding positions equivalent to the Employee's in the industry in which the Company's then principal business activity is conducted; (e) The Company requiring the Employee to be based anywhere other than the Company's principal executive offices in the city in which the Employee is principally located immediately prior to the Change of Control, except for required travel on the Company's business to an extent substantially consistent with the Employee's present business travel obligations; (f) Any material reduction by the Company of the benefits enjoyed by the Employee under any of the Company's pension, retirement, profit sharing, savings, life insurance, medical, health and accident, disability or other employee benefit plans, programs or arrangements, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Employee of any material fringe benefits, or the failure by the Company to provide the Employee with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy, provided that this paragraph (f) shall not apply to any proportional across-the-board reduction or action similarly affecting all executives of the Company and all executives of any person in control of the Company; or (g) The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 14 hereof. The Employee's right to Salary and Benefits Continuation shall accrue upon the occurrence of either of the events specified in (i) or (ii) of the preceding sentence and shall continue as provided, notwithstanding the subsequent expiration of this Agreement pursuant to Section 1 hereof. The Employee's subsequent employment, death or disability within the twenty-four (24) month period following the Employee's termination of employment in connection with a Change of Control shall not affect the Company's obligation to continue making Salary and Benefits Continuation payments. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 3 by seeking employment or otherwise. The rights to Salary and Benefits Continuation shall be in addition to whatever other benefits the Employee may be entitled to under any other agreement or compensation plan, program or arrangement of the Company. The Company shall be authorized to withhold from any payment to the Employee, his estate or his beneficiaries hereunder all such amounts, if any, that the Company may reasonably determine it is required to withhold pursuant to any applicable law or regulation. 4. Termination of Employee for Cause. Upon or following a Change of Control, the Company may at any time terminate the Employee's employment for Cause. Termination of employment by the Company for "Cause" shall mean termination upon: (i) the willful and continued failure by the Employee to substantially perform his duties with the Company (other than (A) any such failure resulting from Employee's disability or (B) any such actual or anticipated failure resulting from Employee's termination of his/her employment for Good Reason), after a written demand for substantial performance is delivered to the Employee by the Board of Directors which specifically identifies the manner in which the Board of Directors believes that the Employee has not substantially performed his duties, and which failure has not been cured within thirty days (30) after such written demand; or (ii) the willful and continued engaging by the Employee in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise, or (iii) the breach by the Employee of the Confidentiality provision set forth in Section 8 hereof. For purposes of this Section 4, no act, or failure to act, on the Employee's part shall be considered "willful" unless done, or omitted to be done, by the Employee in bad faith and without reasonable belief that such action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors at a meeting of the Board of Directors called and held for that purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with his counsel, to be heard before the Board of Directors) finding that in the good faith opinion of the Board of Directors the Employee is guilty of the conduct set forth above in clauses (i), (ii) or (iii) of this Section 4 and specifying the particulars thereof in detail. 5. Prior Termination. Anything in this Agreement to the contrary notwithstanding, if the Employee's employment with the Company is terminated prior to the date on which a Change of Control occurs either (i) by the Company other than for Cause or (ii) by the Employee for Good Reason, and it is reasonably demonstrated by Employee that such termination of employment (a) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control, or (b) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the termination shall be deemed to have occurred upon a Change of Control and the Employee will be entitled to Salary and Benefits Continuation as provided for in Section 3 hereof. 6. Employment at Will. This Agreement contains the entire understanding of the Company and the Employee with respect to the subject matter hereof and, subject to the provisions of any other agreement between the Employee and the Company, the Employee shall remain an employee at will and nothing herein shall confer upon the Employee any right to continued employment and shall not affect the right of the Company to terminate the Employee for any reason not prohibited by law; provided, however, that any such removal shall be without prejudice to any rights the Employee may have to Salary and Benefits Continuation hereunder. 7. Construction of Agreement. Governing Law. This Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania without regard to its conflict of law provisions. Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience of reference only and shall not constitute a part of this Agreement. 8. Covenant as to Confidential Information. (a) Confidentiality of Information and Nondisclosure. The Employee acknowledges and agrees that his employment by the Company under this Agreement necessarily involves his knowledge of and access to confidential and proprietary information pertaining to the business of the Company and its subsidiaries. Accordingly, the Employee agrees that at all times during the term of this Agreement and for a period of two (2) years after the termination of the Employee's employment hereunder, he will not, directly or indirectly, without the express written authority of the Company, unless directed by applicable legal authority having jurisdiction over the Employee, disclose to or use, or knowingly permit to be so disclosed or used, for the benefit of himself, any person, corporation or other entity other than the Company, (i) any information concerning any financial matters, customer relationships, competitive status, supplier matters, internal organizational matters, current or future plans, or other business affairs of or relating to the Company and its subsidiaries, (ii) any management, operational, trade, technical or other secrets or any other proprietary information or other data of the Company or its subsidiaries, or (iii) any other information related to the Company or its subsidiaries or which the Employee should reasonably believe will be damaging to the Company or its subsidiaries which has not been published and is not generally known outside of the Company. The Employee acknowledges that all of the foregoing, constitutes confidential and proprietary information, which is the exclusive property of the Company. (b) Company Remedies. The Employee acknowledges and agrees that any breach of this Agreement by him will result in immediate and irreparable harm to the Company, and that the Company cannot be reasonably or adequately compensated by damages in an action at law. In the event of an actual or threatened breach by the Employee of the provisions of this Section 8, the Company shall be entitled, to the extent permissible by law, immediately to cease to pay or provide the Employee or his dependents any compensation or benefit being, or to be, paid or provided to him pursuant to Section 3 of this Agreement, and also to obtain immediate injunctive relief restraining the Employee from conduct in breach or threatened breach of the covenants contained in this Section 8. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Employee. 9. Reimbursement of Fees. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any contest by the Company, Internal Revenue Service or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Employee about the amount of any payment pursuant to Section 3 of this Agreement) or in connection with any dispute arising from this Agreement, regardless of whether Employee prevails in any such contest or dispute. 10. Certain Reductions of Payments by the Company. Notwithstanding anything herein to the contrary, if the aggregate of the amounts due the Employee under this Agreement and any other plan or program of the Company constitutes a "Parachute Payment," as such term is defined in Section 280G of the Internal Revenue Code of 1986, as amended, then the payments to be made to the Employee under this Agreement which are contingent on a Change of Control shall be reduced to an amount which, when added to the aggregate of all other payments to be made to the Employee which are contingent on a Change of Control, as a result of the termination of his employment, will make the total amount of such payment equal to 2.99 times his Base Amount. The determinations to be made with respect to this paragraph shall be made by an independent auditor (the "Auditor") jointly selected by the Employee and the Company and paid by the Company. In the event the payments to be made to the Employee are required to be reduced pursuant to the limitations in this Section 10, the Company shall allow the Employee to select which payment or benefits Employee wants the Company to reduce in order that the total amount of such payment is equal to 2.99 times such Employee's Base Amount. The Auditor shall be a nationally recognized United States public accounting firm that has not, during the two years preceding the date of its selection, acted in any way on behalf of the Company or any of its subsidiaries. 11. Resolution of Differences Over Breaches of Agreement. Except as otherwise provided herein, in the event of any controversy, dispute or claim arising out of, or relating to this Agreement, or the breach thereof, or arising out of any other matter relating to the Employee's employment with the Company or the termination of such employment, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, the Company and the Employee agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Pittsburgh, Pennsylvania in accordance with this Section 11 of this Agreement and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). The matter shall be heard and decided, and awards rendered by a panel of three (3) arbitrators (the "Arbitration Panel"). The Company and the Employee shall each select one arbitrator from the AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. 12. Release. The Employee hereby acknowledges and agrees that prior to the occurrence of the Employee's or his dependents' right to receive from the Company or any of its representatives or agents any compensation or benefit to be paid or provided to him or his dependents pursuant to Section 3 of this Agreement, the Employee may be required by the Company, in its sole discretion, to execute a release in a form reasonably acceptable to the Company, which releases any and all claims (other than amounts to be paid to Employee as expressly provided for under this Agreement) the Employee has or may have against the Company or its subsidiaries, agents, officers, directors, successors or assigns with respect to matters relating to his employment and termination of employment. 13. Waiver. The waiver by a party hereto of any breach by the other party hereto of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by a party hereto. 14. Assignment. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. The Company shall be obligated to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the Company's business or assets, by a written agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place. This Agreement shall inure to the extent provided hereunder to the benefit of and be enforceable by the Employee or his legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. The Employee may not delegate any of his duties, responsibilities, obligations or positions hereunder to any person and any such purported delegation by him shall be void and of no force and effect with respect to matters relating to his employment and termination of employment. Without limiting the foregoing, the Employee's rights to receive payments and benefits hereunder shall not be assignable or transferable, other than a transfer by Employee's will or by the laws of descent and distribution. 15. Notices. Any notices required or permitted to be given under this Agreement shall be sufficient if in writing, and if personally delivered or when sent by first class certified or registered mail, postage prepaid, return receipt requested -- in the case of the Employee, to his residence address as set forth below, and in the case of the Company, to the address of its principal place of business as set forth below, in care of the Chairman of the Board -- or to such other person or at such other address with respect to each party as such party shall notify the other in writing. 16. Pronouns. Pronouns stated in either the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. 17. Entire Agreement. This Agreement contains the entire agreement of the parties concerning the matters set forth herein and all promises, representations, understandings, arrangements and prior agreements on such subject are merged herein and superseded hereby. The provisions of this Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the party against whom enforcement of any amendment, modification, repeal, waiver, extension or discharge is sought. No person acting other than pursuant to a resolution of the Board of Directors shall have authority on behalf of the Company to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto or to exercise any of the Company's rights to terminate or to fail to extend this Agreement. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized, and the Employee has hereunto set his hand, all as of the day and year first above written. ATTEST: EQUITABLE RESOURCES, INC. _________________________ _________________________________ By: Frederick H. Abrew President and Chief Executive Officer WITNESS: __________________________ __________________________________ Address: ________________________ ________________________ EX-11.01 10 Exhibit 11.01 EQUITABLE RESOURCES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 EARNINGS: Net income .................................. $ 1,548 $60,729 $73,455 Interest net of applicable income taxes on 9 1/2% convertible subordinated debentures 52 146 89 ------- ------- ------- Adjusted earnings ....................... $ 1,600 $60,875 $73,544 ======= ======= ======= SHARES: Average common shares outstanding ........... 34,793 34,509 32,359 Dilutive effect of conversion of 9 1/2% convertible subordinated debentures ....... 84 220 257 Dilutive effect of stock options outstanding 11 11 61 ------- ------- ------- Total ................................... 34,888 34,740 32,677 ======= ======= ======= PRIMARY EARNINGS PER SHARE .................... $ .04 $ 1.76 $ 2.27 ======= ======= ======= FULLY DILUTED EARNINGS PER SHARE .............. $ .04 $ 1.75 $ 2.25 ======= ======= ======= EX-21 11 EQUITABLE RESOURCES, INC. SUBSIDIARY COMPANIES Andex Energy, Inc. Current Automation, Inc. EQT Capital Corporation Equitable Gas-Energy Company Equitable Pipeline Company Equitable Power Services Company Equitable Resources (Argentina) Company Equitable Resources (Canada) Limited Equitable Resources (Ecuador) Company Equitable Resources Energy Company Equitable Resources Marketing Company Equitable Resources (Netherlands) Company Equitable Storage Company Equitrans, L.P. EREC Capital Corporation EREC Nevada, Inc. ERI Global Partners, Inc. ERI Incorporated ERI Investments, Inc. ERI Realty, Inc. ERI Trading Company ET Avoca Company ET Blue Grass Company ET Storage Company 420 Energy Investments, Inc. Hershey Oil Corporation IEC Energy Systems, Incorporated IEC Financial, Inc. IEC Hunterdon, Inc. IEC Kingston, Inc. IEC Management Services, Inc. IEC Montclair, Inc. IEC Plymouth, Inc. Independent Energy Corporation Independent Energy Finance Corporation Independent Energy Operations, Inc. Kentucky West Virginia Gas Company, L.L.C. LIG Chemical Company LIG, Inc. LIG Liquids Company L.L.C. Louisiana Intrastate Gas Company L.L.C. Nora Transmission Company Tuscaloosa Pipeline Company [Companies as of 12/31/95] EX-23.01 12 Exhibit 23.01 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference of our report dated February 13, 1996, with respect to the consolidated financial statements and schedule of Equitable Resources, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 1995 in the Prospectus part of the following Registration Statements: Registration Statement No. 33-52151 on Form S-8 pertaining to the 1994 Equitable Resources, Inc. Long-Term Incentive Plan; Registration Statement No. 33-52137 on Form S-8 pertaining to the 1994 Equitable Resources, Inc. Non-Employee Directors' Stock Incentive Plan; Registration Statement on Form S-8 filed on March 22, 1996, pertaining to the Equitable Resources, Inc. Employee Stock Purchase Plan; Post-Effective Amendment No. 2 to Registration Statement No. 2-69010 on Form S-8 pertaining to the Equitable Resources, Inc. Key Employee Restricted Stock Option and Stock Appreciation Rights Incentive Compensation Plan; Post-Effective Amendment No. 1 to Registration Statement No. 33-00252 on Form S-8 pertaining to the Equitable Resources, Inc. Employee Savings Plan; Post-Effective Amendment No. 1 to Registration Statement No. 33-10508 on Form S-8 pertaining to the Equitable Resources, Inc. Key Employee Restricted Stock Option and Stock Appreciation Rights Incentive Compensation Plan; Registration Statement No. 33-53703 on Form S-3 pertaining to the registration of $100,000,000 Medium Term Notes, Series C of Equitable Resources, Inc. We also consent to the incorporation by reference of our report dated March 8, 1996 with respect to the financial statements and schedules of the Equitable Resources, Inc. Employee Savings Plan included in the Annual Report (Form 11-K) for the year ended October 31, 1995, included in Exhibit 99.01(a) to this Annual Report (Form 10-K) into Post-Effective Amendment No. 1 to Registration Statement No. 33-00252 on Form S-8 pertaining to the Equitable Resources, Inc. Employee Savings Plan. We also consent to the incorporation by reference of our report dated March 8, 1996 with respect to the financial statements and schedules of the Equitable Resources, Inc. Employee Savings Plan included in the Transition Period Report (Form 11-K) for the two-month period ended December 31, 1995, included in Exhibit 99.01(b) to this Annual Report (Form 10-K) into Post-Effective Amendment No. 1 to Registration Statement No. 33-00252 on Form S-8 pertaining to the Equitable Resources, Inc. Employee Savings Plan. We also consent to the incorporation by reference of our report dated March 8, 1996 with respect to the financial statements of the Equitable Resources, Inc. Employee Stock Purchase Plan included in the Annual Report (Form 11-K) for the three-month period ended December 31, 1995, included in Exhibit 99.02 to this Annual Report (Form 10-K) into the Registration Statement on Form S-8 filed on March 22, 1996, pertaining to the Equitable Resources, Inc. Employee Stock Purchase Plan. By /s/ Ernst & Young LLP Ernst & Young LLP Pittsburgh, Pennsylvania March 22, 1996 EX-27 13
5 0000033213 M D BRIGGS 1,000 3-MOS DEC-31-1995 DEC-31-1995 30,169 0 272,598 10,539 22,499 377,749 2,121,648 664,065 1,961,808 389,279 415,527 0 0 214,181 500,898 1,961,808 433,773 433,773 0 479,623 0 3,137 11,880 (55,752) (29,024) (26,728) 0 0 0 (26,728) (.76) (.76)
EX-99.01A 14 Exhibit 99.01(a) SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 1-3551 EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN (Full title of the Plan and address of the Plan, if different from that of the issuer named below) EQUITABLE RESOURCES, INC. 420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219 (Name of issuer of the securities held pursuant to the plan and the address of principal executive office) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Administrative Committee of the Plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN (Name of Plan) By: s/ Dan C. Eaton Dan C. Eaton Vice President - Strategic and Financial Planning March 8, 1996 REPORT OF INDEPENDENT AUDITORS Administrative Committee Equitable Resources, Inc. Employee Savings Plan We have audited the accompanying statements of net assets available for plan benefits of the Equitable Resources, Inc. Employee Savings Plan (the Plan) as of October 31, 1995 and 1994, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of October 31, 1995 and 1994, and the changes in net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment as of October 31, 1995, and transactions or series of transactions in excess of 5% of the current value of plan assets for the year then ended, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The Fund Information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each Fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. s/ Ernst & Young LLP Ernst & Young LLP Pittsburgh, Pennsylvania March 8, 1996 EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS October 31 1995 1994 Investments, at fair value-Note 3: The George Putnam Fund of Boston $ 4,752,239 $ - The Putnam Fund for Growth and Income 3,809,163 - Putnam Income Fund 1,370,664 - Putnam Voyager Fund 3,583,911 - Putnam Asset Allocation-Growth Portfolio 66,882 - Putnam Asset Allocation-Balanced Portfolio 17,351 - Putnam Asset Allocation-Conservative Portfolio 3,970 - Putnam Overseas Growth Fund 69,236 - Loan Fund 714,588 - Putnam Stable Value Fund 6,312,011 - Employer Stock Fund 4,049,947 4,143,410 Fixed Income Fund - 4,813,884 Balanced Fund - 4,689,620 Aggressive Stock Fund - 2,086,435 Common Stock Fund - 2,647,575 Bond Fund - 1,377,416 Short-term investments - 252,422 ------------ ------------- TOTAL INVESTMENTS 24,749,962 20,010,762 Receivables: Participants loans - 779,726 Interest - 897 ------------ ------------- TOTAL RECEIVABLES - 780,623 ------------ ------------- TOTAL ASSETS 24,749,962 20,791,385 Payables: Participants - 127,799 Others - 7,162 ------------ ------------- TOTAL PAYABLES - 134,961 ------------ ------------- Net Assets Available for Plan Benefits $ 24,749,962 $ 20,656,424 ============ ============= SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION YEAR ENDED OCTOBER 31, 1995 Fixed Aggressive Income Balanced Stock Fund Fund Fund Additions to net assets attributed to: Investment income: Interest and dividends $ 255,722 $ 4,245 $ 3,489 Interest on participant loans 47,812 - - ---------- ----------- ---------- Total investment income 303,534 4,245 3,489 Gain realized on sale or distribution of Equitable Resources, Inc. Common Stock Unrealized depreciation of investment in Equitable Resources, Inc. Common Stock Unrealized appreciation (depreciation) in value of investment 3,568 391,338 396,848 Contributions 473,816 390,925 302,918 Participant rollovers 41,356 24,929 8,914 ---------- ----------- ---------- Total additions 822,274 811,437 712,169 Deductions from net assets attributed to: Withdrawals by participants 29,707 122,698 104,756 Purchase of life insurance - - - Expenses 12,376 10,659 5,230 ---------- ----------- ---------- Total deductions 42,083 133,357 109,986 Transfers from (to) funds 665,525 (662,484) 96,642 ---------- ----------- ---------- Net increase (decrease) in net assets available for plan benefits 1,445,716 15,596 698,825 Net assets available for plan benefits: At beginning of year 5,635,939 4,715,623 2,133,491 Transfers between investment options (Note 1) (7,081,655) (4,731,219) (2,832,316) ----------- ---------- ---------- At end of year $ - $ - $ - ========== =========== ========== SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION YEAR ENDED OCTOBER 31, 1995 The Putnam Common The George Fund for Putnam Stock Bond Putnam Fund Growth and Income Fund Fund of Boston Income Fund $ 4,626 $ 1,052 $ 43,001 $ 22,432 $ 19,846 - - - - - --------- ----------- ---------- ----------- ---------- 4,626 1,052 43,001 22,432 19,846 484,958 116,821 149,822 116,794 25,245 400,287 95,970 83,637 135,958 42,504 103,722 421 - - - --------- ----------- ---------- ----------- ---------- 993,593 214,264 276,460 275,184 87,595 122,740 186,369 119,077 45,557 16,798 - - - - - 6,829 3,029 - - - --------- ----------- ---------- ----------- ---------- 129,569 189,398 119,077 45,557 16,798 45,107 (153,967) (136,363) (14,305) 47,333 --------- ----------- ---------- ----------- ---------- 909,131 (129,101) 21,020 215,322 118,130 2,684,710 1,381,635 - - - (3,593,841) (1,252,534) 4,731,219 3,593,841 1,252,534 ---------- ----------- ---------- ----------- ---------- $ - $ - $4,752,239 $ 3,809,163 $1,370,664 ========= =========== ========== =========== ========== SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEAR ENDED OCTOBER 31, 1995 Putnam Voyager Growth Balanced Conservative Fund Portfolio Portfolio Portfolio Additions to net assets attributed to: Investment income: Interest and dividends $ - $ - $ - $ - Interest on participant loans - - - - --------- --------- --------- --------- Total investment income - - - - Gain realized on sale or distribution of Equitable Resources, Inc. Common Stock Unrealized depreciation of investment in Equitable Resources, Inc. Common Stock Unrealized appreciation (depreciation) in value of investment 209,684 (464) (43) 17 Contributions 225,706 27,930 13,982 3,530 Participant rollovers - - - - --------- --------- --------- --------- Total additions 435,390 27,466 13,939 3,547 Deductions from net assets attributed to: Withdrawals by participants 37,434 - - - Purchase of life insurance - - - - Expenses - - - - ----- ------ ----- ------- Total deductions 37,434 - - - Transfers from (to) funds 353,639 39,416 3,412 423 --------- --------- --------- --------- Net increase (decrease) in net assets available for plan benefits 751,595 66,882 17,351 3,970 Net assets available for plan benefits: At beginning of year - - - - Transfers between investment options (Note 1) 2,832,316 - - - --------- --------- --------- --------- At end of year $3,583,911 $ 66,882 $ 17,351 $ 3,970 ========== ========= ========= ========= SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEAR ENDED OCTOBER 31, 1995 Putnam Putnam Employer Life Overseas Loan Stable Stock Insurance Combined Growth Fund Fund Value Fund Fund Funds Funds $ - $ - $ 92,274 $ 168,091 $ $ 614,778 - 13,095 - - 60,907 --------- --------- --------- --------- --------- ---------- - 13,095 92,274 168,091 675,685 125,122 125,122 (281,824) - (281,824) 179 - - - - 1,894,767 23,667 265 98,024 349,774 41,541 2,710,434 - - - 23,998 - 203,340 --------- --------- --------- --------- --------- ---------- 23,846 13,360 190,298 385,161 41,541 5,327,524 - - 182,577 189,344 - 1,157,057 - - - - 38,806 38,806 - - - - - 38,123 --------- --------- --------- --------- --------- ---------- - - 182,577 189,344 38,806 1,233,986 45,390 (76,204) 67 (250,896) (2,735) - --------- --------- --------- --------- --------- ---------- 69,236 (62,844) 7,788 (55,079) 4,093,538 - - - 4,105,026 20,656,424 - 777,432 6,304,223 - - --------- --------- --------- --------- --------- ---------- $ 69,236 $ 714,588 $6,312,011 $4,049,947 $ $24,749,962 ========= ========= ========== ========== ========= =========== SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION YEAR ENDED OCTOBER 31, 1994 Fixed Aggressive Income Balanced Stock Fund Fund Fund Additions to net assets attributed to: Investment income: Interest and dividends $ 2,470 $ 2,587 $ 1,793 Interest on participant loans 60,485 ---------- ---------- --------- Total investment income 62,955 2,587 1,793 Gain realized on sale or distribution of Equitable Resources, Inc. Common Stock Unrealized depreciation of investment in Equitable Resources, Inc. Common Stock Unrealized appreciation (depreciation) in value of investment 238,766 (233,804) (9,893) Contributions 508,954 564,349 359,716 Participant rollovers 72,135 40,928 47,247 ---------- ----------- ---------- Total additions 882,810 374,060 398,863 Deductions from net assets attributed to: Withdrawals by participants 163,103 242,256 56,150 Purchase of life insurance - - - Expenses 13,256 28,780 11,213 ---------- ----------- ---------- Total deductions 176,359 271,036 67,363 Transfers from (to) funds 460,598 (121,432) (8,059) ---------- ----------- ---------- Net increase (decrease) in net assets available for plan benefits 1,167,049 (18,408) 323,441 Net assets available for plan benefits: At beginning of year 4,468,890 4,734,031 1,810,050 ---------- ----------- ---------- At end of year $5,635,939 $ 4,715,623 $2,133,491 ========== =========== ========== SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION YEAR ENDED OCTOBER 31, 1994 Common Employer Life Stock Bond Stock Insurance Combined Fund Fund Fund Fund Funds $ 2,207 $ 889 $ 148,445 $ $ 158,391 60,485 ----------- ---------- ----------- ----------- ---------- 2,207 889 148,445 218,876 62,859 62,859 (1,194,729) (1,194,729) 97,686 (47,870) 44,885 447,849 172,477 352,423 50,010 2,455,778 49,736 3,478 10,639 224,163 ----------- ----------- ----------- ----------- ---------- 597,478 128,974 (620,363) 50,010 1,811,832 82,937 202,419 170,233 917,098 54,711 54,711 13,113 10,932 77,294 ----------- ----------- ----------- ----------- ---------- 96,050 213,351 170,233 54,711 1,049,103 168,013 (427,849) (75,972) 4,701 ----------- ----------- ----------- ----------- ---------- 669,441 (512,226) (866,568) 762,729 2,015,269 1,893,861 4,971,594 19,893,695 ----------- ----------- ----------- ----------- ---------- $ 2,684,710 $ 1,381,635 $ 4,105,026 $ $20,656,424 =========== =========== =========== =========== =========== SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1995 AND 1994 1. Description of the Plan The following description of the Equitable Resources, Inc. Employee Savings Plan (Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General The Plan is a defined contribution profit sharing and savings plan, with a 401(k) salary reduction feature, implemented on September 1, 1985 by Equitable Resources, Inc. and certain subsidiaries (the Company or Companies). All regular, full-time, non-union employees of the Companies who complete a certain service requirement are eligible to participate. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). In December 1995, the Company changed the Plan year to a calendar year from the previous Plan year of October 31. This change had no effect on net assets available for plan benefits. Effective January 1, 1996, all regular, full-time, non-union employees of the Companies are eligible to participate in the Plan immediately upon hire. Contributions The Companies make contributions to the Plan equal to the amount by which participants agree to reduce their salaries (Contract Contributions). These contributions are considered to be Company (as opposed to employee) contributions to the Plan. In addition, the Companies may, at their discretion, contribute an additional amount to the Plan (Discretionary Contributions). All contributions are allocated to individual participant accounts. No Discretionary Contributions were made for the Plan years ended October 31, 1995 and 1994. As a result of the purchase of Louisiana Intrastate Gas Corporation (LIG) by Equitable Resources, Inc., employees of LIG became participants in the Plan in July 1993. As part of the purchase of LIG, the Company agreed to continue, through December 1993, discretionary contributions matching contributions made by LIG employees up to a maximum of six percent of gross earnings. The discretionary contribution made was $38,058 for the Plan year ended October 31, 1994. Effective January 1, 1996, the Companies began matching 50 percent of the first six percent of Contract Contributions made (Matching Contributions) in lieu of making Discretionary Contributions. 1. Description of Plan (Continued) Rollover Contributions Participants are allowed to make rollover contributions (contributions transferred to the Plan from other qualified retirement plans), subject to certain requirements. Vesting Participants are 100% vested in the value of Contract Contributions made, and any rollover contributions. If employment is terminated for any reason other than retirement, death, or total and permanent disability, a participant is entitled to receive the vested value of any Discretionary Contributions, as determined in accordance with the following schedule: Years of Continuous Service Vested Interest Less than five years 0% Five years or more 100% Amounts forfeited by participants upon termination will be used to reduce the amount of the Company's future Matching Contributions to the Plan. Upon retirement, death, total and permanent disability or termination of the Plan, a participant is entitled to receive the full value of any Discretionary or Matching Contributions, regardless of years of continuous service. Withdrawals by Participants Payments to participants are made in one of two ways: a single cash payment or distribution of stock (mandatory for participants who are terminated for a reason other than retirement, death or disability) or equal periodic payments over the lesser of: a) the life expectancy of the participant and beneficiary or b) twenty (20) years. 1. Description of the Plan (Continued) Loans to Participants A participant may borrow money from the Plan in amounts up to 50 percent of the value of the participant's account, plus the vested portion of Discretionary Contributions, subject to certain limitations. All loans are at a rate consistent with rates charged by commercial lenders for similar loans. One half of the participant's nonforfeitable interest in the Plan at the time of the loan is pledged as collateral. As of October 31, 1995 and 1994, collateral for participant loans amounted to $2,739,262 and $2,780,245, respectively. Investment of Contributions Prior to July 31, 1995, contributions were initially deposited with PNC Bank (Trustee), and were invested in a short-term fund until allocated. The Plan authorized the participants to direct the Trustee to invest their accounts in various combinations of the investment funds described below: a. The Fixed Income Fund - comprised of a single type of fixed income investment where the principal and interest are fixed. The Company entered into an ongoing contract with Equitable Life Assurance Society (Equitable Life) to provide this and other investment vehicles and manage the respective funds. On July 31, 1995, the investment assets of the Fund were transferred to the Putnam Stable Value Fund described below. Outstanding participant loan balances of $777,432 included in the Fixed Income Fund were transferred to the Putnam Loan Fund effective July 31, 1995. b. The Balanced Fund - invests in various types of securities: primarily common stocks, securities convertible into common stocks, publicly traded bonds, and short-term money market investments. The Company's contract with Equitable Life provides this investment vehicle and fund management. On July 31, 1995, the assets of the Fund were transferred to The George Putnam Fund of Boston described below. c. The Aggressive Stock Fund - invests primarily in common stocks of medium and smaller sized companies and also in securities not generally defined as growth stocks, but with unusual value or potential. The Company's contract with Equitable Life provides this investment vehicle and fund management. On July 31, 1995, the assets of the Fund were transferred to the Putnam Voyager Fund described below. 1. Description of the Plan (Continued) Investment of Contributions (Continued) d. The Common Stock Fund - invests primarily in common stocks and other equity-type securities. The Company's contract with Equitable Life provides this investment vehicle and fund management. On July 31, 1995, the assets of the Fund were transferred to the Putnam Fund for Growth and Income described below. e. The Bond Fund - invests primarily in publicly-traded fixed income securities, such as bonds, debentures and notes. The Company's contract with Equitable Life provides this investment vehicle and fund management. On July 31, 1995, the assets of the Fund were transferred to the Putnam Income Fund described below. Effective August 1, 1995, the Plan changed its trustee and investment options available to participants. Contributions are initially deposited with the Plan's trustee, Putnam Investments (Putnam). The Plan authorizes the participants to direct Putnam to invest their accounts in various combinations of the investments funds described below: a. The George Putnam Fund of Boston - is a mutual fund that consists of a portfolio balanced between stocks and bonds. b. The Putnam Fund for Growth and Income - is a mutual fund that invests primarily in common stocks that offer potential for capital growth, current income, or both. c. Putnam Income Fund - is a mutual fund that invests primarily in income-producing securities, including both government and corporate obligations, preferred stocks, and dividend-paying common stocks. d. Putnam Voyager Fund - is a mutual fund that invests primarily in common stocks of smaller and newer companies expected to grow substantially faster than that of the market averages. e. Putnam Asset Allocation: Growth Portfolio - is a mutual fund focusing on capital appreciation by investing in a range of both equity and fixed income securities. Equity securities can range between 65-95% of the total assets of the Fund with fixed income securities ranging between 5-35% of the total assets of the Fund. f. Putnam Asset Allocation: Balanced Portfolio - is a mutual fund focusing on total return by investing in a range of both equity and fixed income securities. Equity securities can range between 25-50% of the total assets of the Fund with fixed income securities ranging between 25-50% of the total assets of the Fund. 1. Description of the Plan (Continued) Investment of Contributions (Continued) g. Putnam Asset Allocation: Conservative Portfolio - is a mutual fund focusing on total return consistent with preservation of capital; the Fund invests in a range of both equity and fixed income securities. Equity securities can range between 25-45% of the total assets of the Fund with fixed income securities ranging between 55-75% of the total assets of the Fund. h. Putnam Overseas Growth Fund - is a mutual fund that invests primarily in a diversified portfolio of stocks of companies located outside North America. i. Putnam Stable Value Fund - is a collective investment trust which invests primarily in high-quality fixed-income investments that offer price stability and liquidity; these investments may include guaranteed investment contracts (GICs) that are guaranteed by an insurance company or bank and generally provide a fixed rate of return for a specified time period. Should the underlying insurance companies and banks which issued the investments experience inadequate financial return on their assets, it could potentially affect the investment return or principal of the Plan's investments. Presently, the Plan is not aware of any situation which would cause this to occur. Withdrawals from the Fund may be temporarily delayed at Putnam's discretion due to the liquidity of the assets underlying the Fund. The Employer Stock Fund invests in the Common Stock of the Company. The Fund is managed by the Plan Trustee (Putnam effective July 31, 1995). The Life Insurance Fund is comprised solely of life insurance contracts issued on the lives of participants. This option is subject to a limitation that no more than 25% of the contributions allocated to a participant may be allocated to the purchase of insurance. The Company's contract with Equitable Life provides this investment vehicle and fund management. 2. Summary of Significant Accounting Policies Investments Short-term investments are valued at cost, which approximates market. The Equitable Resources, Inc. common stock is valued at market price as quoted on the New York Stock Exchange. The fixed income fund contract and contracts included in the Stable Value Fund are valued at face value, which approximates market. Other investments are valued at market. 2. Summary of Significant Accounting Policies (Continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. Investments Investments at October 31, 1995 and 1994 are comprised of: 1995 Fair Original Value Cost Equitable Resources, Inc., Common Stock** $ 4,049,947 $ 3,297,497 The George Putnam Fund of Boston* 4,752,239 4,752,239 The Putnam Fund for Growth and Income* 3,809,163 3,809,163 Putnam Income Fund* 1,370,664 1,370,664 Putnam Voyager Fund* 3,583,911 3,583,911 Putnam Asset Allocation- Growth Portfolio* 66,882 66,882 Putnam Asset Allocation- Balanced Portfolio* 17,351 17,351 Putnam Asset Allocation- Conservative Portfolio* 3,970 3,970 Putnam Overseas Growth Fund* 69,236 69,236 Loan Fund 714,588 714,588 Putnam Stable Value Fund* 6,312,011 6,312,011 ---------- --------- Total $24,749,962 $23,997,512 =========== =========== 3. Investments (Continued) 1994 Fair Original Value Cost Equitable Resources, Inc., Common Stock** $ 4,143,410 $ 3,114,846 Fixed Income Fund* 4,813,884 4,813,884 Balanced Fund* 4,689,620 4,689,620 Aggressive Stock Fund* 2,086,435 2,086,435 Common Stock Fund* 2,647,575 2,647,575 Bond Fund* 1,377,416 1,377,416 Short-Term Investment 252,422 252,422 ---------- --------- Total $20,010,762 $18,982,198 =========== =========== The annual interest rate for the Fixed Income Fund was 6.50% for the 1995 period prior to the transfer of assets (Note 1), and 6.00% for the 1994 fiscal year. The annual interest rate for the Putnam Stable Value Fund was 5.80%. *Securities investments are provided by contract through a pooled investment account; fair market value is used as original cost. **Represents 138,460 and 135,826 shares of common stock at October 31, 1995 and 1994, respectively. 4. Gain Realized on Sale/Distribution of Stock During the year ended October 31, 1995, 17,093 shares of Equitable Resources, Inc. Common Stock with a market value of $501,513 were sold at an average price of $29.34 per share. The cost of the shares sold was $404,610 ($23.67 per share) calculated using the "average cost" method. In addition, 4,497 shares of Equitable Resources, Inc. Common Stock with a market value of $133,224 were distributed during the year ended October 31, 1995. The cost of the shares distributed was $105,005. During the year ended October 31, 1994, 4,769 shares of Equitable Resources, Inc. Common Stock with a market value of $168,878 were sold at an average price of $35.41 per share. The cost of the shares sold was $106,019 ($22.23 per share) calculated using the "average cost" method. 5. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, the interests of all affected participants will become fully vested. 6. Income Tax Status of Plan The Internal Revenue Service has determined that the Plan is qualified under Section 401(a) of the Internal Revenue Code and exempt under Section 501(a) of the Code. Future amendments will be made to the Plan as necessary so that the Plan remains qualified and tax exempt under the Code. 7. Federal Income Tax Status - Employee Contributions by the employer to the Plan (including those resulting from salary reduction) and all dividends and interest earned on such contributions are not taxable to the participant for federal income tax purposes until distributed. The tax consequences, to participants, of a distribution from the Plan are dependent upon the circumstances existing at the time of distribution. Delinquent and unpaid loans are considered distributions from the Plan. In general, a participant is subject to federal income tax on a distribution in the year received. Special rules applicable to lump sum distributions may result in deferral of taxation in whole or in part. SUPPLEMENTARY INFORMATION
EQUITABLE RESOURCES, INC. SCHEDULE 1 EMPLOYEE SAVINGS PLAN ASSETS HELD FOR INVESTMENT OCTOBER 31, 1995 CURRENT IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST VALUE The George Putnam Fund of Boston 308,988 units $4,572,2393 $4,752,239 The Putnam Fund for Growth and Income 241,545 units $3,809,1633 $3,809,163 Putnam Income Fund 193,870 units $1,370,6643 $1,370,664 Putnam Voyager Fund 234,243 units $3,583,9113 $3,583,911 Putnam Asset Allocation-Growth Portfolio 6,722 units $ 66,8823 $ 66,882 Putnam Asset Allocation-Balanced Portfolio 1,804 units $ 17,3513 $ 17,351 Putnam Asset Allocation-Conservative Portfolio 431 units $ 3,9703 $ 3,970 Putnam Overseas Growth Fund 5,371 units $ 69,2363 $ 69,236 Loan Fund 8% - 10% N/A $ 714,588 Putnam Stable Value Fund 5.80% per annum2 $6,312,0113 $6,312,011 Employer Stock Fund1 138,460 shares common stock $3,297,497 $4,049,947 1Party in interest to the Plan. 2Rate in effect for Plan year subsequent to the transfer of assets. 3Fair market value is used as original cost.
EQUITABLE RESOURCES, INC. SCHEDULE 2 EMPLOYEE SAVINGS PLAN TRANSACTIONS OR SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS YEAR ENDED OCTOBER 31, 1995 NUMBER OF TOTAL NUMBER TOTAL SALES ORIGINAL NET GAIN PARTY INVOLVED DESCRIPTION OF INVESTMENT PURCHASES PURCHASES OF SALES PROCEEDS COST OR (LOSS) CATEGORY (I) - INDIVIDUAL TRANSACTIONS IN EXCESS OF 5 PERCENT OF PLAN ASSETS * The Fixed Income Fund None None 1 $7,081,655 $7,081,655 - * The Balanced Fund None None 1 $4,731,219 $3,432,125 $1,299,094 * The Aggressive Stock Fund None None 1 $2,832,316 $2,136,058 $696,258 * The Common Stock Fund None None 1 $3,593,841 $2,671,970 $ 921,871 * The Bond Fund None None 1 $1,252,534 $1,087,136 $ 165,398 ** Putnam Stable Value Fund 1 $7,081,655 - - $7,081,655 - ** The George Putnam Fund of Boston 1 $4,731,219 - - $3,432,125 - ** Putnam Voyager Fund 1 $2,832,316 - - $2,136,058 - ** Putnam Fund for Growth and Income 1 $3,593,841 - - $2,671,970 - ** Putnam Income Fund 1 $1,252,534 - - $1,087,136 -
EQUITABLE RESOURCES, INC. SCHEDULE 2 EMPLOYEE SAVINGS PLAN TRANSACTIONS OR SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS YEAR ENDED OCTOBER 31, 1995 NUMBER OF TOTAL NUMBER TOTAL SALES ORIGINAL NET GAIN PARTY INVOLVED DESCRIPTION OF INVESTMENT PURCHASES PURCHASES OF SALES PROCEEDS COST OR (LOSS) CATEGORY (III) - SERIES OF TRANSACTIONS IN EXCESS OF 5 PERCENT OF PLAN ASSETS * Short Term Investments 179 $7,576,016 113 $7,843,813 $7,843,813 - * The Fixed Income Fund 12 $1,388,409 - - $1,388,409 - * The Fixed Income Fund - - 4 $7,110,312 $7,110,312 - * The Balanced Fund - - 10 $5,556,639 $4,066,634 $1,490,005 * The Aggressive Stock Fund - - 8 $3,017,380 $2,295,365 $ 722,015 * The Common Stock Fund - - 8 $3,814,811 $2,855,494 $ 959,317 * The Bond Fund - - 10 $1,905,657 $1,656,544 $ 249,113 ** Putnam Stable Value Fund 10 $7,173,448 - - $7,173,448 - ** The George Putnam Fund of Boston 12 $4,855,480 - - $3,556,386 - ** Putnam Voyager Fund 12 $3,031,758 - - $2,335,500 - ** Putnam Fund for Growth and Income 11 $3,732,213 - - $2,810,342 - ** Putnam Income Fund 12 $1,298,894 - - $1,133,496 - * The above transactions were carried out by the Trustee, PNC Bank. ** The above transactions were carried out by the Successor Trustee, Putnam Investments. There were no (ii) or (iv) reportable transactions during 1995.
EX-99.01B 15 Exhibit 99.01(b) SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from November 1, 1995 to December 31, 1995 Commission file number 1-3551 EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN (Full title of the Plan and address of the Plan, if different from that of the issuer named below) EQUITABLE RESOURCES, INC. 420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219 (Name of issuer of the securities held pursuant to the plan and the address of principal executive office) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Administrative Committee of the Plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN (Name of Plan) By s/ Dan C. Eaton Dan C. Eaton Vice President - Strategic and Financial Planning March 8, 1996 REPORT OF INDEPENDENT AUDITORS Administrative Committee Equitable Resources, Inc. Employee Savings Plan We have audited the accompanying statements of net assets available for plan benefits of the Equitable Resources, Inc. Employee Savings Plan (the Plan) as of December 31, 1995 and October 31, 1995, and the related statement of changes in net assets available for plan benefits for the period November 1, 1995 to December 31, 1995. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1995 and October 31, 1995, and the changes in net assets available for plan benefits for the period November 1, 1995 to December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment as of December 31, 1995, and transactions or series of transactions in excess of 5% of the current value of plan assets for the period November 1, 1995 to December 31, 1995, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The Fund Information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. s/ Ernst & Young LLP Ernst & Young LLP Pittsburgh, Pennsylvania March 8, 1996 EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31 October 31 1995 1995 Investments, at fair value-Note 3: The George Putnam Fund of Boston $ 4,931,626 $ 4,752,239 The Putnam Fund for Growth and Income 4,394,710 3,809,163 Putnam Income Fund 1,425,773 1,370,664 Putnam Voyager Fund 4,277,817 3,583,911 Putnam Asset Allocation-Growth Portfolio 125,276 66,882 Putnam Asset Allocation-Balanced Portfolio 99,230 17,351 Putnam Asset Allocation-Conservative Portfolio 9,158 3,970 Putnam Overseas Growth Fund 144,009 69,236 Loan Fund 747,089 714,588 Putnam Stable Value Fund 5,916,904 6,312,011 Employer Stock Fund 4,194,752 4,049,947 ------------ ------------- Net Assets Available for Plan Benefits $ 26,266,344 $ 24,749,962 ============ ============= SEE ACCOMPANYING NOTES.
EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION FOR THE PERIOD NOVEMBER 1, 1995 TO DECEMBER 31, 1995 The Putnam The George Fund for Putnam Putnam Putnam Fund Growth Income Voyager Growth of Boston and Income Fund Fund Portfolio Additions to plan equity attributed to: Investment income Interest and dividends $ 239,193 $ 208,560 $ 15,529 $ 223,624 $ 5,001 Interest on participant loans - - - - ---------- ---------- --------- ---------- -------- Total investment income 239,193 208,560 15,529 223,624 5,001 Gain realized on sale or distribution of Equitable Resources, Inc. Common Stock Unrealized depreciation of investment in Equitable Resources, Inc. Common Stock Unrealized appreciation (depreciation) in value of investment 44,212 102,561 31,130 (16,251) 125 Contributions 67,411 103,078 27,099 166,547 21,375 ---------- ---------- ---------- ---------- -------- Total additions 350,816 414,199 73,758 373,920 26,501 Deductions from plan equity attributed to: Withdrawals by participants 41,619 2,438 36,442 37,120 - Purchase of life insurance - - - - - Expenses 554 350 164 393 4 ---------- ---------- ---------- ---------- -------- Total deductions 42,173 2,788 36,606 37,513 4 Transfers from (to) funds (129,256) 174,136 17,957 357,499 31,897 ---------- ---------- ---------- ---------- -------- Net increase (decrease) in net assets available for plan benefits 179,387 585,547 55,109 693,906 58,394 Net assets available for plan benefits: At beginning of year 4,752,239 3,809,163 1,370,664 3,583,911 66,882 ---------- ---------- ---------- ---------- -------- At end of year $4,931,626 $4,394,710 $1,425,773 $4,277,817 $125,276 ========== ========== ========== ========== ========
SEE ACCOMPANYING NOTES.
EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION FOR THE PERIOD NOVEMBER 1, 1995 TO DECEMBER 31, 1995 Putnam Putnam Life Balanced Conservative Overseas Loan Stable Employer Insurance Combined Portfolio Portfolio Growth Fund Fund Value Fund Stock Fund Fund Funds $ 3,822 $ 545 $ 2,063 $ - $ 60,977 $ 40,024 $ - $ 799,338 - - - 10,765 - - - 10,765 --------- --------- --------- --------- -------- ---------- -------- ---------- 3,822 545 2,063 10,765 60,977 40,024 - 810,103 58,078 - 58,078 209,238 - 209,238 (338) (305) 2,062 - 1,334 - - 164,530 12,715 3,258 24,595 - 83,467 54,636 5,811 569,992 --------- --------- --------- --------- -------- ---------- -------- ---------- 16,199 3,498 28,720 10,765 145,778 361,976 5,811 1,811,941 --------- --------- --------- --------- -------- ---------- -------- ---------- - - - 41,595 110,670 17,556 - 287,440 - - - - - - 5,811 5,811 3 2 - - 805 33 - 2,308 --------- --------- --------- --------- -------- ---------- -------- ---------- 3 2 - 41,595 111,475 17,589 5,811 295,559 65,683 1,692 46,053 63,331 (429,410) (199,582) - - --------- --------- --------- --------- --------- ---------- -------- ---------- 81,879 5,188 74,773 32,501 (395,107) 144,805 - 1,516,382 17,351 3,970 69,236 714,588 6,312,011 4,049,947 - 24,749,962 --------- --------- --------- --------- ---------- ---------- -------- ---------- $ 99,230 $ 9,158 $ 144,009 $ 747,089 $5,916,904 $4,194,752 $ - $26,266,344 ========= ========= ========= ========= ========== ========== ======== ===========
SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. Description of the Plan The following description of the Equitable Resources, Inc. Employee Savings Plan (Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General The Plan is a defined contribution profit sharing and savings plan, with a 401(k) salary reduction feature, implemented on September 1, 1985 by Equitable Resources, Inc. and certain subsidiaries (the Company or Companies). All regular, full-time, non-union employees of the Companies who complete a certain service requirement are eligible to participate. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). In December 1995, the Company changed the Plan year to a calendar year from the previous Plan year of October 31. The change had no effect on net assets available for plan benefits. Effective January 1, 1996, all regular, full-time, non-union employees of the Companies are eligible to participate in the Plan immediately upon hire. Contributions The Companies make contributions to the Plan equal to the amount by which participants agree to reduce their salaries (Contract Contributions). These contributions are considered to be Company (as opposed to employee) contributions to the Plan. In addition, the Companies may, at their discretion, contribute an additional amount to the Plan (Discretionary Contributions). All contributions are allocated to individual participant accounts. No Discretionary Contributions were made for the period ended December 31, 1995. Effective January 1, 1996, the Companies began matching 50 percent of the first six percent of Contract Contributions made (Matching Contributions) in lieu of making Discretionary Contributions. Rollover Contributions Participants are allowed to make rollover contributions (contributions transferred to the Plan from other qualified retirement plans), subject to certain requirements. 1. Description of Plan (Continued) Vesting Participants are 100% vested in the value of Contract Contributions made, and any rollover contributions. If employment is terminated for any reason other than retirement, death, or total and permanent disability, a participant is entitled to receive the vested value of any Discretionary Contributions, as determined in accordance with the following schedule: Years of Continuous Service Vested Interest Less than five years 0% Five years or more 100% Amounts forfeited by participants upon termination will be used to reduce the amount of the Company's future Matching Contributions to the Plan. Upon retirement, death, total and permanent disability or termination of the Plan, a participant is entitled to receive the full value of any Discretionary or Matching Contributions, regardless of years of continuous service. Withdrawals by Participants Payments to participants are made in one of two ways: a single cash payment or distribution of stock (mandatory for participants who are terminated for a reason other than retirement, death or disability) or equal periodic payments over the lesser of: a) the life expectancy of the participant and beneficiary or b) twenty (20) years. Loans to Participants A participant may borrow money from the Plan in amounts up to 50 percent of the value of the participant's account, plus the vested portion of Discretionary Contributions, subject to certain limitations. All loans are at a rate consistent with rates charged by commercial lenders for similar loans. One half of the participant's nonforfeitable interest in the Plan at the time of the loan is pledged as collateral. As of December 31, 1995 and October 31, 1995, collateral for participant loans amounted to $2,862,297 and $2,739,262, respectively. 1. Description of Plan (Continued) Investment of Contributions Contributions are initially deposited with the Plan's trustee, Putnam Investments (Putnam). The Plan authorizes the participants to direct Putnam to invest their accounts in various combinations of the investments funds described below: a. The George Putnam Fund of Boston - is a mutual fund that consists of a portfolio balanced between stocks and bonds. b. The Putnam Fund for Growth and Income - is a mutual fund that invests primarily in common stocks that offer potential for capital growth, current income, or both. c. Putnam Income Fund - is a mutual fund that invests primarily in income-producing securities, including both government and corporate obligations, preferred stocks, and dividend-paying common stocks. d. Putnam Voyager Fund - is a mutual fund that invests primarily in common stocks of smaller and newer companies expected to grow substantially faster than that of the market averages. e. Putnam Asset Allocation: Growth Portfolio - is a mutual fund focusing on capital appreciation by investing in a range of both equity and fixed income securities. Equity securities can range between 65-95% of the total assets of the Fund with fixed income securities ranging between 5-35% of the total assets of the Fund. f. Putnam Asset Allocation: Balanced Portfolio - is a mutual fund focusing on total return by investing in a range of both equity and fixed income securities. Equity securities can range between 25-50% of the total assets of the Fund with fixed income securities ranging between 25-50% of the total assets of the Fund. g. Putnam Asset Allocation: Conservative Portfolio - is a mutual fund focusing on total return consistent with preservation of capital; the Fund invests in a range of both equity and fixed income securities. Equity securities can range between 25-45% of the total assets of the Fund with fixed income securities ranging between 55-75% of the total assets of the Fund. h. Putnam Overseas Growth Fund - is a mutual fund that invests primarily in a diversified portfolio of stocks of companies located outside North America. 1. Description of Plan (Continued) Investment of Contributions (Continued) i. Putnam Stable Value Fund - is a collective investment trust which invests primarily in high-quality fixed-income investments that offer price stability and liquidity; these investments may include guaranteed investment contracts (GICs) that are guaranteed by an insurance company or bank and generally provide a fixed rate of return for a specified time period. Should the underlying insurance companies and banks which issued the investments experience inadequate financial return on their assets, it could potentially affect the investment return or principal of the Plan's investments. Presently, the Plan is not aware of any situation which would cause this to occur. Withdrawals from this Fund may be temporarily delayed at Putnam's discretion due to the liquidity of the assets underlying this Fund. The Employer Stock Fund invests in the Common Stock of the Company. The Fund is managed by the Plan Trustee. The Life Insurance Fund is comprised solely of life insurance contracts issued on the lives of participants. This option is subject to a limitation that no more than 25% of the contributions allocated to a participant may be allocated to the purchase of insurance. The Company's contract with Equitable Life provides this investment vehicle and fund management. 2. Summary of Significant Accounting Policies Investments Short-term investments are valued at cost, which approximates market. The Equitable Resources, Inc. common stock is valued at market price as quoted on the New York Stock Exchange. The contracts included in the Stable Value Fund are valued at face value, which approximates market. Other investments are valued at market. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. Investments Investments are comprised of: DECEMBER 31, 1995 Fair Original Value Cost Equitable Resources, Inc., Common Stock** $4,194,752 $3,233,707 The George Putnam Fund of Boston* 4,931,626 4,931,626 The Putnam Fund for Growth and Income* 4,394,710 4,394,710 Putnam Income Fund* 1,425,773 1,425,773 Putnam Voyager Fund* 4,277,817 4,277,817 Putnam Asset Allocation - Growth Portfolio* 125,276 125,276 Putnam Asset Allocation - Balanced Portfolio* 99,230 99,230 Putnam Asset Allocation - Conservative Portfolio* 9,158 9,158 Putnam Overseas Growth Fund* 144,009 144,009 Loan Fund 747,089 747,089 Putnam Stable Value Fund* 5,916,904 5,916,904 ---------- ---------- Total $26,266,344 $25,305,299 =========== =========== OCTOBER 31, 1995 Fair Original Value Cost Equitable Resources, Inc., Common Stock** $4,049,947 $3,297,497 The George Putnam Fund of Boston* 4,752,239 4,752,239 The Putnam Fund for Growth and Income* 3,809,163 3,809,163 Putnam Income Fund* 1,370,664 1,370,664 Putnam Voyager Fund* 3,583,911 3,583,911 Putnam Asset Allocation - Growth Portfolio* 66,882 66,882 Putnam Asset Allocation - Balanced Portfolio* 17,351 17,351 Putnam Asset Allocation - Conservative Portfolio* 3,970 3,970 Putnam Overseas Growth Fund* 69,236 69,236 Loan Fund 714,588 714,588 Putnam Stable Value Fund* 6,312,011 6,312,011 ---------- ---------- Total $24,749,962 $23,997,512 =========== =========== The annual interest rate for the Stable Value Fund was 5.88% for the period ended December 31, 1995 and 5.80% for the period ended October 31, 1995. *Securities investments are provided by contract through a pooled investment account; fair market value is used as original cost. **Represents 134,232 and 138,460 shares of common stock at December 31 and October 31, 1995, respectively. 4. Gain Realized on Sale/Distribution of Stock During the two-month period ended December 31, 1995, 10,211 shares of Equitable Resources, Inc. Common Stock with a market value of $302,658 were sold at an average price of $29.64 per share. The cost of the shares sold was $244,580 ($23.95 per share) calculated using the "average cost" method. 5. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, the interests of all affected participants will become fully vested. 6. Income Tax Status of Plan The Internal Revenue Service has determined that the Plan is qualified under Section 401(a) of the Internal Revenue Code and exempt under Section 501(a) of the Code. Future amendments will be made to the Plan as necessary so that the Plan remains qualified and tax exempt under the Code. 7. Federal Income Tax Status - Employee Contributions by the employer to the Plan (including those resulting from salary reduction) and all dividends and interest earned on such contributions are not taxable to the participant for federal income tax purposes until distributed. The tax consequences, to participants, of a distribution from the Plan are dependent upon the circumstances existing at the time of distribution. Delinquent and unpaid loans are considered distributions from the Plan. In general, a participant is subject to federal income tax on a distribution in the year received. Special rules applicable to lump sum distributions may result in deferral of taxation in whole or in part. SUPPLEMENTARY INFORMATION
EQUITABLE RESOURCES, INC. SCHEDULE 1 EMPLOYEE SAVINGS PLAN ASSETS HELD FOR INVESTMENT DECEMBER 31, 1995 CURRENT IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST VALUE The George Putnam Fund of Boston 318,169 units $4,931,6261 $4,931,626 The Putnam Fund for Growth and Income 271,446 units $4,394,7101 $4,394,710 Putnam Income Fund 197,202 units $1,425,7731 $1,425,773 Putnam Voyager Fund 280,513 units $4,277,8171 $4,277,817 Putnam Asset Allocation-Growth Portfolio 12,528 units $125,2761 $125,276 Putnam Asset Allocation-Balanced Portfolio 10,304 units $99,2301 $99,230 Putnam Asset Allocation-Conservative Portfolio 993 units $9,1581 $9,158 Putnam Overseas Growth Fund 10,976 units $144,0091 $144,009 Loan Fund 9.75% N/A $747,089 Putnam Stable Value Fund 5.88 % per annum2 $5,916,9041 $5,916,904 Employer Stock Fund3 134,232 shares common stock $3,233,707 $4,194,752
EQUITABLE RESOURCES, INC. SCHEDULE 2 EMPLOYEE SAVINGS PLAN TRANSACTIONS OR SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS FOR THE PERIOD ENDED NOVEMBER 1, 1995 TO DECEMBER 31, 1995 NUMBER OF TOTAL NUMBER TOTAL SALES ORIGINAL NET GAIN PARTY INVOLVED DESCRIPTION OF INVESTMENT PURCHASES PURCHASES OF SALES PROCEEDS COST OR (LOSS) SERIES TRANSACTIONS: None - -------- 1 Fair market value is used as original cost. 2 Rate in effect for the period ended December 31, 1995. 3 Party in interest to the Plan.
EX-99.02 16 Exhibit 99.02 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE PLAN PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from October 1, 1995 (Date of Inception) to December 31, 1995 Commission file number 1-3551 EQUITABLE RESOURCES, INC. EMPLOYEE STOCK PURCHASE PLAN (Full title of the Plan and address of the Plan, if different from that of the issuer named below) EQUITABLE RESOURCES, INC. 420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219 (Name of issuer of the securities held pursuant to the plan and the address of principal executive office) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Administrative Committee of the Plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. EQUITABLE RESOURCES, INC. EMPLOYEE STOCK PURCHASE PLAN (Name of Plan) By s/ Dan C. Eaton Dan C. Eaton Vice President - Strategic and Financial Planning March 8, 1996 REPORT OF INDEPENDENT AUDITORS Administrative Committee Equitable Resources, Inc. Employee Stock Purchase Plan We have audited the accompanying statement of net assets available for plan benefits of the Equitable Resources, Inc. Employee Stock Purchase Plan (the Plan) as of December 31, 1995, and the related statement of changes in net assets available for plan benefits for the period October 1, 1995 (Date of Inception) to December 31, 1995. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1995, and the changes in net assets available for plan benefits for the period October 1, 1995 (Date of Inception) to December 31, 1995, in conformity with generally accepted accounting principles. s/ Ernst & Young LLP Ernst & Young LLP Pittsburgh, Pennsylvania March 8, 1996 EQUITABLE RESOURCES, INC. EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, 1995 Cash $ 15,355 Investment in Equitable Resources, Inc. Common Stock (781 shares at Fair Value - Note 2) 24,406 Contribution Receivable - Employer 1,773 ---------- Net Assets Available for Plan Benefits $ 41,534 ========== SEE ACCOMPANYING NOTES EQUITABLE RESOURCES, INC. EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE PERIOD OCTOBER 1, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995 Contributions: Employee $ 36,519 Employer 4,430 Unrealized gain on investments 585 Net increase in net assets available for plan benefits 41,534 Net assets available for plan benefits: At beginning of period 0 ------------- At end of period $ 41,534 ============= SEE ACCOMPANYING NOTES. EQUITABLE RESOURCES, INC. EMPLOYEE STOCK PURCHASE PLAN NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD OCTOBER 1, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995 1. Description of the Plan The following description of the Equitable Resources, Inc. Employee Stock Purchase Plan (Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General The Plan is an employee stock purchase plan implemented on October 1, 1995 by Equitable Resources, Inc. and subsidiaries (the Company or Companies). The Plan is subject to approval by a majority of the common stock of the Company present and represented at a special or annual meeting of shareholders to be held on or before September 30, 1996. The Plan provides a method whereby employees of the Company may purchase shares of the Company's common stock at a 10 percent discount through payroll deductions.All non-represented employees of the Companies are eligible to participate in the Plan immediately upon employment. Represented employee eligibility is subject to collective bargaining. At December 31, 1995, there were 83 active participants in the Plan. Contributions and Purchase of Stock Eligible employees can contribute from 1 to 10 percent of their annual base pay to the Plan on an after-tax basis. No interest will accrue or be payable with respect to any of the payroll deductions of a participant in the Plan. Contributions are initially deposited with Putnam Investments (Trustee) and are used to purchase shares of the Company's common stock in accordance with the provisions set forth in the Plan agreement. The price of stock purchased for a participant is 90% of the closing price of the stock on the second business day after the close of each monthly period. The initial monthly period of the Plan began on October 1, 1995. The Plan holds contributions as cash pending the purchase of shares of the Company's common stock. The Company contributes the remaining 10 percent of the stock price and pays fees for the administration of the Plan and any commission charges associated with the purchase of the stock. 1. Description of the Plan (Continued) Dividends on Stock Dividends on stock are automatically used to purchase additional shares for all participants. Participants may, however, make a written request to receive a cash distribution of dividend payments. Sale of Stock Participants are required to hold any shares purchased through the Plan for a minimum of one year. Participants may elect withdrawals, subject to the holding period restriction, of shares of stock or cash from the proceeds of sale of shares. Participants are responsible for all costs associated with the sale of stock from their individual accounts. Termination of Employment Upon termination of the participant's employment for any reason, payroll deductions credited to the participant's account(s) which have not yet been used to purchase stock will be returned to the participant. The participant has the option of either selling the total number of shares in their account or receiving a certificate for their holdings until a future time of sale. Terminated participants are not permitted to purchase shares through the Plan. 2. Summary of Significant Accounting Policies Investments The Equitable Resources, Inc. common stock is valued at market price as quoted on the New York Stock Exchange. Investments at December 31, 1995 are comprised of: 1995 Fair Original Unrealized Shares Value Cost Appreciation Equitable Resources, Inc., Common Stock 781 $ 24,406 $ 23,821 $ 585 ======== ======== ===== 2. Summary of Significant Accounting Policies (Continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. Plan Termination Although it has not expressed any intent to do so, the Company has the right to terminate or to amend the Plan at any time. Upon dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of which the Company is not the surviving corporation, participants will be entitled to receive on the last day of the offering period the cash and/or securities determined to be owed as of the date of such transaction. 4. Income Tax Status of Plan It is the intention of the Company to have the Plan qualify under Section 423 of the Internal Revenue Code. The provisions of the Plan have been construed to extend and limit participation in a manner consistent with the requirements of that section of the Code. 5. Federal Income Tax Status - Employee In general, a participant is subject to federal and, in certain instances, state income taxes on all dividends, in addition to the gains (losses) realized resulting from the sale of the stock. EX-10.18 17 EQUITABLE RESOURCES, INC. DEFERRED COMPENSATION PLAN EFFECTIVE - JANUARY 1, 1996 EQUITABLE RESOURCES, INC. DEFERRED COMPENSATION PLAN Table of Contents ARTICLE I...................................................5 1.1 Statement of Purpose..............................5 ARTICLE II..................................................6 DEFINITIONS.................................................6 2.1 Account...........................................6 2.2 Base Salary.......................................6 2.3 Beneficiary.......................................6 2.4 Board.............................................6 2.5 Bonus.............................................6 2.6 Change in Control.................................7 2.7 Code..............................................7 2.8 Committee.........................................7 2.9 Compensation......................................7 2.10 Company Matching Account.........................8 2.11 Company Matching Amount..........................8 2.12 Company..........................................8 2.13 Credited Service.................................8 2.14 Deferral Account.................................8 2.15 Deferral Benefit.................................8 2.16 Deferral Election................................8 2.17 Disability.......................................8 2.18 Early Retirement.................................8 2.19 Eligible Employee................................9 2.20 Employer.........................................9 2.21 Hardship Withdrawal..............................9 2.22 Investment Return Rate...........................9 2.23 Participant......................................9 2.24 Participation Agreement..........................9 2.25 Plan.............................................9 2.26 Plan Year........................................9 2.27 Savings Plan.....................................10 2.28 Selected Affiliate...............................10 2.29 Retirement.......................................10 2.30 Valuation Date...................................10 ARTICLE III.................................................11 ELIGIBILITY AND PARTICIPATION...............................11 3.1 Eligibility.......................................11 3.2 Participation.....................................11 3.3 Change in Participation Status....................11 3.4 Ineligible Participant............................11 ARTICLE IV..................................................12 DEFERRAL OF COMPENSATION....................................12 4.1 Amount of Deferral................................12 4.2 Company Matching Amounts..........................12 4.3 Crediting Deferred Compensation and Company Matching Amounts. 12 ARTICLE V...................................................13 BENEFIT ACCOUNTS............................................13 5.1 Valuation of Account..............................13 5.2 Crediting of Investment Return....................13 5.3 Statement of Accounts.............................13 5.4 Vesting of Account................................13 5.5 Transfer of Deferral Account Balances.............14 ARTICLE VI..................................................15 PAYMENT OF BENEFITS.........................................15 6.1 Payment of Deferral Benefit upon Death, Disability or Retirement.....................15 6.2 Payment of Deferral Benefit upon Termination......15 6.3 Payments to Beneficiaries.........................15 6.4 In-Service Distribution...........................15 6.5 Hardship Withdrawal...............................16 6.6 Form of Payment...................................16 6.7 Commencement of Payments..........................16 6.8 Small Benefit.....................................17 ARTICLE VII.................................................18 BENEFICIARY DESIGNATION.....................................18 7.1 Beneficiary Designation...........................18 7.2 Change of Beneficiary Designation.................18 7.3 No Designation....................................18 7.4 Effect of Payment.................................18 ARTICLE VIII................................................19 ADMINISTRATION..............................................19 8.1 Committee.........................................19 8.2 Agents............................................19 8.3 Binding Effect of Decisions.......................19 8.4 Indemnification of Committee......................19 ARTICLE IX..................................................20 AMENDMENT AND TERMINATION OF PLAN...........................20 9.1 Amendment.........................................20 9.2 Termination.......................................20 ARTICLE X...................................................21 MISCELLANEOUS...............................................21 10.1 Funding..........................................21 10.2 Nonassignability.................................21 10.3 Legal Fees and Expenses..........................22 10.4 Captions.........................................22 10.5 Governing Law....................................22 10.6 Successors.......................................22 10.7 Right to Continued Service.......................23 EXHIBIT A...................................................24 EXHIBIT B...................................................25 EXHIBIT C...................................................26 ARTICLE I 1.1 STATEMENT OF PURPOSE This is the Equitable Resources, Inc. Deferred Compensation Plan (the "Plan") made in the form of this Plan and in related agreements between the Employer and certain management or highly compensated employees. The purpose of the Plan is to provide management and highly compensated employees of the Employer with the option to defer the receipt of portions of their compensation payable for services rendered to the Employer. It is intended that the Plan will assist in attracting and retaining qualified individuals to serve as officers and managers of the Employer. The Plan is effective as of January 1, 1996. ARTICLE II DEFINITIONS When used in this Plan and initially capitalized, the following words and phrases shall have the meanings indicated: 2.1 ACCOUNT. "Account" means the sum of a Participant's Deferral Account and Company Contribution Account. 2.2 BASE SALARY. "Base Salary" means a Participant's base earnings paid by an Employer to a Participant without regard to any increases or decreases in base earnings as a result of (i) an election to defer base earnings under this Plan or (ii) an election between benefits or cash provided under a Plan of an Employer maintained pursuant to Section 125 or 401(k) of the Code and as limited in Exhibit B attached hereto. 2.3 BENEFICIARY. "Beneficiary" means the person or persons designated or deemed to be designated by the Participant pursuant to Article VII to receive benefits payable under the Plan in the event of the Participant's death. 2.4 BOARD. "Board" means the Board of Directors of the Company. 2.5 BONUS. "Bonus" means a Participant's bonus or sales commission paid by the Employer to a Participant under the plans listed in Exhibit B attached hereto and to the degree limited in Exhibit B, as applicable, without regard to any decreases as a result of (i) an election to defer all or any portion of a bonus under this Plan or (ii) an election between benefits or cash provided under a plan of the Employer maintained pursuant to Section 401(k) of the Code. 2.6 CHANGE IN CONTROL. A "Change in Control" shall occur or be deemed to have occurred only if any of the following events occur (each of such events being herein referred to as a "Change of Control"): (a) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a corporation with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of the Board of Directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting power immediately prior to such sale or disposition; (b) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty percent (20%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the Board of Directors; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of November 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock and other voting securities whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of fifteen percent (15%) or more of the Company's voting securities, shall not constitute a Change of Control; (c) The Company's termination of its business and liquidation of its assets; (d) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such reorganization, merger or consolidation receive or continue to hold less than sixty percent (60%) of the outstanding voting shares of the new or continuing corporation; or (e) If, during any two-year period, less than a majority of the members of the Board of Directors are persons who were either (i) nominated or recommended for election by at least two-thirds vote of the persons who were members of the Board of Directors or Nominating Committee of the Board of Directors at the beginning of the period, or (ii) elected by at least a two-thirds vote of the persons who were members of the Board of Directors at the beginning of the period. 2.7 CODE. "Code" means the Internal Revenue Code of 1986, as amended. 2.8 COMMITTEE. "Committee" has the meaning set forth in Section 8.1. 2.9 COMPENSATION. "Compensation" means the Base Salary and Bonus payable with respect to an Eligible Employee for each plan year. 2.10 COMPANY MATCHING ACCOUNT. "Company Matching Account" means the account maintained on the books of the Employer for the purpose of accounting for the Company Matching Amount and for the amount of investment return credited thereto for each Participant pursuant to Article V. 2.11 COMPANY MATCHING AMOUNT. "Company Matching Amount" means the amount credited to a Participant's Company Matching Account under Section 4.2. 2.12 COMPANY. "Company" means Equitable Resources, Inc. and any successor thereto. 2.13 CREDITED SERVICE. "Credited Service" means the sum of all periods of a Participant's employment by the Company or a Selected Affiliate for which service credit is given under the Equitable Resources Pension Plan. 2.14 DEFERRAL ACCOUNT. "Deferral Account" means the account maintained on the books of the Employer for the purpose of accounting for the amount of Compensation that each Participant elects to defer under the Plan and for the amount of investment return credited thereto for each Participant pursuant to Article V. 2.15 DEFERRAL BENEFIT. "Deferral Benefit" means the benefit payable to a Participant or his or her Beneficiary pursuant to Article VI. 2.16 DEFERRAL ELECTION. "Deferral Election" means the written election made by a Participant to defer Compensation pursuant to Article IV. 2.17 DISABILITY. "Disability" means a Participant's Disability as defined under the Company's Long Term Disability Plan or its successors. 2.18 EARLY RETIREMENT. "Early Retirement" will be granted by the Committee at its sole discretion. 2.19 ELIGIBLE EMPLOYEE. "Eligible Employee" means a highly compensated or management employee of the Company who is designated by the Committee, by name or group or description, in accordance with Section 3.1 as eligible to participate in the Plan. 2.20 EMPLOYER. "Employer" means, with respect to a Participant, the Company or the Selected Affiliate which pays such Participant's Compensation. 2.21 HARDSHIP WITHDRAWAL. "Hardship Withdrawal" has the meaning set forth in Section 6.5. 2.22 INVESTMENT RETURN RATE. "Investment Return Rate" means: (a) In the case of an investment named in Exhibit C of a fixed income nature, the interest deemed to be credited, (b) In the case of an investment named in Exhibit C of an equity investment nature, the increase and decrease in deemed value and dividends deemed to be credited. 2.23 PARTICIPANT. "Participant" means any Eligible Employee who elects to participate by filing a Participant Agreement or who is automatically enrolled as provided in Section 3.2. 2.24 PARTICIPATION AGREEMENT. "Participation Agreement" means the agreement filed by a Participant, in the form prescribed by the Committee, pursuant to Section 3.2. 2.25 PLAN. "Plan" means the Equitable Resources, Inc. Deferred Compensation Plan, as amended from time to time. 2.26 PLAN YEAR. "Plan Year" means a twelve-month period commencing January 1 and ending the following December 31. 2.27 SAVINGS PLAN. "Savings Plan" means, with respect to a Participant, the Equitable Resources, Inc. Employee Savings Plan, or its successor, as Amended and Restated ________________, or as may be amended from time to time. 2.28 SELECTED AFFILIATE. "Selected Affiliate" means (1) any Company in an unbroken chain of companies beginning with the Company if each of the companies other than the last company in the chain owns or controls, directly or indirectly, stock possessing not less than 50 percent of the total combined voting power of all classes of stock in one of the other companies, or (2) any partnership or joint venture in which one or more of such companies is a partner or venturer, each of which shall be selected by the Committee. 2.29 RETIREMENT "Retirement" means the termination of a Participant who has reached age 65. 2.30 VALUATION DATE. "Valuation Date" means a date on which the amount of a Participant's Account is valued as provided in Article V. The Valuation Date shall be the end of the Plan year and any other date determined by the Committee. ARTICLE III ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY. Eligibility to participate in the Plan is limited to Eligible Employees. From time to time, and subject to Section 3.4, the Committee shall prepare, and attach to the Plan as Exhibit A, a complete list of the Eligible Employees, by individual name or by reference to an identifiable group of persons or by descriptions of the components of compensation of an individual which would qualify individuals which are eligible to participate and all of whom shall be a select group of management or highly compensated employees. 3.2 PARTICIPATION. Participation in the Plan shall be limited to Eligible Employees who elect to participate in the Plan by filing a Participation Agreement with the Committee. An Eligible Employee shall commence participation in the Plan upon the first day of his or her first payroll period following the receipt of his or her Participation Agreement by the Committee. 3.3 CHANGE IN PARTICIPATION STATUS. A Participant may change a previously elected percentage of deferral of Base Salary or elect to terminate his or her participation in the Plan at any time by filing a written notice thereof with the Committee. Changes will only become effective as of the beginning of the next payroll period in the month following receipt of the change in election by the Committee and in accordance with the Company's prevailing administrative procedures. Amounts credited to such Participant's Account with respect to periods prior to the effective date of such termination shall continue to be payable pursuant to, receive investment credit on, and otherwise be governed by, the terms of the Plan. A participant may change a previously elected percentage of deferral of Bonus, or elect to terminate future Bonus deferrals, by filing a written notice thereof with the Committee prior to the start of the next Bonus measurement period. 3.4 INELIGIBLE PARTICIPANT. Notwithstanding any other provisions of this Plan to the contrary, if the Committee determines that any Participant may not qualify as a "management or highly compensated employee" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or regulations thereunder, the Committee may determine, in its sole discretion, that such Participant shall cease to be eligible to participate in this Plan. Upon such determination, the Employer shall make a sum payment to the Participant equal to the vested amount credited to his Account as soon as administratively practicable. Upon such payment, no benefit shall thereafter be payable under this Plan either to the Participant or any Beneficiary, and all of the Participant's elections as to the time and manner of payment of his Account will be deemed to be canceled. ARTICLE IV DEFERRAL OF COMPENSATION 4.1 AMOUNT OF DEFERRAL. With respect to each Plan Year, a Participant may elect to defer a specified percentage of his or her Compensation up to the percentage of compensation defined and the terms described in Exhibit B attached hereto. A Participant may change the percentage of his or her Compensation to be deferred by filing a written notice thereof with the Committee. Any such change shall be effective as of the first day of the Plan Year immediately following the Plan Year in which such notice is filed with the Committee. 4.2 COMPANY MATCHING AMOUNTS. If the Committee authorizes a Matching Amount with respect to, and preceding, any Plan Year(s), the Employer shall provide Matching Amounts under this Plan with respect to each Participant who is eligible to be allocated matching contributions under the Savings Plan. The total Matching Amounts under this Plan on behalf of a Participant for each Plan Year shall not exceed the difference between (i) the matching percentage of the Compensation deferred by a Participant under this Plan and of the Participant's pre-tax elective deferrals for the Plan Year under the Savings Plan, less (ii) the Employer matching contributions allocated to the Participant under the Savings Plan for such Plan Year. 4.3 CREDITING DEFERRED COMPENSATION AND COMPANY MATCHING AMOUNTS. The amount of Compensation that a Participant elects to defer under the Plan shall be credited by the Employer to the Participant's Deferral Account periodically, the frequency of which will be determined by the Committee. To the extent that the Employer is required to withhold any taxes or other amounts from a Participant's deferred Compensation pursuant to any state, federal or local law, such amounts shall be withheld only from the Participant's compensation before such amounts are credited. The Company Matching Amount under the Plan for each Participant shall be credited by the Employer periodically, the frequency of which will be determined by the Committee. ARTICLE V BENEFIT ACCOUNTS 5.1 VALUATION OF ACCOUNT. As of each Valuation Date, a Participant's Account shall consist of the balance of the Participant's Account as of the immediately preceding Valuation Date, plus the Participant's Deferred Compensation and Company Contribution Amount credited pursuant to Section 4.2 since the immediately preceding Valuation Date, plus investment return credited as of such Valuation Date pursuant to Section 5.2, minus the aggregate amount of distributions, if any, made from such Account since the immediately preceding Valuation Date. 5.2 CREDITING OF INVESTMENT RETURN. As of each Valuation Date, each Participant's Deferral Account and Company Contribution shall be increased by the amount of investment return earned since the immediately preceding Valuation Date. Investment return shall be credited at the Investment Return Rate as of such Valuation Date based on the average balance of the Participant's Deferral Account and Company Contribution, respectively, since the immediately preceding Valuation Date, but after such Accounts have been adjusted for any contributions or distributions to be credited or deducted for such period. Investment return for the period prior to the first Valuation Date applicable to a Deferral Account or an Company Contribution shall be deemed earned ratably over such period. Until a Participant or his or her Beneficiary receives his or her entire Account, the unpaid balance thereof shall earn an investment return as provided in this Section 5.2. 5.3 STATEMENT OF ACCOUNTS. The Committee shall provide to each Participant, within 30 days after the close of each calendar quarter, a statement setting forth the balance of such Participant's Account as of the last day of the preceding calendar quarter and showing all adjustments made thereto during such calendar quarter. 5.4 VESTING OF ACCOUNT. Except as provided in Sections 10.1 and 10.2, a Participant shall be 100% vested in his or her Deferral Account at all times. A Participant's interest in his or her Company Contribution shall be 100% vested as of a Change in Control. Prior to this event, a Participant's interest in his or her Company Contribution shall vest under the vesting schedule for Company Contribution under the Savings Plan. Any nonvested portion of a Participant's Company Contribution shall be forfeited at termination. Forfeitures under the Plan shall be for the benefit of the Employer and shall not be credited to other Participants. 5.5 TRANSFER OF DEFERRAL ACCOUNT BALANCES Once every month a Participant may, by appropriate direction which is properly received by the Company or the Committee, in accordance with uniform rules established by the Company, elect to transfer in increments of 10% all or part of the deemed value of his or her Deferral Account credits, except as may be limited by the Committee, from any one or more investment options to any one or more other such investment options as listed in Exhibit C. Such a transfer shall not constitute a change in the Participant's current investment election. The effective date of any transfer above shall be the date for which the appropriate direction to the Company or its designee has been properly received in accordance with uniform rules established by the Company. The Company reserves the right to refuse to honor any Participant direction related to investments or withdrawals, including transfers among investment options, where necessary or desirable to assure compliance with applicable law including U.S. and other securities laws. However, the Company does not assume any responsibility for compliance by officers or others with any such laws, and any failure by the Company to delay or dishonor any such direction shall not be deemed to increase the Company's legal exposure to the Participant or third parties. ARTICLE VI PAYMENT OF BENEFITS 6.1 PAYMENT OF DEFERRAL BENEFIT UPON DEATH, DISABILITY OR RETIREMENT. Upon the death, Disability, Early Retirement, or Retirement of a Participant, the Employer shall pay to the Participant or his Beneficiary a Deferral Benefit equal to the balance of his or her vested Account determined pursuant to Article V, less any amounts previously distributed, based on his written election pursuant to Section 6.6 6.2 PAYMENT OF DEFERRAL BENEFIT UPON TERMINATION. Upon the termination of service of the Participant as an employee of the Employer and all Selected Affiliates for reasons other than death, Disability, or Retirement, the Employer shall pay to the Participant a Deferral Benefit in a lump sum equal to the balance of his or her vested Account determined pursuant to Article V, less any amounts previously distributed, as soon as administratively practical. 6.3 PAYMENTS TO BENEFICIARIES. In the event of the Participant's death prior to his or her receipt of all elected annual installments, his or her Beneficiary will receive the remaining annual installments at such times as such installments would have become distributable to the Participant. 6.4 IN-SERVICE DISTRIBUTION A participant may elect to receive an in-service distribution of a portion or all of his or her Deferral Account only beginning at any time not less than one year after the end of the Plan Year in which such Compensation was deferred. A Participant's election for an in-service distribution shall be filed annually in writing with the Committee at the same time his or her Deferral Election is made. The Participant may elect to receive such Compensation as an in-service distribution in lump sum only, the amount of which will be the lesser of the distribution election for that year or the Deferral Account balance attributable to that year's deferral. Any benefits paid to the Participant as an in-service distribution shall reduce the amount of Deferral Benefit otherwise payable to the Participant under the Plan. 6.5 HARDSHIP WITHDRAWAL. In the event that the Committee, under written request of a Participant, determines, in its sole discretion, that the Participant has suffered an unforeseeable financial emergency, the Employer shall pay to the Participant, as soon as practicable following such determination, an amount necessary to meet the emergency (the "Hardship Withdrawal"), but not exceeding the aggregate balance of such Participant's Deferral Account as of the date of such payment. For purposes of this Section 6.5, an "unforeseeable financial emergency" shall mean an event that the Committee determines to give rise to an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal or other such unforeseeable occurrence. Amounts of Hardship Withdrawal may not exceed the amount the Committee reasonably determines to be necessary to meet such emergency needs (including taxes incurred by reason of a taxable distribution). The amount of the Deferral Benefit otherwise payable under the Plan to such Participant shall be adjusted to reflect the early payment of the Hardship Withdrawal. 6.6 FORM OF PAYMENT. The Deferral Benefit payable pursuant to Section 6.1 shall be paid in one of the following forms, as elected by the Participant in his or her Participant Agreement on file as of one (1) year and one (1) day prior to the date of termination or death: (a) Annual payments of a fixed amount which shall amortize the vested Account balance of the payment commencement date over a period not to exceed ten (10) years (together, in the case of each annual payment, with interest thereon credited after the payment commencement date pursuant to Section 5.2). (b) A lump sum as soon as administratively practical. In the event a Participant fails to make a distribution election, his or her vested Account Balance shall be distributed as a lump sum distribution as soon as administratively practical after his or her termination, death or Disability. 6.7 COMMENCEMENT OF PAYMENTS. Commencement of payments under Section 6.1 of the Plan shall begin within 60 days following receipt of written notice by the Committee of an event which entitles a Participant (or a Beneficiary) to payments under the Plan. 6.8 SMALL BENEFIT. In the event the Committee determines that the balance of a Participant's Account is less than $3,500 at the time of commencement of payments, or the portion of the balance of the Participant's Account payable to any Beneficiary is less than $3,500 at the time of commencement of payments, the Committee may inform the Employer and the Employer, in its discretion, may choose to pay the benefit in the form of a lump sum payment, notwithstanding any provision of the Plan or a Participant election to the contrary. Such lump sum payment shall be equal to the balance of the Participant's Account or the portion thereof payable to a Beneficiary. ARTICLE VII BENEFICIARY DESIGNATION 7.1 BENEFICIARY DESIGNATION. Each Participant shall have the sole right, at any time, to designate any person or persons as his Beneficiary to whom payment under the Plan shall be made in the event of his or her death prior to complete distribution to the Participant of his or her Account. Any Beneficiary designation shall be made in a written instrument provided by the Committee. All Beneficiary designations must be filed with the Committee and shall be effective only when received in writing by the Committee. In the event that a Beneficiary form has not been filed, the Beneficiary to whom payment has been designated under the Savings Plan shall be used. 7.2 CHANGE OF BENEFICIARY DESIGNATION. Any Beneficiary designation may be changed by a Participant by the filing of a new Beneficiary designation, which will cancel all Beneficiary designations previously filed. The designation of a Beneficiary may be made or changed at any time without the consent of any person. 7.3 NO DESIGNATION. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participant's designated Beneficiary shall be deemed to be the Participant's estate. 7.4 EFFECT OF PAYMENT. Payment to a Participant's Beneficiary (or, upon the death of a primary Beneficiary, to the contingent Beneficiary or, if none, to the Participant's estate) shall completely discharge the Employer's obligations under the Plan. ARTICLE VIII ADMINISTRATION 8.1 COMMITTEE. The administrative committee for the Plan (the "Committee") shall be those members of the Employee Pension Committee as long as there are at least three such members. If there are not at least three such non-participating persons on the Committee, the Chief Executive Officer of the Company shall appoint other Company officers to serve on the Committee. The Committee shall have complete discretion to i) supervise the administration and operation of the Plan, ii) adopt rules and procedures governing the Plan from time to time and iii) shall have authority to give interpretive rulings with respect to the Plan. 8.2 AGENTS. The Committee may appoint an individual, who may be an employee of the Company, to be the Committee's agent with respect to the day-to-day administration of the Plan. In addition, the Committee may, from time to time, employ other agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Company. 8.3 BINDING EFFECT OF DECISIONS. Any decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan shall be final and binding upon all persons having any interest in the Plan. 8.4 INDEMNIFICATION OF COMMITTEE. The Company shall indemnify and hold harmless the members of the Committee and their duly appointed agents under Section 8.2 against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to the Plan, except in the case of gross negligence or willful misconduct by any such member or agent of the Committee. ARTICLE IX AMENDMENT AND TERMINATION OF PLAN 9.1 AMENDMENT. The Company, on behalf of itself and of each Selected Affiliate may at any time amend, suspend or reinstate any or all of the provisions of the Plan, except that no such amendment, suspension or reinstatement may adversely affect any Participant's Account, as it existed as of the day before the effective date of such amendment, suspension or reinstatement, without such Participant's prior written consent. Written notice of any amendment or other action with respect to the Plan shall be given to each Participant. 9.2 TERMINATION. The Company, on behalf of itself and of each Selected Affiliate, in its sole discretion, may terminate this Plan at any time and for any reason whatsoever. Upon termination of the Plan, the Committee shall take those actions necessary to administer any Accounts existing prior to the effective date of such termination; provided, however, that a termination of the Plan shall not adversely affect the value of a Participant's Account, the crediting of investment return under Section 5.2 or the timing or method of distribution of a Participant's Account, without the Participant's prior written consent. Notwithstanding the foregoing, a termination of the Plan shall not give rise to accelerated or automatic vesting of any Participant's Matching Account. ARTICLE X MISCELLANEOUS 10.1 FUNDING. Participants, their Beneficiaries, and their heirs, successors and assigns, shall have no secured interest or claim in any property or assets of the Employer. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. Notwithstanding the foregoing, in the event of a Change in Control, the Company shall create an irrevocable trust, or before such time the Company may create an irrevocable or revocable trust, to hold funds to be used in payment of the obligations of Employers under the Plan. In the event of a Change in Control or prior thereto, the Employers shall fund such trust in an amount equal to not less than the total value of the Participants' Accounts under the Plan as of the Valuation Date immediately preceding the Change in Control, provided that any funds contained therein shall remain liable for the claims of the respective Employer's general creditors. 10.2 NONASSIGNABILITY. No right or interest under the Plan of a Participant or his or her Beneficiary (or any person claiming through or under any of them) shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of any such Participant or Beneficiary. If any Participant or Beneficiary shall attempt to or shall transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his or her benefits hereunder or any part thereof, or if by reason of his or her bankruptcy or other event happening at any time such benefits would devolve upon anyone else or would not be enjoyed by him or her, then the Committee, in its discretion, may terminate his or her interest in any such benefit (including the Deferral Account) to the extent the Committee considers necessary or advisable to prevent or limit the effects of such occurrence. Termination shall be effected by filing a written "termination declaration" with the Clerk of the Company and making reasonable efforts to deliver a copy to the Participant or Beneficiary whose interest is adversely affected (the "Terminated Participant"). As long as the Terminated Participant is alive, any benefits affected by the termination shall be retained by the Employer and, in the Committee's sole and absolute judgment, may be paid to or expended for the benefit of the Terminated Participant, his or her spouse, his or her children or any other person or persons in fact dependent upon him or her in such a manner as the Committee shall deem proper. Upon the death of the Terminated Participant, all benefits withheld from him or her and not paid to others in accordance with the preceding sentence shall be disposed of according to the provisions of the Plan that would apply if he or she died prior to the time that all benefits to which he or she was entitled were paid to him or her. 10.3 LEGAL FEES AND EXPENSES. It is the intent of the Company and each Selected Affiliate that no Eligible Employee or former Eligible Employee be required to incur the expenses associated with the enforcement of his or her rights under this Plan by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to an Eligible Employee hereunder. Accordingly, if after a Change in Control it should appear that the Employer has failed to comply with any of its obligations under this Plan or in the event that the Employer or any other person takes any action to declare this Plan void or unenforceable, or institutes any litigation designed to deny, or to recover from, the Eligible Employee the benefits intended to be provided to such Eligible Employee hereunder, the Employer irrevocably authorizes such Eligible Employee from time to time to retain counsel of his or her choice, at the expense of the Employer as hereafter provided, to represent such Eligible Employee in connection with the initiation or defense of any litigation or other legal action, whether by or against the Employer or any director, officer, stockholder or other person affiliated with the Employer in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Employer and such counsel, the Employer irrevocably consents to such Eligible Employee's entering into an attorney-client relationship with such counsel, and in that connection the Employer and such Eligible Employee agree that a confidential relationship shall exist between such Eligible Employee and such counsel. The Employer shall pay and be solely responsible for any and all attorneys' and related fees and expenses incurred by such Eligible Employee as a result of the Employer's failure to perform under this Plan or any provision thereof; or as a result of the Employer or any person contesting the validity or enforceability of this Plan or any provision thereof. 10.4 CAPTIONS. The captions contained herein are for convenience only and shall not control or affect the meaning or construction hereof. 10.5 GOVERNING LAW. The provisions of the Plan shall be construed and interpreted according to the laws of the Commonwealth of Pennsylvania. 10.6 SUCCESSORS. The provisions of the Plan shall bind and inure to the benefit of the Company, its Selected Affiliates, and their respective successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of the Company or a Selected Affiliate and successors of any such Company or other business entity. 10.7 RIGHT TO CONTINUED SERVICE. Nothing contained herein shall be construed to confer upon any Eligible Employee the right to continue to serve as an Eligible Employee of the Employer or in any other capacity. EXECUTED THIS 1ST DAY OF JANUARY, 1996. EQUITABLE RESOURCES, INC. BY: GREGORY R. SPENCER TITLE: VICE PRESIDENT, HUMAN RESOURCES AND ADMINISTRATION EXHIBIT A RE: SECTION 3.1 - DESCRIPTION OF ELIGIBLE EMPLOYEES Date: January 1, 1996. THE COMMITTEE HAS DETERMINED THAT THE FOLLOWING NAMED INDIVIDUALS OR GROUPS OF PERSONS OR DESCRIPTIONS OF THE COMPONENTS OF COMPENSATION OF AN INDIVIDUAL WHICH WOULD QUALIFY INDIVIDUALS WHICH ARE ELIGIBLE TO PARTICIPATE IN THE PLAN AS ELIGIBLE EMPLOYEES: Employees eligible to receive bonus payments under the Equitable Resources Short-term Bonus Plan EXHIBIT B RE: SECTION 4.1 - AMOUNT OF DEFERRAL -------------------------------- Dated: January 1, 1996 AS OF THE DATE ABOVE, AND EFFECTIVE UNTIL THIS EXHIBIT IS MODIFIED BY THE COMMITTEE, THE TABLE BELOW INDICATES THE TYPES OF COMPENSATION WHICH ARE ELIGIBLE FOR INCOME DEFERRAL AT THE ASSIGNED PERCENTAGES AS NOTED: - --------------------------------------------------------------- TYPE OF COMPENSATION MAXIMUM PERCENTAGE OTHER LIMITATIONS THAT CAN BE DEFERRED - --------------------------------------------------------------- - --------------------------------------------------------------- Base Salary N/A Any amount over IRS limit - --------------------------------------------------------------- - --------------------------------------------------------------- Bonus 100% In increments of 10% or the entire amount of the Bonus awarded in excess of a stated dollar amount. - --------------------------------------------------------------- EXHIBIT C RE: SECTION 2.18 - INVESTMENT RETURN RATE ------------------------------------- Date: January 1, 1996 The following indicate the investment account equivalents available as of the date indicated that are used in determining the Investment Return Rate. -------------------------------------------------- Account Name Effective Date -------------------------------------------------- Equitable Resources Common 1/1/96 Stock Fund -------------------------------------------------- -------------------------------------------------- Putnam Overseas Growth Fund 1/1/96 -------------------------------------------------- -------------------------------------------------- Putnam Voyager Fund 1/1/96 -------------------------------------------------- -------------------------------------------------- The Putnam Fund for Growth and 1/1/96 Income -------------------------------------------------- -------------------------------------------------- The George Putnam Fund of 1/1/96 Boston -------------------------------------------------- -------------------------------------------------- Putnam Income Fund 1/1/96 -------------------------------------------------- -------------------------------------------------- Putnam Stable Value Fund 1/1/96 -------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----